Part 1: Not the fault finding game!
Part 2: Give an inch and he will take a yard
Under Conclusion No. 2735 of Binh Duong Provincial People’s Committee, Dai Nam Joint Stock Company has not rightfully recognized accounts of emerged financial matters. Accounting finalization included some entries not conformed to financial principles. The current process of self-accounting finalization has not been followed. Out-of-date legal documents have been made use to disallocate costs and expenses, violating some legal regulations on tax. The investigation conclusion forced Dai Nam Joint Stock Company to pay fines and sanctions at totally VND 99,050,474,511, of which, VND 97,750,474,511 has been recovered as sanctions.
Upon announcement of investigation conclusions by Binh Duong Provincial People’s Committee, the false reference to Official Document No. 11427/BTC-TCT of Ministry of Finance replying to proposals of Dai Nam Joint Stock Company has been made. The Official Document 11427/BTC-TCT of Ministry of Finance on replying to proposals of Dai Nam Joint Stock Company regarding the investigation of general cost, it reads: For recognition of general cost of real estate transferring, the Sub-item 1.2 of Item 1 of Part II of Section G of Circular No. 130/2008/TT-BTC dated December 26, 2008 of Ministry of Finance promulgates: “The enterprise must recognize separately its cost and expenses of different business lines that it engages. In the event of failure to do so, the general cost must be allocated and recognized by the ration of revenue from real estate transferring in comparison with general revenue of the enterprise.” Sub-item b of Item 1 of Article 17 of Circular No. 123/TT-BTC dated July 27, 2012 of Ministry of Finance promulgates: “The enterprise must recognize separately its cost and expenses of different business lines that it engages. In the event of failure to do so, the general cost must be allocated and recognized by the ration of revenue from real estate transferring in comparison with total revenue of the enterprise.”
The extract of Official Document of Ministry of Finance replying to proposals of Dai Nam Joint Stock Company. Photo: P.V
The Official Document clearly states: As per regulations, Dai Nam Joint Stock Company, in doing different business lines from 2009 to 2013 including the real estate transferring, must recognize such cost separately. If the company fails to do so (including the recognition of real estate transferring cost), then, its general cost must be allocated by the ration of revenue from real estate transferring in comparison with its total revenue.
In the meantime, investigation conclusion of Binh Duong Provincial People’s Committee showed that from 2009 to 2012, Dai Nam Joint Stock Company, on recognizing management expenses, financial cost, and cost of goods sale in accordance with specific operations has failed to follow regulations of the Sub-item 1.2 of Item 1 of Part II of Section G of Circular No. 130/2008/TT-BTC dated December 26, 2008 of Ministry of Finance and the Sub-item b of Item 1 of Article 17 of Circular No. 123/TT-BTC dated July 27, 2012 of Ministry of Finance which both promulgate: “The enterprise must recognize separately its cost and expenses of different business lines that it engages. In the event of failure to do so, the general cost must be allocated and recognized by the ration of revenue from real estate transferring in comparison with total revenue of the enterprise.”
In accordance with the mentioned regulation, the inspection team agreed with Dai Nam Joint Stock Company on working minutes and minutes of wrong data compilation dated June 11, 2015 regarding the wrong recognition of costs and expenses that the company has rightly done for 2013 and 2014. Accordingly, as the financial expenses used for operations of the company cannot be separately recognized for each operation, the recognition is made by ration of revenue as the company has done. As for cost of goods sale, the inspecting delegation re-recognizes the cost of goods sale by particular emerged economic operations to be recorded to the right operations, recognition by revenue ration is only made to the cost of goods sale generally used and unable to be separated by each operation. The inspection delegation did not separate such cost recognition but the company did and the delegation, then, re-checked and approved the data with signatures of both sides.
After separating cost recognition for separate business operations, the company requested to the inspection delegation that the un-separable general cost and expenses should be recognized by ration of revenue and the delegation approved. After separating cost of goods sale of particular business operations and after re-recognizing cost of goods sale generally used for business operations of the company in accordance with regulations and after increasing and decreasing revenue, cost, and expenses, the additionally payable tax of Dai Nam Joint Stock Company from 2009 to 2013 is VND 44,543,820,463.
Referring to the replying Official Document No. 11427/BTC-TCT dated August 20, 2015of Ministry of Finance regarding to the reply to proposals of Dai Nam Joint Stock Company and regulations of Circular No. 130/2008/TT-BTC and Circular No. 123/2012/ TT-BTC of Ministry of Finance, what the inspection delegation has done to recognition of cost and expenses and above is legally made. In the meantime, Dai Nam Joint Stock Company has carried out the same recognition for 2013 and 2014.
Moreover, the Document No. 145/CVDN dated July 9, 2015 submitted by Dai Nam Joint Stock Company to the inspecting delegation elaborating enterprise income tax determination of the company by referring to inspecting minutes dated August 5, 2009 of inspecting delegation of General Department of Tax on inspecting 2007-2008 period which agreed with recognition of cost and expenses made by the company in accordance with the regulation of “the enterprise must recognize separately its cost and expenses of different business lines that it engages. In the event of failure to do so, the general cost must be allocated and recognized by the ration of revenue from real estate transferring in comparison with total revenue of the enterprise.”
Thus, the mentioned reference made by Dai Nam Joint Stock Company proved that the inspecting delegation of General Department of Tax had pointed out and guided the company to recognize the cost and expenses. This also proved that Dai Nam Joint Stock Company knew how to recognize the cost and expenses separately for particular business operations and the fact that only general cost and expenses of unclear addresses are recognized and recorded to ration of revenue; however, the company intentionally made vague recognition of cost of goods sale for a very long time from 2009 to 2012 without separating the cost and expenses for particular operations. As the inspecting delegation required, the company had separated the cost and expenses for particular operations with clear addresses. As the matter of fact, business operations outcome of the company have not been rightly reflected, leading to un-rightful observation of regulations on State’s budget as per regulations and to insufficient payments of taxes levied on the company as per conclusion of Binh Duong Provincial People’s Committee.
By Reporters – Translated by Vi Bao
