Legal regulations on sanctions for enterprises committing violations in the tax sector

The following article by NPLaw analyzes the legal framework governing sanctions against enterprises committing violations in the tax sector, thereby assisting enterprises in identifying legal risks and adopting effective preventive measures.

The following article by NPLaw analyzes the legal framework governing sanctions against enterprises committing violations in the tax sector, thereby assisting enterprises in identifying legal risks and adopting effective preventive measures.

I. Current situation of enterprises committing violations in the tax sector

In the context of integration and intense competition, many enterprises still fail to strictly comply with tax laws. In practice:

Common violations: Incorrect tax declarations, late tax payments, use of fictitious invoices, cost manipulation, etc.
According to statistics from the General Department of Taxation, tens of thousands of enterprises are subject to tax reassessment each year due to procedural violations or incorrect declarations. Notably, in the e-commerce sector, the total amount of tax arrears and sanctions imposed on 179 enterprises and 1,061 individuals in 2023 reached approximately 275 billion VND, excluding other sectors.

Causes:

Frequent changes in the tax legal framework make it difficult for small and medium-sized enterprises to update;
Lack of legal compliance awareness among certain enterprises;
Intentional exploitation of legal loopholes by some enterprises to evade or defraud taxes for profit maximization.

Tax violations not only result in losses to the state budget but also create an unfair business environment, adversely affecting the sustainable development of the economy.

II. Legal regulations governing enterprises committing violations in the tax sector

1. What constitutes a tax violation by an enterprise?

Tax is a compulsory payment to the State budget imposed on organizations, households, business households, and individuals in accordance with tax laws (Clause 1, Article 3 of the Law on Tax Administration 2019).

An enterprise committing a tax violation is understood as a business entity that fails to comply with or breaches tax regulations, resulting in incorrect declarations, improper tax payments, underpayment of taxes, or engagement in tax fraud. Such violations may be unintentional (errors in declaration) or intentional (tax evasion or fraud).

2. Common tax violations by enterprises

Common violations subject to administrative sanctions include:

Pursuant to Section 2, Chapter XV of the Law on Tax Administration 2019 and Chapter II of Decree No. 125/2020/ND-CP on administrative sanctions in the sectors of taxation and invoices, typical violations include:

Violations of deadlines for tax registration; notification of temporary suspension of business operations; notification of early resumption of business;
Violations of deadlines for submission of tax declarations;
Violations of regulations on provision of information relevant to determining tax obligations;
Violations of compliance with tax inspection, audit decisions, and enforcement of tax administrative decisions;
Tax evasion;
Incorrect declarations resulting in underpaid tax or overclaimed tax exemptions, reductions, or refunds; etc.

3. Forms and levels of sanctions applicable to tax violations

Pursuant to Article 138 of the Law on Tax Administration 2019, enterprises committing tax violations are subject to the following sanctions:

Forms of administrative sanctions:

Warning;
Monetary fine.

Levels of fines:

Maximum fines for acts specified in Article 141 are imposed in accordance with laws on handling administrative violations;
A fine of 10% of the under-declared tax amount or overclaimed tax amount for acts specified at Point a, Clause 2, Article 142;
A fine of 20% of the under-declared tax amount or overclaimed tax amount for acts specified in Clause 1 and Points b and c, Clause 2, Article 142;
A fine ranging from one (01) to three (03) times the amount of evaded tax for acts specified in Article 143.

Remedial measures include:

Compulsory payment of the full amount of evaded or underpaid tax;
Compulsory repayment of improperly exempted, reduced, refunded, or unpaid tax amounts.

Specific sanctions are detailed in Chapter II of Decree No. 125/2020/ND-CP. For example, under Article 16 of Decree No. 125/2020/ND-CP, a fine of 20% of the under-declared tax amount or excess tax benefits applies in cases such as:

Incorrect determination of tax bases or deductible tax amounts, or misidentification of eligibility for tax exemption, reduction, or refund, where transactions are fully recorded in accounting books and lawful invoices/documents;
Incorrect declarations leading to reduced payable tax or increased tax refunds, exemptions, or reductions (other than the above case), where the taxpayer voluntarily makes supplementary declarations and fully pays the tax shortfall before the tax authority concludes the inspection or audit.

III. Questions on tax violations by enterprises

1. What are the most common causes of tax violations?

Common causes include:

Misinterpretation or failure to timely update tax regulations due to frequent legal changes;
Errors in accounting and tax declaration processes;
Financial pressure leading to late payments or concealment of revenue;
Intentional tax evasion or fraud, such as the use of fictitious invoices.

Tax violations arise from both objective and subjective causes, with proactive compliance by enterprises being the most critical factor.

2. Can enterprises be subject to criminal liability for tax violations?

Where violations are serious and intentional, and cause substantial losses to the State budget, enterprises may be subject to criminal liability under Article 200 of the Penal Code 2015 (as amended in 2017) for the offense of tax evasion.

Accordingly, a commercial legal entity committing such offenses may be subject to:

A fine ranging from 300,000,000 VND to 1,000,000,000 VND for tax evasion amounts from 200,000,000 VND to under 300,000,000 VND, or from 100,000,000 VND to under 200,000,000 VND in cases of repeat offenses;
A fine ranging from 1,000,000,000 VND to 3,000,000,000 VND for circumstances under Clause 2;
A fine ranging from 3,000,000,000 VND to 10,000,000,000 VND or suspension of operations from 06 months to 03 years for severe cases stated in Clause 3 of this Article;
Permanent shutdown in cases specified under Article 79 of the Penal Code 2015;

Additional fines from 50,000,000 VND to 200,000,000 VND, prohibition from operating in certain sectors, or prohibition from raising capital for 01 to 03 years.

3. Do enterprises have the right to file complaints or initiate lawsuits against penalty decisions?

Pursuant to Clause 1, Article 147 of the Law on Tax Administration 2019, taxpayers, organizations, and individuals have the right to file complaints with competent authorities against administrative decisions or acts of tax authorities or tax officials where there are grounds to believe such decisions or acts are unlawful and infringe upon their lawful rights and interests.

Accordingly, enterprises have the right to file complaints or initiate lawsuits against penalty decisions if they consider such decisions to be unlawful or infringing upon their legitimate rights.

4. What is the statute of limitations for imposing sanctions?

Pursuant to Article 137 of the Law on Tax Administration 2019:

For violations of tax procedures: The statute of limitations is 02 years from the date of the violation;
For tax evasion not subject to criminal liability, or incorrect declarations leading to underpaid or overclaimed tax: The statute of limitations is 05 years from the date of the violation.

5. Are there any mitigating circumstances applicable to tax violations?

Pursuant to Article 6 of Decree No. 125/2020/ND-CP and Article 9 of the Law on Handling Administrative Violations 2012 (as amended in 2020), mitigating circumstances include:

Voluntary mitigation of consequences, compensation, or remediation of damage;
Voluntary declaration, sincere remorse, or active cooperation with authorities;
Violations committed under emotional distress caused by unlawful acts of others, exceeding legitimate self-defense, or in urgent situations;
Violations committed under coercion or dependence;
Violators who are pregnant women, elderly persons, or persons with illnesses or disabilities affecting their awareness or control;
Violations due to particularly difficult circumstances not caused by the violator;
Violations due to limited awareness.

IV. Legal consultancy services related to tax violations by enterprises

In practice, many enterprises encounter difficulties in handling legal issues related to tax violations. Legal consultancy services play a vital role in:

Advising and updating the latest tax regulations to ensure compliance;
Representing enterprises in dealings with tax authorities and supporting complaint or litigation procedures;
Analyzing legal risks and proposing preventive solutions;
Reviewing accounting records and supporting documents to ensure legality and transparency;
Assisting in negotiation and mediation to minimize financial losses.

The use of legal consultancy services not only enables enterprises to promptly address violations but also enhances tax compliance awareness, protects reputation, and ensures sustainable development.

For any inquiries or legal consultancy needs regarding tax violations, please contact NPLaw for effective support.