LEGAL CONSEQUENCES WHEN A BUSINESS DOES NOT OPERATE AT HEAD OFFICE

Legal basis

  • Decree 98/2020/ND-CP.
  • Law on Tax Administration 2019
  • Circular 26/2015/TT-BTC
  • Circular 119/2014/TT-BTC

1. Legal consequences for businesses not operating at the headquarters

Enterprises that do business at the wrong location as stated in the issued business license will have to suffer the following legal consequences: 

  • Penalties for administrative violations: Accordingly, businesses that do business at the wrong location as stated in the business license will be fined from 5,000,000 VND to 10,000,000 VND (Except in cases where the company has registered business activities for the business location). business other than the head office). If there is a repeat violation or multiple violations, the business may have its business license revoked for 1 to 3 months.
  • Closed tax code: When the tax authority will verify the operating status of the business and determine that the business is not operating at the registered address, after a certain period of time, the tax authority will close the tax code of the business. career. This penalty is specified in Point d, Clause 2, Article 39 of the Law on Tax Administration 2019:

“Article 39. Termination of tax code

  1. Taxpayers who register taxes directly with the tax authority will have their tax code invalidated in one of the following cases:

…

  1. d) The tax authority issues a notice that the taxpayer does not operate at the registered address;”
  • Do not buy invoices from tax authorities if you are eligible to buy invoices: Within 5 working days after receiving the enterprise’s request to use printed invoices, the directly managing tax agency will go to the enterprise’s headquarters to check and issue a Notice of use. printed invoice. Therefore, if the business does not have actual operations at the registered business location, it will not be approved to print invoices. (Clause 4, Article 3, Circular 26/2015/TT-BTC)
  • Costs related to unregistered business locations cannot be accounted for when determining corporate income tax.
  • VAT is not deductible for expenses related to unregistered locations: Businesses will not be entitled to tax deductions if the invoice does not record or does not correctly record one of the criteria such as: name, address, tax code of the seller, so the seller cannot be identified (except in the case of business establishments). may declare and deduct VAT on goods and services purchased under authorization for another organization or individual and the invoice bears the name of the authorized organization or individual). This regulation is based on Clause 15, Article 14 of Circular 219/2013/TT-BTC:

“Article 14. Principles of input value added tax deduction

…

  1. Business establishments are not allowed to deduct input VAT in the following cases:
  • VAT invoices are not used in accordance with the law, such as: VAT invoices do not record VAT (except for special cases where VAT invoices are used to record the payment price as including VAT);
  • The invoice does not record or does not correctly record one of the indicators such as the seller’s name, address, tax code, so the seller cannot be identified;
  • The invoice does not record or incorrectly records one of the criteria such as the buyer’s name, address, tax code, so the buyer cannot be identified (except for the instructions in Clause 12 of this Article);
  • Fake VAT invoices and payment documents, erased invoices, false invoices (no goods or services attached);
  • Invoices record values ​​that do not match the actual value of goods or services purchased, sold or exchanged.”

However, if the company has registered a business location other than the head office, the company can do business at that location without operating at the head office. In case of inspection, the company will not be fined for doing business in the wrong location.

LEGAL CONSEQUENCES WHEN A BUSINESS DOES NOT OPERATE AT HEAD OFFICE

2. Regulations on cases of tax code restoration

Restore tax code is the tax authority allowing a business, organization or individual to restore their tax code after being closed due to violating regulations on registration and business operations. Closed tax codes can be restored in the following cases:

  • The business re-operates at the registered address or registers a new legal business location.
  • Enterprises overcome violations such as tax debt or failure to register promptly and have fully fulfilled tax obligations.
  • Pay off all tax debt and meet requirements from tax authorities.

Procedure for restoring tax code:

  1. Enterprises submit documents to request tax code restoration to the tax authority.
  2. The tax authority will review the situation and require the business to provide additional documents proving its new operations or business location.
  3. After checking, the tax authority will decided to restore the tax code and notify businesses.

Note:

  • The time to restore the tax code can take from a few weeks to several months, depending on the business providing complete records and supporting documents.
  • If a business does not restore its tax code or does not properly fulfill its tax obligations, it will encounter many difficulties in business operations, such as not being allowed to issue invoices and not being able to buy invoices from tax authorities.

3. About Us, Hankuk Law Firm

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