Covid-19 and its consequences affect all industries as well as markets around the world. The difficult economic situation caused some companies and enterprises to make the decision to suspend their business. However, not everyone fully understands the relevant regulation of the law, especially tax problems regarding the business suspension. So, in this article LSX legal firm will give you an insight into: “Does business suspension subject to tax inspection in Vietnam?”
Legal grounds
- Law on Enterprise 2020
- Decree 01/2021/ND-CP
- Decree 126/2020/ND-CP
- Circular 151/2014/TT-BTC
Does business suspension subject to tax inspection?
Suspending business means a company temporarily shutting down for a certain period of time. During the suspension period, the company can not carry out any business or production activities. After the suspension period expires, the company continues to return to normal operations.
Tax inspection means carrying out inspection, examination, and supervision activities of tax authorities for activities related to the arising of tax obligations, and also the implementation of tax administrative procedures of enterprises. This is for the purpose of detecting, preventing, and handling illegal acts.
According to Clause 3, Article 206 of the Law on Enterprise 2020:
“During the suspension period, the enterprise shall fully pay the unpaid taxes, social insurance, health insurance, unemployment insurance premiums and fulfill contracts with its clients and employees, unless otherwise agreed by the enterprise, creditors, clients, and employees.”
Thus, based on the above provisions of the law, it can be divided into two cases as follows:
- If the enterprise has fully fulfilled its tax payment financial obligations on time with the tax authorities, then it will not be subject to tax inspection.
- If enterprises during the temporary suspension of business, have not fully fulfilled their financial obligations with the tax agency, then they must continue to make full payment as prescribed. In case the enterprise is late in paying or not fully complying, it may be subject to tax inspection by an organization specialized in performing the inspection of the tax authority.
Does suspended business have to pay tax?
According to Point c, Clause 2, Article 1 of Decree 22/2020/ND-CP:
” 5. An operating payer of the license fee that has notified its supervisory tax authority in writing of its suspension of production/business in a calendar year must not pay the license fee for that year of production/business suspension if it has sent written notification of production/business suspension to its supervisory tax authority before the prescribed deadline for paying the license fee (January 30 annually) and has made no payment of the license fee for the planned year of suspension.
It must pay the license fee for the whole year if it does not meet the above-mentioned conditions for production/business suspension.”
Besides, Pursuant to Point a, Clause 2, Article 4 of Decree 126/2020/ND-CP:
“a) The taxpayer is not required to submit tax declaration dossiers unless the suspension begins in the middle of a monthly/quarterly/annual tax period, in which case the tax declaration dossier of that month/quarter/year must be submitted.”
Accordingly, enterprises temporarily suspending business do not have to pay tax during the period of business suspension as long as they satisfy the above regulations.
Note: Enterprises must notify in writing of business suspension to the business registration office; at least 03 working days before the date of suspension (Clause 1, Article 206 of the Enterprise Law 2020).
Is business suspension required to notify the tax authority?
Currently, there are no specific regulations on the concept of “business suspension“. However, according to Clause 1, Article 41 of Decree 01/2021/ND-CP:
“1. “business suspension” means the enterprise’s legal status during its business suspension as prescribed in Clause 1 Article 206 of the Law on enterprises. Starting date of “business suspension” status is the date of business suspension registered by the enterprise…”
In other words, business suspension means when an enterprise temporarily stops carrying out production and business activities for a certain period of time.
So, when I suspend my business, do I have to notify tax?
According to Article 14, Circular 151/2014/TT-BTC:
“If the taxpayer applies for business registration at a business registration authority, the business registration authority shall be informed in writing when the taxpayer suspends or resumes their business operation.
The business registration authority must inform the tax authority in writing of the information of business suspension or resumption of the taxpayer within 02 working days from the day on which the document is received. In case the taxpayer register for business suspension, the tax authority must inform the business registration authority in writing of unpaid tax to the government budget of the taxpayer within 02 working days from the day on which the document is received.”
Thus, if a company, individual, or enterprise has a business registration, they do not need to send a notice to the tax office. The business registration authority and the tax authority will notify each other. This notice must made no later than 02 working days from the date of receipt of the taxpayer’s application.
As for companies, individuals, and businesses without business registration. You have to obtain certification from the tax office before suspending business for at least 01 day.
Notes for business suspension
- The period for business suspension of an enterprise must not exceed two consecutive years.
- Must pay all outstanding taxes, debts to partners, customers,…
- Prepare 1 set of suspension documents, including Notice of business suspension; Decision and valid copy of minute of the General Meeting of Shareholders; A copy of the personal identification paper of the person who directly submits the application; Authorization letter.
- Taxpayers need to make a tax declaration when the business suspension expires.
- In case the business household or enterprise continues to suspend its business after the expiration in the notice; it has to further notify the competent authority.
- In case the enterprise resumes business before the time limit stated in the notice of business suspension; it must notify the competent authority. Also, submit tax declaration dossiers to the tax authorities directly managing them according to regulations.
Business suspension service of LSX Legal Firm
Business suspension-a necessary solution for businesses when they cannot continue doing business for a specified period of time. Suspending business quickly will help businesses avoid unnecessary costs. Meanwhile, the business suspension process contains complicated procedures so if businesses do it themselves, they will face many risks. Using the business suspension service of LSX will make you feel secure in each stage of implementation.
To make your case more convenient, LSX will perform:
- Legal advice related to new regulations in business suspension;
- Representing in drafting and editing documents;
- We commit the papers to be valid, and legal for use in all cases;
- Represent to submit documents, receive results, and hand them over to customers.
With a team of experienced, reputable, and professional consultants; The firm is always ready to support and work with clients to solve legal difficulties.
Furthermore, using our service, you do not need to do the paperwork yourself, We guarantee to help you prepare documents effectively and legally.
Also, you will not have to waste time preparing the application, submitting application, or receiving results. At those stages, we will help you do it smoothly.
After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.
Related articles
Suspend business for more than 2 years under Vietnamese legislation
Do I have to file a tax return if I suspend my business in Vietnam?
How long can a business suspend under Vietnamese legislation?
Related questions
For monthly tax reports:
You do not have to submit a tax report if the business suspends for a full month.
You have to submit a tax report if the business suspends for less than a month.
For quarterly tax reports:
You do not have to submit a tax report if the business suspends for a full quarter month.
You have to submit a tax report if the business suspends for less than a quarter.
For tax reports by calendar year or fiscal year.
In case you suspend for a whole year, you do not have to submit annual finalization dossiers and financial statements (financial statements).
In case you suspend for less than a whole year, you must submit.
Each time suspending business is up to 1 year. However, businesses can suspend their business many times in a row (no time limit) but must not exceed 2 consecutive years.
An enterprise can suspend business many times. However, the total consecutive period must not exceed 02 years.
That means an enterprise can announce the suspension of business many times in a row; as long as the total time equal to or less than 02 years.
We can understand, that if the enterprise does not suspend business continuously, then the total business suspension period can last more than 2 years, even 5 years, 10 years.
Contact LSX
Finally, hope this article is useful for you to answer the question about “Does business suspension subject to tax inspection in Vietnam?”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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