Business tax cheats found out

Authorities are taking a closer look at companies claiming SME status

An official at the ministry’s (MoF) tax policy department said initial investigations in Hanoi had rooted out 72 enterprises which had falsely applied the 30 per cent reduction to their corporate income tax (CIT) declarations in the fourth quarter of 2008 and throughout 2009.

The Hanoi Taxation Department had fined the offenders to the tune of around $11.7 million, said the tax official.

These enterprises were mostly “special” enterprises, type 1 enterprises, which are state-owned corporations  and enterprises trading in special sectors such as finance, banking and insurance.

“In other cities and provinces, we are gathering the result of similar  investigations and will come up with a suitable solution for violation cases,” said the official, who declined to be named.

The investigations are being conducted under the auspices of the MoF’s Document 15011/BTC-CST dated November 5, 2010 which requires the implementation of the CIT incentive to small and medium sized enterprises (SMEs) under Resolution 30/2008/NQ-CP to be examined.

“Some enterprises which were recognised “special” ones and some type 1 enterprises still enjoyed the preferential tax rate thanks to taking advantages of criteria on labour numbers which allowed them to be considered SMEs,” stated MoF Vice Minister Do Hoang Anh Tuan in Document 15011.

In January 2009, the MoF released Circular 03/2009/TT-BTC. This circular set out details on the reduction and extension of the time limit for CIT payments under the government’s Resolution 30, which detailed urgent measures aimed at minimising the effects of the global financial crisis.

Under Circular 03, SMEs were entitled to a 30 per cent reduction of their payable CIT in the fourth quarter of 2008 and on payable CIT amounts in 2009 if they satisfied either of two criteria: a registered capital not exceeding VND10 billion or an annual workforce not exceeding 300 people.

However, the CIT preferential policy would be not applied for enterprises which were considered “special” enterprises or type 1 enterprises as mentioned above.

Nguyen Thanh Tung, deputy director of the Auditing and Accounting Financial Consultancy Service Company Ltd said the MoF’s document could lead to unfair treatment for different kinds of enterprises

“Many private domestic enterprises and foreign invested enterprises, which are thought to be large companies or “special” enterprises, still enjoyed CIT preferences thanks to possibly meeting the criteria of SMEs under Circular 03,” said Tung.

Tung said enterprises could definitely use Circular 03 to carry out their tax reduction because the circular clearly regulated cases where tax incentives were applicable.