Risks related to the use of illegal invoices and fraudulent use of invoices
- Masaya Sakai
1. Definition of illegal invoice use and invoice fraud
Article 3, Paragraph 9 of Decree 123/2020/ND-CP dated October 19, 2022 stipulates the use of illegal invoices and fraudulent use of invoices as follows:
|Use of illegal invoices
|Unauthorized use of invoices
|Using fake invoices/documents. Using invoices and documents that do not contain the information required by law.
|Using invoices and documents that do not contain the information required by law. Also, using deleted or modified invoices or documents without complying with laws and regulations.
|Using invoices/documents that are no longer valid or have expired.
|A transaction has actually occurred, but some or all of the invoice details (quantity, amount, etc.) are incorrectly issued. Also, use that invoice.
|Using an invoice during a mandatory invoice ban period. (Except when use is approved by tax bureau notification)
|Issue fake invoices.
An invoice is issued even though no transaction has actually occurred.
|Using electronic invoices that are not registered with the tax department.
|Using an original or copy of an invoice with contents such as amount or quantity intentionally altered.
|Companies that have adopted coded e-invoices from the Tax Bureau use codeless e-invoices.
|Regarding invoices when transporting goods, present a separate invoice for the goods or services to prove the information about the goods or services.
|After the date of publication by the Tax Department of the list of sellers who do not carry out business activities at their registered business address, enterprises continue to use invoices for purchasing goods and services with such sellers.
|Use invoices and documents of other companies and individuals (unless authorized by the tax authority to issue invoices) to legalize the purchase or sale of goods and services.
(Example: I purchased a product from Company A, but Company B issued an invoice.)
|Companies use invoices for purchases of goods and services with sellers before the Tax Department publishes the list of sellers who are not conducting business at their registered business address. Or, the enterprise does not know that the seller is not conducting business at the registered business address, but uses the relevant invoices and documents determined by the tax bureau, public security bureau or other authorities to be illegal.
|Using invoices/documents that are determined to be fraudulent by the Tax Bureau, Public Security Bureau, or other authorities.
2. Risks related to the use of illegal invoices and fraudulent use of invoices
2.1 Regarding administrative fines
Administrative fines related to taxation and invoices were stipulated in Decree 125/2020/ND-CP as follows:
|Administrative Fines and Corrective Measures
|1.Use of illegal invoices and fraudulent use of invoices
|Illegal use of invoices and fraudulent use of invoices pursuant to 1 above (excluding cases stipulated in Article 16, Paragraph 1dd and Article 17, Paragraph 1d of Decree 125/2020/ND-CP)
|・Administrative fine: 20 million to 50 million VND
・Corrective measures: Forcibly destroy used invoices.
|2. Article 16, Paragraph 1dd of this Cabinet Order (act of false declaration)
|Acts that result in a reduction in the amount of tax payable or an increase in the amount of tax refund, exemption, or reduction due to the use of illegal invoices or accounting based on fraudulent use of invoices. If the tax bureau finds out through audit and investigation, the purchaser can fully account for the illegal invoice in accordance with the regulations and prove that the act of using the illegal invoice is attributable to the seller.
|・Administrative fine: 20% of the undeclared amount, or the difference if the amount of tax refund, exemption, or reduction is higher than the regulation
· Corrective action:
Article 16 paragraphs 1d and 2a
|3. Article 17, Paragraph 1d of this Cabinet Order
|Acts that result in a reduction in the amount of tax payable or an increase in the amount of tax refunds, exemptions, or reductions due to accounting based on the use of illegal invoices or fraudulent use of invoices, which is considered tax evasion.
-If there is one or more extenuating circumstances:
Administrative fine = tax evasion amount
-If there are no extenuating or aggravating circumstances:
Administrative fine = 1.5 x tax evasion amount
-If there is one aggravating factor:
Administrative fine = 2 x tax evasion amount
-If there are two aggravating factors:
Administrative fine = 2.5 x tax evasion amount
-If there are three aggravating factors:
Administrative fine = 3 x tax evasion amount
-Pay the tax evasion amount and late payment interest.
(If the sanction expiration date of the administrative fine has expired, the administrative fine will not be imposed, but the tax evasion amount and overdue interest will be paid.)
-Adjust the profit and loss data in the CIT return and adjust the input VAT deductible part in the VAT return to the next term. (if any)
Article 17 Paragraphs 1d, 2, 3, 4, 5, and 6
2.2 Deduction of input VAT
Article 15, Paragraph 1 of Circular 219/2013/TT-BTC stipulates the conditions under which input VAT can be deducted as follows:
Therefore, there is a risk that input VAT relating to the use of illegal invoices and fraudulent use of invoices will not be deductible.
2.3 Whether or not corporate tax (CIT) is deductible
In Article 6, Paragraph 1 of Circular 78/2014/TT-BTC, the conditions to be treated as deductible under CIT are stipulated as follows:
a) Actual costs incurred in connection with the company’s production and business activities
b) Expenses for which there are legal invoices and documents in accordance with the law.”
Therefore, there is a risk that costs related to the use of illegal invoices and fraudulent use of invoices will be considered non-deductible to CIT.
3. Points to note regarding the use of illegal invoices and fraudulent use of invoices
3.1 How to handle cases where the purchase VAT invoice used by a company is a fraudulent invoice or fraudulent use of an invoice
|Treatment of recipients of input VAT invoices
|1. If the invoice was issued before the date on which the seller absconded, disappeared, or disbanded.
|Prove to the tax authorities that the transaction actually occurred and that there are sufficient relevant invoices and documents. The required documents are as follows.
・Invoice, sales contract, cancellation letter (if any), delivery note/delivery note, shipping slip/warehousing slip
・Official letter to the tax bureau (prepare as an explanation that the purchase VAT invoice used by the company is not an illegal invoice or fraudulent use of the invoice)
If the above explanation is accepted, the relevant input VAT can be deducted and the cost can be recorded as a deduction for CIT.
However, the General Administration of Taxation often sends an official letter to the Taxation Bureau requesting that each company confirm the status of invoice usage. It is expected that the Taxation Bureau will not easily approve companies’ explanations/official letters, as they have been rigorously investigating whether companies are using legal invoices during recent tax audits.
|2. If the invoice is issued after the date on which the seller absconded, disappeared, or disbanded.
|If you have not yet declared your VAT deduction and filed your CIT tax return.
|・Temporarily suspend VAT deduction declarations and CIT tax returns for invoices suspected of violating laws and regulations.
– Wait for official results from competent authorities.
・Only invoices that are not suspected of violating laws and regulations should be declared for VAT deduction and filed for CIT tax return.
|If you have already declared your VAT deduction and filed your CIT tax return
|・Adjust the deducted VAT amount.
(If this adjustment causes an additional amount of VAT to be paid by the company, or if the refund amount is adjusted due to a tax audit after the VAT refund has been refunded, the additional amount and late payment interest will be imposed.)
・Revise the amount that was treated as deductible to non-deductible.
(If this adjustment results in a CIT amount to be paid by the company, an additional amount and late payment interest will be imposed.)
3.2 Measures to prevent the use of illegal invoices and the risk of fraudulent use of invoices
・Select and transact with a highly reliable seller.
・Search the seller’s information on the website of the General Department of Taxation (gdt.gov.vn). You can also search and check the invoice information issued by the seller on the invoice information portal (tracuuhoadon.gdt.gov.vn).
・Prepare and keep complete documents and evidence to prove that the actual transaction took place (invoice, sales contract, cancellation letter (if any), delivery note/delivery note, shipping slip/goods receipt) vouchers, payment vouchers, etc.).
- -Check the list of companies with high tax risks and the list of prohibited use of invoices from the tax bureau in the region where the seller is located.
- -Invoices from industries such as restaurants, hotels, and transportation pose a high risk, so special caution is required.
・Use the input invoice checking function of accounting software that is linked to the tax bureau system.