What Happens to Tax Losses When a Vietnamese Company Is Acquired

Acquiring a Vietnamese company does not automatically eliminate its accumulated corporate income tax losses. In a share acquisition, qualifying losses generally remain with the target company and may continue to be used within their original carry-forward period. In an asset acquisition, however, the seller’s historical losses ordinarily stay with the seller. The distinction can materially affect valuation, deal structure and post-acquisition tax planning.

How long can tax losses be carried forward in Vietnam?

Vietnam generally allows a company to carry forward a corporate income tax (CIT) loss fully and continuously for up to five consecutive years, beginning with the year following the year in which the loss arose. The loss is offset against taxable income arising in later years. Any balance remaining after the five-year period expires can no longer be deducted.

An acquisition does not restart this period. If a loss has two years of its carry-forward period remaining when the company is acquired, it will still have only those two years after completion. A large balance approaching expiry may therefore have limited commercial value.

The current framework is principally set out in Law No. 67/2025/QH15 on Corporate Income Tax, Decree No. 320/2025/ND-CP and Circular No. 20/2026/TT-BTC. These rules should be applied according to the relevant tax period and the transitional provisions for losses generated before the new framework took effect.

Do tax losses survive an acquisition?

The answer depends on whether the investor acquires the target company’s shares or purchases its assets and business operations.

Share acquisition

In a share acquisition, the Vietnamese company remains the same taxpayer even though its shareholders change. A change of ownership does not by itself cancel the target’s qualifying carried-forward losses. The losses remain with the target company; they do not become losses of the foreign buyer, its parent company or another group entity.

The target must continue to track the losses by year of origin and apply the remaining balance within the original five-year period. Their survival should not be confused with guaranteed usability. The company must still have eligible taxable income, comply with the applicable offsetting rules and support the amount claimed in its tax filings.

Asset acquisition

In an asset acquisition, the investor buys selected assets, contracts, licences or operating components rather than the shares in the existing company. The acquiring entity is ordinarily a different taxpayer. The seller’s historical CIT losses therefore do not transfer merely because the buyer acquires the business assets or continues the commercial activity. They remain with the company that incurred them.

An asset deal may allow the buyer to select particular assets and liabilities, but it will not ordinarily give the buyer access to the seller’s accumulated losses. A share deal preserves the target’s tax attributes while leaving its historical tax exposures inside the company.

What happens in a merger or corporate restructuring

An asset purchase should also be distinguished from a statutory merger, consolidation, division, separation, conversion of ownership or conversion of legal form. Vietnam’s CIT rules provide for the continued treatment of unused losses in qualifying restructurings, subject to tax finalisation and the applicable conditions. Losses must remain identifiable by their year of origin and do not receive a new five-year period.

Where a business or project is divided between successor entities, the parties should obtain advice on the allocation of losses and tax obligations. Moving assets, employees and operations is not, by itself, enough to establish that losses have legally transferred.

How should a buyer verify the acquired company’s tax losses?

A buyer should obtain a year-by-year loss schedule showing the amount originally declared, the portion already utilised and the remaining balance. This schedule should be reconciled with annual CIT finalisation returns, audited financial statements, accounting records, amended filings and any tax inspection or audit conclusions.

Accounting losses are not automatically the same as tax losses. Expenses recorded in the financial statements may be non-deductible for CIT purposes because they lack adequate invoices, contracts, payment evidence or a sufficient business purpose. If a tax authority determines that the deductible loss differs from the amount declared, the adjusted amount applies within the original carry-forward period; the adjustment does not extend the expiry date.

Particular attention should be paid where losses arose from related-party transactions. Interest, management fees, royalties, service charges and other related-party payments must comply with Vietnam’s CIT and transfer pricing rules. A transfer pricing adjustment, interest-deduction limitation or challenge to the commercial basis of a payment may reduce the loss available for future use.

The source of the loss and the income against which it will be offset must also be reviewed. Vietnam applies specific rules to income and losses from different activities, including real-estate and investment-project transfers and activities receiving CIT incentives. A buyer should not assume that every carried-forward loss can be offset against every future source of taxable income.

How should tax losses affect valuation and deal terms

Carried-forward losses can reduce future cash tax and may therefore influence valuation, but buyers should avoid treating their face value as a cash-equivalent asset. Their economic value depends on the remaining carry-forward period, the target’s forecast taxable profits, the type of income expected after completion and the likelihood that the losses will withstand review by the tax authorities.

In a share acquisition, historical tax liabilities remain within the target. The buyer may address identified risks through the purchase price, tax warranties, specific indemnities or deferred consideration. Protections may cover CIT returns, deductible expenses, related-party transactions, tax incentives and prior inspections.

Post-acquisition forecasts should separately model the losses that are legally available and the amount likely to be utilised before expiry. This provides a more reliable basis for valuation than relying on the balance reported in the target’s accounts.

Key takeaway

A change in shareholders does not, by itself, wipe out a Vietnamese company’s carried-forward CIT losses. In a share acquisition, the losses generally stay with the target and retain their original expiry dates. In an asset acquisition, they ordinarily remain with the seller, while statutory restructurings require separate analysis. Buyers should verify the validity, remaining life, source and practical usability of each loss before assigning it value or relying on it in post-acquisition tax forecasts.