Tax Risks When Enterprises Fail To Contribute Sufficient Charter Capital

According to the provisions of the 2020 Enterprise Law, companies established must register their charter capital. The charter capital is contributed by the company's members when establishing the company. However, after commencing operations, many companies fail to contribute the required amount of registered charter capital. Not contributing or not contributing enough charter capital as stipulated can bring about various legal risks for the enterprise.

According to Article 34, Clause 4 of the Law on Enterprises No. 59/2020/QH14 dated June 17, 2020: Charter capital is the total value of assets contributed or committed to be contributed by the company's members, owners of a limited liability company, or a partnership company when establishing the company; it is the total nominal value of shares sold or registered to be purchased when establishing a joint-stock company. Within 90 days from the date of issuance of the Certificate of Business Registration, the owners and members must fully contribute the committed capital, and the shareholders must fully pay for the registered shares. If they fail to contribute the committed capital within 90 days as agreed, the company must carry out the procedures for reducing its capital as stipulated by law.

Thus, after establishing the company, its members must contribute the registered charter capital within the 90-day period. If they fail to do so, the company must go through the capital reduction procedures. Failure to reduce the charter capital may expose the company to various risks, including tax risks.

Regarding tax risks, according to the provisions in Article 4 of Circular No. 96/2015/TT-BTC and Clause 2 of Article 6 of Circular No. 78/2016/TT-BTC, interest expenses cannot be deducted when calculating corporate income tax corresponding to the portion of the charter capital that has not been contributed. Therefore, if the company does not contribute sufficient charter capital, the interest expenses cannot be deducted when calculating corporate income tax, and the company will also be subject to penalties for incorrect declarations and late tax payments as stipulated. Additionally, under Clause 3 of Article 1 of Circular No. 130/2016/TT-BTC, the tax will not be refunded for enterprises that have not contributed sufficient charter capital. In the case of newly established enterprises with eligible investment projects for tax refunds, if they do not contribute enough registered charter capital, they will also not be eligible for value-added tax refunds.

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Viet Australia Auditing Company is an independent auditing organization licensed and established in 2007 in the Socialist Republic of Vietnam.