When a Vietnamese company or individual sells capital to a foreign investor, the tax question arrives last but argues longest: is income tax on the capital transfer paid directly by the seller, or withheld at source by the buyer before payment? Answer wrongly and the buyer can be assessed for tax that belonged to the seller, while the seller receives an unexpected tax debt notice after the deal money is spent. This article clarifies the rates, the taxpayer and the withholding mechanism under current law.
The Legal Framework You Need
Under the Law on Corporate Income Tax 67/2025/QH15 effective from 1 October 2025, an organisation transferring capital pays tax at 20 percent on taxable income, being the transfer price minus the purchase price and reasonable transfer costs. For individuals, the Law on Personal Income Tax 109/2025/QH15 taxes a resident individual transferring capital contributions at 20 percent on income, while securities transfers are taxed at 0.1 percent of the sale price per transaction. Note that the corporate income tax part of Circular 103/2014/TT-BTC on foreign contractor tax was repealed from 12 March 2026, so the old contractor withholding frame no longer governs current deals.
On who pays, the general principle is that the seller declares and pays tax on its own income. For a foreign organisation seller with no presence in Vietnam, however, enforcement shifts to withholding and payment on behalf: the Vietnamese enterprise whose capital is transferred, or the transferee, declares and pays the tax for the foreign organisation before or at the time of payment. The foreign buyer therefore often acts as the money holder: retaining the amount matching the tax liability from the price, completing the payment on behalf, and only then releasing the balance to the seller.
Applying the Rules to a Real Deal
In negotiation, the point to lock early is whether the price is gross or net of tax in the seller hands. If the contract is silent, the default reading is that the seller bears tax on its own income and the buyer merely assists with withholding and remittance. Many disputes erupt when the seller expects to receive the full verbally agreed sum while the buyer must retain the tax portion at the request of the tax authority and the bank. The professional fix is a dedicated tax clause: the tax base, who files, when payment is due, and tax payment receipts as a condition for the final disbursement.
A further layer of complexity is determining taxable income when the seller capital history is unclear: the original purchase price lacks documents, and the stake was built through multiple capital increases and overlapping transfers. The tax authority may then redetermine both cost base and transfer price from its own data. The buyer should require the seller to produce the full cost base file during tax diligence, and agree an indemnity if assessed tax exceeds estimates because seller information was wrong. Paying on behalf does not make the buyer the taxpayer, but it does make the buyer the party exposed if collection goes wrong.
Illustrative example: A Vietnamese founder sold a 60 percent stake in his education company to a Korean strategic investor. The contract stated a single headline price with no tax clause. At closing, the Vietnamese company, acting as the party required to declare and pay on behalf in the structure used, retained the amount corresponding to the founder personal income tax on the gain. The founder objected, closing paused for nine days, and the parties signed a side letter confirming the seller bore the tax while the buyer side handled filing and delivered the payment receipts for the founder finalisation file.
Procedure and Documents to Prepare
First: identify whether the seller is an organisation or an individual, resident or non-resident, to select the correct tax and payment mechanism. Next: assemble the original capital purchase documents and transfer costs to estimate taxable income. After that: agree in the contract who bears the tax, the withholding and payment-on-behalf mechanism, and the receipts to be handed over. Then: the buyer or the enterprise whose capital is transferred declares and pays the tax on behalf before releasing the final price instalment. Finally: keep the tax payment receipts in the deal file for later finalisation and explanations by both sides.
- identify whether the seller is an organisation or an individual, resident or non-resident, to select the correct tax and payment mechanism.
- assemble the original capital purchase documents and transfer costs to estimate taxable income.
- agree in the contract who bears the tax, the withholding and payment-on-behalf mechanism, and the receipts to be handed over.
- the buyer or the enterprise whose capital is transferred declares and pays the tax on behalf before releasing the final price instalment.
- keep the tax payment receipts in the deal file for later finalisation and explanations by both sides.
Common Risks and How to Prevent Them
The first risk is a contract silent on who bears the tax, producing a money retention dispute at the very moment of payment. The second risk is applying the expired foreign contractor withholding frame of Circular 103/2014/TT-BTC to a current transaction. The third risk is a seller lacking cost base documents, so taxable income is assessed higher than reality. The safeguard is tax diligence from the start, a complete tax clause in the contract, and releasing the final instalment only against tax payment receipts.
Capital transfer tax is usually remembered last, but it should be handled first: run tax diligence from day one, write complete tax clauses into the contract, and hold back the final payment tranche until the tax payment receipts are in hand. Doing it in the reverse order is the easiest way to leave risk hanging over a closed deal.
Frequently Asked Questions
Who pays the income tax when capital is transferred to a foreign investor?
In principle the taxpayer is the seller, because the tax falls on the seller income from transferring capital. The enforcement mechanism differs by seller type: domestic organisations and individuals declare and pay their own tax; a foreign organisation with no presence in Vietnam has its tax declared and paid on its behalf by the Vietnamese enterprise whose capital is transferred or by the transferee before payment. So in a deal with a foreign investor, the buyer often retains and remits the tax money, but the economic burden of the tax still rests on the seller unless the contract agrees otherwise.
Must the tax be withheld at source?
Yes, in statutory cases. Withholding at source here means the payment-on-behalf mechanism: where the seller is a foreign organisation without a Vietnamese presence, the Vietnamese paying party or the enterprise whose capital is transferred withholds the tax from the payment and remits it to the state budget for the seller. For a domestic seller, the buyer does not automatically withhold; the seller self-declares, unless the parties agree the buyer will retain an amount to pay on the seller behalf. The key is distinguishing statutory withholding from a purely contractual money retention.
What is the capital transfer tax rate?
The rate depends on the seller type and the asset transferred. Organisations pay corporate income tax at 20 percent on taxable income under the Law on Corporate Income Tax 67/2025/QH15. A resident individual transferring capital contributions pays personal income tax at 20 percent on income; for securities transfers the rate is 0.1 percent of the sale price per transaction under the Law on Personal Income Tax 109/2025/QH15. Note the tax is computed on income or on sale price depending on the case, not always on the entire transfer price as many people mistakenly assume.
