On December 20, 2024, the People’s Court of Ho Chi Minh City issued its first-instance judgment against 55 defendants in one of the largest economic crimes involving the establishment and operation of 165 “phantom” companies for the illegal trading of value-added tax (VAT) invoices, with a total transaction value exceeding VND 14,000 billion[1]. This case highlights severe risks in tax administration and corporate governance while demonstrating the authorities’ firm resolve in combating economic crimes and protecting state budget revenue.
BACKGROUND
According to the indictment, the case originated from the seemingly legitimate operations of Ánh Dương Tax Consulting Joint Stock Company, led by Bùi Văn Bảo. After acquiring the company and shifting its business focus to company formation consulting, accounting services, and tax declaration, the group identified strong demand from other enterprises for fictitious VAT invoices. These invoices were used to improperly claim VAT deductions and deductible expenses, thereby reducing corporate income tax liabilities.
Bùi Văn Bảo directed employees to use identity documents purchased from pawn shops to hire nominees for registering new companies or acquiring existing ones. These shell companies were equipped with bank accounts, printed invoices, or electronic invoicing software. Transactions were coordinated via messaging apps such as Zalo and Telegram, where parties agreed on invoice details, values, and payment arrangements to legitimize the deals. Funds were circulated through the phantom companies’ accounts before being withdrawn in cash or transferred to the masterminds’ personal accounts.
From April 2018 to May 2022, Bảo’s group alone used 35 phantom companies to issue over 25,250 fictitious invoices valued at more than VND 1,433 billion, generating unlawful profits exceeding VND 18.8 billion. The network expanded as intermediaries like Trần Văn Thịnh broke away to operate independently, establishing 47 additional shell companies and issuing nearly 29,700 invoices worth over VND 8,000 billion. Other defendants, including Bùi Thanh Bình, Phạm Minh Cường, and Nguyễn Khắc Điền, participated on a large scale, forming an interconnected criminal chain.
The investigation results identify that there are 8 intermediary entities purchasing fake VAT invoices from Thịnh for resale, including Tan Minh Thinh Vietnam Co., Ltd., whose owner and legal representative is Li Bao Ping (a Chinese national with headquarters in Long An), who has departed the country. To legitimize 52 fake VAT invoices, the company stamped 39 out of 52 contracts and accompanying documents along with the fake invoices; the remaining 13 invoices lack contracts and supporting documents. Li Bao Ping instructed his son to sign 55 payment orders transferring over 120 billion VND to the accounts of 6 “ghost” companies owned by Thịnh to legitimize the payment documents for the 52 fake invoices purchased. The funds were used as cash flow for the invoices provided by Thịnh to the executing company.
To sustain operations, the perpetrators bribed tax officials for information, cover-ups, and avoidance of inspections. Former tax officers such as Lê Thành Nhân and Trần Quốc Duy received substantial bribes, assisting in address changes and formal tax filings to evade detection. Trần Văn Thịnh faced additional money laundering charges for using illicit proceeds to purchase real estate registered under relatives’ names.
The investigation agency not only prosecuted Vietnamese defendants and accused persons but also prosecuted foreign defendants such as Li XiangZhe (Employee of Tan Minh Thinh Co., Ltd.), Lai ZhiGuang (Owner and legal representative of Hong De Vietnam Co., Ltd.), Wang JinPing (Deputy Director of Minh Huy Wood Co., Ltd.), and Jang JeounHuyn (Director of Kim Hoa Vietnam Co., Ltd.) for the crime of “Illegal invoicing and receipt of documents for state budget revenue” as stipulated in point d, clause 2, Article 203 of the Penal Code and the crime of “Tax evasion” as stipulated in clause 3, Article 200 of the Penal Code. After more than 10 days of trial, the Court issued a strict verdict. Particularly, the legal entity of Tan Minh Thinh Co., Ltd. was fined 3 billion VND for tax evasion. The remaining defendants received sentences ranging from a fine of 300 million VND to 7 years and 6 months in prison.
LEGAL ANALYSIS
The case underscores several critical legal issues under the 2015 Penal Code (as amended in 2017) and current tax regulations.
Individual liability for employees executing superiors’ instructions
Many employees, despite being salaried staff, were held criminally liable for directly participating in setting up shell companies, withdrawing funds, and fabricating documents. Vietnamese criminal law is clear: claiming “only following orders” does not exempt one from liability if the individual knew or should have known the conduct was illegal. Employees who continue without objection may be considered accomplices. Accountants, legal/compliance officers, and related personnel must proactively document dissenting opinions in writing — through internal memos, emails, or meeting minutes — and retain evidence to protect themselves in potential investigations.
Prosecution and trial proceed regardless of a principal offender fleeing abroad
In this case, some of Chinese nationals who are the owners and also hold the positions of Director/Deputy Director of related companies involved to the criminal, although they had left Vietnam when the case occurred. However, even if key figures escape the country, Vietnamese law permits trials in absentia where sufficient evidence exists[2]. This principle ensures that perpetrators cannot evade justice.
Criminal liability of commercial legal entities
Under current law, juridical persons can be independently held criminally liable for specified offenses, including tax evasion. The Supreme People’s Procuracy, in coordination with A09 of the Ministry of Public Security, has initiated criminal proceedings and prosecuted the defendant as a legal entity (Tan Minh Thinh Co., Ltd.) for the crime of “tax evasion” in accordance with Clause 3, Article 200 of the Penal Code[3] exemplifies the application of dual liability (both individuals and the entity), serving as a strong deterrent and reminding companies that violations committed by representatives or under corporate direction can result in direct sanctions against the legal entity itself, including fines, operational bans, or other judicial measures.
KEY LESSONS FOR INVESTORS, ENTERPRISES, AND EMPLOYEES
This case offers profound lessons for businesses and individuals. Enterprises must recognize that tax compliance is both a legal obligation and a core element of sustainable strategy. Relying on fictitious invoices, even temporarily, exposes companies to audits, back taxes, heavy administrative fines, and criminal prosecution. Companies should invest in transparent accounting systems, fully implement electronic invoicing per regulations, strengthen internal controls, and conduct regular staff training on legal risks.
For office professionals, particularly accountants, auditors, legal counsels, and finance staffs, the verdict is a stark reminder that “following orders” is not a shield. Upon encountering potentially unlawful directives, individuals should immediately record objections in writing, escalate internally, or seek independent legal advice. thorough documentation serves as vital evidence for personal protection.
Investors and business leaders are advised to foster a strong compliance culture, establish independent compliance functions where scale permits, and cooperate transparently with tax authorities rather than seeking workarounds. Robust monitoring of bank transactions, document reconciliation, and cash flows is essential to detect irregularities early.
In an era of digital taxation, proactive compliance not only mitigates risks but also enhances corporate reputation and long-term viability. Stakeholders should closely monitor any appeals and stay updated on evolving regulations concerning tax management and electronic invoicing.
In conclusion, the 165-phantom-company invoice trading ring serves as both a cautionary tale about the consequences of economic crimes and an opportunity for Vietnamese enterprises and individuals to strengthen legal awareness and ethical business practices. Strict adherence to the law contributes to a healthier, more transparent business environment in Vietnam.
What CNC can support?
- Criminal Litigation Services: Providing legal defense for suspects and accused individuals, as well as protecting the legitimate rights and interests of victims and related parties throughout all phases of criminal proceedings, from investigation to final judgment.
- Inbound/Outbound Foreign Investment: Company establishment, Investment registration, and Post-registration compliance such as tax, accounting, labor, insurance, payroll, and Outsourced Legal Department services;
- Business Operating Licenses: We assist in obtaining operating licenses for specific business activities including manufacturing, trading, services, e-commerce, healthcare, education, or food & beverage (restaurants), etc.;
- M&A Services: Conducting Legal Due Diligence Reports; Structuring transaction frameworks; Drafting and Negotiating transaction documents; Advising on competition law compliance, including economic concentration control filings and related approvals; Obtaining necessary approvals and licenses; and Post-closing support;
- Personal Data Protection: Support in complying with personal data protection regulations, including drafting and reviewing Data Protection Impact Assessments (DPIAs), Data Processing/Transfer Agreements, Privacy Policies, and other required documents under the Personal Data Protection Law (PDPL);
- Dispute Resolution: Court litigation and commercial arbitration (VIAC, SIAC, ICC); and
- Legal Retainer Services.
Please feel free to contact Mr. Chris Luong – Partner via email: chris.luong@cnccounsel.com for further support.
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[1] https://congan.com.vn/an-ninh-kinh-te/tuyen-an-55-bi-cao-trong-duong-day-lap-165-cong-ty-ma-mua-ban-hoa-don-14000-ty-dong_171698.html
[2] https://tuoitre.vn/plo/mot-cong-ty-bi-truy-to-toi-tron-thue-trong-vu-mua-ban-trai-phep-hoa-don-tri-gia-13000-ti-dong-post809027.html
[3] https://xaydungchinhsach.chinhphu.vn/truy-to-4-cong-chuc-thue-cung-phap-nhan-va-mot-loat-giam-doc-ke-toan-nhan-vien-ngan-hang-119240912152247414.htm
