Increasing the fine level for administrative violations of tax procedures

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The Government has issued Decree 125, effective from December 5, 2020, providing the sanctioning of administrative violations of taxes and invoices. Photo by Thuy Linh.

Raising the sanction level for tax administrative violations

According to statistics by the Ministry of Finance, from 2014 to 2018, the number of violations of tax procedures increased sharply each year. If in 2014, there were 34,837 cases of violations against tax procedures and 10,557 cases of violations on invoices, by 2017, the corresponding numbers were 103,381 cases and 27,535 cases, respectively. In 2018, the number of violations of tax procedures was 192,174 cases and violations on invoices totaled 45,513 cases.

According to the Ministry of Finance, this is due to the low fines that are not strict enough for taxpayers to raise their awareness of observing obligations to register tax and to declare items on tax declaration documents.

To perfect sanctions and raise taxpayers' awareness of compliance and voluntary observance of the tax law, and at the same time ensure consistency with the provisions of the Law on Handling of Administrative Violations, Law on Tax Administration No. 38/2019/QH14 and suitable with the actual situation, improving the effectiveness and efficiency of the sanctioning of tax administrative violations, the Government has issued Decree 125, effective from December 5, 2020, providing sanctioning of administrative violations against taxes and invoices.

Decree 125 has five chapters and 47 articles. Basically, administrative violations of tax, sanctions and remedial measures are built on the basis of inheriting the appropriate regulations in the Decree No. 129/2013/ND-CP; amending and supplementing a number of points to be consistent with the Law on Tax Administration 2019. At the same time, the sanction level for some violations against tax procedures is adjusted to be higher than before. Decree 125 also stipulates in detail the false declarations leading to a lack of tax, specific fines for tax evasion as well as aggravating and mitigating circumstances.

Specifically, the Decree clearly states: administrative violations with tax amount from VND100 million or more or the value of goods from VND500 million or more are determined as large-scale administrative tax violations and an administrative violation of 10 or more invoice numbers is identified as an administrative violation on a large-scale invoice. The principle of determining the fine level when there is an aggravating or extenuating circumstance is calculated to increase or decrease 10% of the average fine level of the fine.

For the group of violations of tax procedures, the minimum fine is VND500,000 and the maximum is VND25 million. In particular, the fine will increase sharply for the group of violations of tax registration deadlines and late submission of tax declaration dossiers.

In addition, the Decree also details the fine levels for tax and fees according to the aggravation and mitigation criteria and in accordance with the principles of the Law on Scope of Operations. Specifically: a one-time fine for violations on administrative tax with one mitigating circumstance; penalty of 1.5 times of calculation on tariff for an act of tax without an extenuating or aggravating condition. For valid tax cases with aggravation, a fine of 2 to 3 times will be imposed.

Supplement number of violations of electronic invoices

Decree 125 stipulates the sanctioning of tax administrative violations, invoices also inherit almost all violations and the fine level for violations on invoices in Decree No. 109. However, the new Decree amends a number of contents and supplemented regulations on violations of regulations on e-invoices with a fine corresponding to the fine level for paper invoices. At the same time, check and eliminate duplicates and puts similar behaviors scattered in many articles into a single article.

Specifically, adjusting the fine level for violations of regulations on loss, fire, and damage of invoices before notification of issuance, or purchased invoices of tax authorities but not yet made, from VND5 million to VND18 million, down to VND1 million to VND8 million, to be similar to the nature of the violation.

The Decree has rearranged a number of articles and clauses such as: gathering the current acts of giving and selling invoices in many articles into one article on sanctioning the act of giving and selling invoices; group of acts of losing, burning or corrupting invoices currently prescribed in many articles into one article on sanctioning the act of losing, burning or damaging invoices during the time of storage; rearranging acts of violation of regulations on invoicing into one article; reviewing and rearranging acts in the direction of only sanctioning the act of providing self-printed invoice software that does not comply with principles or when printed out, does not satisfy all provisions of the law on invoices.

The Decree also adds a number of acts to sanction violations on e-invoices such as: violation of regulations on destruction of invoices, making electronic invoices from a cash register without connection, and electronic data with tax authorities; transferring data of e-invoices to tax offices beyond the prescribed time limit; transferring the e-invoice data summary sheet which does not contain the full quantity of invoices issued in the period; providing e-invoice software that does not ensure principles under the provisions of the law on invoices. The Decree also adds a number of remedial measures such as forcing destruction of invoices; forcing to pay back illegal profits gained from conducting acts of administrative violations.

According to the General Department of Taxation, the promulgation of Decree 125 regulating the sanctioning of tax and invoice administrative violations is expected to enhance the effectiveness and efficiency of tax administration in order to combat tax losses, reduce tax debts, and properly and promptly collect tax amounts to the State budget. The Decree also thoroughly overcomes the shortcomings of the current regulations on handling administrative violations of taxes and invoices, thereby ensuring openness, transparency, consistency and fairness in the law application, ensuring uniformity in the principle of sanctioning administrative violations of taxes and invoices.