Tax Risks: Is Your Business at Risk of an Audit?

In an increasingly stringent legal environment, tax risks have become a critical concern for every business. Minor errors in accounting, tax reporting, or invoice handling can lead to tax reassessments, administrative penalties, or even business disruptions.

W&A Consulting provides comprehensive solutions to help businesses prevent and manage tax risks, proactively ensuring compliance and transparency when working with tax authorities.

Common Causes of Tax Risks

1. Frequent Accounting Staff Turnover

Constant changes in accounting personnel often result in incomplete data handovers, inconsistent records, or missing documents, complicating verification and reconciliation processes.

2. Irregularities in Financial Statements

Red flags such as unusually high inventory levels, excessive cash balances, mismatched registered capital with business scale, significant supplier debts, or discrepancies between payroll staff and insured employees can trigger deeper scrutiny from tax authorities.

3. Errors in Invoice Issuance

Practices such as issuing invoices at lower-than-actual prices, failing to issue invoices upon receiving payments, issuing invoices at incorrect times, or recording large input purchases without corresponding output invoices pose serious risks, potentially leading to tax reassessments and heavy fines.

Common Tax Risks Businesses Should Watch For

1. Revenue-Related Risks

• Incorrect Revenue Recognition Timing: Leads to inaccurate taxable revenue calculations.

• Unreasonable Pricing Policies: Selling prices lower than cost or misaligned with market rates, resulting in negative or unusually low gross margins, may prompt tax authorities to reassign revenue and tax liabilities.

• Incorrect VAT Rate Classification: Applying incorrect VAT rates (0%, 5%, 10%, or non-taxable) leads to improper declarations and payments.

• Revenue Deductions: Invalid or non-compliant invoices fail to qualify for revenue deductions.

2. Cost-Related Risks (Easily Disallowed Deductions)

Many expenses are disallowed due to non-compliance with documentation, contract, or usage requirements. Common risky expense categories include:

Cost of Goods Sold and Inventory Costs

• Unexplained discrepancies in material consumption or abnormal inventory levels.

• Inventory write-downs without regulatory basis.

• Large inventory values deemed unreasonable, raising doubts about cost accuracy.

Foreign Labor Costs

• Lack of valid work permits or documentation.

  
  

• Incomplete personal income tax (PIT) declarations for foreign employees.

  
  

• Non-compliant labor contracts, insurance, or payment records.

Depreciation Costs

• Incorrect depreciation start dates, durations, or methods.

  
  

• Assets not used for business operations or temporarily out of service.

Sales and Administrative Costs

• Incomplete documentation or invalid contracts.

• Non-compliance with arm’s-length transaction principles or unclear allocation bases.

Financial and Other Costs

• Loan interest from related parties exceeding 30% of EBITDA.

  
  

• Loans without proper purpose, contracts, or supporting documents.

3. Related-Party Transaction Risks (Transfer Pricing)

• Errors in identifying related-party relationships or conditions for exemption from documentation requirements.

• Incomplete or unreasonable transfer pricing documentation, potentially leading to reassessed taxable income.

4. Tax Incentive Risks

• Applying tax incentives without meeting eligibility conditions.

• Failing to track revenue and costs between incentivized and non-incentivized activities separately.

W&A Consulting – Comprehensive Tax Solutions for Businesses

Our tax consulting, compliance, and audit support services are designed to help businesses:

✅ Identify and assess internal tax risks

✅ Advise on tax-compliant structures tailored to your business model

✅ Review documents, records, and tax reports before submission

✅ Assist with explanations and interactions with tax authorities during audits

✅ Train accounting and tax staff to minimize future risks

🎯 Don’t let tax risks become an unexpected burden. Start prevention today with W&A Consulting’s expert tax advisory team.

👉 Learn more about our services here.

Contact Us for Detailed Consulting

☎️ +84 93 594 8688

📧 Email: nam.phan@waco.com.vn

🌐 Website: https://www.waconsulting.vn/

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