In the context of Covid-19 pandemic, the local tax authority has been applied a new strategy to meet their annual performance target.
The first action which support to strengthen the legal basis is that Government releases two crucial regulations - New Law on Tax Administration No. 38/2019/QH14 effective on 1 Jul 2020 and Decree 125/2020/ND-CP effective on 5 Dec 2020 regulating administrative penalties for tax or invoice-related violations. Per these new regulations, the local tax authorities take more aggressive approach in managing the tax compliance of tax payers. In particular, the higher penalties for breaches of tax and invoice regulations are imposed to tax payers. Another highlight is that legal representative is prevented from leaving the country if their employer has not paid due taxes. This new regulation not only annoys the travel plan of legal representative but also has a negative impact on the brand name of the enterprise in case of violation. Therefore, it is highly recommended that the enterprise evaluate the tax risk, take remedial actions and develop tax risk management procedure in timely manner.
In addition, there is a new Tax Audit Trend in recent years, especially in FY 2021 when the Covid-19 still happens in unpredictable way and the era of technology bloom. The local tax authorities have been continuously focusing on high risk tax payers. Therefore, they categorize the tax payers into different groups based on evaluation of tax risk level. Then allocating the personnel in charge as well as other internal resources to carry out the tax audit for such high risk subjects. So, who are the high risk tax payers? They can be :
- The enterprises who have been in extreme loss position for many continuous years but still carry out and expand operation activities widely in Vietnam
- E-commercial businesses
- Merge & Acquisition transactions
- Capital transfer transactions, especially overseas transfer
- The one have arisen many intragroup transactions without sufficient evidences that transactions are truly performed and bring benefits to the local Vietnam company.
Given that some provinces/ cities in Vietnam follow the Directive No. 16 on lock-down and Directive No. 15 on social distance, the local tax authorities carry out the tax audit at the tax officer's desk instead of visiting the enterprise's office as normal way. Therefore, the tax officer will contact with the enterprise mostly via call, email and the request documents are required to courier to tax authority's office. This shall lead to rusher time for the enterprise in preparing explanation or supporting documents and limit effective communication between the enterprise and tax authority to a certain level. The enterprise should re-structure filing system for accounting & tax documents in both hard copy and soft copy.
Another crucial thing is that the local tax authority has been applied technology into managing information/data of tax payers and has build up an internal system to share such information among different local authorities such as immigration, licensing, social insurance and tax departments. In parallel, a new system specializing data analysis to identify abnormal transaction or profit margin, then spot out tax under-declaration or tax violation. @TheSharingTown would highly recommend that the enterprise invest in technology system, specially in data analysis as soon as possible. By applying digitalization and automation, the company not only can fasten working flow, reduce human mistakes in normal routine work, but also identify non-compliance areas and plan for next remedial actions in advance before tax audit arises.