Risks Arising from Non-Operation at Registered Business Address

The article concentrates on the risks arising from non-operation at registered business address.

According to the prevailing Law on Enterprises No. 59/2020/QH14 ("LOE 2020"), when registering for establishment, an enterprise must have a head office address with 04 clear levels of administrative units. On change of head office, it must promptly register the change within 10 days. The head office address is the mailing address of the business^[1], publicized on National Business Registration Portal at https://dangkykinhdoanh.gov.vn.

It can be seen that the head office address plays an important role in the day-to-day operation of an enterprise and in the management of competent State authorities.

However, in practice, there are certain situations where enterprises do not temporarily operate at the registered head office address. This can lead to certain legal risks. In this article, BLG would like to clarify the relevant legal issues and provide corresponding recommendations.

1. Scenarios Deemed as Non-Operation at the Registered Address

Currently, the enterprise registration process operates on a "pre-register, post-check" mechanism. The business registration agency grants or refuses to grant enterprise registration based on the validity of the dossier and is not responsible for any pre or post registration violations committed by the enterprise^[2]. Subsequently, the business registration agency may request the enterprise to report its compliance with the Law on Enterprise directly, or request a competent State agency to conduct an inspection^[3].

It is noted that an enterprise is not required to prove its actual operation at the location registered as its headquarters when registering for establishment or change of address. Competent State agencies will later ascertain through inspection whether the enterprise is conducting its business activities at the registered address.

Certain State agencies could trigger such inspection. However, from our experience, such action usually comes from the tax authority. Specifically, the tax authority conducts inspection at the enterprise’s registered address under various circumstances, such as cases of tax refund, post-clearance; restructure, shutdown, changes of business location, planned inspection, or when signs of violations are apparent^[4]. A noteworthy point is that the tax authority uses groups of criteria and indicators to identify enterprises to be inspected. They do not only base on the criteria of revenue, tax declaration, tax payment, use of invoices… but also consider general information to evaluate an enterprise. Low fixed asset value/equity ratio; or frequent changes in enterprise registration information (address, legal representative, etc.) are also considered sign of risk^[5].

Specifically, the tax authority may verify whether an enterprise’s actual operation at its registered address in the following events^[6]:

- The enterprise fails to submit tax declaration or report despite the second notice from the tax authority.

- Documents of tax authority sent to the enterprise by post are returned as there is no recipient.

- Reports from any individual, organization, or notice from competent authority highlight the non-operation of the enterprise at the registered address.

Upon verification, if the enterprise no longer operates at the registered address, the tax authority records the enterprise’s status as “taxpayer’s non-operation at the registered address” and notifies relevant authorities, including the business registration agency for system updates.

Besides, in case of relocation, if the enterprise does not complete the procedure with the new tax authority, it will also be recorded as “taxpayer’s non-operation at the registered address”^[7].

2. Consequences of Non-Operation at the Registered Address

(a) For the enterprise recognized as non-operation at registered address

When an enterprise is recorded as not operating at the registered address, such information will be published on national portals of the General Department of Taxation and the National Business Registration Portal. If the enterprise has dependent units, the tax authority will also update their status as non-operation at the registered address.

Subsequently, the tax authority deactivates Tax Identification Number (TIN) code of the enterprise, and could cooperate with the business registration agency to revoke the enterprise registration certificate, certificate of operation registration of branch, representative office, and place of business as per the Law on Enterprises^[8].

The enterprise may face fine for the above violation. All costs and expenses incurred relating to the issues of registered address are not deductible as stipulated by tax regulations.

(b) For related parties

All invoices issued by the enterprise from the date it is determined as non-operation at the registered office are deemed invalid. Consequently, the related parties cannot use such invoices for tax declaration. In addition, they may be requested to repay taxes resulting from the use of invalid invoices and face penalties in accordance with applicable laws.

3. Recommendations 

Although an enterprise is entitled to request tax authority to restore a deactivated TIN code, and the status as non-operation at registered address does not automatically lead to the revocation of the Enterprise Registration Certificate, this still causes significant challenges for enterprises.

We understand that, in some cases, for objective reasons, enterprises may temporarily not operate at their registered address (e.g.: remote operation when seeking new projects). The following measure could be carefully considered to mitigate risks:

- Ensure the legitimate use of the location registered as the office (e.g., through a lease contract; a certificate of land use rights and assets attached to land, etc).

- Display the company signboard and contact information at the registered address.

- Consider using the supporting services of co-working space service providers (e.g., receiving and forwarding mail, etc.).

For the avoidance of doubt, it is imperative to note that BLG neither encourage nor support the practice of non-operation at the registered address. In all cases, BLG emphasize that enterprise operating in Vietnam must fully comply with all legal regulations.

^[1] Article 4.13 of LOE 2020.

^[2] Article 4.3 and Article 15.1 of Decree No. 01/2021/ND-CP on enterprise registration (“Decree 01/2021”).

^[3] Point c, d of Article 216.1 of LOE 2020.

^[4] Article 110 of Law on Tax Administration No. 38/2019/QH14.

^[5] Decision No. 78/QD-TCT on 02 February 2023 issuing the Set of criteria to evaluate, identify the signs of risks in administration and use of invoice; Directive No. 01/CT-TCT on 11 April 2023 on strengthening measures to review and inspect invoices to prevent fraud in the use of invoices.

^[6] Article 17.2 of Circular 105/2020/TT-BTC guiding tax registration (“Circular 105/2020”).

^[7] Point c of Article 11.3 of Circular 105/2020.

^[8] Clause 3, 5, 6 of Article 17 of Circular 105/2020.

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