The General Department of Taxation has tightened regulations, requiring businesses to prove the legality of all invoices and documents before tax refunds are approved. This has placed a heavy burden on wood enterprises, particularly those dealing with older transactions.

"We have cases where we've purchased goods years ago, and now we can't track down the suppliers who issued the invoices. Some are reluctant to sign confirmations due to fears of additional tax liabilities," shared a representative from a wood company in Thanh Hoa.

The company spent several months last year trying to verify invoices, delaying their tax refund and hampering operations.

While the tax refund amounts in Thanh Hoa are relatively small - just a few dozen billion VND - other provinces like Quang Ninh are experiencing far greater difficulties. Quang Ninh wood businesses are grappling with refund backlogs amounting to thousands of billions of dong.

For larger wood enterprises, such as a plywood manufacturer who successfully received a tax refund in 2023, the process is somewhat smoother, as their transactions with large factories are easier to trace. However, businesses in the wood chip industry, which source from smallholder farmers, face greater challenges.

Vietnam has over a million small-scale forest growers, making it difficult to verify the legitimacy of all purchase invoices.

"In some cases, the landowners have passed away, and their heirs haven't completed inheritance procedures, further delaying invoice verification," explained the director of a wood company.

If tax refunds are delayed beyond 6-9 months, businesses can face significant financial stress. With tax rates ranging from 8-10% and annual sales reaching VND 1 trillion, businesses may see hundreds of billions of dong in pending tax refunds, negatively impacting cash flow.

According to the Vietnam Timber and Forest Products Association, past issues with fraudulent invoices and tax evasion within the industry have led to a situation where the entire sector is classified as high-risk by tax authorities. As a result, legitimate businesses are now subjected to rigorous scrutiny, causing lengthy delays in tax refunds.

Last year, many wood enterprises were pushed to the brink of bankruptcy as tax refund delays dragged on, with some companies sending pleas for help to the Prime Minister.

The situation has since improved, with the tax authorities beginning to differentiate between legitimate businesses and those involved in fraudulent activities. However, the backlog remains significant, and many companies are still waiting for their refunds to be processed.

Wood enterprises have now recognized the importance of ensuring that all invoices and documents are in order from the start. This is especially critical as export markets increasingly demand traceability and certification for sustainable forest products.

However, companies with older unresolved issues continue to struggle, with hundreds of billions of dong still tied up in pending refunds.

Many businesses hope for a more nuanced approach from the tax authorities, one that doesn't unfairly penalize legitimate companies due to past issues within the industry.

They believe that clearer distinctions between legitimate businesses and fraudulent actors would greatly reduce the financial strain on those trying to operate fairly.

Binh Minh