The situation where many individuals register a business but do not actually operate it, and then unexpectedly face back taxes and heavy penalties when dissolving it, is becoming increasingly common. This article analyzes the real-life case of Mr. Tran Quang Phuong in Lam Dong to clarify the obligation to register a tax code and the latest penalty regulations in 2026, helping people avoid unnecessary legal risks.
Legal risks of neglecting tax registration obligations.
Many individuals, after receiving their business registration certificate, often become complacent, believing that if they haven't started actual operations or generated no revenue, they don't need to complete tax procedures. However, according to Article 30 of the 2019 Tax Administration Law, taxpayers must register for tax and be issued a tax identification number before starting production or business activities, or immediately after obtaining a business license.
The case of Mr. Tran Quang Phuong (residing in Lam Dong province) is a typical example. He registered his business on September 6, 2020, but due to economic difficulties, he never actually operated it. At the beginning of 2026, when he went to the authorities to return his license, he was shocked to be informed that he had to declare taxes, pay administrative fines, and be subject to back taxes from 2020 to the present. According to sources... Vietnamese Law, The failure to register for a tax identification number within the stipulated timeframe has resulted in a tax debt that has accumulated over the past five years.
Regulations on deadlines and penalties for administrative tax violations.
According to Clause 2, Article 33 of the 2019 Tax Administration Law, for taxpayers registering directly with the tax authority, the registration deadline is 10 working days from the date of issuance of the business registration certificate. Delays will be severely penalized according to Decree 125/2020/ND-CP and Decree 310/2025/ND-CP, which came into effect at the end of 2025.
Specifically, the act of registering for tax after the prescribed deadline of 91 days or more will face a fine of VND 6,000,000 to VND 10,000,000 for business households. According to the principle of applying penalties in Article 7 of Decree 125/2020/ND-CP, the tax authority will calculate the average of the penalty range (VND 8,000,000). Only if there are two or more mitigating circumstances will the minimum penalty of VND 6,000,000 be applied.
Conditions for exemption or reduction of fines due to force majeure
In his petition to the authorities, Mr. Phuong presented reasons of economic and family hardship in the hope of receiving leniency. However, based on Article 43 of Decree 125/2020/ND-CP and the Law on Tax Administration, exemption from penalties is only applicable if the taxpayer suffers material damage due to force majeure circumstances such as:
- Natural disasters, catastrophes, epidemics, fires, or unexpected accidents.
- Other force majeure events as specifically stipulated by the Government.
Reasons such as "not knowing the regulations," "not receiving guidance notices from the local tax authority," or "personal financial difficulties" are not eligible for exemption or reduction of penalties. The tax authority affirms that the responsibility of business owners to independently understand and comply with the law is a mandatory obligation from the moment they receive their business license.
The process of ceasing operations and fulfilling tax obligations.
To properly complete the business license return procedure and avoid further violations, business owners need to comply with the process outlined in Circular 86/2024/TT-BTC:
- Fulfilling tax filing obligations: Household owners must file tax returns for the entire period from the date of license issuance to the date of termination. Even if no revenue is generated, filing is still mandatory to determine operational status.
- Payment of taxes and fees: This includes the annual business license fee, any lump-sum taxes (if applicable), and late payment penalties incurred throughout the license holding period.
- Settlement of administrative fines: The full amount of the fine must be paid according to the penalty decision (as in the case of Decision No. 721/QD-XPHC concerning Mr. Phuong).
- Termination of tax identification number validity: Termination information will be shared between the business registration authority and the tax authority after the household head has fulfilled all financial obligations to the state budget.
Conclude
Understanding tax registration regulations right from the start of establishing a business is crucial to protecting your rights and avoiding unnecessary financial risks. The case of Mr. Tran Quang Phuong shows that a lack of up-to-date tax policies can lead to a heavy tax burden accumulating over many years. If you are facing difficulties with legal procedures or want to ensure compliance with current regulations, please refer to our professional support solutions. MAN Investment Certificate For prompt and efficient advice and processing of your application.
Contact information for MAN – Master Accountant Network
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Content production is overseen by: Mr. Le Hoang Tuyen – Founder & CEO of MAN – Master Accountant Network, CPA Vietnam with over 30 years of experience in accounting, auditing, and financial consulting.
