ENTERPRISES CAN BE DETERMINED AS “HIGH-RISK TAXPAYER” DUE TO INVALID ADDRESS OF HEADQUARTER?

With the promulgation of Decree No. 70/2025/NĐ-CP and Circular No. 32/2025/TT-BTC, regulations on tax administration in general, and the use of electronic invoices in particular, have been tightened with the aim of enhancing transparency and preventing fraudulent practices. One notable provision is that enterprises with an invalid registered business address may be classified as “high-risk taxpayer”. Such classification entails a range of compliance obligations during the registration and use of electronic invoices, including stringent explanation and documentation requirements imposed by the tax authorities.

Enterprises with invalid registered business addresses may be classified as “high-risk taxpayer”

Effective from June 1, 2025, Circular No. 32/2025/TT-BTC provides detailed regulations on the criteria used to identify “high-risk taxpayer”, among these criteria is the case of enterprises whose registered business address is deemed invalid. An “invalid registered business address” is defined as an address that either does not correspond to a specific location within the official administrative boundaries, or is situated in a residential apartment building not designated for commercial or business use.

Excerpt from Article 9, Circular No. 32/2025/TT-BTC:

“Article 9. Criteria for identifying taxpayers with a high risk of tax non-compliance in the registration for electronic invoice usage

1. Criteria for identifying taxpayers with a high risk of tax non-compliance in the context of registering for the use of electronic invoices:

In cases where the taxpayer’s information is verified to be accurate and the taxpayer confirms such information on the Tax Department’s electronic portal within the prescribed deadline, but any of the following indicators are present, the provisions set out in Point b, Clause 11, Article 1 of Decree No. 70/2025/NĐ-CP shall apply:

a) Criterion 1: The taxpayer has an owner, legal representative, representative of a household business, individual businessperson, or private enterprise owner who is also the owner, legal representative, household business representative, individual businessperson, or private enterprise owner of another entity that has been officially concluded by competent state authorities to have engaged in fraudulent activities or the buying and selling of invoices, as recorded in the tax authority’s database.

b) Criterion 2: The taxpayer has an owner or legal representative, household business representative, individual businessperson, or private enterprise owner who is listed as having suspicious transactions under the Law on Anti-Money Laundering.

c) Criterion 3: The taxpayer registers a head office address that either lacks a specific location in accordance with administrative boundaries or is located in a residential apartment building (excluding those legally permitted for business use); or has a business location situated outside the province/city where the taxpayer’s head office or branch is located.

d) Criterion 4: The taxpayer’s legal representative or owner is simultaneously the legal representative or owner of another taxpayer that is classified as “inactive but not yet completed procedures for tax code termination” or “not operating at the registered address,” or has committed violations relating to taxes, invoices, or supporting documents as guided by the Minister of Finance.

dd) Criterion 5: The taxpayer exhibits other risk indicators as determined by the tax authority, with prior notice and explanation requirements imposed on the taxpayer.”

The identification of “high-risk taxpayer” serves the purpose of enhancing tax administration in connection with the registration and use of electronic invoices.

Mandatory explanation procedures at the request of tax authorities

Pursuant to applicable regulations, enterprises are required to complete the registration process for the use of electronic invoices in cases where they intend to utilize e-invoices without a tax authority’s verification code. The obligation to confirm information as prompted by the electronic system must be fulfilled within the statutory time limit.

In instances where an enterprise is classified as “high-risk taxpayer”, the tax authority is entitled to request the enterprise to provide explanations and supplementary information for verification purposes. The enterprise must comply with such a request within two (02) working days from the date of receipt of the corresponding notice.

High-risk taxpayers must use e-invoices with verification codes issued by the tax authority

Enterprises classified as high-risk taxpayers are required to use electronic invoices with verification codes issued by the tax authority, in cases where the enterprise is currently using e-invoices without a verification code, they must carry out the procedure to switch to invoices with such a code.

An e-invoice with a tax authority verification code is an electronic invoice authenticated by the tax authority prior to the seller (organization or individual) sending it to the buyer. The verification code issued by the tax authority consists of (i) a unique transaction number generated by the tax authority’s system, and (ii) an encoded string of characters, which is encrypted based on the seller’s invoice data.

According to notifications issued by the tax authority, enterprises are required to complete the transition to e-invoices with verification codes within ten (10) working days from the date of notification. The transition entails updating the enterprise’s invoice usage information -specifically, switching from e-invoices without a tax authority code to those with one.

Enterprises may later request to revert to using e-invoices without a tax authority verification code, but it should be noted that such request may only be made after a minimum period of twelve (12) months has elapsed since the transition to e-invoices with codes.

>> PENALTIES FOR ILLEGALLY USING INVOICES AND DOCUMENTS https://linconlaw.vn/penalties-for-illegally-using-invoices-and-documents/

>> AUTOMATIC PIT REFUND, 5 COMMON INQUIRIES https://linconlaw.vn/automatic-pit-refund-5-common-inquiries/