Are enterprises responsible for fulfillment of tax liability upon bankruptcy in Vietnam?

Are enterprises responsible for fulfillment of tax liability upon bankruptcy in Vietnam?

According to Article 4 of the 2014 Law on Bankruptcy, the provisions regarding bankruptcy are as follows:

Definitions

In this Law, the following terms are understood as follows:

1. An enterprise or cooperative that is unable to pay debts is an enterprise or cooperative that fails to fulfill its debt payment obligations within a period of 03 months from the due date of the debt.

2. Bankruptcy is the status of an enterprise or cooperative that is unable to pay its debts and has a bankruptcy declaration issued by the People's Court.

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According to Clause 1, Article 138 of Circular 38/2015/TT-BTC amended by Clause 70, Article 1 of Circular 39/2018/TT-BTC, it is regulated as follows:

Completion of Tax Obligations in Cases of Dissolution, Bankruptcy, or Termination of Operations

1. The completion of tax obligations in cases of dissolution, bankruptcy is implemented according to the provisions of Article 54 of the Law on Tax Administration, the law on enterprises, the law on cooperatives, and the law on bankruptcy. The responsibility to complete tax obligations is as follows:

a) The owner of a private enterprise, the company owner, or the company's board of members; the board of directors, or the liquidation organization of the enterprise, or the manager involved in the case of the company's Charter stipulating they are responsible for completing the enterprise's tax obligations before submitting the dissolution proposal to the business registration authority;

b) The dissolution council of the cooperative is responsible for fulfilling the cooperative's tax obligations before submitting the dissolution dossier to the authority that issued the registration certificate;

c) The asset management and liquidation trustee or enterprise management is responsible for completing the enterprise's tax obligations after there is a decision to open bankruptcy proceedings according to the provisions of the Law on Bankruptcy.

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Thus, an enterprise operating at a loss and unable to pay debts leading to bankruptcy is still responsible for completing the obligation to pay personal income tax.

At this point, the asset management trustee or the enterprise management company is responsible for completing the tax obligations of the enterprise after a decision to open bankruptcy proceedings is issued.

Are enterprises responsible for fulfillment of tax liability upon bankruptcy in Vietnam? (Image from the Internet)

What is the responsibility of an enterprise that is shut down without following procedures for bankruptcy in Vietnam?

According to Clause 2, Article 138 of Circular 38/2015/TT-BTC amended by Clause 70, Article 1 of Circular 39/2018/TT-BTC, it is regulated as follows:

Completion of Tax Obligations in Cases of Dissolution, Bankruptcy, or Termination of Operations

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2. The responsibility to complete tax obligations in cases where the taxpayer ceases operations without carrying out dissolution or bankruptcy procedures in accordance with the law

a) Enterprises ceasing operations without following dissolution or bankruptcy procedures that have not completed tax obligations, the private enterprise owner; the company's board of members, or the company owner; the board of directors; cooperative management; or the related manager according to the company's Charter must be responsible for paying the outstanding tax debts;

b) Households and individuals ceasing business operations without completing tax obligations, the household head or individual is responsible for paying the outstanding tax debts;

c) Cooperations ceasing operations without completing tax obligations, the members of the cooperation are jointly responsible for paying the outstanding tax debts.”

Thus, an enterprise that ceases operations without carrying out bankruptcy procedures, the owner of a private enterprise, the company's board of members, or the company owner, the board of directors, cooperative management, or related manager must be responsible for paying the outstanding tax debts of the enterprise. If it is a household, the head of the household will be responsible, and if it is a cooperation, the cooperation members are jointly responsible for paying the outstanding tax debts.

What are regulations on sequence of redistribution of assets in Vietnam?

Pursuant to Article 54 of the 2014 Law on Bankruptcy, the sequence of redistribution of assets is regulated as follows:

- Should the judge declare bankruptcy, the assets of the enterprise or cooperative are distributed in the following order:

+ Bankruptcy costs;

+ Wages, severance benefits, social insurance, and health insurance for employees, including other benefits under labor contracts and signed collective labor agreements;

+ Debts incurred after opening bankruptcy proceedings for the purpose of restoring business operations of the enterprise or cooperative;

+ Financial obligations towards the State; unsecured debts payable to creditors in the list of creditors; partially secured debts yet to be paid off because the value of secured assets is insufficient to cover the debt.

- If the value of the assets of the enterprise or cooperative, after paying all the items mentioned in Clause 1 of this Article, still remains, the remainder belongs to:

+ Cooperative members, member cooperatives;

+ The owner of a private enterprise;

+ The owner of a single-member limited liability company;

+ Members of a two-member limited liability company or more, shareholders of a joint-stock company;

+ Members of a partnership.

- If the asset value is insufficient for payment, each entity within the same priority rank receives payment proportional to the outstanding debt.