Tax Due Diligence Checklist Before M&A in Vietnam

In a share deal, the buyer acquires more than assets, market share and a team — the buyer inherits the target company's entire tax history. An undetected tax debt, a misstated tax finalization, or a related-party pricing structure with no supporting documentation can turn into a back-tax assessment, late-payment interest accruing at 0.03% per day, and penalties arriving after closing — payable by the very company just acquired.

Tax due diligence is the deep-dive review of tax risk: independent from, but complementary to, overall legal due diligence. If legal DD answers "is this company legally clean", tax DD answers "how much might this company owe — or come to owe — the tax authorities". The 22-item checklist below is organized around the eight risk clusters most often missed by buyers and advisors acquiring businesses in Vietnam.

Table of contents

1. Who this checklist is for and how to use it
2. Quick legal framework reference
3. Detailed checklist (22 items)
4. Quantifying risk and building it into the SPA
5. Common mistakes in tax DD
6. After completing the checklist
7. Frequently asked questions
8. Language versions
9. References

1. Who this checklist is for and how to use it

This checklist is for buyers, lawyers and financial advisors in share or capital-contribution acquisitions of Vietnamese enterprises. For asset deals it remains a useful reference — particularly the items on foreign contractor tax, invoicing and deal taxes.

How to use it: work through each item in order and mark it Clear / To be clarified / Risk. Every "Risk" finding must be quantified in monetary terms (potential back taxes + late-payment interest + estimated penalties) so it can feed into price negotiations and SPA drafting. A checklist that lists findings without putting a number on them is not yet usable.

A note on applicable law over time: from 01/07/2026, the Law on Tax Administration 2025 (108/2025/QH15) replaces the 2019 Law. Because tax DD reviews past tax periods, the citations on tax assessment, late-payment interest and limitation periods in this article follow the 2019 Law for periods before 01/07/2026; obligations arising from 01/07/2026 should additionally be checked against the new text.

2. Quick legal framework reference

3. Detailed checklist (22 items)

Cluster A — Filing, payment and documentation (items 1–4)

Item 1. Are five years of tax filings complete and reconcilable? Collect VAT returns, provisional and final CIT returns, PIT returns, foreign contractor tax returns and business license tax filings for at least the last five years. Reconcile three independent sources: tax filings ↔ accounting books ↔ audited financial statements. Any material gap between revenue/expenses on the filings and on the audited accounts is a red flag — under-declared revenue, inflated costs, or simply a systems error. For the buyer, every unexplained gap is a potential assessment.

Item 2. Are input invoices and vouchers legitimate? Review e-invoicing compliance under Decree 254/2026/ND-CP (effective 01/07/2026; replacing Decree 123/2020/ND-CP and Decree 70/2025/ND-CP) and Circular 91/2026/TT-BTC. Focus on high-value input invoices: illegal invoices or unlawful use of invoices are grounds for tax assessment (Article 50 of the 2019 Law on Tax Administration), and also lead to disallowed CIT deductions and clawback of credited input VAT. For a manufacturer, a single supplier appearing on the tax authorities' "high invoice-risk enterprise" list is enough to put the entire related cost chain in question.

Item 3. Have books and records been retained for the full 10 years? The maximum back-tax lookback is 10 years from the date a violation is discovered (Article 137 of the 2019 Law on Tax Administration) — the authorities may reopen a full decade of files. Check that the target has retained accounting books, vouchers, contracts and supporting explanations throughout. Missing records during an inspection are themselves grounds for tax assessment — and then the tax payable is determined by the authorities, not self-declared by the company.

Item 4. What does the inspection history show? Collect all inspection conclusions, sanction decisions and examination records for past periods: has the company fully paid the assessed back taxes, late-payment interest and penalties? Equally important: which years have never been inspected? Uninspected years are open risk territory — any errors there remain intact and still within the lookback period.

Cluster B — Tax debts, late-payment interest and enforcement (items 5–7)

Item 5. What is the current tax debt position? Ask the target for a detailed tax-debt reconciliation with the tax office: principal, late-payment interest and penalties by tax type (VAT, CIT, PIT, contractor tax…). Where possible, request a written tax-debt status confirmation from the directly managing tax office. Note: a "no tax debt" confirmation only reflects amounts recorded on the system at that point in time — it does not cover uninspected periods or contingent liabilities.

Item 6. Has late-payment interest been accrued up to the expected closing date? Late-payment interest runs at 0.03% per day on the overdue tax amount (Article 59(2) of the 2019 Law on Tax Administration), accruing continuously until full payment into the state budget. On multi-year arrears, the interest can grow into a material figure relative to the principal. Every tax debt found in DD must have interest accrued to the expected closing date and built into the price adjustment. Also worth knowing: 30 days after the payment deadline, if tax remains unpaid, the tax office notifies the taxpayer of the outstanding tax, penalties and days overdue — a signal the debt file has entered formal processing.

Item 7. Is the target under tax enforcement? Check whether enforcement measures for administrative tax decisions are in place: deductions from bank accounts, withholding from salaries or income, seizure of assets, revocation of the enterprise registration certificate… Tax enforcement is not just a monetary liability — it can paralyze business operations after the buyer takes over. Tax debts and enforcement follow the legal entity, not the former owner.

Cluster C — CIT and tax incentives (items 8–11)

Item 8. Will the CIT incentives survive the change of ownership? Cross-check the original incentive approval (investment registration certificate, incentive decision) against CIT Law 2025 (67/2025/QH15, effective 01/10/2025) and its guiding instruments. In a share deal the target's legal personality is unchanged, so incentive status in principle continues — provided the company still satisfies all incentive conditions after the change of ownership (location, sector, investment commitments…). In an asset deal, by contrast, tax incentives do not transfer automatically to the buyer. The conditions for maintaining incentives post-M&A under the new legal framework need case-by-case review — obtain written tax advice before finalizing valuation, because losing incentives rewrites the target's entire after-tax cash flow.

Item 9. How much tax loss carryforward remains? Under the CIT Law, losses may be carried forward in full and continuously for no more than 5 years. Verify the target's remaining carryforward losses within the allowable window — a genuine tax asset with real valuation impact, since it shelters future CIT. At the same time, beware of "phantom losses": losses built on expenses the authorities are likely to disallow on inspection (see item 10) should not be priced into the deal.

Item 10. Do the major expense items qualify as deductible? Review high-value expenses against the non-deductible list (Article 6 of Circular 78/2014/TT-BTC): expenses without lawful invoices or vouchers, over-norm expenses, expenses unrelated to production and business. The three expense categories tax inspectors scrutinize most at FDI companies: (i) interest expense — subject to related-party transaction limits; (ii) management and service fees paid to the foreign parent — routinely tested for arm's-length reasonableness and often partially disallowed; (iii) improper provisions and accruals. Each disallowed expense increases taxable income and the corresponding back tax.

Item 11. Are incentivized and non-incentivized income computed separately? A company with both incentivized and non-incentivized activities must compute each income stream separately for filing purposes. Check whether the target maintains separate accounting; if not, the authorities may reallocate — and income pulled from the incentivized basket into the standard-rate basket creates a back-tax liability.

Cluster D — Transfer pricing (items 12–14)

Item 12. Is the related-party map complete? Reconstruct the target's full related-party map under Decree 255/2026/ND-CP (Articles 4 and 5): equity ownership, borrowing/lending from 10% of the owner's contributed capital, guarantees, common management… Many companies declare only equity relationships and miss links through loans, guarantees or shared management — while the authorities determine related-party status on the substance of control, not on what the company self-declares.

Item 13. Have TP filing and documentation obligations been met? Verify: related-party disclosures (Appendix I) filed with the annual CIT finalization; the local file and master file prepared before the CIT finalization filing deadline and retained for production on the tax authorities' written request (Article 18 of Decree 255/2026/ND-CP); Country-by-Country Reporting where consolidated group revenue exceeds EUR 750 million (Article 19); and whether the company qualifies for documentation exemptions (Article 20(2)). Missing TP documentation is not merely a procedural breach — it strips the company of its only defense when the authorities question internal pricing.

Item 14. Would the related-party pricing survive scrutiny? Failure to comply with related-party pricing declaration and determination obligations is among the grounds for tax assessment (Article 50 of the 2019 Law on Tax Administration). Review the profit margins on material intra-group transactions (raw materials from the parent, finished goods sold to sister companies, royalties, service fees): margins materially out of line with independent comparables in the same industry signal that the authorities may adjust prices and assess back CIT. Where related-party transactions are significant, consider engaging an independent transfer pricing specialist during DD.

Cluster E — Foreign contractor tax (items 15–16)

Item 15. Has contractor tax been withheld on all contracts with foreign vendors? Review every contract with foreign organizations or individuals supplying services, technology transfers or asset leases in Vietnam: has the target declared, withheld and paid foreign contractor tax (the contractor's VAT and CIT components) on each payment? For payments before 01/07/2026, check against Circular 103/2014/TT-BTC (repealed from 01/07/2026); payments from 01/07/2026 are declared under Article 30 of Circular 89/2026/TT-BTC. Pay special attention to the "who bears the tax" clause (net vs. gross-up pricing): if the contract obliges the target to bear the foreign contractor's tax but no withholding was actually made, that is an existing tax debt — plus late-payment interest running from each historical payment.

Item 16. Have outbound payments applied the correct rates? Royalties, service fees, interest and management fees paid abroad — each attracts a different contractor tax rate. Check classification and rate application, and cross-check against Vietnam's double taxation agreements (DTAs) with the recipient's country of residence (treaty relief requires supporting documentation where the target has claimed it). Misrated outbound flows over many years are among the largest "silent" assessments in tax DD.

Cluster F — VAT and VAT refunds (items 17–19)

Item 17. Was input VAT credited in compliance with the conditions? Test input VAT credit conditions: lawful invoices, goods/services used for VAT-taxable business, and non-cash payment as currently required. Review large uncredited input VAT balances and input invoices from suppliers that have absconded or ceased operations — the authorities may disallow the entire input VAT on such invoices upon inspection.

Item 18. Are previously received VAT refunds defensible? If the target has received VAT refunds (new investment projects, exported goods…), re-test the refund conditions at the time of refund under VAT Law 2024 (48/2024/QH15, effective 01/07/2025) and its guiding instruments. The risk: a refund granted today is not the end of the story — if a later inspection finds the conditions were not met, the company must repay the refunded amount plus late-payment interest (recovered refunds fall within the interest-bearing categories under Article 59(1) of the 2019 Law on Tax Administration). For companies with multiple refunded periods, this item is mandatory deep-dive territory.

Item 19. Have VAT rates been applied to the correct classifications? Cross-check goods/services classification and applied VAT rates against VAT Law 2024: items previously outside VAT scope may now be taxable (and vice versa). Verify the periods when VAT reduction policies applied (e.g. the 8% rate under various National Assembly resolutions) covered the right goods, the right taxpayers and the right periods. Multi-year misrating creates a material output-VAT gap.

Cluster G — PIT and labor-related obligations (items 20–21)

Item 20. Have PIT withholding and finalization been completed? Review PIT withholding for employees (local and foreign experts), annual PIT finalization and authorized finalization-on-behalf cases. Watch for irregular income of VND 2 million or more per payment, subject to 10% withholding before payment (Circular 111/2013/TT-BTC); salaries of foreign experts working in Vietnam; and whether in-kind benefits were included in taxable income. Years of withholding gaps accumulate into significant amounts — and the withholding obligation sits with the paying enterprise.

Item 21. Are social, health and unemployment insurance contributions in arrears? Reconcile contribution records with the social insurance agency: is the target in arrears on SI, HI or UI, and has it been sanctioned for insurance violations? Under Social Insurance Law 2024 (41/2024/QH15, effective 01/07/2025), contribution obligations attach to the employer — the buyer inherits them in full on takeover. Insurance arrears are not only a monetary liability; they affect the company's ability to obtain compliance confirmations later.

Cluster H — Taxes on the deal itself (item 22)

Item 22. Have the taxes arising from the transfer been accounted for? The M&A transaction itself creates tax liabilities — and the buyer needs certainty that the seller has (or will) settle them, so the authorities do not come knocking on the target's door after closing:

• Foreign-organization seller: income from capital transfer is subject to 20% CIT with no incentives available (Article 19(3) of Circular 78/2014/TT-BTC); the tax base follows Article 14 of Circular 78/2014/TT-BTC, under which the timing for determining capital-transfer income is the point of transfer of capital ownership.
• Individual seller: transfer of a capital contribution is subject to 20% PIT on the income (transfer price less acquisition cost and related expenses); transfer of securities is subject to 0.1% on the transfer price per transaction (Circular 111/2013/TT-BTC). Withholding-at-source obligations in each specific case should be confirmed with the directly managing tax office.
• VAT: capital-transfer transactions are not subject to VAT (per tax-authority guidance, e.g. Official Letter 1474/CT-TTHT of 2018 from the Ho Chi Minh City Tax Department) — the invoice shows only the payment price, with the tax rate and VAT amount left blank.

The SPA must allocate clearly: who bears the deal taxes, who files and pays, and by when — so the seller cannot simply disappear after receiving the consideration.

4. Quantifying risk and building it into the SPA

Tax DD is only half done when every finding has been converted into money and built into the deal structure. The standard toolkit:

• Purchase price adjustment: for risks quantified with confidence (confirmed tax debts, computable late-payment interest), deduct directly from the price or require the seller to settle before closing.
• Specific tax indemnity: the seller indemnifies the buyer for all tax liabilities (including late-payment interest and penalties) relating to pre-closing periods but assessed afterwards.
• Escrow / holdback: retain part of the consideration for a defined period as a source of compensation if tax risks materialize.
• Tax warranties: the seller warrants at signing that the target has filed completely, paid all taxes due, and has no unresolved tax disputes… Breach of warranty grounds an indemnity claim.
• Survival periods: align them with the statutory limitation frame — up to 10 years for back-tax obligations — rather than the SPA's shorter general warranty period.
• Control of post-closing tax procedures: agree who gets to deal with the tax authorities, decide on appeals or supplementary filings, when inspections cover pre-closing periods.

5. Common mistakes in tax DD

• Reading only the audited accounts without reconciling tax filings. An audit confirms fairly stated accounting figures; it does not confirm correct tax positions. Large assessments routinely hide nowhere in audited statements.
• Missing contractor tax on old cross-border service contracts. It sits "silently" scattered across each payment made years ago.
• Treating a "no tax debt" confirmation as absolute. It reflects only amounts recorded on the system at confirmation date — not uninspected periods or contingent liabilities.
• Not testing whether CIT incentives survive the ownership change. Losing CIT incentives rewrites the entire after-tax cash flow in the valuation model.
• Forgetting the taxes on the deal itself. An unpaid capital-transfer tax by the seller is a risk hanging over the target after closing.
• Failing to put a number on findings. A tax DD report listing 30 qualitative findings with no monetary estimates cannot be used in negotiation.

6. After completing the checklist

Consolidate results into a findings report at three levels — high (directly affects deal value; resolve before closing), medium (build into SPA protections), low (note for post-closing monitoring) — with an estimated amount for each item. On that basis the buyer decides: renegotiate price, add protective provisions, require pre-closing remediation by the seller, or in the worst case walk away. A deal stopped because tax DD found unmanageable risk is still better than a "successful" deal followed by years of back-tax payments.

7. Frequently asked questions

1. How does tax due diligence differ from overall legal due diligence? Legal DD reviews the target's overall legal standing: corporate status, material contracts, disputes, labor, land, licenses. Tax DD drills specifically into tax risk: hidden tax debts, late-payment interest, transfer pricing, tax incentives, foreign contractor tax and taxes arising from the deal itself — items that directly reduce enterprise value and are often skimmed over in legal DD. The two reviews complement rather than replace each other.

2. Does a share buyer inherit the target company's tax debts? Yes. In a share or capital-contribution acquisition, the target's legal personality is unchanged, so all tax liabilities — including those arising before the transfer but assessed afterwards — remain with the company the buyer now owns. That is why tax DD and protective SPA provisions are mandatory, not optional.

3. How many years back should a tax review cover? As a matter of law, the tax authorities may assess back taxes for up to 10 years from the date a violation is discovered (Article 137 of the 2019 Law on Tax Administration). In practice, tax DD typically focuses on the most recent 3–5 years, expanding where red flags appear. The exact scope should be agreed in writing, balancing budget and deal timetable.

4. The target enjoys CIT incentives — will they survive a change of ownership? In a share deal the legal entity is unchanged, so incentive status in principle continues provided the company still satisfies all incentive conditions after the change of ownership. However, the conditions for maintaining incentives under CIT Law 2025 and its guiding instruments need case-by-case review against the original incentive approval. Written tax advice should be obtained before finalizing valuation.

5. What if a tax debt surfaces after closing? It depends on what the SPA provides: purchase price adjustments, indemnity mechanisms for pre-closing tax obligations, escrow or holdback of part of the consideration, and tax warranties from the seller. These protections must be negotiated before signing the SPA — after closing, the buyer has almost no leverage left.

6. Can audited financial statements replace tax DD? No. A financial-statement audit confirms that accounting figures are fairly stated, but it does not test tax positions by tax type, nor does it assess transfer pricing, incentive or foreign contractor tax risks. Many material tax exposures never appear in audited accounts until the authorities issue an assessment.

7. How long does tax DD usually take and what does it cost? Depending on the target's size and review scope, typically 2 to 6 weeks for small and mid-sized companies. Targets with cross-border related-party transactions, multiple tax incentives or a complex inspection history take longer. Fees depend on scope and the advisor engaged — obtain quotes from at least two independent advisors, and start tax DD in parallel with legal DD from day one so the deal timetable does not slip. To discuss the right tax DD scope for your transaction, you may contact FLAT Law Firm for a focused consultation.

8. Language versions

9. References

• Law on Tax Administration 2019 (38/2019/QH14): Article 50 (tax assessment), Article 59(2) (late-payment interest 0.03%/day), Article 137 (sanction limitation periods, 10-year lookback).
• Law on Tax Administration 2025 (108/2025/QH15), effective 01/07/2026.
• Corporate Income Tax Law 2025 (67/2025/QH15), effective 01/10/2025.
• Decree 255/2026/ND-CP on tax administration for enterprises with related-party transactions, effective 01/07/2026.
• Circular 78/2014/TT-BTC: Article 6 (non-deductible expenses), Article 14 (capital-transfer income), Article 19(3) (20% rate, no incentives for capital-transfer income).
• Circular 111/2013/TT-BTC on personal income tax.
• Circular 103/2014/TT-BTC on foreign contractor tax (repealed from 01/07/2026); Circular 89/2026/TT-BTC (Articles 30, 99).
• Decree 125/2020/ND-CP on administrative sanctions for tax and invoice violations.
• Decree 254/2026/ND-CP, Circular 91/2026/TT-BTC on e-invoices and e-documents (effective 01/07/2026).
• VAT Law 2024 (48/2024/QH15), effective 01/07/2025.
• Social Insurance Law 2024 (41/2024/QH15), effective 01/07/2025.

SUPPLEMENTARY REVIEW — DECREE 254/2026 UPDATE (2026-09-29)

• Reviewer: LEGAL-REVIEW-TEAM (Decree 254/2026 sweep)
• Change: Decree 123/2020/ND-CP and Decree 70/2025/ND-CP expired 1/7/2026; Circular 32/2025/TT-BTC replaced by Circular 91/2026/TT-BTC (Art. 25). E-invoice citations swapped in legal_basis + regulation table + checklist Item 2 + references (en/vi/zh).
• Conclusion: LIGHT FIX (c).