When suspected of tax evasion, what may authorities inspect in a business?

When suspected of tax evasion, what may authorities inspect in a business?

Does being suspected of tax evasion make your business feel extremely anxious? What will authorities check, how deep will the inspection go, and how should a business prepare to avoid serious legal risks? This article will help you understand clearly and stay proactive in such a sensitive situation.

What inspections will a business face when suspected of tax evasion?

When there are signs of suspected tax evasion, Vietnamese authorities (typically tax authorities or investigation agencies) may carry out various inspection measures. This does not mean the business has violated the law, but it is clearly a sensitive stage with potential risks if not handled properly.

Especially for foreign individuals or foreign-invested businesses, unfamiliarity with Vietnam’s legal system can make the situation more stressful.

Inspection of accounting records and tax documents

One of the first and most important steps is reviewing the company’s accounting and tax records.

Authorities may request:

• Accounting books (general ledger, detailed records)

• Financial statements by period

• VAT, corporate income tax, personal income tax declarations

• Input and output invoices

• Relevant commercial contracts

Under the Law on Tax Administration 2019, tax authorities have the right to inspect and audit when there are signs of violations or tax risks.

It is important to note that many businesses do not intentionally evade taxes, but errors in recording revenue, expenses, or using invalid invoices may still be considered signs of violations.

Verification of bank transactions and cash flow

Authorities may also compare actual cash flow, not just internal records.

They may:

• Request bank statements

• Compare declared revenue with actual received payments

• Review overseas transfers

• Verify unusual transactions

This step helps determine whether the business is concealing revenue or reducing tax obligations.

For FDI enterprises or foreign individuals, cross-border transactions are often examined more closely.

What should businesses do to protect themselves during tax inspections?

Being inspected does not mean you are guilty. However, your response and preparation can significantly impact the outcome.

Businesses should remain calm and understand their rights and obligations.

Understanding rights and obligations

Businesses have the right to:

• Be informed of inspection decisions

• Provide explanations and documents

• Be legally represented by a lawyer

They must:

• Provide complete and truthful records

• Cooperate with authorities

• Not obstruct inspections

In certain cases, if signs of crime under Article 200 of the Criminal Code 2015 (amended 2017) are found, the case may move to criminal proceedings.

This may lead to:

• Criminal charges

• Defendant prosecution

• Preventive measures (exit ban, detention, etc.)

However, not all tax inspections lead to criminal liability.

Working proactively with a lawyer – a key factor

Many clients come to DEDICA when:

• They receive official summons

• They do not understand the allegations

• They fear criminal liability

Early legal support helps:

• Assess legal risks accurately

• Prepare proper documents

• Represent clients when needed

• Avoid harmful statements

For foreigners, language barriers and legal differences can worsen the situation without professional support.

Important notes to avoid tax suspicion

Many cases arise from seemingly minor errors.

Common red flags:

• Abnormally low revenue

• Sudden unreasonable cost increases

• Use of risky invoices

• Unclear related-party transactions

• Large VAT refunds

These are not proof of violations but triggers for deeper inspection.

Build a transparent system from the start

Businesses should:

• Maintain clear accounting systems

• Regularly review tax records

• Consult lawyers for complex transactions

• Train staff on compliance

At DEDICA, we support:

• Legal retainer services

• Tax and legal risk reviews

• Dispute resolution and criminal defense

The goal is not to avoid inspections, but to be prepared for them.

Being suspected of tax evasion is stressful, especially for foreigners in Vietnam. However, proper understanding and preparation can help protect your legal rights.

This article is for reference only and does not replace legal advice.

Are you facing a similar situation?

Contact DEDICA Law Firm for timely legal support.

Contact DEDICA Law for timely and strategic legal advice:

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