How are the acts of using illegal or fake invoices handled according to the Vietnam law?

How are the acts of using illegal or fake invoices handled according to the Vietnam law?

1. What are the acts of using illegal or fake invoices in Vietnam?

The act of using illegal or counterfeit invoices is stipulated in Clause 1, Article 4 of Decree No. 125/2020/ND-CP dated October 19, 2020 of Vietnam Government, on administrative penalties for violations of tax and invoice regulations.

Using the invoices or evidencing documents mentioned hereunder constitutes the act of using illegal invoices or evidencing documents:
a) Fake invoices and documents;
b) Invoices and documents not yet valid or expired;
c) Invoices suspended during the period of enforcement of the invoice suspension penalty, except those permitted for use according to a tax authority”s notice;
d) E-invoices which are not registered with any tax authority;
e) E-invoices of which tax authority”s codes have not yet been granted if they are subject to the regulation under which e-invoices with tax authority’s codes are required
f. Invoices for goods and services with an issue date from the date the tax authority determines that the seller is not operating at the business address registered with the competent state authority;
g) Invoices or evidencing documents for purchase of goods or services with the invoicing date before the date on which it is determined that the invoicing party are not doing business at the address registered with a competent regulatory authorities or, though the invoicing party’s notification of the closing of their business at the address already registered with the competent regulatory authority has not been sent to the tax authority, the tax authority or the police authority or other regulatory agency establishes that they are illegal.

Companies that use illegal or fake invoices to declare taxes, thereby reducing the amount of tax payable or increasing the amount of tax refunded, exempted, or reduced, are considered to be engaging in tax evasion under Clause d, Section 2 below. The penalty can range from 1 to 3 times the amount of tax evaded, based on Article 17 of Decree 125/2020/ND-CP.

2. Penalties for the act of tax evasion

1) The fine which equals the amount of evaded tax shall be imposed on the taxpayer committing any of the following violations under at least a mitigating circumstance:
a) Failing to submit tax registration applications; failing to file tax returns or filing tax returns 90 days after the deadline or the extended deadline for submission of tax returns, except the cases prescribed in point b and c of clause 4 and 5 of Article 13 herein;
b) Failing to keep accounting entries of amounts collected from the determination of taxes payable, any deficiency in taxes amounts due to non-declaration or false declaration or any increase in amounts of tax refund, exemption or reduction, except the acts prescribed in Article 16 herein;
c) Failing to issue invoices for sale of goods or provision of services, except the cases where the taxpayer has recorded taxes on sold goods or supplied services in the corresponding tax term; issuing invoices for sale of goods or provision of services in which the invoiced items and amounts based on which tax declaration is made are less than those that actually exist if this act is discovered after the deadline for submission of tax returns;
d) Using illegal invoices; illegally using invoices for declaring taxes with the intention of reducing taxes payable or increasing amounts of tax refund, exemption or reduction;
e) Using illegal evidencing documents; illegally using evidencing documents; using evidencing documents or records that do not correctly reflect the nature of transactions or actual values of these transactions for the purpose of falsely determining taxes payable, amounts of tax exemption, reduction or refund; preparing documents or records on destruction of supplies or goods which are not real, resulting in any reduction in taxes payable or any increase in amounts of tax refund, exemption or reduction;
f) Using goods not subject to taxes, or those qualified for tax exemption or consideration of tax exemption, to frustrate the prescribed purposes without informing tax authorities about the conversion of these purposes or registering tax declarations with tax authorities;
g) Taxpayers who continue business operations during the period of requesting business suspension or temporary suspension but fail to notify the tax authorities, except in cases stipulated in point b, clause 4, Article 10 of this Decree.

2. The fine which is 1.5 times as much as the amount of evaded tax shall be imposed on any taxpayer committing one of the violations prescribed in clause 1 of this Article under neither aggravating nor mitigating circumstances.

3. The fine which is 2 times as much as the amount of evaded tax shall be imposed on any taxpayer committing one of the violations prescribed in clause 1 of this Article under an aggravating circumstance.

4. The fine which is 2.5 times as much as the amount of evaded tax shall be imposed on any taxpayer committing one of the violations prescribed in clause 1 of this Article under two aggravating circumstances.

5. The fine which is 3 times as much as the amount of evaded tax shall be imposed on any taxpayer committing one of the violations prescribed in clause 1 of this Article under at least three aggravating circumstances.

6. Remedies:
a) Compelling the full payment of evaded taxes into the state budget with respect to the acts prescribed in clause 1, 2, 3, 4 and 5 of this Article.
If the sanctioning time limits for the acts of tax evasion prescribed in clause 1, 2, 3, 4 and 5 of this Article expire, taxpayers that are not sanctioned must fully pay the amounts of evaded tax, deferred tax calculated based on the amounts of evaded tax into the state budget according to the time limits prescribed in clause 6 of Article 8 herein.
b) Compelling the re-adjustment of losses, the amounts of input VAT deductions specified in tax dossiers (if any) in case of commission of the acts prescribed in clause 1, 2, 3, 4 and 5 of this Article.

3. Aggravating circumstances in the imposition of administrative penalties.

The following circumstances are aggravating circumstances based on Article 10 of the Law on Handling Administrative Violations 2012 (amended 2020):
1) The administrative violations are committed in an organized manner;
2) The administrative violations are committed many times or repeated;
3) Inciting, luring, or using minors to commit violations; coercing individuals who are materially or mentally dependent on oneself to commit administrative violations;
4) Using the persons who violators are clearly known as suffering from mental illness or others that cause their loss of cognitive ability or their ability to control their behaviors in order to commit the administrative violations;
5) Reviling, defaming who is on duty; administrative violations as gangsters;
6) Abusing one’s positions and powers to commit administrative violations;
7) Taking advantage of war, natural calamity circumstances, disaster, epidemic diseases or other special difficulties of the society to commit administrative violations;
8) Committing violations while serving criminal sentences or decisions on application of administrative violation handling measure;
9) Continuing to commit administrative violations though the competent persons have requested the termination of such acts;
10) After the violations, having committed acts of fleeing or concealing the administrative violations.
11) Administrative violations of large-scale, large quantity or large value of goods;
12) Administrative violations against many people, children, the elderly, people with disabilities, pregnant women.
If the aforementioned circumstances have already been defined as administrative violations, they shall not be considered aggravating circumstances.

4. Mitigating circumstances in administrative penalties.

Circumstances considered as mitigating circumstances fall under the cases stipulated in Article 9 of the Law on Handling Administrative Violations 2012 (amended 2020) as follows:
1) The violators have prevented or reduced harms done by the violations or volunteer to overcome the consequences, pay compensations;
2) The violators have voluntarily reported their violations, honestly repenting their mistakes; actively help authorities detect administrative violations, handle administrative violations;
3) Administrative violations committed while in a state of emotional distress caused by the unlawful actions of another person; exceeding the limits of legitimate self-defense; exceeding the requirements of a state of emergency;
4) The violators commit administrative violations due to being forced to or due to their material or spiritual dependence;
5) The violators are pregnant women, old and weak persons, persons suffering from ailment or disability which restrict their capacity to perceive or to control their acts;
6) The violators commit violations due to particularly difficult plights not caused by themselves;
7) The violations are committed due to backwardness.
8) Other extenuating circumstances regulated by the Government.
For information on how the use of illegal or fake invoices is handled according to the law, please contact us.

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