All Legal Risks Related to Red Invoices in Vietnam

Introduction

In Vietnam, the term “red invoice” is commonly used to refer to a VAT invoice, particularly an electronic VAT invoice issued by a business to document the sale of goods or provision of services. Although Vietnam has moved extensively toward electronic invoicing, businesses still commonly use the expression “red invoice” in accounting, tax, and commercial discussions.

An invoice is not merely an accounting document. It can be important evidence supporting VAT deduction, corporate income tax deductibility, revenue recognition, payment documentation, customs procedures, and tax compliance.

Consequently, an incorrect, incomplete, late, or fraudulent invoice can expose both the seller and buyer to significant tax, administrative, financial, and potentially criminal risks.

Vietnam's current e-invoice framework is primarily based on Decree 123/2020/ND-CP, as amended by Decree 70/2025/ND-CP, together with Circular 32/2025/TT-BTC. Decree 70/2025 took effect on 1 June 2025.

This article summarizes the major legal risks businesses should consider when issuing, receiving, using, correcting, or managing invoices in Vietnam.

1. What Is a “Red Invoice” in Vietnam?

“Red invoice” is not the formal legal term used in Vietnam's current electronic invoicing system.

In practice, the term generally refers to a VAT invoice issued by a VAT-paying business under the credit method. Today, such invoices are normally electronic invoices rather than traditional paper invoices.

An invoice may contain important information such as:

• Seller's name and tax identification number;

• Buyer's name and tax identification number;

• Invoice number and invoice code;

• Date of invoice issuance;

• Description of goods or services;

• Quantity and unit price;

• VAT rate;

• VAT amount;

• Total payment amount;

• Electronic signature or other required authentication information.

Because invoice information is increasingly connected with the tax administration system, inconsistencies can become visible during tax audits or electronic data analysis.

2. The Main Categories of Legal Risk

The major invoice-related risks can generally be divided into the following categories:

1. Failure to issue an invoice;

2. Issuing an invoice at the wrong time;

3. Incorrect invoice information;

4. Incorrect VAT rate;

5. Using an inappropriate invoice type;

6. Missing or invalid electronic invoice information;

7. Using illegal or fraudulent invoices;

8. Issuing fictitious invoices;

9. Purchasing invoices;

10. Using invoices from high-risk or non-compliant suppliers;

11. Incorrect invoice cancellation or replacement;

12. Incorrect handling of invoice adjustments;

13. Loss, destruction, or damage of invoices and records;

14. Failure to provide invoices to customers;

15. Tax deduction risks;

16. Corporate income tax deductibility risks;

17. Penalties and tax arrears;

18. Potential tax evasion or criminal liability.

3. Risk of Not Issuing an Invoice

One of the most basic risks is failing to issue an invoice when the business is legally required to do so.

For example, a company sells goods to a customer but does not issue an invoice, or intentionally records revenue without issuing the required invoice.

Under the administrative penalty framework, failure to issue an invoice for the sale of goods or provision of services can result in a monetary penalty. The published penalty framework provides a fine of VND 10 million to VND 20 million for failure to issue an invoice in specified circumstances.

The consequences can extend beyond the invoice penalty because the tax authority may also determine:

• Unreported revenue;

• Understated VAT;

• Understated corporate income tax;

• Late-payment interest;

• Potential tax administration violations.

Therefore, businesses should not treat invoice issuance as merely an accounting formality.

4. Risk of Issuing an Invoice at the Wrong Time

The timing of invoice issuance is a particularly important compliance issue.

Decree 70/2025 introduced amendments to the rules concerning the time of invoice issuance. For example, for sales of goods, the invoice issuance point is generally linked to the transfer of ownership or right to use the goods, regardless of whether payment has already been received.

Incorrect timing can arise when:

• An invoice is issued before the underlying transaction occurs;

• An invoice is issued significantly later than the legally required date;

• A business delays invoicing until payment is received when payment is not the relevant triggering event;

• A business issues invoices in the wrong accounting period.

Depending on the circumstances, late or incorrect invoice issuance can result in administrative penalties and may also create tax reporting discrepancies.

The penalty framework includes different levels of penalties for invoices issued at the wrong time, depending on the circumstances and whether the violation affects tax obligations.

5. Risk of Incorrect Invoice Information

Another common problem is an invoice containing inaccurate information.

Examples include:

• Incorrect company name;

• Incorrect tax identification number;

• Incorrect address;

• Incorrect quantity;

• Incorrect unit price;

• Incorrect VAT rate;

• Incorrect VAT amount;

• Incorrect description of goods or services;

• Incorrect invoice date;

• Incorrect buyer information.

Not every error has the same legal consequence.

A minor administrative error may be capable of correction without significant tax consequences. However, an error that changes the value, VAT amount, buyer, seller, or underlying transaction can become much more serious.

Businesses therefore need appropriate procedures for determining whether an invoice should be:

• Corrected;

• Adjusted;

• Replaced;

• Cancelled or otherwise handled under the applicable e-invoice rules.

6. Risk of Using the Wrong VAT Rate

Applying the wrong VAT rate is another significant risk.

For example, a company may issue an invoice using:

• 10% instead of a lower applicable rate;

• A reduced rate when the transaction does not qualify;

• 0% when the conditions for zero-rating are not satisfied;

• VAT when the transaction should be non-VATable;

• An incorrect tax treatment for special goods or services.

The consequences can include:

• Additional VAT payable;

• Tax penalties;

• Late-payment interest;

• Incorrect VAT deduction by the customer;

• Incorrect revenue and tax reporting.

For businesses operating across multiple industries, VAT classification should therefore be reviewed before invoice issuance rather than corrected after a tax inspection.

7. Risk of Using the Wrong Type of Invoice

Vietnamese regulations distinguish different invoice and document situations.

A business must use the appropriate invoice type for the relevant transaction.

Potential problems include:

• Issuing a VAT invoice when a sales invoice should be used;

• Issuing a sales invoice when a VAT invoice is required;

• Using an inappropriate electronic invoice format;

• Issuing an invoice without the required tax authority code where a coded invoice is required;

• Using a cash-register electronic invoice incorrectly.

The penalty framework includes sanctions for issuing the wrong type of invoice in certain circumstances.

8. Risk of Invalid Electronic Invoices

Electronic invoices create additional technical compliance requirements.

Businesses need to ensure that their systems properly handle:

• Invoice generation;

• Invoice numbering;

• Electronic signatures;

• Tax authority codes where applicable;

• Transmission of invoice data;

• Storage;

• Retrieval;

• Correction and adjustment;

• Data security.

Vietnam's updated framework has specifically addressed electronic invoicing and measures intended to improve the management and prevention of invoice fraud.

A technical failure can therefore become a compliance issue if it causes the business to issue or transmit invoices incorrectly.

9. Risk of Using Illegal Invoices

One of the most serious risks for buyers is using an illegal invoice or invoice that is not legally valid.

For example, a company may receive an invoice from a supplier that:

• Does not actually provide the goods or services;

• Has issued invoices outside the scope of its legitimate business;

• Has used fraudulent information;

• Has issued fictitious invoices;

• Has participated in invoice trading;

• Has had its tax authority permission or invoice status restricted in relevant circumstances.

The buyer may initially believe that the invoice is legitimate because it appears correctly formatted.

However, an invoice's appearance alone does not establish that the underlying transaction is genuine.

10. Risk of “Buying Invoices”

Invoice purchasing is one of the highest-risk practices.

This can occur when a company pays an intermediary or another entity to obtain an invoice without receiving the corresponding goods or services.

For example:

Company A needs additional deductible expenses. It pays Company B to issue an invoice for VND 1 billion, even though Company B did not provide the underlying goods or services.

This creates a potentially serious legal problem.

The invoice may be treated as fraudulent or illegal, and the company may face consequences relating to:

• VAT deduction;

• Corporate income tax expenses;

• Tax arrears;

• Administrative penalties;

• Late-payment interest;

• Potential tax evasion allegations.

The Ministry of Justice has specifically noted that invoice fraud, including fictitious invoices used to evade tax, remains an issue addressed by the amended invoice regulations.

11. Risk of Fictitious Transactions

A particularly serious situation occurs when an invoice exists but the underlying transaction does not.

For example:

• No goods were delivered;

• No services were actually provided;

• The quantity stated on the invoice does not exist;

• The supplier did not perform the stated service;

• Documents were created solely to support the invoice.

This is fundamentally different from a simple clerical mistake.

A genuine transaction supported by an incorrectly prepared invoice may potentially be corrected.

A fictitious transaction, however, can trigger substantially more serious tax and legal consequences.

12. Risk for the Buyer Even When the Seller Is Responsible

A common misconception is:

“The supplier issued the invoice, so the buyer is automatically protected.”

This is not necessarily correct.

The buyer should have reasonable documentation demonstrating that the transaction actually occurred.

Depending on the transaction, this may include:

• Contract;

• Purchase order;

• Delivery note;

• Goods receipt;

• Service acceptance record;

• Payment documents;

• Bank transfer evidence;

• Warehouse records;

• Transportation documents;

• Correspondence;

• Work products;

• Other commercial evidence.

Tax authorities may examine the entire transaction rather than simply looking at the invoice.

Therefore, an invoice should be viewed as one component of a transaction evidence package, not the entire package.

13. VAT Deduction Risk

A major financial consequence of invoice problems is the potential denial or adjustment of input VAT deductions.

For example, if a company claims input VAT based on an invoice but cannot demonstrate the underlying transaction or fails to satisfy applicable documentary requirements, the tax authority may challenge the deduction.

This can result in:

Input VAT claimed → Tax authority rejects deduction → Additional VAT payable + potential penalties/interest

This is particularly important for high-value purchases.

14. Corporate Income Tax Deductibility Risk

Invoice problems can also affect corporate income tax.

Businesses generally need appropriate supporting documents to demonstrate that expenses satisfy the applicable conditions for tax deduction.

If an expense is supported by a problematic invoice, the tax authority may challenge the expense.

For example:

Accounting records show VND 500 million of consulting expenses, but the company cannot demonstrate that the consulting service was actually performed.

The potential result is:

• Expense disallowed for CIT purposes;

• Taxable income increased;

• Additional CIT payable;

• Possible penalties;

• Late-payment interest.

15. Risk of Incorrect Payment Documentation

Invoice compliance should also be considered together with payment documentation.

For significant transactions, businesses should maintain appropriate evidence of payment and transaction settlement.

A company that has:

• A contract;

• An invoice;

• Accounting entries;

but no convincing evidence that the transaction actually occurred may still face questions during a tax audit.

Therefore, companies should reconcile:

Contract → Invoice → Delivery/Service → Payment → Accounting Entry → Tax Return

Any unexplained inconsistency can become a red flag.

16. Risk of Incorrect Invoice Correction

Errors can occur even in well-managed businesses.

The risk arises when the company attempts to correct the invoice using the wrong procedure.

For example, the company may:

• Delete an invoice improperly;

• Issue a replacement invoice when an adjustment is required;

• Issue an adjustment when a replacement is required;

• Correct an invoice without the required supporting documentation;

• Make inconsistent accounting and tax adjustments.

Vietnam's current framework contains specific rules concerning electronic invoice amendments and related procedures. Decree 70/2025 and Circular 32/2025 provide the current framework for these matters.

Businesses should therefore establish a formal invoice-error matrix rather than allowing employees to correct invoices on an ad hoc basis.

17. Risk of Losing Invoice Records

Electronic invoices must be properly stored and retrievable.

Businesses should consider risks such as:

• Data loss;

• System failure;

• Cybersecurity incidents;

• Inability to retrieve historical invoices;

• Poor backup procedures;

• Inconsistent invoice databases;

• Loss of supporting documentation.

Invoice data should be retained together with sufficient supporting records to demonstrate the underlying transaction.

18. Risk of Invoice Fraud by Employees

Invoice-related risks do not always originate from external suppliers.

Employees may potentially:

• Create fictitious suppliers;

• Manipulate invoice information;

• Issue unauthorized invoices;

• Duplicate transactions;

• Create false expense claims;

• Collude with suppliers;

• Modify supporting documents.

Therefore, internal controls should include segregation of duties.

For example:

Procurement → Receiving → Accounting → Payment → Tax review

should not necessarily be controlled entirely by one individual.

19. Risk of Supplier Non-Compliance

A company may receive an apparently valid invoice from a supplier that subsequently becomes subject to tax enforcement.

This creates a practical compliance challenge.

Businesses should therefore perform appropriate supplier due diligence, particularly for:

• High-value transactions;

• New suppliers;

• Unusual transactions;

• Suppliers with inconsistent business activities;

• Transactions involving significant VAT;

• Suppliers that cannot provide normal commercial documentation.

However, supplier screening should not replace evidence that the actual transaction occurred.

20. Risk of Tax Audit and Retrospective Review

Invoice problems can remain unnoticed for years until a tax inspection occurs.

During an inspection, tax authorities may compare:

• E-invoice data;

• VAT declarations;

• CIT declarations;

• Accounting ledgers;

• Bank transactions;

• Inventory records;

• Customs information;

• Contracts;

• Purchase and sales documentation.

This means that an invoice error can become much more expensive if discovered after several tax periods.

21. Potential Tax Penalties

Vietnam's tax and invoice administrative penalty framework contains different sanctions depending on the nature and severity of the violation.

The current consolidated penalty framework includes provisions covering tax and invoice-related administrative violations.

Depending on the circumstances, consequences can include:

• Warning;

• Monetary fines;

• Mandatory issuance or correction of invoices;

• Additional tax payable;

• Recovery of improperly deducted or refunded tax;

• Late-payment interest;

• Other remedial measures.

The applicable penalty depends on the specific violation, circumstances, timing, tax impact, and other legally relevant factors.

22. Potential Tax Evasion Risk

Invoice violations become considerably more serious where they are connected with intentional tax evasion.

For example:

• Creating fictitious purchase invoices;

• Concealing sales;

• Issuing invoices without actual transactions;

• Using invoices to inflate deductible expenses;

• Using fraudulent invoices to claim VAT refunds;

• Creating networks of companies to circulate invoices.

Such conduct may move beyond an ordinary administrative violation and potentially expose responsible individuals or organizations to criminal liability under applicable Vietnamese law.

Therefore, management should treat invoice fraud as a legal and governance risk, not merely an accounting error.

23. Why “The Invoice Looks Correct” Is Not Enough

A modern tax compliance approach should distinguish between:

Invoice validity

Does the invoice satisfy the formal requirements?

and

Transaction validity

Did the underlying transaction actually occur?

These are not necessarily the same thing.

A perfectly formatted electronic invoice can still be problematic if:

• The goods do not exist;

• The service was never performed;

• The supplier is not the actual service provider;

• The amount is fictitious;

• The transaction was created solely to generate an invoice.

Therefore:

A valid-looking invoice does not automatically prove a valid transaction.

24. Practical Internal Control Framework

Businesses can reduce invoice risks by implementing a structured control system.

Before purchasing

Check:

• Supplier identity;

• Tax identification number;

• Business activity;

• Contract;

• Commercial terms;

• Expected VAT treatment.

When receiving goods or services

Check:

• Actual delivery;

• Quantity;

• Quality;

• Acceptance;

• Supporting documents;

• Invoice information.

Before payment

Check:

• Contract;

• Invoice;

• Delivery/acceptance evidence;

• Bank account information;

• Payment approval.

Before recording the invoice

Check:

• Invoice number;

• Date;

• Tax identification numbers;

• VAT rate;

• VAT amount;

• Total amount;

• Goods/services description.

Before VAT filing

Reconcile:

Accounting ledger ↔ E-invoice database ↔ VAT return ↔ Supporting documents

Before CIT finalization

Review:

Accounting expenses ↔ invoices ↔ payment evidence ↔ tax deductibility

25. Red-Flag Transactions

Management should pay particular attention to transactions with characteristics such as:

• Very large invoices;

• Round-number invoices;

• Unusual suppliers;

• New suppliers with very high transaction values;

• Suppliers whose business activities do not appear consistent with the goods/services purchased;

• Invoices issued shortly before tax filing deadlines;

• Repeated invoice cancellations and replacements;

• Large consulting or management service expenses without clear deliverables;

• Goods purchased without corresponding inventory movement;

• Services without evidence of actual performance;

• Payments inconsistent with contractual terms.

A red flag does not automatically mean that a transaction is illegal. It means that the transaction deserves enhanced review.

26. Recommended Three-Level Invoice Control

A practical approach is to establish three levels of control.

Level 1 — Accounting Check

Verify:

• Invoice format;

• Invoice data;

• VAT calculation;

• Accounting treatment.

Level 2 — Business Check

Verify:

• Contract;

• Delivery;

• Acceptance;

• Actual business purpose;

• Payment.

Level 3 — Tax/Compliance Check

Verify:

• VAT treatment;

• CIT deductibility;

• Invoice legality;

• Tax reporting;

• Potential related-party or transfer-pricing implications where relevant.

This three-level model can significantly reduce the risk of relying solely on accounting review.

27. Management Should Treat Invoices as a Legal-Control System

For many businesses, invoices are still treated as a responsibility of the accounting department.

That approach is increasingly insufficient.

Invoice compliance involves multiple departments:

Sales↓Procurement↓Operations / Warehouse↓Accounting↓Tax↓Finance / Treasury↓Management

Each department creates or controls evidence that may ultimately be relevant to the tax authority.

Consequently, invoice compliance should be integrated into the company's broader internal-control framework.

28. Conclusion

Red invoices in Vietnam are much more than documents used to record sales and calculate VAT.

They can affect:

• VAT;

• Corporate income tax;

• Accounting records;

• Cash payments;

• Revenue recognition;

• Expense deductibility;

• Tax refunds;

• Tax audits;

• Administrative penalties;

• Corporate governance;

• And, in serious cases, criminal liability.

Vietnam's electronic invoicing framework has become increasingly sophisticated. Decree 70/2025/ND-CP, effective from 1 June 2025, significantly amended the existing invoice framework, while Circular 32/2025/TT-BTC provides further guidance.

The most important principle for businesses is therefore:

Do not treat an invoice as an isolated accounting document. Treat it as legal evidence supporting a real commercial transaction.

A strong compliance process should ensure that every significant transaction can be traced through:

Contract → Actual transaction → Delivery/Service → Invoice → Payment → Accounting → Tax return

When these elements are consistent and properly documented, the company is in a much stronger position to defend its VAT deductions, tax expenses, and accounting records during a tax inspection.

Note: This article is a general educational overview, not legal or tax advice for a specific transaction. Vietnam's tax and invoice regulations can change, and the appropriate treatment should be assessed based on the facts and applicable regulations at the relevant time.

Resources : Internet