A Complete Guide to Tax Audits in Vietnam: Risks and Countermeasures Japanese Companies Should Know
Attorney admitted in Japan and Foreign Lawyer in Vietnam
Kazuya Mori, Chief Advisor (Japanese Law) at this firm
Managing Partner, NEXORA Law Firm
Attorney admitted in Vietnam
Mediator, Bankruptcy Trustee, and Outside Corporate Auditor
Table of Contents
01 - Tax Audits: Classification and Impact on Businesses
02 - Types of Tax Audits and Their Characteristics
03 - Tax Audit Procedures and Corporate Response Strategies
04 - Corporate Rights in Tax Audits and How to Exercise Them
05 - How Are Companies Selected for Tax Audits? Explaining the Risk Assessment Mechanism
This article, written by a Vietnamese attorney, provides a clear explanation of the basic process, key considerations, and penalty risks involved in tax audits in Vietnam. It covers specific issues that Japanese companies commonly face — such as tax authorities' key focus areas, transfer pricing, invoice management, and entertainment expenses — and presents best practices for each stage: pre-audit preparation, on-site inspection, and post-audit response. NEXORA Law Firm has extensive experience supporting companies through tax audits across Vietnam, working alongside tax specialists and accountants to provide strategic support focused on minimizing the risk of additional tax assessments and preserving corporate credibility. Our services cover the full spectrum, from pre-audit review to remediation and negotiation support.
In recent years, tax audits in Vietnam have become increasingly stringent, and the risks companies face have grown accordingly. A tax audit is an inspection process carried out by Vietnamese tax authorities to verify that a company's tax filings and tax payments are accurate and compliant.
In Vietnam, tax audits are not limited to those conducted under an annual plan — unplanned, ad hoc audits are also on the rise. Companies are therefore required to implement appropriate measures and strengthen their tax compliance. This article provides a detailed explanation of the types of tax audits, the audit process, the countermeasures available to companies, and key points for avoiding risk.
01 - Tax Audits: Classification and Impact on Businesses
1.1. Classification of Tax Audits
Tax-related inspections in Vietnam fall broadly into two categories: "administrative inspection" (Thanh tra hành chính) and "specialized inspection" (Thanh tra chuyên ngành).
1.1.1 What Is an Administrative Inspection (Thanh tra hành chính)?
An administrative inspection is a supervisory activity aimed at monitoring compliance with internal regulations within government agencies. Its main objectives are as follows:
Verifying how government agencies are carrying out their duties
Confirming that administrative decisions are legally sound
Detecting license and permit violations and uncovering misconduct (e.g., improperly issued investment licenses, permits obtained through bribery)
👉 Impact on Businesses
In practice, many investment projects and land use rights have been revoked as a result of violations uncovered during administrative inspections. This is particularly important for companies considering an M&A transaction: it is essential to carefully verify whether the target company has any history of violations. The revocation of a license or permit due to an administrative violation uncovered in an administrative inspection can pose a significant risk to post-M&A business operations.
1.2. What Is a Specialized Inspection (Thanh tra chuyên ngành)?
A specialized inspection checks compliance with the laws and regulations specific to a particular industry or field. Common types of specialized inspections include:
Type of Inspection
Content
Tax Inspection (Thanh tra thuế)
Verification of tax filings and payment status; prevention of tax evasion
Customs Inspection (Thanh tra hải quan)
Monitoring the legality of import/export operations
Financial Inspection (Thanh tra tài chính)
Review of a company's accounting and financial reporting
Environmental Inspection (Thanh tra môi trường)
Verification of compliance with environmental protection standards
Labor Safety Inspection (Thanh tra an toàn lao động)
Inspection of working conditions and protection of employee rights
👉 Impact on Businesses
As a result of a specialized inspection, a company may face severe sanctions such as fines, additional tax assessments, or suspension of operations. In the case of a tax inspection in particular, filings from prior years are reviewed retroactively, making proper ongoing tax management essential.
02 - Types of Tax Audits and Their Characteristics
Tax audits in Vietnam fall broadly into three categories: (1) planned audits, (2) periodic audits, and (3) surprise audits. It is important to understand the characteristics of each and prepare an appropriate corporate response.
2.1. Planned Audits (Thanh tra theo kế hoạch)
A planned audit is one carried out under an audit program that the tax authority has established in advance. These audits are drawn up as part of an annual plan, and the target company is generally notified beforehand.
🔍 Characteristics
✔ Advance notice given: The company is informed in advance that it has been selected for a tax audit, giving it time to prepare.
✔ Selected based on specific criteria: Factors such as the company's financial condition, industry, and past tax filing history are taken into account.
✔ Tax compliance is required: The audit focuses on verifying that the company's books and financial reports are accurately maintained.
2.2．Periodic Audits (Thanh tra thường xuyên)
Periodic audits are inspections carried out regularly by tax authorities (the General Department of Taxation or local tax departments).
They focus in particular on verifying compliance with corporate income tax (CIT), value-added tax (VAT), and personal income tax (PIT) obligations.
🔍 Characteristics
✔ Frequency varies by industry: Industries subject to closer monitoring (import/export, construction, retail, etc.) are audited more frequently.
✔ Data-analysis-driven: The consistency of financial reports and tax filings is evaluated.
✔ Relatively low risk: In the absence of major violations, these audits are often resolved with only minor corrections.
2.3. Surprise Audits (Thanh tra đột xuất)
A surprise audit targets companies suspected of violations or those with a high tax risk score.
These audits are typically triggered by circumstances such as the following:
📌 Common Triggers for Surprise Audits
Anonymous tips or internal whistleblowing (e.g., reports from employees or business partners)
Detection of unusual transactions (e.g., a sharp increase or decrease in revenue over a short period)
A high score on the tax risk assessment (e.g., companies with a history of tax violations)
Selection as part of an investigation into a related company
🔍 Characteristics
✔ No advance notice: A company may be audited without any prior warning.
✔ High risk: If a tax violation is discovered, the company may face substantial additional tax assessments and penalties.
✔ Potential to reach back several years: A tax audit can generally examine transactions going back up to five years.
03 - Tax Audit Procedures and Corporate Response Strategies
Tax Audit Process
Recommended Corporate Response
① Formulation and approval of the audit plan
By the time the audit plan is approved, the assigned tax officer already has access to information such as the company's tax filings. Maintaining regular communication with the tax authority may therefore allow the company to obtain advance information.
② Notification and announcement of the audit plan
The audit plan sets out the inspection team (its head and members), the scope of the audit, and the schedule. In most cases, the company becomes aware of the plan at this stage and should begin preparing.
③ Development of the audit approach and requests for company reports
Where the matter under audit is complex, the tax authority will send the company a detailed audit approach in advance and request a report.
The company should carefully review this approach and prepare in consultation with tax professionals (tax agents, lawyers, and auditors).
④ Formal notification of the audit decision
The company is formally notified in writing of the audit decision, at which point the official audit begins.
At this stage, the company needs to adjust its internal schedule and secure time to prepare.
⑤ Publication of the audit decision
The tax audit decision is documented in writing and must be signed by a representative of the company (its legal representative or an authorized officer).
⑥ Collection of information and materials
Key points for the company's response:
✔ Designate a single person in charge to serve as the point of contact with the tax authority.
✔ Ensure that all materials submitted are internally consistent and free of contradictions.
✔ Do not submit unnecessary materials (provide only the information requested by the tax authority).
✔ Keep a record of all information provided, based on formal documentation.
⑦ Conducting the audit
Key points for responding when an on-site inspection is conducted:
✔ Provide a dedicated workspace for the tax officials.
✔ Arrange for the audit to proceed without disrupting normal business operations.
⑧ Summarizing the audit findings
Key points for the company's response:
✔ Communicate the company's views and explanations before the final audit report is issued.
✔ If a tax assessment appears likely, consult with tax professionals to determine the final response strategy.
⑨ Publication of the audit findings and decision on administrative sanctions
Key point: Once the audit findings are published, the company can no longer file an objection to the results.
If the company disputes the findings, it must pursue an objection through administrative litigation.
04 - Corporate Rights in Tax Audits and How to Exercise Them
Companies are afforded certain rights during tax audits in Vietnam. Exercising these rights appropriately makes it possible to ensure a fair audit and to prevent an unjust tax burden. These rights are set out in detail below.
📌 Corporate Rights and Practical Response Strategies
Corporate Right
Practical Response
① The right to explain matters relevant to the tax audit
With respect to any matter raised during the audit, the company may assert its position and provide a reasoned explanation. Where the auditor's interpretation differs from the company's, it is important to provide a well-reasoned explanation, drawing on the views of tax professionals (tax agents and lawyers) where necessary.
② The right to object to the audit report or reserve comment
If the company disagrees with the content of the audit report, it may set out its views in writing and have them entered into the official record.
→ Countermeasure: To clearly establish the company's position, work with tax professionals to prepare a well-reasoned, legally grounded opinion.
③ The right to decline to provide information unrelated to the matter under audit
Some of the information requested by the tax authority may fall outside the scope of the audit.
→ Countermeasure: Review the formal notice regarding the "purpose and scope of the audit" and use it to determine whether a given piece of information must be provided.
④ The right to object to improper audit procedures (administrative complaint)
If unlawful conduct occurs during the audit (e.g., an improper extension of the audit period, or the unjust application of penalties), the company has the right to file a formal objection.
⑤ The right to claim damages
If the company suffers financial loss as a result of unlawful conduct by the tax authority during the audit, it may seek damages.
→ Countermeasure: Keep a detailed record of the harm suffered and, where necessary, consult a lawyer to consider legal action.
⑥ The right to report unlawful conduct by tax auditors
If an auditor abuses their authority by making improper demands or applying undue pressure, the company has the right to file a formal complaint with the supervisory authority.
📌 Key Points for Companies to Prepare for a Tax Audit
✅ Analyze tax risks in advance and maintain proper bookkeeping and internal audit practices.
✅ Clarify the scope of the audit and avoid providing unnecessary information.
✅ Work with tax agents and lawyers to prepare a legal defense of the company's position.
✅ If the company disputes the audit findings, pursue an objection or appropriate legal proceedings.
Rather than taking a passive stance during a tax audit, a company should take steps to ensure a fair audit by properly exercising its rights. Because how a company responds during the audit has a significant impact on its subsequent tax risk, it is important to respond carefully and in close coordination with tax agents and lawyers.
05 - How Are Companies Selected for Tax Audits? Explaining the Risk Assessment Mechanism
A tax audit is one of the events companies most want to avoid, but not every company becomes a target. Vietnamese tax authorities prioritize companies based on risk assessment criteria, selecting those most likely to have committed tax violations or that have not been audited for an extended period. The criteria and evaluation methods the tax authorities use to determine which companies are selected for a tax audit are explained in detail below.
5.1．Tax Audits as Part of "Post-Filing Verification"
A tax audit is conducted to verify, after the fact, the accuracy of the tax information a company has self-reported. Since auditing every company is not practical, the tax authorities determine audit targets based on risk scoring.
📌 Companies Typically Selected for Audit:
✅ Companies with a high likelihood of tax law violations
✅ Companies that have not been audited for an extended period
✅ Companies whose financial indicators or tax data show anomalies
5.2. Tax Audit Risk Assessment Criteria (Nine Key Indicators)
Tax authorities use nine evaluation indicators to score a company's risk level. Companies with high scores based on these indicators become the target of either a planned audit or a surprise audit.
🔎 Nine Key Risk Assessment Indicators
No
Assessment Criterion
How Risk Is Determined
1
Late tax filings
Companies that submit tax documents after the filing deadline are considered higher risk
2
The company's business type and industry classification
Risk level varies by industry; high-risk industries (e.g., finance, real estate, import/export) are prioritized for audit
3
Rate of change in corporate income tax (CIT)
Companies whose CIT rate shows significant fluctuation over recent years become audit targets
4
Rate of change in value-added tax (VAT)
Significant increases or decreases compared to prior VAT filings warrant attention
5
Operating margin (operating profit ÷ revenue)
A margin that differs markedly from the industry average is treated as a possible indicator of financial statement manipulation
6
EBITDA (pre-tax profit + interest expense) ÷ revenue
Companies with unusually high or low values may be subject to a detailed investigation
7
Net profit ÷ equity
An abnormally low or negative return on equity makes a company an audit target
8
Cost of goods sold ÷ revenue
A cost ratio that differs significantly from the industry average increases tax audit risk
9
Selling expenses ÷ revenue
A company with an unnaturally high ratio of selling and administrative expenses may have underlying tax issues
5.3．Tax Risk Screening Procedure
Tax authorities select audit targets through a multi-stage review process.
🔍 1. Checking Company Data
✅ Confirming that company information registered in the tax system has been entered correctly
✅ Reviewing filing data for any omissions
🔍 2. Detecting Anomalies
✅ Analyzing a company's financial data for figures that deviate significantly from the normal range
✅ Checking for extremely low or extremely high declared tax amounts
🔍 3. Analyzing Sudden Fluctuations at the Company
✅ Flagging companies with sudden increases or decreases in revenue or tax payments
✅ Assessing whether the company can reasonably explain the fluctuation
🔍 4. Assessing the Company's Financial Health
✅ A company with losses exceeding its equity is considered to potentially be engaged in tax manipulation
✅ A company that has posted losses over a long period may also be suspected of engaging in fictitious transactions
🔍 5. Use of External Information
✅ Tax authorities also gather information from external data sources to select audit targets
📌 Sources of information:
✔️ The Ministry of Finance (customs, the treasury, and financial supervisory bodies)
✔️ Auditing bodies (accounting audits, tax authority audits)
✔️ Industry associations and media outlets (newspapers, radio, TV coverage)
✔️ Reports and complaints (internal whistleblowing, third-party reports)
📢 Summary
Tax audits in Vietnam are an unavoidable process for companies, but proper preparation and response can minimize the associated risks. This article has explained in detail the types of tax audits, the audit process, the risk assessment criteria used to select companies, and appropriate countermeasures.
To prepare for a tax audit, companies should:
✅ Conduct regular internal audits to make tax risks visible
✅ Coordinate with tax professionals (tax agents and lawyers) in advance to prepare appropriate countermeasures
✅ Respond calmly upon receiving audit notification and avoid providing unnecessary information
✅ Consider filing an objection or pursuing legal action if they dispute the audit findings
Because tax audits can have a major impact on a company's operations, a strategic approach to risk mitigation is essential. Now is the time to review your tax compliance and put comprehensive countermeasures in place!