Investment activities in economic organizations through mergers and acquisitions (M&A), as well as corporate restructuring undertaken by both domestic and foreign corporate groups, have become increasingly prevalent and diverse. In practice, these transactions are generally carried out in the form of capital transfers or securities transfers. Although both forms ultimately result in the transfer of ownership over an investment in a business organization, each type of transaction is governed by different regulations concerning the tax bases, methods for determining tax liabilities, and the responsibilities of the parties to a transaction for tax declaration and payment.

Several noteworthy features may be highlighted. Corporate income tax (“CIT”) applicable to domestic enterprises is determined based on assessable income after deducting the cost price and reasonable expenses . Meanwhile, foreign enterprises deriving income from capital transfers or securities transfers in Vietnam are subject to a tax calculation method based on a prescribed tax rate applied to assessable revenue. In addition, the prevailing tax regulations provide for tax exemption in respect of capital transfer transactions undertaken for the purpose of intra-group corporate restructuring, provided that such transactions satisfy the statutory conditions .

The CIT regulations governing capital transfers and securities transfers not only affect the determination of tax liabilities and transaction valuation, but also directly influence transaction structuring, execution, the preparation of supporting documentation, as well as the allocation of tax responsibilities and risks among the parties involved in M&A transactions. Provided below is a summary of certain key provisions under the prevailing CIT regulations applicable to capital transfer and securities transfer transactions.

I. Corporate income tax applicable to domestic enterprises

Income derived from capital transfers and securities transfers by domestic enterprises is treated as other income and is included in taxable income for the relevant CIT period . The CIT payable for a tax period is determined by applying the applicable tax rate to the enterprise's assessable income. Under the prevailing regulations, the standard CIT rate is 20%, except where different tax rates are prescribed by law .

1.1. Assessable income from capital transfers:

Income derived from capital transfers refers to income arising from the transfer of part or all of an enterprise's contributed capital, as well as the transfer of shares in non-public companies and shares in organizations that are not listed or registered for trading in accordance with the securities laws .

For enterprises established under the laws of Vietnam, assessable income derived from capital transfers is determined based on the transfer price, after deducting the purchase price of the transferred capital and expenses directly related to the transfer transaction . The assessable income from a capital transfer is determined at the time the ownership of the transferred capital is transferred.

Wherein:

 Transfer price means the actual value received by the transferor under the transfer agreement. Where an enterprise transfers capital in exchange for assets (including shares, fund certificates), other material benefits that generate income, such income shall be subject to CIT. The value of assets, shares, fund certificates, and other material benefits shall be determined based on the market selling price of the relevant assets at the time of receipt.

 Purchase price is determined based on the origin of the investment and the corresponding supporting documents, specifically:

(a) Where the transferred capital represents the initial capital contribution made upon the establishment of the enterprise :

i. Domestic enterprises: the purchase price is the cumulative value of the capital up to the time of the transfer, as evidenced by the accounting books, accounting records, and supporting documents, and confirmed by the capital contributors or participants to the business cooperation contract;

ii. Wholly foreign-owned enterprises: the audit results issued by an independent auditing firm.

(b) Where the transferred capital was acquired from another party: the purchase price is the value of the capital at the time of purchase, as evidenced by the capital transfer contract and the relevant proofs of payment .

 Transfer expenses include actual expenses incurred that are directly attributable to the transfer transaction, supported by lawful invoices and proofs of payment prescribed under the applicable laws .

From a practical perspective, challenges in determining the applicable tax liabilities generally arise not from the tax calculation method itself, but rather from substantiating the purchase price of the capital and the deductibility of the related expenses. For investments made many years earlier or those that have undergone multiple ownership restructurings, enterprises may encounter difficulties in consolidating capital contribution records, payment evidence, and accounting documents required to substantiate the purchase price. Similarly, expenses such as legal advisory fees, financial advisory fees, and other transaction costs are deductible only where the enterprise is able to demonstrate that such expenses are directly attributable to the transaction and maintains adequate supporting documentation.

Accordingly, reviewing investment records and preparing documentation to substantiate the purchase price prior to the execution of the transaction, together with compiling complete records of the related transfer expenses, will significantly reduce the risk of adjustments to assessable income during tax audits or inspections. Where the purchase price and transfer expenses are properly determined and adequately substantiated, the resulting tax liability can be declared and paid in accordance with the actual gain derived from the capital transfer, thereby preventing the tax burden from being imposed on the gross transaction value received by the transferor.

1.2. Assessable income from securities transfers:

Similar to capital transfer transactions, assessable income derived from securities transfers is determined based on the selling price of the securities, after deducting the purchase price and reasonable transfer expenses .

Wherein:

 The selling price of securities is determined as follows:

(a) For listed securities and securities of unlisted public companies registered at the Stock Exchange, the selling price shall be actual the selling price (matching price or agreed price), announced by the Stock Exchange;

(b) For securities of companies other than those mentioned above, the selling price shall be the transfer price written on the transfer contract.

 The purchase price of securities is determined as follows:

(a) For listed securities and securities of unlisted public companies registered at the Stock Exchange, the purchase price shall be actual the purchase price (matching price or agreed price) announced by the Stock Exchange;

(b) For securities purchased at auction, the purchase price shall be the price written on the notice of successful bidder issued by the auctioneering organization and the payment receipt;

(c) For securities other than those mentioned above, the purchase price shall be the transfer price written on the transfer contract.

 Transfer expenses refer to actual expenses related to the transfer, supported by lawful invoices and proofs of payment. Transfer expenses include: expenses for necessary legal procedures for the transfer; fees and charges prescribed by regulations of law on fees and charges; expenses for transaction, negotiation, contract conclusion and other expenses supported by documentary evidence.

For listed securities or securities registered for trading, the determination of the purchase price and the selling price is generally straightforward, as the relevant transaction data is recorded through the Stock Exchange's trading system. However, for transfers of unlisted securities or securities that are not registered for trading, enterprises should pay particular attention to maintaining the transfer contract, payment supporting documents, and other records evidencing the actual transaction value, as these documents form the basis for determining the applicable tax liability. From a practical perspective, maintaining complete supporting documentation not only facilitates accurate tax declaration but also plays a critical role in substantiating the enterprise's tax position during tax audits or inspections.

II. Corporate income tax applicable to foreign enterprises

2.1. Tax calculation method

Unlike enterprises established under the laws of Vietnam, foreign enterprises deriving income from capital transfers or securities transfers in Vietnam are not subject to CIT based on net assessable income. Instead, the applicable tax is calculated by applying a prescribed tax rate to the assessable revenue .

For foreign enterprises, the distinction between income derived from capital transfers and income derived from securities transfers generally follows the same classification applicable to domestic enterprises under the 2025 CIT Law and its guiding regulations. Accordingly, although both transactions involve the transfer of equity interests in a business organization, the transfer of shares in a non-public company or shares in an organization that is neither listed nor registered for trading in accordance with the securities laws is classified as a capital transfer. By contrast, the transfer of shares that qualify as securities under the securities laws is classified as a securities transfer.

Under the prevailing regulations, CIT applicable to capital transfers by foreign enterprises is imposed at a rate of 2% of the assessable revenue, whereas income derived from securities transfers is subject to tax at a rate of 0.1% of the assessable revenue  .

For taxable income derived by foreign enterprises from capital transfer transactions, the corresponding tax liability arises in respect of both direct and indirect transfers.  In the case of transfers of securities and certificates of deposit, the assessable revenue for CIT purposes is the total revenue from sale of securities or certificates of deposit. For transfer of derivative securities that are futures contracts, assessable revenue shall be the price for transfer of individual futures contracts, which equals the settlement price for a futures contract at the time of assessable revenue calculation multiplied by contract multiplier, multiplied by number of futures contracts, multiplied by initial margin, divided by 2 (The initial margin shall be specified by Vietnam Securities Depositories and Clearing Corporation).

The application of a revenue-based tax calculation method simplifies the determination of tax liabilities, particularly in cross-border transactions where the tax authorities may encounter difficulties in verifying the purchase price or expenses incurred overseas. From an investor's perspective, however, this approach also gives rise to several important considerations. As the tax liability is calculated based on the entire transfer value of the capital or securities, a foreign enterprise may still incur CIT even where the transaction generates no gain or only a minimal return on investment. Then, tax liabilities become a factor directly affecting foreign investment in economic organizations.

A noteworthy point is that CIT may also arise in relation to offshore capital transfer transactions where the income is derived from an investment in Vietnam held by a foreign enterprise and the transaction results in a change of the ultimate parent company of the Vietnamese enterprise.  Although no direct transfer of the equity interest in the Vietnamese entity takes place, the transaction is, in substance, regarded as an indirect transfer of capital in Vietnam. Accordingly, the foreign enterprise remains subject to CIT on the income derived from the offshore transfer (except where the transaction forms part of an intra-group restructuring that does not result in a change of the ultimate parent company and does not give rise to any income).  

2.2. Timing for determining assessable revenue

In addition to the applicable tax calculation method, the timing for determining assessable revenue is another key aspect to which enterprises should pay particular attention. Under the prevailing regulations, the timing for determining assessable revenue for CIT purposes is as follows :

(a) Capital transfers: the effective date of the initial capital transfer contract;

(b) Transfers of securities and certificates of deposit: the time of transfer;

(c) Transfers of derivative securities in the form of futures contracts: the time when the investor’s buy or sell order for the futures contract is matched on the trading system of the Stock Exchange, or the maturity dates of the futures contract.

From a practical perspective, many M&A transactions are implemented in multiple stages, including the execution of the transaction contract, the effective date of the transaction contract, completion (closing) of the transaction, and settlement of the purchase price. These milestones do not necessarily coincide and are often conditional upon the satisfaction of conditions precedent or the receipt of the required approvals from the competent authorities. In such circumstances, if an enterprise determines its tax obligations solely by reference to the payment date or the transaction closing date, without carefully reviewing the provisions governing the effectiveness of the transaction contract, it may face the risk of incorrect tax declarations, late payment interest, or administrative penalties for non-compliance with the tax regulations.

Accordingly, the tax implications of the transaction documents should be reviewed concurrently with the negotiation process and the development of the transaction structure in order to ensure consistency between the transaction timetable and the corresponding tax declaration and payment obligations.

2.3. Intra-group corporate restructuring transactions

One noteworthy feature of the prevailing CIT regulations is the treatment of capital transfer transactions undertaken for the purpose of intra-group corporate restructuring. Where the prescribed conditions are fully satisfied, the foreign enterprise acting as the transferor will not be subject to corporate income tax.

Specifically, the transfer of an investment among companies within the same corporate group will not give rise to corporate income tax, provided that all of the following conditions are satisfied :

 The ultimate beneficiary remains unchanged;

 The recorded transfer value is not higher than the book value or the initial value of contributed capital;

 The transaction does not create a difference in value, which is determined according to the restructuring dossier approved by the competent authority and does not exceed the value recorded at the time of capital transfer; and

 The transferee inherits all the value of capital, obligations and interests related to the transferor's investment.

The above provisions reflect a clear shift in tax policy towards recognizing the economic substance of a transaction, rather than determining tax liabilities solely by reference to its legal form or the existence of assessable income. This approach acknowledges that intra-group restructuring transactions are typically undertaken to reorganize ownership structures, centralize investment functions, IPO or M&A transactions, without generating any economic gain for the corporate group. On the contrary, such restructuring exercises often involve substantial implementation costs. Imposing corporate income tax solely because of a change in the legal entity holding the investment would increase restructuring costs and reduce the flexibility of corporate groups in organizing and managing their investment structures. In this respect, the new regulations have, to a considerable extent, removed a significant tax impediment to intra-group ownership restructuring, particularly for multinational corporate groups.

However, the application of this mechanism in practice may give rise to a number of issues that should be carefully evaluated by enterprises.

First, determining the “ultimate beneficial owner” may not be straightforward for corporate groups with multi-tier investment structures or multiple parent companies established in different jurisdictions. In such cases, whether a transaction results in a change of the ultimate beneficial owner should be assessed by reference to the group's overall ownership structure, rather than solely on the legal form of the transaction.

Second, the requirement that “no income is generated” should likewise be assessed based on the economic substance of the transaction. In practice, many intra-group restructuring transactions are carried out at book value or the initial contributed capital value to ensure that no economic gain arises. Nevertheless, enterprises should maintain sufficient supporting documentation to demonstrate that the transaction does not give rise to any increase in value or new economic benefit, rather than relying solely on the transfer price stated in the transfer agreement.

Third, from a tax administration perspective, satisfying the statutory conditions and being able to substantiate compliance with those conditions are two distinct matters. During a tax audit or inspection, the tax authorities may require the enterprise to provide ownership charts before and after the restructuring, the group's internal documentation, accounting records, valuation documents relating to the investment, and other relevant supporting documentation to substantiate that the transaction qualifies for the tax exemption under the prevailing regulations.

Accordingly, for cross-border restructuring transactions, enterprises should assess their ability to satisfy the applicable conditions for this tax treatment at the transaction structuring stage. In practice, the burden rests with the enterprise to demonstrate that the transaction fully satisfies the statutory conditions through the restructuring documentation, pre- and post-restructuring ownership charts, the group's internal records, accounting documentation, and documents substantiating the value of the investment. Preparing comprehensive supporting documentation at the outset of the transaction will enable enterprises to respond more effectively to enquiries from the tax authorities and mitigate the risk of subsequent adjustments to their tax liabilities after the transaction has been completed.

III. Tax declaration, withholding and payment obligations

In addition to correctly determining the applicable tax liability, identifying the party responsible for the declaration, withholding, and payment of corporate income tax is another key issue that should be considered at the transaction planning stage.

Under the prevailing tax administration regulations, where organizations established under the laws of a foreign jurisdiction directly or indirectly transfers capital to organizations established under the laws of Vietnam or to an individual resident in Vietnam, the transferee is responsible for declaring, withholding, and paying, on behalf of the transferor, the corporate income tax payable in respect of the transaction. Where both the transferor and the transferee are foreign organizations or non-resident individuals, the organization established under the laws of Vietnam in which the investment is directly or indirectly transferred shall be responsible for declaring and paying the tax on behalf of the transferor in accordance with the applicable regulations .

From a transaction perspective, this requirement may give rise to additional compliance obligations for the Vietnamese enterprise, even though it is not a party to the negotiations or the transfer agreement executed between the foreign investors. In many cases, the Vietnamese enterprise will need to coordinate with the relevant parties to obtain the transfer agreement, transaction pricing information, and other supporting documentation necessary to comply with its tax declaration and payment obligations under the prevailing regulations.

Accordingly, for transactions involving foreign elements, the parties should consider expressly allocating, in the transaction documents, the responsibilities for providing information, coordinating tax compliance, fulfilling the applicable tax obligations within the prescribed timelines, as well as the mechanism for reimbursement or allocation of any tax liabilities arising from the transaction. Clearly defining these responsibilities at the negotiation stage will help minimize the risk of subsequent disputes and avoid delays to the completion of the transaction.

IV. Conclusion

The corporate income tax regulations governing capital transfers and securities transfers continue to play a significant role in investment and M&A transactions in Vietnam. Properly identifying and determining the applicable corporate income tax obligations, including taxable income, assessable income, applicable tax rate, and timing at which the tax liability arises, is fundamental to investment and business activities in Vietnam. Under the prevailing tax administration framework, taxpayers are responsible for self-assessing, declaring, and paying their tax liabilities in accordance with the applicable laws, subject to subsequent review by the competent tax authorities.

As investment transactions continue to become more sophisticated and increasingly involve complex structure, the tax implications at the transaction structuring stage, conducting comprehensive legal and financial due diligence, and clearly allocating the parties' respective responsibilities in the transaction documents will help mitigate potential tax risks and facilitate the efficient implementation and completion of the transaction.