Question 87: Does the tax authority have the right to tax inspection over the previous years that exceed the time frame of 05 years from the date of its failure to conduct tax inspections at the enterprise?

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At present, the legal documents in the tax area have not yet clearly defined, explained or guided about the time frame during which the tax authority is restricted from conducting inspection and control at the enterprise. And the Law on Tax Administration only regulates the sequence when tax authorities conduct inspections and controls over taxpayers, providing for no restrictions on their decision or appraisal in a certain time frame. Therefore, in principle, the local tax authority may carry out tax inspections and controls over taxpayers at any time as long as a reasonable notice is given in advance.

On the other hand, for an act of tax evasion or tax fraud which is not severe enough for penal liability examination, or an act of tax payment under-declaration or tax reimbursement over-declaration, the Law on Tax Administration stipulates the time frame of 05 years as the statute of limitations for sanctioning tax law violations from the date of committing such violating act[1]. This regulation indicates that tax authorities may only sanction administrative violations related to tax law violations committed by enterprises (including acts of tax evasion or tax fraud which are not serious enough for penal liability examination, or acts of tax payment under-declaration or tax reimbursement over-declaration) if such violations still exist within the statute of limitations for administrative sanctions (five years from the date of committing such violating acts.) In cases where the statute of limitations for sanctioning has expired, tax authorities will have no competence to apply the fine levels for administrative violations to enterprises that commit acts of violating the tax law. This regulation also does not restrict the tax authorities’ right to inspection and control over enterprises at any stage.

In addition, even if the statute of limitations for sanctioning tax law violations has expired, taxpayers, though not subject to administrative sanctions as prescribed, shall pay in full tax arrears, evaded taxes, fraudulent taxes and late payment taxes into the state budget, which will be calculated within 10 years backward of the date of detecting violations[2]. In cases where taxpayers fail to make tax registration, they shall fully pay tax arrears, evaded taxes, fraudulent taxes amounts or late payment taxes for the whole retrospective period counted from the date of detecting violations.

[1]Article 110.2 Law on Tax Administration [2]Article 110.3 Law on Tax Administration