Vietnam Caps Business Suspension Period to Two Years Under New Decree

A new decree in Vietnam has set a maximum limit of two consecutive years for businesses to temporarily suspend their operations. This regulation, effective from July 23, 2024, under Decree 296/2026, stipulates that companies and their branches, representative offices, and business locations can announce a temporary suspension of operations for a maximum of 12 months at a time. Should a business wish to extend this suspension, it must notify the provincial business registration agency at least three days before the planned continuation of the closure. However, the total consecutive period of business suspension cannot exceed 24 months. This means a business can suspend operations twice consecutively, each for 12 months, or register shorter closure periods, as long as the total continuous downtime does not surpass two years. The rule also applies to businesses that had already suspended operations before July 23. Upon the expiry of the 24-month suspension period, businesses must choose between resuming operations or proceeding with dissolution procedures. If a business fails to confirm its return to operation, the business registration authority will request a report and forward the information to the tax authorities. If the company does not submit a report within six months, the managing agency may revoke its business registration certificate and compel dissolution. Under Decree 296, businesses are still required to fulfill financial obligations and settle outstanding debts and contracts with customers and employees during their suspension period. Regarding tax obligations, businesses and household businesses are exempt from filing tax returns during their temporary suspension. However, if the suspension period does not cover a full month, quarter, or fiscal year, the entity must still file tax returns for the corresponding period. According to data from the General Statistics Office (Ministry of Finance), in the first seven months of the year, Vietnam saw approximately 187,200 new businesses established and returning to operation, a 7.5% increase compared to the same period last year. Meanwhile, 155,300 entities withdrew from the market, up 7.6%. On average, about 26,700 businesses entered and 22,200 units withdrew each month.