Although both involve the transfer of capital in businesses, there is a certain distinction in determining the personal income tax (PIT) of individuals transferring shares in joint-stock companies and individuals transferring capital contributions in limited liability companies (including single-member limited liability companies).
In accordance with the regulations at point a, Clause 4, Article 2 of Circular 111/2013/TT-BTC as amended and supplemented by Circular 25/2018/TT-BTC, income from capital transfer includes:
+ Income from the transfer of capital contributions in limited liability companies (including single-member limited liability companies), joint-stock companies, partnership contracts, cooperatives, people's credit funds, economic organizations, and other organizations.
+ Income from the transfer of securities, including:
- Income from the transfer of stocks, stock purchase rights, bonds, debentures, fund certificates, and other types of securities as stipulated in Clause 1, Article 4 of the Securities Law 2019.
- Income from the transfer of shares by individuals in joint-stock companies as stipulated in Clause 2, Article 4 of the Securities Law 2019 and Article 121 of the Enterprise Law 2020.
Based on the aforementioned and the guidance provided in Official Letter 1505, it can be determined that:
- Transactions involving the transfer of capital contributions in limited liability companies under the Enterprise Law are identified as capital transfer transactions.
- Transactions involving the transfer of capital in joint-stock companies under the provisions of the Enterprise Law and the Securities Law are identified as securities transfer transactions.
Below are the fundamental differences in determining the tax and tax payment obligations for personal income arising from the aforementioned transactions:
|
Criteria |
Transaction of share transfer in Joint Stock Company (based on Article 16 of Circular 92/2015/TT-BTC) |
Transaction of capital transfer in Limited Liability Company (based on Article 11 of Circular 111/2013/TT-BTC) |
|
Taxable income |
Taxable income from securities transfer is determined as the transfer price of each transaction (without distinguishing whether individuals selling securities have profit or income from securities investment activities). • The transfer price of securities is determined as follows: - For securities of public companies: it is the execution price (based on matched orders or agreements) at the Stock Exchange. - For securities not falling into the above cases: it is the price stated in the transfer contract or the actual transfer price or the price according to the accounting records of the issuing company in the latest financial statements before the transfer. |
Taxable income from capital transfer is determined by the transfer price minus the purchase price of the transferred capital and reasonable expenses related to generating income from capital transfer (profit/net income from capital investment activities). • Transfer price: The transfer price is the amount that an individual receives under the capital transfer contract. In cases where the transfer contract does not specify the payment price or the payment price in the contract is not appropriate to the market price, the tax authority has the right to determine the transfer price. • Purchase price: The purchase price of the transferred capital is the value of the capital contribution at the time of capital transfer. The value of the capital contribution at the time of transfer includes: the value of the contributed capital at the establishment of the enterprise, the value of the capital contribution from additional contributions, the value of the capital contribution from repurchase, the value of the capital contribution from profit retained for capital increase. • Reasonable expenses (if any): are reasonable expenses that the individual has incurred to serve the capital transfer transaction, such as expenses for implementing transfer procedures as prescribed by the enterprise, expenses paid to brokers/arrangers… |
|
Tax |
0.1% of taxable income (stock transfer price each time). |
20% of taxable income (profit earned from capital investment activities). |
|
Frequency of tax liability arising |
Tax liability arises for all securities transfer transactions |
The tax payment obligation only arises when the individual has profits/gains from capital transfer transactions. |
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