The fourth outbreak of Covid-19 has negatively impacted Vietnam’s economy, especially the economic hub of the country – Ho Chi Minh City. According to a report from the business registration administration, the number of enterprises which suspended business in the first six months of 2021 was 35,607, up by 22.1% compared to the same period in 2020.
Suspension of business seems to be the ultimate solution for many business owners in this time of crisis. As compared to the time and expenses involved in dissolution of business, suspension of business helps investors save costs and time and quickly relieves them from obligations with government agencies. Suspended companies can still return to the market when the economy starts to recover.
Procedures for business suspension
Time limit of business suspension for each notice: The time limit shall be no longer than one year. At the end of the suspension period, if the enterprise wants to continue suspension, they must send a notice to the Business Registration Office within three working days prior to the date of resumption of business.
Method of implementation: Enterprises must send a written notice to the business registration agency at least three working days before the date of business suspension.
During the temporary suspension of business, enterprises must continue to perform the following obligations:
- Pay due taxes, social insurance, health insurance, and unemployment insurance in full.
- Continue to pay debts, and complete the performance of contracts signed with customers and employees unless otherwise agreed by the contracting enterprise, creditor, customer or employee.
Procedures for temporary suspension of investment projects
For FDI companies with investment registration certificates, in addition to the procedures for business suspension, the following procedures must be carried out to suspend the operation of investment projects:
Total downtime: No longer than 12 months.
Methods of implementation: The investor must send a notice to the investment registration authority within five working days from the date of decision to suspend the project. The investment registration agency shall receive and notify the temporary cessation of the project to the relevant agencies.
In case of shutdown of an investment project due to force majeure events, the investor shall be exempted from land rent or granted rental reduction applicable to the shutdown period to help overcome the consequences caused by such force majeure events.
Enterprises do not have to send notices of business suspension to tax authorities.
During the period of business suspension, if no tax obligations arise, such enterprises are not required to submit tax returns for the period of business suspension. In case the business is suspended for less than a calendar year or a fiscal year, they must submit annual tax finalization dossiers.
Enterprises are not allowed to use invoices and are not required to submit reports on the use of invoices. In case the enterprise is approved by the tax authority to use invoices in accordance with the law on invoices, it must submit a tax declaration and report on the use of such invoices as prescribed.
Resumption of operation after suspending business
If an enterprise resumes operation within the registered time limit, it is not required to notify the agency where it had registered to suspend its business.
In case the enterprise resumes operation before the registered deadline, it must notify the agency where it had registered to suspend its business. The enterprise, in this case, must fully comply with tax regulations, submit tax declaration dossiers and a report on the use of invoices according to regulations.
Thus, the implementation of the notice to suspend business helps business owners reduce their economic burden. However, these procedures also need to comply with regulations.
Writing period: 18/08/2021
The article is based on applicable law at the time noted above and may no longer be relevant at the time the reader approaches this article due to the change in applicable law and the specific case in which the reader wishes to apply. Therefore, the article has only reference values.