Many capital transfer deals at FDI enterprises are priced in US dollars or Japanese yen, while Vietnamese tax is always declared and paid in dong. The bridge between those two currency worlds is a question that looks small but costs real money when wrong: at what exchange rate, and at what moment, is the tax converted? This article explains the actual-transaction-rate principle at the arising moment for each deal milestone, how exchange differences are treated, and how exchange risk allocation should be drafted into the agreement.
1. The conversion principle: the actual transaction rate at the arising moment
The current tax administration regime (Law on Tax Administration 108/2025/QH15 and guiding rules on tax declaration for foreign-currency transactions) unifies on one principle: revenue, income and tax arising in foreign currency must be converted into VND at the actual transaction exchange rate at the moment the income/transaction arises — the actual transaction rate being the buying/selling rate of the commercial bank where the transaction is performed at that time, per the structure applicable to each transaction type. Applied to capital transfers: the foreign-currency transfer price in the agreement is converted to VND at the moment the transfer gives rise to the tax obligation (the transfer completion/payment moment per each seller category’s mechanism), and a foreign-currency cost basis — where the seller originally contributed/bought in foreign currency — is likewise converted at the actual rate of its own corresponding arising moment (the contribution/purchase moment). The direct consequence: taxable income in VND is not simply (foreign-currency sale price − foreign-currency cost basis) × one rate; each leg has its own time point and rate, and the difference between those rates itself becomes part of the tax computation result.
2. Three rate points in a deal, and which one decides the tax
A foreign-currency capital transfer has at least three different rate points, and confusing them is the most common error. The signing point: the rate on the signing date has commercial meaning only (the parties’ negotiation reference for the foreign-currency price) — it is not the tax rate, unless the agreement itself fixes a conversion rate for payment (see section 4). The completion/payment point: this is the deciding point — transfer income arises and the withholding/declaration duty attaches at transfer completion and payment through the ICA channel; the transfer price is converted at the actual transaction rate at this point to determine the PIT/CIT base and the VND withholding amount remitted to the budget. Later settlement points: where the deal has deferred instalments or an earn-out, each later payment is a separate arising event — that instalment’s corresponding income portion is converted at the rate of that instalment’s payment moment, with no retroactive return to the first instalment’s rate. The practical consequence for the withholding side (the buyer/Vietnamese organisation withholding for a foreign seller): the withheld tax must be computed and fixed in VND at the exact withholding moment of each payment instalment; withholding at an estimated rate from the signing date and letting the difference “sort itself out later” creates a tax shortfall/surplus requiring adjustment with late-payment risk. The deal file must therefore retain the executing bank’s rate evidence for each payment point — that is the evidence of the tax base.
3. Exchange differences: are they counted into the deal’s income/expenses?
Exchange differences appear at two levels. The transfer tax computation level: because the sale price and the cost basis are converted at two different moments (cost basis at the original contribution/purchase moment, sale price at the transfer moment), the portion of difference from rate movements between the two points is automatically inside the VND taxable income — a seller “gaining on exchange” over a foreign-currency-held stake sees VND income larger than the foreign-currency price difference, and vice versa when the pricing currency weakens against the VND. This is not a separate exchange tax; it is the arithmetic consequence of converting each leg at its arising moment. The organisational accounting level: for a seller/buyer organisation keeping books, exchange differences arising in payment and transaction recognition (between receivable/payable recognition date and actual money arrival) are accounted as financial income/expenses under the accounting regime and treated within overall CIT income per the corresponding rules — separate from the capital transfer tax withheld itself. What must be avoided is double counting: an exchange difference already inside the transfer income base (level 1) may not be counted again as an independent financial income item of the same cash flow. Both sides’ accounting teams need a single exchange rate reconciliation table for the whole deal, stating each point, each applied rate and each difference’s treatment level, so that when the tax authority reconciles, every VND figure in the return traces back to a specific bank rate document.
4. Who bears exchange risk: a contract clause matter, not a tax law matter
Tax law decides only which rate computes the tax; the economic question “between signing and payment, if the rate moves adversely, who bears it” is allocated entirely by the agreement — and an agreement silent on this point is the classic dispute source of foreign-currency-priced deals. Common drafting choices: fixed foreign-currency price, paid in foreign currency via the ICA — the seller receives the full agreed foreign currency, and the VND conversion risk for tax purposes (and for the buyer’s VND needs) sits with the converting side; VND conversion fixed at the signing date — the deal effectively becomes a VND price, and post-signing exchange risk shifts wholly to the seller (if the foreign currency appreciates, the seller receives fixed VND) or the buyer depending on the fixing direction; foreign-currency price with a fluctuation-sharing mechanism — a price adjustment clause when the payment-date rate deviates beyond a percentage band from the signing date (a collar), sharing the risk between both sides. Whichever mechanism is chosen, three points must be explicit: the pricing currency and the payment currency; the rate/rate source used for every conversion in the agreement (including converting to compute the VND withholding tax — best unified on the rate of the very bank executing the ICA payment); and which side bears the difference between estimated withholding tax and the tax fixed at the payment-date rate. A well-drafted foreign-currency capital transfer leaves no exchange rate question to argue after signing — every movement already has an owner.
If the capital purchase price is paid in foreign currency, at what exchange rate is tax computed?
At the actual transaction exchange rate at the moment the income/transaction arises — the buying/selling rate of the commercial bank where the transaction is performed at that time, under the tax declaration regime for foreign-currency transactions (Law on Tax Administration 108/2025/QH15 and guiding rules). The foreign-currency transfer price is converted to VND at the rate of the transfer completion/payment moment to compute PIT/CIT; a foreign-currency cost basis is converted at the rate of its original contribution/purchase moment.
Is the tax rate taken at the agreement signing or at payment?
At the arising moment — the transfer completion and each payment instalment’s moment, not the signing moment. The signing-date rate is only a negotiation reference (unless the agreement itself fixes a conversion rate). For multi-instalment or earn-out deals, each payment instalment converts at the actual transaction rate of that instalment’s payment moment to compute its corresponding tax, and the withholding side must fix the tax in VND at the exact withholding moment of each instalment.
Are exchange differences deductible expenses?
Separate the two levels: within the transfer tax computation itself, the sale price and cost basis converted at two different moments mean the exchange difference between the points is already inside the VND taxable income (not a separate deductible item). At the organisational accounting level, exchange differences arising between recognition and actual payment are accounted as financial income/expenses and treated in overall CIT per the rules — but the amount already inside the transfer income base may not be counted twice. The parties should build a per-point rate reconciliation table with the bank’s rate documents.
Does the seller or the buyer bear exchange rate fluctuation risk?
The agreement allocates it — tax law only designates the tax computation rate, not the economic risk. Choices: fixed foreign-currency price paid in foreign currency via the ICA (conversion risk on the converting side); VND conversion fixed at signing (post-signing risk shifts to one side); or a fluctuation-sharing mechanism when the rate moves beyond a percentage band. The agreement must state the pricing/payment currencies, the rate source for every conversion including withholding tax computation, and which side bears the difference between estimated withholding and the tax fixed at the payment-date rate.
