Circular No. 31/2021/TT-BTC the application of risk management in tax administration

CIRCULAR

Providing the application of risk management in tax administration^[1]

Pursuant to the June 13, 2019 Law on Tax Administration;

Pursuant to the Government’s Decree No. 126/2020/ND-CP of October 19, 2020, detailing a number of articles of the Law on Tax Administration;

Pursuant to the Government’s Decree No. 87/2017/ND-CP of July 26, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the General Director of Taxation,

The Minister of Finance promulgates the Circular providing the application of risk management in taxation.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Circular provides the application of risk management in tax administration by tax offices at all levels, covering:

1. Collection, processing, management and use of information about taxpayers for risk management.

2. Assessment of tax law compliance by taxpayers and classification of risk levels of taxpayers.

3. Application of professional tax administration measures appropriate for levels of tax law compliance by and risks levels of taxpayers.

Article 2. Subjects of application

a/ Taxpayers.

b/ Tax offices.

c/ Tax officers.

4. Related state agencies, organizations and individuals specified in Article 2 of the Law on Tax Administration.

Article 3. Interpretation of terms 

1. Application of risk management in tax administration means application of professional processes, principles, measures and techniques of risk management and results of assessment of tax law compliance by and risk levels of taxpayers in tax administration.

2. Risk management information means tax and tax-related information collected and processed to serve the application of risk management in tax administration.

3. Compliance level means results of assessment and classification carried out by tax offices of tax law compliance by taxpayers.

4. Criteria for compliance assessment means standards for assessment of tax law compliance by taxpayers.

5. Index of criteria for compliance assessment means information indicators bearing specific value of criteria for assessment of tax law compliance by taxpayers.

6. Assessment of tax law compliance means collection, analysis, verification and checking of information about operation and tax law compliance based on criteria and indexes of criteria for compliance assessment to serve classification of levels of law compliance by taxpayers.

7. Tax law compliance management means assessment by tax offices of tax law compliance, classification of risk levels, analysis of acts of taxpayers in order to reasonably use resources for management measures suitable to each level in order to encourage compliance and prevent non-compliance.

8. Analysis of taxpayers’ risks means analysis of information about taxpayers in order to detect signs of violation of tax laws leading to possible loss of state budget revenues.

9. Risk level means severity of risks determined based on combination of risk frequency and consequences.

10. Criteria for risk classification means standards for assessment and classification of risk levels in tax administration.

11. Index of criteria for risk classification means information indicators bearing specific value of criteria for risk classification.

12. Risk assessment means classification, examination and comparison of risk levels against indexes of criteria for risk classification and previous handling of risks for setting an order of priority.

13. Sign of risk means a factor of informative value that shows potentiality of acts of law violation.

14. Sign of tax violation means a factor of informative value that serves as a basis for identification of acts of violation of the tax laws.

15. Sentinel supervision means application by a tax office of professional measures to a taxpayer that is assessed as posing a high tax risk or failing to comply with the tax laws in each field of operation or locality in a given period.

16. Application of information technology in risk management in tax administration (below referred to as risk management application) means the application of information technology in connection and receipt of information from related sources of data inside and outside tax offices, computerization of risk management measures and techniques based on promulgated sets of criteria or indexes of criteria to analyze and assess the compliance and identify risk levels in order to decide on the application of professional measures by tax offices.

17. Taxpayer segmentation means segment by tax offices of taxpayers into groups based on shared characteristics for the application of appropriate management methods.

18. Classification by machine learning method means application of computational and statistical algorithms on computers to identify models, functions and indicators to help classify and forecast risk levels.

19. List-based ranking method means a method to assess taxpayers through checking indexes and criteria on their operation and tax law compliance which are arranged into groups corresponding to each rank. A taxpayer will reach a specific rank if it/he/she is assessed as having satisfied criteria and indexes corresponding to such rank.

20. Scoring method and score-based classification means a method to assess taxpayers based on their score of criteria and indexes on their operation and tax law compliance.

Article 4. Risk management principles

1. Application of risk management must ensure efficiency and effectiveness of tax administration; encourage and create favorable conditions for taxpayers to willingly and properly comply with the tax and tax administration laws and concurrently prevent, promptly detect and handle violations of the tax and tax administration laws.

2. Risk management information shall be collected from information sources inside and outside tax offices (including information from overseas) in accordance with law; managed in a centralized manner at the General Department of Taxation by means of information technology system applications and processed, shared and provided to tax offices at all levels and other state management agencies for tax administration in accordance with law.

3. The assessment and classification of levels of tax law compliance by taxpayers and risk levels of taxpayers shall be carried out in an automatic and accurate manner by using single method or combined methods specified in this law based on provisions of laws, professional tax administration processes and measures, segmentation of taxpayers and criteria specified in this Circular and the taxpayer database.

4. Based on results of assessment of levels of tax law compliance by taxpayers and classification of risk levels of taxpayers, information available on tax offices’ tax administration support applications, information about signs of violations and other signs of risks provided at the time of issuance of a decision, tax offices shall:

a/ Decide on examination, inspection and supervision and application of appropriate professional measures.

b/ Formulate plans to improve overall compliance suitable to tax offices’ resources based on results of analysis of the nature of the act, reasons and scale of each level of tax law compliance and risk level.

5. Tax officers who have strictly complied with laws, this Circular and relevant regulations and instructions on risk management shall be exempted from personal liability in accordance with law.

6. In case the application of risk management encounters an incident or fails to meet requirements on application of risk management specified in this Circular, the risk management shall be applied manually by approving documents on proposals or documents signed by persons competent to apply professional tax administration measures in accordance with the Law on Tax Administration and guiding documents.

7. In case a change in information results in a change in results of assessment of tax law compliance by taxpayers and classification of risk levels of taxpayers and risk management applications have not yet automatically adjusted the compliance level and risk level, the change in assessment results shall be manually updated by tax officers after the latter have obtained competent persons’ approval.

8. Results of application of professional measures corresponding to  the ranking of risk levels must be fully and accurately updated to applications for supporting tax administration by tax offices or risk management applications for each specific case in order to serve the completion and assessment of tax law compliance by taxpayers and classification of risks of taxpayers in the following period.

Article 5. Methods of assessment of tax law compliance by taxpayers and classification of risk levels of taxpayers

Levels of tax law compliance by taxpayers and risk levels of taxpayers shall be determined by using one of or combining the following methods:

1. Scoring and score-based classification method.

2. Machine learning method.

3. List-based ranking method.

Article 6. Procedures for application of tax risk management

Risk management application in tax administration shall be carried out by tax offices through the following steps:

1. Evaluation of the situation and identification of objectives and requirements of risk management

Tax offices shall review common risks of taxpayers and errors usually made by taxpayers in complying with the provisions of Article 17 of Law No. 38/2019/QH14 on Tax Administration or current regulations in order to determine major risks needed to be handled, taxpayers with high risks and handling measures.

2. Collection and processing of risk management information

Risk management information shall be collected and processed under Chapter II of this Circular.

In the course of risk analysis, if information declared by a taxpayer is detected to be erroneous and inadequate, the taxpayer shall provide, give explanations and add information and documents as requested and within a time limit notified by the tax office to ensure accurate assessment of tax law compliance and classification of risk level.

3. Creation and update of indexes for analysis and assessment of tax law compliance by taxpayers and classification of risk levels of taxpayers.

Based on results of the assessment of actual state, and the determination of objectives and requirements of risk management specified in Clause 1 of this Article, risk management information and information technology application, tax offices shall create and update indexes of criteria and weights used for analysis and assessment of levels of tax law compliance by taxpayers and risk levels of taxpayers.

4. Analysis and assessment of levels of tax law compliance by taxpayers, identification of risk levels of taxpayers and risk levels in tax management operations, and management of risk files for cases subject to sentinel supervision.

Taxpayers shall be segmented on the basis of conditions determined to be suitable with tax administration requirements in each period upon the analysis and assessment of levels of law tax compliance by taxpayers and risk levels of taxpayers.

The analysis and classification of levels of tax law compliance by taxpayers and risk levels of taxpayers shall be carried out by the methods specified in Article 5 of this Circular.

5. Based on results of identification of risk levels and assessment of law compliance by taxpayers, tax offices shall apply tax administration measures and formulate plans to improve overall compliance by taxpayers.

6. Monitoring, updating and assessment of feedback on results of the implementation of tax administration measures.

7. Collection, processing, use and archive of information; direction of and guidance on the modification and supplementation of regulations on the application of risk management to ensure effective tax administration.

Chapter II

COLLECTION AND PROCESSING OF RISK MANAGEMENT INFORMATION

Article 7. Risk management information

Risk management information in tax operations include:

1. Information in tax offices

a/ Information about business and tax registration, personal information of founding members, owners and at-law representatives of taxpayers, labor registration and employment, information about the taxpayer status; number of changes of business and tax registration information; results of capital contribution by members, and main business lines;

b/ Information about tax declaration dossiers, tax payment, tax arrears, tax incentives, tax exemption or reduction, extension of tax payment time limits, installment tax payment, tax refund, invoice and document registration, management and use, information about complaints and denunciations, information about inspection, examination and post-inspection and post-examination handling results, and information on transfer pricing transactions;

c/ Other information.

2. State management agencies and related organizations and individuals shall provide their collected information, including:

a/ Information about taxpayers collected by state management agencies and related organizations and individuals according to Articles 26, 27 and 30 of the Government’s Decree No. 126/2020/ND-CP of October 19, 2020, detailing a number of articles of the Law on Tax Administration or current regulations;

b/ Information from abroad or provided by international organizations according to their obligations stated in tax-related treaties to which Vietnam is a contracting party.

3. Other information relating to taxpayers.

Article 8. Collection and processing of risk management information

1. Information collection sources

a/ Via information systems in tax offices;

b/ Through the coordination with agencies and units of the Ministry of Finance and of related ministries and sectors in the exchange and provision of information serving tax administration;

c/ Through coordination with foreign tax offices and authorities in information exchange in accordance with law;

d/ Receipt of information from state agencies and provided by organizations and individuals in accordance with law;

dd/ Information about taxpayers’ activities collected in the course of tax administration;

e/ Purchase of information in accordance with the Law on Tax Administration and guiding documents;

g/ Through the receipt of tax-related information overseas and provided by international organizations under the obligations stated in treaties to which Vietnam is a contracting party.

h/ Other related information sources specified by law.

2. Modes of information collection

a/ Provision or exchange of information in the form of e-data, e-documents or emails, or exchange through the portal of the General Department of Taxation; text messages and calls from telephone numbers officially announced by tax offices;

b/ Provision or exchange of information in writting, via telex or facsimile, or in paper documents;

c/ Direct exchange in the form of written records bearing certification by related parties; appointment of representatives to work together, verify and collect information and documents, organization of conferences and other forms.

3. Processing of collected information

a/ Evaluation of relevance of collected information to information use needs and purposes; and examination of reliability and accuracy of collected information;

b/ Classification, arrangement and storing of information obtained from different sources to serve exploitation and analysis;

c/ Analysis of collected information to find information components that may serve the risk management;

d/ Summarization and linking of relevant factors found through analysis to clarify contents and value of collected information in order to serve the classification of risk levels of taxpayers and assessment of tax law compliance by taxpayers.

Article 9. Application of information technology in risk management

1. Risk management applications and the taxpayer database shall be developed and managed in a centralized manner at the General Department of Taxation to ensure that information used for risk assessment is fully, accurately and promptly updated thanks to information connection and exchange with e-tax data processing systems and other related data information systems.

In case a system encounters an incident or a transmission error, the updating, integration, processing and storage of information in such system shall be carried out as soon as such incident or error is remedied.

2. Tax offices shall apply measures to ensure data security and confidentiality, computer and cyber security in accordance with law.

3. The General Department of Taxation shall specify responsibilities of tax offices and officers at all levels for developing, managing, operating, updating, exploiting and using risk management applications as appropriate to different professional tax operations.

Chapter III

ASSESSMENT OF TAX LAW COMPLIANCE BY TAXPAYERS AND CLASSIFICATION OF RISKS LEVELS OF TAXPAYERS IN TAX ADMINISTRATION

Article 10. Assessment of tax law compliance by taxpayers

1. Taxpayers shall be assessed and classified into the following levels of tax law compliance:

a/ Level 1: High compliance.

b/ Level 2: Medium compliance.

c/ Level 3. Low compliance.

d/ Level 4: Non-compliance.

2. Levels of tax law compliance by taxpayers shall be classified based on the criteria specified in Appendix I to this Circular.

3. Results of assessment of tax law compliance by taxpayers shall be monitored and handled by tax offices as follows:

a/ For taxpayers at the level of non-compliance, management measures specified in Article 22 of this Circular shall be applied;

b/ For taxpayers at the level of high compliance, medium compliance, low compliance or non-compliance, analysis of the nature of their acts shall be carried out to identify measures to improve their compliance.

Article 11. Classification of risk levels of taxpayers being enterprises

1. Classification of overall risk levels

a/ Taxpayers being enterprises shall be classified based on their risk levels in one into the following grades:

a.1/ Class 1: Taxpayers facing very low risks.

a.2/ Class 2: Taxpayers facing low risks.

a.3/ Class 3: Taxpayers facing medium risks.

a.4/ Class 4: Taxpayers facing high risks.

a.5/ Class 5: Taxpayers facing very high risks.

b/ Risk levels of taxpayers shall be classified based on tax law compliance assessment results under Article 10 and based on the criteria specified in Appendix II to this Circular.

c/ Processing results of classification of risk levels of taxpayers being enterprises

c.1/ For taxpayers with very high risk and high risk levels: management measures specified in Article 22 of this Circular shall be applied;

c.2/ For requirements of tax administration in each period, taxpayers with high risk levels may continue to have their risk levels classified in tax administration operations specified in Clause 2 of this Article.

2. Classification of risk levels in tax administration operations

a/ Risk levels of taxpayers being enterprises in tax administration operations shall be classified into one of the following levels:

a.1/ High risk.

a.2/ Medium risk.

a.3/ Low risk.

b/ Risk levels of taxpayers in tax administration operations shall be classified based on results of classification of taxpayers’ risk levels under Clause 1 of this Article and the criteria specified in Appendix II of this Circular.

c/ Processing of results of classification of risk levels

Results of classification of risk levels of taxpayers are subject to application of tax administration measures in different tax administration operations specified in Chapter IV of this Circular.

Article 12. Classification of risk levels of individual taxpayers

1. Risk levels of individual taxpayers shall be classified into one of the following levels:

a/ High risk.

b/ Medium risk.

c/ Low risk.

2. Risk levels of individual taxpayers shall be classified based on tax law compliance assessment results specified in Article 10 and the criteria specified in Appendix III to this Circular.

3. Processing of results of classification of risk levels of individual taxpayers

Results of classification of risk levels of individual taxpayers are subject to application of tax administration measures specified in Article 15 of this Circular.

Chapter IV

APPLICATION OF RISK MANAGEMENT IN TAX ADMINISTRATION

Article 13. Application of risk management in tax administration

1. Based on the tax law compliance assessment results specified in Article 10, results of classification of risk levels of taxpayers specified in Articles 11 and 12 of this Circular, and professional information available at the time of issuance of decisions on determination of lists of taxpayers classified on the basis of risk levels in each period, tax offices shall:

a/ Manage tax law compliance;

b/ Manage tax registration risks;

c/ Manage risks in examination of tax dossiers at their head offices;

d/ Manage risks in tax refund management;

dd/ Manage risks in inspection and examination at head offices of taxpayers;

e/ Manage risks in management of tax arrears and enforcement of tax-related administrative decisions;

g/ Manage risks in management of invoices and documents;

h/ Manage risks for taxpayers subject to sentinel control and supervision;

i/ Manage risks for individual taxpayers;

k/ Apply risk management in other operations in tax administration.

2. Lists of taxpayers facing risks in the cases specified in Clause 1 of this Article shall be updated on tax administration applications in the field of tax administration. Tax offices at all levels shall summarize, update and manage information on taxpayers facing risks to serve tax administration in the entire tax sector.

3. The General Department of Taxation shall provide in detail the assessment and drawing up of lists of taxpayers with risks in the cases specified in Clause 1 of this Article in order to identify key issues in the tax administration meeting tax administration requirements in each period.

4. In case of having suspicious information or detecting signs of violations of the tax laws through inspection, examination, audit, information from reports and denunciations and information provided by state management agencies and investigation agencies, heads of tax offices shall decide to change the form and level of inspection, or take other tax administration measures under their competence and take responsibility for their decisions.

Article 14. Measures to improve tax law compliance by taxpayers

Based on tax law compliance assessment results specified in Article 10 of this Circular, tax offices shall analyze the nature of acts and each level of tax law compliance by taxpayers, and formulate plans to improve tax law compliance with handling measures appropriate for each compliance-related issue as follows:

1. For cases of high compliance: Including in the list of taxpayers that have complied with the tax laws to be considered and selected for commendation and rewarding.

2. For cases requiring improvement of compliance:

a/ To coordinate with related agencies and organizations and tax agents in applying measures to support taxpayers to carry out tax formalities, organizing taxpayer meeting programs, dialogues, seminars and training in order to help taxpayers properly and fully perform their tax obligations;

b/ To study and modify policies, simplify administrative procedures, apply support measures, and apply information technology for convenient tax declaration and payment, thereby helping save time and compliance costs for taxpayers;

c/ To classify risks and apply tax administration measures to risk levels of taxpayers specified in Articles 15 thru 22 of this Circular.

Article 15. Application of risk management to individual taxpayers

Based on the list of individual taxpayers classified by risk level specified in Article 13 of this Circular, tax offices shall apply appropriate tax administration measures under regulations.

1. For business households and individuals

a/ For business households and individuals facing high risks: to apply either of or combination of the following measures:

a.1/ To review, examine and verify related information to serve as a basis for re-determination of turnover and tax amounts of business households and individuals;

a.2/ To draw up a list of business households and individuals for examination and survey in order to re-determine their turnover and tax amounts and the performance of tax obligations of related organizations.

b/ For business households and individuals facing medium risks: To randomly select business households and individuals for being included in the list of business households and individuals subject to survey of turnover and tax amounts; and to continue classifying risks for the subsequent period of assessment.

c/ For business households and individuals facing low risks: To archive dossiers and classify risks for the subsequent period of assessment.

2. For individuals having incomes liable to personal income tax (excluding business households and individuals):

a/ For those facing high risks: To select them for being included in the list for practical examination and verification and organizing examination and verification under current regulations;

b/ For those facing medium and low risks: To archive dossiers and classify risk levels for the subsequent period of assessment.

In case individuals have incomes liable to personal income tax paid by income payers, their incomes shall be controlled through the analysis of signs of risks of income payers.

3. For individuals who have revenues related to land and land-attached assets:

a/ For those facing high risks: To analyze dossiers and draw up lists for submission to heads of tax offices examination plans at head offices of the tax offices, examine tax declaration dossiers at head offices of the tax offices under current regulations for related individuals and organizations;

b/ For those facing medium and low risks: To archive dossiers and classify risk levels for the subsequent period of assessment.

Article 16. Application of risk management in management of tax registration

Based on the list of taxpayers classified according to the levels of risks in tax registration specified in Article 13 of this Circular, tax offices shall apply appropriate measures to handle and process dossiers or coordinate with business registration agencies in handling and processing dossiers in accordance with the laws on business registration and tax registration.

1. In case changes in tax registration information of taxpayers result in changes in their managing tax offices:

a/ For high-risk taxpayers: Tax offices of localities from which and to which taxpayers are relocated shall coordinate in carrying out examination at offices of tax offices, or inspection or examination at offices of taxpayers under current regulations;

b/ For medium-risk taxpayers: Tax offices of localities to which taxpayers are relocated shall select taxpayers subject to supervision and request taxpayers to provide additional explanations about information in documents when so requested by tax offices;

c/ For low-risk taxpayers: Not yet to carry out inspection and supervision; to assess law compliance by taxpayers and classify risks for the subsequent assessment period.

2. In case taxpayers notify suspension of their business activities

a/ For high-risk taxpayers: To intensify the implementation of tax administration measures under regulations suitable to taxpayers’ performance of their tax liabilities for prompt handling of tax arrears, invoices and violations (if any);

b/ For medium- and low-risk taxpayers: To implement tax management measures under regulations; to assess tax law compliance by taxpayers and classify risks for the subsequent assessment period.

3. In cases of invalidation of tax identification numbers

To inspect and examine tax finalization at offices of taxpayers under regulations in the order of priority from higher risk to lower risk levels.

To update the status of dissolution, bankruptcy or operation termination on the tax registration application system for cases in which tax liabilities have been performed according to regulations. To apply measures to urge taxpayers to perform their tax liabilities before their dissolution, bankruptcy or operation termination under regulations.

4. For other cases: To regularly review cases showing signs of high risks in order to determine a list of taxpayers of whom status of operation at business locations need to be examined and verified.

Article 17. Application of risk management in examination of tax declaration dossiers at offices of tax offices

Based on the list of taxpayers classified according to risk levels of tax declaration dossiers specified in Article 13 of this Circular, to apply appropriate measures to handle and process tax declaration dossiers.

1. For high-risk taxpayers: To analyze dossiers and make a list of taxpayers subjects to examination at offices of tax offices in order to submit plans on examination at offices of tax offices to heads of tax offices, and then examine tax declaration dossiers at offices of tax offices under regulation;

2. For medium- or low-risk taxpayers: Not yet to examine tax declaration dossiers at offices of tax offices; to assess law compliance by taxpayers and classify risks of tax declaration dossiers of taxpayers for the subsequent assessment period.

Article 18. Application of risk management in tax refund

Tax offices shall classify tax refund dossiers in accordance with the Law on Tax Administration, relevant legal documents or current regulations. For classification of tax refund dossiers by risks, based on results of classification of risks of tax refund dossiers specified in Article 13 of this Circular, tax offices shall apply appropriate measures to handle and process such tax refund dossiers as follows:

1. Classification and handling of tax refund dossiers:

a/ For tax refund dossiers with high tax risks: To examine them before tax refund.

Provided that for 12 consecutive months from the beginning of the fiscal year, taxpayers having their submitted tax refund dossiers constantly assessed as those with high risks:

a.1/ In case the total risk score or risk score based on each criterion or indicator of the ongoing risk assessment is different from that of the preceding risk assessment: Tax refund dossiers are subject to examination before tax refund.

a.2/ In case the total risk score and risk score based on each criterion or indicator of the ongoing risk assessment is equal to that of the preceding risk assessment; or the risk score based on each indicator of the ongoing tax refund dossier assessment is lower than that of the preceding assessment which results in a corresponding lower total risk score:

- If results of the preceding examination of tax refund dossier or post-tax refund inspection and examination reveal no act of making false declaration, leading to a deficit in the payable tax amount or an increase in the refundable tax amount, the subsequent tax refund dossier is not subject to examination before tax refund.

- If results of the preceding examination of tax refund dossier or post-tax refund inspection and examination reveal acts of making false declaration leading to a deficit in the payable tax amount or an increase in the refundable tax amount, the subsequent tax refund dossier is subject to examination before tax refund.

b/ For tax refund dossiers with medium or low risks: To make tax refund before examination.

c/ After the classification of tax refund dossiers and in the course of processing of tax refund dossiers, if detecting taxpayers showing signs of violation of the tax and customs laws or if taxpayers fail to explain or supplement their tax refund dossiers or though having made dossier explanation or supplementation, still fail to prove that their declared tax amounts are correct, tax offices shall change the form of classification of tax refund dossiers of taxpayers from tax refund before examination to examination before tax refund. The approval of change of the form of classification shall be updated onto the professional operation information system.

2. Post-tax refund examination and inspection

a/ Tax offices shall carry out post-tax refund examination and inspection within five (5) years from the date of issuance of tax refund decisions in the priority order from higher to lower risk score:

a1/ For high-risk taxpayers (for tax refund dossiers not subject to examination before tax refund specified at Point a, Clause 1 of this Article): To carry out examination and inspection within one (1) year from the date of issuance of tax refund decisions;

a2/ For medium-risk taxpayers: To carry out examination and inspection within three (3) years from the date of issuance of tax refund decisions;

a3/ For low-risk taxpayers: To carry out examination and inspection within five (5) years from the date of issuance of tax refund decisions;

a4/ Based on the practical situation, tax offices may carry out post-tax refund examination and inspection earlier than the above-mentioned time limit.

b/ The General Department of Taxation shall stipulate in detail post-tax refund examination and inspection; and combine them with inspection and examination of tax law compliance under regulations.

Article 19. Application of risk management in inspection and examination at offices of taxpayers

1. Tax offices shall select cases subject to inspection and examination at offices of taxpayers, ensuring that:

a/ Cases selected through analysis and assessment of tax law compliance by and classification of risk levels of taxpayers account for at least 90% of total cases subject to inspection and examination under annual plans;

b/ Randomly selected cases account for at most 10% of total cases subject to inspection and examination under annual plans.

2. Selection of taxpayers to be included in plans on inspection and examination at offices of taxpayers

Based on the list of taxpayers classified according to risk levels of tax inspection and examination according to Article 13 of this Circular, tax offices shall select cases subject to inspection and examination at offices of taxpayers as follows:

a/ Selection of cases subject to inspection: To select taxpayers to be included in annual plans on inspection at offices of taxpayers in the order of priority from higher risk to lower risk levels.

b/ Selection of cases subject to examination: To select taxpayers to be included in annual plans on examination at offices of taxpayers in the order of priority from higher risk to lower risk levels, ensuring that selected taxpayers are not identical to those selected to be included in inspection plans specified at Point a, Clause 2 of this Article.

c/ To avoid any overlap in the application of risk management in the selection of taxpayers showing signs of risk for working out tax inspection and examination plans in accordance with the Law on Tax Administration and guiding documents and relevant legal documents.

In case a tax office has reliable information collected through tax administration work to re-classify a taxpayer into the low risk level or has grounds to determine that a taxpayer is classified as a low-risk one and is not included in an annual inspection and examination plan, the tax office shall decide not to select such taxpayer to be included in the annual inspection and examination plan and select another taxpayer under regulations to be included in the annual inspection and examination plan. In case information collected through tax administration work that verifies that a taxpayer shows signs of a high risk, the tax office may select such taxpayer to be included in the annual inspection and examination plan. The tax office shall take responsibility for its decision on such change.

d/ The making of, and competence to approve, plans on inspection and examination at offices of taxpayers; and the list of cases to be added or changes in plans on inspection and examination at offices of taxpayers specified in this Article must comply with the Law on Tax Administration and guiding documents and relevant legal documents.

3. Tax offices shall base themselves on results of risk analysis by application of information technology or risks revealed through professional analysis and information from practical tax administration to determine contents and scope of tax inspection and examination.

Article 20. Application of risk management in management of tax arrears and enforcement of tax-related administrative decisions

Based on the list of taxpayers classified according to risk levels of management of tax arrears and enforcement of tax-related administrative decisions specified in Article 13 of this Circular, tax offices shall manage tax arrears and enforce tax-related administrative decisions in accordance with the Law on Tax Administration and guiding documents, taking into account risk levels so as to prioritize handling or intensify supervision.

1. For high-risk taxpayers: Based on the practical situation, tax offices shall select taxpayers whose tax arrears are recoverable into the state budget, taxpayers with big tax arrears amounts, taxpayers committing the act of dispersing assets or absconding, and taxpayers on exit for increasing supervision frequency; or determining an order of priority for execution regarding the list of taxpayers subject to measures to enforce tax-related administrative decisions;

2. For medium- and low-risk taxpayers: To monitor, supervise and take measures for collection of tax arrears in accordance with the Law on Tax Administration and guiding documents.

Article 21. Application of risk management in management of invoices and documents, and other professional operations in tax administration

1. Application of risk management in management of invoices and documents

Based on the list of taxpayers classified according to risk levels of management of invoices and documents specified in Article 13 of this Circular, tax offices shall apply the following management measures:

a/ For high-risk taxpayers: To include high-risk taxpayers in the list of taxpayers subject to review and examination at offices of tax offices, and include them in annual plans on examination and inspection at offices of taxpayers in accordance with the Law on Tax Administration and guiding documents and relevant legal documents. Based on results of examination and inspection, to change from the current form of using invoices to purchase of invoices issued by tax offices or use of e-invoices with verification codes of tax offices, or to implement other invoice management measures under current regulations; to decide on the form of using invoices for taxpayers using invoices for the first time;

b/ For medium- and low-risk taxpayers: To select suitable subjects for review, examination and handling, and provide more assistance to taxpayers in proper compliance with the law on invoices.

The General Department of Taxation shall specify methods of selection of suitable subjects to meet tax administration requirements of each locality in each period.

2. Application of risk management in other professional operations

Based on risk levels of other professional operations and professional information, tax offices shall decide to apply appropriate professional measures according to their functions and tasks.

Article 22. Control and sentinel supervision of taxpayers showing signs of violation of the tax laws

1. Taxpayers subject to sentinel tax supervision are those showing the following signs:

a/ They conduct via-bank transactions showing suspicious signs as specified by the law on money laundering prevention and combat and related to tax evasions or frauds.

b/ They or their lawful representatives are accused in criminal cases for violations related to taxes, invoices or documents.

c/ They show signs of high tax risks in key issues or through information collected from administration work of tax offices subject to tax administration supervision.

d/ They are selected from the list of taxpayers at the level of non-compliance with the tax laws specified in Article 10, list of very high- or high-risk taxpayers specified in Clause 1, Article 11 of this Circular or fail to provide explanations or additional information, or provide explanations or additional information not meeting requirements or beyond the time limits stated in notices of tax offices.

2. Tax offices at all levels shall monitor, supervise and apply professional tax administration measures appropriate to each case specified in Clause 1 of this Article.

3. The General Department of Taxation shall provide the collection and analysis of information, and identification of key issues subject to supervision and supervision measures in accordance with regulations in each period.

Article 23. Examination and assessment of application of risk management in management of tax registration

1. To examine and assess the following contents:

a/ Quality of the application of professional risk management measures and techniques;

b/ Efficacy and effectiveness of the application of risk management in professional tax administration operations;

c/ Organization and results of implementation of examination or inspection decisions or other professional measures on the basis of application of risk management;

d/ Evaluation of effectiveness of criteria and indicators for assessment of tax law compliance by and classification of risk levels of taxpayers.

2. Examination and inspection measures

a/ To summarize information and figures on application of risk management reported by tax offices at all levels, departments and units of the General Department of Taxation;

b/ To collect, analyze and summarize information about results of the application of risk management in professional tax administration operations;

c/ To form working teams to carry out examination of the application of risk management at tax offices at all levels.

3. The General Director of Taxation shall delegate responsibilities for examination and assessment of the application of risk management in tax administration to risk management units according to Clause 2 of this Article. The assessment shall be carried out regularly and reported on a biannually and annual basis to meet arising operation requirements.

Article 24. Supervision and assessment of the implementation of plans on improvement of law compliance

1. To supervise and assess the following contents:

a/ Organization of implementation of plans on improvement of law compliance;

b/ Results and effectiveness of plans on improvement of law compliance, specifically:

b.1/ Efficacy and effectiveness of application of handling measures by tax offices at all levels on the basis of risk analysis and identification for each taxpayer segmentation;

b.2/ Actual results and expected results of implementation of risk mitigation measures through compliance measurement.

c/ Application of a transparent process in formulation and implementation of plans on improvement of law compliance;

d/ Improvement of overall levels of compliance by different groups of taxpayers and tax liabilities;

dd/ Organizational apparatuses and human resources of tax offices at all levels for the implementation of plans in order to ensure implementation efficiency and effectiveness according to set objectives.

2. Supervision and assessment measures

a/ To summarize information and figures on implementation of plans on improvement of law compliance reported by tax offices at all levels, departments and units of the General Department of Taxation;

b/ To collect, analyze and summarize information about implementation results;

c/ To form working teams to carry out examination at offices of tax offices at all levels.

3. The General Director of Taxation shall delegate responsibilities for supervision and assessment of the implementation of plans on improvement of law compliance to risk management units according to Clause 2 of this Article. The supervision and assessment shall be carried out regularly and reported on a biannually and annual basis to meet requirements on progress of implementation of plans on improvement of law compliance.

Chapter V

ORGANIZATION OF IMPLEMENTATION

Article 25. Implementation responsibility

1. Functional agencies and units of the Ministry of Finance and related ministries and sectors; organizations and individuals involved in tax administration shall provide information and coordinate with one another in the application of risk management in tax administration in accordance with current laws and this Circular.

2. Pursuant to this Circular, the General Director of Taxation shall promulgate:

a/ The indicators and criteria specified in Articles 10, 11 and 12 of this Circular to meet tax administration requirements in each period; and annually review and revise them to ensure their updatedness and practicality;

b/ Specific regulations on responsibilities of tax offices at all levels, tax officers and measures to collect and process information about risk management; scores, weighted scores and professional measures and techniques to manage risks in tax administration;

c/ Processes, regulations, provisions and guidance on application of risk management in tax administration.

3. Risk management units shall act as focal points and assume the prime responsibility for:

a/ Managing and operating applications of risk management in tax administration as well as information and data systems to serve risk management according to their delegated powers;

b/ Organizing, providing professional guidance on, and examining, the collection and processing of information about risk management; professional risk management measures and techniques and application of risk management in professional tax administration operations;

c/ Managing sets of indicators and criteria issued by the General Director of Taxation according to Point a, Clause 2 of this Article on the risk management information system and related information systems; monitoring, assessing, adjusting and adding indicators and criteria to meet management requirements in each period.

4. Tax Branches, regional Tax Branches, provincial-level Tax Departments, departments and units of the General Department of Taxation, tax officers shall properly and fully implement the provisions on application of risk management of this Circular and relevant documents.

Article 26. Effect

1. This Circular takes effect on July 2, 2021.

2. This Circular replaces the Ministry of Finance’s Circular No. 204/2015/TT-BTC of December 21, 2015, providing the application of risk management in tax administration.

3. In case the legal documents referred to in this Circular are revised or replaced, the revising or replacing documents shall prevail.-

Minister of Finance
HO DUC PHOC

* The appendices to this Circular are not translated.