Estimating the Cost of Closing an FDI Enterprise – Why a Legal & Tax Health Check Is Needed Before Filing for Dissolution

Authors: Truong Trong Minh – Senior Associate, Vo Thi Anh Nhi – Paralegal.

For FDI enterprises that no longer wish to operate in Vietnam, the preparation stage for the dissolution procedure needs to be carefully prepared and calculated in detail before submitting the dossier to the state management authority. In practice, each enterprise has a different legal status: some have only just begun operations, some have already fulfilled their tax obligations, but there are also cases that have ceased operations for many years, still have outstanding tax obligations, are not compliant with tax reporting and investment reporting obligations, or have other unresolved debts.

Therefore, before officially filing the dissolution dossier, an enterprise should carry out a legal and tax health check to determine its actual situation, which obligations still need to be handled, and what steps the dissolution process will involve, as well as any issues that may arise, in order to make the most accurate estimate for its financial plan.

1. Why is it necessary to review “legal and tax health” before filing the dissolution dossier?

a) Carrying out tax finalization at the Tax authority

Before completing dissolution, an enterprise must fulfill any outstanding tax obligations. For FDI enterprises that have been operating for many years, the review may involve the history of tax declaration and fulfillment of tax obligations, tax incentives that have been applied, and obligations relating to related-party transactions, if any, with the parent company or related parties overseas.

If errors in accounting, under-declaration, or improper application of tax incentive policies occurred during the course of operations, the enterprise may incur outstanding taxes, late payment interest, and other penalties or financial obligations, depending on each case.

Therefore, reviewing tax compliance obligations before filing the dossier helps an enterprise proactively identify outstanding debts and promptly prepare and gather sufficient documents and records to support its explanations, rather than waiting until they are discovered and handled by the state management authority.

b) Obligations to employees must be fully resolved

An enterprise needs to review and complete any outstanding obligations to its employees, including wages, social insurance, allowances, and other benefits, if any.

For enterprises that have ceased operations for a long period of time, personnel and insurance records may no longer be complete, while the enterprise still needs to accurately determine its outstanding obligations.

Unresolved debts or disputes with employees may cause the dissolution process to require additional procedures and extend the time needed to complete it.

c) Payables and other financial obligations

Debts owed to suppliers, banks, partners, and other related parties also need to be reviewed before proceeding with dissolution.

For FDI enterprises, particular attention should be paid to foreign loans, guarantee obligations, contractual obligations, financial commitments, or other unresolved obligations relating to investment activities.

Fully identifying payables helps an enterprise arrange an appropriate plan for payment, liquidation, or resolution before completing the termination process.

d) Other compliance obligations

FDI enterprises need to reconcile their legal records with their actual status, especially the Investment Registration Certificate, the Enterprise Registration Certificate, and any amendment records throughout the course of operations.

Matters such as investment capital, charter capital, the legal representative, address, business lines, and other registration changes need to be checked to ensure the records are consistent and complete.

For enterprises that have undergone multiple changes but have not fully updated or kept complete records, an advance review can help detect and resolve errors before entering the dissolution process.

In addition, FDI enterprises need to check full compliance with obligations to report on the implementation of the investment project and investment supervision reporting, in order to ensure full compliance and avoid the enterprise having to undergo an inspection or administrative sanction while carrying out the procedure to terminate the project.

2. Why does reviewing in advance help produce a more accurate cost estimate?

If the review step is skipped, an enterprise usually only anticipates visible costs such as:

• Fees for consulting, legal, and accounting services
• Filing fees at state authorities
• Costs of liquidating assets and terminating office/factory lease agreements

However, actual costs may increase further depending on the situation of each enterprise, for example:

• Outstanding taxes, late payment interest, or administrative penalties, if any;
• Additional costs to supplement or complete accounting and tax records;
• Costs of resolving unfinished obligations to employees;
• Costs of resolving outstanding debts, contracts, or disputes;
• Travel and business trip expenses of the legal representative if the matter is prolonged.

Reviewing in advance gives an enterprise an overall picture of mandatory costs, costs that may arise, and costs that depend on the actual situation, thereby enabling it to build a more realistic budget.

More importantly, the investor can know in advance which issues need to be resolved early, rather than only discovering them once the dossier has already been submitted.

Therefore, closing an FDI enterprise is not merely an administrative procedure but a process that requires careful legal and financial preparation.

Proactively reviewing “legal and tax health” before filing the dissolution dossier helps investors:

• Identify outstanding obligations and risks early;
• Limit unexpected additional costs;
• Be more proactive regarding budget and processing time;
• Build a dissolution roadmap suited to the enterprise’s actual situation.

For FDI enterprises that have ceased operations for a long time or whose records and books are incomplete, this initial review step is even more important. The cost and time spent on an advance check usually create significantly greater savings compared to dealing with issues that arise after the dissolution process has already begun.

CDLAF’s Advisory Services for the Dissolution of FDI Enterprises

CDLAF Law Firm is committed to accompanying and supporting enterprises in carrying out the dissolution procedure safely, lawfully, effectively, and with well-controlled risk, including:

• Reviewing and assessing the legal status, accounting records, social insurance, and labor situation before dissolution; proposing appropriate options and a roadmap.
• Carrying out the enterprise dissolution procedure, drafting the dossier, and representing the enterprise in working with the business registration authority, the tax authority, and the social insurance authority throughout the dissolution process.
• Advising on legal matters arising throughout the enterprise’s dissolution process.

📩 BOOK A CONSULTATION WITH CDLAF’S LEGAL TEAM

Do not let procedural errors disrupt your business plans. Contact CDLAF today to receive a preliminary risk assessment from our team of Lawyers:

Hotline/Zalo: [+84 909 668 216]

Email: info@cdlaf.vn

You can refer for more information:

• • Handling Capital After Dissolution for FDI Enterprises: Conditions for Closing the DICA Account and Legally Remitting Funds Abroad
  • Abandoning an FDI Legal Entity in Vietnam: The Risk of Exit Suspension and the Liability of the Foreign Director
  • Tax Finalization upon Dissolution of an FDI Enterprise: 4 Cost-Disallowance Risks and Solutions for a Safe Tax Code Closure
  • Termination of Operations of an FDI Enterprise in Vietnam — Dissolution Procedure and Tax Code Closure
  • Costs of Corporate Dissolution: Economical Yet Effective