Capital gains tax in Vietnam–more commonly referred to by its acronym CGT–is a tax on profits earned from the sale or transfer of assets, such as securities, real estate, or capital in a business. The tax applies to both individuals and corporations, but the rates and methods of calculation vary depending on the type of asset and the entity involved.
Capital gains taxes are outlined in the Law on Personal Income Tax under Section 2, Article 23. They key details are as follows:
Capital gains tax for individuals in Vietnam
Capital gains tax for individuals in Vietnam applies in the following circumstances.
Securities
A 0.1 percent tax is levied on the gross selling price of securities for individuals. This is regardless of whether a profit or loss was made.
Example of capital gains tax on securities in Vietnam
An individual buys 1,000 shares of a publicly listed company for VND 100,000 each. After a year, they sell all 1,000 shares for VND 150,000 each.
- Purchase Price: VND 100 million (1,000 shares × VND 100,000)
- Selling Price: VND 150 million (1,000 shares × VND 150,000)
Even though the individual makes a profit of VND 50 million, the capital gains tax is calculated based on the gross selling price, not the profit.
- Tax Rate: 0.1 percent of the gross selling price
- Capital Gains Tax: VND 150,000 (0.1 percent × VND 150 million)
Real estate transactions
A 2 percent tax is applied on the total value of the real estate transaction (contract value or government valuation) when an individual sells real estate.
Example of capital gains tax on real estate in Vietnam
An individual buys a house for VND 2 billion and sells it a few years later for VND 3 billion.
- Purchase Price: VND 2 billion
- Selling Price: VND 3 billion
The capital gains tax on real estate transactions is based on the total value of the sale, not the profit.
- Tax Rate: 2 percent of the selling price
- Capital Gains Tax: VND 60 million (2 percent × VND 3 billion)
Transfer of capital
For individuals selling shares in non-public companies or transferring capital in businesses, a 20 percent tax on the net gain (the difference between the selling price and the acquisition cost) is applied.
Example of capital gains tax on capital transfers in Vietnam
An individual invests VND 500 million in a non-public company. After several years, they sell their shares for VND 1 billion.
- Purchase Price: VND 500 million
- Selling Price: VND 1 billion
- Profit: VND 500 million
In this case, the capital gains tax is calculated based on the net gain (profit).
- Tax Rate: 20 percent of the net gain
- Capital Gains Tax: VND 100 million (20 percent × VND 500 million)
Capital gains tax on dividends for individuals in Vietnam
When an individual receives dividends from a company, they are subject to a 5 percent personal income tax. This applies to both cash and stock dividends.
Example of CGT on dividends for individuals in Vietnam
An individual owns shares in a company and receives a dividend of VND 10 million.
- Dividend Received: VND 10 million
- Tax Rate: 5 percent
- Tax Payable: VND 500,000 (5 percent of VND 10 million)
After the tax is deducted, the individual would receive VND 9.5 million.
Capital gains tax for corporations in Vietnam
For corporations, capital gains are taxed as part of the corporate income, with the standard corporate income tax rate set at 20 percent. This applies to the sale of capital assets, including stocks, bonds, or real estate.
Example of capital gains tax on corporate real estate sales in Vietnam
A company buys a commercial property for VND 10 billion and sells it for VND 15 billion.
- Purchase Price: VND 10 billion
- Selling Price: VND 15 billion
- Profit: VND 5 billion
As a corporate entity, the profit from this sale is considered part of the company’s taxable income and subject to the corporate income tax rate.
- Tax Rate: 20 percent of the profit
- Capital Gains Tax: VND 1 billion (20 percent × VND 5 billion)
Capital gains tax on dividends for corporations in Vietnam
For companies receiving dividends from other companies in Vietnam, the dividends may be exempt from corporate income tax (CIT), provided certain conditions are met. Typically, this exemption applies if the receiving company holds a significant stake in the distributing company and certain legal requirements are fulfilled.
Example of CGT on dividends for corporations in Vietnam
Company A holds shares in Company B and receives VND 1 billion in dividends. If the conditions for CIT exemption are met, Company A would not be required to pay taxes on these dividends.
However, if the conditions are not met, dividends could be considered part of the company’s taxable income, and they would be taxed at the standard 20 percent corporate income tax rate.
Summary of capital gains tax in Vietnam
These are the general capital gains tax rates, but complexities in specific cases may arise. Tax policies in Vietnam may be subject to change, so it’s advisable to consult a tax professional for detailed and up-to-date guidance.
Also capital gains tax is just one of several taxes in Vietnam foreign firms should be aware of. Other important taxes in Vietnam include Vietnam’s Value-added Tax, Special Consumption Tax, Corporate Income Tax, Foreign Contractor Tax in Vietnam, and Personal Income Tax. By familiarising themselves with these taxes it may foreign firms to avoid running afoul of Vietnam’s tax department.
With this in mind, foreign firms can also keep track of changes to tax rules and regulations by making sure to subscribe to the-shiv.