Selection of VAT, Corporate Income Tax, and Special Consumption Tax returns for inspection at the tax office (Decision 98/QD-TCT)

DECISION

ISSUING PROCEDURES FOR APPLYING RISK MANAGEMENT IN SELECTING VALUE ADDED TAX, CORPORATE INCOME TAX, AND SPECIAL CONSUMPTION TAX DECLARATIONS FOR ON-SITE INSPECTION AT TAX AUTHORITIES

DIRECTOR GENERAL OF THE GENERAL DEPARTMENT OF TAXATION

Based on the Law on Tax Administration dated June 13, 2019;

Based on Decree No. 126/2020/ND-CP dated October 19, 2020 of the Government detailing the implementation of a number of articles of the Law on Tax Administration;

Based on Decision No. 41/2018/QD-TTg dated September 25, 2018, of the Prime Minister, which stipulates the functions, tasks, powers, and organizational structure of the General Department of Taxation under the Ministry of Finance;

Based on Decision No. 15/2021/QD-TTg dated March 30, 2021 of the Prime Minister amending and supplementing... Clause 1, Article 3 of Decision No. 41/2018/QD-TTg dated September 25, 2018, of the Prime Minister stipulates the functions, tasks, powers, and organizational structure of the General Department of Taxation under the Ministry of Finance;

Based on Circular No. 31/2021/TT-BTC dated May 17, 2021, issued by the Minister of Finance, which regulates the application of risk management in tax administration;

Based on Circular No. 80/2021/TT-BTC dated September 29, 2021, issued by the Minister of Finance, guiding the implementation of several articles of the Law on Tax Administration and Decree No. 126/2020/NĐ-CP dated October 19, 2020, of the Government detailing several articles of the Law on Tax Administration;

Based on Decision No. 2363/QD-TCT dated December 16, 2015, of the Director General of the General Department of Taxation, which stipulates the Regulations on the organization and operation of the Risk Management Board under the General Department of Taxation;

Based on Decision No. 1582/QD-TCT dated October 6, 2022, of the Director General of the General Department of Taxation on the promulgation of the set of indicators and criteria for selecting value-added tax, corporate income tax, and special consumption tax declarations with signs of risk for inspection at the tax authority's headquarters;

Based on Decision No. 183/QD-TCT dated March 10, 2023, of the Director General of the General Department of Taxation, which stipulates the amendment and supplementation of the Regulations on the organization and operation of the Risk Management Board under the General Department of Taxation;

As recommended by the Head of Risk Management.

DECISION:

Article 1. Attached to this Decision is the Procedure for applying risk management in selecting Value Added Tax, Corporate Income Tax, and Special Consumption Tax declarations for inspection at the tax authority's headquarters.

Article 2.

1. This decision takes effect from the date of signing.

2. From the date this Decision takes effect, the provisions of the following Decisions shall cease to be in effect:

– Decision No. 1185/QD-TCT dated June 27, 2016, of the Director General of the General Department of Taxation on the promulgation of a set of indicators for checking value-added tax declaration files at tax offices using information technology;

– Decision No. 1186/QD-TCT dated June 27, 2016, of the Director General of the General Department of Taxation on the promulgation of the procedure for checking value-added tax declaration files at the tax office using information technology.

Article 3. Heads of departments and equivalent units under and directly under the General Department of Taxation; Directors of Provincial and City Tax Departments; and Heads of Regional, District, Town, and City Tax Sub-departments under the Provincial and City Tax Departments are responsible for implementing this Decision.

PROCEDURE

APPLYING RISK MANAGEMENT TO SELECTING VALUE ADDED TAX, CORPORATE INCOME TAX, AND SPECIAL CONSUMPTION TAX RETURNS FOR ON-SITE AUDIT AT TAX AUTHORITIES
(Attached to Decision No. 98/QD-TCT dated January 26, 2024 of the General Department of Taxation)

Chapter I

GENERAL RULES

Article 1. Purpose

1. Instruct tax authorities to collect, analyze, and evaluate information to select value-added tax, corporate income tax, and special consumption tax declarations with signs of risk for inspection at the tax authority's headquarters in accordance with the law.

2. Standardize the content and work steps, creating objective consistency in the selection of value-added tax, corporate income tax, and special consumption tax declarations with signs of risk for inspection at the tax office headquarters in accordance with the law.

3. Modernize the process of selecting value-added tax, corporate income tax, and special consumption tax declarations for on-site inspection at tax offices, improving the ability to detect, prevent, and promptly handle taxpayers who make false declarations or evade taxes, thereby contributing to improved tax management efficiency.

Article 2. Scope of Regulation and Applicable Subjects

This document provides guidance on the procedures and steps for applying risk management in selecting value-added tax, corporate income tax, and special consumption tax returns from taxpayers with suspected risk for inspection at the tax authority's office.

The procedure applies to tax authorities at all levels: the General Department of Taxation, the Tax Department, and the Tax Sub-department (including regional Tax Sub-departments).

Article 3. Explanation of terms and abbreviations

1. In this Procedure, the following terms are understood as follows:

– Key performance indicators: These are informational indicators that serve as criteria for identifying and classifying risk levels. Criterion indicators are specifically expressed as numbers, percentages, ratios, or percentages, calculated through the collection and analysis of data.

– Risk score: These are specific scores assigned to each indicator based on the risk level of that indicator and on a risk scoring scale.

– Weight: This is a criterion-based coefficient used to assess the materiality of a criterion to the outcome of a taxpayer risk assessment.

– Risk management applications: It is an application of information technology that connects and receives information from relevant data sources inside and outside the tax authority, digitizing risk management measures and techniques based on a set of criteria and indicators to analyze and evaluate compliance, determine the level of risk, and inform decisions on the application of operational measures by the tax authority.

– Risk threshold: This is a specific score range issued based on the total risk score of the tax return and the number of high-risk criteria or the number and percentage of tax returns on the classified list, from the tax return with the highest risk score to the tax return with the lowest risk score. The risk threshold is used to classify the risk of all tax returns analyzed and evaluated.

– Time of evaluation: This is the time to conduct information analysis and assess taxpayer risk.

– Tax Authority: This includes the General Department of Taxation, the Tax Department, and the Tax Sub-department (including regional Tax Sub-departments).

2. Departments at all levels of the tax authority involved in the process:

– Risk Management Department: The Risk Management Board under the General Department of Taxation, the Tax Declaration and Accounting Department, and the Large Enterprise Database of the Department of Taxation for Large Enterprises. For Tax Departments and Tax Branches with multiple inspection and audit departments/teams, each inspection and audit department/team assigns a focal point officer to utilize the risk management application to select value-added tax, corporate income tax, and special consumption tax declarations with signs of risk for taxpayers under their management. Simultaneously, the Tax Department and Tax Branch designate one inspection and audit department/team as the central coordinating body.

– Tax Inspection and Audit Department: The Tax Inspection and Audit Department under the General Department of Taxation; the Inspection and Audit Division of the Large Enterprise Tax Department under the General Department of Taxation; the Inspection and Audit Divisions under the Tax Department; the Tax Inspection Divisions and Teams and the Tax Management Teams at the commune/ward/inter-commune/ward level or the Tax Management Operations Team (in cases where the Tax Sub-department does not have a Tax Inspection Team and a Tax Management Team at the commune/ward/inter-commune/ward level) under the Tax Sub-department.

– IT Department: The Information Technology Department under the General Department of Taxation; the Information Technology Division under the Tax Department; and the IT department under the Tax Sub-department.

– Other operational departments involved in the Process: Departments/units under and directly affiliated with the General Department of Taxation, Divisions under the Tax Department, Divisions/Teams under the Tax Sub-department that are relevant as assigned by the Head of the tax authority.

3. Abbreviations in the Procedure

– The term for taxpayer is abbreviated as NNT.

Risk management is abbreviated as QLRR.

– Value added is abbreviated as VAT.

– Corporate income tax is abbreviated as TNDN.

– Special consumption tax is abbreviated as SCT.

– Tax return form is abbreviated as HSKT.

– The tax authority is abbreviated as CQT.

Chapter II

PROCESS CONTENT

Article 4. Information Collection and Processing

The tax authorities collect, update, and process information to ensure its completeness, accuracy, and timeliness before conducting risk analysis and selecting taxpayers' VAT, corporate income tax, and special consumption tax returns for inspection at the tax office.

Information used for analyzing and assessing risks, and selecting VAT, corporate income tax, and special consumption tax return forms of taxpayers for inspection at the tax authority's headquarters, is collected from the tax sector's database, centrally managed at the General Department of Taxation through information technology applications, and processed, shared, and provided to tax authorities at all levels to carry out tax management work in accordance with the law.

Tax authorities and tax officials shall collect and process information in accordance with the Procedure for collecting and exploiting information to serve risk management in tax administration issued under Decision No. 86/QD-TCT dated February 8, 2023, by the Director General of the General Department of Taxation.

Article 5. Development and use of a set of criteria and indicators for selecting high-risk VAT, corporate income tax, and special consumption tax audits for on-site inspection by the tax authority.

The Risk Management Board and the Information Technology Department of the General Department of Taxation use the risk assessment criteria issued by the General Department of Taxation in applying risk management in the selection of VAT, corporate income tax, and special consumption tax return forms for inspection at the tax authority's headquarters as follows:

The set of criteria for selecting high-risk VAT, corporate income tax, and special consumption tax audits for on-site inspection by the tax authority, issued under Decision No. 1582/QD-TCT dated October 6, 2022, by the Director General of the General Department of Taxation, is applied uniformly nationwide to forms 01/GTGT, 03/TNDN, and 01/TTĐB issued with Circular No. 80/2021/TT-BTC dated September 29, 2021, by the Minister of Finance. In case the above-mentioned set of criteria is amended, supplemented, or replaced, the amended, supplemented, or replaced set of criteria shall apply.

During the implementation process, if the Tax Department proposes additions or modifications to criteria and indicators to better suit tax management, the Tax Department shall send a document to the General Department of Taxation (Risk Management Board) clearly stating the reasons and basis for establishing the criteria and indicators; the calculation formula; and the scores and weights of each criterion and indicator.

In accordance with tax management requirements in each period, the General Department of Taxation issues documents amending and supplementing the indicators and criteria. The Risk Management Board, in coordination with the Departments/units/Tax Bureaus, researches and advises the Director General of the General Department of Taxation on issuing supplementary or adjusted indicators and criteria for risk analysis.

The Information Technology Department under the General Department of Taxation is responsible for developing and upgrading relevant application software to meet the requirements for incorporating the indicators and criteria issued by the General Department of Taxation into the risk management application for analyzing, evaluating, and selecting VAT, corporate income tax, and special consumption tax returns with signs of risk for inspection at the tax authority's headquarters.

Article 6. Assessment, classification, and processing of HSKT risk level classification results.

1. General principles

– The analysis, assessment, and classification of risk levels to select VAT, corporate income tax, and special consumption tax audits to be conducted at the tax authority's headquarters are performed automatically and centrally on the risk management application.

– On a monthly basis, the Risk Management Department at the tax authorities at all levels directly managing taxpayers, in coordination with the IT department, uses the Risk Management application to select VAT, Corporate Income Tax, and Special Consumption Tax return forms of taxpayers as follows:

+ For VAT and Special Consumption Tax returns: the assessment and classification of risk levels are carried out periodically on the 25th of each month. In cases where the taxpayer submits amended or supplementary tax returns, the reassessment and reclassification of the risk level of the amended or supplementary tax returns are carried out on the 25th of the following month.

+ For Corporate Income Tax Returns: the assessment and classification of risk levels are conducted periodically on April 25th. In cases where the taxpayer has a Corporate Income Tax filing period different from the calendar year or makes amendments or additions to the Corporate Income Tax Return, the assessment and classification of risk levels are conducted periodically on April 25th, July 25th, and October 25th.

– Based on the total risk score of the tax return and the risk threshold, the risk management application automatically classifies the risk level for each VAT tax return, corporate income tax tax return, and special consumption tax return into one of three levels: high risk, medium risk, or low risk. The results of the risk analysis and risk level classification for the taxpayer's tax returns are summarized according to form No. 01-KTTB/QTr-QLRR issued with this Procedure.

2. Establish risk thresholds

– Risk thresholds are the basis for classifying the risk level of taxpayers into three levels: high risk, medium risk, and low risk. Risk thresholds must be approved on the system and are effective from the date of approval. Risk thresholds are adjusted and issued according to management requirements in each period and are guided by the General Department of Taxation as a basis for classifying taxpayer risk.

– The QLRR application allows you to choose from two methods for determining high-risk thresholds:

+ Absolute number method: The number of high-risk tax returns is determined based on the total risk score and the number of high-risk criteria indicators; or the number of high-risk tax returns is specifically assigned to each tax authority.

+ Relative number method: The number of high-risk HSKT indicators is determined by the percentage of HSKT with the highest total risk score and the number of criteria indicators identified as high risk.

The proportion (number) of HSKT classified as low risk corresponds to 50% or more of the total HSKT taken from the lowest risk score.

The proportion (number) of HSKT classified as medium risk: is the proportion (number) of HSKT remaining after subtracting the proportion (number) of HSKT high risk and HSKT low risk.

– In cases where HSKT falls within the high-risk threshold but has the same total risk score, the secondary criteria will be used, with risk results ranked from highest to lowest, in the following order of priority:

3. Assessment and classification of HSKT

Based on the risk level classification results of the tax return, the risk management application automatically selects high-risk VAT, corporate income tax, and special consumption tax returns according to form No. 02-KTTB/QTr-QLRR issued with this Procedure.

The list of taxpayers with high-risk tax returns scheduled for inspection at the tax authority's headquarters is automatically generated using the Risk Management Application (RMA) according to Form No. 03-KTTB/QTr-QLRR issued with this Procedure, following these principles:

– Taxpayers have one to three high-risk tax liabilities (VAT, Corporate Income Tax, Special Consumption Tax).

– The list of taxpayers selected for tax audit at the tax authority's headquarters must not overlap with the list of taxpayers included in the tax authority's headquarters audit plan that has been approved by the tax authority's leadership before December 30th of each year, as stipulated in the Tax Audit Procedure.

No later than the 28th of each month, the Risk Management Department at the tax authorities at all levels directly managing the taxpayer shall generate Form No. 02-KTTB/QTr-QLRR and Form No. 03-KTTB/QTr-QLRR and forward them to the Head of the Tax Inspection and Audit Department directly managing the taxpayer for assignment to review and audit.

In addition, the Tax Management Department can print the Tax Return Review Form generated by the application according to mẫu số 04-KTTB/QTr-QLRR, mẫu số 05-KTTB/QTr-QLRR, mẫu số 06-KTTB/QTr-QLRR issued with this Procedure to support the Tax Inspection and Audit Department in reviewing and checking the taxpayer's tax returns (if needed).

Article 7. Processing the list of taxpayers with high-risk tax returns for inspection at the tax authority's headquarters.

1. General principles

The head of the Tax Inspection and Auditing Department, based on the list of taxpayers with high-risk tax returns, assigns officials to directly handle the files for inspection.

Based on the assigned list, tax officials review and check the contents according to the analysis results of each indicator and criterion.

In cases where taxpayers are classified as high-risk taxpayers but no tax law violations are found during the two (02) previous tax declaration periods after review and inspection, they will continue to be included in the risk analysis and assessment after six (06) months from the date of the inspection results.

If the tax authority has reliable information in its tax administration work that reduces the taxpayer's risk level to a low level, or has grounds to believe that the taxpayer's tax risk level is low, the tax authority will decide not to select that taxpayer for inspection at the tax authority's headquarters.

If the tax authority has reliable information to determine that a taxpayer has a high-risk tax return, the tax authority will select them to be added to the inspection plan.

2. Method of handling

After reviewing and eliminating risks with clearly identifiable causes that have been explained in previous months/quarters/years, the Tax Inspection and Audit Department will submit to the Tax Authority's leadership for approval the list of taxpayers with high-risk tax returns requiring inspection at the Tax Authority's headquarters. Based on the list of taxpayers with high-risk tax returns approved by the Tax Authority's leadership, the Tax Inspection and Audit Department will transfer the list to the Risk Management Department to enter the reasons for adding or excluding high-risk tax returns into the Risk Management application using form No. 02-KTTB/QTr-QLRR no later than the 05th of the following month. The Risk Management application will automatically update the list of taxpayers with high-risk tax returns using form No. 03-KTTB/QTr-QLRR.

Based on the list of taxpayers with high-risk tax returns requiring inspection at the tax authority's headquarters, the Head of the Tax Authority (who may delegate this authority to the head of the Risk Management Department) approves the list on the Risk Management application to transfer it to the tax inspection and audit support system. The Tax Inspection and Audit Department conducts the inspection of tax returns at the tax authority's headquarters according to the guidelines in the current Tax Inspection Procedure.

Article 8. Evaluation of the application of risk management in the selection of VAT, corporate income tax, and special consumption tax returns for inspection at the tax authority's headquarters.

1. For the Tax Department and Tax Sub-department

The tax authorities compile a list of high-risk VAT, corporate income tax, and special consumption tax returns requiring inspection at the tax office; the results of the tax return inspection on the application are used to evaluate the following aspects:

– Evaluate the effectiveness of each criterion indicator according to Form No. 07-KTTB/QTr-QLRR issued with this Procedure for each type of VAT, Corporate Income Tax, and Special Consumption Tax. The application of risk management shall be carried out on February 5th of each year or as required by the Tax Authority.

– Evaluate the results achieved, the difficulties and obstacles encountered, and propose solutions to improve the effectiveness of applying risk management in selecting VAT, corporate income tax, and special consumption tax return forms for inspection at the tax authority's headquarters.

Deadline for submitting reports:

– The District Tax Office submits its evaluation report to the Provincial Tax Department before February 15th of each year.

– The Tax Department submits the assessment report from the Tax Department Office and its subordinate Tax Branches to the General Department of Taxation (Risk Management Board) before February 25th of each year.

The assessment is conducted periodically, annually, and as specific tax administration requirements arise.

2. For the General Department of Taxation

The Risk Management Board, in coordination with the Tax Inspection and Audit Department, the Large Enterprise Tax Department, and relevant departments/units, will implement the following:

– Before February 28th of each year, compile a report evaluating the application of risk management in selecting high-risk VAT, corporate income tax, and special consumption tax cases for inspection at the tax authority's headquarters and submit it to the General Department.

– Organize inspection and supervision of the implementation of risk management in the selection of high-risk VAT, corporate income tax, and special consumption tax audits by tax authorities at all levels.

Chapter III

ORGANIZATION OF IMPLEMENTATION

Article 9. Implementation

1. The Risk Management Board, in coordination with the Tax Inspection and Audit Department, is responsible for guiding and directing the implementation of this Procedure. Departments/units under and directly affiliated with the General Department of Taxation are responsible for coordinating its implementation.

2. Leaders of the competent authorities at all levels are responsible for organizing and implementing the regulations in this Procedure; and for conducting periodic or unscheduled inspections of the implementation of the Procedure by units under their management.

3. During the organization and implementation process, if any difficulties arise, the Departments/units under and directly affiliated with the General Department of Taxation, and the Tax Departments of provinces and centrally-administered cities shall promptly report them to the General Department of Taxation (Risk Management Board) for research, consideration, and resolution.