Suspend or Terminate an FDI Project?

Picture a typical situation: the regional director of a manufacturing FDI enterprise hesitates — “Orders have halved. We want to freeze the company in Vietnam for a while and come back when the market recovers. How do we do this at the lowest cost while keeping the company?”

This is a very common mindset among foreign investors in difficulty: unwilling to terminate outright because they regret the effort, licenses, and relationships built, yet unwilling to keep “burning money” maintaining the apparatus. Vietnamese law allows both options — suspension and full termination — but their conditions, costs, and risks are completely different. Choose wrong, and the investor can fall into the trap of “suspended but not finished, closed but not done” — see the 7 risks of abandoning an inactive FDI company.

This article analyzes both options so you can decide correctly.

Option 1: Suspension — Time-Limited “Freezing”

Suspension is not a single procedure. For an FDI enterprise, there are two independent layers of suspension:

First, suspension of the investment project’s operations. When an investor suspends the investment project’s operations, the law requires written notification to the investment registration authority (Article 35, 2025 Law on Investment).

Second, suspension of the enterprise’s business operations. The enterprise must notify the business registration authority in writing no later than 3 working days before the business suspension date (Article 206(1), 2020 Law on Enterprises). Each notified suspension period may not exceed 12 months; when the period expires and further suspension is desired, a new notification dossier must be sent, again no later than 3 working days before the continued suspension. Note the new rule: from 23 July 2026, Decree 296/2026/ND-CP (amending Article 60(1) of Decree 168/2025/ND-CP) provides that total consecutive business suspension may not exceed 24 months — consecutive suspension notices cannot be issued indefinitely. Once the 24-month cap is reached, the enterprise must resume operations or move to another option.

How Much Does Suspension Cost, and What Obligations Remain?

Many investors mistakenly believe suspension means “costing nothing”. In reality:

• Old financial obligations do not disappear. During business suspension, the enterprise must pay all outstanding taxes, social insurance, health insurance, and unemployment insurance; continue settling debts and fulfilling contracts signed with customers and employees, except where the parties agree otherwise (Article 206(3), 2020 Law on Enterprises).
• Minimum maintenance costs keep running. Office rent (the registered business address must be maintained — abandoning the premises without notice can trigger a tax authority notice of “not operating at the registered address”, bringing a cascade of trouble), accounting fees, land rent if the project uses land, and the legal representative’s salary if retained.
• Tax obligations during suspension. This is the point accountants often miss: a suspended enterprise retains its tax code and legal person status. The tax declaration regime and return-filing obligations during suspension must now be checked directly against the 2025 Law on Tax Administration (effective 1 July 2026, replacing the 2019 Law on Tax Administration) and its guiding documents — do not mechanically apply old guidance that has expired.
• Employees. If all employees are let go, handle it as in cessation of operations (severance allowance, social insurance book finalization). If a few key staff are kept to “mind” the company, their labor contracts and insurance must be fully maintained.

The Biggest Risk of Suspension: “Suspending” Forever Until “Terminated”

Suspension is only safe when the investor truly returns. If the project has ceased operations and 12 months have passed since cessation, with the investment registration authority unable to reach the investor or its lawful representative, the investment registration authority will terminate the project’s operations (Article 36(2)(d), 2025 Law on Investment; the asset handling and dispute mechanism in this case is at Article 67 of Decree 96/2026/ND-CP).

In other words: “freezing and abandoning” is the shortest path to passive project termination — losing the right to proactively liquidate assets, losing the ability to negotiate with state authorities, while the enterprise still carries its unresolved obligations. Even if the investor completed the notification procedure correctly, the 24-month consecutive cap under Decree 296/2026 remains an absolute limit for the enterprise-level business suspension layer. This is the risk scenario many investors do not foresee.

Option 2: Full Termination — Close Cleanly, Clear Obligations

Full termination means completing the full sequence: the investor decides to terminate the investment project’s operations (Article 36, 2025 Law on Investment), liquidates the project, settles taxes — labor — debts, then dissolves the enterprise (Articles 207 and 208, 2020 Law on Enterprises).

The advantage of this option is its finality: once complete, the investor has no more maintenance obligations, no more costs of “feeding” the legal person, and the legal representative no longer represents the enterprise for regular operations. However, the representative remains responsible for the truthfulness and accuracy of the dissolution dossier and for legal obligations arising during their tenure as representative. The downside is higher upfront cost and time — particularly the tax finalization stage — and if they later wish to return to Vietnam, nearly the entire investment procedure must be redone from scratch.

The detailed 12-step sequence is fully listed at: 12-Step FDI Project Termination Checklist.

Quick Comparison Table

So Which Option to Choose?

There is no one-size-fits-all answer, but there is a practical rule:

• Choose suspension when the difficulty is only temporary and can be quantified: e.g., orders falling for the next 6–9 months while long-term contracts remain, or awaiting an investment decision from the parent company. Suspension only fits when the difficulty can recover within the maximum 24-month consecutive suspension limit under current regulations. Governance recommendation: outstanding tax and insurance debts should be settled and sufficient cash flow secured for minimum maintenance costs during suspension — noting that Article 206(3) of the 2020 Law on Enterprises still permits business suspension even with unfulfilled financial obligations.
• Choose full termination when there is no prospect of returning within the permitted suspension period, when one year of suspension maintenance costs nearly equal the cost of termination procedures, or when the enterprise has debts or disputes that need definitive resolution rather than being left to “hibernate” and then erupt.

One important note: if after consideration you do not wish to continue but also balk at dissolution costs, then transferring the project / selling the company to another investor may be a third option worth considering — recovering part of the capital. Two forms must be distinguished: (1) capital/share transfer — the buyer inherits the member/shareholder position, while the enterprise’s obligations remain, in principle, the enterprise’s; (2) investment project transfer — carried out under Article 34 of the 2025 Law on Investment, where the transferee inherits rights and obligations as agreed and as prescribed by law. See the full comparative analysis at: FDI Exit: Bankruptcy, Dissolution, or Transfer?

When Do You Need a Lawyer?

Both options should involve a lawyer when any of the following situations arise:

• The enterprise has outstanding tax or social insurance debts, or is under tax inspection/examination;
• There are foreign employees (their work permits and temporary residence cards are closely tied to the enterprise’s operating status);
• The project uses land or factories — handling land use rights upon suspension/termination is the most complex stage;
• The investor has been “suspended” for a while without completing the notification procedure correctly, and now wants to regularize or switch to full termination;
• The legal representative is a foreigner not permanently residing in Vietnam — all documents require valid authorization.

Hesitating between suspending and fully terminating your FDI project?

FLAT LAW FIRM advises on the option suited to your enterprise’s actual situation: reviewing outstanding obligations, calculating the cost of each option, and executing the chosen procedure as a package.

• Book a free first 30-minute consultation (name / phone number or email / your needs)
• Call 0988424851 · Zalo 0988424851 · WhatsApp 0988424851
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The content on this page is for reference only and does not replace legal advice for your specific situation.