Dividends are the smoothest capital-withdrawal route for a foreign investor in Vietnam: no buyer needed, no change of owner, and the dividend flow to a foreign corporation is not withheld at source in Vietnam. This article clarifies the conditions, procedure and tax treatment of paying dividends to withdraw capital gradually — distinct from division or separation of an enterprise to withdraw part of the capital (FDI-LC-2824), which is a reorganisation transaction, and from an IPO exit (EXP-2635), an entirely different market route.
Dividend conditions: three safety locks
Article 135 of the Law on Enterprises 59/2020/QH14 sets three locks on dividend payment by a joint stock company: the company has completed its tax and other financial obligations under the law; it has set up the company’s funds and fully offset prior losses as required by law and the charter; and immediately after paying the intended dividends in full, the company still ensures payment of all due debts and other property obligations. For a limited liability company, profit distribution to members follows the charter and equivalent principles on profit source and payment capacity. The third lock is the one practice most often underrates: paying dividends while the company is insolvent exposes the distribution to clawback demands and makes the persons deciding the payment jointly liable for the company’s debts up to the wrongly paid amount. The source must be undistributed after-tax profit on approved financial statements — without accumulated profit there is no dividend, however much cash sits in the bank account.
Procedure and the outward cash flow
The procedural chain comprises: finalising the period financial statements and determining distributable profit; the members’ council or general meeting of shareholders approving the dividend resolution and recipient list; performing the notification of outward profit remittance to the tax authority under current tax-administration rules before transferring; and remitting through the investor’s direct investment capital account at an authorised bank, with the resolution, financial statements and tax documents attached. For a joint stock company, Article 135 of the Law on Enterprises requires dividends to be paid in full within six months from the end of the annual general meeting of shareholders that set the dividend level. The remitting bank will check the profit-source file and confirmation that tax obligations for the relevant period are complete, so the tax finalisation file must be prepared before the dividend resolution is issued.
Tax and the dividend’s place in an exit plan
For tax in Vietnam, profits distributed to a foreign corporate investor are not subject to income-tax withholding at source — the policy that makes dividends the cheapest withdrawal flow in tax terms. An individual investor bears personal income tax on capital-investment income under the Law on Personal Income Tax 109/2025/QH15, replacing Law 04/2007/QH12, at 5 percent of the dividend paid. Note that a dividend is purely a profit distribution: it does not reduce charter capital, does not change ownership ratios and creates no transfer event for valuation purposes. In a full-exit plan, dividends therefore serve to extract accumulated value first, lightening the value base for the following sale or dissolution step; the investor must also check home-country tax treatment of the dividend received from Vietnam and any credit available under the double taxation treaty between the two countries, because the real tax cost of the dividend flow often sits at the receiving end rather than in Vietnam.
Frequently Asked Questions
What are the conditions for paying dividends?
A company may pay dividends only from undistributed after-tax profits, after completing tax and other financial obligations, setting up statutory and charter funds, and remaining able to pay due debts after payment — the core conditions in Article 135 of the Law on Enterprises 59/2020/QH14 for joint stock companies; limited liability companies apply equivalent principles through the charter and profit-distribution rules.
What is the procedure for paying dividends?
The sequence is: confirm the financial statements and distributable profit; the owners’ body or general meeting of shareholders approves the distribution plan; prepare the recipient list and notify the tax authority of the outward profit remittance as required before transferring; and remit through the investor’s capital account at an authorised bank. Dividends of a joint stock company must be paid in full within the statutory period from the end of the annual general meeting.
Tax on dividends paid to foreign investors?
Vietnam does not withhold tax on dividends and distributed profits paid to a foreign corporate investor — a long-standing investment-attraction policy. A foreign individual investor bears 5 percent personal income tax on capital-investment income under the Law on Personal Income Tax 109/2025/QH15. Tax in the parent investor’s home country on the dividend received is a separate question to check with home-country tax advice and the applicable tax treaty.
Should I withdraw gradually via dividends instead of selling?
If the goal is gradual withdrawal while the enterprise remains steadily profitable, dividends are the cheapest and smoothest route: no buyer needed, no change of ownership, no transfer tax. But dividends can only withdraw accumulated profits, not the capital itself, and do not end the legal presence; for a full exit, dividends should be the first step of a combined plan rather than the whole plan.
This article has been quality-reviewed by the FLAW AI Legal Council