Cases of using illegal invoices – Penalties

fdiinvietnam.com shares: What is illegal invoice usage? Cases of illegal invoice handling and the latest penalties for illegal invoice usage.

When are invoices and documents considered illegal? How to identify illegal invoices? These are important issues for many businesses that are still wondering and do not clearly understand what is illegal invoice usage. The following article will help businesses distinguish illegal invoices and documents.

I. What is illegal use of invoices?

1. The act of using invoices and documents is considered illegal.

Pursuant to Article 4 of Decree 125/2020/ND-CP specifically stipulates:

➤ Fake invoices and documents: financial documents created or used improperly, without any basis for actual transactions.

➤ Invoices and documents that are not yet valid or no longer valid: financial documents that have not been completed, do not contain enough necessary information or have expired.

➤ Invoices must be stopped during the period of enforcement by the measure of stopping the use of invoices, except in cases where use is permitted according to the notice of the tax authority: invoices are temporarily stopped for a period of time due to the tax authority applying the measure of stopping the use of invoices, unless the tax authority notifies permission to use them again.

➤ Electronic invoices not registered for use with tax authorities: electronic invoices are not registered and licensed for use by tax authorities.

➤ Electronic invoices that have not been assigned a code by the tax authority in the case of using electronic invoices with a code issued by the tax authority: the electronic invoice has been created, but does not have a registration code from the tax authority or does not comply with the regulations on tax authority codes during use.

➤ Invoices and documents for purchasing goods and services have the date on the invoice from the date the tax authority determines that the seller is not operating at the business address registered with the competent state agency.

➤ Invoices and documents for purchasing goods and services with the date of issuance on the invoice or document before the date of determining that the party issuing the invoice or document is no longer operating at the business address that the enterprise has registered with the competent state agency or there has been no notification from the tax authority that the party issuing the invoice or document is no longer operating at the business address registered with the competent authority, however, the tax authority, the police authority or other competent authorities have concluded that the invoice or document is illegal.

>> See more: Viettel, Easyvoice, Mobiphone electronic invoice services.

2. Illegal use of invoices and documents

Cases of using illegal invoices and documents: 

➤ Using invoices and documents that do not fully contain the required content as prescribed; editing or erasing invoices and documents without complying with regulations.

➤ Using fake invoices and documents (invoices and documents recording information about economic transactions but in reality there is no purchase or sale of goods or services in part or in whole); creating invoices with incorrect information or fake invoices.

➤ Using invoices with differences in the value of goods and services or not complying with mandatory standards between invoice links.

➤ Using invoices to circulate during the transportation of goods or using invoices of one good or service to prove another good or service.

➤ Using invoices and documents of other organizations or individuals (except for authorized invoices and invoices of tax authorities) to legalize purchased goods and services or sold goods and services.

➤ Using invoices and documents that have been concluded to be illegal by tax authorities, police agencies or other competent authorities.

See also:

>> Cases of incorrect invoices – how to handle them;

>> Penalty for lost invoices according to Circular 10/2021/TT-BTC;

>> Instructions for processing and writing invoices to return goods to the seller;

>> Handling incorrect electronic invoices – instructions on how to correct them.

II. Cases of handling illegal invoices

Pursuant to the provisions of Circular No. 26/2015/TT-BTC: 

➤ When selling goods and services, the seller must create an invoice, including cases of selling goods and services for promotion, advertising, samples, goods and services used for giving, presenting, exchanging goods and services or paying in lieu of salary to employees (except for goods used for internal circulation, internal consumption to continue the production process).

➤ The content on the invoice must be accurate with the economic information that arises:

• Do not delete or edit; 
• Must use ink of the same color, not fading, do not use red ink; 
• Numbers and letters must be written continuously, without interruption, must not be written or printed on the blank part of pre-printed letters and must not cross out the blank part (if any);
• In case of self-printed invoices or invoices printed via computer, it is not required to cross out the blank space on the invoice.

Pursuant to the provisions of Article 4 of Circular No. 96/2015/TT-BTC specifically stipulates:

➤ Deductible expenses and non-deductible expenses when determining taxable income.

➤ When deducting non-deductible expenses specified in Clause 2 of this Article, enterprises will be allowed to deduct all expenses if they satisfy the following conditions:

• Actual expenses incurred and related to the production and business activities of the enterprise;
• Expenses are supported by legal invoices and documents in compliance with the provisions of law.

1. In case the enterprise has not declared illegal invoices

• In case input VAT is not deductible, you should not declare that invoice and the corresponding VAT amount is not considered an expense;
• For corporate income tax, you should account for that expense as a normal expense, but need to track it on an Excel file to know that it is a non-deductible expense. When preparing the corporate income tax finalization declaration at the end of the year, you need to remove that expense and enter it in indicator B4 on the corporate income tax finalization declaration.

In short, if you have not declared and accounted for it, you should completely remove that invoice (because if the tax authority discovers it, you will be fined for using illegal invoices).

2. In case the enterprise has declared illegal invoices

• For VAT, you should declare a reduction on the VAT declaration and adjust the VAT accounting in the books to non-deductible expenses. In case this adjustment leads to tax payable or if the business has applied for a tax refund, the business will be subject to tax arrears and late payment penalties;
• For corporate income tax, you should declare the adjustment on the tax finalization declaration (if the invoice arises during the year) and reduce the cost, enter it in indicator B4. In case this adjustment affects the corporate income tax payable, the enterprise will be subject to additional tax collection and late payment penalties.

Note:

• Not only is the buyer not allowed to deduct input VAT, not allowed to account for it in expenses, but he is also fined for using illegal invoices;
• In case a business purchases goods or services from a business that later goes bankrupt or absconds, but you have declared and paid taxes, you need to contact the Tax Department to prove that your business has had actual transactions with that business, with invoices, documents, and complete records.

However, you need to note that even if you can prove the actual transaction, if the seller absconds and does not declare taxes, you will have difficulty deducting VAT and accounting for expenses.

III. Penalty for using illegal invoices

According to specific provisions in Article 28 of Decree 125/2020/ND-CP, acts of using illegal invoices or illegally using invoices will be subject to a fine of VND 20,000,000 to VND 50,000,000, except for cases specifically prescribed in Point d Clause 1 Article 16 and Point d Clause 1 Article 17 of this Decree.

That is, in some cases, the use of illegal invoices or illegal use of invoices will not be subject to penalties according to Article 28 cited above. Specifically:

➤ Point d Clause 1 Article 16 and Point d Clause 1 Article 17 are specifically regulated as follows:

• Penalties for false declarations leading to underpayment of additional tax or overpayment of exempted, reduced or refunded tax.
• A fine of 20% of the under-declared tax amount or the tax amount exempted, reduced or refunded is higher than the prescribed amount for the act of using illegal invoices and documents to account for the value of purchased goods and services, reducing the amount of tax payable or increasing the amount of tax refunded, exempted or reduced. However, when the tax authority inspects and checks, the buyer proves that the violation in using illegal invoices and documents belongs to the seller and the buyer has performed full accounting according to regulations.

➤ Article 17 of Decree 125/2020/ND-CP, tax evasion will be punished as follows:

A fine of one time the amount of tax evaded shall be imposed on taxpayers and enterprises with mitigating circumstances or more when committing one of the following acts: using illegal invoices, illegally using invoices to declare taxes to reduce the amount of tax payable or increase the amount of tax refunded, exempted or reduced.

According to Official Dispatch No. 568/TCT-CS dated February 26, 2014 of the General Department of Taxation, in case taxpayers use illegal invoices or illegally use invoices, the following regulations apply:

• If an enterprise uses illegal invoices or illegally uses invoices and causes tax evasion or tax fraud as prescribed in Article 108 of the Law on Tax Administration, the enterprise will only be handled for tax evasion or tax fraud as prescribed in the Law on Tax Administration, Decree No. 98/2007/ND-CP, Decree No. 129/2013/ND-CP, Circular No. 61/2007/TT-BTC, Circular No. 166/2013/TT-BTC, and will not be handled for illegal use of invoices or illegal use of invoices as prescribed in the Law on Tax Administration, Decree No. 51/2010/ND-CP, Decree No. 109/2013/ND-CP, Circular No. 10/2014/TT-BTC; 
• If an enterprise uses illegal invoices or illegally uses invoices without causing tax evasion or tax fraud as prescribed in Article 108 of the Law on Tax Administration, the enterprise will only be handled for the act of using illegal invoices or illegally using invoices as prescribed in the Law on Tax Administration, Decree No. 51/2010/ND-CP, Decree No. 109/2013/ND-CP, Circular No. 10/2014/TT-BTC mentioned above, and will not be handled for the act of tax evasion or tax fraud as prescribed in the Law on Tax Administration, Decree 98/2007/ND-CP, Decree 129/2013/ND-CP, Circular No. 61/2007/TT-BTC, Circular 166/2013/TT-BTC mentioned above.

IV. Frequently asked questions about illegal use of invoices