Acquiring equity in an operating Vietnamese enterprise is the fastest pathway for international investors setting up a business in Vietnam. By purchasing shares or capital contributions, foreign acquirers bypass licensing delays and obtain immediate operational access.
However, equity transactions face statutory oversight under Law on Investment 61/2020/QH14 and Law on Enterprises 59/2020/QH14. Foreign investors must obtain M&A approval from the Department of Finance (incorporating former DPI), enforce foreign exchange controls via Direct Investment Capital Accounts (DICA), and resolve tax liabilities. Structuring an acquisition without verified compliance exposes buyers to transaction invalidation and regulatory penalties.
1. Statutory M&A Approval Criteria and Market Access Thresholds
Foreign investors contributing capital or acquiring shares in an existing Vietnamese enterprise must determine whether the transaction triggers statutory M&A approval (Thủ tục chấp thuận góp vốn, mua cổ phần, phần vốn góp).
Article 26 of Law on Investment 61/2020/QH14 and Decree 31/2021/ND-CP establish three explicit statutory triggers requiring prior approval:
| Trigger Condition | Statutory Basis | Operational Scope |
|---|---|---|
| Market Access Conditions | Law on Investment, Art 26.2(a) | Foreign ownership increases in an entity operating in conditional business sectors |
| Majority Ownership (>50%) | Law on Investment, Art 26.2(b) | Foreign holding increases from <= 50% to > 50%, or increases further when already > 50% |
| National Defense Land | Law on Investment, Art 26.2(c) | Target holds land use rights in border areas, coastal communes, islands, or defense zones |
Market Access Limitations under International Treaties
Vietnam’s schedule of commitments under WTO, EVFTA, CPTPP, and domestic negative lists dictates foreign ownership caps across sensitive industries:
- Telecommunications: Capped at 49% or 49% to 65% depending on network infrastructure services.
- Logistics and Transport: Freight forwarding allows 100% foreign equity, whereas road transport is capped at 49% or 51%.
- Retail and Trading: Wholesaling and retailing are accessible, but establishing secondary retail outlets requires the Economic Needs Test (ENT) or retail store operating licenses.
- Education and Healthcare: Permitted up to 100% subject to minimum statutory capital investment benchmarks.
2. M&A Approval Procedures and Administrative Timelines
The competent authority for M&A approval is the provincial Department of Finance (incorporating the former Department of Planning and Investment - DPI under Decree 150/2025/ND-CP) where the target maintains its head office. For enterprises in industrial or export processing zones, the Management Board of Industrial Zones (Ban Quản lý các KCN/KCX) serves as the investment registration authority.
Application Dossier Requirements
Under Article 66 of Decree 31/2021/ND-CP, the registration dossier comprises:
- Registration Notice: Form specified under Circular 25/2023/TT-BKHDT detailing buyer identity, target entity, pre- and post-acquisition capital structure.
- Corporate Documentation: Certified copy of the buyer’s Certificate of Incorporation (consularly legalized and translated into Vietnamese) or passport for individuals.
- In-Principle Agreement: Preliminary share transfer agreement or memorandum of understanding between seller and buyer.
- Target Entity Records: Certified copies of the Enterprise Registration Certificate (ERC), Investment Registration Certificate (IRC, if any), and audited financial statements.
- Land Use Rights Documentation: Certified land lease contracts and certificates of land use rights held by the target company.
Statutory Timelines: Standard vs. Defense-Sensitive Reviews
| Review Scenario | Statutory Timeline | Governing Provision | Procedural Benchmarks |
|---|---|---|---|
| Standard M&A Review | 15 working days | Article 26.2 (a & b), Law on Investment | Evaluates market access conditions and foreign equity caps |
| Defense Land Review | 10 working days | Decree 239/2025/ND-CP | Department of Finance consults Military Command and Police within 2 days; 5-day response window |
Under Decree 239/2025/ND-CP, where a target company holds land in security-sensitive zones, the review follows a compressed 10-day inter-agency schedule: the Department of Finance sends consultation requests within 02 days; security agencies have 05 days to respond (silence equals consent); and the authority issues its final determination within 10 days of receiving the complete dossier.
3. Direct Investment Capital Account (DICA) and Foreign Exchange Controls
Cross-border capital flows in M&A transactions are strictly regulated by the State Bank of Vietnam (SBV) under Circular 06/2019/TT-NHNN. Violating foreign exchange protocols prevents the legal repatriation of profits and capital divestment.
| Transaction Relationship | Payment Mechanism | Required Banking Channel | Currency Permitted |
|---|---|---|---|
| Non-Resident Buyer to Resident Seller | Must pass through DICA | Target Company’s DICA Account | Vietnamese Dong (VND) only |
| Resident Buyer to Non-Resident Seller | Must pass through DICA | Target Company’s DICA Account | Vietnamese Dong (VND) only |
| Non-Resident Buyer to Non-Resident Seller | Direct offshore settlement | Offshore commercial accounts | Foreign currency (USD, EUR, etc.) |
| Resident Buyer to Resident Seller | Domestic transfer | Standard domestic bank accounts | Vietnamese Dong (VND) only |
The DICA Enforcement Rule (Article 10, Circular 06/2019/TT-NHNN)
Where an M&A transaction occurs between a non-resident foreign investor and a resident Vietnamese party (whether corporate or individual):
- The purchase price must be transferred via the target company’s Direct Investment Capital Account (DICA) opened at an authorized commercial bank in Vietnam.
- Payment cannot be executed directly between the buyer’s and seller’s overseas accounts, nor through standard commercial current accounts.
- The receiving bank requires certified copies of the M&A approval notice, executed Share Purchase Agreement (SPA), and updated ERC before releasing payment to the seller.
Offshore Settlement Between Foreign Non-Residents
Under Article 10 Clause 1 Point a of Circular 06/2019/TT-NHNN, if both the selling shareholder and the acquiring investor are foreign non-residents:
- Payment can be executed directly outside Vietnam in foreign currency between offshore bank accounts.
- The transaction does not route through the target company’s DICA.
- However, transaction valuation must be converted and declared in VND for tax filing purposes, and proof of offshore payment must be filed during subsequent licensing updates.
4. Capital Gains Tax Regime for Corporate and Individual Sellers
Capital assignment in Vietnamese companies triggers mandatory tax declaration and settlement under Circular 78/2014/TT-BTC (amended by Circular 96/2015/TT-BTC) and Circular 87/2026/TT-BTC.
| Seller Entity Type | Target Legal Form | Statutory Tax Rate | Tax Base Calculation |
|---|---|---|---|
| Corporate Seller (Domestic or Foreign) | LLC or JSC | 20% CIT | Net Gain = Transfer Price - Purchase Price - Expenses |
| Individual Seller (Resident or Non-Resident) | LLC Capital | 20% PIT | Net Gain = Transfer Price - Purchase Price - Expenses |
| Individual Seller (Resident or Non-Resident) | JSC Shares | 0.1% PIT | Gross Transfer Price (Deemed securities transaction) |
Corporate Income Tax (CIT) on Capital Assignment
Under Article 14 of Circular 78/2014/TT-BTC:
- Corporate sellers transferring capital contributions or shares in a Vietnamese enterprise are subject to 20% CIT on net capital gains.
- Taxable income is defined as: Transfer Value minus Initial Cost Basis minus Direct Transfer Expenses.
- Transfer expenses include legal advisory fees, brokerage costs, valuation charges, and notarization fees supported by legitimate invoices.
- Deemed Price Risk: If the declared transfer price does not reflect fair market value, tax authorities hold statutory power to re-assess the transaction value under Law on Tax Administration 38/2019/QH14.
Personal Income Tax (PIT) on Equity Transfers
Under Circular 87/2026/TT-BTC (superseding Circular 111/2013/TT-BTC):
- Capital in LLC: Individual sellers pay 20% PIT on net gain.
- Shares in JSC: Individual sellers pay 0.1% PIT on gross transfer proceeds per transaction, regardless of net profit or loss.
- Filing Deadline: The tax declaration dossier must be submitted to the supervisory tax department within 10 days from the date the transfer agreement becomes legally effective.
5. Corporate Governance Updates: ERC and IRC Post-Closing Formalities
Obtaining formal M&A approval does not complete the transfer of ownership. Foreign investors must execute secondary licensing amendments to formalize equity title and governance control.
| Amendment Stage | Responsible Authority | Statutory Deadline | Key Corporate Milestone |
|---|---|---|---|
| 1. M&A Approval | Department of Finance / IZ Board | 10 to 15 working days | Formal consent to foreign equity acquisition |
| 2. Tax Settlement | Supervisory Tax Office | 10 days from SPA signing | Declaration and payment of capital gains tax |
| 3. ERC Amendment | Business Registration Office (DOF) | 03 working days | Updates members, shareholders, and legal representative |
| 4. IRC Amendment | Investment Registration Authority | 10 to 15 working days | Updates project investor identity (if applicable) |
Enterprise Registration Certificate (ERC) Amendment
Pursuant to Decree 01/2021/ND-CP:
- For LLCs: The enterprise must file a notice of change in members or company owner with the Business Registration Office (Phòng Đăng ký kinh doanh under Department of Finance) within 10 days from the transaction completion. The processing time is 03 working days.
- For JSCs: Transfers of ordinary shares in unlisted joint stock companies do not require an ERC change. However, if the transaction changes foreign shareholder registration or foreign shareholding ratios, notification under Article 31.3 of Law on Enterprises 2020 must be filed within 03 working days of the change.
Investment Registration Certificate (IRC) Amendment
Under Decree 31/2021/ND-CP, equity transfers do not automatically require an IRC amendment for existing investment projects. However, an IRC amendment is mandatory if the transaction alters:
- The registered foreign investor named on the IRC.
- The project implementation schedule, scale, or location.
- The total registered investment capital of the project.
6. Due Diligence Priorities and Contingent Liability Mitigations
In Vietnam, share and equity acquisitions operate under universal legal succession: the target enterprise retains all historical liabilities, which transfer directly to the buyer upon closing. Rigorous pre-acquisition due diligence is critical.
| Risk Category | Common Historical Exposures in Vietnam | Contractual Protection Remedy |
|---|---|---|
| Tax Liabilities | Unpaid CIT, aggressive VAT refund claims, transfer pricing gaps | Escrow account retention (10-20% for 12-24 months) |
| Social Insurance (SHUI) | Under-declaring base salary, unpaid social insurance arrears | Complete audit of VssID records and indemnity covenants |
| Sub-Licensing Lapses | Expired environmental permits, unapproved fire safety clearances | Condition precedent (CP) requiring license regularisation |
| Labor Obligations | Severance pay reserves, undocumented labor contracts | Detailed employee novation and indemnity agreements |
Critical Red Flags in Vietnamese Targets
Foreign acquirers must scrutinize four frequent operational pitfalls:
- Social Insurance Under-Declaration: Local targets often register staff at regional minimum wages while paying allowances off-ledger. Under Decree 12/2022/ND-CP, arrears incur late interest and trigger criminal liability for legal representatives.
- Transfer Pricing Non-Compliance: Related-party transactions lacking transfer pricing local files under Decree 132/2020/ND-CP expose targets to retroactive tax re-assessment spanning 10 years.
- Unlawful Land Use: Target factories operating on leased land without proper industrial zoning, land use certificates, or construction permits face operational shutdown orders from provincial authorities.
- Undisclosed Off-Balance Sheet Liabilities: Unregistered loan guarantees, informal distributor commitments, or unrecorded commercial disputes.
By combining rigorous due diligence, contractual representations and warranties (R&Ws), and escrow retentions, international acquirers protect capital investments from contingent liabilities.
Indochina Link Vietnam provides M&A transaction advisory and compliance services. Our specialists execute due diligence, handle M&A approval filings, structure DICA payments, and manage post-acquisition licensing. Contact our corporate M&A team to structure your Vietnam acquisition securely.
