Exit ban proposed for legal reps of companies in Vietnam with $20,000 tax debts

Vietnam’s Ministry of Finance (MoF) has proposed an exit ban on legal representatives of businesses with tax debts exceeding VND500 million ($19,660) for more than 120 days, starting from 2025.

This amount is five times higher than the initial proposal of VND100 million made a month ago, but still lower than the VND1 billion threshold recommended by the Vietnam Chamber of Commerce and Industry (VCCI).

According to the 2019 Tax Administration Law and the government’s Decree No. 126/2020, leaders of tax and customs agencies have the authority to issue decisions on delaying the exit of individuals or representatives of businesses failing to fulfil tax obligations.

However, current regulations do not specify a threshold for tax debts when this enforcement measure is applied. In other words, even a tax debt of just VND1 can lead to an exit ban.

The ministry has also proposed a new threshold where individuals or owners of household businesses with tax debts of over VND50 million ($1,965) for 120 days would be subject to an exit ban. This proposed amount is VND40 million higher than the initial threshold proposed earlier in December.

The MoF proposed these thresholds after studying the policies of other countries. For businesses, many countries do not set a specific debt threshold. The ministry took inspiration from Taiwan, where the threshold is NT$2 million (approximately VND1.57 billion or $61,725).

For individuals, the U.S applies a tax debt threshold of $40,000 (including penalties and interest) to refuse or revoke passports, while Malaysia MYR10,000 (about $2,000).

Comparing average incomes, the U.S. had a per capita income of about $80,000 in 2023, while Vietnam's was around $4,284. Therefore, the MoF believes that the proposed threshold of VND50 million is appropriate.

The exit ban is applied immediately to taxpayers who no longer operate at their registered business addresses, those leaving to live abroad, or foreigners before they leave the country. This means the ban can be enforced regardless of the set debt threshold to collect tax debts for the state budget.

Currently, according to tax authorities, enforcement measures such as exit bans are applied to individuals with tax debts overdue by 90 days. Exit ban decisions can be checked on the tax sector's website and through eTax and eTaxMobile apps. Tax authorities regularly review and update these decisions as needed.

Since the beginning of this year, over 58,680 exit ban notices have been issued, with a total tax debt of over VND80.5 trillion ($3.16 billion). Of which, tax authorities have recovered approximately VND4.3 trillion ($169 million) from nearly 6,500 taxpayers.

The MoF estimates that approximately 81,000 individuals nationwide would face an exit ban if the proposed regulation is applied. If the threshold for tax debt is set at VND100 million for individuals and business owners or VND1 billion ($39,315) for business representatives, around 40,000 individuals would be subject to an exit ban.