High Tax Risk Business Entities
Mrs. Nguyen Thi Ngoc K.'s company (Pleiku City, Gia Lai province) has fulfilled its tax obligations when they have arisen and is not in tax debt. However, recently, the local tax authority has requested her business to make advance payments based on the tax risk threshold for commercial business activities (VAT 0.43%; Corporate Income Tax 0.9%).
Mrs. K. asked, why is the tax authority requiring her business to make these advance tax payments?
The Pleiku City Tax Department, Gia Lai province, answered this issue as follows:
Based on Article 1 of the Tax Management Law regarding the construction, collection, processing, and management of the taxpayer information system, and Article 68 of Circular 80/2021/TT-BTC dated September 29, 2021, of the Ministry of Finance;
Based on Article 4 of Circular 31/2021/TT-BTC dated May 17, 2021, of the Ministry of Finance, which stipulates the application of risk management in tax administration;
Using taxpayer data management information in Gia Lai province, the tax authority has collected and built a database for managing the tax risk threshold for commercial business activities. Specifically, as follows:
The average VAT tax rate to be paid/revenue: 0.43%.
The average corporate income tax rate to be paid/revenue: 0.9%.
Businesses fall into the tax risk category
In Point b of Article 6, Article 8 of Decree 126/2020/NĐ-CP dated October 19, 2020, by the government that regulates various taxes and annual tax settlement as follows:
"Corporate Income Tax:
Taxpayers must self-determine the provisional quarterly corporate income tax (including the temporary allocation of corporate income tax for the provincial level where there are dependent units, business locations, and real estate transfers different from the taxpayer's headquarters) and deduct the tax already provisionally paid from the tax amount to be paid according to the annual tax settlement.
Taxpayers who are required to prepare quarterly financial reports under the accounting law shall base their provisional quarterly corporate income tax on the quarterly financial reports and the provisions of tax law.
Taxpayers who are not required to prepare quarterly financial reports under the accounting law shall determine their provisional quarterly corporate income tax based on quarterly production and business results and the provisions of tax law.
Through the supervision of tax return filings for 2022 and the first and second quarters of 2023 by Mrs. Kiều's unit:
The average VAT tax rate to be paid/revenue for 2022: 0%;
The average corporate income tax rate to be paid/revenue: 0.45%;
The average VAT tax rate to be paid/revenue for the first and second quarters of 2023: 0%.
Comparing these rates with the average risk threshold rates mentioned above, the business falls into the tax risk category and must undergo a tax return review at the tax authority as stipulated in Article 109 of the Tax Management Law.
The tax authority's notification to the business to make provisional payments of the specified taxes aims to help the business fulfill its tax obligations to the state budget in accordance with the provisions of the Tax Management Law.
By: Mai Chi (Government Newspaper)./Translator: LeAnh-Bizic
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