Company obligation when tax code is locked

Due to lack of understanding of legal regulations, enterprises are usually closed their tax codes. So what to do when the company’s tax code is locked? To answer customers’s questions, Viet An Law Firm offers an article below on company obligation when tax code is locked.

Legal basis

• Law on Tax Administration 2019;
• Decree No. 102/2021/ND-CP of the Government regulates penalties for administrative violations of taxes and invoices.
• Circular 80/2021/TT-BTC guides the implementation of several articles of the Law on Tax Administration and Decree No. 126/2020/ND-CP stipulates several articles of the Law on Tax Administration.
• Circular No. 105/2020/TT-BTC dated December 3^rd, 2020 of the Ministry of Finance guides on tax registration.

What is a tax code?

A tax code is a series of numbers encoded according to a certain rule. Before going into the official operation, each company is issued a tax code to use in many activities such as paying taxes, fees, charges, and other revenues according to the provisions of law throughout the operation process of the company.

What is the tax code closure?

The tax code closure is the status of an enterprise’s tax code on the Tax Department being closed or suspended, causing the enterprise to be unable to carry out tax-related procedures and forcing enterprises to cease operations.

What causes enterprises to have their tax codes closed?

Enterprises will close their tax codes in the following cases:

• Enterprises do not operate at the registered address.
• Enterprises terminate operations or dissolve or bankrupt.
• Enterprises have revoked their Enterprise Registration Certificate.
• Reorganize an enterprise (division, merge, acquisition).

Enterprises do not operate at the registered address

In case the enterprise’s taxpayer is no longer doing business at the business registration location and the location cannot be determined, the tax authority will coordinate with the local authority to make a record confirming the status of the taxpayer’s place of business where is not operated. The tax authority updates information in the tax registration database of the tax industry, announces publicly the taxpayer’s status, and coordinates with competent state agencies to carry out procedures to revoke the enterprise registration certificate and at the same time terminate the validity of the tax code under the provisions of Law on Enterprises and the Law on Tax Administration.

Reorganize an enterprise

If the company is not operating effectively or the enterprise owner wants to carry out procedures to transfer the company to another company in the form of a merger or division into small companies, the enterprise’s tax code will be changed according to the actual situation. By transferring all assets, rights, obligations, and legal interests to the merged company, and at the same time terminating the existence of the merged company. The enterprise merger is related to finance and state management of many enterprises, so merger procedures need to comply with the law. In this case, the old tax code will be closed due to a merger into another enterprise.

Enterprise dissolving

When dissolution an enterprise, it must carry out procedures to terminate the validity of its tax code with the tax administration agency according to the provisions of Circular 105/2020/TT-BTC dated December 3^rd, 2020 guides about the registration tax.

Cases where the tax code is often closed because the company registering to operate in one place but operating in another; Enterprise owners who establish a company do not clearly understand about regulations of tax and accounting, leading to not paying taxes or not declaring on time when notified by the tax department or not receiving notification from the tax department, leading to violations of tax regulations.

What are the consequences of having a closed tax code?

The tax code closure will lead to the following consequences:

• Do not issue sales invoices or value-added invoices;
• The following types of declarations submitted via the electronic tax system are not accepted: Value-added tax declarations, personal income tax declarations (if any); Reports on the invoice usage; Types of annual finalization reports such as enterprise income tax finalization, personal income tax finalization, annual financial reports.

Company obligation when tax code is locked

When the tax code is closed, enterprises can only restore their tax code in cases where this enterprise is in a status where the tax authority has issued a notice of taxpayer inactivity at the registered address but the business registration authority has not yet issued a decision to revoke the Enterprise Registration Certificate, the taxpayer must submit a written request to the tax authority to restore the tax code and commit to paying tax obligations to the State Budget, accept handling administrative penalties for tax violations. Enterprises follow these steps to restore their tax code.

Step 1: Find out the reason why the company’s tax code is closed

Based on the cause leading to the closure of the tax code the enterprise must have its tax code invalidated. However, the enterprise can only restore the tax code in the following cases:

• In case the tax authority has issued a notice that the taxpayer is not operating at the registered business address but the business registration authority has not yet issued a decision to revoke the Enterprise Registration Certificate. At that time, the taxpayer has the right to request the tax authority to restore the closed tax code commit to paying tax obligations to the state agency, and comply seriously with penalties for administrative violations of the tax law.
• In case the tax authority determines that the taxpayer is not in the cases where the tax code must be closed, the event of termination of validity of the tax code is due to an error on the part of the tax authority.

Step 2: Send a record requesting a tax code to the direct management tax agency

Enterprises make a request written to restore their tax code according to form No. 25/DK-TCT issued with Circular No. 105/2020/TT-BTC and submit this document to the direct tax management agency for solution.

Step 3: Remedy violations leading to the tax code closure

Within 10 working days from the date of receiving the request written to restore the enterprise’s tax code, the tax authority shall make a list of missing tax declaration dossiers, the status of the invoice usage, and the amount of debt tax, fines, late payment interest (if any) and impose penalties for violations of tax and invoice according to the regulations of law.

At the same time, the tax authority conducts an actual verification at the business headquarters address of the enterprise and makes a record verifying the operating status of the enterprise at the registered address according to the enterprise’s tax code restoration request dossier (the enterprise must sign confirmation in the record). At that time, the enterprise must fully fulfill its tax obligations and requirements of the tax authority according to the provisions of the law.

Step 4: Restore the tax code

Within 03 working days from the date that the enterprise complies fully with administrative violations on taxes and invoices, and fully pays the amount of debt tax, fines, and late payment interest (if any), the tax authority makes a Notice of Tax Code Restoration for the enterprise, sends it to the enterprise, and at the same time, updates the taxpayer’s tax code status on the Tax Registration Application System.

Above is the article on company obligation when tax code is locked. For clients who need consulting on tax code restoration services, please contact Viet An Law Firm – Tax Agent for the best support.