I. Regulations on charter capital contribution of enterprises

According to the provisions of the Enterprise Law 2020 on capital contribution for establishment, members must contribute capital to the company in full and with the right type of assets committed when registering to establish a business within 90 days from the date of approval. issue a Certificate of Business Registration, excluding the time it takes to transport and import assets contributed as capital, and carry out administrative procedures to transfer asset ownership. If not contributing enough capital, the enterprise must adjust and reduce its charter capital according to the actual amount of capital contributed. Members or shareholders who do not contribute enough capital may be removed from the list of members/shareholders.

II. Legal risks for businesses when businesses do not contribute enough charter capital

According to the provisions of Clause 5, Article 16 of the Enterprise Law 2020, regulations on prohibited acts: “False declaration of charter capital, failure to contribute the full amount of charter capital as registered; intentionally valuing assets contributed as capital at an incorrect value.”

According to Decree 122/2021/ND-CP stipulating sanctions for administrative violations in the fields of accounting and investment, there are sanctions for acts of not contributing capital on time and acts of not registering changes with the agency. Business registration office when not contributing enough charter capital as registered. Specifically as follows:

• If an enterprise falsely declares its charter capital, it will be fined from 20 million VND to 100 million VND depending on the level of charter capital declared by the enterprise.
• If the enterprise does not carry out capital adjustment procedures or change members at the end of the capital contribution period and the capital adjustment period expires, a fine of between VND 20 million and VND 30 million will be imposed. 

III. Tax risks when businesses do not contribute enough charter capital

3.1. Refund of value added tax

According to the provisions of tax law in Vietnam, the issue of fully contributing charter capital is not a direct condition for determining the right to a value-added tax (VAT) refund of an enterprise. However, failure to contribute enough charter capital may affect some aspects related to eligibility and conditions for VAT refund.

VAT deduction (Value added) is a mechanism in Vietnam’s tax system that allows businesses and organizations to deduct the VAT amount paid when purchasing goods and services (input tax) from the VAT amount payable from sales. goods and services (output tax). This is part of the principle of VAT, to ensure that tax is only levied on the added value of each step in the supply chain.

VAT refund for investment projects is a mechanism to help businesses or investors receive a refund of input VAT paid during the implementation of investment projects, especially for new investment projects. The purpose of this tax refund is to support businesses, help reduce initial investment costs and promote production and business activities.

According to current regulations, enterprises are not entitled to a refund of value-added tax but are allowed to carry forward the undeducted tax amount of the investment project according to the provisions of law on investment to the next period in the following cases: : 

• Not contributing enough charter capital as registered.

• Doing business in conditional occupations but not meeting business conditions.
• Investment project Exploitation of natural resources and minerals licensed from July 1, 2016 or investment projects to produce goods in which the total value of natural resources and minerals plus energy costs accounts for 51% or more of the product cost. products or more according to investment projects.

So, If business Are not If you contribute the full amount of charter capital as registered, you will not receive a VAT refund, but you will be able to carry over the undeducted tax amount of that investment project to the next period as prescribed by law.

3.2. Interest expense type risk

According to regulations, loan interest expenses cannot be deducted when calculating corporate income tax corresponding to the charter capital not yet fully contributed. Thus, if the enterprise does not contribute enough charter capital, interest expenses will not be deducted when calculating corporate income tax. 

However, businesses may have to pay additional fines for false declaration and late payment of taxes according to regulations.

IV. Risk of civil liability

In some cases, charter capital will be used as a basis for determining legal liability. As an example of a limited liability company, the law on enterprises stipulates that: “Members are responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise…”. At that time, the enterprise may have to bear higher legal liability than in reality because it does not adjust its charter capital to the actual contributed charter capital. This is especially important if the business is unable to pay its debts or is dissolved. 

V. About Us, Hankuk Law Firm

■ Hankuk Law Firm – Introduction

The goal of the legal services provided by HANKUK LAW FIRM is to support businesses, investors, and people. Our organization employs skilled Korean lawyers, partners, and professionals to provide legal services to businesses related to corporations and litigation.

To support the startup process, our lawyers and staff provide a wide range of services, including business law consulting, tax and immigration law consulting, real estate services, business consulting, marketing and communications, human resources, product distribution, franchise options, etc. We provide expert advice on every aspect of your business needs.

To protect the legitimate rights and interests of our clients and achieve the best results, we provide legal advice and participate in civil lawsuits related to business, labor, marriage, family, and inheritance.

■ Contact us now

For reliable and effective legal advice, please contact HANKUK LAW FIRM now. We are committed to providing you with the best possible answers and our team of experienced lawyers has extensive knowledge in many legal fields. We are always here to provide the most competent and dedicated support, whether you are dealing with contractual issues, commercial disputes or need guidance on foreign investment. HANKUK LAW FIRM is honored to have assisted hundreds of domestic and international clients in skillfully resolving complex legal issues as their trusted legal partner. Do not let legal issues hinder your success. Let us accompany you towards legal achievement and comfort. For prompt guidance and support to ensure your rights are always maintained at the highest standards, contact HANKUK LAW FIRM now.

■ Contact Hankuk Law Firm:

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