#Issue 1
Vietnam’s mergers and acquisitions landscape has undergone a fundamental shift with the enactment of the Corporate Income Tax Law No. 67/2025/QH15 (the “CIT Law”), which took effect on 1 October 2025, and the subsequent issuance of Decree No. 320/2025/ND-CP (“Decree 320”) on 15 December 2025 and Circular No. 20/2026/TT-BTC (“Circular 20”) on 12 March 2026. These instruments collectively reshape the tax framework governing capital transfers, real estate transactions, and cross-border deal structures in Vietnam.
I will examine the principal taxes applicable to M&A transactions in Vietnam, with a focus on the changes introduced by these new regulatory instruments and their practical implications for deal structuring, pricing, and compliance.
A share deal involves the transfer of equity interests in the target company – either capital contributions in a limited liability company or shares in a joint stock company. The target entity continues to exist with all its assets, liabilities, contracts, and licenses intact. The buyer steps into the seller’s position as a member or shareholder.
Domestic Corporate Sellers
For a domestic corporate seller, income from capital transfers is taxed under the standard CIT regime at 20% on net gains. Taxable income is calculated as the transfer price less the cost of the transferred capital and directly related transfer expenses (Decree 320, Article 13). The taxing point is the capital transfer date (Decree 320, Article 13.1). The cost of the transferred capital is determined by reference to initial contributed capital or the acquisition price from an earlier purchase, supported by the capital transfer contract and payment documents.
A significant development under the new CIT Law is the removal of the ring-fencing restriction on real estate transfer income. Previously, income from real estate transfers had to be accounted for separately and could not be offset against losses from other activities. From the 2025 tax year, income from real estate transfers is now included in the enterprise’s overall taxable income, allowing cross-offset – except against income currently enjoying CIT incentives.
Foreign Corporate Sellers
Under Decree 320, Article 12, Clause 3, Point i, capital transfers by foreign corporate sellers are now subject to a flat CIT rate of 2% on gross transfer proceeds, replacing the previous regime of 20% CIT on net gains. This is a fundamental change in approach – moving from a net-income basis to a gross-revenue basis.
The 2% deemed rate applies to both direct transfers (transfers of equity interests in Vietnamese entities) and indirect transfers (transfers of interests in offshore entities that hold Vietnamese subsidiaries). This formal recognition of indirect transfers under the CIT framework closes a longstanding regulatory gap.
The deemed rate approach eliminates practical difficulties in establishing cost bases for foreign sellers, particularly in complex multi-jurisdictional structures, but introduces a significant shift in deal economics. For sellers disposing of investments at a loss or thin margin, the 2% gross-based tax may result in a higher effective tax burden than the previous net-gain method. Conversely, sellers realizing substantial gains may benefit from a lower effective rate.
Intra-group Restructuring Exclusion
Decree 320 and Circular 20 provide an exclusion for capital transfers in the form of ownership restructuring transactions within a group, provided that: (a) the restructuring does not result in a change to the ultimate parent company of the entities with direct or indirect ownership in the Vietnamese enterprise; and (b) the transaction does not generate taxable income. Circular 20 elaborates additional conditions, including that the transfer value must not exceed book value or initial contributed capital, and the transferee must inherit the entire capital value, obligations, and rights related to the investment of the transferor.
Timing of CIT Obligation – A Divergence
One notable feature of the new framework is a divergence in the timing rules for domestic and foreign corporate sellers. Under Decree 320, Article 13.1, the taxing point for domestic corporate sellers is the capital transfer date – understood as the date ownership effectively transfers. For foreign corporate sellers, Circular 20, Article 5.2(a) provides that the time of determination of CIT-taxable revenue is the time when the initial capital transfer contract becomes effective.
In practice, there can be a significant time gap between the effective date of a transfer contract and the date of actual closing (when ownership transfers), particularly where conditions precedent such as regulatory approvals, competition clearance, or third-party consents must be satisfied. This creates a timing asymmetry between domestic and foreign sellers for the same type of transaction.
Individual Sellers
Where the seller is an individual, capital gains are subject to Personal Income Tax (PIT). Under the current framework, tax resident individuals pay 20% PIT on the net gain from capital transfers (transfer price less cost of capital and expenses) and non-resident individuals pay 0.1% on the gross transfer price. The new PIT Law No. 109/2025/QH15 (effective from 1 July 2026) introduces changes to rates of 20% net gain or 2% of the transfer price applicable to both resident and non-resident sellers, while securities (shares of public companies) will be taxed at 0.1%.
