A foreign parent selling its stake in a Vietnamese subsidiary bears 20 percent corporate income tax on the transfer gain, and that tax is withheld at the payment stage in Vietnam before the money leaves the border. This article clarifies how the tax is computed, the real role of tax treaties and the pay-on-behalf mechanism — distinct from the topic on tax where a parent forgives a subsidiary’s debt (FDI-LC-1018), an entirely different income event, and from parent–subsidiary transfer-pricing files (FDI-LC-0279), which concern periodic related-party documentation duties.
The tax framework: 20 percent on the transfer gain
A foreign organisation transferring a capital stake in a Vietnamese enterprise is subject to corporate income tax in Vietnam under the Law on Corporate Income Tax 67/2025/QH15, at the 20 percent rate applied to capital-transfer income. Taxable income is determined as the transfer price less the cost of the transferred stake and valid, documented transfer expenses. Two practical points decide the real tax amount. The first is cost: for a stake contributed and purchased over many rounds and years, the cost file comprises contracts, bank remittance documents and capital-adjustment registrations; wherever a documentary link is missing, the corresponding cost portion risks refusal. The second is transfer price: a contract price abnormally low against market value will be examined for re-pricing under the arm’s length principle, especially where buyer and seller are related parties.
Tax treaties: why relief in Vietnam is rare
A parent company’s common expectation is that the double taxation treaty between its residence country and Vietnam will reduce or exempt this transfer tax. In reality, the capital-gains article in most of Vietnam’s tax treaties preserves the right of the country where the company whose stake is transferred is resident to tax gains from transferring shares or capital portions — following the principle of Article 13 of the model conventions — so Vietnam still taxes in full at 20 percent on the gain from transferring shares in a Vietnamese company, save for some treaties with separate clauses for real-estate-rich shares or specific ownership thresholds. The treaty’s benefit sits at the other end: tax already paid in Vietnam is credited against tax payable in the parent company’s residence country under the treaty’s foreign-tax-credit mechanism or that country’s domestic law. The deal’s tax analysis must therefore run simultaneously in both countries; looking only at the Vietnamese side easily misstates the group’s total tax cost.
The pay-on-behalf mechanism and the contract tax clause
Capital-transfer tax of a foreign organisation is collected through a declare-and-pay-on-behalf mechanism: the buyer, an organisation in Vietnam, must declare, withhold and pay tax on behalf of the foreign seller into the budget before paying out the remaining price, under the Law on Tax Administration 108/2025/QH15, replacing the Law on Tax Administration 38/2019/QH14 from 1 July 2026, and its guiding documents. Consequently, the bank remitting the purchase price abroad will require evidence that the transfer tax has been paid before executing the transfer order. In the stake sale contract, the tax clause must settle four points: whether the price is gross or net of tax; which side bears the risk where reassessed tax exceeds the amount withheld; a mechanism retaining part of the price until completion of the tax obligation is confirmed; and the seller’s duty to cooperate in providing cost documentation for the buyer to pay on its behalf. Left blank, the 20 percent tax on the gain becomes a post-closing dispute between the parties instead of a figure clearly allocated from signing day.
Frequently Asked Questions
Tax rate?
The rate is 20 percent of taxable income from a capital transfer under the Law on Corporate Income Tax 67/2025/QH15: taxable income equals the transfer price less the cost of the transferred stake and expenses directly related to the transfer. This framework applies to a foreign organisation selling a stake in a Vietnamese company even where the seller has no permanent establishment in Vietnam.
Does a tax treaty reduce it?
Rarely reduced in Vietnam: most of Vietnam’s double taxation treaties preserve Vietnam’s right to tax gains from transferring shares or capital portions in a Vietnamese company under the capital-gains article. The practical relief sits in the parent company’s country of residence, where tax already paid in Vietnam is usually credited against tax payable there under the treaty or domestic law — each specific treaty must be confirmed.
How is cost basis calculated?
Cost comprises the original purchase price of the stake and valid expenses directly related to the purchase, evidenced by contracts, bank payment documents and investment registration records. With capital increased over several rounds, cost accumulates round by round of contribution and purchase. Missing cost documentation is the biggest risk, because the tax authority may refuse the undocumented cost portion and tax almost the entire sale price.
Deductions?
The withholding mechanism operates at the payment side: the buyer in Vietnam must declare and pay tax on behalf of the foreign organisation selling the stake under tax-administration rules, deducting it from the purchase price before paying the seller. This is why a stake sale contract must always carry a tax clause stating whether the price is gross or net of tax and which side bears the risk of difference when the final tax figure changes.