Not yet received tax refund, why do businesses "complain" about losing both principal and interest?

Businesses "in a state of limbo" waiting for tax refunds

Mr. Pham Quang Anh, Director of Dony Garment Company (HCMC), said that tax refunds for businesses at this time are very difficult and slow, causing businesses' cash flow to "not budge".

“Since last year, Dony’s tax refund has been stuck and has not been refunded, causing us a lot of difficulties. In fact, for export enterprises, tax refunds are very important because the actual profit that enterprises can pocket when exporting is only about 3% - 7%, mostly 5%, but input VAT accounts for about 10%. Therefore, this amount has ‘eaten’ all the profit, even ‘eaten’ part of the enterprise’s original capital,” Mr. Quang Anh analyzed. Therefore, according to CEO of Dony Garment, if the tax refund is not possible, the more the enterprise works, the more it loses.

Export businesses are struggling because VAT refunds are delayed. (Illustration photo)

Explaining further why the VAT refund of only 10% has a big impact on export enterprises, Mr. Quang Anh cited that a Dony shirt costs 80,000 VND to produce, and the enterprise sells it for 100,000 VND, so the enterprise is considered to have a profit of 20,000 VND. In the case of not being refunded 10%, it means the enterprise only has a profit of 10%, equivalent to about 10,000 VND.

However, why do businesses "complain" about losing both profit and principal? In fact, the cost of making a shirt of 80,000 VND is only the direct production cost of making the shirt (fabric, labor, etc.). The other costs include electricity, water, premises, sales staff, marketing, fire prevention and fighting costs, etc., which are a lot. It is estimated that these costs will be another 15,000 VND, so the business only has a profit of about 5,000 VND/product.

Meanwhile, VAT is 10% (equivalent to 10,000 VND). If the refund is successful, the business will make a profit of about 5,000 VND. If the refund is not successful, the business will lose 5,000 VND.

Ms. Hoang Thi Nga, Director of Minh Quang Handicraft Company Limited (HCMC), said that the company's exports are also at a standstill due to long-term tax refund delays.

“Our company submitted its tax refund application in May 2022, the tax refund amount was more than 2.5 billion VND, but we are still waiting. Up to now, the tax refund amount has increased to nearly 7 billion VND,” said Ms. Nga.

Ms. Nga said that verifying goods on ships or ports is the job of the tax authorities, how can businesses do it?

“Recently, I continued working with the tax department and heard the tax officer say that the company's information had been transferred abroad to verify the identity of the buyer. Now I'm waiting for the results and don't know how long I'll have to wait,” said Ms. Nga.

Due to not being refunded, the company is at risk of closing down and stopping production because the 10% VAT tax will take all the money. Meanwhile, the company still has to pay bank interest and many other expenses.

"If we don't get a tax refund in about a month, the company will definitely have to temporarily stop operations because it's out of money," Ms. Nga added.

Wood industry businesses also face difficulties due to tax refunds. (Photo: Tran Hai)

A representative of a rubber company in District 1 also said that VAT refunds from November 2021 to now amount to more than 50 billion VND, leading to a lack of capital to receive orders.

“Currently, the source of funds to maintain operations has been exhausted, the company has had to cut costs, let employees stay home and only pay more than 50% of their salaries… Even businesses do not dare to accept orders at this time because they do not have the capital to import and export goods,” he shared.

Interest must be paid if tax refund is late.

Faced with difficulties facing businesses, the Ho Chi Minh City Tax Department has just directed its affiliated units to focus on increasing efficiency in processing tax refund dossiers for businesses in the area.

Mr. Nguyen Tien Dung, Deputy Director of the Ho Chi Minh City Tax Department, said that most enterprises with complete documents and procedures are refunded value-added tax (VAT) by the tax authority in accordance with regulations. In Ho Chi Minh City, more than 80% of enterprises are refunded first, then inspected; the remaining are enterprises that must be inspected before being refunded. Of this 20%, most enterprises have been and are being refunded, only a few enterprises have not been refunded because they are waiting for verification.

“Currently, the Ho Chi Minh City Tax Department is compiling VAT refund dossiers that are having problems and following the feedback from Associations and Enterprises. On that basis, the unit will organize dialogues with associations and enterprises to clarify the problems; then it will summarize the results and report them to the General Department of Taxation,” Mr. Dung added.

In Ho Chi Minh City, the tax authority reported that 1,105 businesses trading in wood and wood products had abandoned their business addresses and temporarily suspended operations, including 994 businesses abandoning their business addresses and 111 businesses temporarily suspending operations, accounting for 14.5% of the national figure.

In addition, the Ho Chi Minh City Tax Department also noted that its affiliated units should strengthen post-refund inspection and examination for tax refund decisions subject to pre-refund and post-inspection to promptly detect the use of illegal invoices or illegal use of invoices, profiteering in tax refunds to misappropriate the state budget, and strictly handle them according to the provisions of law...

Regarding the fact that businesses are waiting for tax refunds, lawyer Le Ba Thuong, Director of Dan Luat Tin Thanh LLC (Ho Chi Minh City Bar Association), said that the COVID-19 pandemic has caused many businesses to face difficulties in business, many of which have gone bankrupt or dissolved.

One of the biggest difficulties for businesses is that capital is occupied by customers and procedures are stuck, causing delays in VAT refunds.

The question is when a business is late in paying tax debt to the state budget, the business will be fined 0.03%/day for late payment. What should be done when the tax authority is late in refunding VAT to the business?

In fact, state management agencies have also recognized the difficulties that businesses are facing, so the Ministry of Finance has directed localities to resolve value-added tax refund dossiers for businesses in the area, promptly resolve tax refund dossiers for taxpayers, and not wait for full verification before resolving tax refunds for taxpayers. At the same time, it is requested that state management agencies consider paying interest to businesses on the amount of tax that is late for refund.

“However, not all businesses that submit complete documents will be eligible for a VAT refund. If a business's tax refund request is verified to show signs of violating the law, it will be transferred to the investigation agency, but the tax agency must notify the business in writing,” said Mr. Le Ba Thuong.

The Ministry of Finance issued Official Dispatch No. 5427/BTC-VP dated May 26, 2023 to the General Director of the General Department of Taxation on notifying the direction of the Minister of Finance to direct Official Dispatch No. 470/CD-TTg stipulating the responsibility of the Director to be fully responsible for tax refund management work. There is still a situation of delay and delay in handling value-added tax refund dossiers in the area. Urgently handle the tax amount that has been inspected and verified, promptly resolve tax refunds for taxpayers according to the provisions of Article 34 of Circular No. 80/2021/TT-BTC dated September 29, 2021 of the Ministry of Finance, without waiting for full verification to resolve tax refunds for taxpayers.

Tran Hai

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Source: https://vtc.vn/chua-duoc-hoan-thue-vi-sao-doanh-nghiep-than-mat-ca-goc-va-lai-ar798557.html