Tax Review During Corporate Restructuring in Vietnam

First Principle: Restructuring Always Comes with Tax Obligations

Vietnamese tax law treats restructuring transactions as ordinary economic transactions — asset transfers between legal entities, even between companies in the same group, can in principle trigger tax obligations. There is no general “restructuring tax exemption”; any incentives or special mechanisms (if any) apply only in specific cases prescribed by law. Tax review is therefore not an optional “extra for safety” but a mandatory part of transaction design: the restructuring structure must be chosen after calculating the tax cost of each option, not the other way around.

Four groups of tax issues must be reviewed in every restructuring project: (1) tax finalization when a legal entity terminates or converts; (2) tax on asset transfers; (3) the fate of accumulated losses and tax incentives; (4) VAT and other tax obligations related to the transfer transactions.

Tax Finalization upon Termination or Conversion of a Legal Entity

An enterprise undergoing a change of company type, merger, consolidation, division, split-off, dissolution or bankruptcy must finalize tax with the tax authority up to the time of the competent authority’s decision on the conversion, merger, consolidation, division, split-off, dissolution or bankruptcy (except where the law provides otherwise). This is an obligation independent of the enterprise registration procedure — meaning that even when the business registration dossier is complete, the old entity’s tax obligations remain “hanging” until finalization is done.

In practice, tax finalization at the time of restructuring is often an occasion for the tax authority to review the company’s entire compliance history — non-deductible expenses, claimed but ineligible tax incentives, and missed withholding obligations can all be discovered and assessed at this point. The wise company will therefore conduct a tax health-check before filing the finalization dossier, proactively filing supplementary returns and paying arrears (if any) to minimize penalties and late-payment interest — rather than letting the tax authority discover them through inspection.

Loss Carryforward: The Most Valuable Tax Asset in Restructuring

For many companies, accumulated losses carried forward to subsequent years are a highly valuable “tax asset” — and their fate in restructuring is regulated in considerable detail:

• General principle: loss carryforward is continuous for no more than 05 years, counting from the year following the year the loss arose. After this period, any uncarried loss expires.
• Merger, consolidation, change of company type, change of ownership: after tax finalization, the company’s losses are tracked in detail by year of origin and offset against the same year’s income of the post-conversion/merger/consolidation company, or continue to be carried forward to subsequent years — ensuring continuous loss carryforward of no more than 05 years (under Clause 4, Article 7 of Decree 320/2025/ND-CP guiding the Law on Corporate Income Tax).
• Division, split-off: losses arising before the division/split-off that are still within the carryforward period are allocated to the post-division/split-off companies in proportion to the divided/split equity.

An important practical point: loss carryforward rights only have value when the post-restructuring company has taxable income to offset. In deals acquiring loss-making companies to “buy losses for tax deduction”, the tax authority will scrutinize the substance of the transaction — and anti-transfer-pricing and anti-base-erosion rules may also be invoked. Any plan to utilize accumulated losses should be confirmed by independent tax advice before implementation.

Tax on Asset Transfers

When assets are transferred from one legal entity to another during restructuring — whether by sale, capital contribution or asset distribution upon division/split-off — the difference between the transfer price and the book residual value can generate taxable corporate income. For real estate, the transfer also involves income tax on real estate transfers and registration fees upon title transfer.

For VAT, each asset type and transfer form must be analyzed: some asset transfers in restructuring are treated as not subject to VAT declaration and payment under VAT law (for example, intra-company asset movements between independently-accounting member units meeting certain conditions) — but the conditions are strict and should be confirmed in writing by the tax authority for each specific case, not applied by self-interpretation.

A commonly missed point: valuation of transferred assets. Transfer prices between related parties (parent–subsidiary, sister companies) must follow the arm’s-length principle under the related-party transaction rules (Decree 255/2026/ND-CP, effective 1 July 2026). Pricing below market to “avoid” tax carries a very high risk of tax reassessment.

The Fate of Tax Incentives after Restructuring

Many FDI projects enjoy corporate income tax incentives (preferential rates, time-limited exemptions/reductions) attached to the investment project. When restructuring changes the entity implementing the project, the question is whether the incentives are inherited. In principle, tax incentives attach to the investment project meeting the conditions — if after restructuring the project still fully meets all incentive conditions (location, sector, scale, progress, etc.), the new company has grounds to continue enjoying the remaining incentives. However, proving this to the tax authority requires a complete dossier: the restructuring decision, the adjusted Investment Registration Certificate, and the competent authority’s written confirmation of continued eligibility.

Where a merger involves an acquiring company already enjoying incentives for its own project, the incentives of the two projects must be calculated separately for each project — losses/profits between incentivized and non-incentivized activities must not be arbitrarily offset. This is a point the tax authority examines closely in post-merger finalization.

How FLAT LAW FIRM Supports Tax Review in Restructuring

We work closely with the company’s tax advisor (or introduce a suitable one) to conduct a comprehensive pre-restructuring tax review: assessing the tax finalization obligations of the entities involved, calculating the tax cost of each transaction structure option, determining transferable losses and utilization plans, reviewing conditions for inheriting tax incentives, and preparing working dossiers with the tax authority. Legally, we design the transaction structure to optimize both corporate law and tax consequences — two goals that sometimes conflict and must be balanced by experienced counsel. See also our M&A and restructuring services and our tax advisory for FDI enterprises. In-depth article on tax due diligence in M&A: tax due diligence in M&A transactions.

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