Question:
We are currently in the process of applying for the termination of the tax code validity in order to close our Ho Chi Minh City Branch.
However, upon submission, the Tax Officer advised us to reconsider as the closure of the HCMC Branch may give rise to the following two issues:
1. Temporary exit suspension of the Branch’s Legal Representative (i.e., the Branch Director) until the procedure for termination of the tax code is completed;
2. Since the Branch Director of the HCMC Branch is also the Director of our other company’s branch in Binh Duong, the Binh Duong company may be unable to issue invoices during the processing period of the tax code termination at the HCMC Tax Department.
Therefore, we kindly ask SB Law to advise us on the above two points with references to applicable legal provisions.
Additionally, as we have planned to close the HCMC Branch as of June 2025, we have already vacated the leased office space. In this case, where the procedures for tax code termination and branch closure have not yet been completed, would there be any legal risks if we have already returned the office premises (which is the registered business address)?
Answer:
Regarding temporary exit suspension of the Branch Legal Representative and the potential inability of the Binh Duong company to issue invoices:
According to Clause 5, Article 36 of the Law on Exit and Entry, persons subject to temporary exit suspension include: taxpayers, legal representatives of enterprises subject to enforcement of administrative decisions related to tax administration, Vietnamese citizens emigrating abroad, and overseas Vietnamese who have not fulfilled their tax obligations prior to departure in accordance with tax regulations.
Therefore, during the tax code termination process, the Branch Director will only be subject to exit suspension if they fall within the above-mentioned categories. If not, there is no legal basis for such restriction.
In cases where the individual is subject to tax enforcement due to their position at another enterprise, this alone is not a sufficient legal basis for exit suspension under the current tax administration laws.
However, in practice, there have been cases where newly established companies face difficulties in registering for invoice issuance if their legal representative is also heading another entity under tax enforcement or temporary suspension. Nevertheless, the legal basis for such decisions by the tax authority remains unclear.
Regarding the return of the leased office prior to completing branch closure procedures:
Returning the leased office premises before completing the procedures for termination of the tax code and official branch closure may present legal risks. According to the regulations, an enterprise is required to maintain its registered head office or business location until all closure procedures are completed.
Failure to do so may result in administrative penalties for not operating at the registered address.
To mitigate risks and reduce costs, the Branch should consider negotiating with the landlord to allow the Branch to keep a business sign at the premises and to redirect mail or official correspondence (e.g., letters, parcels) to a designated contact person to ensure timely handling of any arising matters.
