Does a Business Temporarily Cease Operations Need to Pay Business License Tax, Submit Financial Statements, and Tax Finalization?
As the tax finalization season approaches, businesses that temporarily suspend operations may have questions about their reporting and tax obligations. TGS Vietnam will share insights on whether businesses that temporarily stop operations need to pay business license tax, submit financial statements, and finalize taxes.
1. Paying Business License Tax
According to Point 1, Section II, Circular No. 96/2002/TT-BTC dated October 24, 2002, by the Ministry of Finance:
"A business that is in operation or newly established and has been issued a tax registration certificate and tax code in the first six months of the year must pay the full business license tax for the entire year. If established and issued a tax registration certificate in the last six months of the year, it must pay 50% of the business license tax for the entire year. A business must pay the tax in the first month of the calendar year; a new business must pay the tax in the month it receives its tax registration certificate and tax code.
A business that is operational but has not declared its tax registration must pay the full business license tax for the entire year, regardless of whether the discovery is in the first or last half of the year."
According to Article 10 of Circular 156/2013/TT-BTC by the Ministry of Finance, which implements the Law on Tax Administration, if a taxpayer has notified the tax authorities about temporarily ceasing operations, the declaration and payment of business license tax are as follows:
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For businesses that notify tax authorities of temporarily ceasing operations for the entire calendar year (from January 1 to December 31), they are not required to file or pay business license tax for that year.
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If the business resumes operations before the first half of the year, it must pay the full business license tax for the year; if it resumes in the second half of the year, it must pay 50% of the full tax.
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For businesses that notify temporary cessation of business for 12 months, which does not coincide with a calendar year (i.e., the cessation lasts across two calendar years), they must file and pay business license tax for the first calendar year.
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For the second year, if the business resumes operations in the first half of the year, it must pay the full business license tax for that year; if the business resumes in the second half, it must pay 50% of the tax.
2. Submitting Tax Finalization Documents
According to Article 14 of Circular 151/2014/TT-BTC dated October 10, 2014, and Article 14, Amendment (d) of Clause 1, Article 10 of Circular No. 156/2013/TT-BTC:
Taxpayers who temporarily cease operations and do not incur any tax obligations during the suspension period are not required to submit tax declaration forms for the duration of the business suspension. However, if the taxpayer temporarily ceases business for less than a full calendar or financial year, they still need to submit their tax finalization documents for that year.
Tax finalization documents include:
According to Clause 3, Article 16 of Circular 151/2014/TT-BTC dated October 10, 2014, tax finalization documents include:
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Corporate income tax finalization form (Form No. 03/TNDN).
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Annual financial statements or financial statements up to the point of a decision to split, merge, convert, dissolve, or terminate business operations.
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One or more annexes to the declaration form issued under Circular 156/2013/TT-BTC and this Circular, depending on the actual situation of the taxpayer.
Based on the above regulations:
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For businesses that notify tax authorities of temporarily ceasing operations for the entire calendar or financial year (from January 1 to December 31), and incur no tax obligations, they are not required to declare or pay VAT, PIT, submit financial statements, or submit corporate income tax finalization.
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For businesses that notify tax authorities of temporarily ceasing operations for 12 months, spanning two calendar years, they must declare and pay VAT, PIT, corporate income tax, and submit tax finalization documents for both years.
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