The method of calculating the share transfer tax for individuals is one of the core legal concepts that any shareholder must firmly grasp before executing a transaction to transfer ownership rights in a joint-stock company. Correctly understanding and accurately applying the calculation procedure not only helps individuals proactively control their financial obligations but also maximizes the prevention of severe legal risks. In practice, numerous cases of misunderstanding the nature of cash flows or delayed declaration have resulted in heavy administrative penalties and arrears of late payment interest by the Tax Authority. Therefore, strict compliance with prevailing regulations is the safest solution to protect the legitimate rights and interests of both the transferor and the transferee.
When are individuals required to pay the share transfer tax?
An individual becomes liable for tax the moment a share transfer is officially finalized, reflecting a change in company ownership. To ensure transparent tax management, current regulations clearly outline the specific scope of application for different types of enterprises:
- Time of Tax Liability: The share transfer tax is calculated based on the actual time of transferring share ownership as stipulated in the transfer contract, regardless of whether the transferor has received full payment or no payment at all from the counterpart.
- Distinguishing between a Joint Stock Company (JSC) and a Limited Liability Company (LLC): Under the provisions of the Personal Income Tax (PIT) Law, capital transfer activities in a joint stock company (including both public and non-public companies) are uniformly classified and managed under the category of “securities transfers”. This is completely different from the “transfer of capital contributions” in a limited liability company, where tax liability only arises when the transaction generates a profit (the transfer price is higher than the cost price).
The essence of the regulation applying a fixed tax rate of 0.1% on the share transfer price is a strict control mechanism by the State. This mechanism is established to completely restrict situations where parties intentionally declare fictitious losses, undervalue transactions, or collude to falsify sales documents for tax evasion purposes, thereby causing revenue loss for the national budget.
The Most Updated Calculation Method for Tax on Share Transfers
Point b, Clause 4, Article 2 of Circular 111/2013/TT-BTC (amended by Article 4 of Circular 25/2018/TT-BTC) stipulates the incomes subject to Personal Income Tax (PIT) as follows:
“4. Income from capital transfers
Income from capital transfers is the personal income received, which includes:
…
b. Income from securities transfers, including: income from the transfer of shares, share purchase rights, bonds, treasury bills, fund certificates, and other types of securities as prescribed in Clause 1, Article 6 of the Law on Securities. Income from the transfer of shares by individuals in joint-stock companies in accordance with Clause 2, Article 6 of the Law on Securities and Article 120 of the Law on Enterprises.”
Furthermore, pursuant to Point b, Clause 2, Article 11 of Circular No. 111/2013/TT-BTC, which was amended and supplemented by Article 16 of Circular No. 92/2015/TT-BTC, personal income derived from securities transfers is subject to personal income tax at a flat rate of 0.1% based on the transfer value per transaction.
In accordance with this provision, the personal income tax liability for share transfers is calculated on the gross transfer value per transaction, irrespective of any capital gain or loss resulting from the variance between the sale and purchase prices.
f that transaction.
For example:
Assume Mr. A owns 10,000 shares of Joint Stock Company X (par value of VND 10,000 per share, equivalent to a cost basis of VND 100,000,000). Due to cash flow requirements, Mr. A decides to transfer his entire shareholding to Ms. B.
- Scenario 1 (Transfer at a profit): Mr. A sells at a price of VND 15,000 per share. The total transfer price is VND 150,000,000.
==> Personal Income Tax payable = 150,000,000 x 0.1% = 150,000 VND
- Due to difficult market conditions, Mr. A accepts a loss-cutting sale at a price of 8,000 VND/share. The total transfer price is 80,000,000 VND. Despite incurring a loss of 20,000,000 VND compared to the initial cost basis, Mr. A is still required to fulfill his tax obligation:–
==> Personal Income Tax payable = 80,000,000 x 0.1% = 80,000 VND
Deadline for filing tax returns for share transfers.
Accurately determining the filing deadline is crucial to the legality of the transaction and helps individuals avoid unnecessary late payment penalties from the tax authorities. According to current tax administration regulations, the timeline for filing and paying personal income tax on share transfer activities is specifically categorized based on the transaction method as follows:
- Case of self-declaration by individuals: The deadline for filing tax returns is no later than the 10th (tenth) day from the effective date of the share transfer contract.
- Case of tax declaration and payment on behalf by the enterprise: If a joint-stock company performs procedures to update its shareholder list without documents proving that the transferring individual has fulfilled their tax obligations, the enterprise is responsible for declaring and paying tax on behalf of that individual. The filing deadline is no later than the time of performing procedures to change shareholder information in the Shareholder Register or the management system of the Business Registration authority.
Deadline for tax payment: The last day of the tax filing deadline is also the deadline for completing the payment of tax into the State Budget.
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Vina TPT’s Share Transfer Tax Consulting and Declaration Services
With extensive experience supporting various enterprises in capital transfer transactions, Vina TPT provides comprehensive tax consulting and declaration services. We assist clients from determining tax obligations to completing filing procedures in accordance with current regulations. Our team of experts ensures that the transfer process is executed smoothly, saving time while ensuring full compliance with prevailing legal requirements.
- Ensuring legal compliance: Reviewing the legality of contracts and supporting documents, and committing to legally optimizing the tax payable.
- Time and cost efficiency: On behalf of our clients, we complete the entire system of tax declarations, file documents directly, and liaise with the competent tax authorities, thereby minimizing the need for travel.
- Mitigating administrative penalties: Closely monitoring transaction timelines to ensure timely filing, thereby maximizing the protection of investors’ capital.
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Conclusion
In summary, when executing a share transfer, individuals must remember the 0.1% tax rate applied to the transfer value (regardless of whether the transaction is profitable or results in a loss). The second key point is the tax filing deadline: tax returns must be submitted to the Tax Authority within 10 days from the effective date of the share transfer contract (or the date the change of ownership is completed in the shareholder register) to avoid late filing penalties. Proactively mastering these milestones and calculation rules is the key to ensuring that both individuals and enterprises operate safely, transparently, and sustainably.
