Can the enterprise issue invoices within the time of tax code closure? How to deal with the situatio

My company is doing business in the field of food and catering services in Danang city.  Recently, we have to face a situation where my company’s tax code is forced to be closed, which leads to many difficulties in the company’s operation. I have received an Announcement stated that my company was not operated at the address registered to the tax authority. For some reason, I did not reply. Now, my company needs to immediately issue an invoice and send it to our customer for their payment. Can we issue the invoices within the time of tax code closure? What is the penalty if my company violates the law in this case? What can I do to remedy the tax code closure?

FDVN’s opinions:

Thank you for concerning FDVN’s legal services. Regarding your consulting requests, after studying the relevant legal documents, FDVN Law Firm would like to give you the following advice:

 [1]. Can the enterprise issue invoices within the time of tax code closure?

Closure of the tax code is also known as TIN deactivation. “TIN deactivation is the procedures of the tax authorities for determining that a TIN is no longer valid in the tax registration system. The tax authority shall revoke the certificate of tax registration or tax identification number notification and publicly announce the deactivated TIN” according to Clause 2, Article 16 of Circular No. 95/2016/TT-BTC on guildelines for tax registration.

Pursuant to Article 16 and Article 19  of Circular No. 95/2016/TT-BTC on cases of TIN deactivation:

“a) For enterprises:

- An enterprise is shut down, dissolved, or goes bankrupt

- An enterprise has enterprise registration certificate revoked

- An enterprise is restructured (division, acquisition, consolidation)”

You do not respond to the notice that the taxpayer does not operate at the registered address of the tax authority that made the business with the termination of the tax code.

So when there is notice the taxpayer does not operate at the registered address of the tax authority did the company is terminated the tax code validity

Pursuant to Article 22 of Circular 39/2014/TT-BTC on guidelines for The Government's Decree No. 51/2010/ND-CP dated may 14, 2010 and Decree No. 04/2014/ND-CP dated January 17, 2014 on sale invoices as follows:

“Article 22. Use of illegal invoices

The use of illegal invoices means the use of counterfeit, unactivated invoices, or expired invoices.

Counterfeit invoices means invoices printed or created using a template of invoices published by another entity, or any invoice that bear the same number or the same invoice symbol.

Unactivated invoices are invoices that have been created in accordance with instructions in this Circular but the notice of publication of which has not been made.

Expired invoices are invoices of which the notice of publication has been made but the issuer does not wish to use them any longer; Invoices are lost after their notice of publication is made (the loss has been notified to the supervisory tax authority); invoices of entities whose TINs have been closed.”

Therefore, your company is not allowed to issue invoices within the time of tax code closure. It will be considered that your company illegally uses the invoices if it continues issuing the invoices within this time.

 [2]. The administrative sanctions in the case of violations on invoices:

Pursuant to Clause 2, 5 Article 11 of Circular No. 10/2014/TT-BTC on guiding the sanctioning of administrative violations on invoices:

“2. A fine of between VND 2,000,000 and VND 4,000,000 will be imposed on the act of failing to destroy or to destroy improperly invoices issued but no longer be valid as prescribed.

The destroying of invoices of organizations and individuals will comply with guidance under the Circular of the Ministry of Finance regarding invoices for selling goods and providing services.”

“5. A fine of between VND 20,000,000 and VND 50,000,000 will be imposed on the act of using invoices illegally (except acts violating provisions under Clause 2, Article 10 of this Circular) or the act of using illegal invoices (except acts violating provisions under Clause 1 of this Article).

Using invoices illegally or using illegal invoices and other cases determined as using invoices illegally or using illegal invoices will comply with provisions under the Decree of the Government and the Circular of the Ministry of Finance regarding invoices for selling goods and providing services.”

It is considered that your company commits tax evasion or tax avoidance in accordance with Article 13, Circular 166/2013/TT-BTC if it illegally issue the invoices.

“Any taxpayer that commits tax evasion or tax avoidance shall incur a fine that is a multiple of the tax arrears:

1. The taxpayer shall incur a fine equals (=) to the tax arrears if the taxpayer commits one of the offenses below for the first time (except for the cases of understatement of tax prescribed in Clause 1 Article 12 of this Circular) or for the second time with at least two mitigating circumstances:

…

b) Using illegal invoices or documents; Using invoices illegally; using unusable invoices to declare tax to reduce tax payable or increase refundable tax, reduced tax, or exempt tax.

…

2. A fine that equals (=) 1.5 times the tax arrears shall be imposed if the taxpayer commits one of the offenses prescribed in Clause 1 of this Article for the first time with aggravating circumstances or for the second time with one mitigating circumstance.

3. A fine that equals (=) 2 times the tax arrears shall be imposed if the taxpayer commits one of the offenses prescribed in Clause 1 of this Article for the second time without any mitigating circumstance or for the third time with one mitigating circumstance.

4. A fine that equals (=) 2.5 times the tax arrears shall be imposed if the taxpayer commits one of the offenses prescribed in Clause 1 of this Article for the second time without one aggravating circumstance or for the third time without any mitigating circumstance.

5. A fine that equals (=) 3 times the tax arrears shall be imposed if the taxpayer commits one of the offense prescribed in Clause 1 of this Article for the second time two or more aggravating circumstances or for the third time aggravating circumstance or for the fourth time onwards.

6. The taxpayer that commits any of the offenses in Clauses 1, 2, 3, 4, 5 of this Article is also required to pay the tax arrears to the government budget.

The tax arrears shall be determined by the competent authority and written in the tax inspection record.

7. If an offense prescribed in Point b, c, d, dd, e, g, h, i, or k Clause 1 of this Article is found before the deadline for submitting the tax declaration expires, or found after the said deadline but it does not lead to a reduction in tax payable or increase in exempt/reduced tax, and does not incur a penalty of tax evasion, the penalties for violations against tax procedures in Clause 4 Article 8 or penalties for accounting offenses shall apply.”

Thus, depending on the nature and extent of the illegal possession, you may be subject to the administrative sanctions or criminal liability and be forced to cancel the expired invoices.

[3]. Things to do when the tax code of the enterprise is closed:

Pursuant to Clause 1, 2, Article 20 of Circular 95/2016/TT-BTC on the cases of the tax code recovery:

“1. A TIN shall be reactivated when:

a) A taxpayer is a business entity or other entity that has an establishment and operation license or equivalent license revoked by the competent authority and has its TIN deactivated by the tax authority as prescribed, but subsequently, the competent authority cancels the revocation of such license.

b) A taxpayer is an enterprise, business entity, other entity, or household business requests the tax authority in writing to reactivate its TIN and commit to cover all tax liabilities payable to the government budget or comply with penalties for administrative violations associated with taxation when it has received a notification of non-operation at the registered address but has not received a decision on revocation of enterprise registration certificate or certificate of household business registration, or has not received a decision on revocation of establishment and operation license or equivalent license by a regulatory agency.

c) A taxpayer is a business entity, other entity, or household business that has submitted an application for TIN deactivation to the tax authority requests for resuming operation in the case where the tax authority has not issued a notification of TIN deactivation.

d) The tax authority determines that the taxpayer does not fall into the case of TIN deactivation due to the tax authority’s fault.”

Therefore, your company’s situation falls into the cases of the tax code recovery.

Applications for TIN reactivation:

“For a taxpayer being enterprise, business entity, other entity or household business that applies for TIN reactivation to the tax authority after it has received a notification of non-operation at the registered address but has not received a decision on revocation of enterprise registration certificate or certificate of household business registration, or has not received a decision on revocation of establishment and operation license or equivalent license by a regulatory agency.

The application includes: An application form for TIN reactivation using Form No. 25/DK-TCT issued herewith”.

Besides, according to Point b, point d, Clause 3 Article 20 of Circular No. 95/2016/TT-BTC on the recovery of tax code and returning the result:

“b) Within 10 working days from the date on which an application for TIN reactivation sent by the taxpayer is received as prescribed in Point b Clause 2 of this Article, the tax authority shall make a list of insufficient tax return, invoicing usage, outstanding tax arrears, fines, late payment interest (if any) and impose a penalty against violations of the law on taxation and invoices as prescribed, and undertake a verification visit at the taxpayer’s premises and make a record verifying the operation of the taxpayer at the registered address based on its application for TIN reactivation (with the taxpayer’s signature), and the taxpayer must cover all tax liabilities and comply with requests of the tax authority as prescribed by law.

Within 3 working days from the date on which the taxpayer complies with all penalties for administrative violations against taxation and invoices, and make full payments of outstanding tax arrears, fines, late payment interest (if any), the tax authority shall:

- Make a notification of TIN reactivation using Form No. 19/TB-DKT issued herewith and send it to the taxpayer.

- Reprint the certificate of tax registration or tax identification number notification and send it to the taxpayer in the case where the taxpayer has submitted the original copy of which enclosed with the application for TIN deactivation.

The notification of TIN reactivation shall be sent to the taxpayer (according to the registered mailing tax; address of legal representative, sole proprietorship owner, president of the Member assembly of partnership; taxpayer's email which is registered online - if any) and relevant regulatory agencies (business registration authority, procuracy, police authority, authority issuing establishment and operation license) within the working day or no later than early time of the consecutive working day from the date on which the notification is signed, and then update the reactivated TIN on the tax registration system.

…

d) The withholding TIN shall be automatically reactivated when the taxpayer’s TIN is updated on the tax registration system.”

Above is FDVN Law Firm's opinion for your consulting requests based on studying the relevant legal provisions. Hopefully, FDVN's advice would be helpful to you.

Legal advisor: Dinh Thi Thong - FDVN Law Firm

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