In accordance with Clause 2, Article 14 of Circular No. 105/2020/TT-BTC dated December 3, 2020, of the Ministry of Finance guiding tax registration, "Dependent units of enterprises, before submitting documents to terminate their activities at the business registration authority, must submit documents to the tax authority directly managing to carry out tax procedures, fulfill tax obligations as prescribed..." This means that, in principle, dependent units must finalize and fulfill all tax obligations before formally ceasing operations.
However, concerning tax rights such as deducting input value-added tax (VAT), practical experience also recognizes cases where dependent units have ceased operations but have not fully deducted the VAT.
Recently, the General Department of Taxation issued Official Letter No. 1362/TCT-KK dated April 2, 2024, in response to the Long An Provincial Tax Department regarding the deduction of VAT for branches that have ceased operations. Accordingly, the General Department of Taxation provides guidance as follows:
In cases where a branch is a dependent unit of an enterprise (parent company) and terminates its operations and tax identification number according to the decision of the parent company but still has undeducted input VAT amounts, if it meets the full conditions for deducting taxes as prescribed by law, then that branch can transfer the undeducted input VAT amount to the parent company for the parent company to continue to declare and deduct as prescribed.
This stems from the nature of the branch being a dependent unit of the enterprise. Therefore, the rights and obligations of the branch upon cessation of operations will be inherited and implemented by the enterprise.
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