The failure to pay value-added tax (VAT) on time can lead to serious consequences for businesses. If a business misses the deadline for VAT payment, it is considered late in fulfilling its tax obligations. The repercussions of late VAT payment pose significant risks to businesses and may even threaten their survival.
Below, DNP Vietnam Law Firm will provide businesses with the most accurate insights into the consequences of failing to pay VAT.
1. Late Payment Penalties and Interest Rates
- Late payment penalties: When a business delays VAT payment, it will be subject to penalties. According to Article 13 of Decree 125/2020/ND-CP, the penalty rates for late VAT payment are as follows:
(1) 1 to 5 days late with mitigating circumstances: Warning
(2) 1 to 30 days late: Fine ranging from 2,000,000 to 5,000,000 VND
(3) 31 to 60 days late: Fine ranging from 5,000,000 to 8,000,000 VND
(4) 61 to 90 days late: Fine ranging from 8,000,000 to 15,000,000 VND
(5) More than 90 days late (if no tax is due or if it has been fully paid before inspection): Fine ranging from 8,000,000 to 15,000,000 VND or 15,000,000 to 25,000,000 VND, depending on the case. - In addition to penalties, businesses must also pay late payment interest, increasing the total amount due.
2. Enforcement Measures
- Payment notice: If VAT is overdue by less than 30 days, the tax authorities will send an official notice requesting immediate payment to avoid further enforcement measures.
- Reminder and warning: If VAT is overdue for more than 60 days, the tax authorities will issue a written reminder warning of potential enforcement actions. This document emphasizes the unpaid tax obligations and the consequences of continued non-compliance.
- Bank account restrictions: If the delay exceeds 91 days, tax authorities may deduct funds from the business’s bank account or freeze it, severely impacting business operations.
- Invoice invalidation: If VAT remains unpaid for over 121 days, tax authorities will issue a decision to invalidate the business’s invoices.
- Operational risks: If a business’s account is frozen, it may be forced to temporarily suspend operations, leading to financial losses and missed business opportunities.
3. Legal Risks
3.1. Administrative sanctions:
In addition to late payment penalties, businesses may face administrative fines for violating tax regulations. According to Article 13 of Decree 125/2020/ND-CP, businesses must comply with tax filing deadlines.
3.2. Daily late payment interest:
Businesses must pay a 0.03% daily interest on overdue tax amounts. If a tax return is not filed, the business will be required to submit the tax return along with any necessary supporting documents.
3.3. Legal disputes:
Businesses may also face legal risks, including lawsuits or compensation claims if late VAT payment causes damage to related parties.
4. Important Considerations for Businesses
- Reputation risks: Late VAT payment can damage a company’s reputation and lead to strict enforcement actions, including bank account freezes and direct fund deductions.
- Official clarification: If issues arise, businesses should submit an official explanation to tax authorities to clarify their situation.
- Regular tax reviews: Businesses should regularly review VAT records to ensure accuracy and timely payment.
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The above information is for reference purposes only. For more detailed information, please contact us using the details below:
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DNP VIET NAM LAW FIRM
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📩 Email: info@dnp-law.com.
📞 Hotline: 0987 290 273 (Đinh Văn Tuấn Lawyer).
Website: https://www.dnp-law.com/
