Investors "have to pay taxes before seeing the money"
The Ministry of Finance is seeking comments on amendments and supplements to a number of articles of Decree No. 126/2020/ND-CP detailing a number of articles of the Law on Tax Administration. One of the main contents is to propose amendments and supplements related to dividend and bonus payments in securities.
Specifically, the Ministry of Finance proposed that personal income tax must be deducted, declared and paid immediately at the time of receiving dividends and bonuses in securities, instead of waiting until the securities are sold. The issuing organization is responsible for deducting and paying taxes on behalf of individuals.
In a document sent to the Ministry of Finance to comment on the Draft Decree amending and supplementing Decree 126/2020/ND-CP, the Vietnam Federation of Commerce and Industry (VCCI) carefully analyzed the adverse impacts of the regulation requiring personal income tax deduction at the time the enterprise pays dividends in shares.
According to VCCI, currently, personal income tax only arises when investors sell these shares and actually record income. However, the new draft proposes a change in the direction of collecting tax as soon as shareholders receive the shares, even if they have not received any cash.
VCCI emphasized that the distribution of dividends in shares does not in essence create real income for shareholders at the time of receipt. This is essentially just a technical operation that changes the capital structure, increases the number of outstanding shares but the total value of shareholders' assets does not change.
To clarify the issue, VCCI gives a specific example: An investor owns 100,000 shares priced at VND30,000/share (total assets of VND3 billion). When the company pays dividends in shares at a ratio of 2:1, the investor receives an additional 50,000 shares. Immediately, the share price will be adjusted down to VND20,000/share.
Thus, the investor’s total assets are still 3 billion VND (150,000 shares x 20,000 VND). They do not have any additional income, but according to the new draft, they will have to immediately pay personal income tax of up to 25 million VND.
According to VCCI, this regulation will create huge financial pressure and liquidity risks for investors, from large funds to small individuals. They will be forced to find other sources of money or sell some stocks to pay taxes, which goes against the spirit of long-term investment. This seriously reduces the attractiveness of the stock market.
Businesses lose the tool to retain capital for reinvestment.
Not only affecting investors, VCCI believes that this proposal also directly impacts the health of businesses. According to VCCI's analysis, paying dividends in shares is a "win-win" solution, helping businesses retain profits for reinvestment and business expansion, while ensuring the rights of shareholders.
This form encourages investors to stay long-term, accompanying the development of the enterprise. Only when the enterprise is profitable and the stock price increases, will investors truly make a profit. This is the way to nurture a sustainable source of revenue for the state budget.
However, if the immediate tax collection regulation is applied, the stock dividend option will become less attractive. Investors will ask: "Why should I receive shares and take risks in the future, when receiving cash dividends can be collected immediately and have a source of income to pay taxes?" This will eliminate an effective tool for businesses to mobilize capital for growth.
VCCI cited data from the tax authority showing that from 2016 to 2024, the actual personal income tax collected from stock dividends (when investors sell) is about 1,318 billion VND. Meanwhile, if the method of collecting immediately at the time of distribution is applied, the estimated figure could be up to 17,420 billion VND.
This difference of more than 16,000 billion VND shows that most investors have chosen to hold stocks for the long term.
"This 'uncollected' tax amount is actually in businesses, becoming an important source of capital for reinvestment, job creation and contributing to GDP growth," VCCI argued. If forced to collect immediately, this capital flow is at risk of being withdrawn from production activities, weakening the competitiveness of businesses.
From the above analysis, VCCI recommends that the drafting agency carefully consider and maintain the current regulations, that is, only deduct personal income tax when investors transfer shares. This not only protects the interests of investors but also contributes to nurturing a sustainable source of revenue for the budget and supporting long-term business development.
Source: https://doanhnghiepvn.vn/kinh-te/chung-khoan/de-xuat-thu-thue-co-tuc-bang-co-phieu-ngay-khi-nhan-vcci-lo-ngai-tac-dong-tieu-cuc-kep/20250724082425199
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