Dividing and splitting enterprises are familiar restructuring tools for foreign-invested groups in Vietnam: spinning a business line into an independent legal entity, or dividing a company when owner groups go separate ways. For FDI enterprises, these transactions trigger two distinctive obligation groups: investment license handling (IRC, sub-licenses) and tax obligations (finalization upon division/split). This article analyzes them under the Law on Enterprises 2020 and the current framework.
1. Legal basis
- Law on Enterprises 2020 (59/2020/QH14, in force): Article 198 (division of companies), Article 199 (split-off of companies).
- Law on Investment 2025 (143/2025/QH15, effective 1 March 2026): investors may divide/split investment projects; project adjustment procedures under Article 33 (for IRC projects).
- Law on Tax Administration 2025 (108/2025/QH15, effective 1 July 2026) and Decree 252/2026/ND-CP (Article 10(5)(b)): tax finalization upon division/split — no later than the 45th day from the division/split decision.
2. Division vs. split-off
| Criterion | Division (Art. 198) | Split-off (Art. 199) |
|---|---|---|
| Formula | A → B + C (B, C entirely new) | A → A + B (A continues) |
| Original company | Ceases to exist after division | Continues to exist, keeps its tax code |
| Debt liability | New companies are jointly liable for obligations, unpaid debts, labor contracts, and property obligations of the divided company | Both the split and new companies are jointly liable for pre-split obligations (unless otherwise agreed) |
| Licenses | Must all be transferred/re-issued to new entities | Original company keeps its own; only the transferred portion needs handling |
| Best for | Owner groups going separate ways | Spinning off a business line while keeping the original brand |
3. Handling investment licenses
- Investment projects attached to the divided/split enterprise: carry out the project adjustment procedure — the Law on Investment 2025 permits dividing/splitting one project into several. A new company becoming the project owner needs its IRC adjusted/re-issued;
- Enterprise registration: new companies register for establishment; in a division, the divided company ceases to exist once the new companies receive their Enterprise Registration Certificates; in a split-off, the split company registers changes to charter capital and members/shareholders;
- Sub-licenses (construction, environment, fire safety, conditional business licenses): issued in the old entity’s name, they cease to be valid for the new entity — transfer or re-apply;
- Warning: under Article 36 of the Law on Investment 2025, a dissolved economic organization that fails to terminate/transfer its investment project faces project termination — dividing a company without properly handling the IRC falls into this trap.
4. Tax obligations upon division/split
- Tax finalization up to the division/split date: file the finalization dossier no later than the 45th day from the division/split decision (from 1 July 2026); the tax authority notifies the business registration office of completion;
- CIT on transferred assets: a compliant division/split with assets transferred at book value triggers no CIT; but asset revaluation or non-pro-rata division may create tax liabilities — review before signing the resolution;
- Joint liability for tax debts of the original company under Articles 198–199;
- Employees: division/split causing job losses triggers the job-loss allowance under Article 47 of the Labor Code 2019.
5. Implementation sequence
- Adopt the division/split resolution (Members’ Council/General Meeting of Shareholders): asset, capital, and obligation allocation plan; labor utilization plan;
- Send the resolution to creditors and employees;
- Adopt charters and elect management of the new companies;
- Register the new enterprises and register changes (split-off case);
- Finalize taxes upon division/split (45-day mark);
- Adjust the investment project / IRC and re-apply for sub-licenses for the new entity;
- Transfer contracts, assets, and employees; update bank accounts, seals, and digital signatures.
6. Common pitfalls
- Forgetting to handle the old company’s IRC after division;
- Sub-licenses in the old entity’s name expiring without re-application;
- Missing the 45-day tax finalization deadline;
- Revaluing assets on division without pre-calculating tax exposure;
- Overlooking job-loss allowances for affected employees.
Content drafted by the FLAW AI Legal Council, pending QA Council review before approval. This article is for general information only and does not replace legal advice for any specific case.