A Hong Kong private equity fund has held 65% of a Vietnamese logistics company for eight years. The fund’s life is ending, the local partner wants to buy out, and the LPs want cash back in Hong Kong. Exiting Vietnam is not the mirror image of entering: the procedures, taxes and foreign-exchange controls form a sequence where one wrong step can freeze the money in Vietnam for months. Here is the exit roadmap.
Route one: selling the shares — the most common exit
The fund sells its 65% stake to the local partner or a third party. Three layers apply:
Corporate approvals. The share transfer must be approved under the company’s charter and registered with the investment registration authority, updating the enterprise registration. Under the current Investment Law (Law 143/2025, effective 1 March 2026, replacing Law 61/2020), the transfer of capital by a foreign investor follows notification and registration procedures — start this early, because the tax and foreign-exchange steps depend on it.
Tax on the transfer. The seller is taxed in Vietnam on the capital gain: sale price minus acquisition cost and transfer expenses. For a corporate seller, the gain is subject to corporate income tax; the buyer or the Vietnamese company typically withholds and declares on the seller’s behalf. Valuations must be arm’s length — related-party sales at artificial prices are adjusted under the transfer pricing rules (Decree 255/2026).
Treaty position. The Hong Kong–Vietnam treaty’s capital gains article preserves Vietnam’s right to tax gains arising in Vietnam. Hong Kong, operating a territorial system, generally does not tax the offshore gain again — but the fund must still report correctly in Hong Kong.
Route two: capital reduction and dissolution
Where no buyer exists, the investor can reduce capital or dissolve the Vietnamese company. Dissolution requires: a dissolution decision, settlement of all debts and tax obligations (a full tax finalisation with the tax authority), return of the investment registration certificate, and enterprise deregistration. The tax finalisation alone commonly takes three to six months. Assets distributed on dissolution are treated as liquidation proceeds, taxable to the extent they exceed contributed capital.
Route three: repatriating the money — the foreign-exchange gate
Profits and sale proceeds can only leave Vietnam through the banking system after tax obligations are fulfilled. The practical sequence: (1) complete the tax declaration and payment on the transfer or liquidation; (2) obtain the tax authority’s confirmation where required; (3) remit through the direct investment capital account (DICA) with the commercial bank, presenting the transfer contract, tax payment evidence and investment registration documents. Banks will not process the outward remittance without the tax paperwork — this is the step where most delays occur.
The Hong Kong angle: why the holding layer matters
Holding the Vietnamese company through a Hong Kong SPV does not change Vietnamese tax on the exit — Vietnam taxes the gain at source. What the Hong Kong layer provides is: a familiar common-law holding jurisdiction for the buyer, treaty clarity on the Vietnamese tax treatment, and efficient onward distribution to LPs without additional Hong Kong tax on offshore profits. What it does not provide is a way to avoid Vietnamese tax — structures designed purely to dodge the capital gains tax will fail the principal purpose test.
Frequently asked questions
Q: Can we repatriate profits before paying the transfer tax?
A: No. Banks require evidence of tax declaration and payment before processing outward remittances of investment capital and profits. Attempting to move funds first creates a foreign-exchange violation.
Q: How is the acquisition cost determined if the fund invested in several rounds?
A: Aggregate all capital contributions actually paid in (converted at historical rates) plus directly related transfer expenses. Keep every capital contribution certificate — reconstructing cost years later is the most common source of disputes.
Q: Does the buyer withhold tax on the purchase price?
A: In practice, yes — the transaction documents should allocate the withholding obligation and gross-up mechanics clearly. The seller remains ultimately liable, so the fund should verify the filing was actually made.
Q: How long does a full exit take?
A: A clean share sale: two to four months. A dissolution with tax finalisation: six to twelve months. Build the timeline into the fund’s wind-down plan and LP communications.
FLAT Law Firm manages investor exits from Vietnam end to end: structuring the sale, tax filings on capital transfers, dissolution procedures, and foreign-exchange documentation for repatriation through Hong Kong.
This article has been quality-reviewed by the FLAW AI Legal Council
