Offshore Deals Creating Transaction Complications and Vietnam Tax Liabilities
The sale of shares in a foreign holding company may appear to take place entirely outside Vietnam. The seller and buyer may both be foreign entities, the share purchase agreement may be governed by foreign law, and the purchase price may be paid to an offshore bank account. The immediate shareholder of the Vietnamese subsidiary may not even change.
Despite this, the transaction can still create a Vietnamese tax liability.
This issue has become increasingly important as foreign investors commonly hold Vietnamese businesses through regional holding companies in Singapore, Hong Kong, the British Virgin Islands, the Cayman Islands and other jurisdictions. These structures serve legitimate commercial purposes, including regional expansion, fundraising, governance and facilitating future exits. However, an offshore holding structure does not, by itself, place the disposal of the underlying Vietnamese investment outside Vietnam’s tax system.
Alitium’s new guide, Offshore Deals: Creating Transaction Complications and Vietnam Tax Liabilities, explains how Vietnam’s indirect transfer rules apply, the impact of the recent corporate income tax reforms, and the practical steps that sellers, buyers and Vietnamese subsidiaries should take before completing an offshore transaction.
Vietnam’s approach to indirect transfers
An indirect transfer can arise where the legal interest being sold is located outside Vietnam, but the transaction changes the direct or indirect ownership of a Vietnamese enterprise, project or investment.
For example, an investor may sell shares in a Singapore holding company that owns a Vietnamese manufacturing, technology, distribution, logistics or property business. Although the Singapore shares are the immediate legal asset being transferred, part of the value paid by the buyer may be attributable to the Vietnamese operations and assets beneath that holding company.
The tax analysis therefore cannot stop at the location of the share register, the governing law of the agreement or the place where the sale proceeds are received. It must consider what economic interests have changed hands, the Vietnamese assets or businesses within the ownership chain, and what proportion of the overall consideration is attributable to Vietnam.
Importantly, these rules are not limited to property companies. An ordinary operating business may derive its value from customers, contracts, employees, licences, intellectual property, goodwill or production capacity. Real-estate-rich structures, including warehouse, hotel, industrial park, renewable energy and serviced apartment businesses, can create additional classification issues because Vietnamese law contains separate provisions for transfers involving real estate, investment projects and certain project rights.
The move to tax on gross sale proceeds
Vietnam’s Law on Corporate Income Tax No. 67/2025/QH15 took effect on 1 October 2025. This was followed by Decree No. 320/2025/ND-CP, effective from 15 December 2025, and further implementing guidance issued during 2026.
The most significant change for foreign corporate sellers is the movement from a gain-based calculation to a deemed tax based on gross sale proceeds.
Before 15 December 2025, a foreign enterprise disposing of capital in a non-public Vietnamese company was generally subject to corporate income tax at 20% of its supported taxable gain. The acquisition cost and qualifying transfer expenses could ordinarily be deducted when determining that gain.
Under the current general regime, foreign enterprises undertaking direct or indirect capital transfers are subject to Vietnamese corporate income tax at 2% of gross sale proceeds. The tax may apply regardless of whether the foreign seller has a permanent establishment in Vietnam and even where the transaction produces no accounting or economic profit.
A 2% rate may appear modest, but its application to gross consideration can produce a severe result. An investor that acquired a holding company for USD 20 million and later sold it for USD 18 million has suffered a commercial loss. Nevertheless, tax may still arise by reference to the relevant gross sale proceeds.
The position can become more complicated where the consideration includes earn-outs, deferred payments, completion adjustments, debt settlements, rollover equity or non-cash consideration. Where an offshore group owns businesses in several jurisdictions, a supportable allocation of the transaction price to Vietnam may also be required.
Restructurings and treaty relief
Decree 320 and Circular No. 20/2026/TT-BTC provide a potential exemption for qualifying internal group restructurings where ultimate ownership does not change and no income is generated. However, the exemption is conditional. Groups should retain clear evidence of the restructuring purpose, pre- and post-transaction ownership, valuation or accounting support, corporate approvals and the absence of income.
A double taxation agreement may also restrict Vietnam’s taxing rights, but treaty relief is not automatic. The result depends on the wording of the relevant treaty, the seller’s tax residence and entitlement, the nature of the assets, and the application of provisions relating to immovable property, permanent establishments, participation thresholds and the Multilateral Instrument.
Incorporation in a treaty jurisdiction is not sufficient. The seller should be able to demonstrate tax residence, beneficial entitlement, commercial substance and compliance with Vietnam’s treaty-relief procedures.
Who must declare and pay?
Although the foreign seller is the party deriving the income, another party may carry the practical declaration and payment obligation.
Where the purchaser is Vietnamese, the purchaser will generally be responsible for withholding, declaring and paying the tax on behalf of the foreign seller. Where both seller and purchaser are foreign, the relevant Vietnamese enterprise in which the investment is held may be required to declare and pay the tax.
This can leave a Vietnamese subsidiary responsible for a transaction to which it was not a party, from which it received no proceeds, and for which it may not have access to the SPA or the information needed to prepare the return.
Circular No. 21/2026/TT-BTC introduced the revised Form 05/TNDN for foreign enterprise capital transfers. The filing deadline is generally no later than the tenth day after the tax obligation arises. Because Circular 20 links revenue recognition to the date on which the initial transfer contract becomes effective, the compliance period may begin before completion, payment or any update to Vietnam’s corporate records.
Planning before the SPA becomes effective
Vietnamese indirect-transfer tax should be addressed before signing. The parties should map the complete ownership chain, identify the Vietnamese companies and assets involved, classify the transaction, assess treaty eligibility, document the allocation of consideration, determine who must file, and coordinate the SPA’s signing, effectiveness and completion provisions with the Vietnamese filing timetable.
The SPA should also deal expressly with tax responsibility, access to information, translations, treaty documents, withholding rights, escrow or retention arrangements, filing control and transaction-specific indemnities.
Download Alitium’s full guide, Offshore Deals: Creating Transaction Complications and Vietnam Tax Liabilities, for a detailed examination of the legislation, filing requirements, treaty considerations, buyer due diligence, common transaction mistakes and practical measures for managing Vietnamese tax exposure.
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For tailored advice on market entry, structuring, compliance or expansion strategy, please contact our Vietnam team at: vietnam@alitium.com
This guide is intended to provide an overview of recent updates and announcements. While it aims to present useful insights, it is important to note that the content shared here should not be considered as formal legal, tax or financial advice. For specific guidance on tax obligations or legal matters related to your business, we strongly recommend consulting with a qualified professional, such as a tax advisor or legal expert, or directly reach out to us.
