Technology and patents are the asset class foreign investors most like to contribute — and the class that generates the most valuation disputes in Vietnamese joint ventures. The legal frame is simple: Articles 34 and 36 of the Law on Enterprises 59/2020/QH14. The difficulty is that a patent value sits on no price list; it sits in a valuation report, and that report gets re-read at exactly the moment relations turn bad: an audit, a stake sale, or a dissolution.
Conditions for IP to become valid capital
Article 34 of the Law on Enterprises defines capital-contribution assets as Vietnamese dong, freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, technical know-how and other assets capable of being valued in dong. Two substantive conditions follow: the right contributed must legally belong to the contributor — a patent held by another group subsidiary must be contributed by that subsidiary, not “verbally guaranteed” by the parent — and the asset must be transferable to the receiving company: registered ownership assigned at the National Office of Intellectual Property for registered patents and marks, or use rights transferred by a recorded licence.
One distinction is chronically confused: contributing ownership and contributing a right of use are entirely different transactions. Contribute ownership and the company becomes the owner — the IP enters the balance sheet and bears its own impairment risk. Contribute a right of use and the IP stays with the contributor; the company only exploits it for the agreed term, after which the right comes home. The charter and the valuation minute must say which one is happening; ambiguity here is the source of most end-of-JV IP fights.
Valuation under Article 36: two routes and one trap
Article 36 offers two routes: the founding members or shareholders agree the value themselves by consensus, or they engage a licensed valuation organisation. Self-agreement is fast and cheap at incorporation, but it arms the trap in Clause 3 of Article 36: if the asset is valued above its actual worth at the contribution date, the members must jointly top up the shortfall and bear joint liability for damage. For IP — where “actual worth” is an arguable concept — a self-valuation minute with no methodology file is a time bomb in the hands of any partner who later wants to renegotiate the equity ratio.
A proper IP valuation file has three layers: method (cost, market or income — for a patent with real licence revenue, the income approach on discounted cash flow is the most persuasive); evidence (comparable licence contracts, revenue of patent-bearing products, documented R&D cost); and valuer (a price-licensed valuation organisation independent of both sides). Where the technology has no revenue yet — common for fresh patents — the valuation must be genuinely conservative: the number written into charter capital is not just a negotiating figure, it is the basis for voting ratios and for asset division on dissolution.
The tax and accounting layer around an IP contribution
Contributing an asset into a newly formed company is not a sale: the contributor books no sales revenue at the contribution date, and the receiving company records the asset at the agreed valuation for depreciation or amortisation under accounting and tax rules. The watch-points come later: if the company later sells the IP, or the contributor sells the corresponding stake, tax arises on the difference under the corporate income tax rules then in force. The contribution also runs through the investment channel, not the bank: its value is recorded in the Investment Registration Certificate and the charter capital, and project capital completion is measured by completion of the rights transfer, not by money movement.
The practice recommendation drawn from disputes that already happened: separate three documents from day one — the valuation minute with its report attached, the rights-transfer instrument (registered at the National Office of Intellectual Property where ownership moves), and a shareholders agreement clause for what happens if the IP dies or is invalidated (patent annulled, mark terminated): is the corresponding capital topped up in cash, or reduced? Without that third document, the day the patent is cancelled is the day the whole capital bargain reopens, on the worst possible terms for everyone.
Frequently Asked Questions
1. By what method is a patent contributed to an FDI company valued?
The law imposes no single method: Article 36 of the Law on Enterprises allows members to agree the value or engage a valuation organisation. Professionally, a patent with real licence cash flow calls for the income approach; an unexploited patent for the cost or market approach with comparable transactions. What is compulsory in substance is keeping the methodology file, because overvaluation triggers the top-up and compensation liability in Clause 3, Article 36.
2. Who is allowed to value IP for a capital contribution in Vietnam?
A valuation organisation licensed under price law — qualified valuation enterprises with practising certified valuers — independent of both contributor and receiving company. If the members agree the value themselves, no outside firm is needed, but all members bear joint liability if the agreed figure exceeds the asset actual value at the contribution date.
3. How is tax calculated when contributing IP as capital?
At the moment of contribution there is no sale, so the contributor has no taxable sales revenue from the act of contributing; the receiving company books the IP at the agreed valuation for depreciation and amortisation. Tax arises on later transactions: selling the IP, selling the corresponding capital stake, or licence income the IP generates — each taxed under the corporate income tax framework in force when it occurs.
4. What is the risk if contributed IP is overvalued?
Three stacked risks: the members must jointly top up the difference and compensate damage under Clause 3, Article 36 of the Law on Enterprises; voting ratios and dissolution asset shares are distorted by the wrong number; and when an audit, an inspection or a buyer due diligence reopens the file, the company entire capital history must be explained again from scratch. An independent, documented valuation is the only way to cut all three risks at once.
This article has been quality-reviewed by the FLAW AI Legal Council