Differences in tax position of individual investors in Vietnam

Hi DMS Lawyers in Vietnam! I am considering to open a foreign invested company in Da Nang, Vietnam. I need to consider the tax implications when investing to establish a company in Vietnam. Could you advise me the main difference in tax position if I choose to set up a single member LLC instead of choosing an LLC with two or more members ?

Hi!

Differences in tax position of individual investors between a single member LLC and a multi-member LLC in Vietnam

Single member LLC:

The main comparative advantage of this type of enterprise is that profits from capital investment of single-member limited liability companies under the ownership of individuals shall not be included in taxable income (Clause 6 Article 11 Circular No. 92/2015/TT-BTC dated June 15, 2015). Therefore, individual investors shall not have to pay personal income tax (PIT) on incomes earned from the profit after tax of the company. This is the main difference in tax position between the two types of enterprise, and is clearly a notable issue that needs to be taken into account when considering the type of enterprise.

Multi-member LLC:

According to provisions in Clause 3 Article 2 Circular No. 111/2013/TT-BTC dated August 15, 2013, amended in Clause 6 Article 11 Circular No. 92/2015/TT-BTC dated June 15, 2015, profits from capital contributions to limited liability companies is included in incomes from capital investment and subject to personal income tax. Therefore, individual investors shall have to pay PIT on incomes earned from the profit after tax of the company. This means, incomes from distribution of after tax profits of a company to individual investors are taxable incomes for personal income tax of those investors.

Related topics:

Set up LLC with two or more members in Vietnam, with capital contributed by foreign investors

Set up 100% FDI company in Vietnam in the form of a single member LLC

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Individual investor’s tax position in a single member LLC and a multi-member LLC in Vietnam