Business suspension of FDI companies in Vietnam

For various reasons, you want to temporarily suspend your FDI companies and register the temporary suspension to the local licensing authority. This can be considered a suitable solution when the company is in a difficult situation, cannot continue to operate, and does not want to dissolve the company. Therefore, to temporarily suspend the business activities of a foreign invested company (FDI), what requirements should be met, and what procedures should be followed? Let’s find out more about the legal provisions for the business suspension of FDI companies in the article below!  

Conditions for temporary business suspension for FDI companies

Pursuant to Clause 1, Article 206 of the 2020 Law on Enterprises:

• A company has the right to suspend its business temporarily and shall notify in writing the Business Registration Division at least 03 working days of the suspension before the date of business suspension or business resumption before the expiry of the notified suspension period.
• Suppose the company wishes to continue suspending its business operation after the notified suspension period. In that case, it is required to notify the Business Registration Division at least 03 working days before the notified suspension period expires.
• The company’s tax code is not closed during the temporary business suspension.

The cases in which a company is forced to suspend its business as follows:

• Suspend conditional business lines; business lines with conditional market access for foreign investors temporarily when detecting that the company does not meet the requirements to the corresponding conditions as prescribed by law;
• FDI companies suspending their business must comply with the request of the tax agency, environment management agency, and in accordance with other relevant laws.

Business suspension period of FDI companies

According to the 2020 Law on Enterprises provisions, the period of business suspension of FDI companies is not more than one year.  Before the suspension period ends, the company reserves the right to extend the suspension period an unlimited number of times. This is a very open new point of the 2020 Law on Enterprises.

Suppose the company would like to continue to extend the suspension status. In that case, it is required to submit an extension application at least 03 working days before the expiry of the previous suspension period.

Obligations of FDI companies as well as notes when suspending business activities

During the business suspension of FDI companies, they also need to perform certain obligations. Specifically:

• Pay the outstanding tax amount.
• Settle social insurance, health insurance, and unemployment insurance debts.
• Pay debts and financial obligations to clients and related parties (unless otherwise agreed by the parties).
• Implement signed contracts with partners, clients, and employees (unless otherwise agreed by the parties).
• FDI companies suspending their business must also register the business suspension of branches, representative offices, and business locations (if any) to the Business Registration Division, where the branches, representative offices, or business locations are located.
• If the company suspends operations for an entire calendar year (for example, from 1 January  2022 to 31 December 2022), the company is not required to pay the yearly business license tax and submit tax reports and financial statements for that year.
• If the company suspends operations for less than one calendar year or one fiscal year, the company is still required to file tax reports to the local tax authority.

For example, if a company registers the suspension from October 2022 to October 2023, the company still has to submit the tax report for Quarter 4 and financial statements for 2022; the company is exempted from submitting the tax report for Quarters 1, 2 and 3 in 2023.

If the company resumes operations in October 2023, the company must submit the tax report for Quarter 4 and financial statements for 2023.

If the company continues to extend the suspension period until the end of December 2023, the company will be exempted from the tax reports for Quarter 4 and financial statements of 2023.

Procedure for the registration of business suspension for FDI companies

Preparation of necessary documents

When an FDI company needs to suspend its business operations temporarily, the first step is to prepare a set of application documents, including:

• Notice of business suspension of FDI companies (under the prescribed form), stating company information, the duration of the business suspension, and reasons for the suspension.
• Decision on business suspension of the owner for the single-member limited liability company / the Members’ Council of the limited liability company with two or more members / the Board of Management of the joint-stock company;
• A valid copy of the meeting minutes of the Board of Management (for joint stock companies) or the Members’ Council (for limited liability companies with two or more members).

File the application

Upon availability of the application documents, the FDI companies suspending must apply directly or online to the Business Registration Division under the Department of Planning and Investment of the province or city where it is headquartered.

Receiving and processing application documents

After receiving the application, the Business Registration Division will check the validity of the application and issue a written confirmation of business suspension within three working days from the submission of the valid application.

Get results

If the dossier is valid, the Business Registration Division will issue a written confirmation of the company’s business suspension and update the company’s suspension status on the National Business Registration Portal within 03 working days.

The duration of business suspension of FDI companies must not exceed one year. After the notice period expires, if the company continues to suspend its business, it must further notify the Business Registration Division at least 03 working days in advance.

Procedures for the suspension of FDI investment projects

Investors wishing to register for an FDI investment project suspension shall submit a notice to the local investment registration authorities. In case of force majeure, the investor is entitled to exemption from land rent or reduction of land use levy during the suspension period to overcome the consequences caused by force majeure according to Article 47 of the 2020 Law on Investment.

In cases of FDI investment project suspension under a decision of a competent authority under Clause 2, Article 47 of the 2020 Law on Investment:

• To protect sites/monuments, relics, antiques or national treasures in accordance with the Law on Cultural Heritage;
• To rectify a violation of the law on environmental protection at the request of the environment authority;
• To take measures to ensure occupational safety at the request of the labor authority;
• Pursuant to a judgment or decision of a court or an arbitral award;
• The investor fails to adhere to the written investment approval or the investment registration certificate and has been sanctioned for administrative violations but continues to commit violations.
• The Prime Minister shall decide to suspend a project in part or in whole if the project execution is detrimental or potentially detrimental to national defense and security at the request of the Ministry of Planning and Investment.

Duration of FDI investment project suspension: The total duration of suspension of an investment project is no more than 12 months. In case of a temporary suspension under a judgment or decision of a court, arbitral award, or a competent authority, the period shall be determined according to such judgment or decision.

Procedures: If the investor registers to suspend the operation of an FDI investment project, the investor shall send a suspension notice to the investment authorities within five days of its suspension decision.

Consulting service for business suspension for FDI companies at LTS LAW

With the consulting service of business suspension of FDI companies at LTS LAW, clients will be enthusiastically advised on legal issues by our teams of experienced lawyers and experts. We provide our clients with practical solutions in accordance with legal regulations and are highly professional.

So, for reasons why many FDI companies choose LTS LAW’s services?

• Teams of experienced lawyers and consultants with enthusiastic and quick advice.
• Commitment to compliance with legal regulations and industry ethical standards.
• Diversified service portfolio to meet the unique needs of each client.
• High-quality service at an affordable cost.

LTS LAW will perform procedures and work directly with the Business Registration Division on behalf of clients. The results are received quickly with the appropriate service cost, limiting many errors.

If you need advice for business suspension of FDI companies or other legal procedures and issues, please get in touch with LTS LAW immediately for more details!

LTS LAW FIRM

Address: Room 602, 6^th Floor, 520 Cach Mang Thang 8, Ward 11, District 3, Ho Chi Minh City, Vietnam.

Email: contact@lts.com.vn

Hotline: (+84) 902 798 066