Years of losses despite growing revenue - why your company lands on the tax audit list

Revenue grows every year, the factory runs close to capacity, yet the corporate income tax (CIT) return shows a loss every year. To management, this may simply be part of an expansion phase. To the tax authority, it is a question that needs an answer. Since 1 July 2026, the Law on Tax Administration No. 108/2025/QH15 has made risk management and electronic data analysis the core principle of tax audits. A company with persistent losses and no clear explanation is an easy candidate for selection.

How does the tax authority choose whom to audit?

Article 33 of Law 108/2025/QH15 requires the tax authority to apply risk management across all activities, from registration, filing and refunds to audits and invoice management; the criteria for assessing and classifying risk are set by the Minister of Finance. Article 22 provides that:

• Tax audits apply risk management and give priority to online, remote audits based on electronic data (clause 1(a)).
• Audits at the taxpayer's premises cover cases showing signs of violation, cases selected under an annual plan or a thematic program, refund files, and cases where an explanation at the tax office was not satisfactory (clause 3(a)).
• For plan-based and thematic cases, the tax authority audits at the premises no more than once a year (clause 3(c)).
• An audit lasts no more than 20 days, extendable once by up to 20 days; for companies with related-party transactions, the limit is 40 days, extendable by up to 40 days (clause 3(d)).

In other words, your data has already been analyzed before the audit team arrives. A run of unusual figures in your returns and financial statements is enough to put your file under review.

Why losses with rising revenue are a red flag

A loss in itself does not break any law. The problem is that the usual drivers of losses overlap with exactly the areas the tax authority cares about most:

For foreign-invested companies, persistent losses have an additional consequence: the foreign investor may not remit profits abroad while the project still has accumulated losses (Article 27.6(c) of Decree 252/2026/ND-CP). Losses are therefore not only a tax issue; they directly affect the group's cash planning.

Illustrative example: A component manufacturer grows revenue from VND 120 billion to VND 200 billion over three years, selling everything to its parent company, while its gross margin stays around 3-4%. Over the same period it pays technical support fees to the parent and borrows from a group company. Even though each transaction has a contract, the overall picture suggests profits may be shifted out of Vietnam. This is exactly the kind of file the risk system will flag.

A loss is fine; an unexplained loss is the problem

There are many legitimate economic reasons for losses: an investment phase with heavy depreciation, production not yet at scale, market expansion, exchange rate swings or rising material prices. What matters is that the company can support those reasons with figures and documents prepared at the time, rather than reconstructing them once the auditors are already on site.

What to prepare before an audit decision

1. Analyze profitability by segment and by customer to show exactly where the losses come from and why.
2. Review your transfer pricing documentation under Decree 255/2026/ND-CP, which applies from the 2026 tax period. The revenue threshold for exemption from preparing a transfer pricing file has risen to below VND 500 billion, but profit margin conditions and disclosure obligations still apply.
3. Review non-deductible expenses under Article 10 of Decree 320/2025/ND-CP, especially interest, intra-group service fees and costs without proper payment documents.
4. Check input invoices from suppliers that show risk indicators.
5. Self-correct if you find errors: supplementary returns may be filed within 5 years before an audit decision is announced (Article 12.5 of Law 108/2025/QH15); for incorrect declarations under Article 45.2, filing and paying in full before that point means no fine (Article 44.2(a)).
6. Consider an advance pricing agreement (APA) for large, recurring related-party transactions; Article 31 of Law 108/2025/QH15 sets out the principles for this mechanism.

How Kaizen can help

Kaizen helps companies see their file through the tax authority's eyes: analyzing risk indicators, reviewing related-party transactions and expenses, and preparing the explanation before the question is asked. Our team, with more than 17 years of Big4 experience, works extensively with Japanese, Korean and Singaporean investors. Start with a free tax health check to find out where your company sits on the risk map.