Cash capital contributions in Vietnam: two legal perspectives – corporate law and tax law

“Vietnamese law allows individuals to contribute charter capital in cash. So why must a company transfer that very same money through a bank when paying its suppliers or business partners?”

This is a question frequently raised by business owners, particularly those establishing a new company. The answer lies in a legal nuance that often goes unnoticed: The corporate law and tax law are designed to serve different regulatory purposes and operate under different legal rationales.

1. The corporate law: cash capital contributions by individuals are lawful

Under the current legal framework, charter capital may be contributed either in cash or through bank transfers, depending on the status of the contributing party, as follows:

• Corporate contributors: Where the capital contributor is a legal entity, capital contributions must be made through non-cash payment methods (such as cheques, payment orders, or other non-cash instruments) in accordance with Article 3.1 Circular No. 09/2015/TT-BTC dated 29 January 2015 of the Ministry of finance, guiding enterprises’ financial transactions in accordance with Article 6 of the Decree No. 222/2013/ND-CP dated 31 December 2013 on cash payments.

• Individual contributors: Vietnamese law does not expressly prescribe the method by which an individual must contribute charter capital.

Article 3.11 of Decree No. 168/2025/ND-CP dated 30 June 2025 on enterprise registration recognizes that evidence of a completed capital contribution may include the register of members, register of shareholders, certificate of capital contribution, or other documents evidencing that the capital contribution has been duly completed. Accordingly, an individual shareholder or member may lawfully make a capital contribution in cash. The company may receive the cash into its cash fund and acknowledge the contribution through any of the evidentiary documents referred to above.

This interpretation is further supported by Official letter No. 786/TCT-CS issued by the General department of taxation on 1 March 2016 and Official Letter No. 4260/NHNN-TT issued by the State bank of Vietnam on 11 June 2020. Such authorities consistently confirm that individuals are not required to make charter capital contributions through non-cash payment methods, unlike corporate contributors.

Accordingly, cash contributions to charter capital made by individuals are fully permissible under Vietnamese law, provided that such contributions are properly recorded in the company’s accounting books and reflected in its cash-on-hand records [1].

2. Tax law: Most business expenses are required to be paid through non-cash payment methods.

While Vietnamese corporate law permits individuals to contribute charter capital in cash, Vietnam’s tax law adopts a markedly different approach to business expenditures.

• According to the corporate income tax, a fundamental condition for an expense to be deductible for corporate income tax purposes is that the taxpayer must possess valid invoices and non-cash payment evidence for payments with a value of VND 5 million or more [2].

• According to the value added tax (“VAT”), one of the conditions for claiming input VAT credits is the availability of non-cash payment evidence for payments of VND 5 million or more (inclusive of VAT) [3].

These two tax laws therefore significantly restrict the practical use of cash in transactions between businesses. In particular, they lower the threshold requiring non-cash payment evidence from VND 20 million under the previous regime to VND 5 million under the current legislation.

In practice, many businesses also choose to settle payments below the VND 5 million threshold through bank transfers, cheques, or payment orders in order to streamline payment processes and facilitate tax compliance.

In other words, cash held in a company’s cash fund may be entirely lawful, but spending that cash is a different matter. Once the company uses those funds to pay suppliers or business partners, it will, in most cases, need to route the payment through the banking system if it wishes the expenditure to qualify as a deductible expense for corporate income tax purposes and to satisfy the conditions for claiming input VAT credits.

3. Where the two perspectives diverge

The issue does not arise from a direct conflict between different laws, but rather from the different regulatory objectives pursued by each legal framework.

• The corporate law focuses on whether charter capital has been fully and duly contributed within the prescribed timeframe. The method of contribution (whether in cash or by bank transfer) is not the primary subject matter regulated by this legislation.

• Tax law, on the other hand, emphasize transparency of cash flows and the ability of tax authorities to verify and monitor transactions. Accordingly, banking records and non-cash payment evidence are required as a basis for substantiating business expenses and tax claims.

The practical consequence is that a lawfully made cash capital contribution, if not subsequently transferred through the company’s bank account before being used for payments, may result in related expenses and input invoices being denied as deductible expenses for corporate income tax purposes and rejected for input VAT credit purposes, even where the underlying transactions are genuine and actually occurred.

4. What should businesses do?

To mitigate potential tax risks, businesses should consider the following measures:

• Although not legally mandatory, shareholders or members are recommended to contribute charter capital via bank transfer into the company’s bank account rather than by direct cash payment. This approach helps ensure that the source and movement of funds are transparent from the outset.

• Where a company has already received charter capital contributions in cash, the company should deposit such cash into its bank account before using those funds to make payments to suppliers, contractors, or other business partners.

• Businesses should establish internal cash flow management and control procedures from the initial stage of capital contribution to minimize the risk of expense disallowance or additional tax assessments during tax audits and final tax settlements.

Although the law permits charter capital contributions to be made in cash, this does not automatically mean that companies may use such cash for all payments and still satisfy applicable tax requirements. The corporate law and tax law operate under different legal frameworks and pursue different regulatory objectives. Accordingly, companies must carefully assess and comply with both frameworks to avoid potential tax-related risks.

1. The above analysis and discussions shall not apply to foreign investors or Vietnamese investors who are individuals making capital contributions to foreign-invested enterprises subject to the application of Circular No. 06/2019/TT-NHNN dated 26 June 2019 of the State bank of Vietnam on foreign exchange management applicable to foreign direct investment activities in Vietnam. Pursuant to such Circular, capital contributions by foreign investors and Vietnamese investors must be made by way of bank transfer into a direct investment capital account.
2. Decree No. 320/2025/ND-CP dated 15 December 2025 providing detailed guidance on the implementation of certain provisions of the Law on Corporate income tax, Article 9.1(c).
3. Decree No. 181/2025/ND-CP dated 01 July 2025 providing detailed guidance on the implementation of certain provisions of the Law on Value-added tax, Article 26.