Executive summary

On 12 March 2026, the Ministry of Finance issued Circular No. 20/2026/TT BTC (Circular 20), providing detailed guidance on the implementation of certain articles of Law No. 67/2025/QH15 on Corporate Income Tax (the CIT Law 2025), effective from 1 October 2025, and Decree No. 320/2025/ND CP dated 15 December 2025 (Decree 320), effective from 15 December 2025. Among other changes, the new regulations introduce a new approach to tax income from capital transfers and tax exemption for intra-group restructuring transactions.

Prior to 15 December 2025, foreign enterprises deriving capital gains from the transfer of capital in non-public companies were subject to a 20% tax on taxable net gains, calculated as the selling price minus the cost basis of the transferred equity and any related transfer expenses. This applies to both direct and indirect capital transfers.

Under the CIT Law 2025, Decree 320 and the relevant implementing guidance, with effect from 15 December 2025, income derived by a foreign enterprise (with or without a permanent establishment in Vietnam) from the transfer of capital in a Vietnamese company is subject to CIT on a deemed basis. The tax is calculated at a rate of 2% of the gross sale proceeds, regardless of whether the transaction results in a gain or a loss (hereinafter referred to as capital gains tax or CGT).

Decree 320 introduces an exemption for intra-group ownership restructuring transactions that do not result in a change of the ultimate parent company of the parties involved, who directly or indirectly own a Vietnamese company after the restructuring and do not generate income from the transactions.

Details of key changes outlined in the Circular 20 follow.

Capital gain tax declaration method

Circular 20 reaffirms that, from 15 December 2025 (the effective date of Decree 320), foreign enterprises carrying out direct or indirect capital transfers are subject to CIT on a deemed basis at a rate of 2% of the gross sale proceeds.

The Ministry of Finance issued the form for declaring nonresident capital gains tax events (i.e., Form No. 05/TNDN) was introduced under Circular No. 21/2026/TT-BTC on 17 March 2026.

Timing of revenue recognition for capital transfer by foreign enterprises

Circular 20 stipulates that, for capital transfer transactions, the taxable revenue for CGT purposes is recognized at the time when the initial capital transfer contract becomes effective in accordance with regulations. The circular does not elaborate on how the effective date of such a contract should be determined. According to Article 401 of the Civil Code, a lawfully concluded contract takes effect from the time it is concluded, unless otherwise agreed by the parties or otherwise provided by relevant laws.

CGT exemption for group internal restructuring transactions

Article 7, Clause 2, Point m. of Circular 20 codifies the CGT exemption applicable to intra-group ownership restructuring if there is no change in the ultimate parent entity (UPE) of the entities holding direct or indirect ownership in the Vietnamese enterprise, and no income arises from the transaction, including in the following cases:

• Company division or separation
• Company consolidation
• Company merger
• Share swap
• Capital contribution in the form of shares
• Distribution of profits or dividends in the form of shares within the group
• Other transactions involving the direct or indirect transfers of ownership in the Vietnamese enterprise

To qualify for the tax exemption, the above transactions must meet these four conditions:

1. No change is made to the ultimate beneficial owner (UBO).
2. The transfer value must not exceed the book value or the original contributed capital amount.
3. No value discrepancy is created; the value stated in the restructuring dossier approved by the relevant authorities must not exceed the value recorded at the time of transfer.
4. The transferee must inherit the entire capital value, obligations and rights associated with the transferor's investment.

However, the regulatory language remains high-level and leaves several important concepts undefined, including with regard to:

Condition (1) - No change in the ultimate beneficial owner

Circular 20 does not provide a definition of UBO, nor does it clarify the method or criteria for determining who the UBO is.

It is worth noting that, prior to the issuance of Circular 20, the term "beneficial owner" had been defined differently for different purposes. For instance, it is defined under the Article 17 of Decree 168/2025/ND-CP on enterprise registrations for regulatory purpose and also under Article 6 of Circular 205/2013/TT-BTC, which provides guidance on the application of tax treaties with Vietnam. Currently, it is uncertain whether either of these existing definitions could be treated as an appropriate reference point for interpreting the UBO concept under Circular 20 in the context of intra-group restructurings within multinational enterprise groups, or whether a separate definition will be required.

Condition (2) - The transfer value must not exceed book value or original contributed capital

Circular 20 does not specify whose accounting records should be used to determine the relevant book value — whether the accounting books of the seller or the target should be used. If the target's records are to be used, in the case of an indirect transfer of a Vietnamese entity, Circular 20 does not state whether the book value should be taken from the records of the entity directly being transferred or the Vietnamese company.

Condition (3) - No value discrepancy is created; the value stated in the approved restructuring dossier by the relevant authorities must not exceed the value recorded at the time of transfer

Further monitoring is needed to determine whether this condition is relevant to any internal restructuring transactions or only to those that require approval from Vietnamese authorities, which is typically required for direct capital transfer transactions falling into the legally specified cases.

Implications

The absence of detailed definitions and implementing guidance makes the four conditions challenging to interpret and apply consistently in practice. As a result, taxpayers may face difficulties in establishing a robust and defensible position to demonstrate compliance. In light of these uncertainties, businesses should remain mindful of the potential interpretational risks, closely monitor further regulatory developments and seek professional advice before applying these rules to specific transactions.