22 Apr THE VAT INVOICE: FROM THE RED SLIP TO THE BLOCKCHAIN

by Mr. Lê N. Bao, Group CEO – PCA

Introduction

In Vietnam, the VAT invoice—hóa đơn giá trị gia tăng, shortened to “hóa đơn GTGT”—was long confused with a red slip later called “red invoice”. In the 1990s, when VAT replaced the former turnover tax, the tax authority sold three‑part booklets: an original for the seller, a duplicate for the tax office, and a third copy, printed on red paper, handed to the customer. This “hóa đơn đỏ” became a familiar symbol: without it, a transaction seemed unfinished—or concealed.

Yet the system had clear limits: handwritten numbering vulnerable to duplication, booklets lost or resold under the counter. In 2010 a first step was taken: companies were allowed to self‑print invoices sealed by a barcode. The decisive milestone came with Decree 123/2020 and Circular 78/2021: since 1 July 2022, every transaction must be recorded electronically, time‑stamped, and validated by the General Department of Taxation (GDT). The “red invoice” is now history; a signed XML file, accessible via QR code, serves as proof and feeds a national database.

This shift from paper to digital validation is upending habits for merchants and consumers alike. Why has Vietnam chosen this path? What dangers remain when an invoice is missing? How can you spot an irregular invoice? And which tools will tomorrow let us trace a product back to the field or the factory? The following paragraphs provide answers.

Article outline

1. Why a centralized system
2. Risks when no invoice is issued
3. Disappointments in online commerce
4. Fraudulent invoicing practices
5. Essential reflexes for individuals and businesses
6. Outlook
7. Conclusion

1. Why centralized control?

Vietnam’s requirement to issue a real‑time validated e‑invoice now places the country among the centralized VAT systems, alongside China, Mexico, Brazil, Italy, Turkey and, soon, Russia. In these jurisdictions, every invoice passes a digital “border post”: a public tax server checks its form, assigns a unique ID, and archives it before it reaches the customer. This clearance procedure blocks fraud at the birth of the transaction.

China led the way in 1994 with the Golden Tax Project: the famed fapiao are generated on a secure fiscal module and become valid only after administration approval. Two years after launch, Beijing already reported an 18 % drop in fraudulent VAT deductions. Vietnam followed the same logic: since 1 July 2022 the GDT portal affixes an electronic seal to each hóa đơn GTGT, eliminating the paper “red invoice”. Mexico, with its SAT‑stamped CFDI, cut its VAT gap by nearly a quarter in a decade. Brazil (NF‑e 2006), Italy (SdI 2019), and Turkey (e‑Fatura 2010) follow the same pattern, while Russia, already equipped with connected B2C tills, plans B2B clearance by 2027.

This model contrasts with the decentralized system used in most European countries or in Hong Kong and Singapore. There, the invoice is numbered by the business itself; it undergoes no prior check. The administration intervenes only afterwards, through audits or SAF‑T‑type file analysis. This freedom simplifies issuance but opens the door to carousel fraud and fictitious deductions: effectiveness then depends on the frequency and depth of tax audits.

In short:

• Centralized system: validation before issuance, state‑issued unique number, real‑time matching of sales/purchases—fraud blocked at source, yet dependent on public infrastructure.
• Decentralized system: free numbering, ex‑post control—flexibility for businesses, but higher risk of convenience invoices.

Vietnam’s move to clearance thus aligns the country with Chinese standards: the invoice becomes a link in a continuous digital chain, the keystone of traceability that the “red invoice”, for all its symbolism, could no longer guarantee. Still, many businesses have not yet adopted a proper attitude towards issuing official invoices. We have been reported that in many instances, trade happens without the required supporting documentation creating liability for both sides of the transaction…

2. Transactions without invoices: what are the major risks?

Drinking alcohol of unknown origin, installing an unbranded charger, or driving with uncertified auto parts: each act can have serious consequences. Several recent cases illustrate this clearly.

• Fatal poisoning – The Poison Control Centre of Bạch Mai Hospital in Hanoi reported, after Tết 2023, a series of patients with blood methanol levels up to 58 %; the victims had consumed bulk beverages bought without brand or invoice. These news are unfortunately often heard of.
• Critical safety defect – In July 2019, Toyota Motor Vietnam recalled 1 592 RUSH vehicles to reprogram the airbag control unit; the manufacturer could alert owners thanks to the serial number and the invoice issued by the dealership.
• Domestic fire risk – The global recall of the Galaxy Note 7 (2016) affected thousands of Vietnamese customers; only those with a valid invoice obtained Samsung’s immediate refund or exchange.

These examples show that a formal circuit—with an invoice—enables rapid recalls, claim handling, and possible compensation. Conversely, purchasing any items without a fiscal document therefore a controlled origin, carries identified risks:

1. Health risk: poisoning (methanol, chemicals), undeclared allergens, material pollution, etc.;
2. Safety risk: fire or explosion (batteries, chargers), unintended behavior, non‑compliant spare parts and components, etc.;
3. No warranty or after‑sales service: impossible to demand repair, exchange, or recall without proof of purchase/transaction, etc.;
4. Financial loss: non‑deductible expense for companies, for individuals, inability to resell the good legally, inability to claim insurances, inability to declare a loss with the authorities, inability to claim ownership of the product, etc.;
5. Legal liability: in an accident, the user of an untraceable product may face charges for negligence or complicity, depending on the severity of damage.

These risks, already high with famous and branded products (hence official recalls), become exponential for goods without declared origin. Demanding the fiscal document is therefore not mere formality; it is the minimum safety condition for both consumers and businesses.

3. Online commerce: the illusion of a “good deal”

Shopee, Lazada, Tik Tok, and, more recently, Temu share most of Vietnam’s e‑commerce traffic. Yet their growth goes hand in hand with exploding violations: according to the Ministry of Industry and Trade, 6 254 online shops had to be cut off from major sites in 2023, with 23 359 illicit products removed—most takedowns on Shopee and Lazada. Market Surveillance Authority teams confirm the trend: in 2024 more than 3 400 digital‑sales inspections led to 1 256 counterfeiting or IP‑infringement cases, with seizures and fines topping US $1.9 million. These figures exclude “invisible” violations—products sold without e‑invoice, hence uncountable—which inspectors say remain the majority.

Regulatory pressure now crosses borders. In Europe, the Commission opened a formal procedure against Temulate 2024 for suspected sale of illegal products and lack of traceability under the Digital Services Act. The same month, Temu sought to join the European anti‑counterfeiting Memorandum of Understanding to reassure regulators and brands.

These investigations highlight one fact: the absence of an electronic VAT invoice is the common denominator of counterfeits, non‑compliant products, and goods of unknown origin. Until the buyer receives a validated VAT e‑invoice (showing the real seller, exact description, and VAT‑inclusive amount), health, financial, and legal risks remain—no matter how attractive the posted price.

4. Fraudulent invoicing practices

The first and bluntest breach is when the merchant flatly refuses to issue an invoice. This breach of the legal invoicing duty immediately deprives the buyer of any guarantee denying as a fact the nature of the transaction and its occurrence; it almost always signals undeclared activity or use of dubious‑origin stock.

Next comes the surcharge demanded to obtain an invoice: the seller says you must pay “a bit more” to get the fiscal document. On “physical goods” this is abusive—as the displayed price should already include the VAT—and often aims to discourage the customer from seeking traceability. In services it can sometimes be justified (flat‑tax regime) if the provider explains the reasons transparently.

The third fraud involves an incorrect invoice. The delivered product is correct, but the fiscal wording (known product description) is not: a premium rum appears as “table wine” or a luxury cosmetic as “miscellaneous accessory”. This mismatch blocks any later claim: the warranty fails, and in a health recall the authority cannot link the invoice to the affected lot.

Finally, the borrowed invoice means a third company with no real commercial link to the buyer and to the transaction issues the document. If the goods never passed through this entity, the invoice is non‑deductible and may count as money‑laundering; the buyer risks prosecution for using a false accounting piece.

Each scenario severs the link between product and fiscal identity; demanding a compliant invoice remains the best way to end them.

5. Essential reflexes: an imperative for individuals and businesses alike

Obtaining a VAT invoice is neither a privilege reserved for companies nor a favor left to the seller’s goodwill; it is a right for every buyer, whether funding a business computer or paying for a family meal. Adopting the right reflexes protects health, finances, and legal security.

1 — Always demand the invoice

Vietnamese regulations set no minimum threshold: whether a 20 000 đồng coffee or a 200‑million‑đồng industrial machine, any transaction must be invoiced. If the seller asks a “red invoice surcharge”, treat it as a red flag and look for a supplier able to issue the document at no extra cost when possible.

2 — Check the document’s accuracy

Before accepting the final version:

• verify the seller’s tax ID (quick Google check);
• ensure the wording precisely describes the product (check serial numbers, model number, etc.), the quantity is correct, and the VAT‑inclusive amount matches the payment;
• confirm the invoice is issued by the same entity that collects the funds; avoid payments to undeclared personal accounts;
• use the draft—common among reputable sellers—to request needed corrections; any vague description (“miscellaneous accessories”) undermines warranty and recourse.

3 — Keep the digital proof

Download and store the signed .xml or .pdf version or keep it in your mails for later use: it is the sole format recognized by the authorities in audits or disputes. For individuals, this document simplifies product recalls or warranty exchanges; for companies, it partly conditions expense deduction and VAT credit.

4 — Assert your rights

If faced with refusal or stalling, calmly remind that issuing an e‑invoice is a legal obligation. The E‑Tax Service portal allows reporting any infraction when necessary.

Ultimately, the VAT invoice is not mere formalism: it guarantees traceability and binds all parties. By demanding it systematically, every consumer and every company feeds a virtuous circle: the stronger the demand for invoices, the more informal supply shrinks, and the safer, fairer, and more trustworthy the market becomes.

6. Outlook: towards “100 % digital” traceability, from invoice to supply chain

The reinforcement of the VAT invoice fits a broader modernization of fiscal and logistical data. Three structuring projects already shape the next five years:

Acceleration of e‑invoices and connected tills

The GDT processed 5.5 billion e‑invoices in 2024 and announces nationwide rollout of real‑time connected cash registers by April 2025; any merchant failing to activate the device risks license suspension. This “Smart Invoice” infrastructure will instantly cross‑check turnover, VAT collected, and supplier purchase history.

Blockchain traceability in agri‑food

The highly trust‑sensitive agricultural sector is piloting blockchain combined with QR codes:

• In Bắc Giang, litchi cooperatives integrated a blockchain module in 2024, giving European importers geolocation of each lot and phytosanitary proof; dynamic QR codes are scanned at collection points.
• Several meat and seafood processors, under the Agriculture Ministry, are testing a TE‑FOOD‑inspired platform certifying slaughter time, transport temperature, and producer identity. According to the Vietnam Blockchain Summit 2024 organizers, over 70 agri‑food companies have integrated or planned such a solution; the goal is to raise QR‑traceable lots from today’s 15 % to 60 % by 2027.

Convergence of public and private initiatives

The State banks on real‑time data; large groups see it as a commercial asset. Modern retailers now publish direct links to e‑invoices on customer receipts; supermarket chains have released roadmaps for full blockchain trace in fresh aisles. Meanwhile, market‑surveillance authorities launched an open dashboard listing, by sector, product recalls and share of traced lots.

In short, the VAT invoice is the first building block: it proves the transaction, secures VAT, and identifies the seller. Tomorrow, it will interface with a blockchain ledger detailing a product’s route from farm or factory to end‑user. All stakeholders—administrations, manufacturers, distributors, consumers—are converging on one demand: transparency through certified data.

Conclusion

Vietnam’s current shift to real‑time validated e‑invoices is no mere technical tweak; it is one of the clearest markers of accelerated modernization in its economic environment. A younger market than those of Europe or advanced Asian economies, Vietnam, in need of business and ethical education, has chosen the pre‑clearance system to support the rapid growth of domestic commerce. This centralization serves two goals: secure tax collection and raise the professionalism of a commercial fabric that, barely a decade ago, largely operated without systematic compliance tools.

The results are already visible: stronger traceability, faster product recalls, fewer warranty disputes. Above all, widespread invoicing restores a principle of competitive equity. Today, businesses that duly declare sales bear a cost the informal economy avoids. When every transaction is traced, the advantage of non‑compliance vanishes; competition then rests on quality, real price, and service—not on fraud. By always demanding an invoice, every consumer drains informal channels, rewards virtuous operators, and puts all companies back on an equal starting line.

Twenty years ago, the local general product offering was still very limited; today almost everything is available either in supermarkets or shopping malls. The next step is to ensure that abundance comes with safety and trust on par with international standards. As merchants join the digital circuit, Vietnam gains extra strengths: reliability for investors, attractiveness for tourists, and heightened protection for consumers. By systematically demanding a VAT invoice, everyone helps build a safer, more transparent, and fairer market in which competitiveness finally rewards those who play by the rules.

— Lê N. Bao, PCA