When a foreign parent company sells capital in a Vietnamese enterprise, the Vietnamese tax is not computed on the sale price but on the transfer income — the sale price minus the cost basis of that very stake and reasonable transfer expenses — at a 20% corporate income tax rate. The mechanism sounds simple, but the entire actual tax is decided by a single variable: how far the cost basis file can be proven. This article covers the income determination, the declaration responsibility through the Vietnamese side, and the true position of double tax agreements in these deals.
1. Determining a foreign organization’s transfer income
Under the Law on Corporate Income Tax 67/2025/QH15 and the guiding regime for foreign organizations without a legal presence in Vietnam, income from transferring capital in a Vietnamese enterprise is CIT-taxable in Vietnam. Taxable income follows the formula: transfer price − cost basis of the transferred stake − reasonable expenses related to the transfer. The cost basis of the portion sold is the total amount the foreign organization actually contributed/paid to own that stake, split pro rata for a partial sale — including the purchase prices of prior acquisitions and supplementary contributions attached to the stake. Deductible transfer expenses are actual, reasonable, documented costs serving the transaction directly: legal and financial advisory fees, valuation fees, lawful brokerage. Two practical points are decisive: first, cost basis must trace back to documents — capital contribution evidence through the capital account over the years, prior stake purchase agreements, prior tax payment vouchers; wherever this chain breaks, the tax authority challenges the cost basis. Second, the contract’s transfer price is the tax authority’s starting point, not its endpoint: where the price is unreasonably below the stake’s market value, the authority may redetermine it on market-price and related-party transaction principles (especially where buyer and seller are in the same group).
2. Who declares, who pays: the Vietnamese side’s withholding role
A foreign organization with no permanent establishment/legal presence in Vietnam does not file CIT returns like a domestic enterprise; the applicable regime is declaration per transfer, through the Vietnamese side withholding and remitting on its behalf. Concretely by transaction structure: the stake buyer (if a Vietnamese organization) or the enterprise whose capital is transferred — per the statutory role in each structure — withholds the CIT on the transfer income before paying the foreign organization, declares and remits it to the budget, and provides the tax payment vouchers to the seller. The negotiating consequences mirror every withholding regime: the agreement must allocate clearly whether the transfer price is gross or net of Vietnamese tax, which side bears the risk if the authority reduces the accepted cost basis (triggering additional tax on the increased income), and the escrow/holdback mechanics for this tax risk in large deals. The Vietnamese tax vouchers then serve the parent for foreign tax credit at home, and are a condition for the bank to process the ICA-related transfer flow smoothly.
3. Does a double tax agreement reduce this 20%?
The common expectation of foreign parents is that the double tax agreement between their country and Vietnam will exempt or reduce the capital transfer tax. In reality, the clause in most of Vietnam’s treaties (the capital gains clause corresponding to international-model Article 13) preserves Vietnam’s taxing right over gains from transferring shares/capital contributions in a Vietnamese company — clearest for companies whose assets consist principally of Vietnamese real estate, and in many treaties for capital transfers generally or where the participation reaches a threshold. Only a few treaties are structured to give the residence country the main taxing right in narrow cases, and every conclusion must be read on the specific treaty text of the exact country pair at the transaction date — there is no general answer to “does the treaty exempt capital transfer tax”. Where the applicable treaty genuinely yields exemption/reduction in Vietnam, the seller must run the treaty application procedure under the Law on Tax Administration 108/2025/QH15 (notification/request with a tax residence certificate and the transaction file) before or at the withholding time per the prescribed deadline — meaning treaty analysis belongs in the deal preparation roadmap, not after the money has been withheld, because refunding withheld tax is a far longer and less certain process than applying correctly from the start.
4. The cost basis file — where the deal wins or loses on tax
With the 20% rate fixed and the formula no mystery, the foreign organization’s entire tax “contest” lies in the file proving cost basis and expenses. A complete cost basis file for the stake sold comprises: the establishment/initial contribution records and every capital increase (resolutions, remittance evidence through the capital account, investment certificates and enterprise registrations across periods); the agreements and payment evidence of every intermediate acquisition; the tax vouchers of prior transfers; the Vietnamese enterprise’s financial statements across the years showing the contributed capital; and an independent valuation at the sale date anchoring the transfer price. For groups holding stakes across multiple tiers and decades, rebuilding this chain must start at the divestment preparation stage (vendor preparation), not when the tax authority asks — and the rebuilding cost is always smaller than the tax assessed when cost basis cannot be proven. In short: a foreign organization selling capital in Vietnam bears 20% on the real transfer income; the final tax depends on its own records discipline throughout the holding period, and the Vietnamese side to the deal is a withholding party with legal responsibility — both sides have reason to design the agreement’s tax clause seriously from the very first draft.
A foreign parent company sells capital in Vietnam — how is its income tax computed?
CIT at 20% on the transfer income under the Law on Corporate Income Tax 67/2025/QH15: income = transfer price − cost basis of the portion sold (the total contributed/paid for that stake, split pro rata for a partial sale) − documented reasonable expenses of the transfer. The tax is not computed on the entire sale price as in the non-resident individual mechanism.
Transfer income equals the sale price minus the purchase price and which expenses?
The sale price is the transfer price in the agreement (the tax authority may redetermine it at market value if unreasonably low). The purchase price/cost basis comprises the initial contribution, supplementary contributions and the prices of prior acquisitions attached to the portion sold. Deductible expenses are actual, reasonable, documented costs serving the transaction directly — legal/financial advisory, valuation, lawful brokerage. Every deduction must be proven by a document chain.
Can the 20% rate be reduced under a double tax agreement?
Usually not: most of Vietnam’s treaties preserve Vietnam’s taxing right over capital transfer gains in a Vietnamese company (the clause corresponding to international-model Article 13), clearest for companies whose assets consist mainly of Vietnamese real estate. A few treaties are structured differently for narrow cases; the conclusion must be read on the exact treaty of the country pair at the transaction date. Where a treaty yields exemption/reduction, the treaty application procedure under the Law on Tax Administration 108/2025/QH15 must be run before/at the withholding time.
Who declares and pays the tax — must the Vietnamese company withhold on behalf?
There is a withholding/remittance mechanism through the Vietnamese side: a foreign organization without a legal presence in Vietnam declares capital transfer tax per transaction through the stake buyer or the enterprise whose capital is transferred (per the statutory role in the deal structure) — the Vietnamese side withholds the tax before paying the foreign seller, declares, remits it to the budget and hands the tax vouchers to the seller for home-country credit.