We are still waiting for the official Decree guiding the Corporate Income Tax Law 2025 (CIT Law 2025). However, the New Draft Decree of the Government dated 5 September 2025 (New Draft Decree) and the Official Letter 4685 of the Tax Department dated 29 October 2025 (Official Letter 4685) provide critical updates.

For foreign investors, the rules for selling capital in Vietnam are shifting. The new rules broaden the tax scope while offering potential - though ambiguous - exemptions. Below is our analysis of the key changes.

1. Clarifying the Scope: Direct vs. Indirect Transfers

In our previous post, we highlighted the uncertainty regarding whether “indirect transfers” (selling the offshore parent) and “direct transfers” (selling the Vietnam entity) would be taxed differently. The previous Draft Decree was ambiguous, applying the 2% revenue tax rate only to transactions where the owner “does not directly manage the business.” This implied that direct transfers might face a different tax rate.

The New Draft Decree resolves this uncertainty with two key changes:

· Unified Tax Treatment: Article 3.3 of the New Draft Decree explicitly states that taxable income for foreign companies includes income from capital transfers, whether direct or indirect. This confirms a unified approach: whether a foreign investor transfers capital in a domestic entity or in an offshore holding company, the tax treatment is identical.

· New exemptions replacing the “management” test: Article 11.2(i) of the New Draft Decree clarifies that the 2% tax on revenue applies to all capital transfers, with three specific exceptions: (i) restructuring (tái cơ cấu), (ii) internal financial arrangements of the seller (dàn xếp tài chính nội bộ của bên chuyển nhượng), or (iii) consolidation of the seller’s parent company (hợp nhất của công ty mẹ của bên chuyển nhượng).

While this appears helpful for internal group restructuring, investors should note that terms like “restructuring” and “internal financial arrangements” are not clearly defined in Vietnamese law. Without specific definitions, the determination of these exemptions will remain subject to the tax officers’ discretion.

2. Clarifying the “real estate transfer” ambiguity

Under the previous Draft Decree, there was a risk that a foreign company directly transferring all capital in a domestic Single-Member Limited Liability Company (LLC) linked to real estate would be forced to pay tax under real estate transfer rules (20% on net income) rather than capital transfer rules (2% on revenue). This was due to the wording of Article 12, which seemed to exclude only cases listed in Article 11.2 - previously only listed capital transfers “where the owner does not directly manage the business.”

By revising Article 11.2(i) to cover all capital transfers (direct or indirect), the New Draft Decree closes this gap. It clarifies that all capital transfer transactions of foreign companies fall under the capital gains tax calculation.

3. When to declare Capital Gains Tax for capital transfers?

The Tax Department’s Official Letter 4685 sets a rigid compliance timeline. Taxpayers must declare and pay the Capital Gains Tax for capital transfers within 10 days of the “transfer of capital ownership” (the date legal title changes). The Tax Department has explicitly stated that this deadline applies even if the buyer has not fully paid the seller yet. This creates a scenario where the seller must pre-fund the tax liability even though full payment has not been fully received.

In cases where the final transfer value is not officially determined at the time of transfer of capital ownership, taxpayers may make a supplementary and adjusted tax declaration in the tax period corresponding to the date of capital ownership transfer.

This post is writen by Nguyen Thuc Anh.

Vietnam Business Law