Businesses must digitally connect with the tax authorities
The Ministry of Finance has just published a draft circular guiding the implementation of the Law on Tax Administration and Decree No. 123/2020/ND-CP concerning invoices and records. One of the important contents in this draft circular is that cash registers of restaurants, cafes, hotels,… will digitally connect with the tax authorities from July 1, 2022.
Specifically, organizations and individuals (excluding contracted households) perform activities in the fields of: commercial centers, supermarkets, restaurants, hotels, retail of modern medicines, entertainment services, retail agent of consumer goods, providing goods and services directly to the consumers... will use authenticated e-invoice generated from the cash register digitally connected with the tax authorities.
Authenticated e-invoice means an e-invoice that is granted an authentication code by the tax authorities before it is sent to the buyer by the goods seller or service provider. The authentication code on an e-invoice is a unique serial number generated by the tax authority’s system and a series of characters encoded by the tax authority based on the information specified by the seller on the invoice.[1]
Cash registers that are digitally connected with the tax authorities are synchronous electronic devices, or a system of many electronic devices combined by a sales software with common functions such as cash register, saving sale activities and data, printing invoices, searching and reporting transactions and are digitally connected with the tax authorities in a standard format by electronic means.
Through this connection, the General Department of Taxation will build a database of authenticated e-invoice generated from the cash register as a basis for directing local tax authorities in the tax administration for households and individuals’ businesses and relevant entity. The local tax authorities will exploit the database of authenticated e-invoice generated from the cash register to control the revenue declaration of households and individuals’ businesses in order to ensure the consistent with the cost factors in the tax period. This is one of the solutions to prevent tax loss as well as ensure transparency in tax administration, especially for small businesses.
Particularly for households and individuals’ businesses that operate in disadvantaged areas or extremely disadvantaged areas, in case they do not conduct transactions with tax authorities by electronic means, there is no information technology infrastructure or accounting and e-invoicing software to make e-invoices and to transmit electronic data to the buyer and the tax authorities, a paper invoice printed by the Tax Department will be used for a maximum period of 12 months, and at the same time, the tax authorities are obliged to propose a solution to gradually converting to the application of e-invoices.
In fact, the use of authenticated e-invoice and the digital connection of cash registers of small business with the tax authorities still present difficulties, specifically as follows:
Firstly, in order to comply with the above regulations, the small business must build a system of machinery and equipment to ensure the use of authenticated e-invoice. In addition, they must train their staffs to be able to use e-invoices, which would increase installation and operating costs for business entities.
Secondly, the use of authenticated e-invoice causes the small business to lose the right to handle incorrect e-invoices in case the invoice has not been sent to the buyer. According to current regulations, in case the seller discovers that the e-invoices which have not been sent to buyers contain errors, he/she can correct the information and then send it back to the buyer. But when using an authenticated e-invoice, the seller shall inform the tax authority of cancellation of such erroneous e-invoices, prepare new e-invoices with digital signatures for submission to the tax authority for its issue of new authentication codes in place of the previous ones before sending them out to buyers. As such, the processing of erroneous e-invoices depends on the tax authorities, which may trigger in the delay in processing and issuing new invoices to customers.
This circular is expected to take effect from July 1, 2022. Tax authorities encourage agencies, organizations and individuals that meet the conditions for information technology infrastructure to apply regulations on electronic invoices and records as guided in this Circular and Decree 123/2020 before July 1, 2022. Therefore, it is necessary to develop a clear management policy for the competent authorities as well as issue detailed instructions to organizations and businesses on steps to prepare technical infrastructure and use e-invoices. In addition, it is necessary to carry out regular inspection to promptly detect shortcomings and limitations in order to propose comprehensive measures in accordance with the actual situation.
Specifically, organizations and individuals (excluding contracted households) perform activities in the fields of: commercial centers, supermarkets, restaurants, hotels, retail of modern medicines, entertainment services, retail agent of consumer goods, providing goods and services directly to the consumers... will use authenticated e-invoice generated from the cash register digitally connected with the tax authorities.
Authenticated e-invoice means an e-invoice that is granted an authentication code by the tax authorities before it is sent to the buyer by the goods seller or service provider. The authentication code on an e-invoice is a unique serial number generated by the tax authority’s system and a series of characters encoded by the tax authority based on the information specified by the seller on the invoice.[1]
Cash registers that are digitally connected with the tax authorities are synchronous electronic devices, or a system of many electronic devices combined by a sales software with common functions such as cash register, saving sale activities and data, printing invoices, searching and reporting transactions and are digitally connected with the tax authorities in a standard format by electronic means.
Through this connection, the General Department of Taxation will build a database of authenticated e-invoice generated from the cash register as a basis for directing local tax authorities in the tax administration for households and individuals’ businesses and relevant entity. The local tax authorities will exploit the database of authenticated e-invoice generated from the cash register to control the revenue declaration of households and individuals’ businesses in order to ensure the consistent with the cost factors in the tax period. This is one of the solutions to prevent tax loss as well as ensure transparency in tax administration, especially for small businesses.
Particularly for households and individuals’ businesses that operate in disadvantaged areas or extremely disadvantaged areas, in case they do not conduct transactions with tax authorities by electronic means, there is no information technology infrastructure or accounting and e-invoicing software to make e-invoices and to transmit electronic data to the buyer and the tax authorities, a paper invoice printed by the Tax Department will be used for a maximum period of 12 months, and at the same time, the tax authorities are obliged to propose a solution to gradually converting to the application of e-invoices.
In fact, the use of authenticated e-invoice and the digital connection of cash registers of small business with the tax authorities still present difficulties, specifically as follows:
Firstly, in order to comply with the above regulations, the small business must build a system of machinery and equipment to ensure the use of authenticated e-invoice. In addition, they must train their staffs to be able to use e-invoices, which would increase installation and operating costs for business entities.
Secondly, the use of authenticated e-invoice causes the small business to lose the right to handle incorrect e-invoices in case the invoice has not been sent to the buyer. According to current regulations, in case the seller discovers that the e-invoices which have not been sent to buyers contain errors, he/she can correct the information and then send it back to the buyer. But when using an authenticated e-invoice, the seller shall inform the tax authority of cancellation of such erroneous e-invoices, prepare new e-invoices with digital signatures for submission to the tax authority for its issue of new authentication codes in place of the previous ones before sending them out to buyers. As such, the processing of erroneous e-invoices depends on the tax authorities, which may trigger in the delay in processing and issuing new invoices to customers.
This circular is expected to take effect from July 1, 2022. Tax authorities encourage agencies, organizations and individuals that meet the conditions for information technology infrastructure to apply regulations on electronic invoices and records as guided in this Circular and Decree 123/2020 before July 1, 2022. Therefore, it is necessary to develop a clear management policy for the competent authorities as well as issue detailed instructions to organizations and businesses on steps to prepare technical infrastructure and use e-invoices. In addition, it is necessary to carry out regular inspection to promptly detect shortcomings and limitations in order to propose comprehensive measures in accordance with the actual situation.
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