On 26 June 2024, the State Bank of Vietnam (SBV) issued Circular No. 23/2024/TT-NHNN, amending and supplementing provisions in a 2016 circular (Circular 10/2016/TT-NHNN) on indirect investment abroad.

Executive summary

Although Circular 23, effective from 12 August 2024, introduces no changes to the underlying taxation of the equity awards in Vietnam, it does impact a company's informational reporting requirements, particularly regarding implementation of the equity award program for Vietnamese employees.

Key developments

By abolishing the SBV's approval requirement, Circular 23 has streamlined administrative procedures, making it more convenient for organizations to implement overseas equity award programs.

In addition, replacing "Stock Purchase Rights with Preferential Conditions" with "Other Forms of Equity Award Abroad that Do Not Generate Cash Outflows" should provide organizations with more options in the form of equity awards for Vietnamese employees. However, organizations should ensure that these forms of equity awards do not generate cash outflows.

After one year from the effective date of the new Circular (i.e., 12 August 2025 and beyond), equity award programs that were registered with the SBV before 12 August 2024 and include the award of stock purchase rights with preferential conditions may only be implemented in other forms of equity awards abroad that do not generate cash outflows.

Impact on employers

Circular 23 expands the scope of organizations implementing the overseas stock issuance program to include organizations with a commercial presence in Vietnam and organizations related to foreign organizations through forms of share ownership, capital contributions and other forms as regulated by Vietnamese law.

Under Circular 23, registering with and seeking approval from the SBV before implementing the overseas equity award program is no longer required. Instead, the organization responsible for carrying out the overseas equity award plan will only need to open a transaction account at a licensed commercial bank to conduct the transactions according to the guidance provided in Circular 23.

Organizations implementing the equity award plan in Vietnam are still required to submit reports to the SBV on the status of the overseas equity award program for Vietnamese employees. Note, however, that reporting will now be required monthly, rather than quarterly. The deadline for submitting reports is no later than the 12th of the month following the reporting month.

Circular 23 also specifies a new form to be used for this periodic reporting. Reports are to be sent (1) electronically to the email address baocaocophieu@sbv.gov.vn and (2) in writing (i.e., hardcopy) to the SBV.

Organizations that have deployed or are planning to deploy overseas equity award programs for Vietnamese employees should carefully consider the changes under Circular No. 23 to prepare well for future implementation.

Key steps

Affected taxpayers should consult their mobility or tax advisors to help determine how Circular No. 23 might affect them.