Misclassified HS codes are the most common — and most expensive — mistake importers make. One wrong digit on a customs declaration can turn into a fine of 10% or 20% of the tax shortfall, or even 1–3 times the evaded tax if the act is classified as tax evasion. This article analyses the penalty framework under Decree 169/2026/ND-CP (effective 1 July 2026, replacing Decree 128/2020/ND-CP), including where administrative penalties end and criminal liability begins.
1. What counts as “misdeclaration causing a tax shortfall”?
Article 10(1) of Decree 169/2026/ND-CP covers “violations of tax declaration rules leading to underpaid tax or increased exempted, reduced, refunded or uncollected tax”. The main groups of conduct are:
- Wrong tax calculation factors: misdeclaring quantity, goods name, quality, customs value, HS code, tax rate or tax level — except cases falling under Article 15(1)(b);
- Wrong preference objects: misdeclaring non-taxable objects, tax-exempt objects, or goods managed under tariff quotas;
- Exemption/reduction/refund dossiers: preparing and declaring incorrect dossiers for tax exemption, reduction, refund or non-collection;
- Processing/manufacture for export: violating management rules for materials used in processing or export production leading to inventory shortages; preparing settlement reports inconsistent with reality; declaring processing/export-production types without suitable production facilities or machinery.
The common thread: the misdeclaration must result in a tax shortfall (or an increase in exempted, reduced, refunded or uncollected tax) to fall under Article 10. Errors that do not affect the tax amount are handled under other provisions.
2. Three penalty levels: 10%, 20% and 1–3 times
Depending on who discovers the error and how proactively it is fixed, Articles 10 and 15 of Decree 169/2026 apply three different levels:
| Fine | Calculated on | When it applies |
|---|---|---|
| 10% | The underpaid tax (or the increased exempted, reduced, refunded or uncollected tax) | The taxpayer self-discovers and files a supplementary declaration more than 60 days after customs clearance but before a post-clearance audit/inspection decision is issued (Article 10(2)) |
| 20% | The underpaid tax | Customs discovers the error during clearance procedures, or during a post-clearance audit/inspection of cleared goods; customs value not supplemented but discovered during inspection (Article 10(3)) |
| 1 to 3 times | The evaded tax | The act is classified as tax evasion without criminal prosecution (Article 15(2): 1 time with no aggravating circumstances; each aggravating circumstance adds 0.2 times, up to 3 times) |
Illustrative example: an importer underpays VND 500 million in import tax due to a wrong HS code. Voluntary supplementary declaration before any inspection decision: VND 50 million fine (10%) + full payment of the VND 500 million shortfall + late-payment interest. If discovered during a post-clearance audit: VND 100 million fine (20%) + full tax payment + late-payment interest.
3. When does misdeclaration become “tax evasion”?
Not every misdeclaration is tax evasion. Article 15(1) of Decree 169/2026 lists tax evasion acts in the customs field, notably:
- Using unlawful documents, or documents inconsistent with the actual transaction, to declare tax;
- Misdeclaring HS codes, tax rates or tax levels for goods for which customs authorities or the Ministry of Finance have previously issued guidance (Article 15(1)(b)) — a distinctive aggravating feature of Decree 169/2026: misclassifying goods already classified by the authorities is hard to present as an innocent mistake;
- Arbitrarily erasing or altering documents resulting in a tax shortfall;
- Failing to voluntarily remedy by paying the full tax before the administrative violation record is drawn up (Article 10(4)(b) referring to Article 15(1)(c));
- Cases transferred by criminal proceedings bodies where the violator does not voluntarily pay the full tax before the penalty decision is issued.
Once classified as tax evasion: a fine of 1–3 times the evaded tax plus mandatory payment of the full evaded tax (Article 15(3)).
4. The criminal threshold: the crime of tax evasion
When the evaded tax reaches the criminal prosecution threshold, the case is no longer administrative — it is prosecuted under Article 200 of the 2015 Penal Code (amended 2017) on tax evasion. Note that Article 3(3) of Decree 169/2026 provides that acts are only subject to administrative penalties when they are not subject to criminal prosecution — the specific quantitative thresholds must be checked directly against the current Penal Code, not assumed.
5. Beyond the fine: what else must be paid? How long is the limitation period?
- Full payment of the tax shortfall (Article 10(5) of Decree 169/2026) — a remedial measure applied together with the fine;
- Late-payment interest calculated under the Law on Tax Administration 108/2025/QH15 (passed 10 December 2025, effective 1 July 2026) — the applicable rate must be taken from the current law, not from the expired Law 38/2019;
- Statute of limitations: 5 years for administrative penalties. Even after the limitation expires, if within 10 years counting back from the date the violation is discovered, the violator must still pay the full tax shortfall plus late-payment interest (Article 5 of Decree 169/2026).
6. How to minimise the risk
- Review HS codes before declaration: cross-check against guidance documents and classification notices issued by customs for the same goods — critical, because misclassifying previously-guided goods may be treated as tax evasion;
- File supplementary declarations early: self-review within 60 days of clearance to minimise sanctions; even after 60 days, voluntary declaration before an audit decision still attracts only 10% instead of 20%;
- Remedy immediately upon discovery: pay the full shortfall before the violation record is drawn up — this timing determines whether the case escalates to tax evasion;
- Keep complete documentation proving the good faith of the declaration.
Frequently asked questions
Does misdeclaration without a tax shortfall fall under Article 10?
No. Article 10 requires a shortfall in tax payable or an increase in exempted, reduced, refunded or uncollected tax. Errors not affecting the tax amount are handled under other provisions.
Is a voluntary declaration after 60 days still mitigated?
Yes. A self-filed supplementary declaration after 60 days but before a post-clearance audit/inspection decision attracts 10% instead of 20%.
Is Decree 128/2020 still applicable?
No. Decree 128/2020/ND-CP expired on 1 July 2026; the current framework is Decree 169/2026/ND-CP.
This article is for general information only and does not constitute legal advice. Businesses should consult a lawyer or the customs authorities before applying it to a specific case.
Need help reviewing declarations, HS codes or handling customs administrative violations? Contact FLAT Law Firm: /en/contact/ — a team of lawyers with 30+ years of experience in corporate and customs law.
