Economic Sector

Last updated: Thursday, February 21, 2019


More Specific Regulations on Tax Refund

Posted: Friday, July 06, 2018

The addition of regulations on tax refund will help tax authorities and taxpayers in Vietnam perform their obligations more transparently and conveniently. In the new Law on Tax Administration, contents concerning tax refund include cases subject to tax refund, tax refund documents, responsibility of tax authorities, tax refund officers, and responsibility of tax authorities in settling tax refund documents.

In practice, some issues emerged. For example, the Law on Tax Administration stipulates refund for excess tax payment resulting from compliance with some other tax laws such as the Law on Import and Export, the Law on Personal Income Tax, the Law on Special Consumption Tax and other tax laws. Such interpretation will never cover all cases of refunds as result of overpaid taxes. Tax refund is categorised into two cases: VAT refund and refund of overpaid taxes.

For the classification of inspected documents before tax refund, the Law on Tax Administration specifies a number of cases which must be checked before the refund like first-time refund, refund of diplomatic exemption, and refund for enterprises transforming the organisational model. Therefore, there will be many cases to be checked before the refund while tax authorities lack resources for implementation and yet to follow risk management principles, resulting in the ineffective law enforcement. Hence, tax offices said that some current criteria should be changed into risk factors to calculate and classify the level of risk when dealing with tax refund. For high risk cases, checks must be performed before the tax refund.

With respect to the deciding competence of tax refund, the Law on Tax Administration stipulates that Director of the Tax Department or head of tax-collecting agencies shall decide the tax reimbursement, irrespective of the power of ratifying investment projects, the value of refund or complexity that requires professional involvements.

According to the Ministry of Finance, to ensure the close control of tax refunds, sourced from the State Budget, to right recipients and minimise the risk of tax loss, it is necessary to assign the responsibility of heads of finance agencies and tax authorities entitled to decide the tax refund. Besides, the Law on Tax Administration needs to complete regulations on tax refund with the aim of applying risk management principles in the settlement of tax refund based on taxpayer information data provided by tax authorities and collected from other relevant agencies. It is necessary to decentralise the refund deciding competence of heads of tax agencies at all levels (the Ministry of Finance, the General Department of Taxation, the Taxation Department, etc.), ensure heightened supervision and responsibility in tax refund settlement for taxpayers. At the same time, it is important to reform administrative procedures and clarify responsibility in tax refund.

To do that, there is a need to review and improve the electronic process of tax refund from the receipt and return of tax refund request results to specific steps in the tax system; review relevant laws for necessary amendments; perfect the information technology application system, build tax refund databases, integrate information on tax declaration and payment, and apply risk management mechanism in tax refund.

In fact, at the proposal for the compilation of the amended Law on Tax Administration, the Ministry of Finance suggested amending provisions of Articles 57, 58, 59 and 60 of the law on two cases eligible for tax refund: VAT refund and refund for overpaid tax; applying risk principles in classifying tax refund dossiers, assigning tax offices to settle tax refunds and selecting cases of inspection and examination after tax refund.

At the same time, the ministry also recommended supplementing provisions on tax refund documents. In addition, the amended Law on Tax Administration will be added with provisions on the jurisdiction of settling and issuing decisions based on the level and scale of taxpayers' request for tax refund and the competence of issuing project investment certificates.

Thanh Nga

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