Shall tax liability be fulfilled upon bankruptcy in Vietnam?

Shall tax liability be fulfilled upon bankruptcy in Vietnam?

Based on Article 67 of the Law on Tax Administration 2019, the fulfillment of tax obligations in cases of dissolution, bankruptcy, and termination of business activities is regulated as follows:

Fulfillment of Tax Obligations in Cases of Dissolution, Bankruptcy, and Termination of Business Activities

1. The fulfillment of tax obligations in the event of a business dissolution is carried out in accordance with the laws on enterprises, credit institutions, insurance business, and other relevant legal provisions.

2. The fulfillment of tax obligations in the event of a business bankruptcy is executed following the procedures and processes stipulated in the Bankruptcy Law.

3. A business that terminates its operations or abandons its registered business address without fulfilling its tax obligations, the remaining tax debt shall be the responsibility of the private business owner, the owner of a one-member limited liability company, the contributing shareholders, capital-contributing members, and general partners, according to each type of business as stipulated in the Enterprise Law.

4. In cases where a household business or an individual business stops operating without completing tax obligations, the remaining tax debt shall be borne by the household head or the individual.

5. Taxpayers with branches or dependent units that cease operations while still owing taxes and other debts to the state budget are responsible for inheriting the debts of the branches or dependent units.

Thus, a bankrupt business must still complete its tax obligations according to the procedures and processes specified in the Bankruptcy Law.

Shall tax liability be fulfilled upon bankruptcy in Vietnam? (Image from the Internet)

What are cases of cancellation of outstanding tax in Vietnam?

According to Clause 1, Article 85 of the Law on Tax Administration 2019, the cases in which tax debts, late payment penalties, and fines are cancelled are as follows:

Cases Eligible for Cancellation of Outstanding Tax, Late Payment Penalties, and Fines

1. Enterprises and cooperatives declared bankrupt, having settled payments under bankruptcy law, particularly when there are no remaining assets to pay tax debts, late payment penalties, and fines.

2. Individuals who have died or have been declared by the court as deceased, lost legal capacity, with no assets including inheritable ones, to fulfill tax debts, late payment penalties, and fines.

3. Tax debts, late payment penalties, and fines not covered in Clauses 1 and 2 of this Article, which the tax authorities have taken coercive measures as outlined in point g, Clause 1, Article 125 of this Law, and which have been outstanding for over 10 years since the due date, but remain uncollectible.

Taxpayers who are individuals, individual businesses, household heads, private business owners, and owners of one-member limited liability companies whose tax debts, late payment penalties, and fines have been cancelled as specified in this Clause, must reimburse the state for the debts when they resume production, business activities, or establish new production and business facilities.

4. Tax debts, late payment penalties, and fines for cases affected by wide-ranging natural disasters, disasters, or epidemics that have been granted late payment exemptions according to Clause 8, Article 59, and tax payment extensions under point a, Clause 1, Article 62, and still suffer damage without recovery capability to continue production and business operations or fulfill tax debts.

5. The Government of Vietnam shall stipulate the coordination between tax administration bodies, business registration authorities, and local governments to ensure that the tax debts, late payment penalties, and fines cancelled as specified in Clause 3 of this Article are reimbursed to the state budget before business registration certificates or enterprise registration certificates are issued; detailing Clause 4 of this Article.

Thus, a bankrupt business can be granted a cancellation of outstanding tax if it has made the required payments under the law on bankruptcy and has no remaining assets to pay tax debts.

What are the requirements for cancellation of outstanding tax applications upon bankruptcy in Vietnam?

Based on Clause 2, Article 86 of the Law on Tax Administration 2019, the requirements for cancellation of outstanding tax applications upon bankruptcy include:

- A written request for cancellation of outstanding tax from the tax authority directly managing the taxpayer subject to cancellation of outstanding tax;

- A court decision declaring the business bankrupt;

- Relevant documents related to the cancellation of outstanding tax request.