Taxation on financial investment activities: what enterprises and individuals need to know

In the context of an increasingly dynamic financial market, financial investment activities have become an indispensable part of the business development strategies of both individuals and enterprises. Consequently, tax obligations related to these activities are among the most critical concerns, requiring a thorough understanding of the law to optimize benefits while ensuring compliance. Understanding these complexities, NPLaw provides a comprehensive overview of the applicable legal regulations on taxation on financial investment activities to help investors operate with greater confidence and efficiency.

I. Current situation regarding taxation on financial investment activities

Vietnam’s financial investment market is experiencing rapid growth, with diversification across stocks, bonds, investment funds, and derivative products. However, such developments bring with it challenges in managing and implementing tax obligations related to financial investments.

While many individual investors remain uncertain about the types of applicable taxes, methods of calculation, and declaration duration, particularly newcomers, leading to mistakes or delays in compliance. On the other hand, for enterprises, the accounting and taxation of corporate income tax (CIT) arising from financial investments are far more complex, involving provisions for devaluation, discrepancies between selling and cost prices, and distinctions between short-term and long-term investments.

In particular, determining tax obligations for indirect investment forms, such as through funds or investment entrustment, remains a concerned matter. The tax authorities have increasingly strengthened oversight, demanding higher transparency and compliance from all market participants.

In summary, tax regulations governing financial investment activities are main factors to ensure legal compliance and optimize financial returns.

II. Legal provisions on taxation on financial investment activities

To ensure compliance and optimize financial efficiency, investors must understand the specific legal provisions currently in force. Taxes on financial investment activities are primarily governed by the Law on Personal Income Tax (PIT) and the Law on Corporate Income Tax (CIT), focusing on the following key aspects:

1. What is taxation on financial investment activities?

Taxation on financial investment activities refers to taxes that individuals and enterprises must pay to the State budget on income derived from financial investments, such as trading securities (stocks, bonds), capital contributions, transfers of equity, dividends, interest on deposits, or other investment forms. The principal taxes applicable are the Personal Income Tax (PIT) for individuals and the Corporate Income Tax (CIT) for organizations.

2. Are individuals and enterprises subject to taxation on income from financial investments, and if so, which types apply?

Both individuals and enterprises earning income from financial investment activities are subject to taxation, except for cases exempted by law.

• For individuals: Pursuant to Article 3 of the Law on Personal Income Tax 2007 (as amended by Article 2 of Tax Laws 2014), income from financial investments is subject to Personal Income Tax. Common taxable income includes:
  + Income from capital transfers (sale of shares or contributed capital);
  + Income from dividends, capital contribution interest, and bond interest.
• For enterprises: Under Clause 2, Article 3 of the Law on Corporate Income Tax 2025, income from financial investment constitutes taxable income subject to Corporate Income Tax. Such a type of income, typically referred to as “other income” or “income from financial activities,” is aggregated with income from production and business activities for tax calculation purposes, applying the general tax rate of 20%.

3. Methods for calculating taxation on income from financial investments

Tax calculation for Personal Income Tax and Corporate Income Tax related to financial investment income is prescribed as follows:

• For Personal Income Tax: According to Article 10 of Circular No. 111/2013/TT-BTC, the applicable tax rates are:
  + Transfer of securities: 0.1% of the selling price per transaction, regardless of profit or loss;
  + Dividends (in cash), capital contribution interest, and bond interest: 5% of total income received (withholding at source).
• For Corporate Income Tax: According to Article 7 of the Consolidated Document No. 14/VBHN-VPQH on Corporate Income Tax, taxable income is determined as follows:
  + Taxable income during a tax period = Taxable income – exempted income – carried-forward losses from prior years.
  + Taxable income = Revenue – deductible expenses + other income (including income generated abroad).

Thus, formula is as follows: Taxable income = (Revenue + other income) – (deductible expenses + exempted income + carried-forward losses)

Income from the transfer of investment projects (except for exploration and mining projects), transfer of participation rights in investment projects, or transfer of real estate may be offset against profits from production and business activities within the same tax period. The Government provides detailed regulations and guidance on such a matter.

In short, correctly distinguishing between income categories and investment types is essential for applying the appropriate tax type and calculation method in accordance with the law.

III. Common questions regarding taxation on financial investment activities

Given the complexity of Personal Income Tax and Corporate Income Tax regulations, proper compliance requires deep legal understanding. Below are answers to some frequently asked questions.

1. How must individuals with income from share transfers pay Personal Income Tax?

Individuals earning income from share transfers must pay Personal Income Tax at the rate of 0.1% of the transfer price per transaction, irrespective of profit or loss.

2. Are investment funds exempt from or entitled to tax incentives?

Income derived from investment activities of securities investment funds in Vietnam is exempt from Corporate Income Tax. The legal basis is Clause 7, Article 4 of the Law on Corporate Income Tax and Clause 7, Article 8 of Circular No. 78/2014/TT-BTC, which explicitly provides that income of securities investment funds is exempt from tax to promote domestic capital market development.

3. Can enterprises include provisions for decline in value of investment securities as deductible expenses for calculating Corporate Income Tax?

Enterprises may not include provisions for the devaluation of investment securities as deductible (allowable) expenses when calculating Corporate Income Tax.

Under Clause 2, Article 4 of Circular No. 96/2015/TT-BTC (amending Circular No. 78/2014/TT-BTC), provisions for financial investment losses are non-deductible when determining taxable income. It means that although such provisions may appear in accounting records, they must be excluded from deductible expenses during finalization.

4. Are short-term financial investments entitled to preferential Corporate Income Tax compared to long-term investments?

Current Corporate Income Tax regulations make no distinction in tax rates between short-term and long-term financial investments. All income from financial activities, regardless of duration, is subject to the same general Corporate Income Tax rate of 20%, except for special incentives applicable to certain sectors or regions.

5. When does Personal Income Tax liability arise for individuals entrusting investments through securities companies?

Personal Income Tax liability arises when the individual investor actually receives or is entitled to receive income (e.g., distributed profit). The entrusted party (the securities company or fund management company) is responsible for withholding tax at source when paying or distributing investment returns to the investor.

IV. Legal consultancy services on taxation on financial investment activities

Understanding tax regulations applicable to financial investments is fundamental to ensuring success and legal compliance. For both individuals and enterprises, keeping up with frequent amendments to tax laws can be challenging.

To help investors maintain transparent, lawful, and tax-efficient operations, NPLaw provides specialized legal consultancy services, including:

• Guidance on the declaration, calculation, and payment of Personal Income Tax and Corporate Income Tax for financial investment activities;
• Advice on tax exemptions, reductions, and preferential policies applicable to specific financial investment forms;
• Assistance in verifying transactions and investment-related documents when necessary.

Contact NPLaw for reliable legal support that helps you focus confidently on investment performance.