To: Departments of Taxation of provinces and centrally run cities.

For the implementation of Law on supporting small- and medium-sized enterprises in establishing enterprises on the basis of converting household businesses, the Government issued Decree 108/2018/ND-CP dated August 23 2018 amending a number of provisions of Decree 78/2015/ND-CP dated September 14 2015 on providing guidelines for business registration.

Pursuant to the provisions of Clause 3, Clause 4 Article 16 of Law on assistance for small- and medium-sized enterprises on terminating termination of household businesses and inheritance of their rights, obligations and legitimate interests upon the enterprise establishment.

Pursuant to the provisions of Clause 6 Article 1 of Decree No.108/2018/ND-CP dated August 23 2018 by the Government on amending a number of articles of the Government’s Decree No.78/2015/ND-CP dated September 14 2015 on registering enterprises from household businesses conversion.

Pursuant to Joint Circular No. 01/2016 / TTLT-BKHDT-BTC dated February 23, 2016 of the Minister of Planning and Investment and the Minister of Finance on providing guidelines for the exchange of information on enterprises between the National Enterprise Registration Information system and Tax Information System.

General Department of Taxation hereby requests Provincial Departments of Taxation to follow these instructions:

1. Conversion principles

An enterprise that is converted from a household business will be granted a new enterprise identification code according to the enterprise registration certificate, the tax identification numbers of the household businesses will be invalidated whether the 10-digit tax identification numbers of household business and 13-digit number of the business location; the tax identification number of the terminated household business shall continue to be used as the personal tax identification number of its representative.

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 Household business must fulfill their tax obligations at their supervisory tax authorities. In case a household business fails to fulfill its tax obligations, the small or medium-sized enterprises converted from the business household will inherit all the legitimate rights, obligations and interests of household business according to the provisions of law. When a household business is converted into a limited liability company or a joint stock company, the household business owner (the representative of the household business) shall be responsible for all the unpaid debts of the household business by his/her assets, unless otherwise provided for by law.

2. Processing of applications for conversion of household business into enterprise sent by by the National Enterprise Registration Information system

- When receiving an application for registration of an enterprise which is converted from household business from the National Enterprise Registration Information System (hereinafter referred to as “business registration system”): the tax information system will verify the registration information of the enterprise and compare the information on the registration certificate of the household business before being converted into an enterprise, and the identity of representative of the household business (conventional/new-format ID card, or passport) sent by the business registration system with the information of the household business existing in tax information system.

- After verifying, the tax information system provides one of these two feedbacks below for the business registration system:

In case the information about the household business and the enterprise is adequate and consistent: the tax information system will send information about the enterprise identification number and the supervisory tax authority of the new enterprise to the business registration system.

In case the the information about the household business and the enterprise is not adequate and consistent: the tax information system will not issue a enterprise identification number and send a message to the business registration system; the business registration authority will inform the applicant accordingly.

3. Procedures for invalidating tax identification numbers of household business and transfer of their tax obligations

After receiving the confirmation of granting enterprise registration by the business registration system, the tax information system will automatically update the tax identification numbers of the new enterprise (the 10-digit or 13-digit tax identification numbers) and specify that the taxpayer has stopped operating but has not completed procedures for tax code invalidation after the household business is converted into a small or medium enterprise.

The supervisory tax authorities in the same district with the household business and the household business shall invalidate the business household's tax identification numbers. In case the supervisory tax authorities of the new enterprise and the supervisory tax authority of the converted household business are located in different provinces or districts, the former shall request the latter to carry out the procedures according to the form attached to this dispatch.

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- In case of transferring tax obligations to enterprises or household business representatives according to the provisions specified in Point 1 of this Dispatch, supervisory tax authorities of household business shall make notices on transfer of taxpayers’ obligations according to the process of management in tax declaration, tax payment and tax accounting and hand over to the supervisory tax authorities of enterprises or the supervisory tax authorities of the household business representative (if other tax authorities manage it).

4. The function of TMS application:

The TMS application will be upgraded in 02 phases:

Phase 1 ( March 2019): upgrading some functions of the TMS application to handle requests of enterprise registration, invalidation of household business’s tax codes and transferring/inheriting tax obligations.

Phase 2 (July 2019): upgrading functions for supervisory tax authorities to make a notice about the conversion of household business on application and for supervisory tax authorities of enterprises and supervisory tax authorities of household business to look up the list of business locations specified as the taxpayer has stopped operating but has not completed procedures for tax code invalidation after the household business is converted into a small or medium enterprise. The General Department of Taxation (by the Administration of Information Technology) will announce the application’s upgrade with the mentioned functions to the tax authorities at all levels via email address.

If any difficulties and problems arise in the course of implementation, tax offices are requested to report in time to the General Department of Taxation for study and further guidance.

For supervisory tax authorities information and implementation.

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