Are there any risks when the Customs office refunds the overpaid Value Added Tax at the import stage?

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Quang Ngai Customs officers inspect imported goods. Photo: T.Hoa

Normally, the VAT paid by enterprises at the import stage, to the monthly tax reporting period, is declared and deducted at the domestic Tax office. After that, if there are transactions to correct the customs declaration, such as the enterprises submits a C/O to enjoy special preferential tax rates or the case of goods that are crude oil, petrol and ore, as the agreement on the price mechanism is determined after delivery and when the official price is available, this price will be reduced compared to the provisional price registered on the customs declaration. The enterprise will exceed the amount of VAT at the import stage when performing the operations to correct the customs declaration.

At that time, according to current regulations, enterprises have the right to request Customs to refund this overpaid VAT amount. However, if the enterprise has deducted input VAT before at the domestic Tax office but still exercises the right to refund this excess VAT at the Customs office, it is very easy to lead to the risk that the enterprise will refund the excess value (deduction) two times for a VAT amount already paid into the State budget (one time deducting at the Tax office and one time refunding the excess at the Customs office).

According to Clause 4, Article 132 of Circular 39/2018/TT-BTC dated April 20, 2018 amending and supplementing a number of articles of Circular 38/2015/TT-BTC dated March 25, 2015 of the Minister of Finance regulating customs procedures, customs inspection, supervision, export tax, import tax and tax administration for exported and imported goods: “For VAT to be refunded according to the provisions of Clause 2, the taxpayer is responsible for declaring to the Tax office where the enterprise is managed about the amount of VAT refunded by the Customs office in accordance with the law. After issuing the tax refund decision, the Customs office shall provide information to the Tax office”.

However, the implementation of this declaration relies entirely on the enterprise's sense of legal observance, the information mechanism between the Tax office and the Customs office after a tax refund decision is not really reliable. It is easy to miss information.

For the same overpaid VAT at the import stage at the customs office, the different enterprises choose to handle it differently. While many enterprises that have overpaid VAT at the import stage do not apply for a refund at the Customs office, they only make deductions directly at the Tax office. But some units choose the right to refund excess VAT at the Customs office and then adjust it with the Tax office (because it has been deducted before).

In case for any reason intentionally or unintentionally, after refunding the overpaid VAT at the Customs office, the enterprise fails to declare to the Tax office managing them about the amount of VAT refunded by the Customs office under the provisions of the law, it leads to a great risk in tax management that overpaid VAT at the Customs office will return to the enterprises up to two times (once in the form of deduction at the Tax office and once in the form of direct refund at the Customs office).

In order to ensure compliance with the provisions of the law, strict management, and avoiding risks caused by objective and subjective factors related to the refund of overpaid VAT at the import stage, the Customs office should further strengthen the post-customs clearance inspection for declarations that refund VAT overpaid at the import stage.

At the same time, Customs should consider soon having a reliable mechanism or upgrading the information exchange system between the Customs and the Tax office on this issue in the direction of integrating the inspection and monitoring of VAT refund data of the enterprises, avoiding the case that the enterprise refunds the excess VAT at the Customs office but does not adjust the deduction at the domestic Tax office, minimizing the risk of double tax refund for excess VAT.

Or it is also possible to amend the unified document like in the previous regulations that only the Tax office has the authority to refund VAT (including excess VAT at the import stage). This will help improve the efficiency of tax administration at the Customs office as well as avoid creating loopholes leading to related law violations.