Capital Transfer Tax for Foreign Investors in Vietnam 2026

What is Capital Transfer Tax for Foreign Investors?

Capital transfer tax for foreign investors is a mandatory financial obligation when foreign individuals or organizations divest, sell shares, or transfer capital in companies operating in Vietnam.

In Vietnam M&A transactions, this is an indispensable legal component. Compliance not only ensures the transaction is legally recognized but also serves as a “passport” for repatriating profits abroad legally.

Failure to comply may lead to:

• Invalid transactions: Authorities refuse to update new investor ownership
• Tax arrears & late payment penalties: These can escalate significantly over time

Capital Transfer Tax for Foreign Investors: Applicable Tax Rates in 2026

Determining the correct tax rate is a decisive step in any Vietnam M&A transaction. The rate depends on:

• Legal status of the transferor (individual vs organization)
• Type of company (joint stock company vs limited liability company)

1. For Foreign Individuals

Tax obligations arise when transferring shares or capital contributions.

(i) Share Transfer (Joint Stock Company)

• Tax rate: 0.1% on total transfer value
• Applies to all share transfers
• No requirement for profit

Example:
Transfer value: VND 50 billion
→ Tax = 50 billion × 0.1% = VND 50 million

This is why many Vietnam M&A transactions prefer share transfer structures for tax efficiency.

(ii) Capital Contribution Transfer (LLC)

• Tax rate: 20% on taxable income

Formula:
Income = Selling price – Cost – Valid expenses

Example:

• Selling price: VND 30 billion
• Cost: VND 18 billion
  → Profit: VND 12 billion
  → Tax = 12 billion × 20% = VND 2.4 billion

Key risks:

• Requires full supporting documents
• High risk of tax reassessment if documentation is insufficient

Each structure—share transfers in joint stock companies or capital contribution transfers—can result in billions of VND in tax differences under the capital transfer tax for foreign investors framework.

Submit your transaction details today to Far East Legal and receive a strategic, optimized M&A structure that minimizes PIT on capital transfer, CIT on capital transfer, and ensures a smooth, fully compliant Vietnam M&A transaction.

2. For Foreign Organizations

Income from capital transfer is subject to Corporate Income Tax (CIT)

• Tax rate: 20% on actual profit

Formula:
Tax payable = (Selling price – Cost – Valid expenses) × 20%

Important Conditions

All components must be supported by valid documents:

• Contracts
• Bank statements
• Financial reports

Major Risks

• Missing cost documentation
• Complex multi-layer structures
• Unclear financial records

→ Tax authorities may:

• Impose taxable income
• Apply unfavorable tax calculations

Comparison of Capital Transfer Tax for Foreign Investors by Scenario

In practice, many investors choose the wrong structure—between share transfers in joint stock companies and capital contribution transfers—leading to significantly higher tax costs or exposing themselves to unnecessary legal risks. This is especially critical in the context of capital transfer tax for foreign investors, where even a small misstep can trigger costly consequences. Therefore, conducting a pre-transaction review is not just advisable—it is an essential and strategic step under the provisions of the Investment Law 2020.

If you are planning a transaction involving capital transfer tax for foreign investors, accurately assessing the applicable tax structure from the outset can help you optimize tax efficiency, avoid hidden risks, and ensure a smooth, compliant M&A process in Vietnam. Far East Legal can support you in reviewing PIT on capital transfer, CIT on capital transfer, and structuring your Vietnam M&A transaction to achieve maximum legal certainty and financial efficiency.

Tax Obligations in Vietnam M&A Transactions

In all Vietnam M&A transactions:

• The seller is responsible for declaring and paying capital transfer tax
• The buyer must verify compliance with PIT on capital transfer or CIT on capital transfer

If tax obligations are not fulfilled:

• The application dossier may be rejected
• The transaction may be delayed

Standard Legal Procedure for Declaring Capital Transfer Tax

In any transaction involving capital transfer tax for foreign investors, proper tax declaration and payment procedures are mandatory to complete legal formalities and obtain recognition from authorities.

Step 1 — Determine Tax Obligations

Identify the applicable tax: PIT (for individuals) or CIT (for organizations). Determine the calculation method:

• 0.1% on transfer value (shares)
• 20% on profit (capital contribution)

Step 2 — Prepare Tax Filing Documents

The tax dossier typically includes:

• Share Purchase Agreement (SPA)
• Bank payment evidence (especially for cross-border transactions)
• Documents proving cost basis and related expenses
• Tax declaration forms issued by tax authorities

This is a critical step to avoid the risk of tax reassessment.

Step 3 — Submit Tax Declaration

• Deadline: Within 10 days from the completion of the transfer
• Submission authority: Managing tax authority

Step 4 — Pay Tax and Finalize Business Registration Changes

• Pay tax based on the declared amount
• Proof of tax payment is mandatory to complete legal procedures
• Tax receipt is a required document

If missing → the application will be rejected

Note that tax declaration is only one step in the entire M&A process. If you do not clearly understand the sequence of procedures, legal risks may easily arise.

Full reference: Process for Foreign Investors Acquiring a Vietnamese Company 2026

“Pitfalls” and Legal Risks to Avoid

Failure to comply with regulations on capital transfer tax for foreign investors is not merely a procedural error—it can become a serious legal risk leading to significant financial losses and long-term consequences. Key risks include:

Administrative Penalties

Incorrect, late, or non-declaration of capital transfer tax may result in penalties under Decree 125/2020/ND-CP (amended by Decree 310/2025/ND-CP). This is a common mistake that can lead to unnecessary penalties and directly affect transaction timelines.

Tax Reassessment

Tax authorities have the right to review the entire transaction. If discrepancies are found, you may face:

• Significant tax arrears
• Late payment penalties
  → Increasing overall costs substantially and uncontrollably

Rejection of Business Registration Changes

Failure to provide proof of tax payment → application rejected.
This may cause prolonged delays, missed business opportunities, and avoidable losses.

M&A Transaction Not Recognized

Invalid payment or failure to declare tax may result in the transaction being deemed illegal. Consequences include:

• Ownership rights not recognized
• Inability to repatriate profits abroad
• Complex disputes and risk of losing control over the investment

The good news is that all these risks can be effectively mitigated by properly reviewing capital transfer tax obligations for foreign investors and preparing complete documentation from the outset.