VI Reducing the charter capital of a one-member LLC established by a foreign investor in Vietnam is an important legal procedure, carried out to adjust the charter capital of the company to suit the actual financial situation and development strategy of the enterprise. Therefore, the reduction of charter capital must be carried out transparently, in full compliance with the procedures and regulations of current laws to protect the legitimate rights of the company owner and related parties. Through today’s article, let’s learn about this issue with Pham Consult!
1. Cases of reducing charter capital of a single-member LLC
The charter capital of a single-member LLC when registering to establish a business is the total value of assets committed by the company owner and recorded in the company’s Charter. This is the initial capital of the company, used to carry out business activities and ensure the company’s financial obligations. However, depending on the specific situation, the enterprise can reduce the charter capital to suit their needs and capabilities. According to Clause 3, Article 87 of the Law on Enterprises 2020, a single-member LLC reduces its charter capital in the following cases:
(i) Refunding a portion of the capital contribution to the company owner if the company has been operating continuously for 02 years or more from the date of business registration and ensuring full payment of debts and other financial obligations after returning the capital contribution to the company owner;
(ii) The charter capital is not fully and timely paid by the company owner as prescribed in Article 75 of the Enterprise Law 2020. In this case, the company owner must register to change the charter capital by the value of the contributed capital within 30 days from the last day of full contribution of charter capital.
2. Dossier for reducing charter capital of a single-member LLC established by a foreign investor in Vietnam
Reducing the charter capital of a single-member LLC established by a foreign investor in Vietnam will change the contents of the business registration certificate as prescribed in Article 28 of the Law on Enterprises 2020 and the investment registration certificate as prescribed in Article 40 of the Law on Investment 2020. Therefore, according to Article 51 of Decree 01/2021/ND-CP of the Government on business registration, when carrying out procedures for reducing charter capital, a single-member LLC must prepare a dossier for registering changes to business registration contents and adjusting the investment registration certificate. The dossier includes the following documents:
– Notice of change in business registration contents signed by the legal representative of the enterprise;
– Document requesting adjustment of the investment project;
– Report on the implementation of the investment project up to the time of adjustment;
– Decision of the owner of the one-member LLC on the reduction of charter capital;
– Decision to adjust the investment project;
– Explanation of the reduction of charter capital;
– Authorization document in case the submitter is not the owner or legal representative
– Valid copy of one of the following personal identification documents of the authorized person to carry out the procedure (if any):
+ For Vietnamese citizens: Citizen identification card or Identity card or valid Vietnamese passport.
+ For foreigners: Foreign passport or valid document in lieu of foreign passport.
– Notarized copy of business registration certificate;
– Notarized copy of investment registration certificate;
In addition to the above documents, in case of charter capital reduction, the enterprise must have a commitment to ensure full payment of debts and other financial obligations after the capital reduction (Clause 4, Article 51, Decree 01/2021/ND-CP).
3. Procedures for reducing the charter capital of a single-member LLC
Step 1: Prepare and submit documents
The company prepares documents and submits the application for charter capital reduction to the Business Registration Office where the company has its head office.
Step 2: Review documents
After receiving the application for charter capital reduction, the Business Registration Office will be responsible for reviewing the validity of the application and carrying out the procedure for changing the charter capital reduction for the single-member LLC.
In case the application is valid, the Business Registration Office shall issue a Certificate of Business Registration and publish the change in the charter capital of the enterprise on the National Information Portal.
In case of refusal to supplement the business registration dossier, the Business Registration Office shall notify the single-member LLC in writing. The notice must clearly state the reasons and the requirements for amendments and supplements (if any).
Step 3: Announce information on the reduction of charter capital of a single-member LLC
After reducing the charter capital, a single-member LLC must announce the change information on the National Business Registration Information Portal within 30 days from the date of change.
After the company completes the procedure for announcing information on the reduction of charter capital on the National Business Registration Information Portal, the Business Registration Office shall issue the company a Receipt of announcement of business registration content.
Step 4: Carry out tax declaration procedures
The reduction of charter capital by a single-member LLC will reduce the amount of business license tax that the company must pay. At that time, the company needs to carry out the following procedures:
– Declare and submit a declaration of adjustment and supplement of tax registration information according to form 08-MST issued with Circular No. 105/2020/TT-BTC.
– Submit a declaration of business license fees in the tax period of the following year. The annual business license tax that a business must pay is based on the charter capital stated on the business registration certificate and investment registration certificate. In case of a decrease in charter capital, the business license tax will be reduced, therefore, businesses paying business license fees must submit a business license tax declaration no later than January 30 of the year following the year of change (Point a, Clause 1, Article 10, Decree 126/2020/ND-CP).
After reducing the charter capital, a single-member LLC must announce the change information on the National Business Registration Information Portal within 30 days from the date of change.
After the company completes the procedure for announcing information on the reduction of charter capital on the National Business Registration Information Portal, the Business Registration Office shall issue the company a Receipt of announcement of business registration content.
Step 4: Carry out tax declaration procedures
The reduction of charter capital by a single-member LLC will reduce the amount of business license tax that the company must pay. At that time, the company needs to carry out the following procedures:
– Declare and submit a declaration of adjustment and supplement of tax registration information according to form 08-MST issued with Circular No. 105/2020/TT-BTC.
– Submit a declaration of business license fees in the tax period of the following year. The annual business license tax that a business must pay is based on the charter capital stated on the business registration certificate and investment registration certificate. In case of a decrease in charter capital, the business license tax will be reduced, therefore, businesses paying business license fees must submit a business license tax declaration no later than January 30 of the year following the year of change (Point a, Clause 1, Article 10, Decree 126/2020/ND-CP).
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