The Ministry of Finance promulgated Circular No. 65/2022/TT-BTC taken effect from January 01, 2023 detailing provisions of clause 2 Article 91 of the Decree No. 98/2020/NĐ-CP dated August 26, 2020 on providing the penalties on administrative violations in commercial activities, production of, trading in counterfeit or banned goods and protection of consumer rights and Article 37 of Law on Handling of Administrative Violations. In particular, the regulations specifically explained illicit profits earned through the commission of administrative violations.

Illicit profits earned through the commission of administrative violations are objects, money, valuable papers, or other assets gained from committing administrative violations that organizations or individuals have committed in commercial activities, production of, trading in counterfeit or banned goods and protection of consumer rights.

The remarkable new point is the change in the way of determining illicit profits which is money. Before, the ground to determine the amount of money of violated individuals, and organizations earned through the commission of administrative violations in commercial activities, production of, trading in counterfeit is “the entire amount of money that an organization or individual earned through the commission of administrative violations” (according to clause 1 Article 5 Circular No. 149/2014/TT-BTC dated 10/10/2014), which means the amount of money that has been earned from the transfer, consumption, dispersal, and destruction of violated goods and services. According to the new regulation, the ground to determine the amount of illicit monetary profits of individuals, and organizations has been amended as “the amount of money gained from the transfer, consumption of violated goods, provision of violated services after the deducting the direct cost constituting the goods, on the basis of dossiers and documents providing the legitimacy and validity of such costs that are provided by the violator”.

In the process of performing administrative violations in commercial activities, production of, trading in counterfeit, violated organizations and individuals may have to spend an amount of money which is the investment cost to have violated goods or run violated services, for instance, materials costs, direct labor costs,… Therefore,  the actual profit that the violated individuals, and organizations earned after performing administrative violations is less than the amount of money earned from the transfer, consumption of violated goods, and provision of violated services due to the initial cost. This cost will be excluded to determine the illicit profits that individuals and organizations earned through the commission of administrative violations. To be more specific:

 (I) this is the direct cost constituting the goods, and services: the cost associated with activities or services, including materials, labor, and equipment costs,… these costs are usually proportional to the number of goods or services.

 (ii) violations organizations and individuals have full dossiers and documents providing the legitimacy and validity of this cost: including labor contracts, sale receipts,…

To sum up, the way to calculate the illicit profits which are money earned through the commission of administrative violations in commercial activities, production of, and trading in counterfeit to take remedial measures will be significantly changed after this amendment. Besides, Circular No. 65/2022/TT-BTC will be applied and replace Circular No. 149/2014/TT-BTC on prescribing illicit profits earned through the commission of administrative violations, not only in commercial activities, production of and trading in counterfeit, but also apply to all administration violations in other fields.

Hai Dinh

IP Associate

[email protected]

+84 28 73 009 678

Linh Bui

IP Consultant

[email protected]

+84 24 710 94666 (-105)