In the negotiation room of a project sale in Long An, the question that slows both sides down is not the price but one line in the buyer’s spreadsheet: how much capital transfer tax, calculated on what, and who must pay it. The seller wants a net price, the buyer wants to withhold at source, and the tax office awaits a declaration of the correct character. This article unties those three knots under the legal framework actually in force at transaction time, because applying one outdated framework is enough to distort the deal’s entire price structure.
Applicable legal basis
Tax on a foreign investor’s capital assignment falls on the income from the assignment, not on the entire sale price in the ordinary case. For a seller that is an organisation, assignment income equals the transfer price less the cost basis of the capital portion and the assignment expenses, and is subject to corporate income tax under Corporate Income Tax Law No. 67/2025/QH15. Where the seller is a foreign organisation without a permanent establishment in Vietnam, declaration, withholding and payment on its behalf follow the framework for foreign contractors and organisations in Decree 320/2025/ND-CP and Circular 20/2026/TT-BTC, which replaced the corresponding part of Circular 103/2014/TT-BTC.
For a seller that is an individual, personal income tax under Law No. 109/2025/QH15 distinguishes two easily confused cases. Assigning a capital portion in an enterprise that is not securities: tax is 20% of the income, meaning the sale price less cost basis and related reasonable expenses. Assigning securities: tax is 0.1% of the transfer price on each occasion, with no expense deduction. Applying the securities formula to an assignment of a capital portion in a limited liability company is the most serious quantification error in this field, because the gap between the two formulas can reach tens of times the tax amount.
Analysis for the company’s situation
Who pays, and who withholds
In substance the taxpayer is the seller, because the tax falls on the seller’s income from the transaction. The collection mechanism differs: where the seller is a foreign organisation not present in Vietnam, the buyer or the Vietnamese enterprise whose capital is assigned declares, withholds and pays the tax into the budget on the seller’s behalf before assignment money is paid abroad, and the bank will demand documents of that step in the remittance file. For an individual seller, the enterprise where the individual assigns capital or the paying organisation withholds according to the transaction form. The parties should state clearly in the assignment contract who owns the declaration, who keeps the payment documents, and whether the contract price is gross or net of tax, because tax disputes in these deals almost always originate from one ambiguous sentence in the contract.
Can a double taxation treaty help
Vietnam maintains a wide network of double taxation treaties, and most contain an article on capital gains from assignments. The treaty advantage for capital assignments is nevertheless narrower than commonly assumed: most treaties still allow Vietnam to tax where the assigned interest relates to a company whose assets consist principally of immovable property in Vietnam, and for shares or interests with a substantial participation ratio. Treaty application procedures require a notification file and the seller’s tax residence certificate submitted to the tax office under Tax Administration Law No. 108/2025/QH15; without completing the procedure, tax is withheld under domestic law and the seller must pursue a refund afterwards, a far longer journey.
Cost basis: the number that decides the actual tax
Because the tax falls on income, the cost basis of the assigned capital is the decisive variable. Cost basis comprises the initial capital contribution value evidenced by contribution documents through the capital account, subsequent capital increases, and previously acquired capital portions with payment documents. A seller holding the interest over many years with multiple changes but no archived chain of contribution documents falls into a weak position: the tax office accepts only the cost basis proven by documents, and the unproven part is treated as taxable income. Preparing the cost basis file is therefore pre-signing work, parallel to price negotiation, not an excavation exercise left until declaration day.
Procedure and document checklist
- Determine the seller’s status (organisation or individual) and the interest’s character (capital portion or securities) to select the correct tax formula.
- Assemble the cost basis file: contribution documents through the capital account, capital increases, prior acquisition documents.
- Compute assignment income (sale price less cost basis less assignment expenses) and the tax under the current framework.
- Agree in the contract who declares, withholds and pays on behalf, and whether the price is gross or net of tax.
- Complete declaration and payment, keeping the documents as the condition for the bank remittance file abroad.
Risks and practical notes
The largest quantification risk is applying the wrong formula between the two individual regimes, or forgetting that an organisational seller may deduct cost basis, so the deal’s tax estimate is wholly off and the parties negotiate on a wrong number. A second risk is a cost basis that cannot be proven after years of holding, so capital genuinely contributed is taxed as income. Neither risk can be fixed on declaration day; both must be handled at deal structuring and document gathering before signing.
Frequently asked questions
How much capital transfer tax is paid when selling an FDI project to a foreign investor?
There is no single fixed rate on the sale price in the ordinary case. An organisational seller pays corporate income tax on the assignment income (price less cost basis less assignment expenses) under CIT Law 67/2025/QH15. An individual seller pays personal income tax at 20% of income for capital portion assignments, under Law 109/2025/QH15.
Is capital transfer tax calculated on the sale price or on the profit?
On the income, meaning the gain of the transaction: the transfer price less the cost basis of the capital portion and reasonable assignment expenses. The exception is an individual’s securities assignment, where tax is 0.1% of the transfer price per occasion with no expense deduction. Confusing the two mechanisms is a common error causing very large tax differences.
Who is the taxpayer, the seller or the buyer?
The seller is the taxpayer, because the tax falls on the seller’s income. But where the seller is a foreign organisation not present in Vietnam, the buyer or the Vietnamese enterprise whose capital is assigned declares, withholds and pays on its behalf before money is remitted abroad, under Decree 320/2025/ND-CP and Circular 20/2026/TT-BTC.
Can a double taxation treaty be applied?
Possibly, under the capital gains article of the treaty between Vietnam and the seller’s residence country, with the notification procedure and a tax residence certificate under Tax Administration Law 108/2025/QH15. Most treaties nevertheless preserve Vietnam’s taxing right where the interest relates to a property-rich company or a substantial participation, so any exemption must be checked treaty by treaty.
This article has been quality-reviewed by the FLAW AI Legal Council