What is tax evasion? How much tax evasion is criminally prosecuted?

What is tax evasion? What are the acts of tax evasion? How much is the fine for tax evasion, and how is it handled? What is the administrative penalty – how much is tax evasion subject to criminal prosecution?

Tax evasion is a reality that has become a burning issue today. In order to prevent tax evasion, state agencies have issued strict sanctions to severely punish this behavior.

I. What does tax evasion include?

1. What is tax evasion?

Tax evasion is understood as the acts of individuals and organizations implementing methods that are not permitted by law with the purpose of reducing the amount of tax payable.

For example :

• Selling without issuing invoices to reduce revenue;
• Creating false information such as purchasing invoices to increase tax deductible expenses or creating fake records to refund VAT…

2. Tax evasion

According to Article 143 of the Law on Tax Administration No. 38/2019/QH14 (issued on June 13, 2019), enterprises with the following acts will be considered tax evasion:

• Failure to submit tax registration documents, failure to submit tax declaration documents, or submission of tax declaration documents after 90 days from the deadline for submission of documents or the deadline for extension of tax declaration submission;
• Failure to fully record in the accounting books the revenues related to determining the amount of tax payable;
• Not issuing invoices when selling goods or services or recording value information on sales invoices lower than the actual payment value of the goods or services sold;
• Using illegal invoices and documents or illegally using invoices to declare goods and input materials in activities that generate tax obligations to reduce the amount of tax payable or increase the amount of tax exempted, reduced or deductible, refundable or non-payable;
• Using vouchers and documents that are not true to the nature of the transaction or are not true to the actual transaction value to incorrectly determine the amount of tax payable, the amount of tax exempted or reduced, the amount of tax refunded, or the amount of tax not payable;
• Falsely declaring exported and imported goods but not submitting additional tax declaration documents after the goods have been cleared through customs;
• Intentionally failing to declare or making false declarations about taxes on exported and imported goods;
• Colluding with the shipper to import goods for the purpose of tax evasion;
• Using goods in the group of non-taxable, tax-exempt, or tax-exempt goods for purposes other than those prescribed without declaring the change of purpose of use to the tax authority;
• Taxpayers whose business activities are in a period of suspension or temporary suspension of business activities but do not notify the tax authority.

Note:

Taxpayers shall not be penalized for tax evasion but shall be penalized according to the provisions of Clause 1, Article 141 of this Law in the following cases:

• Failure to submit tax registration documents, tax declaration documents or submit tax declaration documents after 90 days but no tax payable arises;
• Submitting a tax declaration after the 90-day deadline with tax payable and having paid the full amount of tax debt and late payment to the state budget before the time the tax authority issues a decision to conduct a tax audit or inspection or before the time the tax authority makes a record of the late submission of the tax declaration.

See also:

>> Cases where invoices must be issued and where invoices are not required;

>> How to declare and deduct VAT on imported goods;

>> Instructions on accounting, formulas and how to calculate export tax.

II. How much tax evasion is subject to criminal prosecution?

➤ According to Article 136 on principles of administrative sanctions of the Tax Administration Law No. 38/2019/QH14, if a violation of the law on tax administration is serious enough to require criminal prosecution, it will be implemented in accordance with the provisions of the criminal law.

➤ According to Article 200 of the Penal Code No. 100/2015/QH13, amended by Clause 47, Article 1 of the Law amending the Penal Code 2017, the crime of tax evasion stipulates: If there is an act of tax evasion with an amount of VND 100,000,000 or more, and at the same time has been administratively sanctioned for tax evasion or has been convicted of this crime or one of the crimes prescribed by this law, and has not had the criminal record cleared but continues to violate, then the offender will be criminally prosecuted.

III. How much is the fine for tax evasion?

1. Administrative penalties for tax evasion

1.1. Administrative penalties

➤ According to Point d, Clause 2, Article 138 of the Tax Administration Law No. 38/2019/QH14, the penalty is from 1 to 3 times the amount of tax evaded. The remedy is to force the full payment of the evaded tax amount.

➤ According to Article 17 of Decree 125/2020/ND-CP, penalties for tax evasion are as follows:

1. A fine of one time the amount of tax evaded shall be imposed on a taxpayer if there is one or more mitigating circumstances when committing one of the following violations:
   1. Failure to submit tax registration dossiers, tax declaration dossiers or submit tax declaration dossiers after 90 days from the deadline for submitting tax declaration dossiers or from the extended deadline for submitting tax declaration dossiers, except for the cases specified in Point b, Point c, Clause 4 and Clause 5, Article 13 of this Decree;
   2. Failure to record in accounting books revenues related to determining the amount of tax payable, failure to declare or incorrect declaration leading to a shortage of tax payable or an increase in the amount of tax refunded, exempted or reduced, except for the acts specified in Article 16 of this Decree (*);
   3. Not issuing invoices when selling goods and services, except in cases where taxpayers have declared taxes in the corresponding tax period, or issuing invoices for selling goods and services but with incorrect quantity and value of goods and services to declare lower taxes than actual and discovered after the deadline for submitting tax declarations;
   4. Using illegal invoices or illegally using invoices to declare taxes in order to reduce the amount of tax payable or increase the amount of tax refunded, exempted or reduced;
   5. Using illegal documents; using documents illegally; using documents and papers that do not reflect the true nature of the transaction or do not reflect the actual transaction value to incorrectly determine the amount of tax payable, the amount of tax exempted, reduced, or refunded; establishing procedures and records to destroy materials and goods that are not in accordance with reality in order to reduce the amount of tax payable or increase the amount of tax refundable, exempted, or reduced (**);
   6. Using goods that are not subject to tax, are exempt from tax, or are subject to tax exemption for purposes other than those prescribed without declaring the change of purpose of use or declaring tax to the tax authority (***);
   7. Taxpayers whose business activities are in the process of requesting to suspend or temporarily suspend business activities but do not notify the tax authority, except for the case specified in Point b, Clause 4, Article 10 of this Decree.
2. A fine of 1.5 times the amount of tax evaded shall be imposed on a taxpayer who commits one of the acts specified in Clause 1 of this Article without any aggravating or mitigating circumstances;
3. A fine of twice the amount of tax evaded shall be imposed on a taxpayer who commits one of the acts specified in Clause 1 of this Article with one aggravating circumstance;
4. A fine of 2.5 times the amount of tax evaded shall be imposed on a taxpayer who commits one of the acts specified in Clause 1 of this Article with 2 aggravating circumstances;
5. A fine of three times the amount of tax evaded shall be imposed on a taxpayer who commits one of the acts specified in Clause 1 of this Article with three or more aggravating circumstances;

Note:

Violations of the provisions in (*), (**), (***) in Clause 1 above, if discovered after the deadline for submitting tax declarations but do not reduce the amount of tax payable or the amount of tax not yet refunded, or do not increase the amount of tax exempted or reduced, will be subject to administrative penalties according to the provisions in Clause 3, Article 12 of this Decree.

1.2. Remedial measures for tax evasion

• Forced to pay the full amount of tax evaded into the state budget for violations of the provisions in clauses 1, 2, 3, 4, 5 above.

In case the tax evasion acts as prescribed in Clauses 1, 2, 3, 4, 5 above have expired, the taxpayer will not be penalized for tax evasion but will have to pay the full amount of tax evasion and late payment fees calculated on the amount of tax evasion to the state budget within the time limit prescribed in Clause 6, Article 8 of this Decree.

• Forced to readjust the loss amount and the deductible input VAT amount on the tax declaration (if any) for the acts specified in Clauses 1, 2, 3, 4, and 5 above.

1.3. Statute of limitations for administrative sanctions for tax evasion

The statute of limitations for administrative sanctions for tax management violations against tax evasion according to Clause 2, Article 137 of the Tax Administration Law No. 38/2019/QH14 stipulates:

• For tax evasion acts that are not yet subject to criminal prosecution, acts of false declaration leading to a shortage of tax payable or an increase in the amount of tax exempted, reduced, refunded, or not collected, the statute of limitations for handling violations is 5 years from the date of committing the violation;
• If the statute of limitations for administrative violations in tax management has expired, the taxpayer will not be penalized but must still pay the full amount of tax arrears, evaded tax, exempted, reduced, refunded, incorrectly collected tax, and late payment to the state budget within 10 years from the date of discovery of the violation. In case the taxpayer does not have a tax registration, he/she must pay the full amount of tax arrears, evaded tax, and late payment for the entire period from the date of discovery of the violation.

2. Criminal penalties for tax evasion

According to Article 200 of the Penal Code No. 100/2015/QH13, amended by Clause 47, Article 1 of the Law amending the Penal Code 2017, it is stipulated as follows:

➤ For individuals

1. Anyone who commits one of the following acts of tax evasion with an amount from VND 100,000,000 to under VND 300,000,000 or under VND 100,000,000 but has been administratively sanctioned for tax evasion or has been convicted of this crime or one of the crimes specified in the following articles: 188, 189, 190, 191, 192, 193, 194, 195, 196, 202, 250, 251, 253, 254, 304, 305, 306, 309 and 311 of this Code, but has not had his/her criminal record cleared and continues to commit the violation, shall be fined from VND 100,000,000 to VND 500,000,000 or imprisoned from VND 100,000,000 to VND 100,000,000. 3 months – 1 year:
   • Failure to submit tax registration documents, tax declaration documents or submit tax declaration documents after 90 days from the deadline for submitting documents or the deadline for extending the deadline for submitting tax declaration documents as prescribed by law;
   • Failure to fully record in the accounting books the revenues related to determining the amount of tax payable;
   • Not issuing invoices when selling goods or services or recording value information on sales invoices lower than the actual payment value of the goods or services sold;
   • Using illegal invoices and documents to account for goods and input materials in activities that generate tax obligations to reduce the amount of tax payable or increase the amount of tax exempted, reduced or increase the amount of tax deducted or refunded;
   • Using other illegal documents and vouchers to incorrectly determine the amount of tax payable or the amount of tax refunded;
   • Falsely declaring exported and imported goods but not making additional tax declarations after the goods have been cleared through customs, if not falling under the cases specified in Articles 188 and 189 of this Code;
   • Intentionally failing to declare or making false declarations about taxes on exported and imported goods, if not falling under the cases specified in Articles 188 and 189 of this Code;
   • Colluding with the shipper to import goods, if not falling under the cases specified in Articles 188 and 189 of this Code;
   • Using goods that are not subject to tax, are exempt from tax, or are considered for tax exemption for purposes other than those prescribed without declaring the change of purpose of use to the tax authority.
2. If the crime falls into one of the following cases, the offender will be fined from VND 500,000,000 – VND 1,500,000,000 or imprisoned from 1 to 3 years:
   • Organized crime;
   • Tax evasion amount from 300,000,000 VND – under 1,000,000,000 VND;
   • Abusing position and power to evade taxes;
   • Committing a crime 2 times or more;
   • Dangerous recidivism.
3. If tax evasion is 1,000,000,000 VND or more, the offender will be fined from 1,500,000,000 VND – 4,500,000,000 VND or imprisoned from 2 to 7 years.
4. In addition, the offender may also be fined from VND 20,000,000 to VND 100,000,000, banned from holding positions, practicing a profession or doing certain jobs from 1 to 5 years, or have part or all of his/her property confiscated.

➤ For legal entities

If a commercial legal entity commits a crime specified in this article, it shall be punished as follows:

• Committing one of the acts specified in Clause 1 above and evading tax with an amount from VND 200,000,000 to under VND 300,000,000 or from VND 100,000,000 to under VND 200,000,000 but having been administratively sanctioned for tax evasion or having been convicted of this crime or of one of the crimes specified in the following articles: 188, 189, 190, 191, 192, 193, 194, 195 and 196 of this Code, but not yet having had the criminal record cleared and still committing the violation, shall be subject to a fine from VND 300,000,000 to VND 1,000,000,000;
• If the crime falls under one of the cases specified in Points a, b, d and dd Clause 2 of this Article, the fine will be from VND 1,000,000,000 to VND 3,000,000,000;
• If the crime falls under the provisions of Clause 3 of this Article, the offender shall be fined from VND 3,000,000,000 to VND 10,000,000,000 or have his/her operation suspended for a period of 6 months to 3 years;
• If the crime falls under the provisions of Article 79 of this Code, the operation will be permanently suspended;
• In addition, commercial legal entities may also be fined from VND 50,000,000 to VND 200,000,000, banned from doing business, banned from operating in certain fields, or banned from raising capital for 1 to 3 years.

IV. Time limit for criminal prosecution for tax evasion

According to the provisions of Article 27 of the Penal Code No. 100/2015/QH13 on the time limit for criminal prosecution as follows:

• The statute of limitations for criminal prosecution is the time limit prescribed by this Code, after which the offender will not be prosecuted;
• The statute of limitations for criminal prosecution is prescribed as follows:
  • 5 years for less serious crimes;
  • 10 years for serious crimes;
  • 15 years for very serious crimes;
  • 20 years for particularly serious crimes.
• The statute of limitations for criminal prosecution is calculated from the date the crime is committed, specifically:
  • If within the above-mentioned time limit, the offender continues to commit a new crime for which this Code prescribes a maximum penalty of more than 1 year in prison, the statute of limitations for the old crime will be recalculated from the date of committing the new crime;
  • If during the above-mentioned time limit, the offender intentionally evades and there is a wanted decision, the statute of limitations will be recalculated from the time the person surrenders or is arrested.

V. Frequently asked questions about administrative and criminal penalties for tax evasion