Using automation to simplify tax refunds for businesses

During the National Assembly meeting on July 12, Chairman of the National Assembly Vng nh Hu underlined the significance of combating fraud and mistakes without causing delays in company tax payments.

Mr. Phm Xuân He, former Deputy Director of the Institute of Banking Strategy (State Bank of Vietnam), remarked in an interview with Business Forum magazine that a considerable amount of resources for firms are now trapped owing to tardy tax returns.

Given the current environment of cash flow constraints and a lack of operating capital, this problem must be reviewed. Experts feel that tax officials and taxpayers should be treated more fairly. Businesses that have followed with tax legislation and presented sufficient documentation should be eligible for automatic tax refunds.

According to the Vietnam Financial Leasing Association's recommendations, there are now two primary barriers. First, financial leasing organizations rent out assets to exporting enterprises (after customs processes have been completed), which is deemed exporting products and services to the non-tariff zone (equivalent to exporting items overseas). Similarly, organizations who provide assets for financial leasing to exporting enterprises, like other businesses that export products or services, should be eligible for export tax breaks. In this scenario, financial leasing businesses should be reimbursed for the VAT they paid while acquiring assets in the United States.

Despite several inquiries, no formal response has been received from government agencies, whether tax authorities or the Ministry of Finance. As a result, several financial leasing firms owe considerable amounts to tax collectors and are unsure when they will be repaid.

Second, when financial leasing organizations give financial leasing to exporting enterprises (credit supplied with long-term assets), the exporting businesses may be unable to repay the debt. In such circumstances, financial leasing businesses must seize the assets and undergo import processes, including the payment of additional taxes such as VAT and import tax (if applicable).

However, present legal regulations do not specify import processes or the payment of additional taxes when repossessing goods for financial leasing businesses.

Tax refunds are causing a huge administrative burden due to complicated procedures, resulting in firms losing resources that could have been utilized for recovery help.

Mr. He suggests that early improvements of the whole tax refund process be implemented, including:

First, ensure that firms participating in export, purchase, and collaboration have recorded invoices through the banking system or customs, and that they are completely monitored in the electronic system. As a result, there should be a smooth connection between tax authorities and other agencies such as customs and banks, allowing for immediate tax reimbursements once all electronic documentation is completed.

Second, in tax policy, the term "unit" should be defined. The tax authorities must have a uniform understanding that the term "unit" refers to an organization, not only people. Individuals selling or leasing assets, for example, should be regarded a "unit." This explanation is critical in assessing tax exemptions for assets purchased or leased back to the same firm or individual.

Third, the Laws and legal documents should specify the roles and obligations of all parties, including state management organizations in charge of tax collection. Delays in tax refunds should result in fines and interest rates comparable to those imposed to enterprises borrowing for operating purposes. This will encourage firms to take a more proactive and responsible role in the tax refund process.