The Law on Personal Income Tax 2025 (hereinafter, the “PIT Law 2025”) will enter into force on 01 July 2026, replacing the Law on Personal Income Tax 2007 and the amended Law on Personal Income Tax 2012. Alongside the PIT Law 2025, the drafting of its guiding decree is underway to ensure an operational framework for implementing the newly enacted statutory provisions. As of the current date, the Ministry of Finance has released a Draft Decree guiding the PIT Law 2025 (hereinafter, the “Draft Decree”) for public consultation from enterprises and associations, with the official Decree yet to be promulgated. This article summarizes the regulations governing the transfer of capital, shares, and securities under the PIT Law 2025 and the Draft Decree within the context of the upcoming implementation of the new tax policy.
Building upon the framework established by the PIT Law 2025, the Draft Decree categorizes income from capital transfers into three distinct groups: income from the transfer of capital in economic organizations, income from the transfer of securities, and income from the transfer of capital in other forms . Among these, this article focuses on the conventional categories of transfer transactions, namely the transfer of capital in economic organizations and the transfer of securities.
A. REGULATORY UPDATES ON PERSONAL INCOME TAX FOR INCOME FROM CAPITAL TRANSFERS
A noteworthy update under the PIT Law 2025 is that transactions involving the transfer of shares in joint-stock companies that are neither public companies nor listed or traded under the securities law are now classified as income from capital transfers, falling within the same category as transactions for the transfer of capital contribution in enterprises. Accordingly, when an individual transfers shares in a joint-stock company that is neither a public company nor listed or registered for trading on a stock exchange under the provisions of the securities law, such individual must pay PIT at the rate of 20% on the assessable income, or 2% on the transfer price if the purchase price and related expenses cannot be determined. Furthermore, the guidelines for determining personal income tax on transfers of capital, shares, and securities for non-resident individuals shall apply in the same manner as those for resident individuals. The new regulations also mandate that individuals transferring capital must personally declare and pay tax prior to modifying the list of contributing members or the register of shareholders at the enterprise where the capital is being transferred. If the transferring individual fails to provide documents proving the fulfillment of tax obligations, the issuing organization, when completing procedures to amend the list of contributing members or register of shareholders, shall declare and pay the tax on behalf of that individual.
Provided below is a detailed summary of the regulations on personal income tax governing income from capital transfers under the PIT Law 2025 and the Law on Tax Administration 2025, both of which are set to enter into force in the near future.
1. Income from capital transfers
Income from capital transfers refers to income derived from the transfer of a portion or the entirety of capital contribution in limited liability companies, partnerships, business cooperation contracts, cooperatives, cooperative unions, people’s credit funds, and other organizations, as well as the transfer of shares in joint-stock companies that are neither public companies nor listed or registered for trading under the provisions of the securities law.
Personal income tax on income from capital transfers is calculated using the following formula:
PIT = Assessable Income x 20%
= (transfer price – purchase price and reasonable expenses related to the generation of income from capital transfer) x 20%
In the event that the purchase price and related expenses concerning the capital transfer cannot be determined, the following formula shall apply:
PIT = Transfer price x 2%
Wherein,
• Transfer price means the amount of money received by an individual under the capital transfer contract.
• Purchase price means the value of the capital contribution at the time of the capital transfer, which equals the total value of the initial capital contribution and any subsequent contributions or additional purchases.
In the event that the capital is contributed to establish an enterprise: the purchase price shall be the cumulative value of the capital contribution up to the time of the capital transfer, determined on the basis of accounting books, invoices, and source documents.
In the event that the capital is acquired through a repurchase: the purchase price shall be the value of the capital at the time of purchase, determined on the basis of the capital repurchase contract and payment documents.
The time for determination of assessable income shall be the time of completion of the transaction as prescribed by law.
2. Income from securities transfers
Income from securities transfers refers to income derived from the transfer of shares or stock purchase rights in public companies, listed organizations, or organizations registered for trading; as well as the transfer of bonds, bills, fund certificates, and other types of securities under the provisions of the securities law.
Personal income tax on income from securities transfers is calculated using the following formula :
PIT = Transfer price x 0.1%
Wherein:
• Transfer price shall be determined based on the following cases:
In the event of listed securities, securities registered for trading, and shares of unlisted public companies that are registered for trading on the Stock Exchange: the actual selling price (matching price or put-through price) as notified by the Stock Exchange.
In the event of remaining securities: the price specified in the transfer contract, the actual transfer price, or the book value of the entity whose securities are being transferred at the time of the most recent financial statement prepared in accordance with regulations prior to the time of transfer.
The time for determination of assessable income:
• The time when the transfer income is received, for transactions executed on the Stock Exchange.
• The time when ownership rights to the securities are transferred at the Vietnam Securities Depository , for transactions not executed on the Stock Exchange.
• The time when the contract enters into force, for cases failing to fall within the two aforementioned categories.
3. PIT declaration; deduction, declaration, and payment of PIT on behalf of individuals
Individuals transferring capital shall personally declare and pay tax. Except in the event that the transferring individual does not have documents proving the completion of tax obligations, when the issuing organization performs the procedures to change the list of contributing members or the list of shareholders, it shall perform the tax declaration and tax payment on behalf of that individual.
For securities traded through the trading system on the Stock Exchange, the organizations responsible for declaring and paying tax on behalf of the individual shall be: Securities companies, commercial banks where the individual opens a depository account, or fund management companies where the individual entrusts their investment portfolio.
For securities not traded through the trading system on the Stock Exchange, the organizations responsible for declaring and paying tax on behalf of the individual shall be: securities companies or commercial banks where the individual opens a securities depository account, in the event of shares of public companies registered at the Vietnam Securities Depository; or securities companies, in the event of shares of joint-stock companies that are not yet public companies but have authorized a securities company to manage their register of shareholders.
Please note: The italicized text indicates provisions that have not yet been passed and are currently recorded in the Draft Decree; these will need to be updated upon the entry into force of the official regulations as of 01 July 2026.
B. IMPACTS OF THE NEW PIT LAW ON M&A TRANSACTIONS AND RELATED RECOMMENDATIONS
The amendments proposed in the Draft Decree are projected to directly impact the operational processes of M&A deals in Vietnam. Provided below are the critical considerations that the parties must particularly take into account:
1. Tax calculation methods for income from capital transfers
The Draft Decree proposes to consolidate income from the transfer of capital contribution (in limited liability companies, partnerships, cooperatives, etc.) and shares in unlisted, non-public joint-stock companies to apply a tax rate of 20% on profits, or 2% on the transfer price. Meanwhile, securities transfers (concerning public, listed, and registered-for-trading companies) shall be subject to a PIT rate of 0.1% on the transfer price.
Given the non-frequent and non-continuous nature of transactions involving the transfer of shares in joint-stock companies that are neither public companies nor listed or traded on a stock exchange under the securities law, the underlying nature of these transactions closely resembles the transfer of capital contribution in a limited liability company rather than securities trading on the market. This regulation has a two-sided impact, presenting both positive effects and limitations, as manifested by the fact that the application of the 20% tax rate is only beneficial in the event that the individual possesses full information regarding the purchase price and transaction expenses to determine the assessable income. Conversely, in the event that the purchase and sale of shares in an enterprise are classified as a capital transfer transaction but lack sufficient information to determine the assessable income, a 2% tax rate shall be applied to the gross transfer price, which is many times higher than the 0.1% tax rate applied to income from securities transfers.
This new regulatory approach demonstrates that classifying transferred shares under the new regulations serves as a solution that contributes to promoting transaction transparency, ultimately driving an increase in the number of joint-stock companies registering for listing or official trading on the stock exchange. On the other hand, this classification creates a disparity in tax obligations between investors in non-public joint-stock companies and public joint-stock companies, as well as between unlisted and listed entities, despite the underlying nature of shares sharing the same principle of free transferability. Consequently, the aforementioned difference in tax calculation methods creates a significant gap in tax obligations among investors, inadvertently diminishing the investment attractiveness of non-public joint-stock companies.
The disparity in tax obligations upon the entry into force of the new PIT Law regulations raises a major consideration for parties conducting transactions. Investors must be fully aware that transferring shares in non-public or unlisted companies will no longer enjoy the same tax mechanism as ordinary securities. Instead, tax obligations will be driven higher based on the profit margin of each individual transfer. However, a share transfer transaction does not generate PIT on the gross proceeds received by that individual in all circumstances; rather, the tax is calculated solely on the assessable income. Therefore, in the event that individuals possess a clear and transparent basis to determine the purchase price and expenses related to the share transfer, such individuals shall not be liable for PIT if the sale of shares does not generate a profit.
2. Regulations on purchase price in the PIT calculation method for capital transfers
To clarify the basis for determining assessable income, the Draft Decree has introduced strict regulations regarding the purchase price for capital transfer transactions. Accordingly, the requirement to prove the purchase price based on accounting books and source documents (for capital contributed for establishment) and contracts and actual payment documents (for repurchased capital) is contributing to promoting the transparency of the transfer market. This mechanism enables the Buyer to easily verify the actual value based on the documents required for PIT declaration purposes, thereby eliminating fictitious capital and preventing the risk of hidden tax arrears back-claimed from the previous owner.
However, the regulations also pose a significant challenge for the seller regarding the burden of proof. In the event that the target enterprise misplaces documents or its historical bookkeeping system is incomplete, reconstructing the records will be highly difficult and could easily prolong the execution timeline of M&A transactions. Share transfer transactions executed as an internal process of the enterprise without going through a stock exchange often offer less assurance in terms of document generation and retention, or such internal documents may be arbitrarily adjusted, lacking objectivity and causing difficulties for tax authorities during audits and the determination of tax obligations. Concurrently, there is also a risk that this regulation could be exploited for tax fraud by declaring an inflated purchase price to reduce or eliminate the payable assessable income. Therefore, in M&A transactions, reviewing and verifying the authenticity of the seller’s documentation system for determining the cost basis will be a critical consideration to avoid future tax arrears risks. In such circumstances, the parties may have to accept declaring and paying PIT at a tax rate of 2% on the transfer price to eliminate related risks when the purchase price cannot be determined as the basis for calculating assessable income. Given this change, the parties must meticulously calculate this PIT cost equation right from the valuation and deal-structuring phases.
3. Definition of income from securities transfers
In tandem with tightening the tax management of capital transfers, the Draft Decree also aims to establish a clear distinction in scope from the category of income from securities transfers. Specifically, income from securities transfers is explicitly defined to encompass shares and stock purchase rights in public companies, listed organizations, or organizations registered for trading; along with bonds, bills, fund certificates, and other types of securities.
Clarifying this scope enables transacting parties to readily determine the applicable tax mechanism when designing the deal structure, thereby minimizing legal disputes regarding the choice of tax calculation methods between 20% on profits versus 0.1% on the selling price for any specific financial asset.
4. Determination of the transfer price for listed securities and the remaining categories of securities
The parties must particularly take into account the mechanism for determining the transfer price, which is regulated separately for each category of securities. For listed securities and shares of public companies registered for trading on the Stock Exchange, applying the actual selling price as notified by the Stock Exchange helps centralize and transparentize the tax calculation basis and shortens the due diligence timeline; however, it reduces the parties’ flexibility in the face of unexpected market fluctuations. Meanwhile, the mechanism for determining the price based on the contract or the most recent accounting books applied to the remaining categories of securities, despite allowing proactive pricing in deal negotiation, carries the inherent risk of triggering unforeseen tax costs. In the event that the actual transfer price is set lower than the book value and fails to comply with the arm’s length principle, the tax authorities may impose a tax assessment on the transaction.
5. PIT declaration; deduction, declaration, and payment of PIT on behalf of individuals
Finally, to ensure that tax streams are collected accurately and fully, the Draft Decree details the responsibilities for tax declaration and payment on behalf of individuals. For capital transfers, the individual’s obligation regarding PIT declaration and payment arising from the capital transfer must be personally performed and completed by such individual prior to altering the register of contributing members or the register of shareholders at the enterprise where the individual transfers the capital. In the event that the enterprise whose capital is being transferred proceeds to alter the register of contributing members or the register of shareholders without holding documents proving that the relevant individual has declared and paid PIT, such enterprise shall be held liable for paying the tax on behalf of that individual.
For securities transfers, the Draft Decree also explicitly identifies the entities responsible for declaring tax on behalf of the individual, such as securities companies, commercial banks, or fund management companies, depending on whether the transaction is executed through the system of the Stock Exchange or not.
This regulation primarily serves to clearly define the legal liabilities among the parties participating in the M&A deal. Specifically naming which agency, organization, or individual must bear responsibility in each specific scenario, whether the transaction occurs on-exchange or over-the-counter, will completely eliminate any shifting of responsibility that causes omissions in performing tax obligations. Mandating the ultimate responsibility of the organization related to the payment of personal income when performing the declaration and tax payment obligations on behalf of the individual will create a stringent oversight system, thereby preventing individuals from failing to declare their taxes or intentionally evading financial obligations when conducting transfers.
However, the new PIT Law 2025 and the Law on Tax Administration 2025 have not yet clearly regulated whether a non-resident individual may authorize the enterprise where the individual transfers capital, or the transferee, to perform the tax declaration and payment on their behalf. Since non-resident individuals do not have a tax registration in Vietnam, self-declaration and payment are unfeasible. In such circumstances, the income-paying party or, ultimately, the enterprise where the individual transfers capital has the obligation to declare tax on behalf of the non-resident individual in order to complete the transfer procedures. Therefore, it is highly probable that the detailed guiding documents of the new PIT Law and the Law on Tax Administration will clarify the provisions for this specific case so that non-resident individuals have a clear basis for enforcement.
C. RELATED RECOMMENDATIONS
Stemming from the major changes in the draft regulations on PIT for capital and securities transfers, the first urgent solution for market participants is to proactively standardize their cost basis documentation and bookkeeping systems at an early stage. The regulations tighten the substantiation of the purchase price using actual source documents to qualify for the 20% tax rate on the profit margin for non-public enterprises leaves sellers with no room for neglecting the historical capital transaction records of the enterprise. Target enterprises, particularly startups, must review all capital contribution documents, historical transfer contracts, and bank payment documents to be ready to provide them to buyers and tax authorities.
Alongside document preparation, transacting parties must also revamp their tax due diligence processes to align with the new landscape. Previously, the applicable tax rate was merely 0.1% calculated on the transfer price specified in the contract. Currently, however, for share transfer transactions by individuals, it is mandatory to determine the purchase price and expenses related to the share transfer to calculate the assessable income. In the event that an individual cannot determine the purchase price and related expenses concerning the shares they hold, they must pay PIT for the share sale transaction at a tax rate of 2% calculated on the transfer price specified in the contract. Such an increased tax liability in a single transaction can pose an obstacle for the transferring individual; consequently, the seller may request the buyer to pay an additional premium on top of the purchase price to offset the income tax that the individual must bear. The clear demarcation between the tax calculation methods, 20% on profits versus 2% on the transfer price for non-public companies, requires the buyer to elevate tax due diligence to the highest priority to accurately determine the potential latent financial liabilities of the seller and the target company.
Concurrently, the parties must meticulously calculate the timing when the contract enters into force, explicitly stipulate whether the responsibility for tax declaration and payment rests with the transferring individual or the enterprise whose capital contribution or shares are being transferred, and formulate an appropriate transfer price payment mechanism. This ensures that the transaction proceeds in the proper sequence and that the tax-paying cash flow is always readily available, thereby mitigating the risk of transaction delays or the seller and target company being penalized for late tax payment.
For further information, please contact:
Xuan Thuy NGUYEN, Partner, LNT & Partners
Thuy.Nguyen@LNTpartners.com
