Invoices are rejected when partners stop doing business.
Ms. Thanh Nhan (accountant of an electronic components supplier in Ho Chi Minh City) is worried about whether the company's tax refund request to the tax authority will be processed quickly because the company is running out of operating capital. The company's current capital is only 2 billion VND, but the tax refund that has not been processed is more than 1 billion VND. Even if the company wants to borrow money from the bank to do business at this time, the company's financial situation does not allow it.
Ms. Thanh Nhan said that the company sells electronic components to enterprises in export processing zones with a 0% tax rate. According to regulations, the company is entitled to a 10% VAT refund. Previously, the company refunded tax twice a year using the refund-first-check-later method, so the tax refund was very fast. However, in recent years, the tax authority has been checking-first-refund-later, so the invoice verification is not only for enterprises selling directly to enterprises but also for invoices of F2, F3 enterprises...
Verification of this invoice cannot be quick, some tax authorities respond, some units do not. Many invoices belonging to enterprises that temporarily suspended operations when business was difficult in March 2023 (after the time of issuing invoices to Ms. Thanh Nhan's company) were also rejected and not recognized by the tax authorities.
"The tax amount of these invoices is several tens of millions of dong, so the company has to pay it. However, because of the invoices of the temporarily suspended businesses, the entire tax refund request of the company, up to 1 billion dong, has not been resolved, which is the important thing," Ms. Nhan was upset.
Businesses worry when receiving invoices from businesses that have ceased operations.
A representative of a plastics exporting company in Ho Chi Minh City (who did not want to be named) said that the story of not being able to get VAT refunds in Ho Chi Minh City is quite common. His company itself has transactions with many companies and partners in different provinces and cities when buying and selling. This is a very normal thing, but because of that, his company's tax refund application in 2022 was "stuck" because the tax authority requested to wait for verification of the declared transaction with a unit in the Mekong Delta region from the third quarter of 2019. By 2022, when the tax authority verified, this unit temporarily stopped operating.
At the same time, the local tax authority where the goods were sold, when asked to verify, discovered that the local enterprise had declared an insufficient sales invoice and had not paid taxes. This person was upset that when transacting, the enterprise had a contract with the seller according to the business license, paid via bank and had a financial invoice with full VAT declaration. Therefore, the violation of the local partner or the temporary suspension of operations was beyond the control of the enterprise.
Especially for transactions that occurred 3 years ago compared to the time of the tax authority's inspection, it would be unfair for the tax authority to hold businesses like yours responsible for this risk. Not to mention the situation after the Covid-19 pandemic, many businesses fell into difficulty and requested to temporarily suspend business. Shouldn't every business that has a sales contract or invoice with a partner in this situation be held jointly responsible? While the tax authority has complete records that can be checked at the time the company made the transaction a few years ago, the partner was still operating normally.
Misery waiting for foreign buyers to be checked
In 2022, the Vietnam Cassava Association and enterprises have continuously petitioned and sent official dispatches to the General Department of Taxation, the Ministry of Finance, and the Prime Minister regarding the issue of not being able to refund VAT on cassava starch products. According to information from the association, many enterprises have not yet received tax refunds because tax authorities in each place have different understandings. The problem of cassava enterprises is since the General Department of Taxation issued Official Dispatch No. 632 dated March 7, 2022 on VAT refunds on cassava starch products. Accordingly, the General Department of Taxation directed internal tax agencies to carry out tasks related to tax refund management. In which, it requested tax departments to inspect, review, and compare enterprises in the area that have declared transactions with enterprises and organizations from China, leading to the suspension of VAT refunds of cassava exporting enterprises.
Accountant of an electronic components supplier in Ho Chi Minh City
According to the Vietnam Cassava Association, the documents for VAT refund on agricultural exports only include a tax refund request; sales and processing contracts; customs declarations; and bank payment documents. Current laws on VAT refunds do not stipulate that tax refund documents must have confirmation from foreign customers to be eligible for a refund. At the same time, exporting enterprises do not have the obligation or capacity to verify foreign partners when signing contracts. Verifying the legal status of buyers in the importing country is beyond the capacity of enterprises. Therefore, enterprises cannot verify whether that partner still exists or not. Meanwhile, China is a large cassava export market of Vietnam, accounting for 93%. This means that most enterprises in this industry have been and are facing the risk of having their tax payments "suspended".
In recent times, many cases of VAT refund fraud have been discovered. The fraud cases belong to which industry group, the enterprises in that industry will be "tightened". For example, in 2021, some enterprises have imported goods (electronic components, computers) with similar designs and technical specifications. When importing, some enterprises declare very low values, but when exporting, some other enterprises declare very high values. Or each export shipment weighs only a few kilograms to a few dozen kilograms, but the declared value is up to several billion VND or tens of billions of VND. This leads to potential risks of buying and selling invoices, falsifying VAT domestically to inflate the value of exported goods in order to appropriate VAT refunds.
Therefore, the General Department of Taxation has issued an official dispatch requesting local tax authorities to review enterprises trading in high-risk goods such as electronic components, wood and wood products, agricultural, forestry and fishery products, etc. to conduct inspections and checks according to instructions. When inspecting and checking VAT refunds, it is necessary to compare actual records, the nature of transactions and compare them with tax law provisions, etc.
The situation of one bad apple spoiling the barrel is causing many businesses to "suffer", with thousands of billions of VAT being held and it is unknown when they will be refunded.
The cassava industry has been facing many difficulties due to the impact of the Covid-19 pandemic for over 2 years. The amount of inventory is large, many businesses no longer have money to buy raw materials, forced to stop production... If the VAT refund problem is not resolved promptly, it will lead to the collapse of the production chain, billion-dollar crops and impact other industries with border exports similar to the cassava industry.
Vietnam Cassava Association
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