Handling the underreporting of sales revenue

Underreporting sales revenue is one of the most common compliance issues that may expose enterprises to tax reassessments, administrative sanctions, and adverse impacts on the transparency of their business operations.

I. Legal risks that enterprises may face when underreporting revenue

In business operations, revenue serves as a crucial basis for determining tax obligations and reflecting an enterprise’s financial position. However, in practice, many enterprises intentionally or unintentionally underreport revenue in order to reduce the amount of tax payable or due to errors arising from accounting procedures and the management of invoices and supporting documents. Such conduct may result in serious legal consequences if detected by the tax authorities.

One of the most common risks is the imposition of tax arrears, late-payment interest, and administrative sanctions for tax violations in accordance with tax administration laws. Furthermore, if the underreporting of revenue involves fraudulent conduct intended to evade taxes on a substantial scale, the individuals concerned may also take criminal liability for the offence of tax evasion under the Criminal Code 2015.

In addition to financial sanctions, enterprises may be subject to in-depth tax inspections and audits, suffer reputational damage, and encounter difficulties in obtaining financing, participating in bidding processes, or entering into commercial partnerships. Thus, the truthful and complete declaration of revenue is a mandatory requirement to ensure legal and financial security for enterprises.

II. Concept of underreporting sales revenue

1. What is underreporting sales revenue?

Underreporting sales revenue refers to the failure of an enterprise or business individual to fully reflect the actual revenue generated from the sale of goods or provision of services in tax declarations, accounting records, or financial statements. Such conduct may occur in various forms, such as failing to issue invoices for certain transactions, recording revenue at an amount lower than that actually generated, or delaying the recognition of revenue in order to reduce tax liabilities.

2. How does underreporting sales revenue differ from failing to declare revenue?

Underreporting sales revenue occurs when an enterprise submits revenue declarations, but the reported figures do not fully reflect the actual revenue generated. In contrast, failure to declare revenue refers to the complete omission or non-disclosure of revenue arising from one or more transactions to the tax authorities.

Although both acts may result in a loss of State budget revenue, the severity of the violation and the applicable sanctions may differ depending on the nature of the conduct, its consequences, and the degree of fault involved. Failure to declare revenue is generally regarded as a more serious violation if there is evidence of an intentional concealment of entire transactions.

3. Is underreporting revenue considered a violation of law?

Pursuant to Clause 1, Article 12 of the Law on Tax Administration 2025, taxpayers are obligated to accurately, truthfully, and fully declare information relevant to the determination of tax liabilities. Thus, underreporting revenue that results in a reduction of tax payable or an increase in tax exemptions, reductions, or refunds constitutes a violation of tax laws.

Depending on the nature and severity of the violation, the enterprise may be subject to administrative sanctions, tax reassessments, and late-payment interest in accordance with Decree No. 125/2020/ND-CP. If the conduct involves serious fraudulent intent aimed at tax evasion, the individuals concerned may additionally be prosecuted under the Criminal Code 2015.

III. Legal regulations relating to the underreporting of sales revenue

1. How does the law regulate the obligation to fully declare sales revenue?

Pursuant to Clause 1, Article 12 of the Law on Tax Administration 2025, taxpayers are required to file accurate, truthful, and complete tax declarations and submit tax dossiers within the prescribed deadlines. Taxpayers must also fully report all revenue items forming the basis for determining tax liabilities. In addition, accounting laws require enterprises to accurately and comprehensively record all revenue generated during an accounting period.

It means that all proceeds derived from the sale of goods or provision of services must be fully reflected in invoices, accounting books, and tax declarations. Where an enterprise intentionally omits revenue or records revenue below the actual amount in order to reduce tax liabilities, such conduct shall be deemed a violation of tax laws.

2. Authority to inspect and audit underreporting of revenue

Pursuant to Clause 2, Article 38 of the Law on Tax Administration 2025, tax authorities are empowered to conduct tax inspections and tax audits of taxpayers in order to assess the accuracy and truthfulness of tax declarations and compliance with tax laws. Such inspections and audits may include the examination of invoices, supporting documents, accounting records, transaction data, and other documents relating to the enterprise’s revenue.

In addition to tax authorities, if there are indications of serious violations or criminal offences, the police and other competent authorities may coordinate investigations in accordance with the law.

Enterprises that underreport revenue may be subject to either periodic inspections or ad hoc inspections where tax risks are identified. Accordingly, tax authorities possess extensive powers to inspect, audit, and address instances of underreporting sales revenue.

3. Regulations on tax reassessment for underreported revenue

Pursuant to Clause 1, Article 16 of the Law on Tax Administration 2025, if a taxpayer is found to have underreported revenue resulting in an underpayment of tax, the tax authority is entitled to reassess the taxpayer’s tax obligations and impose late-payment charges. The late-payment interest rate is 0.03% per day calculated on overdue tax amounts and other state receivables administered by tax authorities, and 0.03% per day calculated on overdue tax amounts administered by customs authorities.

If the taxpayer fails to cooperate or does not provide sufficient supporting documents, the tax authority may also apply tax assessment measures based on tax administration databases and other relevant information.

If the underreporting of revenue continues over multiple years, the accumulated tax arrears and late-payment interest may become substantial and seriously affect the enterprise’s financial position. Thus, underreporting revenue not only results in additional tax liabilities but may also lead to significant financial consequences.

4. How is the underreporting of sales revenue sanctioned?

Pursuant to Article 16 of Decree No. 125/2020/ND-CP, any incorrect tax declaration resulting in an underpayment of tax or an increase in tax exemptions, reductions, or refunds shall be subject to a fine equal to 20% of the underdeclared tax amount. In addition, the taxpayer must fully pay the outstanding tax amount together with late-payment interest in accordance with the Law on Tax Administration 2025.

In case the underreporting of revenue involves fraudulent conduct and intentional concealment of revenue for the purpose of tax evasion involving substantial amounts, the violating individual or organization may also be subject to criminal prosecution for the offence of tax evasion under Article 200 of the Criminal Code 2015 (as amended and supplemented in 2017). Sanctions may include substantial fines, suspension of business operations, or imprisonment depending on the severity of the violation.

IV. Questions regarding the underreporting of sales revenue

1. Is it possible to submit a supplementary tax declaration upon discovering underreported revenue?

Pursuant to Point d, Clause 5, Article 12 of the Law on Tax Administration 2025, taxpayers are entitled to submit supplementary tax declarations when errors are identified in previously filed tax dossiers, including cases involving the underreporting of sales revenue. Such supplementary declarations must be submitted before the competent authority announces a decision to conduct a tax inspection or audit at the taxpayer’s premises, or before the tax authority detects the violation.

If an enterprise voluntarily files a supplementary declaration and fully pays the outstanding tax amount together with late-payment interest in accordance with the law, it may be eligible for consideration of mitigating circumstances in relation to administrative sanctions, depending on the specific circumstances of the case. However, where the underreporting of revenue involves intentional fraudulent conduct or is remedied only after the violation has been discovered, the enterprise may still be subject to strict enforcement measures.

2. Can failure to issue invoices be considered a cause of underreported revenue?

Under tax and invoicing regulations, the issuance of invoices constitutes an important basis for recognizing revenue and determining tax obligations. If goods are sold or services are provided without issuing invoices as required by law, the resulting revenue may not be fully reflected in accounting records and tax filings.

Accordingly, the failure to issue invoices is commonly regarded by tax authorities as one of the primary causes of underreported sales revenue. In addition to being subject to tax reassessment in respect of omitted revenue, enterprises may also take separate sanctions for violations relating to electronic invoicing regulations.

3. Is revenue generated from sales through facebook, tiktok, and shopee required to be fully declared?

Pursuant to Clause 1, Article 12 of the Law on Tax Administration 2025, all revenue generated from business activities must be declared and be subject to tax obligations in accordance with the law, regardless of whether the business is conducted through traditional channels or digital platforms. Accordingly, revenue generated from sales through Facebook, TikTok, Shopee, or other e-commerce platforms must be fully declared to the tax authorities.

At present, tax authorities have strengthened the monitoring of electronic transaction data and cooperate with banks, logistics service providers, and e-commerce platforms to verify the actual revenue earned by online sellers. Any deliberate concealment or incomplete declaration of revenue may result in tax reassessments and sanctions in accordance with applicable laws.

4. Can a tax return be amended upon discovering underreported revenue?

Point d, Clause 5, Article 12 of the Law on Tax Administration 2025 permits taxpayers to amend tax declarations upon discovering errors relating to revenue, expenses, or tax liabilities. Such amendments are made through supplementary tax filings in accordance with the procedures prescribed by the tax authorities.

However, amending a tax return does not automatically exempt a taxpayer from liability in all circumstances. If the error results in an underpayment of tax, the enterprise must still pay the outstanding tax amount together with any accrued late-payment interest.

5. Does underreporting revenue affect a company's ability to obtain bank financing?

Revenue is one of the main factors considered by banks when assessing an enterprise’s financial capacity, repayment ability, and level of transparency during the loan approval process. If an enterprise underreports revenue, the figures reflected in its financial statements and tax records may fail to accurately represent the actual scale of its operations, thereby negatively affecting its ability to obtain loans or secure credit facilities.

Furthermore, during the due diligence process, banks often verify the consistency between declared revenue, account cash flows, and sales invoices. If indications of inaccurate or dishonest reporting are identified, the enterprise may be regarded as presenting elevated financial and legal risks.

V. Why should you seek legal advice from NPLaw regarding issues relating to the underreporting of sales revenue?

The underreporting of sales revenue may expose enterprises to numerous legal risks, including tax reassessments, late-payment interest, administrative sanctions, and reputational damage in the course of business operations.

With extensive experience in tax and corporate legal advisory services, NPLaw is prepared to assist clients in assessing legal risks, reviewing relevant documents, advising on appropriate remedial measures, handling supplementary tax declaration procedures, and protecting clients’ lawful rights and interests when dealing with tax authorities.

Seeking legal advice immediately upon identifying an error not only enables enterprises to address the issue in compliance with applicable laws but also helps minimize financial losses and mitigate potential legal consequences that may arise in the future.

The information provided above is for reference purposes only. Should you require detailed advice regarding a specific case, please contact NPLaw Firm for prompt legal assistance.