Inactive Company: Tax and Accounting Obligations You Still Have Even If You Invoice Nothing

It is one of the most common questions from people who set up a limited company and then stopped using it: “if I’m not invoicing anything, do I still have to file anything?” The short answer is yes. A commercial company does not cease to exist, or to have obligations, simply because it has no activity: as long as it is registered in the Commercial Registry and has an active tax ID, the tax authorities and the Registry expect its returns and its accounts.

What you are still required to file

Corporate Income Tax (Form 200). Commercial companies must file it every financial year, even if they had no income, even if the result is zero or negative, and even if the tax due is zero. The general deadline is the twenty-five calendar days following the six months after the end of the financial year; for a company whose financial year matches the calendar year, that means July. Having no tax to pay does not exempt you from filing.

Annual accounts. The directors must prepare the accounts within the first three months of the following financial year, submit them to the general meeting for approval and file them with the Commercial Registry within one month of that approval. An inactive company also has a balance sheet (with its cash, its debts or its share capital) and therefore must prepare, approve and file it.

Periodic returns. This depends on the company’s tax registration status. If the company is still registered with VAT obligations, it must file its periodic self-assessments, even “nil returns”, until the registration is amended. The same applies to withholdings if it is registered as a withholding agent. That is why it is worth checking, using Form 036, which obligations are actually still in force. And if there were transactions with third parties above the thresholds, Form 347 may also be due.

Accounting books. Even with no transactions, the company must keep accounting records and have its official books legalised at the Commercial Registry, normally after the end of the financial year.

The risks of “letting it die”

The usual temptation is to do nothing and hope the problem goes away. It doesn’t. Some of the most common risks:

• Tax penalties for failing to file mandatory returns, which pile up year after year.
• Registry closure: if accounts are not filed for a prolonged period, the Commercial Registry may close the company’s registry page and refuse to record any new acts until the situation is regularised. In addition, failure to file the accounts carries fines.
• Directors’ liability: if grounds for dissolution exist (for example, losses that reduce net assets below half of the share capital) and no action is taken in time, the directors may be held personally liable for the company’s subsequent debts.
• Revocation of the tax ID in certain cases of non-compliance, with very awkward consequences for operating later on.
• Debts that remain alive: the company keeps its obligations to the tax authorities, Social Security and suppliers, and neglect only makes them worse.

How to dissolve a company properly

The orderly exit is to dissolve and liquidate. The usual path is as follows:

1. Dissolution resolution at a general meeting (or because a legal ground applies), appointing liquidators, followed by its formalisation in a public deed and registration in the Commercial Registry.

2. Liquidation: collect receivables, pay debts and sell off the assets. It is wise to be clear about the real balance sheet before you begin; if the company’s assets are not enough to pay its creditors, a different route may be needed and it should be assessed with professional advice.

3. Final balance sheet and distribution of the company’s remaining assets among the shareholders, taking into account their taxation under personal income tax or Corporate Income Tax depending on who the shareholder is.

4. Deed of extinction and cancellation of the entries in the Commercial Registry.

5. Tax deregistration using Form 036 and filing of the final returns, including the Corporate Income Tax return for the liquidation period. The accounting documentation must be kept for the legal period, even after the company has been extinguished.

A common mistake is to deregister for VAT and believe that the company is thereby “closed”. Tax deregistration does not extinguish the company: it continues to exist as a legal entity, with Corporate Income Tax and annual accounts obligations, until it is cancelled in the Registry.

If it is not the right time to dissolve, keeping the company “in hibernation” is legitimate, but with the minimum compliance up to date: a tax registration that reflects reality, the annual Form 200, accounts filed and books legalised. It is usually considerably cheaper than dragging along penalties and regularising years of arrears.

At Zythos Business we help freelancers and small businesses decide what makes sense in each case: keeping the company compliant at minimal cost, catching up if there are years outstanding, or planning a clean dissolution with the returns, the filing of accounts and the tax registration all coordinated. If you have a dormant company and are unsure what you are missing, we will review your situation before the problem grows.