Article 206 of the Law on Enterprises 2020 and Decree 126/2020/ND-CP guiding the Law on Tax Administration stipulates that enterprises have the right to suspend business but must notify in writing the time and time limit for stopping or continuing business to the Business Registration Agency at least 03 working days before the date of business suspension and then the Business Registration Agency will send a notice to the Tax Agency within 01 or 02 working day.

In a crisis period, instead of dissolving or bankrupting a business, suspending business is a good solution to help businesses minimize costs, find new opportunities in accessing capital sources and adjust business strategies.

Business suspension

‘Business suspension’ is the temporary failure of an enterprise to carry out business activities, the Enterprises Law 2020 and Decree No. 01/2021/ND-CP no longer limit the total business suspension period to no more than 02 years for 02 consecutive registrations such as the Enterprises Law 2014 and Decree No. 78/2015/ND-CP. Businesses can announce the suspension of operations several times in a row if the previous notice of business suspension is about to expire.

During the business suspension period

The enterprise must still pay the full amount of tax owed, continue to pay debts, and perform the contract signed with customers and employees (if any), unless otherwise agreed by creditors, customers, and employees.

During the business suspension period, enterprises do not have to pay license tax, do not declare monthly value-added tax, and do not submit year-end financial statements. A note on the calculation of license tax payable has been specifically guided by the General Department of Taxation at Point c Clause 2 Article 1 of Decree No. 22/2020/ND-CP amending and supplementing a number of articles of Decree No. 139/2016/ND-CP as follows: Taxpayers who have a notice of business suspension for the whole calendar year (from 01/01 to 31/12) are not required to declare, pay a license tax for the entire calendar year of business suspension; If the taxpayer has a 12-month notice of business suspension, which does not coincide with the calendar year (i.e. the business suspension period lasts for 02 calendar years), they must declare and pay a license fee for the whole year.

When suspending business, businesses can worry less about wages for employees, taxes, and other expenses. As a result, enterprises focus on human and material resources to solve outstanding difficulties; seek to raise capital from domestic and foreign investors to restructure the business, or as well as be “immobilized” waiting for new and better opportunities. An outstanding advantage of business suspension is that when the business resumes operation, the procedure is very simple, for example, if the suspension period expires, the business will operate on its own, and if it is earlier than the suspension period, it is only necessary to make a notification letter.

The article is based on laws applicable at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable laws and the specific cases that the reader may wish to apply may have changed. Therefore, the article is for referencing only.


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