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How Should A Representative Office Prepare For A Tax Inspection In Vietnam?
Understanding Vietnam’s personal income tax obligations can help companies prepare for tax inspection and mitigate the risk of penalties resulting from non-compliance.
In Vietnam, the General Department of Taxation conducts random tax inspections on companies every five years. According to the Vietnam Breaking News’ article published last December, more than 67,000 enterprises were inspected in 2014, accounting for 14% of all businesses operating in Vietnam. While improvements in technology in recent years has helped employers and employees to better fulfill tax obligations, tax inspections may be conducted more often in the future.
Vietnam’s authority conducts a tax inspection when a representative office has unusual administrative activities such as closing an office, extending a business license, or requesting a tax refund in the current financial year. Representative offices should prepare all documents needed for the Personal Income Tax audit. Understanding how these audits work can help minimise the risks from tax inspection and penalties resulting from tax violations.
A tax inspection takes the following format in Vietnam:
1. A letter is issued from the authority to the representative office advising of a tax inspection.
2. The office must prepare required documentation such as an employee list, employment contracts, copies of expats’ passports, work permits, dependent registration, payroll registers, tax reports, annual tax finalisation reports, payments, bank book, cash book and other supporting documents relating to the employees’ income paid.
3. There is then a face-to-face meeting with the authority to present the documentation for the inspection. In principle, the inspection itself takes between one and five days, depending on the complexity of the required documents and tax inspection period. However, the inspection often takes much longer or even months to complete.
4. Finally, written minutes signed by both parties will be issued by the authority after the inspection.
One of TMF Group Vietnam’s HR and payroll services is to help clients be prepared for tax inspections, to understand the tax obligations for compliance and to help companies ensure all documents are kept properly including tax reports, expenses reimbursement documents, cash books and bank books. We can also help clients with expense management services to avoid complex issues arise during the inspection, and to let companies focus on their core businesses.
TMF Group Vietnam is a one-stop solution for facilitating business across Vietnam and globally. We operate offices in Hanoi and Ho Chi Minh City. Get in touch with our Vietnam team to learn more.