16-08-26 MTParners
On 30 June 2026, the Government issued Decree 253/2026/ND-CP guiding the 2025 Personal Income Tax Law (Law No. 109/2025/QH15), effective from 1 July 2026. Many families assume that any inheritance from parents is automatically exempt from personal income tax (PIT), as is the case for real estate. In fact, capital contributions in limited liability companies, partnerships, cooperatives and similar entities are not exempt, regardless of whether the recipient is a biological or adopted child. So what exactly does the law require, what is the tax rate, and what is the legal basis?
Under Article 4 of the 2025 Personal Income Tax Law, inheritance and gift income is exempt from PIT only when the asset is real estate and the parties are close relatives: spouses; biological parents and children; adoptive parents and children; parents-in-law and children-in-law; grandparents and grandchildren; and siblings. Capital contributions in a business are not included in this exempt list.
Article 15 of Decree 253/2026/ND-CP expressly lists income from inheriting or receiving as a gift part or all of a capital contribution in a limited liability company, partnership, business cooperation contract, cooperative, cooperative union or people’s credit fund as taxable income — regardless of whether the recipient is a biological child, an adopted child, or any other relation to the deceased.
Article 18 of the 2025 Personal Income Tax Law provides that PIT on inheritance and gift income for resident individuals equals taxable income multiplied by a 10% tax rate. Taxable income is the value of the inherited or gifted asset exceeding VND 20 million per occurrence — this threshold was raised from VND 10 million under the previous law, effective from 1 July 2026.
Example: a child inherits a capital contribution worth VND 500 million from a parent. Taxable income equals 500 million minus 20 million, i.e. VND 480 million; the PIT payable is 480 million x 10% = VND 48 million.
Taxable income is determined at the time the taxpayer receives the inheritance, which is generally aligned with the time of registering the change of capital-contributing member with the business registration authority. The heir must self-declare and pay PIT when completing the member-change registration; if the heir does not wish to become a member of the company, the capital contribution is bought back by the company or transferred in accordance with the Law on Enterprises.
Inherited shares, bonds and fund certificates are taxed the same way — 10% on the value exceeding VND 20 million — under Article 15 of Decree 253/2026/ND-CP. Only real estate transferred between the close relatives listed in Article 4 is fully exempt; cars, boats, aircraft and other assets subject to ownership registration are taxed the same way as capital contributions.
Many family-owned businesses (limited liability companies, joint-stock companies) trigger a 10% PIT liability when capital contributions or shares pass to children through inheritance — whether by will or by operation of law. This is a cost that should be factored into any succession plan, especially for family businesses with large capital contributions, where the resulting tax bill can run into hundreds of millions of VND.
Raising the exempt threshold from VND 10 million to VND 20 million eases the burden somewhat for small inheritances, but it does not change the underlying rule: capital contributions in a business remain fully taxable, unlike real estate transferred between parents and children.
Individuals and families who own a business should plan the transfer of assets to their children early — through a will, ownership restructuring, or staged transfers or gifts — to anticipate the tax liability and avoid a large one-time tax bill.
The value of the capital contribution should be determined accurately at the time of the ownership transfer to declare tax correctly and avoid back-tax assessments or penalties for late payment or incorrect declaration.
Consult a lawyer or tax adviser before registering the change of capital-contributing member with the business registration authority, to ensure compliance with the declaration and payment deadlines under the 2025 Personal Income Tax Law.
MT & Partners Law Firm, with a team of experienced lawyers in corporate, tax and inheritance matters, is ready to advise individuals, families and businesses on asset transfer planning, tax declaration, and optimizing personal income tax obligations. Contact hotline 0987140772 or email info@mtpartners.vn for consultation.
(*) This article is for reference only and does not replace specific legal advice.
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