Can fines and late payment interest be exempted in case of force majeure?

According to Binh Phuoc Customs Department, during post-clearance audit, the unit had conducted inspection for the yarn item of Bautex Vina Co., Ltd. With inspection results, Binh Phuoc Customs Department issued a notice to impose tax on yarn products due to the incorrect declaration of HS codes.

However, at the time of inspection, Bautex Vina Co., Ltd. said the Customs authority imposed tax on customs declarations registered after the issuance date of a document directing to conduct post-clearance audit for goods of type A12. Post-clearance audit within five years after the goods have been cleared for A12 business type will cause problems for enterprises because enterprises have calculated the profits after producing goods. Ff the customs authority conducts a post clearance audit after clearance and imposes tax on large amounts, the firm does not calculate this estimate.

Bautex Vina Co., Ltd emphasised that, due to the impact of the pandemic, the company has no orders, customers are making late payments and businesses are maintaining moderate operations.

Binh Phuoc Customs officials check vehicles on entry and exit. Photo: N.H

Therefore, Bautex Vina Co., Ltd. agreed to pay the tax assessment but asked for an extension of the tax assessment until December 31, 2021. At the same time, Bautex Vina Co., Ltd. proposed the Customs authority consider exempting administrative fines and late payment interest. The reason Bautex Vina Co., Ltd. said that because of the impact of the pandemic, the operation of firms faced many difficulties.

Regarding this issue, according to General Department of Vietnam Customs, Point a, Clause 27, Article 3 of the Law on Tax Administration No. 38/2019/QH14 stipulates one of the force majeure cases: “a) The taxpayer suffers material damage due to experiencing natural disasters, catastrophes, epidemics, fires, unexpected accidents.”

Clause 8, Article 59 of the Law on Tax Administration No. 38/2019/QH14 stipulates: “8. Taxpayers who must pay late payment interest as prescribed in Clause 1 of this Article are exempted from late payment interest in case of force majeure specified in Clause 27, Article 3 of this Law.”

The time limit for extending deadline for tax payment is prescribed as follows: a) No more than trwo years from the date of expiration of time limit of tax payment for the case specified at Point a, Clause 1 of the article.

Clause 1, Article 140 of the Law on Tax Administration No. 38/2019/QH14 stipulates exemption from fines for tax administration violations: “1. Taxpayers who are fined for administrative violations of tax administration suffer damage in the event of force majeure specified in Clause 27, Article 3 of this Law shall be exempt from fines. The maximum total amount of fines shall not exceed the value of damaged property or goods. 2. Not exempting from fines for administrative violations on tax administration for cases where the decision on sanctioning administrative violations on tax administration has been completed by tax administration agencies or competent State agencies.”

Point a1, Clause 2, Article 11 of Circular 06/2021/TT-BTC dated January 22, 2021 of the Ministry of Finance stipulating: “2. Documents enclosed with the official letter requesting the extension of tax payment for the case specified at Point a, Clause 1, Article 62 of the Law on Tax Administration… a.1) A written certification from one of the following agencies or organisations: Police offices of communes, wards and townships; People's Committees, wards and townships; Management Board of Industrial Parks, Export Processing Zones, Economic Zones, Border Gate Management Boards, Airport Authorities, and Port Authorities where force majeure events have occurred causing natural disasters, catastrophes, epidemics, and unexpected accidents causing material damage, directly affecting production and business: 1 original paper.”

Compared to the above provisions, the case of Bautex Vina Co., Ltd. has been taxed and the enterprise is still operating so it must pay late payment interest and fines.