Dissolution is a procedure for terminating an enterprise. Before dissolution, the enterprise must carry out certain procedures

Legal grounds:

• Enterprise Law 2020;
• Circular No. 38/2015/TT-BTC;
• Circular No. 39/2018/TT-BTC.

We received an inquire from a client who is an FDI enterprise as follows: my company is a foreign-invested enterprise, specialized in processing electronic components for export. Currently, my company has decided to stop operating, so what procedures do I need to do with the tax office?

1. Cases of dissolution of FDI enterprises

Dissolution is the process of terminating business activities. Dissolution is both a right and an obligation of an enterprise, depending on each specific case.

Cases and conditions for enterprise dissolution are specified in Article 207 of the Enterprise Law 2020 as follows:

Article 207. Cases and conditions for enterprise dissolution

1. An enterprise is dissolved in the following cases:

a) The operation term stated in the company’s charter expires without a decision on extension;

b) According to resolutions and decisions of the business owner for private enterprises, of the Members’ Council for partnerships, of the Members’ Council or of the company owner for limited liability companies; of the General Meeting of Shareholders for joint-stock companies;

c) The company no longer meets the minimum number of members as prescribed by this Law for 6 consecutive months without carrying out procedures for enterprise transformation;

d) The certificate of enterprise registration is revoked, unless otherwise provided for by the Law on Tax Administration.

2. An enterprise may only be dissolved when it ensures payment of all debts and other property obligations and is not in the process of settling disputes at Court or Arbitration. The relevant manager and the enterprise specified at Point d, Clause 1 of this Article are jointly responsible for the debts of the enterprise.

According to the above provisions, FDI enterprises can actively dissolve when the operation term expires or when the company owners decide to dissolve.

2. Execution of tax obligations upon enterprise dissolution

According to the provisions of Clause 2, Article 207 of the Enterprise Law 2020, in order to be actively dissolved, the enterprise must ensure payment of all debts and other property obligations and not in the process of settling disputes at Court or Arbitration. In which, other property obligations of the enterprise include obligations to the State such as the obligation to pay compulsory insurance and taxes owed.

Pursuant to Article 138 of Circular No. 38/2015/TT-BTC, as amended and supplemented by Circular No. 39/2018/TT-BTC  as follows:

Article 138. Fulfillment of tax payment obligations in case of dissolution, bankruptcy or termination of operation

1. The fulfillment of tax payment obligation in case of dissolution or bankruptcy shall comply with the provisions of Article 54 of the Law on Tax Administration, the Law on Enterprises, the Law on Cooperatives and the Law on Bankruptcy. Responsibilities for fulfilling tax payment obligations are as follows:

a) The owner of a private enterprise, the owner of the company or the company’s members’ council; The Board of Directors or the enterprise liquidation organization, the relevant manager, in case the company’s charter stipulates, is responsible for fulfilling the tax payment obligation of the enterprise before submitting the dissolution request to the business registration agency;

b) The Cooperative Dissolution Council is responsible for fulfilling the cooperative’s tax payment obligation before sending the dissolution dossier to the agency that has issued the registration certificate;

c) The asset management officer or the asset management and liquidation enterprise is responsible for fulfilling the tax payment obligation of the enterprise after the decision to open bankruptcy procedures is issued in accordance with the Bankruptcy Law.

2. Responsibility to fulfill tax obligations in case taxpayers terminate their operations and fail to carry out procedures for dissolution or bankruptcy as prescribed by law

a) If an enterprise terminates its operation without following dissolution or bankruptcy procedures and has not yet fulfilled its tax payment obligation, the owner of a private enterprise shall; the company’s members’ council or the company’s owner; The Board of Directors; governance of the cooperative; or the relevant manager in case the company’s charter stipulates to be responsible for paying the tax owed;

b) When households and individuals terminate their business activities and have not yet fulfilled their tax payment obligations, the heads of households and individuals are responsible for paying the tax arrears;

c) If a cooperative group terminates its operation and has not yet fulfilled its tax payment obligation, the members of the cooperative group shall be jointly responsible for paying the tax arrears.

According to the above regulations, when dissolved, FDI enterprises need to fulfill tax obligations as prescribed. After fulfilling the tax obligations, the enterprise will be issued a certificate by the tax authority to certify that the tax obligation has been fulfilled.

Specifically, based on Clauses 1 and 2, Article 140 of Circular No. 38/2015/TT-BTC, as amended and supplemented by Circular No. 39/2018/TT-BTC  as follows:

Article 140. Certification of fulfillment of tax payment obligations

1. When there is a need to confirm the fulfillment of tax payment obligations (including confirmation of tax amounts, late payment interest, fines and other paid amounts and/or tax amounts already paid to the state budget), The taxpayer or the competent state management agency must send a written request for confirmation of the fulfillment of the tax payment obligation according to the criteria specified in form No. 05, Appendix IIa attached to this Circular, and send it to the customs authority. through the Customs Electronic Data Processing System. In case of submitting paper dossiers, taxpayers or competent state management agencies shall send a written request for certification of tax payment obligation fulfillment according to form No. 34/CVXNHT/TXNK Appendix VI issued together with this Circular to the General Department of Customs.

2. Within 05 working days from the date of receipt of the written request for confirmation of tax debt, the customs authority shall inspect and certify the fulfillment of the tax payment obligation and notify the taxpayer or Competent state management agencies handle results as follows:

a) Confirmation of fulfillment of tax obligations;

b) Confirmation of unfulfilled tax obligations clearly stating that the declaration has not yet fulfilled tax obligations;

c) Complete and supplement the dossier so that the customs authority has a basis for certifying the fulfillment of tax obligations.

3. In case an enterprise requests confirmation of fulfillment of tax payment obligations in order to dissolve, terminate its operation or close its tax identification number, from the date the General Department of Customs issues a document certifying that it no longer owes tax, enterprises will not be allowed to register customs declarations.

Thus, before dissolution, the enterprise needs to send a document to the tax authorities to confirm the fulfillment of tax obligations.

The tax authorities will conduct an inspection, if the business has not yet submitted the tax reports and owes tax, the tax authorities will notify the business of the reason for the request. Businesses need to file tax returns and pay taxes in full.

After completing all tax obligations, the enterprise will be granted a certificate by the tax authorities to continue carrying out the dissolution procedures at the business registration office.