"We never started doing business, generated no revenue, so why were we still required to declare taxes, pay back taxes, and be fined when we returned our business license?"
This is a very common question among individuals who register a business but do not actually operate it. In reality, many only discover, upon closing the business, that tax obligations have been silently accumulating for many years. This article analyzes a real-life situation, directly comparing it with the Tax Administration Law and current penalty decrees, to help readers understand the legal nature of the matter, avoid confusion between "not doing business" and "not having tax obligations," and draw important lessons to minimize risks when registering a business.
Real-life case study
“Mr. TQP registered his business on September 6, 2020. However, due to economic difficulties and family reasons, the business has not commenced operations since then. When processing the license return, I was informed that he had to declare taxes to obtain a tax identification number, pay fines, and pay back taxes from 2020. Throughout this period, Mr. TQP received no notification or guidance from the tax authorities. He wishes to be guided on the procedures for termination and to have the fines waived or reduced due to objective reasons.”
This case is not uncommon and serves as an important legal lesson for individuals entering the business world. Below is a detailed analysis based on current legal regulations.
Tax registration obligation: A proactive responsibility of taxpayers.
According to Article 30 of the 2019 Tax Administration Law, taxpayers must register for tax and be issued a tax identification number before commencing production and business activities.
For business households registered directly with the tax authority (Clause 2, Article 33 of the 2019 Tax Administration Law):
- The registration period is 10 working days from the date the Business Registration Certificate is issued.
Regarding the lack of notification: According to Article 17 of the Tax Administration Law, tax registration and the use of tax identification numbers are the responsibility of taxpayers. The law stipulates that this is a self-declaration and self-payment obligation; the tax authority is not obligated to send reminder notifications when individuals have not yet registered for a tax identification number for the first time.
Penalties for late tax registration.
Failure to meet deadlines from 2020 to the present (more than 90 days late) is considered a serious violation of tax procedure deadlines.
Based on Decree No. 125/2020/ND-CP (amended by Decree 310/2025/ND-CP):
- Penalty: A fine of VND 6,000,000 to VND 10,000,000 will be imposed for delaying tax registration by more than 91 days (Clause 4, Article 10).
Principles for calculating penalties (Article 7): For business households, the penalty level applied is the same as for individuals. Typically, the average penalty will be 8,000,000 VND.
- If there is one mitigating circumstance: Reduce the average penalty by 10%.
- If there are two or more mitigating circumstances: The minimum amount (6,000,000 VND) will be applied.
Is it possible to be exempted from or have the fine reduced due to "economic hardship" or "family reasons"?
According to Article 43 of Decree 125/2020/ND-CP, taxpayers are only exempt from penalties in cases of force majeure (as stipulated in Clause 27, Article 3 of the Law on Tax Administration), including:
- Natural disasters, catastrophes, epidemics, fires.
- The unexpected accident caused material damage.
Note: "Economic hardship" or "family reasons" are generally not considered force majeure circumstances under tax law to exempt taxpayers from penalties. Unless these hardships directly result in material losses due to natural disasters or unforeseen accidents, taxpayers are still required to comply with the penalty decision.
Handling tax obligations when no revenue is generated.
Even if they haven't started a business, taxpayers are still required to do the following:
- Tax declaration: To provide the tax authorities with a basis for determining that the business household has not generated any revenue (the flat-rate tax is zero).
- Tax collection: If, during the period from 2020 to the present, the business household has not completed the procedures for temporarily suspending business operations as required, legally, the business household is still operating and must pay annual business license taxes (business license fees).
Procedure for terminating the tax identification number and returning the license.
To complete the business closure process, you need to follow the procedures outlined in Circular 86/2024/TT-BTC:
- Step 1 – Fulfilling tax obligations: Submitting the initial tax registration application (supplementing late applications), complying with administrative penalties for tax procedure violations, and paying all business license taxes incurred from 2020 until the end of the period.
- Step 2 – Termination of tax identification number: Information from the business registration authority will be shared with the tax authority to close the tax identification number after you have fulfilled all tax obligations.
Once you have your business license, you should proactively familiarize yourself with your tax obligations immediately. If you are not yet ready to operate, you must go through the procedure to temporarily suspend business operations to avoid incurring business license tax and other procedural complications later on.
Contact information MAN – Master Accountant Network
- Address: No. 19A, Street 43, Tan Thuan Ward, Ho Chi Minh City
- Mobile/Zalo: 0903 963 163 – 0903 428 622
- Email: man@man.net.vn
Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Source: Article Vietnam Law
