Buying into an existing Vietnamese company gives you immediate access to its licences, customers and team. It also means you inherit whatever sits unresolved in its books.
Background
A foreign investor may enter the Vietnamese market by contributing capital to, or acquiring shares in, an existing local company. Compared with incorporating a new entity, this route often avoids the Investment Registration Certificate and is therefore administratively lighter.
Where the target operates in a sector with market access conditions for foreign investors, or where the transaction pushes foreign ownership past a regulatory threshold, a capital contribution registration with the investment authority is still required before completion.
A point often missed during negotiation is that the seller incurs tax on income from the capital transfer. Who bears that cost should be settled in the contract rather than discovered at closing.
Common challenges
- Signing before screening. Price agreed and documents signed, only to discover that the sector caps foreign ownership below the stake purchased.
- Undiscovered tax exposure. Filing errors accumulated over several years do not disappear at closing. They become the new owner problem.
- Payment through the wrong channel. Acquisition consideration must move through the correct account type under foreign exchange rules, otherwise repatriation becomes difficult later.
- Capital transfer tax left unallocated. Contracts silent on who bears the seller tax lead to disputes, or to a transaction stalled pending tax clearance.
- Incomplete corporate records at the target. Missing resolutions, minutes or shareholder registers will hold up the change-of-registration filing.
How TrustlineAX helps
- A clear picture of what you are buying. Legal due diligence covering registered activities and foreign ownership limits, current ownership structure, sub-licences, corporate records and the completeness of the accounting system.
- Quantified tax and labour exposure. Tax due diligence identifying deductibility risks, understated liabilities, social insurance gaps and employment contract issues, with an estimate of what each could cost you.
- A transaction structure that will actually clear. Advice on the achievable stake, the transaction form and the contractual protections needed to allocate identified risk between the parties.
- Regulatory approvals obtained. Preparation and filing of the capital contribution registration where required, through to written approval.
- Corporate changes completed. Updating members, shareholders, charter capital and legal representative on the Enterprise Registration Certificate.
- Capital transfer tax handled correctly. Calculation and filing support for the transferor tax obligation within the statutory deadline.
How we work
- Preliminary screening. We confirm whether your intended stake is permitted and whether the deal requires registration.
- Due diligence. Legal and tax review of the target, delivered as a findings report ranked by materiality.
- Negotiation support. We review the deal terms that carry tax and regulatory consequences.
- Regulatory filing. We register the capital contribution with the investment authority and follow it through to approval.
- Completion. Correct payment routing, corporate change filings and settlement of transfer tax.
Frequently asked questions
Which deals require registration with the investment authority?
Capital contribution registration applies in the cases set out in the Law on Investment, typically where the target operates in a sector with market access conditions for foreign investors, or where the transaction takes foreign ownership past a regulatory threshold. It must be assessed against the specific business lines and ownership structure.
Is acquiring faster than incorporating?
Administratively it often is, since the IRC step may not apply. Once due diligence and negotiation are included, however, total elapsed time is not necessarily shorter, particularly where the target has issues to resolve.
Who pays capital transfer tax?
The obligation sits with the transferor who realises the income. The parties may agree commercially on who bears the cost, but that agreement does not change who is legally required to declare it.
Is due diligence necessary for a young company?
We recommend it even then. The typical risk in a newer target is not large unpaid tax but incomplete corporate records or misaligned registered activities, both of which can block or delay the transaction.