Circular 31 / 2021 / TT-BTC Regarding risk management in tax administration, the regulations on the application of risk management in tax administration were issued by the Ministry of Finance on May 17, 2021, and came into effect on July 2, 2021.
Below are some key points that businesses need to understand and plan for to avoid being classified as high-risk cases.
This article will cover:
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Assessing and classifying the risk level of taxpayers;
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Focused monitoring of taxpayers showing signs of violating tax laws.
1. Assessment and monitoring activities of the tax authorities
- Collecting, processing, managing, and utilizing taxpayer-related information for risk management purposes.
- Assessing tax compliance and classifying taxpayer risk levels.
- Apply tax management measures corresponding to the levels of tax law compliance and the level of risk posed by taxpayers.
- Regulations on criteria and indicators for assessing compliance and classifying the risk level of taxpayers, both businesses and individuals.
2. Methods for assessing tax compliance and classifying taxpayer risk levels.
The level of tax compliance and taxpayer risk are determined by one or a combination of the following methods:
- Scoring and classification methods.
- Machine learning (Artificial intelligence, also known as AI, to analyze data and quickly describe the taxpayer's situation)
- Category-based ranking method.
3. Sources and methods of collecting information on tax obligations
Information used for risk management in tax operations includes:
3.1. Information within the tax authority
a) Information on business registration and tax registration; personal information of founding members, owners, and legal representatives of the taxpayer; registration and employment of workers; information on the taxpayer's status; number of changes to business registration and tax registration information; capital contribution status of members; main business lines;
b) Information on tax returns; tax payments; tax arrears; tax incentives, exemptions, and reductions; tax payment extensions; installment payments; tax refunds; registration, management, and use of invoices and documents; information on complaints and denunciations; information on the results of inspections and audits and post-inspection/audit handling; information on related-party transactions;
3.2. Information outside the tax authority: This refers to information collected from relevant state management agencies, organizations, and individuals who are responsible for providing it, including:
a) Information on taxpayers collected from relevant state management agencies, organizations, and individuals includes: Banks; Labor; Social Insurance; Business Registration Authority; Investment Management Authority; Relevant ministries and agencies;
b) Information from foreign countries and international organizations.
4. Application of information technology in tax risk management
a) The tax authorities develop highly integrated and automated risk management applications.
b) The tax authorities shall build a database of taxpayers, which will be centrally managed at the General Department of Taxation.
5. Assessment and classification of taxpayers
5.1. Assessing taxpayers' compliance with tax laws.
Taxpayers are assessed and classified according to one of the following levels of tax law compliance:
- Level 1: High compliance.
- Level 2: Average compliance.
- Level 3: Low compliance.
- Level 4: Non-compliance.
5.2. Classification of risk levels for corporate taxpayers
Taxpayers who are businesses are classified according to their risk level into one of the following categories:
- Category 1: Very low-risk taxpayers.
- Category 2: Low-risk taxpayers.
- Category 3: Medium-risk taxpayers.
- Category 4: High-risk taxpayers.
- Category 5: Very high-risk taxpayers.
5.3. Classification of risk levels for individual taxpayers
The risk level of individual taxpayers is classified into one of the following categories:
- High risk.
- Medium risk.
- Low risk.
6. Processing monitoring and evaluation results
The tax authorities base their decision-making process on the results of the aforementioned tax compliance assessment and operational information available at the time of the decision to determine the list of taxpayers classified according to risk levels for each period.
The list of high-risk taxpayers under the above-mentioned cases is updated on the risk management application in tax administration.
The principles of management and control are as follows:
a) High risk:
- Review, check, verify
- Inspection and auditing
b) Medium risk:
- Random selection for inclusion in the review, inspection, and verification list.
- Continue performing risk classification for the next assessment period.
c) Low risk:
- Maintain records and perform risk level classification for the next assessment period.
For cases of high compliance: Include in the list for consideration and selection for commendation and reward of taxpayers who comply with tax laws.