On 14 July 2023, the General Department of Taxation issued  Decision No. 970/QD-TCT ("Decision 970") stipulating the statutory tax audit process to be abided by the tax agencies and tax officials when conducting tax examinations or tax inspections. The tax audit process regulated in Decision No. 746/QD-TCT and its amendments will be superseded from the effective date of Decision No. 970 which is 14 July 2023.

We outline below noticeable changes contained in Decision 970 in comparison with the previous tax audit process.

The process explicitly provides guidelines on the development of an annual tax audit plan, technical bases for evaluation of taxpayers’ probable tax risks to facilitate the selection of tax audit targets; and the timeline for tax authorities (from local to central levels) to prepare and submit a tax audit plan (to higher tax authorities) in a year for approval.

Under the process, a tax audit can be conducted upon the requests of the State Audit, the State Inspectorate, or other competent authorities, in addition to the annual tax audit plan determined by the General Department of Taxation (“GDT”) and the results of tax risk evaluation of taxpayers as stipulated under the previous process.

At least 90% of the taxpayers that are evaluated to be at high tax risk will be subject to on-site tax audits. This ratio under the previous process is 80% - 85%. However, up to 10% of the tax audit targets that are randomly selected will be subject to tax audits. This ratio under the previous process is 15% - 20%. This suggests that the tax audit plan will be more focused on taxpayers with high tax risks.

The new process empowers the tax authorities to deem the tax payable amounts if relevant taxpayers fail to provide additional documents or explanations or if the explanations are deemed not sufficient to prove that the tax declarations are correct. 

Unlike the previous process, the new process does not require the tax audit minutes to present the legal basis for the reassessment or adjustments provided in the minutes. This would cause difficulties for taxpayers to acknowledge the reasons of the reassessments made by the tax audit team.

Under the new process, the tax authorities may transfer tax evasion cases as their assessment through the tax audit to prosecutors.

There are positive provisions for taxpayers under the new tax audit process including:

• Taxpayers may request for suspending a tax audit and the time period for the suspension. The process does not limit the time period. 

• Tax audit team and tax authorities may consult other authorities before making final decision on the tax audit for issues that are unclear.

• Taxpayers have five days to review and provide feedback to the draft tax audit minutes before signing. An extension may be accepted. 

Observation: Tax audits in Vietnam have become an on-radar screen issue of tax authorities in the past few years and shall continuously and stringently be focused in the future. This may lead to more frequent tax audits, more enforcement, and adjustments, with increased potential for tax penalties and interest to be applied. 

Disclaimer: This publication is for general update. This should not constitute our professional advice for the particular case, entity, or any person. Should you need further information on the matter or our professional assistance for your specific cases, please contact us.