Genuine transactions, shell company counterparties
One issue causing concern for many businesses and household businesses is the risk of unknowingly dealing with shell companies that do not conduct genuine production or commercial activities and exist solely to trade invoices. In such cases, legitimate businesses can find themselves under suspicion even when the underlying transactions were entirely genuine.
Most legitimate businesses verify the legal status of their partners before signing contracts, and at the time of the transaction those companies are operating normally. However, several years later, the counterparties may be identified by authorities as being part of invoice-trading networks.
If required to explain the transactions and unable to prove their authenticity, businesses may lose deductible expenses and face reassessments of value-added tax and corporate income tax. They may also be fined 20 percent of the underreported tax and charged late-payment interest of 0.03 percent per day. In cases involving the use of illegal invoices, administrative fines can reach up to VND30 million.
Pham Thu Hue, an accountant with many years of experience working for businesses in Ho Chi Minh City, said she had encountered numerous such cases.
"It really is an unforeseen misfortune. If a supplier was operating normally at the time of the transaction but is found several years later to have been a shell company, what can a business do to avoid tax reassessments?" Hue said.
Chairwoman Chau Ngo Dieu Hien of the Members' Council of Taynama AMC said businesses can protect their interests when a supplier suddenly abandons its registered business address by proving that the transaction was genuine, supported by clear documentation of the flow of goods and payments.
According to her, businesses should retain a complete set of documents, including quotations, contracts, delivery records specifying vehicle license plates and recipients, invoices, and non-cash payment records. For genuine transactions involving suppliers later placed on a tax risk list, businesses should proactively review all documentation to ensure sufficient evidence is available as soon as the issue is discovered.
In taxation, identifying such risks through ordinary business practices is difficult, so businesses should use technology to automate monitoring. Many tools can now update databases containing thousands of high-risk companies identified by tax authorities and monitor suppliers' operating status in real time.
These systems can issue alerts if a supplier ceases operations or abandons its registered address, allowing accountants to promptly supplement any missing supporting documents to protect the legal validity of invoices.
Business owners must understand tax
Many entrepreneurs start businesses based on passion or professional expertise but have limited knowledge of finance and accounting. Experts say this knowledge gap is one of the main reasons new business owners and household businesses make costly mistakes.
According to Le Khanh Lam, deputy chief executive officer and chairman of the Members' Council of RSM Vietnam Auditing and Consulting Company, one common mistake among small and medium-sized enterprises is maintaining "two sets of books"—one for internal management and another for tax reporting—while also failing to separate personal finances from company finances.
Many business owners use personal bank accounts to receive customer payments or pay personal expenses with company funds, making it difficult to determine actual revenue and reducing financial transparency.
Delegating all accounting work without adequate oversight can also lead to errors, including incorrect invoice issuance dates, incomplete expense documentation, or the use of invoices issued by high-risk companies without the owner's knowledge.
Experts advise that chief executives do not need to be tax specialists, but they should understand that taxation is a strategic part of running a business.
Ngo Thanh Hanh, chief executive officer of THTAX Training and Consulting Company, said business owners should be familiar with at least three key reports such as the income statement showing actual profits and losses, the cash flow statement, and reports on accounts receivable and accounts payable to monitor the risk of capital being tied up by customers or suppliers.
Businesses should also undergo regular quarterly "tax health checks" with tax specialists to identify errors early. According to the chief executive officer of THTAX Training and Consulting Company, getting tax compliance right from the outset is always far less costly than dealing with the consequences later.
