1. What is the investment risk coefficient?  The e-invoice risk coefficient, also known as the K coefficient, is calculated based on the value of invoices in the period, with the formula: K = Total value of goods sold on invoice / (Total value of inventory + Total value of purchased goods).

2. What K coefficient is considered risky? The K coefficient is determined based on industry data and will be different for each industry. When the K coefficient of a business exceeds the normal threshold, the business will be at risk.

Note: Trade industries often have lower K coefficients than manufacturing industries, and service industries often have the highest K coefficients.

3. When the K coefficient exceeds the threshold, the system will:

• Automatically send warning emails to businesses.
• Tax authorities require businesses to explain and conduct strict supervision.
• If there is no reasonable explanation, the business may be determined to stop using invoices.

4. What do businesses need to do when they have to explain the K coefficient? 

Subjective case: If the enterprise commits a violation, it needs to: Additional declaration of VAT, CIT or erroneous expenses.

Objective case: Due to industry characteristics or incorrect declaration, businesses need to: Prepare an official letter clearly explaining the reasons, such as:

• • • • Goods purchased are few, mainly the value of labor and depreciation.
      • Processing and service activities do not have many input invoices.
      • Invoices are written incorrectly or are industry-specific.