April 2023

Under the current Penal Code^[1], there are several tax and invoice-related criminal offenses including:

• Tax evasion;
• Illegal printing, issuing, selling and purchasing invoices and receipts for payment of State revenues;
• Collusion with taxpayer that lead to serious consequences

For the purposes of this questionnaire, we assume that the criminal tax fraud offence refers to the tax evasion as stipulated under Article 200 of the Penal Code.

According to Article 200 of the Penal Code, tax evasion is constituted when:

• For individual taxpayers, the amount of the evaded taxes is from VND 100 million and above or under VND 100 million if an individual taxpayer has incurred an administrative penalty for tax evasion or has an unspent conviction for certain offences; or
• For corporate taxpayers, the amount of the evaded taxes is from VND 200 million and above or from VND 100 million to under VND 200 million if a corporate taxpayer has incurred an administrative penalty for tax evasion or has an unspent conviction for certain offences; and
• Taxpayers commits any of the following nine (9) acts:

• a) Failure to submit the application for tax registration; failure to submit tax declaration; submit tax declarations after 90 days from the deadline or after the extended deadline as prescribed by law;
  
  
• b) Failure to record revenues related to the determination of tax payables in accounting books;
  
  
• c) Failure to issue invoices after selling goods/services or declare lower values on invoices than actual values of goods/services sold;
  
  
• d) Use of illegal invoices or vouchers to record purchased goods and raw materials that results in reduction of tax payable or increase tax exemption, tax reduction, deductible or refundable tax;
  
  
• e) Use of other illegal documents to falsify the amount of tax payable or refundable tax;
  
  
• f) Making incorrect declaration of exported or imported goods without making an additional tax declaration after customs clearance are granted;
  
  
• g) Deliberately not declaring tax or declaring incorrect tax on exported or imported goods;
  
  
• h) Colluding with the shipper to import goods;
  
  
• i) Using non-taxable goods, goods eligible for tax exemption or conditional tax exemption for improper purposes without notifying the change of purposes to the tax authority.

[1] Penal Code No. 100/2015/QH13 as amended by Law on Amended Penal Code No. 12/2017/QH14 (the “Penal Code”)

By law, the commitment of the above nine acts could lead to criminal investigations if there are signs that there are evaded taxes and underpaid taxes falling within the statutory threshold.

As previously mentioned, in short, the amount of the evaded taxes exceeds VND 100 million for individual taxpayers and exceeds VND 200 million for corporate taxpayers can trigger criminal prosecution.

If administrative penalties have been applied, that means a violation is an administrative one and there is no criminal charge. However, by law, relevant authorities can still re-consider criminal charges even if there have been administrative penalties imposed. In that case, if criminal charges are triggered, administrative penalties will be abolished since the violation amounts to criminal charge. In addition, even when the underpaid tax is lower than the threshold triggering criminal charges, there may be criminal charges if taxpayers have been imposed administrative penalties for tax evasion.

Yes, tax evasion crime is an act conducted with an intention to evade tax.

The spontaneous filing of an amended tax return and fulfilment of taxes before the initiation of criminal proceedings can prevent triggering a criminal liability. This is because tax evasion criminal offense will be triggered when the criminal acts lead to the evaded taxes exceeding the threshold amounts mentioned in Question 1 above. The spontaneous fulfilment of taxes will reduce underpaid taxes.

Under the Law on Criminal Procedure Code in Vietnam, there are two relevant procedures to initiate a typical criminal case including the initiation of criminal proceedings against the accused and the prosecution by prosecutors. By law, the authorities that have the authority to initiate a criminal case including investigating bodies, agencies that are authorized to investigate and initiate the criminal case, the Procuracies, and the jury panel^[2]. Meanwhile, only the Procuracy has the authorization to prosecute the criminal cases after the criminal investigation is completed.

The common function of the Procuracy is to prosecute the criminal offence. However, the Procuracy can also initiate a criminal case against a tax fraud offence in the following circumstances^[3]:

a) The procuracy decides to rescind a decision not to press criminal charges from investigation authorities or bodies assigned to investigate;

b) The procuracy directly processes denunciations, information, and requisitions;

c) The procuracy directly discovers signs of crime or initiates the criminal case according to the requirement of the Jury panel.

[2] Article 153, the Law on Criminal Procedure Code No. 101/2015/QH13 (as amended)

[3] Article 153.3, the Law on Criminal Procedure Code No. 101/2015/QH13 (as amended)

For criminal tax evasion, the statute of limitation ("SOL") is 5 years or 10 years, depending on the serious level of the criminal tax evasion^[4].

For administrative offences, the SOL for sanctioning administrative violations of tax evasion is 5 years. After the SOL for sanctioning tax evasion administrative violation, taxpayers will not be sanctioned but still have to pay tax arrears (including underpaid taxes, evaded taxes, exempted taxes, reduced taxes, refunded taxes greater than statutory amounts, late payment interests) within ten (10) years from the date of detecting violations^[5].

[4] Article 9, Article 27.2, Article 200, the Penal Code

[5] Article 8.2b, Article 8.6a, Decree 125/2020/ND-CP

The statute of limitation starts to run on the following day after the deadline for tax declaration and payment of the tax period^[6].

[6] Article 8.2b, Decree 125/2020/ND-CP and Article 27.3, the Penal Code

For individual taxpayers, criminal sentences include monetary fines ranging from VND 100 million to VND 4.5 billion, imprisonment from 3 months to 7 years, the prohibition from holding certain positions for up to five years, and confiscation of part or all of their properties^[7].

For corporate taxpayers, criminal sentences include monetary fines ranging from VND 300 million to VND 10 billion, the suspension of taxpayer operation for up to 3 years or permanent suspension of taxpayer operation; the prohibition from doing business in certain sectors/activities or from raising capital for up to 3 years.

[7] Article 200, the Penal Code

Yes, it should minimise criminal liability.

Under Article 51.1r of the Penal Code, the self-disclosure of the offender is considered to be a mitigating factor of criminal liability.

Yes. Under Article 51.1 of the Penal Code, the following circumstances (among others) are mitigating factors that will mitigate the criminal responsibilities:

a) The offender voluntarily makes rectification, pays damages or relieves the consequences;

b) The offender commits a less serious crime and does not have prior criminal record;

The tax evasion offender may be considered for a lighter criminal liability if it voluntarily fulfils its tax obligations assessed by the tax authorities.

Yes. The criminal investigation of a tax offence will be included in the tax authorities’ statute of limitation period if after investigation, prosecution agencies decide not to prosecute the criminal tax evasion and transfer the cases to the competent tax authorities for sanctioning the administrative penalties^[8].

[8] Article 8.3, Decree 125/2020/ND-CP

No. After the case becomes criminal, the tax authorities will not issue the Decision for sanctioning the administrative violation on tax and invoices^[9].

[9] Article 38.1dd, Decree 125/2020/ND-CP

No. There is no procedure for tax/criminal settlement with the tax authorities/public prosecutor/judge.

Both individuals and companies can be prosecuted for criminal tax evasion as stipulated under Article 200 of the Penal Code.

Yes.

No. In case of an employee/director being prosecuted in connection with the lack of payment of Company’s taxes, that will be their individual liability. The Penal Code does not provide a circumstance where a legal entity is responsible for amounts claimed to its employees or directors. However, a legal entity may also be subject to criminal charges for tax evasion under the Penal Code, it is likely that the Company rather than its employee/director will be prosecuted and accordingly liable for its evaded tax but please note that the fact that a commercial legal entity is imposed criminal charges and subject to criminal liability does not exclude the criminal liability of related individuals.

Over the last five years, there have been an increase of criminal prosecution for tax offences, mostly in relation to transfer of real estate by individuals and VAT refunds related to exported goods.