Foreign investors entering the Vietnamese market no longer choose to establish a new company as the first option. Instead, many prefer transferring shares to foreign investors through M&A transactions because this method is faster, more flexible, and helps maintain the existing legal entity, licenses, and business operations.

However, despite being common, transferring shares to foreign investors is not a simple internal transaction. It is strictly governed by investment law, enterprise law, market access conditions, foreign ownership limits, and tax regulations. Therefore, understanding the correct legal procedures is essential before signing any share transfer agreement.

This article provides a step-by-step legal guide to help investors and business owners clearly understand how transferring shares to foreign investors works in Vietnam and how to do it properly.

I. Legal Basis for Transferring Shares to Foreign Investors

Before conducting any transaction, investors must understand the legal framework regulating transferring shares to foreign investors in Vietnam.

1.1 Key Legal Documents

The main regulations include:

• Law on Investment 2020
• Law on Enterprises 2020
• Decree 31/2021/ND-CP guiding the Law on Investment
• WTO Commitments and Vietnam’s Market Access Schedule

These documents determine whether foreign investors are allowed to buy shares in a Vietnamese company and under what conditions.

1.2 Competent Authorities

Two main authorities are involved:

• Department of Planning and Investment (DPI)
• Tax Department

Therefore, a share transfer involving foreigners is both an investment procedure and a tax procedure.

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II. Conditions for Transferring Shares to Foreign Investors

Not every company is immediately eligible for transferring shares to foreign investors. Several conditions must be reviewed first.

2.1 Business Lines and Market Access

Firstly, the company’s business lines must be checked against Vietnam’s market access list for foreign investors. Some sectors:

• Allow 100% foreign ownership
• Limit foreign ownership to a certain percentage
• Require specific investment conditions

2.2 Foreign Ownership Ratio Limits

Secondly, the foreign ownership ratio after the transfer must comply with legal limits. In many sectors, foreign ownership must not exceed 49% or 51%.

2.3 Land Use Rights of the Company

Moreover, if the company holds land use rights in sensitive locations (border, coastal, defense areas), M&A approval is usually required.

Because of these factors, reviewing legal conditions is the most important step before transferring shares to foreign investors.

III. When Is M&A Approval Required?

Many investors mistakenly believe that a share transfer only requires updating the business registration. However, in many cases, M&A approval for foreign investors is mandatory before the transfer.

M&A approval is required when:

• The company operates in conditional business sectors for foreign investors
• The transfer increases foreign ownership to over 50%
• The company has land use rights in sensitive areas

On the other hand, if the company operates in unrestricted sectors and foreign ownership remains below the threshold, M&A approval may not be required.

Therefore, determining whether M&A approval is needed is a key legal checkpoint in transferring shares to foreign investors.

IV. Step-by-Step Procedure for Transferring Shares to Foreign Investors

The process of transferring shares to foreign investors follows a clear legal sequence.

Step 1 – Check Market Access Conditions

Firstly, review business lines, ownership limits, and land factors.

Step 2 – Apply for M&A Approval (if required)

If required, a dossier is submitted to the DPI, including:

• Registration for capital contribution/share purchase
• Legal documents of the foreign investor
• Agreement on share transfer
• Company legal documents

The processing time is about 15 working days.

Step 3 – Sign the Share Transfer Agreement

After approval, parties sign the official share transfer agreement, specifying transfer value, payment method, and obligations.

Step 4 – Declare and Pay Transfer Taxes

Before updating the company registration, taxes arising from the transfer must be declared and paid.

Step 5 – Update the Enterprise Registration Certificate

Finally, the company updates shareholder/member information with the DPI.

This sequence must be followed strictly when transferring shares to foreign investors.

V. Tax Implications When Transferring Shares to Foreign Investors

Tax is the most commonly overlooked issue in transferring shares to foreign investors.

5.1 Personal Income Tax (PIT) / Corporate Income Tax (CIT)

• If the seller is an individual → PIT applies
• If the seller is a company → CIT applies

5.2 Tax Declaration Timeline

Tax must be declared within 10 days from the effective date of the transfer agreement.

5.3 Common Tax Mistakes

Many businesses update the business license before declaring tax, which leads to penalties. Therefore, tax compliance must come before registration updates.

VI. Common Risks When Transferring Shares to Foreign Investors

Although the procedure seems straightforward, many risks arise in practice.

• Not checking market access conditions before signing contracts
• Forgetting M&A approval requirements
• Incorrect tax declaration order
• Poorly drafted share transfer agreements

As a result, the transaction may be rejected or fined by authorities. These risks make professional legal support essential when transferring shares to foreign investors.

VII. Why Choose MVA Vietnam for Transferring Shares to Foreign Investors?

Because transferring shares to foreign investors involves investment law, enterprise law, and tax law at the same time, mistakes can be costly and time-consuming.

MVA Vietnam provides:

• Legal review of market access conditions before the transaction
• Preparation and submission of M&A approval dossiers
• Drafting legally sound share transfer agreements
• Tax declaration and compliance support
• Representation to work with DPI and tax authorities

With extensive experience in M&A and foreign investment procedures, MVA Vietnam ensures that transferring shares to foreign investors is conducted smoothly, legally, and efficiently.

MVA VIETNAM ACCOUNTING AND AUDITING COMPANY LIMITED

Address: LK3 – 04, Loc Ninh urban area, TT. Chuc Son, H. Chuong My, City. Hanoi

Phone: 024.7109.7766 (keys 5) – Hotline: 0329.199.983

Wechat: 0329.199.983

Email: quynt.mva@gmail.com