Vietnam’s New Capital Gains Tax Rules For Foreign Enterprises

On 14 June 2025, the National Assembly passed the amended Corporate Income Tax Law 2025 (CIT Law 2025). Among other things, this legislation is expected to bring significant changes in determining the method of calculating tax for capital transfer and securities transfer transactions (Capital Gains Tax) undertaken by foreign companies. This post aims to provide a comprehensive and clear overview by analyzing and comparing these new regulations with those stipulated in the Corporate Income Tax Law 2008 (CIT Law 2008).

1)         Definition of Taxable Income Arising in Vietnam for Foreign Companies

A key area of adjustment in the CIT Law 2025 relates to the definition of taxable income arising in Vietnam for foreign companies, making it more transparent.

Under the CIT Law 2008, the specific definition of such income was not explicitly clarified within the law itself; rather, it was detailed in Decree 218/2013 guiding the CIT Law 2008. In contrast, the CIT Law 2025 has directly incorporated this definition, clearly stating that taxable income arising in Vietnam for foreign companies is income originating from Vietnam, irrespective of the location where business activities are conducted.

2)         Clarification that transfer of shares in non-public joint stock company is capital transfer

The CIT Law 2008 and its guiding regulations does not clarify whether transfer of shares in non-public joint stock companies is capital transfer (chuyển nhượng vốn) or securities transfer (chuyển nhượng chứng khoán). Although it can be reasonably inferred from Circular 78/2014 that such transfer is considered securities transfer, in practice, the tax authority took different views on this issue from time to time and such transfer could also be classified as capital transfer.

The Draft Decree guiding the CIT Law 2025 (Draft Decree) now clarifies that capital transfer includes transfer of shares in non-public companies (Article 12.1), and securities transfer includes transfer of securities of public company (Article 13.1).

3)         Method of Capital Gains Tax Calculation

A notable change introduced by the CIT Law 2025 is in the method of Capital Gains Tax calculation for foreign companies, especially for indirect capital transfer transactions. The table below illustrates the differences between the CIT Law 2008 and the CIT Law 2025:

	Securities transfer	Capital transfer
Direct transfer (transfer of capital in a domestic company)
CIT Law 2008	0.1% on revenue	20% on taxable income (*) Taxable income = Transfer price - Purchase price – Transfer expenses
CIT Law 2025	0.1% on revenue (*) Expected tax rate under the Draft Decree	% on revenue. Specific tax rate currently unavailable. (*) The Draft Decree only provides the tax rate applicable to “capital transfer transactions where the owner does not directly manage the business activities in Vietnam”. This tax rate can be understood to apply exclusively to indirect transfer at the parent company level.
Indirect transfer (transfer of capital in a foreign enterprise holding capital in a subsidiary in Vietnam)
CIT Law 2008	Not provided. In practice, these transactions were often taxed similarly to direct transfers.
CIT Law 2025	0.1% on revenue (*) Expected tax rate under the Draft Decree	2% on revenue. (*) Expected tax rate under the Draft Decree. “Capital transfer transactions where the owner does not directly manage the business activities in Vietnam” could be interpreted to capture all transfers at parent companies located in the upper tiers of subsidiaries in Vietnam.

As can be seen from the table above, under the CIT Law 2025, both direct and indirect transfers will be taxed using a percentage (%) method based on the revenue arising in Vietnam. The reason provided by the Ministry of Finance (MOF) is that “in practice, most foreign organizations, when transferring capital to foreign parties, declare the transfer price equal to the cost, while in Vietnam there is not enough basis to verify the accuracy of the actual transfer price and related actual expenses regarding capital contribution and capital transfer activities”.

This new regulation offers the advantage of clarifying the Capital Gains Tax calculation method for indirect transfers, which was previously a grey area, thereby promoting greater transparency in tax administration. Nevertheless, a significant limitation of this new method is that it is based solely on revenue, without considering whether the transfer results in a loss or profit. This implies that even if the transfer results in a loss or is conducted at par (zero gain), the transferor will still be subject to tax.

4)       Ambiguity concerning the application of CIT rules on capital transfer linked to real estate to foreign companies

Previously, Article 14.1 of Circular 78/2014 on income from capital transfer provided that a corporate transferor of the entire contributed capital in a one-member limited liability company, if the transfer is “linked to real estate,” must declare and pay CIT based on a real estate transfer activity. The CIT on real estate transfer is calculated as 20% of the taxable income (which is determined based on relevant revenue, capital costs, losses, and deductible expenses). However, two points remained unclear: (i) what constitutes a “capital transfer linked to real estate,” and (ii) whether these rules apply to foreign companies’ capital transfers.

The Draft Decree’s Article 12.1 maintains the same rules without clarifying the term “capital transfer linked to real estate.” Nevertheless, it adds that “this provision does not apply to the cases provided under Article 11.2.” This new addition creates further uncertainty.

On one hand, it could be interpreted to mean that the rules on capital transfers linked to real estate do not apply to foreign companies, as Article 11.2 stipulates that the CIT payable by foreign enterprises under Articles 2.2(c) and 2.2(d) of the CIT Law 2025 is calculated as a percentage of revenue.

On the other hand, the wording of Article 12.1 could be read as only excluding certain cases listed in Article 11.2. One such case is “capital transfer transactions where the owner does not directly manage the business activities in Vietnam.” If this interpretation is adopted, a foreign company’s direct transfer of all capital in a domestic one-member limited liability company linked to real estate would still require them to declare and pay tax based on real estate transfer rules. However, this would go against the principle of the CIT Law 2025. The law states that the CIT payable by foreign enterprises under Articles 2.2(c) and 2.2(d) of the CIT Law 2025 is calculated as a percentage of “revenue,” without taking into account losses or expenses.

This post is written by Nguyen Thuc Anh with comments from Ha Thanh Phuc and Nguyen Quang Vu.