Scenario: input invoices from a supplier that has absconded — handling and prevention

Your company buys raw materials from a domestic supplier: complete e-invoices, payment by bank transfer, goods received into the warehouse months ago. One morning, the accountant receives a letter from the tax authority: that supplier has been identified as "not operating at its registered business address," and the tax authority asks the company to review all related input invoices. At this point, the first question is not "who is right and who is wrong," but: how do you handle those invoices correctly, and how do you prove your transactions are genuine?

This article is for businesses — especially FDI enterprises purchasing domestically — facing exactly this situation. It follows the real-world sequence: understanding the concept correctly, identifying the decisive timeline, handling each case with the tax authority, preparing the evidence dossier, assessing penalty risks, and finally a prevention checklist for the purchasing department.

1. How an "absconded supplier" is understood in tax language

In tax administration practice, "absconding" is not a criminal offence but shorthand for the situation where a taxpayer is no longer operating at the business address registered with the competent state authority, cannot be contacted, and is often accompanied by signs of illegal invoice trading. The tax authority establishes this status through a verification procedure and issues a notice; from that point, the enterprise's tax code may be placed under risk management, suspended, or subjected to enforced suspension of invoice use.

The key point for the buyer: the law does not equate every invoice from an absconded supplier with an illegal invoice. The boundary lies in the invoice issue date compared against the date on which the tax authority determined that the seller was not operating at its registered address. Invoices for the purchase of goods or services whose issue date falls on or after the date the tax authority determined the seller was not operating at its registered business address — or which have been concluded by a competent authority to be illegal — are the ones classified as "illegal invoices" under the regulations on administrative penalties for invoice violations. Invoices issued before that date, when the supplier was still operating normally, remain in principle lawful invoices at the time of issue.

2. The decisive timeline: matching invoice issue dates against the tax authority's notice

Before doing anything else, the business should build a reconciliation table for each related invoice, covering: invoice number, issue date, value, VAT amount, and — most importantly — the date on which the tax authority determined that the supplier was not operating at its registered address (per the official notice, not rumour or the date the business itself discovered the problem).

There are two groups of invoices:

Group 1 — invoices issued before the supplier was determined to be non-operating: this is the group the business has grounds to defend. The transaction took place while the seller was still operating lawfully; if the business can prove the purchase was genuine, it can generally retain its right to credit input VAT and to treat the cost as deductible.
Group 2 — invoices issued on or after the date the supplier was determined to be non-operating: this is the high-risk group. These invoices are illegal; the business may not credit the input VAT and may not include them in deductible expenses when determining taxable income for corporate income tax (CIT).

This classification is not the business's own speculation — it must be based on the tax authority's official documents. If no official notice has been received and the business has only heard that the supplier "has a problem," it should proactively check the supplier's tax-code status on the tax authority's information portal and contact the managing tax officer to verify, rather than adjusting its filings on its own initiative.

3. Scenario A: not yet declared for credit — pause and wait for the conclusion

If, at the time the tax authority's notice is received, the business has not yet declared the input VAT on the suspect invoices for credit, the handling under the Ministry of Finance's guidance is: the tax authority notifies the business in writing to temporarily suspend declaring the credit for those invoices, pending the official conclusion of the competent authority.

The business should:

Suspend declaration; do not cancel the invoice. The suspension is a precautionary measure while awaiting the conclusion; the business continues to declare credit only for invoices with no signs of violation.
Keep the tax authority's written notice in the case file — this is the evidence that the business complied with the guidance, in case it is later questioned about why a filing period was missing a credit amount.
Prepare the dossier proving the transaction is genuine (detailed in section 5) so that when the tax authority conducts its inspection or examination, the documents can be produced immediately instead of being gathered defensively afterwards.

4. Scenario B: already declared for credit — file a (temporary) reducing adjustment

The more common case: the business already declared and credited the input VAT earlier, and may even have obtained a VAT refund. In that case, under the tax authority's guidance, the business files an adjusted return reducing the input VAT already credited in respect of the suspect invoices, pending the official conclusion.

Two points must be understood correctly to avoid unnecessary panic:

The reducing adjustment is a temporary measure, not a final conclusion. If the inspection or examination verifies that the purchase transaction was genuine and compliant, the business has grounds to have its credit right restored accordingly.
If the suspension or adjustment increases the VAT payable, the tax authority is responsible for monitoring these cases, without yet requiring payment or charging late-payment interest while awaiting the official conclusion of the competent authority. In other words, the business is not charged late-payment interest on the tax amount "on hold" pending verification.

If the business affirms that its purchase of goods and its use of the input VAT invoices for credit declaration were in accordance with regulations, it must commit to bear legal responsibility for that assertion. In parallel, the tax authority will carry out an inspection or examination at the business to conclude and handle violations as prescribed — including verifying and cross-checking with the business in the purchase relationship. This commitment carries real legal weight: if verification shows the transaction was not genuine, the business will bear the full consequences, including penalties and possible criminal liability. Commit only when you truly have your documentation under control.

5. Proving the transaction is genuine: the dossier to prepare

When the tax authority inspects or examines, verification focuses on two axes: whether the goods were real, and whether the money was actually paid. Below is a checklist the business should start preparing as soon as the notice is received, each item with its rationale and how to do it.

1. The purchase contract (if any). Why: the contract is the first evidence of the parties' intent to transact, showing the subject matter, quantity, price, delivery and payment terms. How: gather the full set — framework contract, appendices, purchase orders, and negotiation emails. Basis: the tax authority lists the purchase contract as the first item of verification concerning goods.

2. Delivery documentation. Why: whether the goods were real shows in the delivery leg — fictitious invoices typically leave no logistics trail. How: collect delivery minutes, warehouse issue/receipt slips, bills of lading, vehicle information, transport costs, and delivery locations. Basis: the tax authority's verification guidance requires checking the form and place of delivery, the means and cost of transport, and the origin of the goods before delivery.

3. Bank payment documents. Why: the money trail is the hardest evidence to fake; cash payment or payment through personal accounts seriously weakens credibility. How: obtain bank statements showing transactions with the exact account of the seller, reconciling amounts and number of transactions against the invoices and the contract. Basis: the tax authority verifies the transacting bank, the payer, the number and form of payments.

4. Complete accounting records. Why: a genuine transaction must be fully and timely recorded; complete accounting is also a condition for a more lenient treatment of invoice violations. How: print detailed ledgers, entries for goods receipt and payment, and the payables reconciliation with the supplier. Basis: the penalty regulations provide a reduced exception where the buyer proves the fault lies with the seller and has maintained complete accounting records.

5. The supplier due-diligence file at the time of the transaction. Why: to show that, at the time of purchase, the supplier was operating normally and the business had carried out reasonable due diligence — ruling out deliberate collusion. How: keep the tax-code lookup results, the business registration certificate, supplier evaluation minutes, and tender/quotation files (if any). Basis: the general principle on the taxpayer's burden of proof when the tax authority has grounds for suspicion.

6. The written commitment to bear responsibility (when affirming the transaction was proper). Why: this is the procedural condition for the tax authority to conduct its inspection or examination and conclude in the business's favour. How: draft a written commitment stating that the business affirms the transaction was genuine and compliant and accepts legal responsibility; submit it to the directly managing tax authority. Caution: sign the commitment only after thoroughly reviewing the entire dossier in the five items above.

6. Input VAT credit and CIT-deductible expenses: when they are kept, when they are disallowed

The handling principle for each invoice group classified in section 2:

Group 1 (invoices issued before the supplier was determined to be non-operating): if the business proves the purchase of goods was genuine and the invoice was used in accordance with regulations, it may credit the input VAT and include the cost in deductible expenses when determining taxable CIT income. This is the scenario where the dossier in section 5 does its work.
Group 2 (invoices issued on or after the date the supplier was determined to be non-operating): the invoices are illegal; the business may not credit the input VAT and may not include them in deductible expenses. In this case, the reducing adjustment is mandatory and there is little basis for defence.

A practical note for FDI enterprises: many companies have a policy of periodic VAT refunds for investment projects. If a refund dossier contains invoices from an absconded supplier, the tax authority will separate those invoices for handling under the above procedure; the remaining refund is unaffected. The business should proactively review and segregate the at-risk invoices when preparing the refund dossier, rather than letting the tax authority discover them during pre-refund verification.

7. Penalty and criminal liability risks

The level of legal risk depends on whether the transaction was genuine and on the business's attitude of cooperation:

Administrative penalties for invoice violations: the act of using an illegal invoice, or unlawfully using an invoice, is subject to monetary penalties under current regulations (the band cited by multiple sources updated for 2026 is from VND 20 to 50 million), together with the remedial measure of cancelling the invoices used. Two important exceptions apply: (i) where the buyer proves the fault lies with the seller and has maintained complete accounting records, a penalty of 20% of the under-declared tax applies instead of the invoice-penalty band; (ii) where the act is determined to be tax evasion, the penalty is 1 time the evaded tax amount.
Recovery of tax and late-payment interest: wrongly credited input VAT and wrongly deducted CIT expenses will be recovered; late-payment interest is calculated from the time the tax obligation arose, as prescribed by the Law on Tax Administration 108/2025/QH15.
Criminal liability: where a business deliberately uses illegal invoices in its tax declarations so as to reduce the tax payable by a qualifying amount, the responsible persons may face the offence of tax evasion under Article 200 of the Penal Code. The seller or any broker trading invoices may face the offence of illegally printing, issuing, or trading invoices and state-budget collection documents under Article 203. The boundary between an administrative violation and a criminal offence lies in the elements of intent and the tax amount — a point the business must never take lightly when signing a commitment to the tax authority.

8. Prevention checklist: a supplier due-diligence process for the purchasing department

Most of the invoice risk from absconded suppliers can be prevented with purchasing discipline. Businesses should issue an internal procedure with the following steps:

1. Due diligence before signing the contract. Why: stop the risk at its source instead of dealing with the consequences. How: check the supplier's tax code and operational status on the tax authority's information portal; verify the enterprise registration certificate; for high-value suppliers, conduct an actual site survey of the business premises. Basis: the taxpayer's duty of care in transactions.

2. Periodic review of active suppliers. Why: a supplier may "abscond" after cooperating for some time; today's status does not guarantee next month's invoices. How: assign the accounting team to re-check the status of key suppliers quarterly; set up alerts for tax authority notices about enterprises not operating at their registered address. Basis: the timeline in the illegal-invoice regulations is tied to the date the tax authority makes its determination, so timely updates help the business stop transacting at the right moment.

3. 100% bank payment to the seller's own account. Why: the bank money trail is the strongest evidence when a transaction must be proven genuine. How: a hard rule in the purchasing process — no cash payment, no transfers to the seller's employees' personal accounts; verify the account holder's name against the name on the invoice and the contract. Basis: the payment-verification content of the tax authority.

4. Keep complete delivery documentation for each order. Why: e-invoices today are easy to issue and store; what distinguishes a genuine transaction from a fictitious invoice is the logistics trail. How: require the warehouse team to sign delivery minutes for each goods receipt, and keep bills of lading and transport documents with the payment file. Basis: the goods-verification content of the tax authority.

5. Reconcile e-invoices against the tax authority's data. Why: detect problematic invoices early — at receipt, before they enter the declaration. How: check the validity of each e-invoice on receipt (the tax authority's code for coded invoices, the seller's digital signature); periodically reconcile the input-invoice listing against data on the electronic tax system. Basis: the e-invoice regulations in Decree 254/2026/ND-CP and Circular 91/2026/TT-BTC.

6. Approval thresholds and segregation of duties. Why: internal invoice fraud usually starts where one person both selects the supplier and approves payment. How: require the supplier proposer to differ from the approver and from the person making payment; transactions above a value threshold must go through a procurement council or board approval. Basis: internal control principles, which also reduce personal liability risk when violations occur.

9. Frequently asked questions

Are invoices issued before the supplier absconded automatically disallowed?

No. An invoice is only classified as illegal when its issue date falls on or after the date the tax authority determined that the seller was not operating at its registered business address, or when there is an official conclusion from a competent authority. Invoices issued before that date stand firm if the business proves the purchase was genuine and compliant — with a dossier of contract, delivery documents, bank payments, and complete accounting records. Basis: the definition of an illegal invoice in the regulations on administrative penalties for invoice violations and the guidance in Official Letter 11797/BTC-TCT. Practical note: when you receive the tax authority's notice, prepare the evidence dossier immediately — do not wait until the inspection to start gathering it.

We have already declared and credited the input VAT. What must we do?

File an adjusted return reducing the input VAT already credited in respect of the suspect invoices once the tax authority issues its written notice, and wait for the official conclusion. This is a temporary measure, not a final conclusion — if the transaction is verified as genuine, the business has grounds to have its credit right restored. While awaiting the conclusion, if the adjustment increases the tax payable, the tax authority monitors the amount without yet requiring payment or charging late-payment interest. Basis: Official Letter 11797/BTC-TCT of the Ministry of Finance. Recommended action: in parallel with the adjusted filing, prepare the written commitment to bear responsibility (if affirming the transaction was proper) and the full evidence dossier, ready for the inspection or examination.

We buy through a commercial intermediary — are the absconded supplier's invoices relevant?

No, if the invoice the business receives is issued by the intermediary itself. The absconding risk attaches to the party that invoices the business directly — the party with whom the business contracts, pays, and from whom it receives the invoice. Where an intermediary is involved, the business should review the chain: with whom the contract was signed, who issued the invoice, and into whose account the money was transferred. If all three point to the intermediary and the intermediary is still operating normally, the business's invoices are not within the scope of this handling. Basis: the principle that an illegal invoice is determined by the status of the invoice issuer. Note: always pay into the account of the invoice issuer — this is the most important evidence of a transaction's legitimacy in every situation.

Can we sue the absconded supplier for compensation of the tax loss?

Legally, a business may bring a civil claim for damages if it proves the supplier's conduct caused the loss — for example, the tax recovered because invoices were disallowed. In practice, however, the obstacles are formidable: an absconded supplier typically has no remaining assets, no identifiable address for service of process, and even a court victory would be nearly impossible to enforce. The practical strategy should therefore concentrate on two things: proving the transaction was genuine to preserve the VAT credit, and tightening supplier due-diligence procedures from the outset. Litigation should only be considered where assets or an address of the breaching party can be identified.

Is buying from a newly established supplier considered risky?

No regulation prohibits buying from a newly established business, and a company's age is not a legal criterion for assessing an invoice. The tax authority examines two things: whether the transaction was genuine, and whether the invoice was lawful at the time of issue. With a new supplier, the purchasing business should apply one level more of diligence: verify the tax code and operational status, confirm the actual business address, require compliant e-invoicing, and pay via bank transfer. This is a preventive measure belonging to internal risk management, not a mandatory legal obligation — but in practice, it is precisely these due-diligence files that will save the business when a dispute with the tax authority arises.

10. Points to note and next steps

The absconded-supplier situation always has a "grey zone": the final conclusion on each invoice depends on the tax authority's inspection, examination, and evidence assessment in each specific case. No document guarantees in advance that a given dossier will be accepted 100%. What the business can do — and should do now — is: classify invoices by timeline, comply with the guidance to suspend or adjust declarations upon receiving an official notice, prepare a complete evidence dossier, and sign a commitment to bear responsibility only when truly confident about the transaction.

If your business is facing a tax authority notice about an absconded supplier, or wants to build a proper supplier due-diligence process from the outset, FLAT Law Firm can assist in reviewing dossiers, working with the tax authority, and designing internal control procedures suited to the scale of your business. Contact FLAT Law Firm via hotline 0988424851 for advice tailored to your specific situation.

References

Law on Tax Administration No. 108/2025/QH15 (Luật Quản lý thuế số 108/2025/QH15) (effective 01/7/2026, replacing Law 38/2019/QH14)
Decree No. 254/2026/ND-CP (Nghị định số 254/2026/ND-CP) dated 30/6/2026 on e-invoices and Circular No. 91/2026/TT-BTC (Thông tư số 91/2026/TT-BTC) (effective 01/7/2026; replacing Decree 123/2020/ND-CP and Decree 70/2025/ND-CP)
Decree No. 125/2020/ND-CP (Nghị định số 125/2020/ND-CP) on administrative penalties for tax and invoice violations (as amended by Decree No. 310/2025/ND-CP (Nghị định số 310/2025/ND-CP), effective 16/01/2026) — Articles 4, 16, 17
Official Letter No. 11797/BTC-TCT (Công văn số 11797/BTC-TCT) dated 22/8/2014 of the Ministry of Finance on handling input VAT credit for invoices with signs of violation
Penal Code 2015 (Bộ luật Hình sự 2015) (as amended) — Article 200 (tax evasion), Article 203 (illegal printing, issuance and trading of invoices and state-budget collection documents)