VietnameseOfficial Dispatch No. 7333/BTC-TCT of June 24, 2008, On handling of business establishments using unlawful invoices
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Official Dispatch No. 7333/BTC-TCT of June 24, 2008, On handling of business establishments using unlawful invoices
| Issuing body: | Ministry of Finance | Effective date: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Official number: | 7333/BTC-TCT | Signer: | Do Hoang Anh Tuan |
| Type: | Official Dispatch | Expiry date: | Updating |
| Issuing date: | 24/06/2008 | Effect status: | Known Please log in to a subscriber account to use this function. Don’t have an account? Register here |
| Fields: | Administration , Tax - Fee - Charge |
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THE MINISTRY OF FINANCE ------- | THE SOCIALIST REPUBLIC OF VIETNAM Independence– Freedom – Happiness --------------- |
No. 7333/BTC-TCT On handling of business establishments using unlawful invoices | Hanoi, June 24, 2008 |
To: Provincial Tax Offices
The Ministry of Finance has received official letters of some Provincial Tax Offices, asking for guidance on handling of business establishments using unlawful invoices. Concerning this matter, the Ministry of Finance provides the following guidance:
1. Current provisions on tax policies related to the use and management of invoices and unlawful invoices
1.1. Provisions on invoices:
Point 2 and Point 3.1, Part C of the Ministry of Finance’s Circular No. 120/2002/TT-BTC of December 30, 2002, guiding the implementation of the Government’s Decree No. 89/2002/ND-CP of November 7, 2002, providing for the printing, issuance, management and use of invoices, stipulate:
Point 2: “Organizations and individuals that commit acts of violation specified in Articles 12, 13, 14, 15 and 16 of the Government’s Decree No. 89/2002/ND-CP of November 7, 2002, causing loss of tax revenues to the state budget shall, apart from being administratively sanctioned under these articles, be also subject to:
2.1. Retrospective collection of evaded tax amounts.
2.2. Tax-related fines under the tax laws. If committing serious violations, they shall be examined for penal liability under law.”
Point 3.1: “…For organizations and individuals that have purchased invoices but used them illegally (they fled away), those invoices will not be accepted for declaration to calculate creditable or refundable value-added tax amounts and compute reasonable expenses.”
1.2. Provisions on value-added tax:
Point 1.3, Section III, Part B of the Ministry of Finance’s Circular No. 120/2003/TT-BTC of December 12, 2003, and Point 1.3, Section III, Part B of the Ministry of Finance’s Circular No. 32/2007/TT-BTC of April 9, 2007. guiding value-added tax, stipulate: “Business establishments may not calculate and credit input value-added tax in the following cases: Added value invoices are issued against regulations, i.e., they are not written with value-added tax (except for special cases in which added value invoices may be written with value-added tax-inclusive prices); the seller’s name, address or tax identification number is not written or incorrectly written so that the seller is unidentifiable; value-added tax payment invoices and documents are counterfeit, invoices are erased or improperly modified, false invoices (invoiced goods or services are not actually sold); invoices are written with a value not true to the real value of goods or services purchased, sold or exchanged.”
1.3. Provisions on business income tax:
Point 4, Section IV, Part B of the Ministry of Finance’s Circular No. 128/2003/TT-BTC of December 22, 2003, and Point 1.1, Section III, Part B of the Ministry of Finance’s Circular No. 134/2007/TT-BTC of November 23, 2007, guiding business income tax, stipulate: “Business establishments may not calculate as costs expenses without sufficient invoices or documents as prescribed or with unlawful invoices or documents.”
Point 7, Part E of the Ministry of Finance’s Circular No. 128/2003/TT-BTC of December 22, 2003, stipulates: “Tax offices may assess taxable incomes for calculating business income tax for business establishments in the following cases:
- They fail to observe or improperly observe the accounting, invoice and document regulations.
- They fail to declare or improperly declare tax bases or fail to prove the tax bases stated in their tax declarations at the request of tax offices…”
1.4. Provisions on element-based assessment:
Point 2.1, Section XII, Part B of the Ministry of Finance’s Circular No. 60/2007/TT-BTC of June 14, 2007, guiding the implementation of a number of articles of the Law on Tax Administration and guiding the implementation of the Government’s Decree No. 85/2007/ND-CP of May 25, 2007, detailing the implementation of a number of articles of the Law on Tax Administration, stipulates:
“Taxpayers that pay tax by the declaration method are subject to assessment of each element related to the determination of payable tax amounts in the following cases:
2.1. Tax agencies obtain, through tax examination or tax inspection, grounds to believe that taxpayers have conducted accounting at variance with regulations, or have inadequately, inaccurately and untruthfully recorded figures in accounting books, thus leading to incorrect identification of elements used as a basis for calculation of payable tax amounts, except for the case of tax assessment.”
1.5. Provisions on accounting:
In Accounting Standard No. 01 - General Standard promulgated and publicized together with the Minister of Finance’s Decision No. 165/2002/QD-BTC of December 31, 2002, stipulating the basis accounting principle of matching as follows: “The recording of revenues and that of costs must match. When a revenue is recorded, a corresponding cost related to the generation of such revenue must be recorded. Costs corresponding to revenues include costs incurred in the period in which revenues are created and costs incurred in the previous periods or payable costs related to the revenues of such period.”
1.6. Provisions on unlawful invoices:
Point 4.4, Section IV, Part B of the Ministry of Finance’s Circular No. 32/2007/TT-BTC of April 9, 2007, guiding value-added tax; Section V, Part B of the Ministry of Finance’s Circular No. 61/2007/TT-BTC of June 14, 2007, guiding the handling of tax law violations, specifies 7 cases in which purchase, sale and use of invoices and documents are considered unlawful.
2. Pursuant to the above provisions and based on the practical situation, tax offices shall handle each specific case of violation as follows:
2.1. In case tax offices, police offices or other functional agencies conclude, through inspections, verifications or investigations, that invoices used by business establishments are unlawful:
2.1.1. Business establishments may not use these invoices for making declaration for input value-added tax credit. If tax credit (or tax refund) has already been made, tax offices shall recover credited or refunded value-added tax amounts.
2.1.2. Upon determining incomes liable to business income tax, business establishments may not account values of goods and services purchased with unlawful invoices as reasonable costs.
2.1.3. In case tax offices inspect and request business establishments to prove that business establishments have purchased goods and services for use in production or business activities; have entered into contracts and made written records of contract liquidation (if any); have made warehousing and ex-warehousing bills, payment vouchers and conducted accounting strictly under regulations; and business establishments warrant that the purchase of goods and services is true, purchased goods and services have been sold out with proper tax declaration and payment and adequate accounting, and they shall take responsibility before law, tax offices shall assess costs of goods and service purchase to be subtracted upon determination of incomes liable to business income tax under Point 7, Part E of the Ministry of Finance’s Circular No. 128/2003/TT-BTC of December 22, 2003, for cases in which unlawful invoices were used for accounting invoiced expenses as costs before July 1, 2007; or assess, based on elements, costs of goods and service purchase under Point 2.1, Section XII, Part B of the Ministry of Finance’s Circular No. 60/2007/TT-BTC of June 14, 2007, for cases in which unlawful invoices are used for accounting invoiced expenses as costs from July 1, 2007, on.
When assessing costs, tax offices may refer to goods or service prices announced by state management agencies at the time of assessment, or selling or buying prices set by enterprises engaged in the same business line or trading in the same goods item, or selling prices set by enterprises trading in the same goods item to determine goods or service costs to be subtracted upon determination of incomes liable to business income tax.
In case business establishments using unlawful invoices have been handled by tax offices and prohibited from accounting invoiced goods and service values as reasonable costs upon determination of incomes liable to business income tax and business establishments lodge no complaints or lodge complaints after the expiration of the statute of limitations for complaining, no retrospective assessment of costs will be made under provisions of this Section.
2.1.4. In case business establishments use unlawful invoices, resulting in tax underpayment, frauds or evasion, they shall be sanctioned for tax-related administrative violations, specifically as follows:
- In case the use of unlawful invoices results in tax underpayment, frauds or evasion which is not serious enough to be subject to criminal investigation and handling, tax offices shall impose sanctions specified in Chapter II of the Government’s Decree No. 100/2004/ND-CP of February, 25, 2004, on the sanctioning of administrative violations in the tax domain, and its guiding documents, for cases of use of unlawful invoices before July 1, 2007; or impose sanctions specified in Sections III and IV, Part B of the Ministry of Finance’s Circular No. 61/2007/TT-BTC of June 14, 2007, for cases in which unlawful invoices are used from July 1, 2007.
- In case the use of unlawful invoices results in tax evasion or fraud which is serious enough criminal handling, tax offices shall transfer dossiers of violating business establishments to police offices for criminal handling under regulations.
2.1.5. In case the use of unlawful invoices does not result in tax underpayment, fraud or evasion, business establishments shall be sanctioned for their acts of using unlawful invoices under Clause 4, Article 14 or Clause 3, Article 15 of the Government’s Decree No. 89/2002/ND-CP of November 7, 2002, on the printing, issuance, management and use of invoices.
2.2. In case business establishments use goods and service purchase invoices of fleeing business establishments to declare for value-added tax credit or to account invoiced goods and service purchase expenses as costs upon determination of incomes liable to business income tax, and the time of goods and service purchase is prior to the date on which business establishments are identified as fleeing according to tax offices’ notices and but tax offices or other functional agencies do not have enough grounds to conclude that those invoices are unlawful, tax offices shall inspect to verify whether goods and services have been purchased and request business establishments to prove and take responsibility before law for the truthfulness of purchase and sale. If there are purchase and sale contracts and written records of contract liquidation (if any), warehousing and ex-warehousing bills, and payment vouchers; and purchased goods and services of fleeing establishments for use in business activities have been sold out with tax declaration and adequate and proper accounting, business establishments may credit input value-added tax according to those purchase invoices and account invoiced purchase expenses as costs upon determination of incomes liable to business income tax.
If tax offices or other functional agencies conclude, through inspections, verifications or investigations, that invoices used by business establishments are unlawful, business establishments shall be handled under Point 2.1 above.
3. In case tax offices obtain, through inspections, grounds to conclude that business establishments have committed acts of issuing false invoices (invoiced goods or services are not actually sold) and using unlawful invoices (invoiced goods are not purchased) in order to legalize the accounting of invoiced expenses as costs (sale invoices and purchase invoices are both false because no goods have been sold or purchased), tax offices shall exclude turnover and costs already included in incomes liable to business income tax and concurrently impose sanctions specified in Articles 14, 15 and 16, Chapter III of the Government’s Decree No. 89/2002/ND-CP of November 7, 2002, on the printing, issuance, management and use of invoices, and notify in writing tax offices managing business establishments that have issued these false invoices and business establishments that have used false invoices of sanctioned establishments of acts of issuing and using false invoices.
The Ministry of Finance notifies the above guidance to local tax offices for information. Any problems arising in the course of implementation should be promptly reported to the Ministry of Finance for study and settlement.
FOR THE MINISTER OF FINANCE VICE MINISTER Do Hoang Anh Tuan |
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