Wanting to pull money out of a subsidiary — which route? Reducing charter capital, selling the stake, or liquidating the company: each has different procedures and taxes in China and Vietnam. This article compares them so you pick the cheapest, fastest way.
1. Three capital-withdrawal routes
- Reduction: reducing charter capital — taking money back;
- Sale: selling the stake — to another party;
- Liquidation: dissolving the company — distributing leftovers;
- Compare: taxes and time — differing;
- Choose: objectives — partial or full exit;
- Advice: before deciding — ask lawyers and tax advisers.
2. Reducing charter capital in Vietnam
- Conditions: under enterprise law — obligations completed;
- Resolution: the owner/board — resolving;
- Register: the business registration — authority;
- Creditors: protecting — creditor rights;
- Time: qualitative frame — ask in practice;
- Tax: considering — income tax.
3. Capital reduction in China
- Procedure: under company law — of China;
- Creditors: notifying — creditor protection;
- Register: the business registration — authority;
- Details: ask counsel — in China;
- FX: moving money out — procedures;
- Compare: relatively complex — (qualitative).
4. Selling stakes in Vietnam
- Contract: transferring — the capital contribution;
- Priority: remaining members — pre-emptive rights;
- Register: changing — certificates;
- Tax: transfer tax — on the seller;
- Valuation: market price — against transfer pricing;
- Buyer: diligence — before buying.
5. Transfers in China
- Contract: transferring — shares/capital;
- Approval: authorities — depending on case;
- Tax: transfer tax — (qualitative frame);
- Valuation: reasonable — avoiding reassessment;
- FX: transferring — money abroad;
- Details: Chinese lawyers — advising.
6. Capital-transfer tax: the frame
- Principle: the spread — sale price minus cost;
- Rate: under tax law — per country (ask advisers);
- DTA: taxing rights — allocated;
- Payer: the transferor — usually;
- Withholding: the buyer withholding — in some cases;
- Plan: calculating tax upfront — when pricing.
7. Liquidating a company in Vietnam
- Decision: dissolution — voluntary;
- Liquidate: assets and debts — collecting, paying;
- Tax: finalising tax — before closing;
- Employees: rights — settled;
- Time: lengthy — (qualitative);
- Distribute leftovers: assets — to owners.
8. Liquidating a company in China
- Procedure: liquidation — under law;
- Committee: a liquidation committee — formed;
- Creditors: notifying — claims;
- Tax: finalising — fully;
- FX: moving out — the remainder;
- Details: ask counsel — in China.
9. Optimal withdrawal sequencing
- Step 1: dividends — from profits;
- Step 2: capital reduction — withdrawing contributions;
- Step 3: transfer — selling;
- Step 4: liquidation — last;
- Rule: cheap first, costly later — less tax first;
- Calculate: total tax — per option.
10. Comparing time and cost
- Reduction: fastest — of the three (qualitative);
- Transfer: depends on negotiation — finding buyers;
- Liquidation: slowest — many procedures;
- Cost: lawyers and tax — per route;
- Plan: starting early — before cash is needed;
- Reality: asking — realistic timelines.
11. Valuing transferred stakes
- Methods: asset, income — market;
- Assess: independent — valuers;
- Low price: reassessed — by tax;
- Negotiate: two parties — agreeing;
- File: valuation reports — kept;
- Tax: the calculation basis — for transfer tax.
12. Pre-emptive rights of remaining members
- Vietnam: remaining members — prioritised;
- Procedure: offering — first;
- Deadline: per charter — and law;
- Declining: in writing — before outside sale;
- China: its separate rules — consult counsel;
- Charter: may differ — as agreed.
13. Employee obligations on withdrawal
- Reduction: no direct impact;
- Transfer: the employer — unchanged;
- Liquidation: terminating — labour contracts;
- Allowances: severance, job-loss — per law;
- Notify: the union — and employees;
- Plan: budgeting — costs.
14. Tax duties when closing a company
- Finalise: corporate income tax — to closing date;
- VAT: refunds/offsets — handled;
- PIT: employees’ — finalised;
- Inspect: the tax authority — auditing;
- Tax debts: paying in full — before closing;
- Time: allowing — for tax checks.
15. Moving money abroad after withdrawal
- Lawful source: proving — the withdrawn money;
- Tax: fully paid — documents;
- Bank: transferring through — banks;
- FX: complying — with regulations;
- China: SAFE — controlling;
- Dossier: complete — avoiding blocks.
16. Partial vs full withdrawal
- Partial: reduction/dividends — keeping operations;
- Full: sale/liquidation — ending;
- Tax: differing — calculating;
- Strategy: phased — gradual exit;
- Flexible: keeping the door — open;
- Decide: the board — strategy.
17. Impact on the investment licence
- Reduction: adjusting the IRC — investment capital;
- Transfer: changing owners — registering;
- Liquidation: terminating — the project;
- Incentives: clawed back — if conditions unmet;
- Procedure: the investment authority — notifying;
- Plan: synchronised — legal + tax.
18. Withdrawal mistakes
- Not calculating tax: surprised — by the bill;
- Low valuation: reassessed — back taxes;
- Ignoring creditors: breaching — procedures;
- Slow: needing cash urgently — too late;
- Missing dossiers: FX blocked — transfers;
- DIY: complex — get advice.
19. Withdrawal checklist
- Route — chosen?
- Tax — calculated?
- Valuation — done?
- Creditors — handled?
- IRC — adjusted?
- FX — prepared?
20. Recommended withdrawal roadmap
- 12 months out: deciding — strategy;
- 9 months out: advisers — legal and tax;
- 6 months out: valuation — assessing;
- 3 months out: procedures — starting;
- Execute: tracking — progress;
- After: finalising — fully.
21. Earn-outs in stake sales
- Concept: deferred consideration — tied to performance;
- Use: bridging valuation — gaps;
- Tax: timing — of tax;
- Secure: security — for payment;
- Disputes: calculation disputes — common;
- Draft: precisely — drafted.
22. Representations and warranties in sales
- Give: sellers warranting — key matters;
- Tax: tax warranties — essential;
- Caps: liability caps — negotiated;
- Time: claim periods — limited;
- Disclose: disclosure letters — qualifying;
- Survive: survival periods — agreed.
23. Employee transfers in business sales
- Transfer: automatic — in asset deals;
- Consult: employee consultation — required;
- Terms: preserved — terms;
- Dismiss: restrictions — on dismissals;
- Plan: HR planning — early;
- Advise: labour lawyers — engaged.
24. Non-compete clauses for sellers
- Agree: non-compete — periods;
- Scope: geography and sector — defined;
- Enforce: enforceability — varying;
- Pay: compensation — for restraint;
- Draft: reasonable — scope;
- Check: per country — rules.
25. Post-closing adjustments
- Adjust: working capital — adjustments;
- Mechanism: completion accounts;
- Disputes: expert determination;
- Escrow: holdbacks — securing;
- Time: short windows — for claims;
- Draft: clearly — drafted.
26. Management buyouts as an exit
- Concept: managers buying — the business;
- Finance: leveraged — structures;
- Price: fair valuation — needed;
- Approve: board approvals — obtained;
- Conflict: managing conflicts — of interest;
- Document: full — documentation.
27. Distressed exits: special considerations
- Speed: urgency — prioritised;
- Creditors: creditor pressure — managed;
- Price: discounted — expectations;
- Liability: director liability — watched;
- Advise: restructuring — specialists;
- Document: decisions — recorded.
28. Tax losses on exit
- Use: loss utilisation — optimised;
- Carry: loss carry-forward — rules;
- Change: ownership changes — restrictions;
- Plan: timing — of exit;
- Value: losses have value — priced;
- Advise: tax specialists — consulted.
29. Exit readiness: preparing in advance
- Clean: clean records — maintained;
- Resolve: legacy issues — resolved;
- Update: registrations — current;
- Plan: exit planning — early;
- Value: readiness adds value — to price.
30. Post-exit obligations reminder
- Records: retaining — statutory records;
- Tax: post-exit filings — completed;
- Warranties: surviving — obligations;
- Contacts: adviser contacts — kept.
31. Keeping the deal file after closing
- Archive: complete — deal files;
- Access: controlled — access;
- Retain: statutory — periods.
Contact us
FLAT Law Firm advises Chinese investors throughout the Vietnam investment cycle — from deal structuring and licensing to operations and compliance. Contact us for advice tailored to your project.
This article has been quality-reviewed by the FLAW AI Legal Council
