Couple set up two companies to facilitate invoice trading
The indictment of the Ninh Binh Provincial People’s Procuracy, made public at the trial on May 7, 2024, stated that from 2016 to 2020, Nam Phuong Ninh Binh JSC received a tax refund of over VND75 billion in value-added tax after exporting wood chip orders.
Of this VND75 billion, VND45.78 billion was refunded based on 91 fake invoices issued by Linh Nhung Company to Nam Phuong Ninh Binh JSC.
As a result, the operators of Nam Phuong Ninh Binh JSC and Linh Nhung Company, Nguyen Duc Hau, Bui Thi Kim Nhung, and accountant Ba Thi Hien, were prosecuted for “Tax Evasion” under Clause 3 and 4 of Article 200 of the Criminal Code.
At the trial, defendant Nguyen Duc Hau confessed that Nam Phuong Ninh Binh JSC and Linh Nhung Company were essentially family businesses. Linh Nhung Company, established in 2015 with Hau as its director, specialized in wood chip exports. Nam Phuong Company, directed by Hau’s wife, Bui Thi Kim Nhung, was founded in 2016 and also primarily traded wood chips.
Nam Phuong Company purchases wood chips from residents of Hoa Binh, Ninh Binh, and Phu Tho provinces for export. Photo by Long Van
To export wood chips, Nam Phuong Ninh Binh JSC needed invoices for customs inspection and verification. Additionally, according to state policies, the company would be eligible for a value-added tax refund based on the invoices for purchasing wood chips for export. To legitimize the paperwork and profit from tax refunds, Hau instructed the company accountant, Ba Thi Hien, to create fake documents.
Consequently, from 2016 to 2020, with 91 fake invoices from Linh Nhung Company, Nam Phuong Ninh Binh JSC received a refund of VND45.78 billion in value-added tax. This money was transferred to the company’s account and used by Hau to fund its operations.
At the trial, Hau’s wife, Bui Thi Kim Nhung, admitted that despite being the director of Nam Phuong Ninh Binh JSC from 2016 to 2021, she lacked the expertise and only signed and legalized documents.
Based on the investigation documents and the defendants’ testimonies, the Ninh Binh Provincial Court sentenced Nguyen Duc Hau to 18 months in prison, Ba Thi Hien to 12 months in prison, and Bui Thi Kim Nhung to a fine of VND 1.6 billion.
Regarding the state’s tax loss of VND45.78 billion, the court ordered the three defendants to repay the full amount. Specifically, Hau was responsible for 95%, Nhung for 4.8%, and Hien for 0.2%.
“Tax officials did not detect all violations but were not complicit”
At the trial, a representative from the Ninh Binh Taxation Department stated that Nam Phuong Ninh Binh JSC had been refunding taxes from March 2016 to 2021. According to the procedure, the company’s tax refund dossier was received and categorized by the department’s officials. Functional departments then processed the dossier, after which the department director issued a tax refund decision.
The representative affirmed that the tax refund for Nam Phuong Ninh Binh JSC followed the proper sequence and regulations. The Taxation Department had inspection teams that detected invoice discrepancies and conducted tax arrears collections. These teams also verified the invoices, some of which were genuine, while feedback on others was still pending.
In response to the court’s question about the prolonged failure to detect the company’s large-scale tax violations, the representative explained that the officials had fulfilled their duties to the best of their abilities.
The court determined that there was no evidence of collusion or bribery by Nam Phuong Ninh Binh JSC to the Taxation Department officials and therefore did not prosecute them.
Previously, in an interview with reporters, an inspector from the Ninh Binh Taxation Department (the whistleblower in this case) stated that there were some issues that needed further investigation or clarification regarding the tax refund inspection measures for Nam Phuong Company.
According to the whistleblower, the Ministry of Finance issued Document No. 10492/BTC-TCT dated July 30, 2015, on strengthening the management of value-added tax, which stipulates a 100% pre-refund inspection for high-risk enterprises.
The 2019 Law on Tax Administration and Decree 132/2020/ND-CP on tax management for enterprises with related transactions also have regulations on tax control for related parties. Meanwhile, “Nam Phuong Ninh Binh Company (the invoice purchasing enterprise) and Linh Nhung Company (the invoice selling enterprise) have a close personal relationship and are related parties with abnormal signs such as the same address and accountant. Still, the Director of Ninh Binh Taxation Department signed a decision to refund taxes to Nam Phuong Ninh Binh Company first and then inspect later, which is a violation of the regulations,” said the whistleblower, requesting clarification of the responsibility of the leadership of Ninh Binh Taxation Department.
