The following article by NPLaw provides a detailed analysis of the legal regulations governing tax-related transactions, aiming to assist enterprises and taxpayers in not only complying with tax laws but also building a transparent, safe, and efficient financial–tax management framework.

I. Current situation of tax-related transactions

In the context of an increasingly developed market economy, economic and commercial transactions are occurring with high frequency and diversity. Most of these transactions are associated with tax obligations, ranging from the sale of goods and provision of services to specific activities such as real estate transfers, investment, and repatriation of profits abroad.

However, in practice, many enterprises and individuals either fail to fully understand their tax obligations or deliberately seek to evade them, resulting in situations such as:

  • Misreporting or failing to declare tax obligations;
  • Issuing invoices inconsistent with the actual transaction;
  • Conducting concealed transactions to reduce tax liabilities;
  • Failing to comply with regulations on tax reporting and finalization.

These matters not only create legal risks for enterprises but also affect the State budget’s revenue and distort the business environment.

II. Legal provisions on tax-related transactions

1. What are tax-related transactions?

Tax-related transactions refer to economic, commercial, civil, or financial activities that give rise to tax obligations to the State. In other words, any transaction that generates income, value added, or asset transfers is considered a tax-related transaction.

Examples:

  • An enterprise sells goods to customers: Value-added tax (VAT) arises.
  • An individual transfers real estate: Personal income tax (PIT) arises.
  • An enterprise earns profits: Corporate income tax (CIT) arises.

2. What are the criteria for determining whether a tax-related transaction is lawful?

Currently, the law does not provide a specific set of criteria for determining the legality of tax-related transactions. However, based on the provisions of the Law on Tax Administration 2019, a tax-related transaction is considered lawful when it meets the following fundamental conditions:

  • Clear legal basis: The transaction must be supported by valid contracts, documents, and invoices.
  • Proper declaration and payment of taxes: Enterprises or individuals must fully declare and pay the appropriate taxes at the correct rates.
  • Financial transparency: All expenses, profits, and revenues related to the transaction must be recorded and accounted for properly.
  • Without tax evasion or fraud: Transactions structured solely to avoid tax obligations are deemed sham and unlawful.

3. What legal risks arise from non-transparent tax-related transactions?

If a tax-related transaction lacks transparency, enterprises and individuals may face various legal risks, including:

  • Administrative fines for tax violations: Monetary fines for misdeclaration, late payment, or non-payment under Articles 12, 16, and 17 of Decree No. 125/2020/NĐ-CP on administrative sanctions for tax and invoice violations.
  • Tax inspection or audit: The tax authority has the right to inspect when there are signs of tax law violations under Article 113 of the Law on Tax Administration 2019.
  • Tax assessment: Where transactions are unclear, tax authorities may determine payable tax amounts through assessment.
  • Criminal liability: In serious cases of tax evasion or fraud, enterprises may be prosecuted under Article 200 of the Penal Code 2015 for the crime of tax evasion.
  • Reputational and operational risks: Violating enterprises may be listed as high-risk entities, negatively affecting their ability to obtain loans, enter contracts, or participate in bidding.

III. Questions on tax-related transactions

1. Are there mechanisms encouraging enterprises to ensure transparency in tax-related transactions?

Several mechanisms currently promote voluntary tax compliance, including:

  • Electronic tax declaration and refund systems: Reducing administrative procedures, costs, and time.
  • Tax incentives: Available for small and medium enterprises, those in priority sectors, or investing in disadvantaged areas.
  • Tax compliance credit rating: Enterprises with good tax compliance records face fewer inspections and audits, reducing administrative pressure.
  • Reduced sanctions: Enterprises that self-disclose and correct violations before inspection receive lighter sanctions.

Hence, ensuring transparency in tax-related transactions not only fulfills a legal duty but also offers tangible benefits to enterprises.

2. How are disputes arising from tax-related transactions resolved?

Tax disputes commonly occur when:

  • Enterprises disagree with tax reassessment or determination decisions;
  • There are contractual disagreements regarding tax obligations between parties;
  • Fraud or falsification of invoices and documents occurs.

Such disputes may be resolved through:

  • Administrative complaints filed with the directly managing tax authority;
  • Administrative lawsuits before courts if dissatisfied with the complaint resolution;
  • Commercial arbitration or civil litigation, if the tax-related dispute is connected with contractual matters.

3. What sanctions apply if enterprises fail to fully report tax-related transactions?

If enterprises fail to adequately report tax-related transactions, they may face the following sanctions:

  • Administrative fines under Decree No. 125/2020/NĐ-CP, including sanctions for violations related to tax inspection, enforcement of tax administrative decisions (Article 15), or misdeclarations leading to tax deficiencies or improper exemptions, reductions, or refunds (Article 16);
  • Late payment interest under Article 59 of the Law on Tax Administration 2019;
  • Sanctions for tax evasion under Article 143 of the Law on Tax Administration 2019;
  • Criminal prosecution under Article 200 of the Penal Code 2015 (as amended in 2017).

4. In what cases must tax-related transactions be reported to state authorities?

Currently, the law does not impose a general reporting obligation for tax-related transactions, but only requires tax declaration upon the occurrence of such transactions. According to Clause 1, Article 42 of the Law on Tax Administration 2019, taxpayers must accurately, truthfully, and fully declare all contents in tax returns.

The principles for tax declaration and price determination include:

  • Applying comparative analysis with independent transactions and assessing the substance-over-form principle to determine actual tax obligations;
  • The price of related-party transactions is adjusted according to independent transactions for declaration and determination of the amount of tax payable according to the principle of not reducing taxable income;
  • Small-scale, low-risk taxpayers may be exempted and entitled to simplified declaration mechanisms.

5. How should enterprises remedy errors in tax-related transactions?

According to Clause 1, Article 47 of the Law on Tax Administration 2019 (as amended in 2024), taxpayers who detect errors in previously submitted tax returns may supplement their tax dossiers within 10 years from the filing duration of the relevant tax period, in the following cases:

  • Before tax authorities or competent bodies announce inspection or audit decisions;
  • When the records are outside the scope or period of announced tax inspections or audits.

For contents falling within the inspection or audit scope, taxpayers may provide additional explanations or supporting documents according to tax and inspection laws, or comply with conclusions or determinations made by competent specialized authorities regarding their tax obligations.

Thus, upon detecting errors in tax-related transactions, enterprises may correct them by filing supplementary tax declarations.

IV. Legal consultancy services on tax-related transactions

In change of the increasingly strict and complex tax regulatory framework, engaging professional legal consultancy services is a prudent solution for enterprises to:

  • Obtain guidance on tax laws applicable to specific transactions;
  • Review contracts, documents, and invoices for legality and compliance;
  • Receive assistance with tax declaration, finalization, and reporting in a timely and lawful manner;
  • Be represented in dealings with tax authorities during inspections, audits, or complaint proceedings;
  • Receive preventive legal advice and lawful tax optimization solutions.

For any inquiries or legal support regarding tax-related transactions, please contact NPLaw for the most effective assistance.