Capital Gain Tax
The transfer of contributed capital in an established company in Vietnam will trigger Capital gain tax (“CGT”). Transfer of contributed capital is not subject to Valued Added Tax in Vietnam. CGT is in nature income tax which is levied on income earned by organizational or individual shareholder from the transfer of capital in Vietnam.
The matrix below summarizes CGT rates applicable in different scenarios:
For individual shareholders
Enterprise form of target | Joint-stock companies (both listed & non -listed) | Companies of other forms |
|---|---|---|
| Tax resident status | ||
Tax-resident | 0.1% on proceeds | 20% on gain |
Non-tax resident | 0.1% on proceeds | 0.1% on proceeds |
For organizational shareholders
Enterprise form of target | Listedjoint-stock companies | Companies of other forms |
|---|---|---|
| Tax resident status | ||
Tax-resident | 20% on gain | 20% on gain |
Non-tax resident | 0.1% on proceeds | 20% on gain |
Tax filing and payment obligations
In general, if the seller is a tax resident of Vietnam, the seller is required to file and pay CGT directly to the Vietnamese tax authority. If the seller is an offshore entity and the buyer is a tax resident of Vietnam, the buyer is required to withhold and declare CGT on behalf of the seller.
When both the seller and the buyer are offshore entities, the company whose capital is being transferred is required to declare and pay Capital Gains Tax (CGT) on behalf of the seller. Failure to declare and pay CGT will result in penalties being imposed on the target company during future tax audits.
Special withholding and tax filing requirements apply to securities companies, commercial banks where the individual opens a securities custody account, and fund management companies.
CGT exemption under Double Taxation Agreements (“DTA”)
In certain cases, CGT might be exempted in Vietnam under DTAs between Vietnam and relevant countries. It is important to note that CGT exemption is not automatically granted but requires an application be submitted by statutory. Tax authority will review the case and issue the approval on CGT exemption under DTA or rejects the exemption request.
It is important to be aware of CGT filing and payment obligations to stay compliant as well as utilize CGT exemption opportunities under DTAs. It is also crucial to be aware of CGT risks in relation to CGT calculation, supporting documents for relevant declared deductions and transfer price.
Are you interested in further topics of our Vietnam practice? Please feel free to contact our team in Ho Chi Minh City.