What is tax settlement? When do tax authorities inspect businesses? Experience in tax settlement – what documents should businesses prepare for tax settlement?
When the business has been operating for a while, the enterprises will receive a request for settlement from the tax authority. So, when will the tax authority come to the company to settle the tax? What do the tax authorities usually check when settling taxes at the enterprise? What are the preparations for tax settlement? Let’s find out the answer with Online Accounting in the article below.
I. What is tax settlement?
Tax settlement is the process by which the tax authority directly checks the records and books of a business after a period of business and actual operations to see if they comply with legal regulations and tax laws. From there, it guides businesses to overcome issues that are not in compliance with the provisions of the tax law, to avoid losing the business’s revenue sources as well as contributions to the state.
II. When will the tax authorities come to settle and inspect the business?
Tax authorities will conduct enterprise inspections in the cases specified in the Procedure issued with Decision No. 970/QD-TCT dated July 14, 2023, including:
- Check based on tax returns;
- Check in case of detecting signs of law violation;
- Check when the business refunds tax;
- Plan-based or thematic testing (*);
- Inspection upon recommendation of state audit, state inspector and other competent state agencies;
- Audit in case the taxpayer conducts:
- Division, separation, merger, consolidation, conversion of business type;
- Dissolution, termination of operations, equitization, termination of tax code validity or change of business location leading to change of tax authority of the enterprise.
- Surprise inspections, including:
- Check when there is a complaint;
- Inspection under the direction of the Head of the tax authority or under the direction of the Head of the superior tax authority;
- Inspection based on taxpayer’s request (division, separation, consolidation, merger, conversion of business type, dissolution, termination of operation, equitization, termination of tax code validity, change of business location leading to change of tax authority);
- Check before refund;
- Inspection as proposed after conducting inspection at tax authority headquarters;
- Other cases are subject to surprise inspection.
➨ Thus, not all businesses are allowed to have their tax settlements done by the tax authorities after 5 years.
(*) The selection of enterprises for planned or thematic inspections at headquarters will be prioritized in order from high risk to low, considering selecting enterprises that have not been inspected or tax audited for more than 5 years, and at the same time not overlapping with enterprises that have been included in the tax inspection plan.
III. What do tax authorities check when settling taxes at enterprises?
According to regulations, when the tax authority finalizes taxes at an enterprise, it will conduct an inspection of the following tasks:
- Check tax returns: Check all previously submitted tax returns, including VAT, CIT, PIT and other tax returns (if any);
- Verification of tax payment documents: The tax authority will check and ensure the accuracy of documents, invoices, tax reports, tax audit records and all documents related to the tax payment process of the enterprise;
- Auditing of accounting books and documents: Reviewing the business’s accounting books to ensure they match the tax returns filed;
- Regarding the accounting period: Review the accounting process of the enterprise during the tax authority’s inspection, including determining accounting events, recording documents and determining financial figures;
- Explanation of errors: Businesses need to provide detailed explanations of any errors during tax settlement, including explaining why the errors occurred and how they were resolved.
>> See more: Accounting bookkeeping services.
IV. What documents does a business need to prepare for tax settlement?
When a business receives a tax settlement request from the tax authority, the business’s accountant needs to carefully prepare documents, vouchers and accounting books to serve the tax officer’s inspection.
Businesses need to note the following rules:
➨ Arrange original documents
- Arrange the original documents by month/quarter, in the order of the input and output tax lists. These documents need to be combined with the monthly/quarterly VAT declaration submitted to the tax authority;
- Each document or group of documents must be accompanied by:
- For sales invoices, it is necessary to include a receipt (if cash is collected), warehouse delivery note, contract and liquidation minutes (if any);
- For purchase invoices, it must be accompanied by a payment voucher (if cash is paid), warehouse receipt, payment request, contract and liquidation/handover minutes (if any).
- If selling on installments, it is necessary to attach accounting vouchers and warehouse delivery notes, contracts and liquidation minutes (if any).
Note:
All documents must have full stamps and signatures according to the title. Every month/quarter (depending on the number of documents), create a separate file with a full cover to store the documents.
➨ Arrange reports submitted to tax authorities
- Documents for each year must be accompanied by the corresponding report for that year. Periodic reports include:
- Monthly/quarterly VAT declaration;
- Monthly/quarterly personal income tax deduction declaration;
- Report on the use of tax deduction documents (if any) monthly/quarterly.
- Annual reports include:
- Financial statements;
- Finalization of personal income tax and corporate income tax;
- Annual tax return report.
- ➨ Prepare annual books
Prepare annual books including:
- General journal, sales journal, purchase journal;
- General ledger, details of customer receivables and supplier payables;
- Cash book and bank deposit detail book;
- General ledger of all accounts, detailed ledger of accounts (in the form of a general journal);
- Summary book of increase and decrease of fixed assets, tools and equipment;
- Fixed asset depreciation table, tool and equipment allocation table, prepaid expenses;
- Inventory import and export summary table, detailed book of materials and goods (if any).
Note:
All books must be printed out and fully signed and stamped, and the serial numbers of the vouchers must be entered and arranged in order.
➨ Arrange economic contracts
- Arrange input and output contracts in chronological order, detailed by name of each supplier/customer;
- Check documents related to each contract, including original contract, acceptance/handover minutes and contract liquidation records (if any);
- Check the labor contract and salary scale system to ensure that it is signed correctly, completely and that the content has full information according to regulations;
- Also, consider decisions on appointments, transfers and salary increases.
➨ Legal documents
- Prepare legal documents of the enterprise (business registration, investment certificate, etc.) including originals and fully notarized (authenticated) copies;
- Official dispatches related to tax authorities.
➨ Check other details
- Check and compare the detailed ledger with the general ledger;
- Compare economic transactions with accounting books: Check the accuracy between input invoices, output invoices and the enterprise’s accounting books;
- Check debts with all parties: customers, suppliers;
- Check the entered data and tax declaration on input invoices and output invoices against the declared tax list, ensuring the figures match;
- Check the completeness of signatures on documents;
- Check the payroll with account book 334 to make sure they match. For employees, check if their personal records are complete.
V. Questions related to tax settlement at enterprises
1. When moving to another district, causing a change in the tax authority managing the business, does the business have to make a tax settlement?
Yes. However, in some cases, if the business has not generated revenue, it does not have to make a final settlement.
>> See more: Procedures for changing company address to another district.
2. Will the tax authority come to the unit to settle the tax every 5 years?
No. The settlement is based on the cases mentioned in section II of the article, so it is not necessary that the tax authority will come to the unit to settle the settlement once every 5 years.
>> See details: When will the tax authority come to settle the settlement at the enterprise?