Tax compliance obligations are one of the most important and mandatory obligation for every individual and organization. However, in the process of complying with tax laws, errors or risks are inevitable. Therefore, assessing tax compliance obligations is essential for managing these risks. PHAM CONSULT would like to provide valuable information and professional services on tax compliance assessment as follows.
Tax compliance obligations.
Tax compliance involves the responsibility of individuals and organizations to pay taxes as per the law. This is the basic and important responsibility of each individual and organization to contribute to the state budget, help support socio-economic development and maintain social justice.
Compliance with tax laws will help prevent tax evasion, reduce risks as well as enhance the reputation of individuals and organizations with tax authorities and the community. It can be said that the obligation to comply with taxes is not only a legal responsibility but also a moral responsibility of each organization and individual in society.
Assessing tax compliance obligations
Although the assessment of tax compliance obligations has not been officially regulated in any legal documents. However, pursuant to Clause 7, Article 3 of Circular 31/2021/TT-BTC regulating the application of risk management in tax management, tax law compliance management is understood as follows: “7. Tax compliance management is the process by which tax authorities assess compliance with tax laws, classification of risk levels, analysis of taxpayer behavior, and thereby reasonable use of resources for tax purposes. Management measures appropriate to each level, to encourage compliance and prevent non-compliance.”
Through the above legal provisions, we can explain that tax compliance assessment is the process of assessing the level of tax compliance of an organization or individual with regulations and requirements of tax authorities, based on criteria and indicators of taxpayers’ compliance assessment criteria. Assessing tax compliance obligations is critical to risk management as well as regulatory compliance.
To assess tax compliance obligations, the following basic tasks should be performed:
Tax law compliance levels.
Pursuant to Article 10 of Circular 31/2021/TT-BTC regulations on the application of risk management in tax administration as follows:
“1. Taxpayers shall be assessed and classified according to one of the following levels of compliance with tax laws:
Other criteria as prescribed by relevant documents.
| Number | Criteria group | Criteria |
| (1) | (2) | (3) |
| 1 | Taxpayer activity status | Taxpayers who are active and not subject to the issuance of a notice of taxpayer inactivity at the address registered with the tax authority for a period of two (02) years or earlier from the time of assessment |
| 2 | Carry out the declaration and payment of taxes arising according to regulations | Declare and pay taxes arising as prescribed in the past two (02) years from the time of assessment |
| 3 | Comply with the regime of management and use of invoices and vouchers | Comply with the regime of management and use of invoices and documents as prescribed for a period of two (02) years or earlier from the time of assessment |
| 4 | Administrative violations | Taxpayers shall be sanctioned for administrative violations of taxes and invoices for a period of two (02) years or earlier from the time of assessment |
| 5 | Taxpayers shall be administratively sanctioned for acts of tax deficiency and tax evasion for a period of two (02) years or earlier from the time of assessment | |
| 6 | Taxpayers who commit acts of using invoices illegally or illegally using invoices for a period of two (02) years or more from the time of assessment | |
| 7 | Taxpayers shall be administratively handled by tax administration agencies for their non-compliance with tax inspection and inspection decisions, or enforcement of tax administrative decisions within two (02) years or earlier from the time of assessment | |
| 8 | Tax debt situation | The amount of tax owed and the number of days of late payment of tax amounts owed by the taxpayer at the time of assessment |
| 9 | Other groups of criteria | Other criteria as prescribed by relevant documents |
The above criteria are established to classify tax law compliance into levels 1, 2, 3, and 4.
Principles for assessing the level of compliance with obligations
Pursuant to Point a, Clause 1, Article 8 of Decision 18/2023/QD-TCT issuing the procedure for applying risk management in tax administration, specifically:
“a) The assessment of taxpayers’ compliance with tax laws and classification of taxpayers’ risk levels shall be carried out automatically by information technology application, on the basis of a set of indicators of criteria and assessment methods promulgated by the General Department of Taxation.”
Through this legal provision, the principle of assessing the level of compliance with tax obligations is conducted on the basis of a set of indicators of criteria and assessment methods promulgated by competent state agencies.
Order of assessing compliance with tax obligations
Pursuant to Point đ, Clause 1, Article 8 of Decision 18/2023/QD-TCT issuing the procedure for applying risk management in tax administration, specifically:
The first is to assess the taxpayer’s compliance with tax laws. This assessment will collect, analyze, verify, and collate information about taxpayers’ tax compliance activities. This assessment will be considered based on the following factors: time to pay tax on time, rate and amount of tax payable in accordance with the law, compliance with the provisions of tax law, not violating tax laws such as: tax evasion, tax fraud or false tax declaration.
Secondly, after assessing the compliance level, we can classify the overall risk level of taxpayers according to the provisions of Clause 1 Article 11 of Circular 31/2021/TT-BTC including:
Tier 1: Very low-risk taxpayers.
Tier 2: Low risk taxpayers.
Tier 3: Medium-risk taxpayers.
Tier 4: High-risk taxpayers.
Tier 5: Very high-risk taxpayers.
The classification of risk levels in tax management operations helps businesses understand the issues that need attention and prepare an effective risk resolution plan.
Finally, it is a classification of risk levels in tax administration operations, whereby the level of risk in tax administration operations is basically classified based on factors: risks of tax audit and inspection, risks of financial statements, risks of tax estimation and assessment, risks of compliance with tax laws.
Set of criteria for classifying the level of tax risk
For tax-related activities, it is inevitable that unnecessary risks are more or less. Accordingly, in Clause 10 Article 3 of Circular 31/2021/TT-BTC, there are regulations on criteria for risk classification as follows:
“10. Criteria for classifying risk levels are criteria for assessing and classifying risk levels in tax administration.”
From the above provisions, we understand that tax risk classification criteria are standards to assess the level of risk that an organization or individual may encounter in the process of complying with tax regulations.
Criteria for classifying the level of tax risk for businesses and individuals will be specified differently according to the law in Circular 31/2021/TT-BTC.
Questions for PHAM CONSULT
Enterprise B is headquartered in District 3, Ho Chi Minh City. Enterprises operating in the production of agricultural products and import and export. I would like to ask if I now want to assess the level of compliance with tax obligations of business B, how and based on what information?
ANSWER:
PHAM CONSULT would like to answer your questions about the details of tax compliance assessment as follows:
Step 1: On-site inspection
Conduct inspections at the head office of the enterprise and other production facilities and branch offices nationwide to assess the level of tax compliance.
Step 2: Review documents and documents
Check the corporation’s accounting records, transaction documents, and tax reports to ensure that any information has been properly reported and recorded.
Step 3: Check your internal processes.
Examine your internal tax management processes and systems, including tax filing, filing, and reporting processes.
Step 4: Check contracts and trades
Review contracts and transactions with your partners, suppliers, and customers to ensure that transactions have been duly executed and comply with tax regulations.
Step 5: Analyze data and metrics.
Conduct analysis of tax data and data to compare and determine the relevance of tax reports to the actual business activities of enterprises.
Based on the inspection results, it will be possible to assess the level of compliance with tax obligations of enterprise B.
If you have any legal questions that need to be answered, do not hesitate to contact PHAM CONSULT immediately at hotline +84932 103 118 to receive advice from specialists.
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