Is establishing a company but not doing business subject to sanctions? in Vietnam

Currently, there are many businesses that have been granted Business Registration Certificates but are not operating.

So are these businesses subject to having their business registration revoked? Income tax issues; How should insurance be handled for these companies?

Besides, is establishing a company without doing business a violation of the law? Are there any administrative violations?

These are questions that are always asked of companies that are in the situation of being registered for business but not doing business for many different reasons. ANT Legal will answer customers’ questions as follows:

Reasons to establish a company but not do business?

There are many reasons why individuals and organizations have established companies but do not do business. This means not organizing and operating the company to produce and make profits.

It could be a financial reason. After establishing a business, you realize that there is not enough finance to operate the company. Therefore, the owner has stopped all activities and does not conduct business anymore.

But it is also a financial problem, but due to objective conditions: epidemics, natural disasters, fires, etc. These are unexpected causes that cause the company to stop doing business for a period of time; or even permanently discontinued.

Is it okay to establish a company but not do business?

Business registration certificate revoked

Pursuant to Article 212 of the Law on Enterprises 2020 stipulates:

Article 212. Revocation of Business Registration Certificate

1. Enterprises’ Certificate of Business Registration will be revoked in the following cases:

a) The declared content in the business registration dossier is fake;

b) Enterprises established by people prohibited from establishing enterprises according to the provisions of Clause 2, Article 17 of this Law;

c) The enterprise ceases business operations for 01 year without notifying the Business Registration Authority and the tax authority;

d) The enterprise fails to send a report as prescribed in Point c, Clause 1, Article 216 of this Law to the Business Registration Authority within 06 months from the deadline for sending the report or makes a written request copy;

Thus, if your company stops doing business for 01 year without notifying the business registration authority and the tax agency, the business registration certificate will be revoked.

Is it okay to establish a company but not do business?

Forced dissolution of the business

In addition, Article 207 of the 2020 Enterprise Law stipulates the following cases of enterprise dissolution:

Enterprises are dissolved in the following cases:

a) At the end of the operating term stated in the company charter without a decision to extend;

b) According to the resolution or decision of the business owner for private enterprises of the Board of Members for a partnership, of the Board of Members, the company owner for a limited liability company, of the General Meeting of Shareholders for a joint stock company;

d) Having the Business Registration Certificate revoked, unless otherwise prescribed by the Law on Tax Administration.

Thus, if your company has had its business registration certificate revoked; According to regulations, your company is forced to dissolve in order; procedures according to regulations.

Establishing a company but not doing business may be subject to administrative sanctions

According to the law, if you delay in the process of declaring and paying taxes, you will also be prosecuted for administrative liability. It may be a fine with each specific penalty level specified in the current law on handling administrative violations.

Thus, if your company stops doing business for some reason, it needs to go to the business registration authority and tax agency to carry out certain procedures. Firstly, if you just temporarily suspend your business, you must notify those two agencies for management. If you stop for 1 year, you can temporarily stop declaring and paying taxes in that year. Second, if you completely stop doing business, you also need to proceed with dissolution or bankruptcy procedures according to the provisions of law.

And if you stop doing business without notifying any agency, the company will be forced to carry out liquidation procedures based on the above regulations; or declare bankruptcy. In addition, you may also be subject to administrative penalties for not declaring taxes.