Tax obligations during business dissolution are not merely administrative procedures but also the highest legal responsibility that business owners must fulfill before leaving the market. According to the latest regulations in the 2019 Tax Administration Law and the 2020 Enterprise Law, a business can only be officially dissolved after settling all debts to the state budget, from income tax to social insurance obligations. This article will provide detailed guidance on the process of fulfilling tax obligations during dissolution, the order of debt payment, and important considerations to ensure you complete your tax obligations quickly, transparently, and legally.
Legal regulations regarding tax obligations when dissolving a business.
Understanding the legal basis not only helps businesses follow the correct procedures but also avoids unnecessary administrative penalties related to tax obligations during dissolution.
- The legal basis is Article 67 of the Law on Tax Administration No. 38/2019/QH14: This is the original document stipulating the fulfillment of tax obligations in cases of dissolution, bankruptcy, or cessation of business operations.
- The role of Law No. 59/2020/QH14 on Enterprises in the debt control process: This law clearly defines the responsibilities of the legal representative and owner in ensuring debt payment, especially tax obligations, during dissolution before the business name is removed from the company's register.
- The principle is that all tax obligations must be fulfilled before a business name is removed from the National Business Registration Portal: The business registration authority will only officially remove the business name from the National Information Portal upon receiving electronic confirmation from the directly managing tax authority that all tax obligations have been completed upon dissolution.
Specific tax responsibilities for each type of entity.
Each type of business has different liability for assets, which directly affects how tax obligations are handled upon dissolution.
- Fulfilling tax obligations upon voluntary dissolution: Businesses proactively carry out tax settlement and payment procedures according to the publicly announced dissolution plan.
- The procedure for fulfilling tax obligations when a business goes bankrupt, as stipulated in the Bankruptcy Law, is as follows: Tax debts will be paid based on the liquidation value of the business's assets, after prioritizing bankruptcy costs and employee rights.
- Tax liability of the owner of a private enterprise upon dissolution: The owner of a private enterprise is liable without limit for the tax debts of their business, using all of their personal assets.
- Tax obligations of shareholders and contributing members in a joint-stock company or partnership: Shareholders are liable to the extent of their contributed capital, while partners are jointly and severally liable for the full payment of tax obligations upon the dissolution of the company.
- Responsibilities of household businesses and individual business owners upon cessation of operations: Individuals or household business owners are obligated to pay all outstanding tax debts to the state budget using their own assets, similar to the tax obligations of a private enterprise upon dissolution.
- The parent company's obligation to inherit tax debts from its branch or subsidiary: When a branch closes, the parent company is responsible for inheriting and paying all outstanding taxes owed by the branch to fulfill its tax obligations upon dissolution.
Order of priority for debt payment during dissolution
To ensure fairness and social welfare, the law stipulates the following order for debt repayment from a company's assets:
| Order of priority | Details of the debt | Note |
|---|---|---|
| Priority 1 | Salary, benefits, insurance | Direct rights of workers |
| Priority 2 | Tax debt | Fulfill tax obligations upon dissolution. |
| Priority 3 | Other debts | Supplier debt, unsecured debt |
Based on the priority order above, we see that tax obligations upon dissolution are second only to employee benefits. After these priority groups have been settled, if any assets remain, they can then be distributed to owners, members, or shareholders in proportion to their ownership stake.
Procedures for settling accounts and terminating tax identification numbers.
The process of fulfilling tax obligations during dissolution is usually the most time-consuming stage due to the need for thorough assessment from the tax authorities.
- The tax settlement dossier for dissolution, as guided by Circular 105/2020/TT-BTC, includes: a written request to terminate the tax identification number, a dissolution decision, and minutes of the meeting related to confirming tax obligations upon dissolution.
- The process for coordinating the inspection and verification of tax obligations between relevant agencies: The tax authority will conduct an inspection or review of records to accurately determine the amount of tax debt to be paid before confirming that the tax obligations upon dissolution have been fulfilled.
- Procedures for offsetting or refunding overpaid taxes for businesses upon dissolution: If a business has overpaid taxes, it can request to offset the excess against other outstanding taxes or apply for a tax refund after deducting the tax debts.
- Conditions for issuing a notice of official termination of tax identification number: Only when the tax liability balance is zero and the business has submitted all tax reports up to the time of dissolution will the tax identification number be permanently closed.
- Updated guidelines on tax liability confirmation procedures upon dissolution, effective July 1, 2025: Processes are gradually shifting to a fully electronic environment, shortening the time required for tax debt confirmation for businesses. You can find more details at [link/website]. Tax obligations upon dissolution.
Special cases that do not require direct tax settlement.
The law also allows businesses with low tax risk to apply for simplified tax obligations when dissolving.
- Conditions apply to businesses that do not generate revenue or expenses throughout their operation: Newly established businesses that have not yet commenced actual operations are often granted tax identification numbers more quickly without requiring on-site inspections.
- According to the Ministry of Finance, regulations for entities meeting the criteria of size and low risk nature state that small and micro-enterprises that comply well with tax laws may be considered exempt from on-site inspections when fulfilling their tax obligations upon dissolution, provided they demonstrate honesty in their self-assessment documents.
Answering frequently asked questions about taxes during the dissolution process.
Below is a compilation of some frequently asked questions that business owners have when fulfilling their tax obligations during the dissolution of a business in practice.
- Can a business that has not fulfilled its tax obligations upon dissolution submit an application to the Department of Planning and Investment? You can still submit the initial dissolution notice, but the final application to remove the business name will be rejected if the tax identification number has not been paid due to outstanding tax debts.
- How do contributing members handle situations where a business lacks sufficient assets to pay its tax debts? Depending on the type of business, members may have to use their personal assets to pay on behalf of the business, or they may only lose their contributed capital when the business fulfills its tax obligations upon dissolution.
- Procedures for dissolving a branch while still owing taxes locally: A branch cannot close its tax registration number if it still owes taxes. The parent company needs to pay these taxes on behalf of the branch at the tax authority managing the branch to fulfill its tax obligations upon dissolution.
Conclude
Fulfilling tax obligations during dissolution is the most crucial and complex step in the business termination process. Proactively settling and paying tax obligations early during dissolution not only speeds up the process but also protects the reputation of the individual managers before the law. If your business is having difficulty reconciling tax debt figures, please contact us. Contact an expert Tax consulting to find the best solution.
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Content is moderated by: Mr. Le Hoang Tuyen – Founder & CEO of Man, CPA Vietnam Auditors With over 30 years of experience in accounting, auditing, and financial consulting...
Source:
- Law on Tax Administration No. 38/2019/QH14 of the National Assembly.
- Law on Enterprises No. 59/2020/QH14 of the National Assembly.
- Circular 105/2020/TT-BTC of the Ministry of Finance provides guidance on tax registration.
