Can a Foreign Director Be Criminally Liable for Tax Evasion in Vietnam?

Many foreign directors operating businesses in Vietnam often assume that tax compliance is entirely the responsibility of the company or the accounting department. However, when tax authorities detect signs of tax evasion, the first question is not only what violations the company committed, but also who may bear criminal liability.

In practice, there have been numerous cases where directors or legal representatives of companies were invited by investigation authorities for questioning, and in some cases even prosecuted in tax evasion cases.

For foreigners managing businesses in Vietnam, this situation can be deeply concerning:

• Can a foreign director be held criminally liable under Vietnamese law?
• If the mistake was made by the accounting department or a tax service provider, who is responsible?
• If an investigation has already begun, what should a foreign director do to protect their legal rights?

To answer these questions, it is necessary to look at Vietnamese criminal law regulations and how they are applied in practice by investigative authorities.

Vietnamese Law on the Crime of Tax Evasion

Under the Vietnamese Criminal Code, tax evasion is generally understood as using methods or schemes to avoid paying or to underpay taxes that should be paid to the State.

Common acts that may be considered tax evasion include:

• Failing to record actual revenue in accounting books
• Using illegal or invalid invoices
• Declaring false expenses to reduce taxable income
• Failing to declare taxes for actual business activities

If the amount of evaded tax reaches VND 100 million or more, or if the amount is lower but the offender has previously been administratively sanctioned for tax evasion, criminal liability may be considered by the competent authorities.

Possible penalties may include:

• Monetary fines
• Non-custodial reform (non-imprisonment corrective measures)
• Imprisonment in more serious cases

In addition, commercial legal entities (companies) may also face criminal liability if the tax evasion is committed in the name of the company and for the benefit of the company.

This leads to an important question: which individual within the company may be held criminally responsible?

Can a Foreign Director Be Held Responsible on Behalf of the Company?

In many situations, the director or the legal representative of the company is the first person whose responsibility is examined by investigative authorities.

Under Vietnamese enterprise law, the legal representative is the person who:

• Represents the company in transactions
• Signs important legal and financial documents
• Is responsible for managing and operating the company’s activities

Therefore, when tax evasion is suspected, investigators often look at:

• Who made or directed the relevant financial decisions
• Who signed tax declarations or financial statements
• Who benefited from the reduction of tax obligations

If there is evidence showing that a director knew about or directed the tax evasion, that person may be subject to criminal liability, even if they are a foreign national.

It is important to understand that:

Vietnamese criminal law applies to anyone who commits a crime within Vietnamese territory, regardless of nationality.

However, not every tax error leads to criminal prosecution. In many cases, the issue may result only in administrative penalties or tax reassessments, especially where there is no evidence of intentional wrongdoing.

Common Situations Where Foreign Directors Are Investigated for Tax Evasion

In the course of providing legal advice to foreign-invested companies, lawyers often encounter situations where foreign directors are unexpectedly invited to work with investigation authorities.

This often happens because the director may not fully understand Vietnam’s tax regulations, particularly when they rely heavily on the accounting department or external tax service providers.

Errors Made by Accountants or Tax Service Providers

A common scenario occurs when:

A company hires an external accounting service or delegates all tax declarations to an internal accountant. During a tax inspection, the authorities may discover issues such as:

• Invalid input invoices
• Actual revenue not being declared
• Incorrectly recorded expenses

In such cases, investigators will typically examine:

• Whether the director knew about or instructed the violations
• Whether the director exercised proper oversight over the company’s financial activities

If it can be demonstrated that the director neither knew about nor directed the wrongdoing, responsibility may lie with other individuals within the company.

However, if the director signed financial statements or tax declarations, simply claiming lack of knowledge may not always be sufficient to exclude potential liability.

How Do Authorities Determine the “Responsible Person”?

In tax evasion cases, investigative authorities usually focus on identifying:

• The person who made financial or strategic decisions for the company
• The person who signed tax documents or financial reports
• The person who benefited from the reduced tax obligations

For companies with foreign investment, authorities may also consider:

• The company’s management structure
• The actual role of the director in daily operations
• The division of responsibilities within the accounting department

This means that each case is assessed individually, depending on the available evidence and specific circumstances.

Therefore, it is generally not possible to determine the outcome of a case based solely on initial information.

What Should Foreigners Do If They Are Investigated for Tax Evasion in Vietnam?

For foreigners, being invited to work with the police or tax authorities can be highly stressful, particularly if they are unfamiliar with Vietnam’s legal system.

At this stage, how the situation is handled initially can significantly affect the legal rights and interests of the individuals involved.

Understand Your Legal Rights and Obligations

Under Vietnamese criminal procedure law, individuals under investigation have several fundamental rights, including:

• The right to engage a lawyer to protect their interests
• The right to be informed of their rights and obligations when working with investigative authorities
• The right not to be compelled to provide statements against themselves

Understanding these rights can help foreigners avoid unnecessary legal risks when interacting with authorities.

In some cases, inaccurate statements or misunderstandings about tax regulations can unintentionally complicate the situation.

Seek Legal Counsel Experienced in Criminal Cases Involving Foreigners

Criminal cases involving foreign nationals often present additional challenges, such as:

• Language barriers
• Differences between legal systems
• Complex procedures when dealing with investigative authorities

Working with a lawyer who understands Vietnamese criminal law and has experience assisting foreign clients can help to:

• Explain the legal procedures in Vietnam clearly
• Assess the actual legal risks involved
• Support communication and work with investigation authorities appropriately

DEDICA is a law firm based in Ho Chi Minh City with lawyers who have previously worked at international law firms and multinational corporations. We regularly advise and represent:

• Foreigners under investigation in criminal cases in Vietnam
• Foreign nationals involved in criminal proceedings
• Foreign-invested businesses facing legal risks

In many situations, obtaining legal advice at an early stage can help clients better understand their legal position and consider appropriate options.

Please note that each case has different facts and evidence. Any assessment of criminal liability must be made based on the specific circumstances of the case.

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