New tax rules ease capital transfer exemptions

Vietnam has updated its corporate income tax rules for capital transfers, introducing stricter oversight and clearer exemptions under a new regulatory framework.

Decree 320 tightens tax rules for capital transfers

The government issued Decree No. 320/2025/ND-CP on December 15, 2025, establishing new standards for taxing capital transfer transactions. The measure primarily affects foreign enterprises, applying a 2% deemed corporate income tax on transfer proceeds in most cases. It also defines when indirect transfers trigger tax obligations and revises exemptions for internal group restructuring.

The Ministry of Finance issued two circulars to implement the changes. Circular No. 20/2026/TT-BTC, issued March 12, provides guidance on compliance procedures and documentation requirements. Circular No. 21/2026/TT-BTC, published on March 17, 2026, updates the tax declaration forms for capital transfer transactions.

When taxable revenue is recognized has become a central issue. The rules state revenue is recognized when the “initial capital transfer agreement” takes legal effect. However, Circular 20 does not define this term, leaving room for interpretation. Authorities might consider it the original agreement, even if later amended, as long as it meets legal effectiveness requirements.

Transactions worth VND 5 million or more face additional review. If non-cash payment records are missing or invalid, tax authorities may reassess the transaction and determine the transfer price for CIT purposes.

Who pays the 2% deemed tax

The 2% rate applies to three types of foreign enterprises:

• Those without a permanent establishment in Vietnam;
• Those with a permanent establishment in Vietnam, if the capital transfer income isn’t connected to the establishment’s activities; and
• Those operating in Vietnam through e-commerce or digital platforms.

Under Point i, Clause 3, Article 12 of Decree 320, income from capital transfers derived by these foreign enterprises is subject to CIT on a deemed basis at a rate of 2 percent of the capital transfer proceeds.

Related: Fuel market volatility affects tax teams

Exemptions for internal group restructuring

Some transfers avoid the 2% tax. Circular 20 outlines exemptions for intra-group ownership restructuring, confirming that qualifying transactions are not subject to deemed CIT where they do not result in a change to the group’s ultimate parent company and do not generate taxable income. Eligible cases include:

• Demergers and company divisions;
• Capital contributions made using shares;
• Stock dividend and bonus share distributions within the group; and
• Other direct or indirect ownership transfers involving Vietnamese enterprises within the same corporate group.

To qualify, restructurings must meet four conditions:

• The ultimate beneficial owner remains unchanged following the restructuring;
• The transfer value does not exceed the book value or the original investment value;
• The transaction does not create any gain, and the value determined under the approved restructuring documentation does not exceed the recorded value at the time of transfer; and
• The transferee assumes all investment values, rights, and obligations associated with the transferred capital.

To mitigate tax risks and ensure compliance, businesses should familiarise themselves with the new administrative requirements and the key obligations introduced under the full framework.

New declaration procedures

Foreign enterprises must now use Form 05/TNDN, introduced under Circular 21, to report corporate income tax from capital transfers. The form is issued as an appendix to the circular.

The changes are part of Vietnam’s broader effort to update its tax system. While the new rules may increase administrative work, they also offer clearer guidance for foreign investors working within the country’s tax environment.

The adjustments come as Vietnam prioritizes processing of critical rare earths, which could attract additional foreign capital.