Discrepancies between figures on tax returns (VAT, CIT, PIT) and financial statements are among the most common “red flags” triggering a tax authority’s request for explanation. In the era of electronic data cross-checking, these gaps are usually detected automatically — and how a company responds determines the risk level: from a successful explanation to tax assessment and sanctions. This article sets out 7 key points under the Tax Administration Law 108/2025/QH15 (effective 01/7/2026, replacing Law 38/2019/QH14) and current guiding instruments.
1. The right to explain belongs to the taxpayer — and sits in Article 37, not Article 13
Article 37.1 of Tax Administration Law 108/2025 provides: taxpayers may be informed about tax calculation, tax assessment, and tax handling contents; may reserve their opinions and provide explanations; and may know the tax refund processing time, the non-refunded amount, and its legal basis.
This is the most common citation trap on this topic: many articles write “the right to explain under Article 13 of the Tax Administration Law” — completely wrong. Article 13 of Law 108/2025 governs tax declaration, calculation, and withholding for business households and individuals (effective from 01/01/2026), and has nothing to do with the right to explain. Citing the wrong article at the very first basis undermines the credibility of the company’s entire explanation dossier.
2. The correct legal position: explanations within desk audits at the tax authority’s office
Article 22.2.b of Law 108/2025 provides: tax audits at the tax administration authority’s office are conducted based on tax dossiers and the tax administration database on the Tax Administration Information System; the tax authority may request the taxpayer to explain and supplement information and documents; issue tax assessment decisions, handle administrative violations of tax administration, or move to an audit at the taxpayer’s office.
In other words: return-vs-statement discrepancies are typically detected through electronic data cross-checking → the tax authority sends a Notice requesting explanation — this is an audit step at the tax authority’s office, not yet a tax inspection or an audit at the company’s premises. Do not merge the two stages: their legal consequences differ (tax assessment, sanctions). The right to explain comes with a duty to comply: Article 37.2.p requires taxpayers to comply with explanation requests, supplement information and documents; provide them timely, fully, accurately, and truthfully; sign audit minutes within the deadline; and comply with conclusions and handling decisions.
3. No explanation or an unconvincing one → risk of tax assessment
Article 24.2 of Law 108/2025 lists the cases of tax assessment, including: failure to supplement tax dossiers as requested; incomplete, untruthful, or inaccurate declaration of tax bases; failure to record or incompletely recording figures in accounting books; failure to present accounting books, invoices, vouchers, and necessary documents within the deadline; non-compliance with audit decisions… Details on tax assessment are in Articles 36, 37, and 38 of Decree 252/2026/ND-CP (30/6/2026, effective 01/7/2026 — replacing Decrees 126/2020, 91/2022, 117/2025).
The practical message: silence or a perfunctory explanation is the riskiest choice. A reasoned explanation with detailed reconciliations between the returns and the financial statements is the only way to stop the tax authority from moving to assessment.
4. Early self-detection: supplementary filing + voluntary full payment BEFORE audit is a conditional “shield” from sanctions
Article 9.3 of Decree 125/2020/ND-CP (still in force; amended by Decree 310/2025/ND-CP) provides: no administrative tax sanctions apply where the taxpayer has filed a supplementary tax dossier and voluntarily paid the full tax due before the tax authority announces an audit/inspection decision at the taxpayer’s office, or before the tax authority discovers the violation (without inspection), or before another competent authority discovers it.
This is a conditional “shield” — the key condition is “before the audit/inspection announcement or discovery.” Never write the absolute “supplementary filing means no sanction” without this condition. So when a discrepancy is self-detected, the company should proactively file supplementary returns and pay in full immediately — the earlier, the lower the risk.
One important limit: Article 12.8 of Decree 252/2026 provides that tax dossiers older than 05 years from the filing deadline may no longer be supplemented, but the taxpayer may supplement an explanation dossier to the tax authority; the authority reviews it and issues a notice accepting or rejecting the explanation, plus an administrative sanction decision on tax administration (if any).
5. Sanction levels for false declarations and limitation periods
Article 12 of Decree 125/2020 (sanctions for organizations) provides: VND 500,000–1,500,000 (false declaration not affecting tax liability determination); VND 1,500,000–2,500,000 (false declaration of return/appendix items not affecting tax liability); VND 5,000,000–8,000,000 (false declaration of items affecting tax liability determination). Sanctions for individuals equal one-half of the organizational levels.
On limitation periods (Article 8 of Decree 125/2020, amended by Article 1.6.b of Decree 310/2025/ND-CP): tax procedural violations — 02 years; false declarations causing underpaid tax or increased exemption/reduction/refund — 05 years.
6. Risk-based compliance management: poor explanations affect the company’s “record”
Article 28 of Decree 252/2026/ND-CP establishes taxpayer classification by tax-law compliance level and tax risk level. Taxpayers with low compliance or high risk are warned, supervised, and monitored; low compliance combined with high risk triggers enhanced management measures (audit, supervision, enforcement).
Notably, the mechanism includes public disclosure of taxpayers failing to respond to explanation requests regarding invoice risks flagged by the e-invoice system. In other words, ignoring an explanation notice not only leads to assessment in the current case but also worsens the company’s compliance “record” for subsequent periods.
7. Limits companies should remember
- Explanations do not replace the duty to declare correctly and pay on time. If disagreeing with an assessed tax amount, the company must still pay while retaining the right to complain or sue (Article 37.2.o);
- The “10 working days” in Article 49 of Circular 89/2026/TT-BTC applies only within the tax refund dossier process (the tax authority issues an explanation notice within 03 working days; the taxpayer submits the written explanation within 10 working days) — do not generalize it into a universal explanation deadline for all tax audits. The specific deadline follows each explanation notice in the case;
- The law does not issue a dedicated “template for explaining return-vs-statement discrepancies” — explanations follow the tax authority’s Notice requesting explanation (per Ministry of Finance forms);
- Circular 90/2026/TT-BTC governs only tax registration (personal identification numbers as tax codes; e-commerce and the digital economy) — it is not a basis for the explanation procedure;
- The old instruments — Tax Administration Law 38/2019, Decrees 126/2020 and 91/2022, Circular 86/2024 — expired on 30/6/2026; never cite them as current.
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Frequently asked questions
Where is the taxpayer’s right to explain provided?
Article 37.1 of Tax Administration Law 108/2025 — not Article 13 (Article 13 governs declaration, calculation, and withholding for business households and individuals).
Does receiving an explanation request mean a tax inspection?
Not yet. This is a tax audit step at the tax administration authority’s office (Article 22 of Law 108/2025) — the authority cross-checks data and requests explanations and documents before deciding next steps.
Is a self-detected false declaration sanctioned?
No sanction applies if the taxpayer has filed a supplementary dossier and voluntarily paid the full tax due before the tax authority announces an audit/inspection decision or before discovery (Article 9.3 of Decree 125/2020).
Legal bases: Tax Administration Law 108/2025/QH15 (Articles 22, 24, 37); Decree 252/2026/ND-CP (Articles 12, 28, 36, 37, 38); Decree 125/2020/ND-CP (Articles 8, 9, 12; amended by Decree 310/2025/ND-CP); Circular 89/2026/TT-BTC (general guidance on the Tax Administration Law).
Has your company received a notice requesting explanation of tax return discrepancies? Reach us via the Contact page of FLAT Law Firm for support in preparing explanation dossiers, supplementary filings, and managing tax assessment risks.
For reference only, not legal advice.
The legal content of this article is reviewed by FLAT’s AI Legal Council and submitted to the owner for approval; it is not an opinion of a licensed lawyer and does not replace legal advice for specific cases.
