Capital transfer tax is an important tax applied to income arising from the transfer of capital contributions and shares in enterprises. In 2025, the determination of taxable income, declaration, accounting and tax payment will be increasingly tightened, especially in the context of capital contribution and business sale and purchase transactions becoming more and more popular. The following article will help you understand what capital transfer tax is, how to declare and account for personal income tax from capital transfers, and specific regulations for LLCs and joint stock companies.
What is capital transfer tax?
Capital transfer tax is a type of personal income tax (PIT) applied when an individual has income from transferring capital contributions in a limited liability company or shares in an unlisted joint stock company. This income is considered a type of taxable income according to the provisions of Article 10 of Circular 111/2013/TT-BTC guiding the Law on PIT.
It is necessary to distinguish between capital transfer tax and real estate transfer tax. While real estate transfer tax applies to assets such as houses and land, capital transfer tax applies when transferring ownership of capital/shares in an enterprise.
Current applicable capital transfer taxes
Personal income tax from capital transfer
Personal income tax on capital transfer is applied at the rate of 20% on taxable income. The method of determining taxable income is calculated as follows:
| Taxable income = Transfer price – Cost price – Reasonable costs |
In there:
- The transfer price is the actual price stated in the contract.
- Cost price is the initial value when contributing capital (according to the capital contribution certificate or company accounting books)
- Reasonable costs are expenses related to the transfer procedures.
Taxable income is determined at the time the transfer contract takes effect.
Personal income tax on capital transfer of LLC
When an individual transfers his/her capital contribution to a limited liability company, personal income tax must be declared and paid at the tax authority where the company is headquartered. The dossier includes:
- Capital transfer contract
- ID card/CCCD of related parties
- Documents proving initial cost
- Tax declaration form 04/KK-TNCN
The enterprise is not responsible for deducting tax on behalf of the individual in this case, but the individual fulfills the tax obligation himself.
Personal income tax on capital transfer of joint stock company
In the case of transferring shares of a joint stock company that is not listed on the stock exchange, personal income tax is still applied according to the same principles as for a limited liability company. However, the determination of the transfer price in the absence of a clear market transaction price can be based on the enterprise valuation report or the agreement in the contract.
Capital transfer tax declaration: Procedure and documents
The declaration of capital transfer tax must be carried out in accordance with the following procedures:
- Individuals transferring the transfer shall submit tax declaration documents to the Tax Department where the enterprise is headquartered.
- Documents include: Declaration form 04/KK-TNCN, Copy of transfer contract, ID card/CCCD of all parties, Certificate of capital contribution/shares
- Deadline for submitting declaration: no later than 10 days from the date of signing the transfer contract.
- Pay tax: according to notice from tax authority after valid documents.
If not declared on time, individuals may be subject to administrative penalties according to Decree 125/2020/ND-CP.
Accounting for personal income tax from capital transfer
Accounting for personal income tax from capital transfer mainly occurs in cases where the enterprise pays on behalf of the individual transferring or is related to the cost of purchasing the capital portion.
Sample accounting entry:
| Accounting | Interpretation | Accounts Recognition |
|---|---|---|
| Debt 221 | Purchase capital value | There are 112 |
| Debt 811 | Personal income tax expense paid on behalf of individuals | There are 111 |
However, businesses are not required to pay on behalf of individuals. If there is an agreement to pay on behalf of individuals, it is necessary to clarify that this expense is not deductible when determining corporate income tax.
In case of capital transfer at par value, is personal income tax payable?
A common problem is the transfer of capital at par – meaning the transfer price is equal to the original cost price. Is there any tax involved?
According to Circular 111/2013/TT-BTC, in all cases of transfer, individuals must still declare taxes, even when there is no taxable income. In case the transfer price is equal to the cost price, taxable income is 0, and the amount of personal income tax payable is 0 VND.
However, if a return is not filed, an individual may be subject to a penalty for failure to file on time, even if no tax is payable.
Some legal notes when transferring capital
- After completing the transfer, the company needs to update member/shareholder information on the business registration certificate at the Department of Planning & Investment.
- Capital transfer must comply with the company's charter and must not exceed the ownership ratio if there are restrictions.
- For LLCs with 2 or more members, the transfer contract should be notarized to ensure legality.
Real-life situation: Incorrect declaration and handling of capital transfer tax
Case 1: Individual A transferred 20% of capital contribution in a limited liability company but did not declare personal income tax within the deadline. Three months later, the tax authority conducted an inspection and issued a decision to impose an administrative penalty of VND 3 million for late tax declaration as prescribed in Article 13 of Decree 125/2020/ND-CP.
Lesson learned: Filing capital transfer tax is mandatory, even when transferring between internal members. Late filing not only results in penalties but also affects personal tax compliance history.
Case 2: Company B buys back shares from individual C and pays personal income tax on behalf of this individual. However, the enterprise includes the tax paid on behalf of this individual as deductible expenses when determining taxable income. When settling taxes, the tax authority excludes all these expenses and collects the related corporate income tax.
Lesson learned: Personal income tax paid on behalf of individuals cannot be counted as deductible expenses according to Clause 2, Article 4 of Circular 96/2015/TT-BTC. Enterprises need to separate the tax obligations of individuals and enterprises to avoid being charged with arrears and late payment penalties.
Conclusion: Understand the regulations to avoid tax risks when transferring capital
Proper implementation of capital transfer tax regulations helps individuals and businesses avoid legal risks, penalties and optimize reasonable tax costs. Correct, complete and timely declaration is a key factor in every capital contribution or transfer transaction.
If you need advice on declaring and accounting for capital transfer tax, please contact us. Master Accountant Network – MAN Get support from tax experts with over 14 years of experience.
