Regulation on temporary exit suspension for tax debtors: Perspectives from the tax authority

DNHN - To enhance debt collection efficiency, the combination of various enforcement measures, along with the application of modern technology, will be the key factor for success in Vietnam's tax management.

Amid increasingly stringent tax policies in Vietnam, the regulation on temporary exit suspension for tax debtors has become an important measure to protect national budget revenue. Mr. Dang Ngoc Minh, Deputy Director General of the General Department of Taxation, shared with the press the perspectives from tax law enforcement agencies, particularly regarding the controversies surrounding the reasonableness of this measure.

According to Mr. Minh, the regulation on temporary exit suspension for tax debtors has been applied for many years, especially within laws such as the 2020 Law on Tax Administration and the Law on Exit and Entry of Vietnamese Citizens, which took effect in July 2020.

Article 66 of the Law on Tax Administration states: "Taxpayers who are subject to enforcement of administrative decisions related to tax management, Vietnamese citizens emigrating abroad, Vietnamese residing abroad, and foreigners exiting Vietnam must fulfill their tax obligations; in cases where tax obligations have not been completed, they shall be subject to temporary exit suspension according to legal regulations on exit and entry."

Clause 5 of Article 36 of the Law on Exit and Entry stipulates: "Taxpayers, legal representatives of enterprises under enforcement of administrative decisions on tax management, and Vietnamese emigrating abroad who have not completed their tax obligations in accordance with tax management laws shall be temporarily suspended from exiting."

Notably, the law does not clearly specify the size of the tax debt, whether small or large. This means that as long as the taxpayer has overdue debts for more than 90 days, they may be subject to enforcement measures, including temporary exit suspension.

For legal entities that have not fulfilled their tax obligations, the legal representatives of the enterprise may also be subject to temporary exit suspension until the enterprise settles its tax debts. This point has sparked controversy, as many corporate directors are merely hired managers and do not own the company. However, Mr. Minh emphasized that the law is clear: individuals responsible for representing and managing the legal entity must bear responsibility for the entity’s tax debts.

In 2024, the number of exit suspension notices increased significantly compared to the previous year. From the beginning of 2023 to August 2024, the tax authorities issued 17,952 exit suspension notices, with total tax debts amounting to 30,388 billion VND. Of these, 10,829 cases involved taxpayers who had abandoned their business addresses, with tax debts exceeding 6,894 billion VND. This far exceeds the figures for 2023, when only 2,411 cases of exit suspension were issued, with total tax debts of 6,719 billion VND.

Mr. Minh stated that this increase is mainly due to the General Department of Taxation’s directive to tax departments to focus on handling cases of deliberate tax evasion, especially businesses that have abandoned their business addresses. This demonstrates the tax sector’s efforts to ensure fairness and strict law enforcement while safeguarding the national budget’s revenue.

However, Mr. Minh also noted that the data reveals the limitations in the effectiveness of debt recovery through this measure. Only 21.8% of the 6,539 cases subject to temporary exit suspension have paid their taxes. This raises questions about the effectiveness of the exit suspension measure, as many businesses and individuals still fail to fulfill their tax obligations despite enforcement actions.

So, is temporary exit suspension a strong measure? Many argue that it is a strong enforcement tool, but Mr. Minh emphasized that it is not the strongest of the tax enforcement measures. In practice, other enforcement measures such as suspending invoice usage or revoking business licenses can produce more immediate results. Specifically, the suspension of invoice usage is widely applied and has a significant impact on the operations of businesses, forcing them to comply with tax obligations more swiftly.

Mr. Minh added that, in the context of technological advancement, the tax sector has been applying many new technological solutions to improve tax management and debt collection efficiency. Technologies such as artificial intelligence (AI) are being utilized to assist tax officers in their processes, ensuring timely enforcement measures, thereby enhancing the efficiency of tax debt recovery.

Notably, in cases of hardship caused by natural disasters or epidemics, tax authorities have flexibly applied measures such as tax deferral, extension, or reduction to help businesses and individuals overcome difficulties.

Quy Anh