Question:
We are a foreign company holding capital in a limited liability company (LLC) in Vietnam and are planning to transfer our contributed capital to another organization. However, we would like to clearly understand whether, in this case, the obligation to declare and pay taxes falls on the buyer or the seller. What are the specific regulations on tax declaration procedures to ensure a smooth transaction and avoid unnecessary legal risks?
Answer:
At your request, we provide the following information regarding tax declaration obligations in cases where a foreign organization transfers capital in an LLC in Vietnam to another organization:
1. Tax Declaration Method
Under Vietnamese law, one type of taxable income is income from capital transfer transactions, including the transfer of capital contribution rights. Therefore, corporate income tax (CIT) declaration for such transactions must be conducted on a per-occurrence basis, as stipulated in Point o, Clause 4, Article 8 of Decree 126/2020/ND-CP.
2. Responsible Party for Tax Declaration
In cases where a foreign entity transfers capital to another foreign entity, and neither party operates under the Law on Investment 2020 and the Law on Enterprises 2020, the Vietnamese company in which the foreign entity holds capital is responsible for declaring, withholding, and remitting CIT on behalf of the foreign investor. This is in accordance with Point c, Clause 2, Article 14 of Circular 78/2014/TT-BTC.
Therefore, in your case, since both the buyer and the seller are foreign organizations, the responsibility for tax declaration may lie with the Vietnamese company in which you have invested.
3. Tax Declaration Documents
Once the taxable income is determined, the Vietnamese company where you hold capital must prepare a tax declaration dossier in accordance with Section 7.3 of the Appendix issued with Decree 126/2020/ND-CP, which includes:
- Corporate Income Tax declaration for capital transfer income (Form 05/TNDN – issued under Circular 80/2021/TT-BTC);
- A copy of the capital transfer agreement;
- A copy of the capital contribution certificate;
- Original documents of related expenses (if any).
4. Tax Declaration Deadline and Submission Location
Deadline for submission:
According to Clause 3, Article 44 of the Law on Tax Administration 2019, tax declaration documents for taxes declared on a per-occurrence basis must be submitted no later than the 10th day from the date the tax obligation arises.
Submission location:
As per Clause 6, Article 11 of Decree 126/2020/ND-CP, the tax declaration dossier for corporate income tax on capital transfer transactions by a foreign investor must be submitted to the tax authority directly managing the Vietnamese company where the foreign organization is investing
