Recently, many enterprises have encountered issues related to purchasing invoices from shell corporations or are suspected of engaging in illegal invoice transactions. So, how should such cases be handled?

According to legal regulations, handling these cases can be quite challenging due to the complex legal issues involved and the requirement for clear evidence. In this article, KMC will provide some information and reference the relevant legal documents for your reference.

Note: This article is for informational purposes only and does not constitute legal advice for any specific case.

1. What Constitutes the Use of Illegal Invoices?

The use of illegal invoices refers to the use of any of the following types of invoices:

  • Fake invoices: Invoices that are printed or created using the invoice template of another organization or individual, or printed/created with duplicate numbers under the same invoice series.
  • Invoices without validity: Invoices that have been created in accordance with guidelines but have not completed the required notification of issuance.
  • Expired invoices: This includes the following types of invoices:
    • Invoices that have completed the full issuance procedures, but the issuing organization or individual has notified that they will no longer be used.
    • Invoices that have been lost after the issuance notification and have been reported as lost to the directly managing tax authority.
    • Invoices of organizations or individuals that have ceased using their tax identification number (also known as tax code cancellation).

Therefore, using invoices from enterprises that have abandoned their business address or from shell corporations may be considered as using illegal invoices.

Penalty: Ranges from 20,000,000 VND to 50,000,000 VND (with an average of approximately 35 million VND).

2. Principles for Handling Invoices from Shell Corporations

     2.1. Verify Partners Before Processing Invoices

Enterprises should proactively verify their business partners to avoid the risk of purchasing invoices from shell corporations. Some measures that can be applied include:

The above methods are for reference only. Therefore, enterprises must proactively verify the information of suppliers before signing contracts to minimize risks.

View more: A list of 637 companies identified as high risk for engaging in the illegal sale of invoices

     2.2. Determining the Timing of Input Invoices

When an input invoice related to a shell corporation is identified, the accountant must determine the timing of the invoice to take appropriate actions:

  • In cases where the invoice is issued before the enterprise (seller) goes into hiding:
    • The tax authority will verify the actual transaction to determine its validity.
    • If the enterprise can prove the transaction is legitimate and meets all required conditions, such as contracts, payment documents, and warehouse receipts, the enterprise may be eligible for VAT deduction and may include it as a legitimate expense when calculating taxable income for Corporate Income Tax (CIT) purposes.
  • In cases where the invoice is issued after the enterprise (seller) goes into hiding:
    • The invoice is not eligible for VAT deduction.

It cannot be included as a legitimate expense when calculating taxable income.

     2.3. Handling Invoices from Shell Corporations

Depending on the VAT declaration status of the enterprise, the tax authority will provide specific guidance on how to handle the situation:

  • If the enterprise has not declared VAT deduction: The tax authority will notify the enterprise to temporarily suspend VAT declaration and wait for conclusions from the competent authorities.
  • If the enterprise has declared VAT deduction: The tax authority will require the enterprise to adjust and reduce the amount of VAT already deducted.

In cases where the enterprise affirms that the transaction is legitimate, the tax authority will conduct an inspection and verification process to reach a final conclusion. This process includes:

  • Goods: Sales contract, delivery method, and the origin of the goods.
  • Payments: Payment methods, banking transactions.
  • Export (if applicable): Customs documents, payment documents through the bank.

If the inspection confirms the transaction's legitimacy, the enterprise will be allowed to deduct VAT and recognize the expense as legitimate. If violations or tax fraud are detected, the file may be referred to the competent authorities for further legal action.

     2.4. Notes on Suspending VAT Deduction

  • If the tax authority requires the suspension of VAT deduction, the enterprise should note the following:
    • In cases where VAT payable arises, the tax authority will monitor the situation and will not require immediate payment.
    • No late payment penalties will be applied until an official conclusion is made by the competent authorities.

Enterprises can refer to the detailed content in Official Letter No. 11797/BTC-TCT dated August 22, 2014, for further clarification on the related regulations.

3. Solutions from KMC: Review and Ensure Compliance

To assist enterprises in managing risks related to invoices from shell corporations, KMC offers review and compliance assurance services, helping enterprises to:

  • Review the input invoice system to identify risks related to suppliers showing signs of violations.
  • Assess compliance with tax and accounting regulations, ensuring that documentation and records are complete and valid.
  • Provide guidance on handling invoices with potential risks and propose solutions in accordance with legal regulations.
  • Advise on establishing an internal control system to prevent the use of invalid invoices.

Contact KMC today for detailed consultation and protect your enterprise from invoice-related risks.