Circular No. 31/2021/TT-BTC replacing Circular No. 204/2015/TT-BTC dated December 21, 2015 of the Ministry of Finance regulating risk management in tax administration will take effect from July 2, 2021. From this point, new principles and procedures on applying risk management for taxpayers will be implemented.

The application of risk management in selection of taxpayers with signs of risk
to develop tax inspection and examination plans must avoid duplication and overlap.
Photo: Thùy Linh

Avoid duplicate inspection

According to the General Department of Taxation, Circular No. 31 adjusts the content of the formulation and authority to approve on-site inspection and examination plans at the taxpayer's office and the list of additions and adjustments to the inspection and examination plan at the taxpayer's office must comply with the provisions of the Law on Inspection, the Law on Tax Administration and guidance documents. Besides, the regulation on the list of inspectors required to reach 1% to 2% of the total number of operating firms is removed and the list of inspection reaches the rate of 15%-18% of total number of operating enterprises in Circular 204 because at present, the Ministry of Finance regulates this ratio in the guidance on inspection every year.

For the selection of taxpayers to develop on-site inspection plans at the taxpayer's office, the tax authority must work based on the list of taxpayers classified following the risk levels of inspection activities. The application of risk management in selection of taxpayers with signs of risk to develop tax inspection and examination plans must avoid duplication and overlap in accordance with the provisions of the Law on Tax Administration and guidance documents on enforcement and other legal documents.

According to the General Department of Taxation, if the tax authority has reliable information which reduces the risk of taxpayers to a low level or has grounds to believe the risk level of taxpayers is low and is not included in the annual inspection and examination plan, the tax authority will decide not to select that taxpayer to put in the inspection and examination plan and select other taxpayers as prescribed. In tax administration, if there is information and it is verified that taxpayers showed signs of high risk, the tax authority can add it to the annual inspection and examination plan. The tax authority will be responsible for its decisions.

At the same time, the tax authority shall base on the results of risk analysis by using information technology applications or from business analysis and information from actual tax administration to determine the content and scope of tax inspection.

The General Department of Taxation affirms the formulation and authority to approve on-site inspection and examination plans at the taxpayer’s office, the list of additions and adjustments to the inspection and examination plan at the taxpayer's office comply with the provisions of the Law on Tax Administration, guidance documents and other legal documents.

Apply management measures for a case-by-case

A notable part of Circular No. 31 is the key control and supervision of taxpayers showing signs of tax violations. According to the General Department of Taxation, this regulation inherits Article 20 of Circular 204 and supplements cases where it is assessed taxpayers do not comply with the tax law, taxpayers are at high risk levels or taxpayers do not explain and adding information or explanation or not provide enough information in accordance with the request and time limit in the document of the tax authority.

Circular No. 31 stipulates four cases where taxpayers are subject to key tax supervision. They are: taxpayers perform banking transactions with suspicious signs as stipulated in the provisions of the law on prevention and combat of money laundering related to tax evasion and tax fraud; a taxpayer or taxpayer's legal representative is prosecuted for tax violations, invoices and documents; taxpayers showing signs of high tax risk in key topics or via collecting information from the management of tax authorities that need to monitor tax administration; taxpayers selected from the list of taxpayers who are not complying with law on tax, taxpayers who are at very high risk and taxpayers who do not explain, supplement information or have to explain, supplement information but not enough as requested or on time.

Tax authorities at all levels are responsible for monitoring, supervising and applying appropriate professional tax management measures in each case. Along with that, the General Department of Taxation shall specify the collection and analysis of information, determining key supervision and monitoring measures in accordance with the provisions of law.

The General Department of Taxation said the amendments, supplements and instructions in the draft circular regulating risk management in tax administration are aimed at ensuring the effectiveness and efficiency of tax administration, as well as fair treatment among taxpayers by stipulating the application of sanctions to high-risk taxpayers who violate tax laws and choosing to commend and reward taxpayers who comply with the law on tax and at the same time, encouraging and facilitating taxpayers to voluntarily comply with the provisions of law on tax and tax administration.