The Ministry of Finance has set out directives regarding the inspection of state budget obligations in Official Letter No. 10039/BTC-TTr dated October 3, 2022.
With regard to tax and customs, the ministry specifically requests the following:
1. For the General Department of Taxation
- Strengthening inspections and auditing with regard to transfer pricing and tax evasion, while timely detecting cases of incorrect, insufficient and fraudulent tax declarations, focusing on the following subjects:
+ Taxpayers being classified as high tax risk, with high risk relating to invoices and taxpayers who are subject to post-tax refunds inspections/audits;
+ Taxpayers enjoying tax incentives (e.g. exemption/reduction), tax exemption and tax relief under double tax treaties;
+ Taxpayers undertaking capital transfers, trademark transfers, project transfers, entity splits and mergers;
+ Taxpayers operating in new industries and particular business sectors;
+ Financial institutions and banks;
+ Foreign-invested enterprises with potential transfer pricing, taxpayers having related party transactions and taxpayers with a loss position for many years;
- Strictly managing VAT refunds to avoid profiteering causing state budget losses; focusing inspections on taxpayers with large refundable amounts and illegal invoices.
- Utilizing information technology and artificial intelligence (AI) applications to reconcile, examine and manage taxpayers’ invoices.
- Conducting tax inspections and audits, handling tax debt and ensuring correct, sufficient and timely collection of taxes, fees, charges and other tax revenues for the state budget.
2. For the General Department of Customs
- Conducting inspections and audits on the compliance of customs and tax laws at enterprises that are involved in the import and export of key goods, including: imports of goods subject to high tax rates with large turnover; goods that are highly likely to be exposed to fraud in terms of HS code and value; and supervising product policies, especially those that impact human health, fraud of origin, quality, food safety, value, and tax rates
- Conducting inspections and audits of enterprises that enjoy import duty exemptions under incentivized investment sectors; export processing enterprises importing machinery and equipment from overseas; enterprises exporting minerals and goods with mineral content; and export enterprises that have a significant and sharp increase in tax refunds.
The MoF requires that financial inspections and audits in 2023 must strictly adhere to the above directions with proper coordination amongst competent authorities to avoid overlapping and duplication.
In addition, the General Department of Taxation has also approved a list of companies subject to tax inspections and audits for 2023, which was submitted by local tax departments.
*Please contact KPMG if you need further consultancy on the impact of Official Letter 10039 and any assistance needed for upcoming tax and customs audits.