Legal liability for tax evasion and penalties in accordance with the law
Tax evasion refers to the intentional violation of tax laws with the aim of reducing or avoiding tax obligations. This act is not only subject to administrative penalties, but in many cases may also result in criminal prosecution in accordance with Vietnamese law. In this article, TNTP Lawyers will analyze the concept, common tax evasion acts as well as the legal liability that taxpayers may bear when evading taxes.
1. Concept of tax evasion
According to Article 143 of the Law on tax administration 2019, tax evasion is defined as the act of a taxpayer failing to declare, making false or dishonest declarations, or using fraudulent means to avoid or reduce tax obligations. Accordingly, to identify tax evasion, individuals and organizations should be aware of the following factors:
• Subject of implementation
The subject can be an individual or an organization that is obliged to pay taxes according to the law. In particular, according to the provisions of Article 200 of the Penal Code 2015, amended in 2017, when an organization commits tax evasion, not only the organization will be prosecuted, but related individuals such as legal representatives, directors, chief accountants, etc. can also be prosecuted for criminal liability if they direct, implement or lack responsibility in tax management.
• Subjective factor
Tax evasion is always accompanied by fraudulent behavior: such as:
– Issuing fake invoices
– Falsifying accounting records
– Using fabricated contracts
– Declaring fictitious expenses
– Concealing taxable income or failing to file tax declarations
This is an important factor to distinguish between tax evasion and accounting errors or mistakes. Accordingly, if there are errors or mistakes, taxpayers will only be subject to administrative penalties at a lighter level.
• Common tax evasion behaviors
According to Article 143 of the Law on Tax Administration, some common tax evasion behaviors include (but are not limited to):
– Not declaring or incorrectly declaring revenue and income, leading to a reduction in the amount of tax payable.
– Buying and selling invoices, creating false invoices, using illegal documents to legalize false expenses, tax deductible expenses to reduce the amount of tax payable.
– Not issuing invoices when providing goods and services to hide revenue.
– Making false accounting entries to increase costs and reduce taxable income.
– Not submitting tax declarations on time to prolong the time and avoid tax obligations.
Accordingly, the common point of tax evasion is to avoid paying taxes or reduce tax obligations. Clearly identifying signs of subjects and behaviors that are prone to committing can help businesses and related individuals avoid administrative or criminal liability.
2. Administrative penalty level
Pursuant to Article 17 of Decree 125/2020/ND-CP, individuals or organizations that evade taxes but not to the extent of criminal prosecution will be subject to administrative penalties as follows:
• Fine from 1 to 3 times the amount of tax evaded, depending on the nature and severity of the violation;
• Forced to pay the full amount of tax evaded and late payment;
• Forced to adjust the amount of loss or deductible input value-added tax on the tax records (if any).
3. Criminal sanctions
According to Article 200 of the 2015 Penal Code, amended in 2017, if the tax evasion has a large amount of money or aggravating circumstances, individuals and legal entities may be subject to criminal sanctions as follows:
• For individuals:
– Fine from 100 to 500 million VND or imprisonment from 3 months to 1 year, if the tax evasion amount is from 100 to less than 300 million VND or recidivism.
– Fine from 500 million to 1.5 billion VND or imprisonment from 1 to 3 years, if the tax evasion amount is from 300 to less than 1.5 billion VND.
– Fine from 1.5 to 4.5 billion VND or imprisonment from 2 to 7 years, if the tax evasion amount is over 1.5 billion VND.
• For organizations:
– Fine from 300 million to 10 billion VND;
– Temporary or permanent suspension of operations, depending on the level and violation.
Tax evasion is a serious violation of the law, not only causing damage to the State budget but also directly affecting the reputation and operation of enterprises. Therefore, individuals and organizations need to fully comply with tax obligations, declare honestly and on time, and proactively review internal risks to avoid unnecessary legal consequences.
Above is the article “Legal liability for tax evasion and penalties in accordance with the law” sent by TNTP Lawyers to our readers. We hope that the article will be useful to our readers.
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