How is a foreign company found to have committed tax fraud handled?

A foreign company is found to have committed tax fraud shall be handled in accordance with applicable laws and regulations. The article below sets out the legal provisions governing cases where a foreign company is found to have committed tax fraud and addresses certain related issues, with a view to assisting individuals and organizations in protecting their lawful rights and interests.

I. Current status of foreign companies found to have committed tax fraud in the present period

The current status of foreign companies found to have committed tax fraud remains widespread and complex, involving a variety of violations sharing the common purpose of tax evasion, continuous loss declarations, and the use of unlawful invoices.

Competent authorities have intensified inspection and examination activities and have uncovered numerous major cases. Many criminal cases have been instituted, and foreign individuals and directors involved in large-scale tax fraud rings have been arrested and prosecuted.

1. Definition of a foreign company found to have committed tax fraud

Pursuant to Point b, Clause 1, Article 2 of the 2025 Corporate Income Tax Law, corporate income taxpayers are organizations engaged in the production and business of goods or services that generate taxable income in accordance with this Law (hereinafter referred to as “enterprises”), including enterprises established under foreign laws (hereinafter referred to as “foreign enterprises”) with or without a permanent establishment in Vietnam.

Accordingly, a foreign enterprise is an enterprise established in accordance with foreign laws that has or does not have a permanent establishment in Vietnam.

Pursuant to Clause 1, Article 3 of the 2019 Law on Tax Administration, tax is a compulsory payment to the state budget made by organizations, households, business households, and individuals in accordance with tax laws.

Thus, a foreign company is found to have committed tax fraud refers to a case in which an enterprise with foreign investment intentionally commits acts in violation of tax laws for the purpose of evading or reducing tax obligations, or unlawfully obtaining tax benefits.

2. Which authorities have jurisdiction to investigate when a foreign company is found to have committed tax fraud?

Pursuant to Clause 1, Article 114 of the 2019 Law on Tax Administration, heads of tax administration authorities at all levels have the authority to issue decisions on tax inspections.

Pursuant to Clause 2, Article 2 of the 2019 Law on Tax Administration, tax administration authorities include:

• Tax authorities, including the General Department of Taxation, Tax Departments, Sub-departments of Taxation, and Regional Sub-departments of Taxation;
• Customs authorities, including the General Department of Customs, Customs Departments, Post-Clearance Audit Departments, and Customs Sub-departments.

Accordingly, the competent authorities to investigate cases where a foreign company is found to have committed tax fraud are the Tax Authority and the Public Security Authority. The tax authority acts as the lead agency in tax administration, inspection, and examination of enterprises. Where the violation shows signs of constituting a criminal offense (serious tax fraud, organized conduct, or repeated offenses), the tax authority shall transfer the case file to the Public Security Authority for investigation and prosecution in accordance with criminal procedure laws.

II. Legal provisions relating to foreign companies found to have committed tax fraud

Understanding the legal provisions relating to foreign companies found to have committed tax fraud is a common need and concern of many stakeholders. In this regard, NPLaw sets out below the most up-to-date regulations governing foreign companies found to have committed tax fraud.

1. Impacts on a foreign company when found to have committed tax fraud

A foreign company found to have committed tax fraud will face numerous serious consequences, including sanctions under tax laws and substantial reputational damage, adversely affecting its business operations in the host country. Specifically:

• Tax arrears recovery: The company shall be required to pay the full amount of evaded taxes, together with late payment interest calculated on the unpaid tax amount in accordance with law.
• Administrative penalties: Depending on the severity of the violation, the company may be fined from one (01) to three (03) times the amount of tax evaded or fraudulently obtained.
• Criminal liability: Where the tax fraud is particularly serious in nature and degree, the legal representative or related individuals may be subject to criminal prosecution, with penalties including substantial fines or imprisonment.
• Enforcement of tax administrative decisions: Tax authorities may apply enforcement measures such as deduction from bank accounts, temporary exit suspension, or revocation of business registration certificates/investment registration certificates if the company fails to comply with sanctioning decisions.
• Loss of brand reputation: Being found to have committed tax fraud severely undermines the trust of partners, customers, investors, and employees, negatively impacting the company’s image and brand in the market.
• Enhanced supervision: The company may be classified as a high-risk taxpayer, resulting in more frequent and stringent tax inspections and examinations in the future.

Accordingly, the impacts on a foreign company found to have committed tax fraud are extremely serious and significantly affect its investment and business activities.

2. Legal provisions relating to foreign companies found to have committed tax fraud

Pursuant to Article 59 of the 2019 Law on Tax Administration, a foreign company that makes late payment of taxes shall be subject to a late payment interest of 0.03% per day calculated on the outstanding tax amount. The late payment interest is calculated continuously from the day following the date on which the tax payment obligation arises until the day preceding the actual payment into the state budget.

Pursuant to Clause 2, Article 14 of Decree No. 125/2020/NĐ-CP, violations of regulations on the provision of information related to the determination of tax obligations are subject to fines ranging from VND 3,000,000 to VND 5,000,000 for any of the following acts:

• Failure to provide, or provision of incomplete or inaccurate, information, documents, vouchers, invoices, or accounting books related to the determination of tax obligations; provision of incomplete or inaccurate bank account numbers or balances, or payment account information to competent authorities upon request;
• Failure to provide, or provision of incomplete or inaccurate, indicators or data related to tax obligations required to be registered in accordance with regulations, without reducing tax obligations to the state budget;
• Failure to provide, or provision of incomplete or inaccurate, information and documents relating to deposit accounts, payment accounts at credit institutions or the State Treasury, or third-party receivables and payables upon request by tax authorities.

When a foreign company is penalized for tax fraud, the handling must be conducted in a transparent manner, in accordance with due process, and based on specific legal grounds. Enterprises should review and apply the provisions of the 2019 Law on Tax Administration, Decree No. 125/2020/NĐ-CP, and Decree No. 126/2020/NĐ-CP to accurately determine their obligations, applicable penalties, and rights to lodge complaints or request tax refunds/offsets in each specific case.

3. What forms of tax fraud are foreign companies commonly involved in?

Foreign companies often employ sophisticated methods to minimize their tax obligations, the most common of which include:

• Transfer pricing: This is the most common and complex form, involving the pricing of goods, services, intangible assets, or intra-group loans among affiliated companies within the same corporate group in order to shift profits from high-tax jurisdictions to low-tax jurisdictions.
• False or incomplete declaration of tax obligations: The company fails to declare or inaccurately declares revenue, expenses, deductions, or tax exemptions in its tax returns, resulting in an underpayment of taxes.
• Misdeclaration of commodity codes or taxable values: Incorrect declaration of commodity codes or declaration of imported goods at values lower than their actual values in order to benefit from lower tax rates or reduce payable import duties.
• Off-the-books accounting: Maintaining two sets of accounting records (one for internal use and one for tax declaration purposes) to conceal actual revenue.

Accordingly, foreign companies are commonly involved in the above-mentioned forms of tax fraud.

4. What are the legal consequences when a foreign company is found to have committed tax fraud?

When a foreign company is found to have committed tax fraud in Vietnam, the company and related individuals may face numerous serious legal consequences, including administrative sanctions, criminal liability, and other coercive measures. Specifically:

• Administrative penalties: Pursuant to Article 32 of Decree No. 125/2020/NĐ-CP, the competent tax authority shall decide the penalty corresponding to the nature and severity of the violation, including:
  + Monetary fines: Ranging from several million to hundreds of millions of Vietnamese dong, depending on the violation, the level of authority, and the jurisdiction of management.
  + Warnings: Applicable to minor violations that have not caused serious consequences.
  + Suspension of operations or remedial measures: Applicable to serious violations, to ensure that the enterprise fulfills its tax obligations in accordance with law.
  + Payment of late-paid taxes together with interest in cases where tax fraud results in late payment of taxes.
• Restrictions on business rights: Tax fraud may lead to other legal restrictions, including:
  + Adverse impacts on reputation and the ability to participate in bidding activities or enter into contracts with domestic partners.
• Additional administrative enforcement measures: Tax authorities may apply coercive measures such as suspension of customs procedures, freezing of bank accounts, or temporary suspension of business operations in Vietnam until the company fully fulfills its tax obligations.

In cases where the tax fraud is sufficiently serious (for example, where the evaded tax amount reaches a statutory threshold, the conduct is organized, or there is dangerous recidivism), the foreign company and/or its legal representative or responsible individuals may be subject to criminal prosecution in accordance with the Vietnamese Penal Code.

Accordingly, when a foreign company commits tax fraud, the legal consequences are not limited to monetary penalties but also include payment of late taxes together with interest, suspension of operations, restrictions on business rights and reputation, as well as risks of complaints and enforcement measures. Understanding these consequences enables enterprises to proactively manage tax compliance, fulfill obligations in a timely manner, and minimize legal risks in Vietnam.

III. Frequently asked questions relating to foreign companies found to have committed tax fraud

To better understand the regulations relating to foreign companies found to have committed tax fraud, below are several common questions and clarifications.

1. Does a foreign company found to have committed tax fraud have the right to appeal against the sanctioning decision?

Pursuant to Article 147 of the 2019 Law on Tax Administration, taxpayers, organizations, and individuals have the right to lodge complaints with competent authorities against administrative decisions or administrative acts of tax administration authorities or tax officials where there are grounds to believe that such decisions or acts are unlawful and infringe upon their lawful rights and interests. Individuals also have the right to denounce violations of tax laws committed by taxpayers, tax officials, or other organizations or individuals.

Accordingly, a foreign company found to have committed tax fraud fully has the right to lodge a complaint (appeal) against sanctioning decisions in accordance with Vietnamese law. This right is guaranteed for both domestic and foreign organizations and individuals operating in Vietnam.

2. What evidence is necessary to determine that a foreign company has committed tax fraud?

To determine that a foreign company has committed tax fraud in Vietnam, competent authorities must collect and analyze various types of evidence. Such evidence typically relates to acts of concealing revenue, inflating expenses, or abusing tax incentive policies, including:

• Use of unlawful invoices and vouchers: Including the use of fake invoices to legitimize input goods or to claim value-added tax deductions.
• Destruction or alteration of accounting documents and books: Acts intended to reduce payable taxes or increase refundable, exempted, or reduced tax amounts.
• Preparation of false tax declarations: False declarations regarding goods’ names, categories, quantities, weights, quality, value, origin, commodity codes, or applicable tax rates for exported or imported goods.
• Verification of goods’ origin (C/O): Detection of the use of forged Certificates of Origin (C/O) to unlawfully enjoy tariff preferences.
• Data from electronic tax and customs systems: Comparison and cross-checking of declared information among related parties and across tax periods to detect inconsistencies.
• Bank account statements: Analysis of cash inflows and outflows related to suspicious transactions with foreign entities or intermediary companies.
• Emails, messages, and internal documents: Evidence demonstrating intent or directives from management regarding tax fraud conduct.

In summary, the determination of tax fraud requires close coordination among competent authorities (tax, customs, and police) and the systematic collection of business operation records, invoices, and accounting documents to substantiate acts of tax fraud.

3. Who bears responsibility when a foreign company is found to have committed tax fraud?

In the event that a foreign company is found to have committed tax fraud in Vietnam, liability shall be borne by both the corporate legal entity and the related individuals (such as the legal representative, director, chief accountant, etc.), depending on the nature and severity of the violation.

Pursuant to Article 13 of the Law on Enterprises 2020, as amended and supplemented in 2025, the legal representative of a company shall bear personal liability for damage caused to the enterprise due to breaches of the following obligations:

• Exercising assigned rights and obligations honestly, prudently, and in the best manner to ensure the lawful interests of the enterprise;
• Being loyal to the interests of the enterprise; not abusing position or title, and not using information, know-how, business opportunities, or other assets of the enterprise for personal gain or for the benefit of other organizations or individuals;
• Promptly, fully, and accurately notifying the enterprise of any enterprise in which he/she or his/her related persons are owners or hold shares or capital contributions in accordance with this Law.

Other individuals: Persons such as the chief financial officer, chief accountant, or any other employees directly involved in preparing falsified dossiers or documents, or making false declarations leading to tax fraud, shall also bear corresponding liability in proportion to their respective violations.

4. How may a foreign company remedy violations after being found to have committed tax fraud?

When tax fraud is detected, a foreign company must implement remedial and transparent measures to mitigate legal consequences, including:

• Comprehensive review and assessment of violations:
  Clearly identify the affected tax periods and determine the amount of unpaid or fraudulently evaded taxes. Clarify the causes of the violations (whether due to mistakes, differences in accounting systems between countries, or intentional fraud). Collect and re-examine all relevant dossiers, documents, and invoices in preparation for explanations to the tax authorities.
• Proactively working with and providing explanations to tax authorities:
  + The enterprise should proactively contact the tax authority to notify detected errors (if self-detected prior to an official audit) or cooperate during inspection and examination processes.
  + Fully provide information and documents as requested by competent authorities.
  + Close cooperation and a cooperative attitude may be considered as mitigating factors for penalty reduction.
• Supplementary declaration and full payment of outstanding taxes:
  + Prepare and submit supplementary and adjusted tax declarations for erroneous tax periods and fully pay the outstanding principal tax amounts (if any) into the state budget in accordance with law.

Accordingly, a foreign company found to have committed tax fraud may remedy violations in the above-mentioned manner.

5. Are there cases where a foreign company found to have committed tax fraud may be subject to criminal liability? Examples?

A foreign company found to have committed tax fraud in Vietnam may be subject to criminal liability. Under current Vietnamese law, tax evasion and tax fraud constitute serious violations and may be subject to criminal prosecution, regardless of whether the enterprise is domestic or foreign-invested.

Pursuant to Article 200 of the 2015 Penal Code, as amended by Point a, Clause 47, Article 1 of the 2017 Law amending the Penal Code, a person committing acts of tax evasion involving the following amounts shall be subject to criminal liability for the crime of tax evasion:

• From VND 100 million or more; or
• Below VND 100 million but having previously been administratively sanctioned for tax evasion or previously convicted of this crime or one of the following crimes: smuggling; illegal transportation of goods or currency across borders; production or trading of prohibited goods; storage or transportation of prohibited goods; production or trading of counterfeit goods, etc., without having criminal records expunged and committing further violations.

Acts constituting the crime of tax evasion include:

• Failure to submit tax registration dossiers or tax declaration dossiers;
• Failure to record revenues in accounting books related to the determination of payable taxes;
• Failure to issue invoices upon sale of goods or provision of services, or recording invoice values lower than actual transaction values;
• Use of unlawful invoices or vouchers to account for input goods or materials in taxable activities, resulting in reduced payable tax amounts or increased tax exemption, reduction, deduction, or refund amounts;
• Use of other unlawful documents or materials to incorrectly determine payable tax amounts or refundable tax amounts;
• False declaration of exported or imported goods without making supplementary tax declarations after customs clearance;
• Intentional failure to declare or false declaration of taxes on exported or imported goods;
• Collusion with consignors to import goods;
• Use of goods subject to non-taxation or tax exemption for improper purposes.

Example of tax fraud for tax evasion purposes:
A case involving Mr. Stephen Ward Kim (born in 1961, U.S. nationality, of Korean origin), the legal representative of Durian Co., Ltd. Durian Co., Ltd. is a 100% foreign-invested enterprise headquartered in Vat Lai Commune, Ba Vi District (former), Hanoi City. The enterprise was established and operated by Mr. Stephen Ward Kim, specializing in importing materials for garment export processing under the temporary import–re-export regime.

Mr. Stephen Ward Kim was prosecuted for investigation into tax evasion in Vietnam. Initial investigation results determined that, by taking advantage of tax incentive policies applicable to imported goods for export processing, Mr. Stephen Ward Kim, as the legal representative of Durian Co., Ltd., directed the false declaration of quantities and values of goods in order to evade import tax and value-added tax, with a total evaded amount exceeding VND 3.2 billion.

V. Why should you seek legal counsel regarding a foreign company found to have committed tax fraud?

The above information addresses issues relating to a foreign company found to have committed tax fraud as provided by NPLaw to our valued readers. With a team of experienced lawyers and legal professionals, NPLaw provides reputable and professional legal services, ensuring the best possible protection of clients’ lawful rights and interests. Should you require legal assistance, please contact NPLaw for consultation and support.