The dividend fight is the classic Vietnamese JV conflict: the foreign partner wants profits home on its reporting cycle, the Vietnamese partner wants them retained to expand the plant. Vietnamese law takes neither side — Article 68 of the Law on Enterprises leaves the distribution decision to the members council once tax and financial obligations are met. Because the law leaves the door open, the outcome is decided entirely by the charter written at incorporation, when both sides were still friendly.
Who decides: the fight is in the voting threshold
The annual distribution decision belongs to the members council (LLC) or the general meeting of shareholders (JSC), taken together with the annual financial statements. At the default 65% threshold of Clause 3, Article 59, a 51% holder still cannot decide alone if the 49% partner attends and votes no — but one improperly convened meeting missed by the minority changes the arithmetic completely. A minority protecting its dividend stream therefore cannot rely on statutory thresholds alone; the reliable tools are placing distribution on the reserved matters list, or — for the side favouring retention — doing exactly the same in the opposite direction.
The stronger tool is a pre-written dividend policy in the charter: a minimum percentage of after-tax profit must be distributed unless a higher-threshold resolution decides otherwise, with the sole carve-out that distribution would breach debt-service capacity. A written policy turns the annual question from “shall we pay?” into “is there a lawful reason not to pay?” — reversing the burden of negotiation every single year.
Years without dividends: is the minority right infringed?
In principle, retaining profit for reinvestment is a lawful business decision if properly approved and backed by real business reasons: capacity expansion, debt repayment, risk reserves. The minority cannot, merely by pointing at years of no dividends, get a court to order a payout. The picture changes when non-payment travels with signs of abuse: the majority paying its own appointees high salaries, bonuses and management fees, or running related-party transactions at prices unfavourable to the company. Then the profit is not retained — it is extracted through another channel, and the minority has grounds to demand an independent audit, challenge the related-party dealings, and sue managers for breach of their duty of loyalty under the Law on Enterprises.
In a joint stock company there is one more narrow statutory lever: a shareholder or group holding at least 10% of ordinary shares for at least six consecutive months may request an extraordinary general meeting where shareholder rights are seriously infringed. It is a procedural lever, not a right to be paid — but enough to force the dividend question onto the formal agenda instead of being struck from it year after year.
Tax and remittance: the least contested layer
Vietnam levies no withholding tax when a company distributes profit to a foreign corporate investor — after-CIT profit is remitted abroad once the company has completed its financial obligations and the tax notification procedure under current tax administration rules. Individual shareholders are treated differently: dividends are capital-investment income bearing 5% personal income tax under the Law on Personal Income Tax 109/2025/QH15. That gap is why holding the stake through an offshore parent is usually more efficient than holding it personally — a structuring point to settle at JV design stage, not at the first dividend.
A common practical trap: profit is declared but cannot be remitted because the company tax finalisation is unfinished or the financial statements are unaudited — preconditions of any distribution. The charter should lock a calendar: audit completed in the first quarter, the annual meeting deciding distribution in the second, remittance right after the tax notice. Dividends stuck on paperwork are a loss nobody compensates, and entirely preventable with a written timetable.
Frequently Asked Questions
1. How high should a minimum dividend ratio in the charter be?
There is no statutory figure; negotiations usually settle on a floor percentage of after-tax profit that must be distributed each year, with the only retention carve-out being that payment would make the company unable to service due debts. The number must follow the sector capital hunger — heavy manufacturing argues a low floor, asset-light services a high one — but any written floor beats none.
2. The foreign side wants profit home, the Vietnamese side wants retention: who decides?
The members council or the general meeting decides, under the charter and Law on Enterprises thresholds — by default a 65% approval of attending members in an LLC. A side that wants the outcome tilted its way must lock it in advance through the reserved matters list or a minimum dividend policy in the charter, because at the annual meeting pure business argument rarely beats voting mechanics.
3. Do years without dividends infringe minority rights?
Not automatically. Retention for genuine business reasons, properly approved, is lawful. An infringement case arises when non-payment comes with abuse: the majority extracting value through salaries, bonuses, management fees and unfavourable related-party transactions. The minority remedies then are audit demands, challenges to related-party dealings and claims against managers — not a direct action for dividends.
4. What tax applies to dividends paid to the foreign partner?
For a foreign corporate investor: Vietnam withholds no tax on profit distributed after corporate income tax; the money is remitted once financial obligations and the tax notification are complete. For individuals: dividends are capital-investment income taxed at 5% personal income tax under the Law on Personal Income Tax 109/2025/QH15.
This article has been quality-reviewed by the FLAW AI Legal Council