What is Tax Evasion – Penalties for Tax Evasion According to Current Law

Tax evasion is no longer an unfamiliar concept to many people today, as it is an extremely pressing issue that the state is focusing on preventing. Due to the increasingly sophisticated nature and extent of this crime, state agencies have issued strict sanctions to prevent and punish such violations. The legal consequences of tax evasion will be detailed in the following article.

I. What is Tax Evasion?

1. Definition of Tax Evasion:

Tax evasion is the act of individuals or organizations implementing illegal methods or behaviors to avoid tax obligations or reduce the amount of tax payable according to regulations.

2. Object of the Tax Evasion Crime:

The object of the tax evasion crime is the infringement on the state’s tax regulations, causing a reduction or damage to state budget revenue.

3. Objective Aspect of Tax Evasion:

The objective aspect of tax evasion is demonstrated through the behavior of individuals or organizations making fraudulent declarations in production and business activities to avoid tax obligations or pay much lower taxes than required by state regulations.

A tax evasion crime is constituted if the amount of tax evaded is from 100,000,000 VND to under 300,000,000 VND. If it is under 100,000,000 VND but the individual has been administratively sanctioned for tax evasion, has been convicted of this crime or one of the crimes specified in Articles 188-196, 202, 250, 251, 253, 254, 304, 305, 306, 309, and 311 of the Penal Code and has not yet had the criminal record expunged, and still continues to violate.

4. Acts Considered as Tax Evasion:

Acts considered as tax evasion are listed according to Clause 1, Article 200 of the 2015 Penal Code, amended and supplemented in 2017 as follows:

Individuals or organizations that fail to submit tax registration documents; tax declaration documents or submit tax declaration documents more than 90 days after the deadline for submitting tax declaration documents or the extended deadline for submitting tax declaration documents as prescribed by law;
Failing to record in accounting books the revenues related to the determination of the tax payable for that revenue;
Not issuing invoices or issuing invoices but recording the sale value lower than the actual payment value of the sold goods or services;
Accounting for goods or input materials by using illegal invoices and documents to reduce the payable tax amount or increase the tax-free amount, increase the deductible tax amount, the refundable tax amount;
Declaring incorrectly the actual exported, imported goods; failing to declare additional tax declaration documents after customs clearance, if not falling under the cases specified in Articles 188 and 189 of the 2015 Penal Code, amended and supplemented in 2017;
Intentionally failing to declare or intentionally declaring wrongly about taxes for exported, imported goods if not falling under the cases specified in Articles 188 and 189 of the 2015 Penal Code;
Having collusion with the shipper to import goods not falling under the cases specified in Articles 188 and 189 of the 2015 Penal Code;

II. Criminal Responsibility for Tax Evasion

Article 200 of the 2015 Penal Code stipulates the penalty framework for tax evasion offenses as follows:

Penalties for individuals violating tax evasion:

First Penalty Framework: A fine ranging from 100,000,000 VND to 500,000,000 VND or a prison term from 3 months to 12 months if: The amount of tax evaded is from 100,000,000 VND to under 300,000,000 VND; tax evasion under 100,000,000 VND but has been administratively sanctioned for tax evasion or has been convicted of tax evasion or one of the crimes specified in Articles 188, 189, 190, 191, 192, 193, 194, 195, 196, 202, 250, 251, 253, 254, 304, 305, 306, 309, and 311 of the Penal Code without a criminal record expunged and still continues to violate.
Second Penalty Framework: A fine ranging from 500,000,000 VND to 1,500,000,000 VND or a prison term from 1 year to 3 years if committing the crime under one of the following circumstances:
- The crime is organized;
- The amount of tax evaded is from 300,000,000 VND to under 1,000,000,000 VND;
- Abusing position and power to commit the crime;
- Dangerous recidivism;
- Committing the crime more than twice;
Third Penalty Framework: A prison term from 2 to 7 years if the amount of tax evaded is 1,000,000,000 VND or more; a fine ranging from 1,500,000,000 VND to 4,500,000,000 VND.
Additional Penalties for Tax Evasion: In addition to the prison term, the offender may also be fined from 20,000,000 VND to 100,000,000 VND; banned from holding certain positions; banned from practicing certain professions or performing certain jobs from 1 year to 5 years or have part or all of their assets confiscated.

Penalties for commercial legal entities:

If a commercial legal entity commits one of the acts considered as tax evasion with an amount of tax evaded from 200,000,000 VND to under 300,000,000 VND; from 100,000,000 VND to under 200,000,000 VND but has been administratively sanctioned for tax evasion or has been convicted of this crime. Or has been administratively sanctioned or convicted of one of the crimes specified in Articles 188, 189, 190, 191, 192, 193, 194, 195, and 196 of the 2015 Penal Code without a criminal record expunged and still continues to violate, then fined from 300,000,000 VND to 1,000,000,000 VND.
If committing the crime as specified in points a, b, d, and dd of Clause 2, Article 200 of the Penal Code, then fined from 1,000,000,000 VND to 3,000,000,000 VND.
If committing the crime as specified in Clause 3, Article 200 of the 2015 Penal Code, then fined from 3,000,000,000 VND to 10,000,000,000 VND or suspended from operation for a term from 6 months to 3 years.
Permanent suspension if committing the crime specified in Article 79 of the 2015 Penal Code (amended and supplemented in 2017), then permanently suspended from operation.
In addition, a commercial legal entity may also be fined from 50,000,000 VND to 200,000,000 VND; banned from business, banned from operation in certain fields, or banned from raising capital from 1 year to 3 years.

III. Administrative Sanctions for Tax Evasion

Article 17 of Decree 125/2020/ND-CP stipulates administrative penalties for tax evasion as follows:

Application of fines:
- A fine equal to the amount of tax evaded for taxpayers with at least one mitigating circumstance when committing one of the following violations:
  - Failure to submit tax registration documents;
  - Failure to submit tax declaration documents or submission more than 90 days after the deadline for submitting tax declaration documents or after the extended deadline for submitting tax declaration documents; except for cases specified in Points b and c, Clause 4 and Clause 5, Article 13 of Decree 125/2020/ND-CP;
  - Failure to record in accounting books the revenues related to determining the payable tax amount; not declaring, declaring incorrectly resulting in a shortage of payable tax amount or an increase in the refundable, exempted, or reduced tax amount, except for acts specified in Article 16 of Decree 125/2020/ND-CP;
  - Not issuing invoices when selling goods or services except for cases where taxpayers have declared tax on the value of goods and services sold in the corresponding tax period; issuing invoices for goods and services with incorrect quantities and values to declare lower taxes than actual;
  - Using illegal invoices and documents to declare tax, reducing the payable tax amount or increasing the refundable, exempted, or reduced tax amount;
  - Illegally using documents, or documents that do not reflect the true nature of the transaction or actual transaction value leading to incorrect determination of the payable tax amount, exempted, reduced, or refunded tax amount;
  - Failure to declare the change in use purpose, declaring tax with the tax authority related to the use of goods not subject to tax, exempted from tax, exempted from tax for incorrect purposes;
  - During the period taxpayers apply for suspension, temporary suspension of business activities but still conduct business without notifying the tax authority, except for cases specified in Point b, Clause 4, Article 10 of Decree 125/2020/ND-CP.
- A fine equal to 1.5 times the amount of tax evaded for taxpayers committing one of the following acts without any aggravating or mitigating circumstances:
  - Failure to submit tax registration documents;
  - Failure to submit tax declaration documents or submission more than 90 days after the deadline for submitting tax declaration documents or after the extended deadline for submitting tax declaration documents; except for cases specified in Points b and c, Clause 4 and Clause 5, Article 13 of Decree 125/2020/ND-CP.
- A fine equal to 2 times the amount of tax evaded if committing one of the above acts with one aggravating circumstance.
- A fine equal to 2.5 times the amount of tax evaded if committing one of the above acts with two aggravating circumstances.
- A fine equal to 3 times the amount of tax evaded if committing one of the above acts with three or more aggravating circumstances.
Application of measures to remedy consequences:
- Obliged to pay the full amount of tax evaded into the state budget for violations.
- In case the tax evasion act has passed the statute of limitations for penalties, the taxpayer will not be fined for tax evasion but must pay the full amount of tax evaded, late payment interest calculated on the amount of tax evaded into the state budget within the time limit specified in Clause 6, Article 8 of Decree 125/2020/ND-CP.
- Obliged to adjust the tax records for losses and the deductible input VAT (if any)

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_Nguyen Thu Phuong_