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Share and Asset Deals in Vietnam

Mergers and acquisitions are useful tools in facilitating corporations in deploying their business in Vietnam. This can be structured in two common ways, (i) purchase of shares, or (ii) purchase of assets. Various commercial, tax and financial considerations will determine the structure.

An acquisition in the form of a share deal, which can preserve tax attributes and licensing benefits of the target entity, is the option more frequently used in Vietnam.

Share deals provide the buyer with the benefit of being able to utilize tax losses and tax incentives applicable for the target entity. However, the buyer has the responsibility of business liabilities when acquiring the target entity. This may also bring about hidden liabilities, including tax and debts arising as a result of past activities of the target entity. It is recommended that the buyer limits their liabilities by warranties, indemnities and guarantees from the seller.

On the other hand, an asset purchase could bring about greater benefits for the buyer due to the mitigation of tax risks as the buyer will not take on risk from contingent tax exposures of the seller. However, all tax benefits, including tax losses, tax incentives, tax refund, still remain with the seller.


Where the transaction is structured as a share deal, the underlying agreement is made between the buyer and the company (seller) shareholder(s), resulting in a transfer of ownership of the business entity along with the assets and ongoing liabilities. This generally includes the liability for taxes.

In an asset deal, the seller remains as the legal owner of the business entity, the buyer has the flexibility to cherry pick the assets they want and identify the liabilities that they can accept. This generally does not include purchasing the target’s cash, and the seller typically retains its long-term debt obligations. The buyer will only inherit liabilities that it specifically assumes accordingly to the terms of the asset purchase agreement.


In general, share transfer in Vietnam includes the sale of capital contributed in a limited liability company and securities of a joint stock company and, in certain circumstances, the taxes imposed on each transaction are different. The seller being a corporate or individual, local or foreign seller will also give rise to how the seller will be taxed in Vietnam. The transaction can be either taxed on gain at the standard corporate income tax (CIT) rate of 20% or at 0.1% of the selling price.

In an asset deal, the gain derived from the transfer of asset is regarded as other income and subject to CIT at the standard rate of 20%. The transfer of most assets is also subject to value-added tax, normally at the standard rate of 10%. Furthermore, certain kinds of assets would be subject to stamp duty and/or import duty in some circumstances.


In an asset deal, the buyer generally wants to allocate a higher amount to assets which have a high rate of depreciation. This would allow the buyer to claim greater tax deductions against any income earned in the business. On the other hand, a seller will generally want to allocate a lower amount to assets which have a high rate of tax depreciation to avoid “recapture” of previously claimed depreciation. To justify the transfer price, an independent evaluation party should be engaged. Such assessment could be presented to the tax authorities in the event the tax authorities deem that the transfer price does not conform to the market price based on their data source.

However, this will not be an issue for share deals. The tax cost of each asset remains the same before and after the acquisition of share, as ownership of the assets remains with the target entity.

Invest in Due Diligence to Identify Associated Opportunities and Risks

An acquisition plan involves finding a form for the acquisition of target that generates a profitable (beneficial) outcome. The decision on how to structure an acquisition is not always straightforward. Each deal should have its own strategic approach taking into consideration the pros and cons of acquisition methods.

In an acquisition transaction, the buyer and seller are bound to have a difference in interests. The seller, besides seeking the highest price, will also strive to minimize its exposure to any risks post completion of the transaction. On the contrary, the buyer will seek to acquire at the lowest possible price and it will also aim to avoid any hidden risks and liabilities that the target entity may take on. Effective negotiation is required to balance these interests.

In order to make the right decision, it is essential to invest time and effort to study the target entity thoroughly with the aid of due diligence which often includes legal, financial and tax due diligence.

Due diligence is an important exercise to identify the opportunities and risks as the form of an acquisition transaction can have significant tax and other business-related consequences for both buyer and seller.

Furthermore, the success or failure of an acquisition might also be affected by post-closing stage, a process providing a specific way to identify and solve the complex processes/problems that arise as well as implement the obligation clearance upon merger/restructuring, that is often overlooked by investors during acquisition integration. Seeking professional support in the whole process of a merger and acquisition deal would be an efficient approach to determine which structure best suits their requirements.