9 Serious Tax Violations Commonly Faced By F&B Businesses

Operating in the food and beverage (F&B) sector is a dynamic business area but one that carries considerable legal and tax-related risks. According to an announcement from the Quy Nhon City Tax Department (Binh Dinh) in February 2024, audits and cross-checks of tax filings at F&B businesses have revealed numerous common yet serious violations. These issues may lead to administrative penalties, tax arrears, or even criminal prosecution.

Below are 9 typical tax violations that F&B businesses should pay special attention to:

1. Failure To Issue Invoices When Selling Goods Or Providing Services

In practice, buyers are not accustomed to requesting invoices, and taxpaying entities often intentionally do not issue them. Sometimes, when buyers do request invoices, businesses add an extra 10% to the price, discouraging invoice requests.
Consequences: This violation can result in a fine from VND 10,000,000 to 20,000,000 (based on Clause 1, Article 4, Decree 123/2020/ND-CP dated October 19, 2020).
Remedial Action: Required to reissue the invoice upon the buyer’s request, under Article 24, Decree 125/2020/ND-CP.

2. Legalizing Input Invoices Or Issuing False Output Invoices

Some businesses purchase invoices from “ghost” companies that do not operate in reality to legitimize input costs. They also issue invoices to entities that did not directly purchase from them to provide documents for expense recording.
Consequences: Fines range from VND 20,000,000 to 50,000,000 (based on Point a, Clause 2, Article 5, Decree 123/2020/ND-CP).
Remedial Action: Required to cancel the used invoices, per Article 28, Decree 125/2020/ND-CP.

3. Inflating Purchases Of Beer And Soft Drinks (High Ratio Items)

F&B establishments often report abnormally high expenses for beer and soft drinks compared to actual consumption in order to increase input VAT credits and reduce tax liabilities. However, these costs are easily flagged during inventory audits and consumption checks.
Consequences:

• Disallowed input VAT deduction, increasing payable tax.
  
  
• Potential back tax payments and penalties if inconsistencies in inventory are found.
  
  
• Imbalanced accounting books, negatively affecting audits and financial reports.
  

4. Declaring Lower Purchase Prices While Recording Higher Invoice Prices

To inflate material costs and overhead, especially in seafood or agricultural products, some businesses fake purchase declarations using non-invoice form 01/TNDN.
Consequences:

• Disallowed cost deductions, resulting in corporate income tax (CIT) arrears.
  
  
• May be classified as tax fraud, with penalties up to 3x the evaded tax (Article 17, Decree 125/2020/ND-CP).
  

5. Declaring Maximum Allowable Expenses That Don’t Actually Exist

This involves fabricating transactions with fake documents, fake signatures, forged labor contracts, or purchased invoices from other businesses.
Consequences:

• Subject to fines from 1 to 3 times the evaded tax (Article 17, Decree 125/2020/ND-CP).
  
  
• Legal status of the business at risk, affecting ability to bid or raise capital.
  
  
• Financial reports become unreliable, damaging investor trust.
  

6. Inflating Employee Salary Expenses To The Maximum

This usually includes fake payrolls or contracts. Businesses may maintain two payroll records—one reported to tax and social insurance authorities, the other for internal tracking.
Consequences:
If discovered via Social Insurance data matching:

• Administrative penalties under tax and labor laws.
  
  
• Back payment of PIT and social insurance with interest for late payment.
  
  
• Labor disputes and loss of transparency in financial audits.

7. Misstating Accounting Records And Tax Declarations

This is often done to conceal taxable revenue, inflate deductible CIT expenses, or increase input VAT credits. Businesses might claim these were “accounting errors” if caught.
Consequences:

• May be classified as tax evasion if fraud is evident.
  
  
• Heavy fines, forced corrections to financial reports, and supplementary tax payments.
  
  
• Undermines credibility with investors and partners.
  

8. Incomplete Or Inaccurate Accounting Books

Some businesses keep dual accounting systems—an internal set that reflects full operations and a partial set for tax purposes. They omit records of taxable income or make false declarations to reduce taxes.
Consequences:

• Non-compliance with accounting regulations.
  
  
• Disallowed expenses without valid documents.
  
  
• Subject to back taxes, fines, and possible criminal charges for intentional fraud.
  
  
• Harms audit results and capital-raising efforts.
  

9. Establishing Shell Companies Solely To Trade Invoices

Some businesses are set up without any real business activity, just to be eligible to use invoices and sell fake ones to other parties.
Consequences:

• Criminal prosecution under Article 203 of the 2015 Penal Code.
  
  
• Other businesses using these invoices may also face investigation and liability.
  
  

Recommendations from TPM for F&B Business Owners:
Review all accounting and tax documents, especially input/output invoices, payrolls, and standard cost structures.

Absolutely avoid using illegal invoices or invoices from non-operational entities.
Be transparent about revenue, costs, and staff salaries in tax filings and financial reports.

Seek professional accountants familiar with the F&B sector for compliant and strategic support.

Complying with tax laws not only helps businesses avoid penalties but also builds a sustainable foundation for scaling operations, attracting investment, and establishing a reputable brand in the competitive F&B industry.

Legal Reference: Based on Official Dispatch No. 235/CCTTP-KTr2