Nowadays, it is common for foreign individuals and organizations to invest in Vietnam, however, after a period of investment, for many reasons, foreign investors desire to transfer their capital contribution to other individuals or organizations. Nevertheless, the number one question that comes to mind is, “Do foreign investors have to perform any tax obligations? If they do, how so?

Conditions and Procedures

As prescribed by law, foreign investors have the right to transfer capital – they own in an economic organization formed in Vietnam – to other individuals or organizations.

When transferring, investors must comply with the conditions and regulations.

CIT obligations (when transferring capital)

When conducting capital transfer, the investor must pay CIT:

Capital Transfer

Capital Transfer Tax

Income from a capital transfer is taxed income. The taxed income from it is determined as follows:

Capital Transfer

Of which:

The transfer price is the total actual value earned by the transferor under the transfer contract.

However, the parties need to be aware that the transfer price is based on the actual value of the contributed capital. Whenever the payment price is not stated in the transfer contract or when the tax agency has grounds to determine that the payment price does not match the market price, it may inspect it and fix the transfer price.

The transfer price is fixed on the basis of the tax agency’s investigation or capital transfer prices in other cases simultaneously, of the same economic organization or under similar transfer contracts at the time of transfer. Whenever the transfer price is fixed by the tax agency is inappropriate, it is based on the valuation by a professional valuation organization competent to determine transfer prices at the time of transfer.

 

The purchase price of the transferred capital amount

– Whenever a transfer of contributed capital is for an enterprise establishment, it is the value of the contributed capital amount recorded in accounting books, invoices, and documents at the time of transfer and certified by the parties investing in the enterprise or to the business cooperation contract, or is based on audit results provided by an independent audit company for wholly foreign-owned enterprises.

– In the event of a capital redemption, it is the value of the capital amount at the time of redemption. The purchase price is determined based on the contract on redemption of the contributed capital amount and payment documents.

Transfer expenses are actual expenses directly related to the transfer with lawful documents and invoices.

Transfer expenses include expenses for conducting legal procedures necessary for the transfer; charges and fees paid for conducting transfer procedures; expenses for transactions, negotiations, and signing of the transfer contract; and other expenses supported by evidence.

Tax Declaration for Capital Transfer Income

Foreign organizations doing business in Vietnam and/or earning income in Vietnam (herein referred to as foreign contractors) but do not comply with the Investment Law or the Law on Enterprises and have capital transfer activities, will declare corporate income tax business according to each birth.

Organizations and individuals receiving the capital transfer are responsible for determining, declaring, withholding, and remitting on behalf of foreign organizations the payable corporate income tax amount.Whenever the capital transferee is also a foreign organization that does not operate under the Investment Law or the Enterprise Law, the enterprise established under the law of Vietnam where the foreign organization invests its capital must declare and pay instead of corporate income tax payable from capital transfer activities of foreign organizations.

If an enterprise earns income from the capital transfer, this income is determined as miscellaneous income and is declared in taxable income when calculating corporate income tax.

The time limit for submitting tax declaration dossiers is the 10th (tenth) day from the date the competent authority approves the capital transfer or the 10th (tenth) day from the date the parties agree to transfer the capital in the transfer contract. Capital transfers in the case of not having to approve the capital transfer.

Capital Transfer

Declaration dossier

Declaration of CIT:

  1. A declaration on CIT on capital transfers (form No. 05/TNDN attached herewith Circular 156/2013/TT-BTC);
  2. A photocopy of the transfer contract. If the transfer contract is written in a foreign language, some essential information must be translated into Vietnamese: the transferor, the transferee, time of transfer, transfer content; rights and obligations of all parties, contract value, deadlines, method of payment, and currency;
  3. A photocopy of the decision on approval for capital transfer made by a competent authority (if any);
  4. A certificate of capital contribution;
  5. Original documents of expenditures.
  6. A declaration on CIT on capital transfers (form No. 05/TNDN attached herewith Circular 156/2013/TT-BTC);
  7. A photocopy of the transfer contract. If the transfer contract is written in a foreign language, some essential information must be translated into Vietnamese: the transferor, the transferee, time of transfer, transfer content; rights and obligations of all parties, contract value, deadlines, method of payment, and currency;
  8. A photocopy of the decision on approval for capital transfer made by a competent authority (if any);
  9. A certificate of capital contribution;
  10. Original documents of expenditures.

If additional documents must be provided, the tax authority must notify the transferee within one day of the dossier being received (if the dossier is submitted directly), or within 3 (three) days from the day on which the dossier is received (if the dossier is sent by post or submitted electronically).

Tax declarations shall be submitted to the tax authority where the foreign transferor applied for tax registration.

For a consultation on procedures for transferring investors’ contributed capital, please feel free to contact us at phone number: 0916 545 618 or email hung.le@cnccounsel.com and  thanh.tran@cnccounsel.com

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