Tax management must ensure genuine compliance

Tax authorities are shifting strongly towards an approach that examines and evaluates the nature of transactions, which require businesses to comply with invoices and documents, and simultaneously prove that expenses — especially internal group expenses such as management fees, technical service fees, and interest expenses — are actually incurred, reasonable, and commensurate with their benefits received.

- By Bui Van Thanh Head, New Sun Law Firm

In practice, it is not uncommon for businesses to have high revenue but low profit margins, or even prolonged losses. These situations can stem from many reasons that they consider reasonable, such as long investment periods, high depreciation costs, market dominance strategies, high financial costs, or cyclical industry fluctuations.

However, the tax authorities will assess this phenomenon from a tax management perspective. With the issuance of Dispatch No.1927/CT-KTr requesting to strengthen thematic inspections in 2026 for businesses with prolonged losses and sluggish profits to detect fraud, tax evasion and ensure budget revenue, the General Department of Taxation under the Ministry of Finance included the group of investors and manufacturers with “very large revenue but prolonged losses or thin profits” in the list of key thematic inspections.

This shows an important change that multiyear losses are no longer a normal financial state in the investment and trading activities of enterprises, but have become a risk criterion for the tax authorities to select as targets for in-depth inspection.

The noteworthy point of Dispatch 1927 is not in the inspection of loss-making enterprises, but in the way the criteria for selecting targets are designed. The tax authorities are not conducting mass audits, but are focusing on objects with revenues of VND1 trillion ($40 million) onwards, those experiencing consecutive losses for many years (especially during 2023-2024), and those with prolonged losses but showing signs of expanding investment, increasing capital, and increasing asset size.