Potential tax risks for transfer capital in an offshore company with subsidiaries in Vietnam

In April 2015, the General Department of Tax (GDT) instructs a provincial tax department to consider imposing corporate income tax (CIT) on a capital transfer transaction whereby a Vietnamese buyer acquires the entire equity interest of a Hong Kong company (Offshore Target Co) from a foreign seller. The Offshore Target Co holds shares in a joint venture company in Vietnam. The GDT considers the purchase price that the foreign seller receives from the Vietnamese buyer for sale of shares in the Offshore Target Co as “taxable income arising in Vietnam” (thu nhập chịu thuế phát sinh tại Việt Nam) of the foreign seller under Decree 12/2015. The GDT’s view could raise a tax concern over capital transfer in an offshore company which in turn have shares in a Vietnamese company, at least in case the buyer is a Vietnamese company.

Conditions for new foreign investor in Vietnamese insurance companies

The table below summaries the key conditions that a new foreign institutional investor may need to satisfy when investing in an existing insurance company in Vietnam. The target insurance company can be either a joint stock company (JSC) or a limited liability company (LLC). The investment could either be acquisition of new shares issued by the target or of existing share held by existing owners. Except in case of acquiring less than 10% existing shares, in all cases, an approval from the Ministry of Finance is required.

Investment Law 2014 – What kinds of Investment Registration Certificates that a foreign investor needs?

Under Enterprise Law 2014, a foreign investor wanted to set up a company in Vietnam is required to obtain an Investment Registration Certificate (IRC) regarding the foreign investor first. Under Investment Law 2014, an IRC is a document recording the information about the investment project that the investor registers with the licensing authority. However, as there is no clear definition of an investment project, there may be various “kinds” of ICs that may be available to a foreign investor.

Registration of securities issued by public companies

The Securities Law 2006 requires any securities issued by a public company to be registered with the Vietnam Securities Depository Centre (VSD). The term “securities” includes, among other things, shares, bonds, warrants, options, future, and “investment contracts”. The registration at VSD is to record the ownership rights and other rights of the securities holders.