Criminal liability of commercial legal entities for tax evasion

In the market economy with fierce competition, currently many enterprises and economic organizations in Vietnam commit many illegal acts to make a profit. The most common in the economic field is tax evasion, doing illegal business, speculation, and smuggling. Most of these activities are carried out by managers, representatives of commercial legal entities in an organized and increasingly sophisticated manner, on a large scale in the form of transfer pricing activities and associated transactions.

To overcome the situation, the Criminal Code 2015 has provided criminal sanctions for commercial legal entities in many criminal acts specified in Article 76, including tax evasion (Article 200).

Accordingly, an individual or a commercial legal entity who commits any tax evasion acts with amount from VND 100,000,000 to under VND 300,000,000 or under VND 100,000,000 even though he/she/it has been incurred an administrative penalty for tax evasion or has been convicted of this crime or one of the offences listed in Article 200 of Criminal Code 2015, shall be subject to criminal liability.

However, we should be noted that, according to the provisions of the Code, non-commercial legal entities are not criminally responsible for this crime, but only commercial legal entities are responsible.

The basic difference: the main objective of the commercial legal entities is to make profits and then, divide it among members; but for the non-commercial legal entities, their main objective is not to seek profit; If there is a profit, it also will not be shared among the members.

Non-commercial legal entities include state authorities, armed forces, socio-political organizations, professional organizations, social funds, charitable funds, social enterprises and other non-commercial entities. It is also important to note that the criminal liability of commercial legal entities does not exclude the criminal liability of individuals.

However, commercial legal entities shall only bear criminal responsibility if the criminal offence is committed in the name of the corporate legal entity, committed for the interests of the corporate legal entity, under instructions or approval of the commercial legal entity, in the time limit for criminal prosecution has not expired.

According to the Criminal Code 2015, the acts of Vietnam’s citizens or Vietnam’s commercial legal entities are committed outside of Vietnam’s territory which stipulated as crimes in the Criminal Code 2015, may also be prosecuted for criminal liability in Vietnam.

Therefore, the individual and the commercial legal entities of Vietnam which have trading, joint venture or Related party activities abroad, not only complied with the foreign laws but also complied with Vietnam laws in order to overcome legal risks.

The current Tax Management Law listed tax evasion, tax fraud as violations of tax laws. These two behaviours have similarities, but cannot be the same. However, unfortunately, in the law, decree and circular guiding the handling of tax administrative violations, there is no concept or definition to distinguish the difference between these two acts.

Therefore, it is necessary for the competent authorities to issue a regulatory document to recognize the difference and avoid doing wrongly in administrative or criminal handling. Because according to the Criminal Code, only acts that are defined as crimes will be considered for criminal prosecution. Thus, it is impossible to criminal prosecution for tax fraud.

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Lawyer Pham Dinh Hung – Director of Saigon Asia Law Firm

By |2021-11-09T14:41:44+00:00November 9th, 2021|Legal science|