Introduction
Are you planning to transfer capital to foreign investors in Vietnam but unsure whether your business line has foreign ownership limits? Does your company need prior approval before completing a share transfer? Will you be required to adjust the Investment Registration Certificate before updating the Enterprise Registration Certificate?
Many enterprises encounter difficulties when conducting a share transfer to foreign investors in Vietnam, particularly in conditional sectors or when foreign ownership exceeds 50%.
In this article, Green NRJ will present the legal conditions, procedures, required documents, and tax obligations related to capital transfer to foreign investors in Vietnam, helping businesses implement the process accurately and efficiently under current regulations.
Conditions for Transfer of Capital to Foreign Investors
When carrying out a transfer of capital to foreign investors in Vietnam, enterprises cannot simply rely on internal shareholder agreements. Instead, the transaction must comply strictly with the Law on Investment 2020 and the Law on Enterprises 2020, particularly with respect to foreign ownership limits and sector-specific investment conditions.
In practice, before transferring shares to foreign investors in Vietnam, a business must first determine whether its industry is subject to foreign investment conditions and whether the transaction will alter the foreign ownership ratio in a way that changes the company’s legal status. These two elements are decisive in determining whether prior approval from the competent authority is required.
Transfer of Capital in Vietnamese Enterprises (100% Domestic Capital)
For a Vietnamese enterprise that is entirely domestically owned, the transfer procedure depends largely on the ownership ratio after the foreign investor acquires capital. If the company operates in a business sector that is not conditional for foreign investors and the foreign ownership ratio remains below 50% after the transaction, the procedure is relatively straightforward. In this case, the enterprise is only required to amend its Enterprise Registration Certificate (ERC) to record the new shareholder or member. The transaction does not trigger a change in investment status, and no prior approval for capital contribution registration is necessary.
However, the legal landscape changes significantly if the enterprise operates in a conditional business sector or if the foreign investor’s ownership reaches or exceeds 50% of the charter capital. In such circumstances, the capital transfer is deemed to have a substantial impact on the company’s investment structure. The enterprise must first complete the registration procedure for capital contribution or share purchase with the competent authority (currently the Department of Finance). Only after obtaining written approval may the company proceed to amend its Enterprise Registration Certificate to formalize the change in ownership.
This requirement ensures that the transaction complies with Vietnam’s foreign investment regulations and respects foreign ownership caps applicable to specific industries.
Transfer of Capital in Enterprises with Foreign Elements (Foreign-Invested Enterprises – FIE)
The regulatory requirements become more complex when the company already has foreign elements. In practice, an enterprise may be considered to have foreign elements not only when it has foreign shareholders or holds an Investment Registration Certificate (IRC), but also when it contains other foreign-related factors in its structure, such as a foreign individual acting as the legal representative or holding key managerial positions. Although the presence of a foreign legal representative alone does not automatically classify the company as a foreign-invested enterprise under the Law on Investment, it is still a foreign factor that authorities may take into account when reviewing a transfer of capital to foreign investors in Vietnam.
In these cases, the transfer of capital to another foreign investor requires a more comprehensive legal review. The enterprise must assess not only domestic foreign ownership limits but also Vietnam’s commitments under WTO agreements and other international treaties. Certain sectors impose strict foreign ownership caps or require a minimum level of Vietnamese participation. For instance, freight transportation services may limit foreign ownership to 49%, while some tourism-related activities require a specific Vietnamese capital ratio to be maintained.
Where a capital transfer results in a change of foreign investor in a company holding an Investment Registration Certificate, the procedure involves two mandatory steps. First, the enterprise must adjust its Investment Registration Certificate to reflect the new investor and updated ownership structure. This step confirms that the investment project continues to comply with applicable conditions. Only after completing the IRC adjustment may the enterprise amend its Enterprise Registration Certificate to update shareholder or member information.
This sequential process is essential to ensure that the transfer of capital to foreign investors in Vietnam remains legally valid and fully compliant with the country’s investment management framework.
By carefully evaluating industry restrictions, foreign ownership thresholds, and investment status implications before proceeding, businesses can significantly reduce regulatory risks and ensure a smooth and lawful capital restructuring process.
Detailed Procedure to Transfer Capital to Foreign Investors in Vietnam
The capital contribution procedure in Vietnam varies depending on whether the enterprise is a 100% Vietnamese-owned company or an enterprise that already has foreign elements. Understanding the correct sequence of procedures is essential to ensure the legality of a transfer of capital to foreign investors in Vietnam.
Vietnamese Enterprises
| Procedure Step | Description & Required Documents |
|---|
| Step 1 Registration of Capital Contribution / Share Purchase | – Written registration for capital contribution/share purchase (standard template); – Notarized copy of ID/Passport (for individual investors); – Copy of Certificate of Incorporation or equivalent legal documents (for organizational investors). |
| Step 2 Amendment of Enterprise Registration Certificate (ERC) | – Notice of changes to enterprise registration information; – Decision of the Owner/Chairman of Members’ Council/Chairman of Board of Directors; – Minutes of Members’ Council or Board of Directors meeting. |
Important Notes
If the investor is an organization, the Certificate of Incorporation may be replaced by other legal documents proving its legal status.
Depending on the company type, additional documents (1–2 items) may be required.
If the capital transfer changes the number of members, the company must conduct procedures to convert its business type. In such case, additional documents include:
Company Charter;
Application for enterprise registration;
Notice of changes to enterprise registration information;
Minutes and Decision of the competent authority.
If the transferred ownership ratio is below 51% and the business line is not conditional for foreign investors, only Step 2 is required.
Enterprises with Foreign Elements
| Procedure Step | Description & Required Documents |
|---|
| Step 1 Amendment of Investment Registration Certificate (IRC) | – Application for adjustment of investment project; – Explanation of compliance with trading conditions (if applicable); – Bank confirmation of account balance ≥ registered investment capital; – Notarized passport/ID (individual investor); – Consular legalized Business Registration Certificate (foreign organization); – Financial statements for the last two years (foreign organization); – Authorization letter for capital representative (foreign organization). |
| Step 2 Amendment of Enterprise Registration Certificate (ERC) | Procedures and required documents are similar to those applicable to Vietnamese enterprises. |
Place of Submission: After preparing the complete set of documents for capital contribution, share purchase, investment adjustment, or amendment of enterprise registration, the dossier must be submitted at the Business Registration Office of the Department of Finance where the company is located.
Processing Time: Under current procedures, the registration authority typically issues the updated Enterprise Registration Certificate within approximately 25–30 working days from the date of submission, provided that the submitted documents are complete and valid.
Tax Obligations When Transferring Capital to Foreign Investors
In principle, when a Vietnamese individual transfers capital or shares, Personal Income Tax (PIT) obligations will arise. The transferor is required to submit a tax declaration to the competent tax authority within 10 days from the effective date of the transfer. Failure to comply with the declaration and payment requirements may result in administrative penalties and late payment interest in accordance with Vietnamese tax regulations.
For share transfers in a Joint Stock Company (JSC), PIT is calculated at a fixed rate of 0.1% of the total transfer value. This tax is imposed on the gross transfer price, regardless of whether the transaction generates a profit or a loss. Both tax declaration and payment must be completed within the statutory deadline.
In contrast, for capital transfers in a Limited Liability Company (LLC), PIT is calculated based on taxable income rather than total transfer value. Taxable income is determined by deducting the original purchase price and related expenses from the transfer price. The applicable PIT rate is 20% of the taxable income. Similar to JSC transfers, the declaration must be submitted within 10 days from the date the transfer becomes effective.
Given the strict timelines and different tax calculation methods depending on the company type, careful compliance is essential to avoid penalties and additional financial liabilities.
Conclusion
Transfer capital to foreign investors in Vietnam requires strict compliance with ownership limits, investment conditions, licensing procedures, and tax obligations under Vietnamese law. From capital registration and IRC adjustment to ERC amendment and tax declaration, each step must be carefully implemented to ensure legal certainty and avoid unnecessary risks. In this article, Green NRJ has outlined the key regulatory considerations and procedural requirements to help businesses navigate the process efficiently. If you are planning a capital transfer to foreign investors in Vietnam, contact Green NRJ for professional guidance and end-to-end legal support to ensure a smooth, compliant, and secure transaction.
