Handling financial obligations is the most important aspect when dissolving a business. This is the most detailed guide to settling all financial obligations to the state budget when dissolving a business.
Guide to settling tax obligations
The goal of tax payment processing is to obtain confirmation from the tax authorities that there are no outstanding tax debts. To obtain this confirmation, businesses should follow the guidelines below.
+ Specifically for education, healthcare, and performing arts activities: 2%.
+ For trading goods: 1% + For other activities: 2%.
1. In which cases is tax settlement not required upon dissolution?
1. Pay corporate income tax at a percentage rate on revenue.
Businesses and organizations subject to corporate income tax at a percentage rate on revenue from the sale of goods and services as stipulated by the law on corporate income tax are undergoing dissolution or cessation of operations.
2. Businesses that have not generated revenue and have not used invoices.
A business is dissolved or ceases operations, but from the time it was granted a Business Registration Certificate or Enterprise Registration Certificate until the time of dissolution or cessation of operations, the business has not generated any revenue and has not used any invoices.
3. Revenue has been generated and invoices have been used, but the following conditions must be met:
Businesses subject to corporate income tax based on self-declaration may dissolve or cease operations when they meet all the following financial obligations:
- The average annual revenue (calculated from the year before tax settlement or audit to the time the business is dissolved or ceases operations) does not exceed 1 billion VND/year.
- From the time a business has not yet undergone tax settlement or inspection until the time of its dissolution or cessation of operations, it has not been penalized for violating the law regarding tax evasion.
- The amount of corporate income tax paid from the year that has not yet been settled or audited until the time of dissolution or cessation of operations is higher than the corporate income tax if calculated as a percentage of revenue from the sale of goods and services.
|
Regulations regarding percentage of revenue
|
For the cases mentioned in points 1, 2, and 3 above, no later than 05 (five) working days from the date of receiving the dossier submitted by the taxpayer (including the dissolution or cessation of operations decision; documents proving that the taxpayer falls under the above-mentioned cases and has paid all applicable taxes, if any), the tax authority shall confirm that the enterprise has fulfilled its tax obligations.
2. Cases requiring tax settlement upon dissolution.
For cases where a business dissolves or ceases operations and does not fall under the exemptions mentioned above, based on actual needs, the tax authority directly managing the taxpayer will conduct tax finalization according to the plan issued by the tax authority.
1. In order for the tax authorities to plan the tax settlement for the dissolution of the business, the company needs to complete and submit the following procedures:
- A document from the General Department of Customs confirming the fulfillment of tax obligations related to import and export activities, if your business engages in import and export operations. Alternatively, a written commitment stating that there are no outstanding tax debts or other payments due to the State budget related to import and export activities up to the date of the tax debt confirmation from the General Department of Customs, and that the business takes responsibility for this commitment.
- Minutes of asset liquidation (if any assets are to be liquidated).
- Notification of invoice cancellation results and report on invoice usage up to the time of filing the dissolution application.
- Corporate income tax (CIT) settlement report and personal income tax (PIT) report up to the time of submitting the dissolution application.
- Submit Value Added Tax (VAT) returns up to the time of submitting the business dissolution documents.
- Financial statements are prepared up to the settlement date. FDI enterprises must submit corresponding audited financial reports.
2. Time limit for processing dissolution documents at the tax authority.
After submitting all the above-listed documents, the deadline for tax settlement to dissolve the company is forty-five (45) days from the date of submission of all documents. During this time, the business needs to prepare thoroughly, complete accounting books and appoint personnel to handle explanations to work with representatives of the tax authority.
Instructions for settling social insurance obligations.
The goal of settling social insurance obligations is to obtain confirmation from the social insurance agency that there are no outstanding social insurance debts. To obtain this confirmation, businesses should follow the guidelines below.
In addition to fulfilling its obligations to employees, businesses are also responsible for confirming the completion of their financial obligations to the social insurance management agency as follows:
1. Finalize the employee's insurance record as follows:
- According to Article 47 of the Labor Code, the following is stipulated: “Article 47. Responsibilities of the employer upon termination of a labor contract: Within 07 working days from the date of termination of the labor contract, both parties are responsible for fully settling all amounts related to the rights and benefits of each party; in special cases, this period may be extended but not exceeding 30 days.”
- The employer is responsible for completing the verification procedures and returning the social insurance book and other documents that the employer has retained from the employee.
2. Please confirm that you do not owe any mandatory insurance premiums:
- Conduct a reconciliation of mandatory social insurance contributions up to the time of dissolution.
- Please confirm that you have no outstanding social insurance debts.
Instructions for settling import and export tax obligations (Customs)
The goal of settling import and export tax obligations is to obtain confirmation from the Customs authority that there are no outstanding import and export tax obligations. To obtain this confirmation, businesses should follow the guidelines below.
1. Principles of Obligation Confirmation
- Goods subject to export and import taxes must be paid before customs clearance or release. This excludes cases where the taxpayer is entitled to preferential treatment as stipulated in the Customs Law.
- Therefore, most import and export taxes have been paid in full, except for cases where issues arise requiring post-audit: Export processing; Tax adjustments discovered before dissolution.
2. Verification procedures
The documents required to confirm that there are no outstanding customs tax debts for the purpose of dissolution include:
- I would like to confirm that I have no outstanding customs tax debts.
- Minutes of the meeting, decision to dissolve the company.
- Copies of the business registration certificate and establishment decision of the entity (certified).
Within 5 working days, the General Department of Customs will issue a written response regarding whether or not the unit owes customs tax.
Upon receiving a confirmation letter from the General Department of Customs stating that the business has no outstanding tax debts, the business must submit this document to the tax authorities before its tax identification number expires.
Liquidate company assets and pay off debts.
The Enterprise Law stipulates who organizes the liquidation of assets and the order of debt payment. Accordingly, the owner of a private enterprise, the Board of Members or the owner of a company, or the Board of Directors directly organizes the liquidation of the enterprise's assets, except in cases where the company's charter stipulates the establishment of a separate liquidation organization.
The company's debts are paid in the following order:
- Wage debts, severance pay, social insurance contributions as prescribed by law, and other employee benefits as stipulated in collective bargaining agreements and signed employment contracts;
- Tax debt;
- Other debts.
- After all debts and business dissolution costs have been paid, the remaining amount belongs to the sole proprietor, members, shareholders, or company owners.
According to the Enterprise Law, the contract liquidation period cannot exceed 06 months from the date the dissolution decision is approved. This timeframe is only suitable for small businesses with no complex transaction relationships and highly liquid assets.
For large businesses or those with numerous assets, requiring a long time to liquidate and repay debts, this timeframe may not be sufficient to settle all contracts and outstanding debts.
