This article provides guidance on the procedures for contributing assets as capital to establish a business.
1. Regulations on contributing capital in the form of assets
Applying Article 34 of the 2020 Enterprise Law, contributed capital assets are as follows:
"Article 34. Contributed Assets
1. Capital contributions include Vietnamese Dong, freely convertible foreign currency, gold, land use rights, intellectual property rights, technology, technical know-how, and other assets that can be valued in Vietnamese Dong.
2. Only individuals and organizations who are the legal owners or have the legal right to use the assets specified in Clause 1 of this Article have the right to use those assets as capital contributions in accordance with the law.”
Thus, property owners whose assets are valued in Vietnamese Dong can use them to contribute capital to businesses or to establish businesses.
2. Valuation of contributed assets
Applying Article 36 of the 2020 Enterprise Law, the following guidelines apply to the valuation of contributed assets:
Article 36. Valuation of contributed assets
1. Assets contributed as capital other than Vietnamese Dong, freely convertible foreign currency, or gold must be valued by the founding members, shareholders, or a valuation organization and expressed in Vietnamese Dong.
2. Assets contributed as capital when establishing a business must be valued by the founding members or shareholders according to the principle of consensus, or by a valuation organization. If a valuation organization is used, the value of the contributed assets must be approved by more than 50% of the founding members or shareholders.
In cases where contributed assets are valued higher than their actual value at the time of contribution, the founding members and shareholders shall jointly contribute the difference between the appraised value and the actual value of the contributed assets at the time the appraisal is completed; and shall be jointly liable for damages caused by intentionally overvaluing the contributed assets.
3. Assets contributed during the course of operations shall be valued by agreement between the owner, the Board of Members (for limited liability companies and partnerships), the Board of Directors (for joint-stock companies), and the contributor, or by a valuation organization. If a valuation organization is used, the value of the contributed assets must be approved by the contributor and the owner, Board of Members, or Board of Directors.
In cases where contributed assets are valued higher than their actual value at the time of contribution, the contributor, owner, members of the Board of Members (for limited liability companies and partnerships), and members of the Board of Directors (for joint-stock companies) shall jointly contribute an additional amount equal to the difference between the appraised value and the actual value of the contributed assets at the time the appraisal is completed; and shall be jointly liable for damages caused by intentionally overvaluing the contributed assets.
3. Transfer of ownership of contributed assets to the enterprise.
3.1. Documentation of contributed assets as prescribed by the Enterprise Law
Applying Article 35 of the 2020 Enterprise Law, the following guidance is provided on the transfer of ownership of contributed assets:
"Article 35. Transfer of ownership of contributed assets
1. Members of limited liability companies, partnerships, and shareholders of joint-stock companies must transfer ownership of contributed assets to the company in accordance with the following regulations:
a) For assets with registered ownership or land use rights, the contributor must complete the procedures for transferring ownership of the asset or land use rights to the company in accordance with the law. The transfer of ownership or land use rights for contributed assets. not subject to registration fee;
b) For assets not registered for ownership, capital contribution must be made by the delivery and receipt of the contributed assets, confirmed by a written record, except in cases where it is done through a bank account.
2. The record of handover of contributed assets must include the following main contents:
a) Name and registered office address of the company;
b) Full name, contact address, legal document number of the individual, legal document number of the organization of the capital contributor;
c) The type of assets and the number of asset units contributed; the total value of the contributed assets and the percentage of that total value in the company's charter capital;
d) Date of delivery and receipt; signature of the capital contributor or their authorized representative and the legal representative of the company.
3. The capital contribution shall only be considered fully paid when the legal ownership of the contributed assets has been transferred to the company.
4. Assets used in the business operations of a private enterprise owner do not require a transfer of ownership to the enterprise.
5. Payments for all activities related to the purchase, sale, transfer of shares and capital contributions, receipt of dividends, and transfer of profits abroad by foreign investors must be made through accounts as prescribed by the law on foreign exchange management, except in cases of payment in assets or other non-cash forms.”
3.2. Documentation of contributed assets as required by tax law.
This applies to cases where individuals or non-business organizations contribute assets as capital to limited liability companies or joint-stock companies.
Apply Clause 13, Article 14 of Circular 219/2013/TT-BTC. In the case of individuals or non-business organizations contributing assets to a limited liability company or joint-stock company, the documentation for the contributed assets includes:
- Minutes of Capital Contribution Certification
- Property handover record.
In cases where the contributed asset is a newly purchased, unused asset with a valid invoice accepted by the capital contribution acceptance committee, the value of the capital contribution is determined according to the value recorded on the invoice, including VAT; the recipient of the capital contribution is entitled to deduct the VAT recorded on the invoice for the asset purchased from the contributing party.
In the case where a business organization contributes assets as capital to establish a business.
Applying Clause 7, Article 5 of Circular 219/2013/TT-BTC, assets contributed to a business must include:
- Minutes of capital contribution for production and business
- Joint venture and partnership agreements;
- Minutes of asset valuation by the Capital Contribution Acceptance Council of the contributing parties (or valuation document from an organization with the function of asset valuation as prescribed by law).
- The documentation regarding the origin of the assets is included.
4. Tax issues when contributing assets as capital.
4.1. Value Added Tax
Applying Clause 7, Article 5 of Circular 219/2013/TT-BTC: Businesses are not required to declare and pay value-added tax when Contributing assets as capital to establish a business.
The capital contribution must be made in full compliance with the procedures stipulated in this section as instructed above.
Contributing assets as capital does not require the issuance of invoices, as guided by Official Letter No. 3422/TCT-CS dated September 6, 2010, from the General Department of Taxation.
Official Document 3422_TCT-CS: Tax Policy on Contributed Assets
4.2. Value Added Tax
The differences resulting from the revaluation of assets when contributing capital are included in other income for the purpose of calculating corporate income tax, as follows:
14. Differences arising from the revaluation of assets in accordance with the law for capital contribution, or for asset transfer during division, separation, merger, acquisition, or conversion of business type (except in cases of equitization, restructuring, or innovation of 100% state-owned enterprises) are determined specifically as follows:
a) The increase or decrease resulting from asset revaluation is the difference between the revalued value and the remaining value of the asset recorded in the accounting books. This difference is included once in other income (for an increase) or deducted from other income (for a decrease) in the tax period when determining taxable income for corporate income tax purposes at the enterprise with the revalued assets.
b) The increase or decrease resulting from the revaluation of land use rights for: capital contribution (where the enterprise receiving the land use rights gradually allocates the land value to deductible expenses), transfer during division, separation, merger, acquisition, conversion of enterprise type, capital contribution to investment projects for the construction of houses and infrastructure for sale, is included once in other income (for the increase) or deducted from other income (for the decrease) in the tax period when determining taxable income for corporate income tax at the enterprise with the revalued land use rights.
Specifically, any increase resulting from the revaluation of land use rights contributed to a business to form fixed assets for production and business activities, where the business receiving the land use rights is not allowed to depreciate them and cannot gradually allocate the land value to deductible expenses, shall be gradually included in the other income of the business with the revalued land use rights for a maximum period of 10 years, starting from the year the land use rights were contributed. The business must notify the number of years for which it allocates the difference to other income when submitting its corporate income tax return for the year in which it begins declaring this income (the year in which the land use rights were revalued).
In cases where, after contributing capital, the enterprise continues to transfer the capital contribution in the form of land use rights (including cases of transferring capital contribution before the 10-year period), the income from the transfer of capital contribution in the form of land use rights must be calculated and declared for tax purposes as income from the transfer of real estate.