Which businesses at high risk in invoice issuance?

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The Ministry of Finance has announced consultancy for the draft circular guiding the implementation of a number of articles of the Government's Decree No. 123/2020 / ND-CP on invoices and documents.

Risks of invoice issuance

The draft circular guides a number of contents of e-invoices and e-documents in accordance with the Law on Tax Administration No. 38/2019 / QH14 and Decree No. 123/2020 / ND-CP prescribing invoices and documents such as: e-invoice under authorisation; types of e-invoices; name of e-invoice sheet, serial number of e-invoice; high risk businesses of applying electronic invoices of the tax agency and e-invoice application for special cases. In addition, the draft circular also guides some contents of paper invoices, cancellation of paper invoices and solutions.

This draft provides for the application of e-invoices when selling goods and services for cases ofhigh tax risks. A seller of goods or services that falls under high tax risks shall use an e-invoice with the tax agency’s code, regardless of the value of each sale of goods or services.

Enterprises and economic organisations subject to high tax risks are those that have an equity capital of less than VND15 billion and one of the following signs: failure to have legal ownership and use right for facilities (in line with business lines registered on the tax registration); do business in exploitation of soil, stone, sand and gravel; have suspicious banking transactions according to the provisions of law on prevention of money laundering; have revenue from sale of goods or providing services to other businesses whose owners have a parent, spousal, sibling or cross-ownership relationship, accounting for over 50% of total revenue on the finalisation of corporate income tax.

This draft circular also provides for enterprises at high risks in the issuance and use of invoices. They are newly established business establishments (operating for less than12 months) that have one of the following signs: failure to contributecharter capital as prescribed; registering many business lines; the owner registered theirbusiness in a locality other than the place where his/her permanent residence is registered; have sudden increase in revenue; the value of sold goods sold, output value-added tax is equal to or has insignificant difference from value of purchased goods or the input value-added tax.

Regarding business lines, cases of high risk in the issuance and use of invoices are: supermarket (retail of consumer goods, electronics); catering, restaurant, hotel; transport; construction materials business; petroleum, minerals (coal, kaolin and iron ore); agricultural and forestry products (wood chips, planks and slats,).

In addition, some other cases at high risks in invoice issuance such as enterprises with large revenue but lackingadequate warehouses (or have not got warehouses, do not pay warehouse rental costs), have not got fixed assets, or a disproportionate workforce (less than 10 employees); enterprises establish and operate in a province with input invoices and hire workers from an enterprises in another province; enterprises change their legal representative twice or more within 12 months or change the legal representative and change the business location at the same time.

Responsibilities of tax agency

In this draft, the Ministry of Finance statesthe General Department of Taxation is responsible for developing risk criteria to submit to authorities for promulgation or to promulgate according to its competence and developingprocedures and information technology system nationwide to assess and identify cases with signs of risk in issuance and use of invoices.

In addition, the tax agency is responsible for notifying enterprises or economic organisations in the case of high tax risks to change into using e-invoices with the tax agency’s code.

The draft clearly states that an enterpriseor economic organisation using e-invoices subject to high tax risks will apply e-invoices with the tax agency’s code in 12 consecutive months of operation from the time when the tax agency notifies the change for applying e-invoices with the tax agency's code.

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After 12 months, the tax agency will review and determine that if the enterprise or economic organisation is not subject to tax risk and eligible for applying e-invoices without the tax agency’s code, the tax agency will notify the enterprise or the economic organisation of allowing to use e-invoices without the tax agency's code as in Article 15 of the Government's Decree No. 123/2020 / ND-CP of October 19, 2020.