Tax Policy on Capital Contribution Transfer in Foreign-Invested Enterprises

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On June 5, 2024, the General Department of Taxation issued Official Letter No. 2375/TCT-CS regarding tax policies on the transfer of capital contributions in foreign-invested enterprises.

The General Department of Taxation provided the following opinions on this matter:

According to the records, HPI Investment and Development Co., Ltd. (a Vietnamese enterprise) and Charm Cheer Industry Co., Ltd. (a foreign entity residing in Taiwan) are the two investors who contributed capital to establish Binh An Energy Company with capital contribution ratios of 30% and 70%, respectively. In 2015, Charm Cheer Industry Co., Ltd. transferred 19% of its capital contribution to HPI Investment and Development Co., Ltd.

On March 8, 2024, the Hai Phong Tax Department issued Official Letter No. 710/CTHPH-TTKT1 in response to HPI Investment and Development Co., Ltd. regarding tax policy.

Pursuant to Clause 2, Article 2 of Circular No. 78/2014/TT-BTC dated June 18, 2014, by the Ministry of Finance, foreign entities engaging in capital transfer activities must pay corporate income tax (CIT) according to the guidance in Article 14 of Circular No. 78/2014/TT-BTC (amended and supplemented by Article 8 of Circular No. 96/2015/TT-BTC dated June 22, 2015, by the Ministry of Finance), which regulates income from capital transfers. The declaration of CIT for capital transfer activities is regulated in Article 16 of Circular No. 151/2014/TT-BTC dated October 10, 2014, by the Ministry of Finance. In cases where HPI Investment and Development Co.,Ltd. receives the capital transfer, it is responsible for determining, declaring, withholding, and paying on behalf of the foreign entity the CIT due from the capital transfer activity in accordance with the regulations.


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