A supplier disappearing after a transaction does not automatically turn its invoices into “sham invoices”. But when records are lost or scattered, the buyer is in the weakest possible position: it must prove, years later, that the transaction genuinely happened, with no counterparty left to cross-check against.
How do the tax authorities treat invoices of a runaway supplier?
When a business is found to have abandoned its registered address or absconded, the tax authority typically reviews all of its output invoices and notifies the authorities managing the buyers. Each buyer is asked to explain the legitimacy of the input invoices it credited for VAT and the expenses it deducted for CIT. This does not mean every invoice is denied: tax obligations are determined by the substance of the transaction under the Law on Tax Administration 108/2025/QH15, and a genuine purchase — real goods, real payment — gives the buyer grounds to defend its credits and deductions.
Criminal exposure arises only where there are signs of invoice trading, i.e. transactions that never existed. Where the transaction is real but the evidence is weak, consequences usually stay administrative: recovery of credited tax, late-payment interest and possible penalties.
What does a proof chain for a genuine transaction contain?
An effective defence file is a closed chain in which each independent document corroborates the others on quantity, timing and value: the purchase contract and annexes; the VAT invoice; warehouse receipts and delivery minutes signed by both sides; transport documents or weighbridge slips where applicable; payment orders and bank statements showing non-cash payment to the supplier’s own account; warehouse ledgers showing the goods actually received and consumed; and the corresponding sales documents proving the goods entered the business cycle. Bank payment is necessary but not sufficient — a real payment with no physical flow of goods behind it still attracts suspicion.
Where internal accounting data has been lost, recovery sources include: the company’s own bank statements (banks retain and re-issue them on request), e-invoice data held by the e-invoice service provider, customs records for imported goods, and copies retained by counterparties, carriers or downstream customers.
The penalty exposure
If the authority concludes the buyer used illegal invoices or illegally used invoices, Article 28 of Decree 125/2020/ND-CP (as amended by Decree 102/2021/ND-CP and Decree 310/2025/ND-CP) imposes a fine of VND 20 million to VND 50 million for that act, on top of tax recovery and late-payment interest. If the transaction is proven genuine, with real goods and real payment, the company has grounds to request that Article 28 not be applied and the credits be preserved — which is why rebuilding the proof chain must happen before the explanation meeting, not after a recovery decision has been issued.
Frequently Asked Questions
Which documents prove the transaction was genuine?
A closed chain of documents corroborating one another on quantity, timing and value: the purchase contract, the invoice, warehouse receipts and delivery minutes signed by both sides, transport documents, bank statements or payment orders to the supplier’s own account, warehouse ledgers showing receipt and consumption, and the corresponding output sales documents. Each document alone is weak; the probative force lies in how the whole chain fits together.
Is bank payment alone sufficient?
Not by itself. Non-cash payment through the bank is a necessary condition and strong evidence of the money flow, but the authority also traces the physical flow of goods: whether the goods actually entered the warehouse, were consumed in production and generated corresponding output. A real payment with no goods flow behind it is still suspected of being invoice trading.
Can the input VAT still be credited?
Yes, if the transaction is proven genuine and the credit conditions are met: a valid invoice, goods actually purchased for VAT-taxable activities, and non-cash payment for invoices of VND 5 million or more under the Law on Value Added Tax 48/2024. Tax obligations follow the substance of the transaction under the Law on Tax Administration 108/2025/QH15 — the buyer does not lose its credit merely because the seller later absconded.
Where can the cost-disallowance decision be challenged?
The first-instance complaint goes to the person who issued the decision disallowing the credit and expenses — usually the Director of the directly managing Tax Department — within 90 days under Article 9 of the Law on Complaints 02/2011/QH13. If the first-instance outcome is not accepted, the company complains to the immediate superior tax authority or brings an administrative lawsuit at the competent People’s Court.
This article has been quality-reviewed by the FLAW AI Legal Council
