Is proprietary trading in securities subject to value-added tax in Vietnam?

What is proprietary trading in securities in Vietnam?

Pursuant to Clause 30, Article 4 of the Law on Securities 2019, the regulation is as follows:

Definition of terms

In this Law, the following terms are understood as follows:

....

27. The securities trading market is a location or form of information exchange to gather buying and selling orders and conduct securities transactions.

28. Securities trading is the conduct of brokerage operations, proprietary trading in securities, underwriting the issuance of securities, securities investment consultancy, managing securities investment funds, managing securities investment portfolios, and providing securities services as regulated in Article 86 of this Law.

29. Securities brokerage is the intermediary activity of executing securities purchases and sales for clients.

30. Proprietary trading in securities is when a securities company buys and sells securities for itself.

Therefore, based on the legal regulation, proprietary trading in securities refers to when a securities company buys and sells securities for its own account.

Is proprietary trading in securities subject to value-added tax in Vietnam (VAT)?

According to point c, Clause 8, Article 4 of Circular 219/2013/TT-BTC, the objects not subject to VAT are regulated as follows:

Objects not subject to VAT

....

8. The following financial, banking, and securities trading services:

...

b) Loans that are individually provided, not regular business or supplying activities by taxpayers who are not credit institutions.

Example 5: VC Corporation has temporary idle funds not used for business activities. VC Corporation signs a loan contract with T Company for a 6-month term and receives interest. The interest received by VC Corporation falls under the category not subject to VAT.

c) Securities trading including: securities brokerage, proprietary trading in securities, underwriting the issuance of securities, securities investment consultancy, custody services, managing securities investment funds, managing securities investment companies, managing securities investment portfolios, organizing market services by the stock exchange or securities trading center, services related to registered and deposited securities at the Vietnam Securities Depository, lending money to customers for margin trading, advancing money for selling securities, and other securities trading activities as regulated by Law on Securities.

Activities providing information, organizing share auctions for issuing organizations, supporting technical services for online securities transactions of the Stock Exchange.

Therefore, according to the aforementioned regulation, proprietary trading in securities is not subject to value-added tax.

Is proprietary trading in securities subject to value-added tax in Vietnam? (Image from the Internet)

Is securities company that buys securities from or sells securities to itself considered proprietary trading in securities in Vietnam?

According to Clause 3, Article 22 of Circular 121/2020/TT-BTC, the regulation on proprietary trading in securities is as follows:

Proprietary trading operations

3. The following cases are not considered proprietary trading in securities:

a) Buying or selling securities to correct errors after transactions;

b) Buying and selling one's own shares.

4. A securities company must prioritize executing customer orders before executing its own orders.

5. A securities company must disclose to customers when it acts as a counterparty in trading agreements with customers.

6. In cases where customer orders to buy or sell securities may significantly affect the price of those securities, the securities company is not allowed to buy or sell the same type of securities for itself beforehand or disclose this information to third parties.

Therefore, according to the aforementioned regulation, buying and selling one's own shares is not considered proprietary trading in securities.

What are regulations on proprietary trading in securities in Vietnam?

According to Article 22 of Circular 121/2020/TT-BTC, the regulation on proprietary trading in securities is as follows:

- A securities company must ensure it has sufficient funds and securities to settle its own account's trading orders.

- The proprietary trading operations of a securities company must be conducted in its own name, not under someone else’s name or using an individual's name, nor allowing others to use the proprietary trading account.

- The following cases are not considered proprietary trading in securities:

+ Buying or selling securities to correct errors after transactions;

+ Buying and selling one's own shares.

- A securities company must prioritize executing client orders before executing its own orders.

- The securities company must inform clients when it is the counterparty in trading negotiations with them.

- In cases where customer orders to buy or sell securities may have a significant impact on the price of those securities, the securities company is not allowed to purchase or sell the same type of securities for itself beforehand or disclose this information to third parties.

- When clients place limit orders, the securities company is not allowed to buy or sell the same kind of securities for itself at a price equal to or better than the client's price before the client's order is executed.