What is tax assessment? Which cases qualify your business for tax assessment? What is the process and how should you handle a tax assessment decision? This article will answer all your questions about tax assessment according to the latest regulations.
During operation, compliance with tax regulations is a mandatory obligation for all businesses. However, businesses do not always declare and pay taxes fully and accurately. In such cases, the tax authorities will step in and perform an important task: tax assessment.
1. What is tax assessment?
Tax assessment is the process by which tax authorities determine, calculate, and determine the amount of tax that a business or individual must pay to the state budget. This occurs when taxpayers violate tax laws and regulations, such as failing to declare taxes, making incomplete or inaccurate declarations, or failing to provide sufficient information for the tax authorities to calculate taxes.
Essentially, this is a strong measure by the tax authorities to ensure fairness and prevent revenue loss for the state budget. The tax assessment decision is legally binding and businesses are obligated to comply.
2. Cases where businesses are subject to tax assessment according to regulations.
According to the current Law on Tax Administration (Law No. 38/2019/QH14), the tax authorities will assess taxes for businesses in the following cases:
- No tax registration, no tax filing: Businesses are operating but failing to fulfill their registration or tax declaration obligations as required by law.
- Failure to submit the requested additional tax documents: When the tax authorities request explanations or additional information and documents, and the business fails to comply or complies only partially.
- Incomplete, untruthful, or inaccurate tax declarations: This is the most common scenario. Businesses intentionally or unintentionally misdeclare factors used as the basis for calculating taxes (revenue, expenses, taxable value, etc.), leading to a reduction in the amount of tax payable.
- Violation of regulations regarding related-party transactions: Failure to submit, late submission, or incomplete declaration of information in related-party transaction documents.
- Buying, selling, exchanging, and accounting for the value of goods and services not at the usual transaction price: There are indications of transfer pricing, falsifying business results to evade taxes.
- Failure to reflect, or incomplete or inaccurate reflection in the accounting records: Accounting records, invoices, and supporting documents that are not transparent or valid are unsuitable as a basis for calculating taxes.
- Tax audit, tax inspection There is evidence to prove that the business's accounting practices are not in accordance with regulations.
- Purchasing goods or services from a fictitious party: Using illegal invoices to claim input VAT deductions or increase deductible expenses when calculating corporate income tax.
3. Basis for tax assessment by the tax authority
When determining taxes, tax authorities do not arbitrarily assign a figure but base it on clear legal grounds.
The tax authorities will rely on one or more of the following grounds:
- The tax authority's own database.
- Compare this to the tax payable by other businesses in the same industry and with the same scale of operation.
- The documents and inspection/audit results are still valid.
- The valuation results are from a professional valuation council or appraisal organization.
4. Tax assessment process by the tax authorities
The tax assessment process typically follows these steps:
- Violation detected: Through tax management, inspection, and auditing.
- Prepare a record of administrative violations: Record the company's violations.
- Request for explanation (if any): Businesses have the right to provide explanations regarding issues raised by the tax authorities.
- Issue a decision to determine the tax: Based on the collected evidence, the tax authority will issue an official decision stating the assessed tax amount (including principal tax, late payment penalties, and administrative tax violation fines).
- Send the decision to the business: The decision will be sent to the business as per regulations.
5. What should businesses do when they receive a tax assessment decision?
Upon receiving a tax assessment decision, businesses should calmly review the information and follow these steps:
Step 1Review the file: Carefully examine the grounds and reasons given by the tax authorities in their decision. Compare them with accounting records, invoices, supporting documents, and relevant legal regulations.
Step 2: Comply or Appeal:
- Case 1: Agree with the decisionIf the business finds the tax authority's decision to be correct, it is obligated to pay the full amount of tax, late payment penalties, and fines within the deadline specified in the decision.
- Case 2: Disagreement with the decisionIf there is sufficient evidence and legal grounds to believe that the tax assessment decision is inaccurate or unreasonable, the business has the right to file a complaint against the tax assessment decision.
6. Procedure for appealing tax assessment decisions
- Time limit for complaints: Businesses have 90 days, from the date of receiving or becoming aware of the administrative decision, to file an initial complaint.
- Complaint form: Complaints are made by submitting a written complaint to the tax authority that issued the decision (Tax Team, Tax Branch, Tax Department).
- Obligations during the waiting period: Businesses are still required to pay the full amount of taxes, late payment penalties, and fines that have been assessed, unless a competent state agency decides to temporarily suspend the enforcement of the tax assessment decision.
- Complaint resolution: The tax authorities are responsible for receiving and resolving complaints within the prescribed time limit. If a business disagrees with the initial complaint resolution, it has the right to file a second complaint with a higher authority or initiate an administrative lawsuit in court.
Tax assessment is a necessary measure to ensure a healthy and fair business environment. For businesses, understanding tax assessment regulations not only helps avoid unnecessary legal risks and financial losses but also forms the foundation for sustainable development.
The best way to avoid being assessed for taxes is to proactively build a transparent accounting system, strictly adhere to tax declaration and payment regulations, and maintain complete and legitimate invoices and documents.