Risk management in VAT refund
Circular 99/2016/TT-BTC on VAT refund management clarified applicable principles of risk management in the management of VAT refund. According to the General Department of Taxation,tax offices apply risk management to encourage and create favorable conditions fortaxpayersto comply with the provisions of law, as well as prevent, detect and handle violations of tax laws in tax administration for taxpayers.
The risk assessment, and legal compliance review of taxpayers pursuant to the provisions of laws, processes, and professional measures of tax administration, is based on criteria of risk management, specialist information, and information and data on the "Taxpayers database system" of the General Department of Taxation.
Accordingly, tax offices shall check, inspect, supervise and control on the basis of risk level rating,and apply appropriate measures for cases rated low-risk level. The Circular specifies the application of professional measures to manage tax refunds for certain high-risk cases, for example: When the tax inspection discovered that a taxpayer purchased goods and services from another taxpayer (the provider of goods and services) with tax evasion or tax fraud, the tax office would inspect the provider of goods and services; or offer the tax office, which directly manages the provider of goods and services, to plan to inspect or provide information about that taxpayer’s observance of tax law to have foundation to settle the tax refund.
In the cases where taxpayers havepayment transactions involvingorganizations and individuals with suspicious transactions under the warning list of inspection offices or banking supervisions; or by means of checking, tax inspections discover taxpayers have payment receipts without complete or regulated content, the tax offices will send documents to request credit organizations or organizations providing related intermediary payment services to provide information (including account ledger) of the payers (or transfers), the beneficiaries of the money on the receipt (or individuals related to the beneficiaries) to have foundation to settle the VAT refund;
In the cases thattax inspections discover the taxpayers have signs of tax evasion or tax fraudunder the provisions of the tax law and have signs of crime,tax offices will transfer the file to Police offices to handle according to the provisions of the Criminal Procedure Code.
In a recent press conference related to this issue, the representative of the General Department of Taxation said the benefits of the application of risk management in the VAT refund would increase the proportion of taxpayers complying with the law. Besides, tax officeshave coordinated measures of risk assessment, classification of documents, and selection of high-risk cases to inspect, creating favorable conditions for taxpayers complying with the law. Tax offices will execute a full update to the database system of tax specialist information and taxpayers liston the principle of electronic and digitized documents and information. The operational activities must be executed on the system to ensure the management status updates regularly and continuously.
According to the General Department of Taxation, common sense would be an attempt to implement tax refund in time, striving to increase the proportion of “tax refund before inspection” records. The goal at the end of 2016 is that the proportion of “tax refund before inspection” cases is at least 80%; in which at least 20% of the cases will be inspected after tax refund within 12 months; therefore 40% of the cases must be inspected immediately before or after tax refund.
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