Documents and procedures for transferring shares according to the law

1. Is income from share transfer taxable income?

According to Clause 4, Article 2 of Circular 111/2013/TT-BTC, amended by Article 4 of Circular 25/2018/TT-BTC, taxable income from capital transfer is regulated as follows:

“Income from capital transfer is income Personal income received includes:

a) Income from transfer of capital contributions in limited liability companies (including single-member limited liability companies), partnerships, business cooperation contracts, cooperatives, people’s credit funds, economic organizations, other organizations.

b) Income from transfer of securities, including: income from transfer of shares, stock purchase rights bonds, bonds, treasury bills, fund certificates and other types of securities as prescribed in Clause 1, Article 6 of the Securities Law. Income from transfer of shares of individuals in joint stock companies as prescribed in Clause 2, Article 6 of the Securities Law and Article 120 of the Enterprise Law.

c) Income from capital transfer in other forms.”

Thus, income from Share transfer is taxable income. Besides, according to the provisions of Article 3 of this Circular, the case of a father transferring shares to his child is not exempt from personal income tax.

2. How is personal income tax payable when a father transfers shares to his child?

According to Article 16 of Circular 92/2015/TT-BTC the tax calculation in case of share transfer is stipulated as follows:

“a) Taxable income

Taxable income from securities transfer is determined as the stock transfer price securities each time.

a.1) Securities transfer price is determined as follows:

a.1.1) For securities of public companies traded on the Stock Exchange, the securities transfer price is the price implemented at the Stock Exchange. The exercise price is the security price determined from the results of order matching or the price formed from agreed transactions at the Stock Exchange.

a.1.2) For securities not falling under the above cases, the transfer price is the price recorded in the transfer contract or the actual transfer price or the price according to the accounting books of the unit with the transferred securities at the time of preparing the latest financial statement according to the provisions of law on accounting before the time of transfer.

b) Tax rate and tax calculation:

Individuals transferring securities pay tax at the tax rate of 0.1% on the securities transfer price each time.

How to calculate tax:

Personal income tax payable = Price of each securities transfer x Tax rate of 0.1%.”

Thus, in case the father transfers it to the child, the father is the bearer personal income tax with a tax rate of 0.1% on the securities transfer price each time.

3. What are the documents and procedures for transferring shares?

According to Article 127 of the Law on Enterprises 2020, the transfer of shares is regulated as follows:

“1. Shares are freely transferable, except for the cases specified in Clause 3, Article 120 of this Law and the Company’s Charter has regulations restricting the transfer of shares. In case the Company Charter has regulations restricting the transfer of shares, these regulations are only effective when clearly stated in the shares of the corresponding shares.

2. The transfer is carried out by contract or transaction on the stock market. In case of transfer by contract, the transfer documents must be signed by the transferor and transferee or their authorized representatives. In case of transactions on the stock market, the transfer order and procedures are carried out in accordance with the provisions of securities law.

3. In case a shareholder who is an individual dies, the shareholder’s will or legal heir becomes a shareholder of the company.

4. In case a shareholder who is an individual dies without an heir, the heir refuses to inherit or is disqualified from inheritance, the number of shares of that shareholder will be resolved according to the provisions of civil law.

5. Shareholders have the right to donate part or all of their shares in the company to other individuals or organizations; Use shares to repay debt. Individuals and organizations that are gifted or receive debt repayment in the form of shares will become shareholders of the company.

6. Individuals and organizations receiving shares in the cases specified in this Article only become shareholders of the company from the moment their information specified in Clause 2, Article 122 of this Law is fully recorded in the shareholder register.

7. The company must register a change of shareholder in the shareholder register at the request of the relevant shareholder within 24 hours of receiving the request according to the provisions of the company’s Charter.”

Thus, shares are freely transferable except for the transfer of shares of founding shareholders and the company’s charter has restrictions. The transfer is carried out by contract or transaction on the stock market. In case of transfer by contract, the documents are required. The transfer must be signed by the transferor and transferee or their authorized representatives. In case of transactions on the stock market, the transfer order and procedures are carried out in accordance with the provisions of securities law.