In early September 2025, Vietnam’s financial market received a significant update: the Ministry of Finance officially withdrew its proposal to impose a 20% tax on annual stock trading profits in the draft amendment to the Personal Income Tax (PIT) Law. Instead, the Ministry confirmed that it will maintain the existing 0.1% tax rate on each securities transfer transaction, a system that has been applied for years.

This development immediately attracted the attention of investors, economists, and the business community. Many experts believe this is a rational and timely decision that ensures market stability while preserving Vietnam’s competitiveness in the global investment landscape.

The Initial Proposal: 20% Tax on Securities Profits

In July 2025, during the consultation process for the amended Personal Income Tax Law, the Ministry of Finance proposed a new tax scheme for securities income:

• Individuals selling securities would be required to pay 20% tax on net profits, calculated as the selling price minus the purchase price and deductible expenses.

• If the cost basis and expenses could not be determined, the existing system would remain in place: 0.1% tax on the total transfer value of each transaction.

The intention behind this proposal was to achieve greater tax fairness, ensuring that investors with higher profits contribute more, aligning Vietnam’s system with international practices where progressive capital gains taxes are common.

Why Did the 20% Tax Proposal Spark Controversy?

The proposal quickly sparked heated debates among experts and investors. Concerns centered on several key points:

Heavy Tax Burden for Retail Investors

The majority of Vietnam’s stock market participants are retail investors with modest capital. A flat 20% tax on profits was deemed excessive, especially when compared to other investment channels such as real estate (currently taxed at 2% of transaction value) or savings deposits (interest income not taxed).

Risk to Market Sentiment

At a time when the VN-Index was recovering and reaching new highs, a stringent tax policy risked discouraging participation, potentially leading to capital outflows and reduced liquidity.

Administrative and Enforcement Challenges

Accurately determining cost basis and deductible expenses for each investor remains a challenge due to fragmented and incomplete data infrastructure. This could increase disputes, compliance burdens, and administrative complexity.

Competitive Disadvantage in the Region

Experts warned that the 20% tax could make Vietnam less attractive compared to regional peers. For instance, Singapore exempts capital gains from securities, while Thailand applies lighter taxation. Such a policy could reduce Vietnam’s appeal to both domestic and foreign investors.

Ministry of Finance Officially Withdraws Proposal: 0.1% Rate Maintained

On September 4, 2025, the Ministry of Finance announced its decision to withdraw the 20% tax proposal and continue applying the current mechanism: 0.1% tax on the transfer value of each securities transaction.

This decision is widely regarded as reasonable and timely, with several advantages:

• Preserves a simple, transparent, and predictable tax framework.

• Avoids policy shocks and maintains investor confidence.

• Supports the development of Vietnam’s capital markets and aligns with the nation’s ambition to achieve an emerging market upgrade.

Positive Impacts on the Market

Stabilizing Investor Sentiment

The withdrawal reassured retail investors, reducing fears of excessive taxation and reinforcing confidence in market participation.

Encouraging Capital Inflows

By maintaining the simple 0.1% transaction tax, Vietnam’s stock market remains attractive compared to alternative investment channels, thereby fostering both domestic and foreign capital inflows.

Sustaining Market Liquidity

High tax burdens often discourage trading and reduce liquidity. The continued 0.1% tax ensures a vibrant market, with active trading volumes and stronger capital-raising potential for listed companies.

Expert Perspectives: Long-Term Roadmap Needed

While maintaining the 0.1% rate is appropriate for now, economists argue that Vietnam should pursue a long-term roadmap for capital gains taxation:

• Data infrastructure investment: Enhance systems for storing and retrieving investor cost basis and expenses.

• Fairer taxation framework: Once infrastructure matures, consider shifting to a profit-based tax model, taxing only when gains are realized.

• Global benchmarking: Study international practices to design a competitive tax regime that balances revenue generation with market development.

• Linkage with Real Estate Taxation: Simplification Trend

  Notably, around the same time, the Ministry of Finance also withdrew its proposal to apply a 20% tax on real estate gains, instead keeping the 2% transaction value tax. This indicates a broader trend toward simplifying tax policy in the short term, prioritizing feasibility and transparency while laying the groundwork for future reforms.

The Ministry of Finance’s decision to drop the 20% tax proposal on securities profits marks a significant, market-friendly adjustment. By retaining the 0.1% transaction tax, the government ensures policy stability, bolsters investor confidence, and maintains the attractiveness of Vietnam’s capital markets.

As Vietnam strives to upgrade its market classification and attract more international capital, a stable, transparent, and competitive tax regime will be crucial. The latest decision demonstrates flexibility and responsiveness to stakeholder feedback, underscoring the government’s commitment to fostering a sustainable and investor-friendly financial market.