VietNamNet Bridge – A lot of newly set up businesses never exist in reality, but only exist on paper just to help the owners appropriate the VAT refund.

The General Department of Taxation (GDT) and the General Department of Customs (GDC) have both decided to take drastic measures to prevent bogus businesses from appropriating the VAT refund.

GDT and GDC sat together to draw up the criteria to “measure” the risks of the businesses in the fields of agriculture, forestry, seafood and the companies exporting products to the countries with land border lines. The criteria would be referred to by GDT and GDC officers when considering giving VAT refunds to enterprises in order to prevent fraud.

According to GDC, a lot of “virtual” export cases have been reported from the provinces of Nghe An, Ha Tinh, Quang Binh, Quang Tri, An Giang and Kien Giang, which aimed to get VAT refund.

Bogus businesses mushroomed

The trickery that most of businesses used was registering the temporary import for re-export later at competent agencies. In general, the imports were the products in high domestic demand that bear high import tariff 20-30 percent. After importing the goods, they made customs declarations about the re-export and asked for tax refund.

Under the current regulations, the temporary imports for re-export later would get a VAT refund.

However, in fact, the businesses sold all the imports on the domestic market and showed forged documents to competent agencies for a VAT refund.

Investigation agencies have found that in many cases, involved subjects colluded with each other to forge export documents, or submit the same documents for different tax refunds.

The businesses collected invoices from different sources in different localities and from different enterprises, legalized the origin of the import consignments, or exploited the agencies’ loosened management to cheat taxation bodies. They might provide high figures about the goods categories and the amounts of export goods in order to get high VAT refunds.

In the localities, a lot of businesses were set up and registered as import-export companies, but then got dissolved just after a short time of operation. Investigation bodies have found that the businesses were established just to get tax refund, and they got dissolved when fulfilling the mission.

Most recently, the Kien Giang provincial Police have found 7 subjects suspected of setting up virtual businesses and trading invoices to appropriate VAT refund.

The prevention measures

GDT and GDC have decided that suspicious businesses are the ones which have been set up within the last 24 months and don’t have production workshops, storehouses, and do not carry out production activities in reality. They would bear the stricter supervision by competent agencies to fight against tax frauds.

The businesses with the stockholder equity of less than VND20 billion and registered five or more business fields would also become the “aiming points” for state management agencies.

A report showed that a lot of the businesses did not operate in reality, but only focused on issuing blank invoices to get the 10 percent VAT refund. By the moment their behavior was discovered, the group of businesses had issued the invoices on exporting VND1.1 trillion worth of products, appropriating VND110 billion.

Kim Chi