What taxes are involved in m&a transactions?

Understanding what taxes are involved in mergers and acquisitions (M&A) transactions not only helps enterprises optimize transaction structures but also ensures legal compliance and avoids potential disputes and losses in the future.

I. Current situation of taxation in M&A transactions

In recent years, the mergers and acquisitions market in Vietnam has become increasingly dynamic, with both the value and number of transactions rising significantly, particularly in sectors such as real estate, finance – banking, retail, manufacturing, and technology. However, alongside this growth, legal and tax issues arising from M&A transactions have become a major concern for both domestic enterprises and foreign investors.

A common reality is that many M&A transactions face difficulties in determining specific tax obligations due to the complexity of the tax system, differences in transaction structures (such as share acquisitions, capital contribution transfers, or asset purchases), as well as the application of double taxation avoidance agreements for foreign investors. In addition, many enterprises have not paid sufficient attention to tax due diligence prior to executing transaction agreements, leading to risks of retrospective tax assessments or administrative fines.

Furthermore, transfer pricing and tax evasion in certain M&A transactions have drawn particular attention from regulatory authorities. Some investors attempt to undervalue transactions to reduce personal income tax or corporate income tax liabilities, while in other cases, transaction values are overstated to legitimize cash flows. Such a situation highlights that ensuring transparency and compliance with tax regulations in M&A transactions is both urgent and complex.

II. Legal regulations on taxation in M&A transactions

1. What are taxes in M&A transactions?

M&A stands for “Mergers and Acquisitions,” referring to activities through which control over an enterprise is obtained via merger or acquisition of part or all of such an enterprise.

Taxes in M&A transactions are financial obligations arising from the transfer of shares, capital contributions, or assets between parties involved in the transaction. These may include corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), registration fees, and import-export taxes (where goods or specific assets are involved).

2. How are tax obligations allocated between the seller and the buyer in M&A transactions?

Tax obligations in M&A transactions are generally allocated as follows:

For the seller:

• If the seller is an individual: Income derived from the transfer of capital or shares is subject to personal income tax (pursuant to Article 13 of the Law on Personal Income Tax 2007, as amended in 2012, 2014, and 2022).
• If the seller is an enterprise: Income from the transfer of capital, shares, or assets is subject to corporate income tax (Clause 2, Article 3 of the Law on Corporate Income Tax 2025).

For the buyer:

• Generally, the buyer is not required to pay tax directly but may be liable for registration fees if acquiring assets subject to ownership registration (e.g., land use rights, automobiles, residential houses according to Article 3 of Decree No. 10/2022/ND-CP on registration fees).
• If the buyer is an organization, it must pay attention to its obligation to withhold, declare, and remit personal income tax on behalf of the seller (if the seller is an individual according to Article 25 of Circular No. 111/2013/TT-BTC).

Accordingly, the seller takes primary responsibility for tax obligations arising from income, while the buyer may be responsible for coordination in declaration, withholding, and remittance in certain cases as prescribed by law.

3. What are the legal requirements for tax declaration and payment in M&A transactions?

Legal provisions on tax declaration and payment in M&A transactions include:

• Article 68 of the Law on Tax Administration 2019 provides that in cases of enterprise reorganization, enterprises being divided or split must fulfill outstanding tax obligations before such division or separation. If tax obligations remain unfulfilled, the separated entities or newly established entities (in cases of division) shall be responsible for completing such obligations.
• Point c, Clause 1, Article 6 of Decree No. 181/2025/ND-CP guiding the Law on Value-Added Tax stipulates that asset transfers in cases of division, separation, consolidation, merger, or conversion of enterprise type are not subject to VAT declaration and payment.
• Circular No. 78/2014/TT-BTC on corporate income tax provides that where a divided or separated company transfers land use rights, it must declare and pay corporate income tax on income derived from real estate transfers in accordance with Chapter V of the Circular. Additionally, where land use rights are revalued for internal transfer upon separation, any increase in value shall be recorded as “other income” and subject to corporate income tax under Clause 14, Article 7 of the Circular.
• Personal income tax finalization: Clause 3, Article 21 of Circular No. 92/2015/TT-BTC provides that where employees are transferred from an old organization to a new one due to merger, consolidation, division, separation, or conversion of enterprise type, the new organization is responsible for conducting PIT finalization on behalf of the employee (upon authorization), including income paid by the former organization, and must collect the PIT withholding certificates issued by the former organization (if any).

III. Questions on taxes in M&A transactions

1. Are there tax incentives for M&A transactions to promote corporate restructuring?

Currently, Vietnamese law does not provide specific tax incentives exclusively for M&A activities. However, enterprises participating in M&A may enjoy tax incentives if they meet the conditions applicable to new investment projects, expansion projects, or projects in incentivized sectors or locations under Article 12 of the Law on Corporate Income Tax 2025.

Thus, tax incentives do not arise directly from M&A activities but rather from the nature of the post-M&A project.

2. What are common tax-related legal risks in M&A transactions?

Common tax-related legal risks include:

• Incorrect determination of transfer value (e.g., undervaluation to reduce PIT/CIT liabilities).
• Failure to declare or late declaration of tax obligations.
• Tax evasion or fraud through improper asset valuation inconsistent with market prices.
• Failure to resolve outstanding tax obligations of the target company prior to acquisition, resulting in the buyer inheriting tax liabilities.

3. How are tax adjustments handled if errors are discovered after the transaction is completed?

Pursuant to Article 47 of the Law on Tax Administration 2019 (as amended in 2025), taxpayers who identify errors in submitted tax returns may file supplementary declarations within 10 years from the deadline for submission of the tax return for the relevant tax period, provided that:

• The supplementary filing is made before the tax authority or competent authority issues a decision on inspection or audit;
• The tax dossier does not fall within the scope or period subject to inspection or audit as stated in such decision.

4. How are deadlines for tax declaration determined in M&A transactions?

Under Clause 4, Article 44 of the Law on Tax Administration 2019, the deadline for submitting tax declarations in cases of enterprise reorganization is no later than the 45th day from the occurrence of the relevant event. In addition:

• For taxes declared on a monthly basis: No later than the 20th day of the following month.
• For taxes declared on a quarterly basis: No later than the last day of the first month of the following quarter.

For taxes with annual tax periods:

• No later than the last day of the third month from the end of the calendar year or fiscal year for annual tax finalization; and no later than the last day of the first month of the calendar or fiscal year for annual tax declarations.
• No later than the last day of the fourth month from the end of the calendar year for personal income tax finalization by individuals directly conducting finalization.

5. Does the law require revaluation of assets for tax purposes in M&A transactions?

For capital transfers, tax is calculated based on the actual transfer price stated in the contract, and revaluation is not mandatory. However, tax authorities have the right to impose a tax assessment if the contract price is inconsistent with market value (Article 50 of the Law on Tax Administration 2019).

In cases of merger or consolidation, transferred assets may be revalued for accounting purposes in accordance with accounting standards. Any increase in value is recognized as “other income” and is subject to corporate income tax under Clause 14, Article 7 of Circular No. 78/2014/TT-BTC.

IV. Legal advisory services on taxation in m&a transactions

Legal advisory services related to taxation in M&A transactions typically include:

• Tax due diligence: Reviewing the tax obligations of the target company and assessing tax risks prior to the transaction.
• Transaction structuring advice: Selecting appropriate M&A structures (share acquisition, asset acquisition, merger, consolidation) to optimize tax efficiency.
• Tax declaration and payment advisory: Providing guidance on procedures for declaration, withholding, and payment of PIT, CIT, and registration fees.
• Tax dispute resolution: Representing clients in working with tax authorities in case of disputes.
• Long-term tax strategy advisory: Developing lawful tax planning strategies and leveraging post-M&A investment incentives.

Should you have any further inquiries regarding taxation in M&A transactions or other legal matters, please contact NPLaw for direct consultation and guidance from our team.