FLAT LAW FIRM
Request a consultation

Foreign Investment

FDI Capital Transfer in Vietnam: When Is Approval Needed?

9 min readFLAT LAW FIRM
Hai bàn tay trao nhau bìa tài liệu hợp đồng màu xanh navy trên bàn họp gỗ, phía sau là cửa kính văn phòng nhìn ra khung cảnh thành phố mờ.

A foreign investor wants to exit a joint venture in Vietnam. An investment fund wants to buy 30% of a manufacturing company in Binh Duong. An offshore parent transfers its entire capital contribution to a subsidiary within the same group. All three are capital transfers in an FDI company, but their legal consequences differ completely: some require only a contract and an enterprise change registration completed in days; others mandatorily require prior approval from the investment registration authority before the deal can take effect.

This article distinguishes three capital-transfer scenarios in foreign-invested companies, explains when approval is required, what the procedures involve, and the tax and foreign-exchange obligations most often overlooked.

Contents

1. Three capital-transfer scenarios to distinguish

Before asking "is approval needed," identify which scenario your deal falls into:

Scenario 1 — Internal transfers not changing the "foreign element." Examples: two existing foreign investors transferring stakes between themselves; a parent transferring capital to a group subsidiary; a Vietnamese member transferring to another Vietnamese member. Common thread: no increase in foreign ownership, no new foreign investor in a conditional sector.

Scenario 2 — A foreign investor buying in. Examples: an offshore fund buying shares in a Vietnamese company; a new foreign investor contributing capital that raises the foreign ownership ratio; a transfer turning a domestic company into a foreign-invested one. This is the most tightly controlled scenario.

Scenario 3 — Transfers linked to an investment project. An FDI company is usually tied to a project holding an Investment Registration Certificate (IRC). When a capital transfer changes the project's investor, investment procedures arise on top of corporate ones: IRC amendment, or even fresh policy approval if adjusted contents fall within approval scope.

These scenarios can overlap in a single real deal — acquiring 100% of a project company is both scenario 2 and scenario 3.

2. Scenario 1: transfers not changing the foreign ownership structure

Here, investment law requires no approval procedure. The deal follows enterprise law:

  • LLCs: a member transfers its stake per the company charter; remaining members enjoy pre-emptive rights within the charter's timeframe. The transfer contract must be in writing.
  • Joint-stock companies: shareholders freely transfer shares, except voting preference shares and the 3-year transfer restriction on founders' ordinary shares (under the Enterprise Law).

After signing, the company must register the change of enterprise registration contents (members/shareholders) with the business registration authority. This is mandatory — without it, the transferee's legal standing is incomplete and the company may face administrative penalties.

Key warning: even with no investment approval, tax obligations apply in full (see section 6). Many intra-group deals get back-taxed because parties assumed "internal transfers are tax-free."

3. Scenario 2: foreign investor buying in — when approval is required

This is the crux. The 2025 Investment Law requires foreign investors making capital contributions or purchasing shares/stakes in Vietnamese economic organizations to complete approval procedures with the investment registration authority in statutory cases, including:

  • The contribution/purchase increases foreign ownership in the organization;
  • The organization operates in a conditional market-access sector for foreign investors (per international commitments and Vietnamese law);
  • Other cases prescribed by law.

Beyond procedure, foreign investors must satisfy market-access conditions: charter-capital ownership ratios, investment forms, operational scope, investor capacity, and other conditions under international commitments (WTO, CPTPP, EVIPA, etc.) and Vietnamese law.

Dossier and filing: the application for approval of capital contribution/share/stake purchase is filed with the investment registration authority where the organization is headquartered. Dossier components follow Decree 96/2026/ND-CP, including the registration document, legal papers of the foreign investor and the organization, and the contribution/purchase agreement.

Recommended sequence:

  1. Screen market-access conditions for the target's sectors before price negotiation — this determines whether the deal can proceed at all.
  2. File for approval and obtain the authority's written consent.
  3. Sign the transfer contract; pay through the direct investment capital account.
  4. Register enterprise changes; declare and pay capital-transfer tax.

Common trap: signing and paying before approval, with a clause making the contract "effective upon approval." Workable in principle — but if approval is refused (e.g., the sector is closed to foreign investors), the deal collapses and recovering deposits becomes a messy dispute. Always verify market access before placing deposits.

4. Scenario 3: transfers linked to a project holding an IRC

When the target operates a project holding an IRC, a change of investor (direct or via capital transfer) may constitute a project transfer or project adjustment:

  • The new investor inherits the project's rights and obligations under the Investment Law and must satisfy applicable conditions — including market-access conditions for foreign investors.
  • The project company must complete IRC amendment (change of investor) at the issuing investment registration authority.
  • If the transfer involves adjusting contents subject to investment policy approval (objectives, scale, location, timeline, etc.), an adjusted policy approval is additionally required.

In M&A practice, buyers typically require sellers to complete the IRC amendment as a condition precedent, or hold back part of the price until procedures conclude.

5. Post-transfer enterprise change registration

Regardless of scenario, after closing the company must register changes with the business registration authority:

  • LLC member changes: notice of member-list change, with the transfer contract and meeting minutes/resolution.
  • JSC founder-shareholder / share-class changes: enterprise registration update as applicable.
  • Legal representative change (if any): register simultaneously to avoid the exited person remaining on record with attendant liability risks.

The registration deadline is 10 days from the change (under the Enterprise Law). Late filing may draw administrative penalties in the planning-and-investment sector.

6. Tax on capital transfers

Tax is independent of approval — no approval does not mean no tax:

  • Individuals transferring LLC stakes: 20% personal income tax on taxable income = transfer price − purchase price − reasonable transfer costs.
  • Individuals transferring securities (JSC shares, listed or not): 0.1% on each transfer price, no deductions.
  • Organizations transferring capital: gains included in corporate income taxable income (standard 20% rate).
  • The transfer price must follow the market price. Abnormally low contract prices invite tax authorities to impose a deemed price — the biggest risk in intra-group deals booked at nominal values.

The transferor (or authorized organization) must declare and pay within statutory deadlines; tax payment receipts are required for outward remittance (section 7).

7. Foreign exchange: where the money flows

All foreign-investor capital transfers must go through a direct investment capital account (DICA) at a bank licensed for foreign-exchange operations in Vietnam:

  • Purchase money flows into the target's DICA (for additional contributions) or to the transferor through the banking system.
  • Transfer proceeds, after tax settlement, may be remitted abroad via the DICA.

Banks typically require: the transfer contract, the investment authority's approval (if applicable), tax payment receipts, and the updated enterprise registration certificate. Missing any of these is the most common reason funds get "stuck" at banks for weeks.

8. Five common mistakes

  1. Assuming intra-group transfers are tax-free — authorities still impose market prices and back-taxes.
  2. Signing and paying before capital-purchase approval — the deal collapses if approval is refused.
  3. Forgetting the IRC amendment when acquiring a project company — the new investor goes unrecognized, affecting incentives and later procedures.
  4. Missing enterprise change registration deadlines — the exited person stays on legal record with liability exposure.
  5. Nominal contract prices — deemed taxation, plus suspected transfer-pricing manipulation where parties are related.

9. FAQs

Does a transfer between two existing foreign investors require approval?

Generally no investment approval is needed if the deal does not change the project's investor, does not increase foreign ownership beyond thresholds, and does not involve a conditional market-access sector. The company must still register the change of members/shareholders and the transferor must declare and pay income tax on the transfer. If the deal relates to a project holding an IRC, check notification duties to the investment registration authority.

Does a foreign investor buying shares in a Vietnamese company need approval?

Yes, in statutory cases. The 2025 Investment Law requires foreign investors making capital contributions or purchasing shares/stakes to obtain approval when the purchase increases foreign ownership or when the enterprise operates in a conditional market-access sector. Market-access conditions under international commitments must also be satisfied. The dossier is filed with the investment registration authority where the enterprise is headquartered.

What is the procedure for acquiring an entire investment project (buying the project company)?

This is a transfer of the investment project, not merely a capital transfer. The new investor inherits the project's rights and obligations and must satisfy applicable conditions, including market-access conditions for foreign investors. The project company must amend its IRC (change of investor) and update enterprise registration (ERC). If the transfer involves adjusting contents subject to policy approval, an adjusted policy approval is required.

How much tax is payable on a capital transfer?

Individuals transferring capital contributions: 20% personal income tax on taxable income (transfer price minus purchase price and reasonable costs). Individuals transferring securities (JSC shares): 0.1% on each transfer price. Organizations: gains included in corporate income taxable income (standard 20% rate, or incentive rates if eligible). The transfer price must follow the market price; tax authorities may impose a deemed price.

Can transfer proceeds be remitted abroad?

Yes, after Vietnamese tax obligations are settled. Foreign investors conduct capital-transfer transactions through a direct investment capital account (DICA) at a licensed bank. Proceeds, net of tax and financial obligations, may be remitted abroad under forex regulations. Keep full documentation: transfer contract, tax payment receipts, bank confirmations.

What happens if required approval is skipped?

The transaction may be deemed legally incomplete; the company cannot register changes with the business/investment registration authorities; the transferee is not recognized as a lawful member/shareholder; and administrative penalties in the investment sector may apply. In serious cases, authorities may order remediation, jeopardizing the new investor's entire business plan.

10. When to work with counsel

Engage counsel before signing the term sheet if your deal involves any of: a foreign buyer; a target in a conditional sector; a target running an IRC project or enjoying incentives; a transfer price materially different from book value; related parties.

FLAT Law Firm advises comprehensively on capital transfers and M&A for foreign investors: market-access screening, capital-purchase approvals, IRC amendments, enterprise registration, tax and forex advice. Call our hotline 0988424851 for advice on your specific deal.

References

  1. Investment Law No. 143/2025/QH15 dated 11/12/2025, effective 01/3/2026.
  2. Decree No. 96/2026/ND-CP dated 31/3/2026 detailing the Investment Law.
  3. Enterprise Law No. 76/2025/QH15.
  4. Circular No. 111/2013/TT-BTC dated 15/8/2013 guiding the Personal Income Tax Law.
  5. Foreign Exchange Ordinance No. 28/2005/PL-UBTVQH11 and guiding regulations on forex management for foreign direct investment.