A partial withdrawal is not a sale: there is no buyer and no negotiated price, so the tax question is not the rate but how cleanly the returned amount splits between capital handed back and accumulated profit taken out. Split it wrongly and the whole remittance can be recharacterised as taxable income.
Three withdrawal routes, three different tax treatments
In a limited liability company, a member withdrawing part of its contribution is in substance receiving a capital refund coupled with a charter-capital reduction under Article 68 of the Enterprise Law 59/2020/QH14, available where the company has operated continuously for over two years and can still pay its debts after the refund. Money matching the original contribution is a mere return of capital and creates no income; only the excess — retained profit paid out on withdrawal — is taxable. In a joint stock company, a partial exit usually runs through the company buy-back mechanism in Article 133, which makes the transaction look much more like a transfer by the selling shareholder.
How a dividend paid alongside the withdrawal is treated
Withdrawal rounds are often packaged with a dividend resolution to optimise cash movement, but the two flows are taxed separately. A foreign corporate investor receiving dividends in Vietnam suffers no dividend withholding tax — a notable difference from several regional jurisdictions. An individual shareholder, by contrast, is withheld at 5% on dividends under the Personal Income Tax Law 109/2025/QH15. The exposure arises when one resolution records a single blended payment: the tax authority can require the split to be redone and assess the profit element that was booked as capital.
Keeping the withdrawal from being recomputed
- Build a reconciliation of original contributions, earlier withdrawals and retained earnings so this round’s income element is fixed precisely.
- Separate the resolutions and payment orders into two flows — capital refund and profit distribution — even when they are paid on the same day.
- Update the enterprise registration and the investment capital account after the reduction so the outbound remittance matches the foreign-exchange file.
Frequently Asked Questions
Do partial capital withdrawals bear tax?
Only the part exceeding the original contribution is taxed. The refund of contributed capital itself is a return of capital and creates no income; accumulated profit withdrawn in the same round is taxable under the capital-income rules for the relevant investor type, and a separate dividend to an individual bears 5% withholding.
Does charter capital decrease?
Yes. In an LLC a partial withdrawal reduces charter capital under Article 68 of the Enterprise Law 59/2020/QH14: the company must have operated continuously for more than two years, remain able to pay its debts after the refund, and register the new charter capital within the statutory period.
What about dividends?
Dividends paid to a foreign corporate investor are not subject to withholding tax in Vietnam. Individual shareholders bear 5% personal income tax on dividends under Law 109/2025/QH15, withheld by the company before payment.
Who files?
Income arising on the profit element of a withdrawal is declared per occurrence; the Vietnamese company normally declares, withholds and pays on the foreign investor’s behalf, and completes the tax notification before remitting funds through the capital account.
This article has been quality-reviewed by the FLAW AI Legal Council