Risk indicators regarding invoices and VAT refund fraud issued by the General Department of Taxation.

Dear: Provincial and city tax departments under the central government.

Over the past time, the General Department of Taxation has issued instructions on strengthening tax administration, managing invoices, strengthening inspection and examination for businesses with high tax risks, and combating complete fraud. value added tax (VAT), tax evasion. Accordingly, the local Tax Office has contributed to effectively preventing and overcoming frauds in VAT refund, tax evasion, raising awareness of tax law observance, and at the same time contributing to creating a favorable environment. fair and healthy business school. However, at present, the investigating agencies still continue to detect and dismantle a number of lines to set up companies to illegally buy and sell VAT invoices, in order to appropriate tax money from the state budget.

To promptly detect, prevent, and strictly handle cases of invoice trading for illicit gain, the General Department of Taxation requests that tax authorities at all levels, based on current regulations, continue to implement solutions as directed in the following documents: Official Letter No. 3928/TCT-TTKT dated September 18, 2020, on strengthening tax authority measures to prevent, detect, and handle violations of the law on invoice management and use; Official Letter No. 2838/TCT-KTNB dated July 28, 2021, on rectifying, inspecting, reviewing, and taking preventive and handling measures for taxpayers with signs of risk regarding the buying, selling, and use of illegal invoices…

In addition, the following specific measures need to be implemented simultaneously:

1. Tax authorities at all levels shall organize the implementation, dissemination, execution, summarization, evaluation, and exchange of experiences regarding signs and behaviors of violations in invoice management: Issuance, use, and sale of illegal invoices. Simultaneously, they shall review, assess, and classify businesses with suspected invoice-related risks. In cases of high tax risk, the tax authorities shall request clarification and explanation. If the basis for the suspected risk is proven, the business shall be included in the重点 inspection and supervision; if the explanation is insufficient to prove the risk, a tax audit and inspection combined with an invoice inspection shall be conducted immediately.

(Some risk indicators and violations regarding invoices are listed in the Appendix attached to this document).

2. In inspection and auditing work, the following tasks should be performed: Verifying the origin of purchased goods and invoices up to the final stage (when there are signs of circular invoicing); Inspecting the warehouse and information on the delivery and receipt of goods for each shipment; Checking and verifying purchased goods in cases where the taxpayer purchases input from businesses operating in localities that do not have the source of those raw materials or goods; Comparing the conformity between the goods and services on the purchase invoice and the corresponding sales invoice; Comparing payment documents for the purchase and sale of goods recorded at the enterprise with actual documents generated at the bank where the taxpayer transacts to detect circular money transfers and suspicious transactions through the bank, conducting verification of bank transactions (bank statements) and coordinating with local authorities to immediately verify any remaining issues of the enterprise.

For invoices used for VAT deduction and refund purposes, if during inspections or audits it is discovered that the taxpayer is using direct input VAT from a business with signs of illegal invoice trading but there is no official conclusion from the tax authority or relevant agency: The tax authority will notify the business in writing to declare and adjust VAT and refund documents. If the business still maintains that the goods transactions associated with the input VAT invoices are genuine and in accordance with regulations, the business must commit to being legally responsible for its declaration and refund documents. At the same time, the tax authority managing the business must coordinate with the tax authority directly managing the business with signs of illegal invoice trading to examine the tax declaration documents of this business to verify and conclude on the business's violations related to the invoices (if any).

3. When tax authorities at all levels receive requests for verification regarding invoices, origin of goods, transportation, etc., they must cooperate in the verification process and provide the verification results within 10 working days at the latest from the date of receipt of the verification request. In complex cases, the time for providing results shall not exceed 30 working days. Regarding this matter, during implementation, if cooperation is not received or is not timely from other tax departments, the tax department is requested to immediately report to the General Department of Taxation for timely action.

For the verification unit and units related to the unit being verified, it is requested that the Tax Departments review and consider this as a warning about businesses showing signs of risk within their tax jurisdiction, in order to develop a plan for targeted inspection and supervision.

4. Based on local management practices, the Tax Departments shall assess areas with high tax risk indicators and promptly report to the Provincial/City People's Committee and the Provincial/City Steering Committee for Combating State Budget Revenue Losses to direct relevant agencies to coordinate with tax authorities in combating state budget revenue losses. At the same time, they shall advise the Provincial/City People's Committee to direct relevant Departments and Agencies to strengthen coordination to improve the effectiveness of state management in tax matters, such as: exchanging business information between the national business registration information system and the tax information system; effectively carrying out business registration; reviewing information on newly established businesses; effectively implementing the integrated one-stop mechanism; and transmitting timely, accurate, and complete information to combat state budget revenue losses (Department of Planning and Investment). Information on the origin of goods in the market to detect cases where organizations and individuals trade in goods that are of unknown origin, do not keep accounting records, and therefore do not declare taxes (Department of Industry and Trade);…

5. Enhance the exchange of skills through practical assessments of businesses showing signs of risk related to invoices and invoice trading within each tax authority and at all levels of tax authority. Simultaneously, disseminate information on identifying illegal invoice trading and usage and the penalties for each type of transaction so that taxpayers are aware and avoid participating in such transactions. Coordinate with media outlets to publicly disclose information on businesses engaging in invoice trading to serve as examples and to "warn" those who have violated or intend to violate the law on invoice trading. When the tax authority notifies of businesses with invoice risks, the leaders of local tax authorities are requested to actively direct coordinated inspections and handling.

6. Strengthen training and professional development for inspection and auditing staff to ensure they have sufficient capacity to inspect, detect, and handle businesses suspected of buying, selling, or using illegal invoices.

7. Strengthen the inspection and supervision of civil servants and public employees in the performance of their duties, especially those who frequently interact with taxpayers and those involved in inspection and auditing. Resolutely and strictly punish errant civil servants and remove from the system those who are weak in capacity and qualifications, lack awareness and responsibility, neglect management, or violate the 10 disciplinary rules for civil servants and public employees in the tax sector as stipulated in Decision No. 1036/QD-TCT dated June 11, 2013, of the Director General of the General Department of Taxation.

8. Strengthen coordination with police agencies according to Joint Circular No. 85/2016/TTLT-BTC-BCA dated June 20, 6 of the Ministry of Finance - Ministry of Public Security in verifying the origin of goods , verify the buyer and seller from the beginning to the end; Dossiers and documents transferred to the police agency must ensure the legality, clearly identify the signs, forms and tricks of illegal printing, issuance and use of invoices to evade taxes or show signs of purchase. selling invoices of organizations, individuals and businesses; Closely coordinate the provision of information and documents at the request of the police agency during the investigation, handling and update of investigation results, in order to speed up the progress and soon investigate conclusions and recommendations. prosecute and handle according to the provisions of law and update the handling results in a timely manner. Promulgating and amending coordination documents to be consistent with current regulations.

9. Strengthen coordination with banks to verify bank payments and suspicious transactions in accordance with Decision No. 1796/QD-BTC dated September 11, 2017, of the Minister of Finance on amending and supplementing a number of Articles of the Regulations on handling information of organizations and individuals with suspicious transactions at tax authorities at all levels in Decision No. 568/QD-BTC dated March 26, 2015, of the Minister of Finance.

10. Strengthen coordination with Customs agencies to promptly exchange and provide information in accordance with Decision No. 2413/QD-BTC dated November 23, 2017, of the Minister of Finance on the promulgation of regulations on information exchange between Customs agencies and Tax agencies: verification of origin of goods, import declarations, export declarations, surprise inspections of export shipments of tax-refunded enterprises, etc.

The General Department of Taxation hereby informs the Tax Departments for their knowledge and implementation. If any difficulties or problems arise during implementation, the Tax Departments are requested to report them to the General Department of Taxation for timely consideration and resolution.

APPENDIX

REGARDING SIGNS OF VIOLATING BEHAVIOR
(Attached is Official Letter No. 1873/TCT-TTKT dated June 1, 2022, on strengthening the review and inspection to detect taxpayers with signs of risk regarding invoices and combating VAT refund fraud).

– Businesses that change their legal representative two or more times within 12 months, or change their legal representative while simultaneously relocating their business premises;

– Businesses that change their operating status or business activities more than twice in a year.

– Newly established businesses with non-fixed business locations (changing business locations multiple times within 1-2 years of operation).

– Businesses relocate their business operations after having received a Notice of Cessation of Business at the registered address.

– Businesses established by individuals with family ties who jointly contribute capital, such as spouses, siblings, etc.

– Newly established businesses where the person named as director or legal representative is a company whose business address has been announced by the tax authorities as abandoned (with outstanding tax debts) or temporarily suspended for a specified period.

– Businesses that have been established for many years without generating revenue are then sold or transferred to others.

– Businesses established without a mining license but issuing invoices for natural resources and minerals.

– Businesses sell and buy goods that are not suitable for the conditions and characteristics of each region.

– The business has not yet paid the full registered charter capital;

– Businesses involved in mergers and acquisitions with a value of less than 100 million VND;

– Businesses operating supermarkets (retail of consumer goods, electrical appliances); food and beverage businesses, restaurants, hotels; transportation businesses; construction materials businesses; petroleum businesses; businesses in the field of land, stone, sand, and gravel mining; mineral businesses (coal, kaolin, iron ore, etc.); agricultural and forestry product businesses (wood chips, wood panels, timber, etc.); and those with significant labor leasing activities.

– Sudden increase in revenue, specifically: In the previous reporting period, revenue was very low, approximately zero, but in the following period there was a sudden increase in revenue, or the revenue in the following period increased dramatically (3 times or more compared to the average revenue of previous periods), but the amount of value-added tax (VAT) payable was low (VAT payable < 1% of the revenue generated in the period);

– High revenue but inadequate or no warehouse space, resulting in no warehouse rental costs;

– Annual declared revenue exceeds 10 billion VND, but the tax payable is less than 100 million VND (1%).

– Businesses use a large number of invoices (from 500 to 2000 invoices). The number of invoices cancelled is also large, averaging about 20% of the total number of invoices used.

- Businesses using electronic invoices according to Decree No. 123/2020/ND-CP and Circular No. 78/2021/TT-BTC have an unusually low number of electronic invoices compared to the number of invoices used under Decree No. 51/2010/ND-CP.

– Businesses that do not issue invoices or issue invoices but do not report on invoice usage (or report late).

– Businesses where the value of goods sold and output VAT are equal to or only slightly different from the value of goods purchased and input VAT.

– Businesses whose sales of goods and services do not match their purchases of goods and services;

– Businesses with large revenues and output and input VAT but no tax payable, and with negative VAT balances for multiple periods.

– The enterprise has no fixed assets or the value of fixed assets is very low;

– Businesses with suspicious bank transactions (money deposited and withdrawn on the same day);

– Businesses employ a workforce that is disproportionate to their size and industry.

– An individual (as the legal representative) establishes and operates multiple businesses.