Internal documents "override" the law?
After sending six petitions to the leaders of the Ho Chi Minh City People's Committee, the General Department of Taxation, the Ho Chi Minh City Tax Department, the Minister of Finance, and two petitions requesting a meeting with the leaders of the Ho Chi Minh City Tax Department within one year, a representative of Leglor Production-Trade-Service Company Limited (Thu Duc City, Ho Chi Minh City) on May 24 told Thanh Nien that he had just had a meeting with the Deputy Director of the Ho Chi Minh City Tax Department on May 18. After discussing with the enterprise and related departments, Mr. Thai Minh Giao, Deputy Director of the Ho Chi Minh City Tax Department, directed the Thu Duc City Tax Department to submit a proposal for a value-added tax (VAT) refund for Leglor Company to the Ho Chi Minh City Tax Department and will sign it immediately. Although they are still waiting for a tax refund decision, reaching this step, according to the Leglor representative, is also a commendable result after a long time of calling for help.
Many wood businesses have their VAT refund dossiers "stuck" due to regulations on verifying the origin of wood all the way to the forest owner.
Specifically, Leglor Company's tax refund dossier was first submitted in July 2021, but encountered the period of social distancing to prevent the Covid-19 epidemic in Ho Chi Minh City, so by the end of 2021, the tax refund dossier had to be adjusted because the District 9 Tax Department was then waiting to merge into the Thu Duc City Tax Department. By the beginning of 2022, the Thu Duc City Tax Department issued a record of inspection data and determined that the company's tax refund dossier was eligible.
On that basis, the Thu Duc City Tax Department has twice submitted a proposal to refund VAT for the company to the Ho Chi Minh City Tax Department, but for unknown reasons the case has not been resolved. Ironically, when the tax refund dossier with the VAT amount of 10.5 billion VND has not been processed, the tax authority has not accepted the dossiers of the following batches, so the company continues to wait and bury its capital.
It is estimated that the amount of VAT paid after nearly 2 years that needs to be refunded is nearly 30 billion VND, a very large amount for a private company, especially in the context of recent years. More tragically, according to Mr. Le Tan Phu, representative of Leglor Production-Trading-Service Company Limited, currently, even if there are orders, the company cannot deploy production and export due to lack of capital, which is pushing many companies closer to the brink of bankruptcy due to the increasing amount of VAT refunds being "held".
Ms. HTN (Director of a wood manufacturing company based in District 1, Ho Chi Minh City)
"The reason why the tax refund has not been received is because the tax authority requires verification of the origin of the wood to the forest owner (F0) before the tax refund dossier can be processed. However, this verification is very difficult, even impossible because the reality is that domestically grown wood is very small and scattered, and purchased through many sources. While we are a company specializing in directly exporting outdoor furniture products made of cajuput wood (wood sourced from domestically grown forests) and purchasing finished products from partners, we cannot know which units the manufacturers will buy raw materials from," he said, adding that the company has full export contracts, has customs clearance confirmation declarations, and all payments are made through banks, has full legal payment documents, but cannot pass the "barrier" of the internal document requesting verification of the origin of the wood from the tax authority.
"We are about to "suffocate", the risk of bankruptcy is looming because the VAT refund is "held", there is a lack of capital for production, and we are in debt to the bank. Our company does not know where to get money to maintain operations, pay interest and especially the principal debt that is about to mature. We do not know what will happen to hundreds of workers working at the company if the company is dissolved. We are still anxiously waiting for the decision to get a tax refund after the recent meeting with the Ho Chi Minh City Tax Department," said Mr. Phu.
Nearly 3,000 billion VND "locked up", the wood industry calls for help
Operating for more than 20 years, Ms. HTN, director of a wood manufacturing company headquartered in District 1 (HCMC), said that it has never been as difficult as it is now, because the amount of tax refunded is getting bigger and bigger, up to about 7 billion VND. A year ago, the company applied for a refund of 2.5 billion VND in VAT, but to this day it has not been refunded. Subsequent tax refund applications were delayed, so the amount of tax refund is getting bigger and bigger, up to about 7 billion VND. The tax authority has now verified more than 60% of input invoices, but the application is still not refunded, just because of the requirement to verify the origin of the wood. The company mainly buys raw materials from companies, most of which are state-owned companies, and the verification process is still taking a long time.
"Verifying goods on ships or ports is the job of the tax authority, how can businesses do it? I heard the tax officer say that the business's information has been transferred abroad to verify the identity of the buyer, now waiting for the results. If the foreign side does not respond, will the business not get a tax refund? The tax authority can check foreign businesses through other channels such as tax codes... instead of hoarding money like this," Ms. N. was upset and said that the company is in a situation where it is trying to find export contracts but the tax is not refundable, the more work the business does, the more tax is suspended.
"Many months ago, I thought this problem would be solved, and the company had high hopes, so they tried to maintain operations, instead of suspending or closing down. However, it is getting more and more unclear! From a company that at its peak had 300 workers, now there are only a few dozen left. The company is holding on, completing signed orders and then suspending operations. The capital is exhausted. The business is not making a profit of 10%, but if we consider borrowing from the bank to get capital to do business, we will die," Ms. N. said frankly.
Considering the wood industry as high-risk and conducting inspections will cause difficulties for businesses because it takes a lot of time to verify the origin. With the amount of thousands of billions of VND not yet refunded, many businesses face the possibility of bankruptcy because they no longer have operating capital.
Mr. Le Minh Thien (Vice President of Vietnam Timber and Forest Products Association)
Vice President of the Vietnam Timber and Forest Products Association (VIFOREST) Le Minh Thien said that the amount of tax refunds that wood enterprises nationwide have been stuck with for many years is about 2,500 - 3,000 billion VND. In particular, for enterprises buying wood chips, there is almost "no way out". The request to verify the list of planted forest goods between the wooden furniture exporter and each forest grower is not feasible. People have a few hectares of trees, or grow trees in between until they sell them to purchasing enterprises. Requiring enterprises exporting products from planted forest wood to directly verify each person is impossible. It is impossible to get the list, and it is also unknown who signed to confirm this list. The Ministry of Agriculture and Rural Development has also stepped in to support businesses to remove obstacles, but it has not been resolved.
Previously, in 2020, the General Department of Taxation issued Official Dispatch 2928 and Official Dispatch 2424 requesting the Tax Departments of provinces and centrally run cities to strengthen measures to prevent, detect and handle violations of the law on VAT refunds; Review taxpayers at risk of VAT refunds. This includes "tightening" management of VAT refunds for businesses trading in high-risk goods such as wood and wood products. Since then, according to Mr. Le Minh Thien, many wood businesses have had difficulty getting VAT refunds.
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