Contribute capitalis the contribution of assets to form the company’s charter capital, including capital contribution to establish a company or additional charter capital contribution of an already established company. However, how is the transfer of ownership of capital assets contributed to the company done? Are individuals/organizations contributing capital to establish a company subject to value added tax? 

CSPL:  Articles 34, 35 of Law on Enterprises 2020

              Article 5 Circular 219/2013/TT-BTC

1. Assets contributed as capital

Capital contributed assets are assets contributed by individuals or organizations to create the company’s charter capital. Currently, the types of assets allowed by the State to contribute capital are regulated as follows:

– Capital contributed assets are Vietnamese Dong, freely convertible foreign currencies, gold, land use rights, intellectual property rights, technology, technical know-how, and other assets that can be valued in Vietnamese Dong.

– Capital contribution assets other than Vietnamese Dong, freely convertible foreign currencies, or gold must be valued by members, founding shareholders or valuation organizations and expressed in Vietnamese Dong.

– Only individuals and organizations that are legal owners or have legal use rights to assets have the right to use those assets to contribute capital according to the provisions of law.

2. Transfer of ownership of assets contributed as capital

– Members of limited liability companies, partnerships and shareholders of joint stock companies must transfer ownership of assets contributed as capital to the company according to the following regulations:

+ For assets with registered ownership or land use rights, the capital contributor must carry out procedures to transfer ownership of that asset or land use rights to the company according to the provisions of law. The transfer of ownership and land use rights for assets contributed as capital is not subject to registration fees;

+ For assets whose ownership rights are not registered, capital contribution must be made by handing over and receiving the contributed assets with confirmation by a record, except in cases where it is done through an account.

–  The minutes of delivery and receipt of contributed assets must include the following main contents:

+ Name and address of the company’s headquarters;

+ Full name, contact address, legal document number of the individual, legal document number of the organization of the capital contributor;

+ Type of asset and number of units of contributed assets; total value of assets contributed as capital and the proportion of that total asset value in the company’s charter capital;

+ Delivery date; signature of the capital contributor or authorized representative of the capital contributor and the company’s legal representative.

– Capital contribution is only considered fully paid when legal ownership of the contributed assets has been transferred to the company.

– Assets used in business activities of the private enterprise owner do not have to go through procedures to transfer ownership to the enterprise. career.

3. Does contributing capital with assets to establish a business require declaring and paying value-added tax?

Pursuant to the provisions of Point a, Clause 7, Article 5 of Circular 219/2013/TT-BTC:

Article 5. Cases in which VAT is not required to be declared, calculated and paid

…

7. Other cases:

Business establishments are not required to declare and pay taxes in the following cases:

a) Contributing capital with assets to establish a business. Assets contributed as capital to the enterprise must include: minutes of capital contribution for production and business, joint venture and association contracts; Minutes of asset valuation of the Council of capital contribution delivery and receipt of capital contributors (or valuation document of an organization with valuation function according to the provisions of law), accompanied by a set of documents on the origin of assets.

Conclusion: Contributing capital with assets to establish a business does not require declaring and paying value added tax. However, to be considered a capital contribution asset, the individual/organization contributing capital must have all the supporting documents according to regulations.