What is a tax audit at a business? Tax audit procedures of tax authorities and how to write an official letter requesting a postponement of tax settlement (postponement of tax audit) – download the official letter.
I. Legal basis
- Law on Tax Administration No. 38/2019/QH14;
- Decree 126/2020/ND-CP;
- Circular 80/2021/TT-BTC.
II. What is a tax audit? What is the purpose of a tax audit?
Tax audit is one of the taxpayer management activities carried out by the tax authority. Taxpayers are obliged to provide complete and accurate documents when requested by the tax audit team, and are responsible for the documents they provide to serve the audit.
➨ Purpose of tax audit
Taxpayers’ tax obligations are currently based on the mechanism of self-calculation, self-declaration, self-payment and self-responsibility, so it is very easy to make mistakes and commit fraud.
Therefore, tax authorities need to have a mechanism for inspection and examination to ensure that taxpayers have fully, honestly and accurately performed their tax obligations and other relevant legal regulations, and at the same time have a plan to handle any violations by taxpayers.
>> Learn more: When will the tax authority come down to audit the business?
III. Procedures for requesting postponement of tax audit (postponement of tax settlement)
1. Procedures for tax inspection at enterprises
Tax authorities conduct tax inspection procedures at enterprises as follows:
➤ Step 1. Tax authority issues tax inspection decision
When preparing for a tax audit of an enterprise, the head of the tax authority will issue a tax audit decision according to form No. 04/KTT issued with Appendix I of Circular 80/2021/TT-BTC.
The tax authority then sends the tax inspection decision to the enterprise within 3 working days from the date of signing.
➤ Step 2. Announce the decision to inspect or request to postpone the tax inspection of the enterprise
In case the enterprise does not respond after receiving the tax authority’s inspection decision
The tax authority shall announce the decision to conduct the inspection and conduct the inspection. The inspection according to the decision must be conducted no later than 10 working days after the signing of the inspection decision.
The head of the tax inspection team is responsible for:
- Go directly to the enterprise to announce the tax inspection decision;
- Make a statement;
- Explain the content of the inspection decision so that taxpayers can grasp the information and have responsibility to comply.
In case the enterprise requests to postpone the tax inspection
After receiving the notice from the tax authority, if the enterprise finds that it cannot carry out the inspection in time, it can send a written request to postpone the inspection to the tax authority, stating the reason and the postponement period in the document. Accordingly:
- Deadline for submitting a request to postpone a tax audit: Before the tax authority announces the audit;
- Time for tax authority to respond: Within 5 working days from the date of receipt of the enterprise’s request to postpone tax inspection.
The tax authority will notify the business of whether or not the business is accepted to postpone the inspection time.
➤ Step 3. Conduct tax audit at the enterprise
After announcing the inspection report, the tax inspection team is allowed to conduct an inspection at the enterprise’s headquarters within 10 days from the date of announcement of the inspection.
During the inspection at the enterprise’s headquarters, if the tax authority finds that the inspection decision needs to be adjusted or there is a force majeure event that requires the inspection to be temporarily suspended, the head of the inspection team is responsible for reporting to the inspection department leader to issue a decision to adjust or a decision to temporarily suspend the inspection.
➤ Step 4. Make a report of the inspection
After conducting the business data inspection, the inspection team will mention the existing problems and violations (if any) specifically by showing them on the tax inspection report.
The signing of the inspection report by both parties is carried out within 5 working days from the date of completion of the inspection. If the enterprise still has different opinions, they will be kept with the report.
In case the taxpayer fails to sign the inspection record after the prescribed time limit, a record of administrative tax violation will be drawn up.
➤ Step 5. Processing results after testing
Depending on each case, the Head of the tax authority decides:
- Handling tax violations if tax settlements arise after inspection;
- Administrative sanctions;
- Issue an audit conclusion if no tax is payable.
2. Process and procedures for making an official dispatch requesting to postpone tax settlement
➤ Step 1. Send a letter requesting to postpone tax audit
To request a postponement of tax audit, enterprises shall draft Official Letter No. 08/KTT issued together with Circular No. 80/2021/TT-BTC. Specifically:
- Content of the dispatch: The enterprise clearly states the time and reason for requesting to postpone the tax inspection;
- Deadline for submission: After the enterprise receives the inspection decision but the tax authority has not yet announced the inspection decision (before the tax authority announces the inspection decision);
- Place of receipt of the document: Tax authority that issued the decision to inspect and audit corporate taxes.
>> DOWNLOAD FREE FORM: Official letter requesting postponement of tax settlement.
➤ Step 2. Receive results from tax authorities
After receiving a business’s request to postpone a tax audit, the tax authority is responsible for:
- Send notice to the business to know whether the request for postponement is approved or not;
- The notification period is within 5 days from the date of receipt of the document.
Accordingly, there are 2 cases that will occur as follows:
- In case the tax authority agrees: If the tax authority agrees to postpone the tax settlement time previously issued to the enterprise, based on the requested time, the enterprise needs to prepare documents to serve the tax settlement when the requested postponement time expires;
- In case the tax authority does not agree: If the tax authority does not agree with the reason for the postponement of tax settlement that the enterprise has proposed, the enterprise is still required to continue preparing documents for tax settlement within the prescribed time limit to avoid administrative violations of tax laws.
IV. Frequently asked questions when requesting to postpone corporate tax settlement
1. What are the things to note before a tax audit?
Before a tax audit, businesses need to note the following:
- Establish a complete accounting system and store documents right from the start of operations;
- Review and re-check the completeness and reasonableness of accounting documents, and complete outstanding issues;
- Grasp the latest regulations on tax laws as well as administrative penalties to proactively explain and minimize penalties as much as possible.
>> Refer to the notes when: Finalizing corporate income tax.
2. What are the principles in tax audit activities?
Principles in tax inspection activities include:
- Firstly, enterprises providing data for tax settlement procedures must be based on the reported data that enterprises still report quarterly and fiscal year. Errors in declaration and data provision will cause disadvantages for enterprises in the settlement process;
- Second, at the time of periodic reporting and declaration, enterprises must use the correct prescribed form and be responsible for the accuracy and honesty of the declared data to ensure that all tax obligations that arise are met;
- Third, before and during the tax settlement process, businesses need to closely follow legal documents on taxes and how to declare and pay taxes in accordance with the law.
3. Will the business be subject to a tax audit once after 5 years of operation?
Not necessarily. A business can be subject to inspection either before or after the 5-year period of operation.
Whether a business is subject to inspection or not depends mainly on the tax authority’s assessment of whether the business is at high tax risk or on the tax authority’s random selection to plan the inspection and examination (including businesses with less than 12 months of operation but showing unusual signs in revenue and invoices).