DECREE NO. 320/2025/NĐ-CP: MAJOR CHANGES TO CAPITAL TRANSFER TAX AND TAX EXEMPTION MECHANISM FOR GROUP RESTRUCTURING

The Government of Vietnam has officially issued Decree No. 320/2025/NĐ-CP (hereinafter referred to as Decree 320) on 15 December 2025, which takes effect immediately from the signing date. This Decree introduces fundamental changes to Corporate Income Tax (CIT) applicable to capital transfer activities (both direct and indirect) conducted by foreign investors.

Below is a summary of the key changes and Baker Tilly A&C’s analysis for enterprises’ consideration:

1. The “2% rule” – A fundamental change in the method of calculating capital transfer tax

This is the most significant change, directly impacting the financial obligations of M&A transactions involving foreign investors.

• Previous regulation:
  CIT was calculated at 20% of taxable income (transfer price minus cost base minus transfer-related expenses).
• New regulation (pursuant to Clause 3, Article 12 of Decree 320):
  CIT payable by foreign investors is calculated at 2% of taxable revenue, i.e. the total transfer value

Impact:
Shifting from profit-based taxation to revenue-based taxation simplifies administrative procedures and reduces disputes related to determining the cost base. However, it also requires investors to reassess their cash flow planning, as tax liabilities may arise even in loss-making or low-margin transactions.

2. “Unlocking” tax barriers for internal group restructuring

A notable positive development introduced by the Decree is the tax exemption mechanism for internal group restructuring. Specifically, capital transfer transactions may be exempt from tax (subject to a 0% tax rate or no tax declaration requirement) if both of the following conditions are strictly met:

• Continuity of ownership: The restructuring transaction does not result in a change of the ultimate parent company of the parties involved.
• No income generated: The restructuring transaction itself does not generate actual income or profit.

3. Time for tax determination

As a general principle, taxable income from capital transfers is determined at the time ownership of the capital is transferred. Accordingly, enterprises currently negotiating or finalizing transactions should promptly review the transaction completion date as the basis for determining the applicable tax obligations.

BAKER TILLY A&C’S COMMENTS AND RECOMMENDATIONS

In light of the immediate effectiveness of Decree 320, we recommend that our clients:

• Review ongoing transactions:
  For transactions signed or completed around 15 December 2025, enterprises should clearly determine the timing of capital ownership transfer to apply the appropriate tax regime (20% on profit or 2% on revenue).
• Reassess M&A tax costs:
  With the application of a 2% tax on total transfer value, high-value transactions should carefully estimate tax liabilities to avoid unexpected impacts on the final transfer price.
• Prepare documentation for restructuring tax exemption:
  Enterprises planning internal restructuring should proactively prepare documentation evidencing the ultimate parent company and no income generated, in order to qualify for the tax exemption.
• Continue monitoring further guidance issued by the competent authorities.

For further advice on the impact of Decree No. 320/2025/NĐ-CP on your specific circumstances, please feel free to contact Baker Tilly A&C.

Contact information

Mr. Nguyen Bao Anh - Deputy General Director in charge of Tax, Transfer Pricing & Outsourcing Services

Email: anh.nb@a-c.com.vn