By Lawyer Nguyen Nhu Hai – UniLaw LLC

Taxation and Law: Understanding Legal Obligations and Hiring Attorneys

In the complex landscape of Vietnam’s developing economy, the intersection of Taxation and Law: Understanding Legal Obligations and Hiring Attorneys has become a critical focal point for both domestic enterprises and foreign investors. Navigating the labyrinth of tax codes, enterprise regulations, and investment commitments requires more than just accounting; it demands a sophisticated legal strategy to ensure compliance and mitigate risks. This article provides an in-depth analysis of these obligations, beginning with a real-world case that underscores the severe consequences of overlooking legal and tax duties in commercial transactions.

The Critical Case of Hidden Tax Liabilities in Capital Transfers

The importance of legal certainty regarding tax obligations is perhaps best illustrated by a significant dispute involving a capital transfer agreement between an individual, referred to here as Mrs. D1, and a Plaintiff entity, Company T3. The case, documented in Decision No. 10/2025/QD-PT, centers on Principle Contract No. 01/HDCNV18 for the transfer of capital.

The Situation: Under Clause 2, Article 2 of the Principle Contract, the Plaintiff (the Seller) made a solemn guarantee: “The Seller commits and ensures that before the parties proceed with the capital transfer procedures, the Company has no outstanding tax debts or other financial obligations to state agencies”. Relying on this assurance, Mrs. D1 (the Buyer) agreed to the transfer. However, during the implementation phase, the Tax Department of Province D issued Notification No. 9127/TB-CTDON dated December 1, 2021. This official document revealed a staggering reality: the target company actually owed the state budget a total of 32,250,905,969 VND in taxes, penalties, and late payment interests.

Mrs. D1 subsequently delayed her third payment installment, arguing that her delay was a direct result of the Plaintiff’s failure to settle the company’s financial and tax liabilities as promised. The Plaintiff, however, sued Mrs. D1, demanding the remaining payment plus a 10% annual interest rate for late performance of obligations.

The Judgment: The court scrutinized the Plaintiff’s breach of the “no tax debt” commitment. It was noted that at the first-instance trial on April 24, 2025, the Plaintiff admitted they still had unpaid tax arrears. The court determined that the Plaintiff’s deliberate concealment of these debts and failure to settle them within the agreed timeframe constituted a serious violation of the Principle Contract. Consequently, the court applied Article 294 of the Commercial Law regarding exemptions from liability when a breach is caused by the other party’s fault. The court ruled that Mrs. D1’s delay in payment was justified due to the Plaintiff’s prior breach. The Plaintiff’s request for late payment interest was rejected as it did not align with the actual will of the parties or the reality of the breach. This case highlights that tax obligations are not merely numbers on a ledger; they are fundamental legal warranties that can derail multi-million dollar transactions if not handled with professional legal oversight.

Fundamental Obligations of Enterprises under the Law

Every business operating in Vietnam, whether a local start-up or a multinational subsidiary, is bound by a core set of duties defined by the Law on Enterprises. Understanding these is the first step in mastering Taxation and Law: Understanding Legal Obligations and Hiring Attorneys.

Article 8 of the Law on Enterprises (Law No. 59/2020/QH14) outlines the primary obligations of a business entity:

“Article 8. Obligations of enterprises… 5. To organize accounting, pay taxes and perform other financial obligations in accordance with the law”.

Interpretation for clients: This article makes it clear that paying taxes and keeping accurate books is not optional; it is a mandatory legal duty of the company itself. Failing to do so is a direct violation of the law that governs the company’s very existence.

Furthermore, the law mandates transparency and accuracy in reporting:

“Article 8. Obligations of enterprises… 4. To fully and promptly perform obligations regarding enterprise registration, registration of changes in enterprise registration contents, public disclosure of information on the establishment and operation of the enterprise…”.

Interpretation for clients: Companies must keep the government updated on who owns them and where they are located. If you move your office or change your director and don’t report it, you are breaking your legal obligations.

The “active” status of a company is often tied to its tax compliance. For instance, an enterprise can be legally marked as “no longer operating at the registered address” if the tax authorities cannot find them during verification. This status is updated in the National Business Registration Database, and only the tax authority has the power to decide when this negative legal status ends.

The Legal Framework of Value Added Tax (VAT)

Value Added Tax is a consumption tax that permeates almost every commercial interaction. The Law on Value Added Tax defines the scope and the responsible parties.

“Article 2. Value-added tax: Value-added tax is a tax calculated on the added value of goods and services arising during the process from production and circulation to consumption”.

Interpretation for clients: VAT is essentially a tax on the “markup” or value added at each stage of a product’s life. Businesses act as collectors for the government, taking VAT from buyers and paying it to the state.

The law also specifies who must pay this tax:

“Article 4. Taxpayers: 1. Organizations and individuals producing and trading in goods and services subject to value-added tax (hereinafter referred to as business establishments). 2. Organizations and individuals importing goods subject to value-added tax (hereinafter referred to as importers)”.

Interpretation for clients: If you sell goods, provide services, or bring products into Vietnam from abroad, you are legally a “taxpayer” in the eyes of the VAT law.

Compliance with VAT also involves strict rules on invoicing. Article 13 of the Law on VAT (as amended) prohibits several fraudulent activities:

“Article 13. Prohibited acts in tax deduction and refund: 1. Buying, giving, selling, organizing advertising, brokering the purchase and sale of invoices. 2. Creating fake transactions… 4. Using illegal invoices…”.

Interpretation for clients: You cannot buy “fake” invoices to reduce your tax bill. The government considers this a serious crime, and it can lead to heavy fines or criminal charges.

Corporate Income Tax (CIT): Calculation and Legal Standards

Corporate Income Tax is the tax levied on the profits of a company. It is one of the most complex areas where Taxation and Law: Understanding Legal Obligations and Hiring Attorneys becomes vital.

The basic formula for determining taxable income is provided in the regulations:

“Article 6. Determination of taxable income: 1. Taxable income in a tax period is determined as follows: Taxable income = Taxable income – Tax-exempt income + Losses carried forward according to regulations”.

Interpretation for clients: To find out how much tax you owe, you take your total profit, subtract any income the government says is “exempt” (like certain agricultural profits), and then add any losses from previous years that you are allowed to count.

A crucial rule often missed by smaller enterprises is the quarterly provisional payment requirement:

“Total corporate income tax temporarily paid for 04 quarters must not be lower than 80% of the corporate income tax payable according to the annual tax finalization. In case the taxpayer pays less… they must pay late payment interest…”.

Interpretation for clients: You can’t wait until the end of the year to pay all your taxes. You must pay a “guess” amount every three months. If your total “guesses” are much lower than what you actually owed, the government will charge you interest on the difference.

The role of an attorney is often to identify “deductible expenses.” Not every dollar spent by a business reduces its taxable profit. For example, interest paid on loans corresponding to unpaid charter capital is not deductible. Without legal counsel, a business might incorrectly calculate its profit, leading to an audit and heavy penalties.

Legal Consequences of Tax Non-Compliance

Failing to meet tax obligations triggers a cascade of legal enforcement measures. Under Article 125 of the Law on Tax Administration, the most severe administrative measure is the revocation of the business registration certificate.

“Revocation of the Enterprise Registration Certificate due to tax management enforcement” is a legal status where the Business Registration Office, at the request of the tax authority, officially cancels a company’s right to exist because of unpaid taxes. The only way to end this status is if the tax authority confirms that the debt has been settled or a payment plan has been approved.

Perhaps even more personal for business owners is the “Exit Suspension” or travel ban:

“Article 2. Objects of application: 1. Individual business, household business owners, individuals who are legal representatives of enterprises… in the case of being forced to execute administrative decisions on tax management… or not operating at the registered address…”.

Interpretation for clients: If your company owes significant taxes (usually over 500 million VND for companies), the government can stop you, the Director, from leaving Vietnam at the airport. You will be stuck in the country until the company’s tax bill is paid.

The Vital Role of Attorneys in Tax Finalization and Licensing

Hiring attorneys is not just for disputes; it is for prevention. Unilaw’s internal records show extensive work in supporting clients through “tax finalization,” a process required before a company can be dissolved or merged.

In the case of Hyweb Vietnam, a company from China, Unilaw assisted in the complex process of tax finalization to complete the official dissolution. This involved clearing all VAT and CIT obligations with the Hanoi Tax Department and obtaining confirmation from the General Department of Customs that no import-export tax debts remained.

“Work performed by UNILAW: … Consulting in detail on legal regulations related to the dissolution of enterprises with foreign investment… đại diện or supporting the client in working with competent state agencies… General Department of Customs: UNILAW supported the Company in applying for confirmation of no import-export tax debt”.

Interpretation for clients: When you want to close a business, you can’t just walk away. You need a “clean bill of health” from the tax and customs offices. A lawyer handles the paperwork and negotiations to make sure you can close the doors legally.

Attorneys also provide “Advice Letters” that act as a shield. For a client named Cncvina, Unilaw provided a comprehensive list of administrative and tax procedures required after receiving an Investment Certificate, including guidance on CIT, PIT, and VAT reporting deadlines to avoid administrative fines.

Taxation Obligations in Foreign Investment (FDI)

Foreign investors face additional layers of Taxation and Law: Understanding Legal Obligations and Hiring Attorneys. Under Vietnam’s commitments to the World Trade Organization (WTO), foreign-invested enterprises (FIEs) are often restricted in the types of services they can provide during the first few years of operation.

For example, in Taxation Services (CPC 863), FIEs were initially only permitted to supply services to other foreign-invested enterprises and foreign-funded projects in Vietnam for a period of one year after accession.

“11. A Member may not invoke Article XVII… with respect to a measure of another Member that falls within the scope of an international agreement between them relating to the avoidance of double taxation”.

Interpretation for clients: There are special international treaties (Double Taxation Agreements) that prevent you from being taxed on the same income in two different countries. Lawyers help you use these treaties to save money legally.

For specific projects like offshore oil and gas, investors must fulfill all financial obligations to the Vietnamese State according to tax laws and relevant Double Taxation Avoidance Agreements. This includes registering the mechanism for determining revenues with the Ministry of Finance for state management purposes.

The Duty of “Foreign Contractor Tax” (FCT)

A common trap for Vietnamese companies hiring foreign consultants or services is the Foreign Contractor Tax. As analyzed in a Unilaw memo for Jaguar Vietnam, when a foreign parent company (like Jaguar Japan) provides services or pays salaries for Japanese staff in Vietnam and seeks reimbursement, FCT obligations are triggered.

“Nghĩa vụ thuế nhà thầu (FCT): Determining the obligation to pay contractor tax if Jaguar Japan provides services in Vietnam, especially related to the parent company paying salaries for staff in Vietnam…”.

Interpretation for clients: If you pay a foreign company for work done in Vietnam, the Vietnamese government wants a piece of that money. Usually, the Vietnamese company must “withhold” or take out the tax before sending the money abroad.

This is closely tied to “Transfer Pricing” or “Related Party Transactions.” The law requires these transactions to reflect market prices (the “Arm’s Length Principle”) to prevent companies from shifting profits to low-tax countries.

Attorneys in Commercial Litigation and Tax Evidence

When business disputes reach the courtroom, tax documents often become the most vital evidence. In a dispute involving Dongbang Logistics Vina, Unilaw acted as the legal representative to recover debts for transportation services.

The legal strategy included requesting Interim Relief Measures:
“Nộp đơn đề nghị biện pháp khẩn cấp tạm thời… phong tỏa tất cả các tài khoản ngân hàng của Bị đơn và cấm ông KANG GUEON CHAN (người đại diện theo pháp luật của Bị đơn) xuất cảnh khỏi Việt Nam”.

Interpretation for clients: If a company owes you money and is trying to run away, a lawyer can ask the court to “freeze” their bank accounts and stop the boss from leaving the country until they pay up.

In another case between Company B and Company D regarding construction contracts, the court had to clarify whether VAT had been correctly applied to invoices worth over 3 billion VND. The court of appeals noted that the lower court failed to verify the “fault” of each party regarding the settlement documents, which directly affected the tax benefits claimed by the parties.

Customs Duties and “Priority Enterprise” Status

For companies engaged in large-scale import and export, the Law on Customs provides a “Priority Regime” that offers significant tax and procedural advantages. To qualify, a company must demonstrate compliance with tax and customs laws for two consecutive years and maintain good accounting and auditing standards.

“Article 43. Priority regime for enterprises: 1. Exemption from inspection of relevant documents… exemption from physical inspection of goods… 3. Priority when performing tax procedures for goods in accordance with the law on tax”.

Interpretation for clients: If you are a “gold-star” company that always pays taxes on time and has clean books, the government will let your shipments pass through customs faster without opening every box.

Conversely, if a company is found to be using “fake documents” to declare tax or fails to provide records during an audit, customs authorities have the power to “Fix the tax amount” (ấn định thuế). This means the government decides how much you owe based on their own data, often resulting in a much higher bill than expected.

The Legal Procedure for Tax Appeals and Complaints

The relationship between Taxation and Law: Understanding Legal Obligations and Hiring Attorneys also includes the right to challenge the government. Taxpayers have the right to lodge complaints or participate in legal proceedings according to the law.

Under Article 53 of the Law on Tax Administration, if a tax authority’s assessment is found to be higher than what is legally owed (per a court judgment), the government must refund the overpaid amount to the taxpayer. This requires a lawyer to prove the error in court using accounting standards and legal principles like the “Principle that the nature of the transaction determines the tax obligation”.

Obligations in Special Situations: Bankruptcy and Reorganization

Tax obligations are prioritized even when a company is failing. In cases of bankruptcy, the order of payment is strictly regulated by the Law on Bankruptcy, with taxes usually being a high-priority debt.

In the event of a merger or demerger (reorganization), the tax burden does not vanish:
“Article 68. Completion of tax payment obligation in case of enterprise reorganization: 1. The divided enterprise is responsible for completing the tax payment obligation before performing the enterprise division… 2. The separated, merged, or consolidated enterprise is responsible for completing the tax payment obligation…”.

Interpretation for clients: You can’t escape tax debt by splitting your company into two or merging with another. The “new” companies will simply inherit the old tax bills.

Conclusion: The Strategic Necessity of Legal Counsel

The integration of Taxation and Law: Understanding Legal Obligations and Hiring Attorneys is the cornerstone of sustainable business growth in Vietnam. Whether it is ensuring that a capital transfer contract includes a robust tax warranty (as seen in the 32 billion VND dispute), navigating WTO service commitments, or managing the personal risks of a travel ban for a Director, legal expertise is indispensable. Attorneys do not just interpret the law; they build the infrastructure of compliance that allows a business to operate without fear of sudden enforcement or crippling penalties. As the Vietnamese legal system continues to modernize and synchronize with international standards, the role of professional legal counsel in tax matters will only become more vital.

1. Decision No. 10/2025/QD-PT (TANDTC, Sept 6, 2025) – Commercial Law Art. 294, Civil Code Art. 351, 357, 468.
2. Case 73/2023/KDTM-PT (TANDCC HCMC, July 10, 2023) – Law on Enterprises 2014 Art. 50, 51.
3. Case 42/2021/TL-KDTM (Dongbang Logistics Vina v. Client) – Commercial Law 2005 Art. 236, 306, Law on Entry/Exit Art. 28.
4. Law on Enterprises No. 59/2020/QH14 – Art. 8, 12, 137, 157.
5. Law on Value Added Tax No. 48/2024/QH15 – Art. 1, 2, 4, 13.
6. Law on Tax Administration No. 38/2019/QH14 – Art. 4, 5, 6, 27, 39, 52, 67, 125.
7. Decree 126/2020/ND-CP (Amended by Decree 91/2022/ND-CP) – Art. 8 (80% CIT rule).