What is the transfer price for income from capital transfer in Vietnam?

What is the transfer price for income from capital transfer in Vietnam?

According to Clause 1, Article 11 of Circular 111/2013/TT-BTC, the regulations are as follows:

Basis for taxable income from capital transfer

1. For income from transferring capital contributions

The basis for taxable income from transferring capital contributions is the taxable income and tax rate.

a) Taxable income: Taxable income from transferring capital contributions is determined by the transfer price minus the purchase price of the transferred capital and any related reasonable expenses incurred to generate income from capital transfer.

If the enterprise accounts in foreign currency, and the individual transfers shares in foreign currency, the transfer price and purchase price of the transferred shares are determined in foreign currency. If the enterprise accounts in Vietnamese dong and the individual transfers shares in foreign currency, the transfer price must be determined in Vietnamese dong according to the average exchange rate on the interbank foreign currency market announced by the State Bank of Vietnam at the time of transfer.

a.1) Transfer price

The transfer price is the amount received by the individual as per the capital transfer agreement.

If the transfer agreement does not specify a payment price or the payment price in the agreement is not consistent with the market price, the tax authority has the right to determine the transfer price according to the law on tax management.

a.2) Purchase price

The purchase price of the transferred capital is the value of the contributed capital at the time of capital transfer.

The value of the contributed capital at the time of transfer includes: the value of the initial capital contribution to establish the enterprise, the value of additional capital contributions, the value of capital repurchased, and the value of capital from recorded profit increases. Specifically, as follows:

a.2.1) For the initial capital contribution to establish the enterprise, it is the value at the time of capital contribution. The capital contribution value is determined based on accounting records, invoices, and evidence.

a.2.2) For additional capital contributions, it is the value at the time of the additional capital contribution. The additional capital contribution value is determined based on accounting records, invoices, and evidence.

a.2.3) For repurchased capital, it is the value at the time of repurchase. The purchase price is determined based on the capital repurchase agreement. If the capital repurchase agreement does not specify a payment price or the payment price is not consistent with the market price, the tax authority has the right to determine the purchase price according to the laws on tax management.

a.2.4) For capital from recorded profit increases, it is the value of the profit recorded as an increase in capital.

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Thus, the transfer price for income from capital transfer is the amount received by the individual as per the capital transfer agreement.

What is the transfer price for income from capital transfer in Vietnam? (Image from the Internet)

Is income from capital transfer subject to personal income tax in Vietnam?

According to Clause 4, Article 3 of Decree 65/2013/ND-CP, the regulations are as follows:

Taxable income

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4. Income from capital transfer, including:

a) Income from transferring shares in economic organizations;

b) Income from transferring securities;

c) Income from transferring capital in other forms.

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Thus, income from capital transfer is one of the incomes subject to PIT.

How to declare personal income tax for income from capital transfer in Vietnam?

According to Clause 4, Article 26 of Circular 111/2013/TT-BTC, the declaration of personal income tax for income from capital transfer (excluding securities transfer) is as follows:

- Resident individuals transferring capital contributions must declare tax for each transfer regardless of whether income arises.

- Non-resident individuals with income from transferring capital contributions in Vietnam do not declare tax directly with the tax authority, but the organization or individual receiving the transfer performs tax deduction as guided in point e, clause 1, Article 25 of Circular 111/2013/TT-BTC and declares tax each time it arises.

- Enterprises processing changes in the list of contributing members in case of capital transfer without proof that the transferring individual has fulfilled tax obligations, must declare and pay tax on behalf of the individual.

In cases where the enterprise pays the tax on behalf of the individual, the enterprise prepares the tax declaration file on behalf of the individual.

The enterprise filing on behalf of the individual adds "Filed on behalf" before the phrase “Taxpayer or Legal Representative of the Taxpayer," and the filer signs, writes the full name, and places the enterprise’s seal.

On the tax calculation file, tax collection documents must accurately reflect the taxpayer as the individual transferring contributions (in case of resident individuals) or the individual receiving contributions (in case of non-resident individuals).