Tax on Capital Transfers in Vietnam

Is income from capital transfers taxable?

Yes. Clause 2, Article 3 of CIT Law No. 67/2025/QH15 (passed by the National Assembly on 14/6/2025, effective from 01/10/2025 and applicable from the 2025 CIT tax period) lists “income from capital transfers, transfers of capital contribution rights, and securities transfers” among other taxable CIT income. This applies to all transfers of capital contributions in LLCs and shares in joint-stock companies — whether the seller is an organization or individual, domestic or foreign.

The point to grasp before going into detail: the tax calculation is not the same for every seller. The new law distinguishes three groups — foreign enterprises, Vietnamese enterprises, and individuals — with three different calculation methods. Confusing the groups is the most common mistake when computing a transaction’s tax obligations.

The big change: 2% on the transfer price

Before 01/10/2025, foreign enterprises transferring capital in Vietnamese enterprises paid CIT at 20% on taxable income — i.e., the transfer price minus cost and reasonable transfer expenses (under Article 14, Circular 78/2014/TT-BTC, as amended by Circular 96/2015/TT-BTC). If the transaction was at a loss (sale price below cost), no tax arose.

Law 67/2025/QH15 and Decree 320/2025/ND-CP (implementing guidance, effective from December 2025) fundamentally changed this calculation for foreign enterprises transferring capital contributions in LLCs and shares of unlisted joint-stock companies: the old “20% on transfer profit” is replaced by a uniform “2% on the transfer price”.

The practical consequences of this change are enormous, and it is the point foreign investors most often miss when computing net sale prices:

• Tax is calculated on the total transfer value, with no deduction of cost and expenses. Formula: CIT payable = Transfer price × 2%.
• Tax obligations arise even when the transaction is at a loss. Previously, selling at a loss incurred no tax; since the new law took effect, any transfer transaction triggers 2% tax on the sale price.
• For large-value transactions, 2% on total value may be significantly larger than 20% on the gain — pricing calculations and tax-clause negotiations in the share purchase agreement (SPA) must be completely redone.

Detailed guidance on declaration and payment procedures continues in Circular 20/2026/TT-BTC (effective from March 2026).

Distinguishing by seller status

Seller is a foreign enterprise transferring capital contributions in an LLC or unlisted shares: pays 2% tax on the transfer price as analyzed in section 2.

Seller is a Vietnamese enterprise: income from capital transfers is included in the enterprise’s taxable CIT income and subject to the standard 20% rate on the income portion (transfer price minus cost and reasonable expenses). Note: the preferential 15% and 17% rates under Law 67/2025/QH15 do not apply to income from capital transfers and transfers of capital contribution rights.

Seller is an individual transferring shares of an unlisted joint-stock company: the transaction is classified as “securities transfer” and subject to 0.1% tax on the transfer price — the rate maintained as before under current regulations. (From 01/7/2026, Personal Income Tax Law No. 109/2025/QH15 takes effect with some changes on individual asset transfer taxation — individual investors need to update further.)

Summary table:

Tax exemption for intra-group restructuring

Alongside tightening the calculation method, the new law adds a notable exemption: intra-group restructuring transactions meeting certain conditions are exempt from income tax on capital transfers. The basis is the exclusion at Article 12, Decree 320/2025/ND-CP, with detailed application conditions in Circular 20/2026/TT-BTC.

This is good news for multinational groups regularly moving capital among member companies for governance reasons — instead of each internal transfer triggering 2% tax on the transaction value, qualifying internal transactions are exempt. However, the application conditions contain some unclear points in the text (such as the timing of determining book value, and handling exchange-rate fluctuations when contributing capital in foreign currency), so application requires careful consideration — including sending an official letter to the directly managing tax authorities before executing the transaction.

Who declares, pays, and deadlines

Withholding and payment-on-behalf obligations. When the seller is a foreign organization, the law provides a tax collection mechanism through the related party in Vietnam: the Vietnamese organization receiving the capital transfer may have an obligation to declare and pay tax on behalf of the foreign transferor. Where both buyer and seller are foreign organizations (offshore transactions transferring capital in a Vietnamese enterprise), the Vietnamese enterprise whose capital is transferred may become the paying party. Tax clauses in the SPA must clearly state which party is responsible for declaration, payment on behalf, and the reimbursement mechanism — this is content that tax reimbursement clauses in contracts must address from negotiation.

Declaration deadlines. Under Circular 20/2026/TT-BTC, the declaration and payment deadline for foreign enterprises is uniformly calculated from the effective date of the first capital transfer contract (SPA). In practice, many M&A transactions have post-closing price adjustments (earn-out mechanisms, working capital adjustments) — supplementary payments may trigger additional declaration obligations, requiring tracking until the transaction is fully completed.

Common risks

Calculating tax under the old formula. The biggest risk today is parties still computing under the 20%-on-profit formula for foreign-enterprise sellers — while the new law has moved to 2% on price. For loss-making or thin-margin transactions, the difference between the two calculations can reach tens of billions of VND, and the party with the payment-on-behalf obligation in Vietnam bears the direct risk.

Misdetermining the transfer price. The transfer price is the direct tax base (for the 2% rate), so price determination — including payments outside the SPA, earn-outs, and attached asset values — must be complete and substantiated. Tax authorities have the right to deem the price where the transfer price does not match market price.

Missing indirect transaction obligations. Indirect capital transfers — e.g., an offshore parent transferring shares of an intermediate holding company whose main asset is a Vietnamese enterprise — may still trigger tax obligations in Vietnam. Multi-tier holding structures do not automatically exclude tax obligations.

Not distinguishing capital transfer from project transfer. Selling shares of the project company (share deal) and directly selling the entire investment project (asset deal) are subject to two different tax regimes — see tax on investment project transfers. Transaction structure choice directly affects both parties’ total tax obligations.

When to contact a lawyer

• Before signing the SPA: computing the transaction’s tax obligations by each party’s status, negotiating tax clauses and payment-on-behalf mechanisms;
• Transactions with complex elements: indirect transfers via holding companies, earn-outs, post-closing price adjustments, intra-group restructuring;
• Needing to assess eligibility for the intra-group restructuring exemption or treaty benefits under double taxation agreements;
• Having been subject to deemed transfer pricing, deemed tax assessments, or penalties related to executed transactions;
• Needing to review tax obligations in tax due diligence of M&A transactions before investment decisions.

How FLAT LAW FIRM assists

• Computing capital transfer tax obligations according to each party’s correct status in the transaction;
• Drafting and negotiating tax clauses in SPAs: tax obligation allocation, withholding and payment-on-behalf mechanisms, tax reimbursement, tax warranties;
• Advising on transaction structure (share deal / asset deal) from overall tax and legal perspectives;
• Assessing eligibility for the intra-group restructuring exemption and treaty benefits under double taxation agreements;
• Representing businesses before tax authorities, complaining against deemed assessment and penalty decisions — in coordination with FLAT’s tax consulting services for FDI enterprises.

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