Taxation in share transfer transactions is a significant legal issue that directly affects the interests of investors and enterprises. In practice, many transactions give rise to risks due to misunderstandings of tax obligations or improper application of tax regulations. Current law provides a relatively clear framework governing taxpayers, tax declaration methods, and the timing at which tax liabilities arise. A thorough understanding of these regulations helps limit disputes and avoid the risk of tax reassessment and penalties.

I. Current situation regarding taxation in share transfer transactions

In practice, share transfer transactions have become increasingly common; however, compliance with tax obligations remains inconsistent and, in many cases, inaccurate. Many individuals and enterprises still confuse the applicable types of taxes, particularly personal income tax, corporate income tax, and withholding tax obligations.

In addition, numerous cases involve incorrect determination of transfer prices, the timing of tax liability, or the taxpayer, leading to risks of tax arrears, reassessment, and administrative penalties. This situation highlights the necessity of properly understanding and accurately applying tax law in share transfer transactions.

II. Concepts of taxation in share transfer transactions

To properly understand the legal obligations arising from share transfers, it is first necessary to clarify the concept of taxation in share transfer transactions and the scope of tax law governing such transactions. This serves as an essential basis for correctly identifying applicable taxes, taxpayers, and the proper performance of tax obligations.

1. What is taxation in share transfer transactions?

Under Vietnamese tax law, taxation in share transfer transactions refers to tax obligations arising from income, profits, or the transfer of ownership of shares when an individual or organization sells or transfers shares in a company. This is not a separate category of tax, but rather a collection of specific taxes imposed on income or gains derived from share transactions, including:

  • Personal income tax (PIT) applicable to individuals transferring shares;
  • Corporate income tax (CIT) applicable where enterprises are subject to tax on income from share transfers;
  • Withholding tax applicable to foreign investors in accordance with regulations on income derived from securities transfers.

The nature of taxation in share transfer transactions is to tax the income or profit earned by the transferor, ensuring fulfillment of financial obligations to the State and contribution to the State budget in accordance with tax law. Tax liabilities are determined based on the difference between the transfer price and the cost price or the taxable price as prescribed by law, depending on the status of the transferor (domestic individual, domestic organization, or foreign investor).

2. What types of taxes arise from share transfer transactions under current law?

Pursuant to current tax regulations, share transfer transactions may give rise to the following taxes:

  • First, Personal Income Tax (PIT)
    + Pursuant to Point b, Clause 4, Article 2 of Circular No. 111/2013/TT-BTC, as amended by Article 4 of Circular No. 25/2018/TT-BTC, income derived from the transfer of shares by individuals is classified as income from securities transfer and is subject to PIT.
    + Under Point b, Clause 2, Article 11 of Circular No. 111/2013/TT-BTC, as amended by Article 16 of Circular No. 92/2015/TT-BTC, individuals transferring shares are subject to PIT at a rate of 0.1% of the transfer price per transaction, regardless of whether a gain or loss arises.

  • Second, Corporate Income Tax (CIT)
    + Pursuant to Article 15 of Circular No. 78/2014/TT-BTC, income derived by enterprises from share transfers is classified as income from securities transfer and constitutes other income for CIT purposes. Taxable income is determined as the transfer price minus the acquisition cost and lawful expenses directly related to the transfer.

  • Third, other taxes and fees (if any)
    + Depending on the specific transaction, share transfers may involve certain charges such as licensing fees, securities service fees, or custody fees. However, these are not taxes directly imposed on the share transfer transaction but rather transaction-related costs regulated by specialized legislation.

3. How does taxation differ between domestic and foreign investors in share transfer transactions?

Based on Circular No. 111/2013/TT-BTC, Circular No. 78/2014/TT-BTC, and relevant guiding documents, Vietnamese tax law distinguishes between domestic and foreign investors in applying taxes to share transfer transactions.

  • For domestic investors:
    + Resident individuals transferring shares (securities) are subject to PIT at 0.1% of the transfer price per transaction, regardless of profit or loss.
    + Domestic enterprises deriving income from share transfers are subject to CIT on taxable income, calculated as the difference between the transfer price and acquisition cost, less deductible expenses.
  • For foreign investors:
    + Where non-resident individuals or foreign organizations transfer shares or securities in Vietnam, tax obligations are generally determined based on a percentage of gross transfer proceeds, commonly 0.1% for securities, applied under a withholding and remittance mechanism in Vietnam.
    + Tax calculation does not depend on whether the transaction generates a profit, ensuring simplicity and efficiency in tax administration for cross-border investments.

The fundamental difference lies in the tax base: domestic enterprises are typically taxed on actual profits, whereas foreign investors are generally taxed at a fixed rate on gross transfer proceeds, irrespective of gains or losses.

III. Legal regulations governing taxation in share transfer transactions

Share transfer transactions are governed not only by enterprise and securities laws but also by tax law. Proper identification of taxpayers, applicable taxes, tax bases, and declaration and payment obligations is essential to ensure compliance and minimize legal risks.

1. Who is responsible for paying tax in share transfer transactions?

Tax liability is determined based on the legal status of the transferor. Pursuant to Article 2 of the Corporate Income Tax Law 2025 (as guided by Article 2 of Decree No. 320/2025/NĐ-CP), where the transferor is an enterprise, income derived from the transfer of shares or capital contributions constitutes income from capital transfer and is subject to CIT, regardless of whether the transfer is made in cash or in kind.

Where the transferor is an individual, pursuant to Article 2 of the Personal Income Tax Law 2025, resident or non-resident individuals deriving income from share transfers in Vietnam are subject to PIT.

2. How are tax declaration, withholding, and payment conducted?

Tax compliance in share transfer transactions generally involves the following steps:

  • Determination of tax liability arising from the transaction;
  • Withholding at source, where required by law (particularly for non-resident individuals);
  • Tax declaration with the competent tax authority on a transaction-by-transaction basis;
  • Payment of tax to the State budget within statutory deadlines, often as a condition for completing shareholder change procedures.

3. Are there tax incentives or exemptions for certain share transfer transactions?

Although there is no general tax exemption for all share transfers, tax incentives apply in certain special cases. Pursuant to Clause 2, Article 7 of Decree No. 20/2026/NĐ-CP (guiding Resolution No. 198/2025/QH15), enterprises deriving income from transferring shares or capital contributions in innovative start-up enterprises may be exempt from CIT on such income, subject to statutory conditions.

4. Main tax risks to consider in share transfer transactions

Main risks include:

  • Incorrect determination of applicable tax and taxpayer;
  • Transfer prices not reflecting market value, especially in related-party transactions;
  • Failure to properly withhold tax at source;
  • Late or incorrect tax declaration;
  • Incomplete or invalid documentation.

Proper review of tax obligations, strict compliance with declaration and payment procedures, and adequate documentation are essential to mitigate these risks.

IV. Questions on taxation in share transfer transactions

1. Are individuals required to pay tax on share transfer in all cases?

Individuals transferring shares are generally subject to PIT at 0.1% of the transfer price per transaction, regardless of profit or loss, except for specific statutory exemptions.

2. How is tax calculated if the original acquisition cost cannot be determined?

Where acquisition cost cannot be substantiated, tax is calculated based on the actual transfer price or market price, in accordance with general tax administration principles.

3. When does tax liability arise in share transfer transactions?

Tax liability generally arises at the time the transfer contract becomes effective or when ownership rights are transferred, depending on the nature of the securities.

4. How is tax handled if a transaction is cancelled or the price is adjusted?

Where a transaction is lawfully cancelled or adjusted, tax liabilities may be correspondingly adjusted through supplementary tax declarations or tax refunds, in accordance with tax administration regulations.

V. Why seek legal advice from NPLaw for share transfer tax issues

With a team of lawyers experienced in tax law and M&A transactions, NPLaw assists enterprises and investors in accurately identifying tax obligations, optimizing lawful tax structures, assessing risks, and representing clients before tax authorities. This ensures legal compliance while safeguarding financial interests in share transfer transactions.

The above information is provided for reference purposes only. For advice tailored to specific cases, please contact NPLaw for professional consultation.