Tax Audit In Vietnam: How To Prepare


Posted: 18th November 2021 09:28

Taxation is a major component of Vietnam’s state budget revenues and as the country’s budget deficit increases, taxpayers and enterprises will continue to face increased scrutiny from tax authorities trying to meet their revenue targets. 

In addition, the pandemic has caused significant difficulties to businesses with a shortfall in the collection of taxes due to several tax incentives and tax reductions. Therefore, it is imperative for businesses to be aware of non-compliance on tax issues as this can affect their cash flow. Tax authorities are likely to increase scrutiny in order to meet a shortfall in tax revenues.

As per the Ministry of Finance, tax collection in the first six months of 2020 accounted for 43.9 percent, an 11.1 percent decrease compared to the same period in 2019, which was the lowest in the previous seven years.

Vietnamese tax authorities will enforce tax collection using tax audits. As mentioned in our previous articles, the tax system requires the business entity to self-assess their tax liabilities and exposure. This will subsequently be checked by the tax authorities.

Businesses using tax audit plans should look at how to prevent tax loss, transfer pricing, tax evasion, tax debts, as well as high-risk businesses.

Common Risk Areas During A Rax Audit

The most common areas where the tax authorities are likely to challenge and scrutinize are:

Corporate Income Tax

Value-added Tax (VAT)

Personal Income Tax (PIT)

Foreign Contractor Tax (FCT)

Transfer Pricing

Penalties

Depending on the situation tax authorities may impose the following penalties:

Areas In Focus And Risk System

Taxpayers to face tax audits will be selected based on the tax probable risk (TPR) system. The TPR analyzes taxpayers’ risk information for conducting tax audits. Tax audits may focus on:

Minimizing Risks And Planning Ahead

With growing scrutiny from tax authorities, firms need to have a tax risk management system in place to help identify the areas of tax risk in an organization. Once identified, they need to evaluate them to understand the effect and likelihood of occurrence and manage the risk to minimize tax exposure.

With regulators and tax officials taking an aggressive approach, firms and taxpayers should be proactive in nature, to reduce compliance costs and tax exposures.

With the end of the financial year approaching, businesses should carry a thorough review of areas that are typically subject to technical risks from tax audits and ensure proper tax and accounting documents.


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