Vietnam Double Tax Avoidance Agreements

Global investors often find themselves in an unfavorable position of having to face being double taxed – taxed by two different countries on the same income – unless there is a Double Tax Avoidance Agreement in place. For example, a company might be subject to taxes in its native or resident country, and also in another foreign country where it has raised income by providing labor, or via a foreign invested company that provides goods or services.

Contributing Advisor

Vivie Wei

Double Tax Avoidance Agreements (DTA) treaties effectively eliminate double taxation in specific cases by identifying exemptions or reducing the amount of taxes payable. It is therefore important for foreign investors, or expatriates working in Vietnam, to be aware of any DTAs that may exist between Vietnam and the native countries that apply to them, and to understand how these agreements are applied in practice between their native or resident countries and Vietnam. As of 2024, Vietnam has signed DTAs with approximately 80 countries and territories. These treaties eliminate double taxation by identifying exemptions or reducing tax payable in Vietnam for residents of the signatories of the agreements.

Who do DTAAs apply to?

Having stayed in Vietnam for 183 days or more within one calendar year or a consecutive 12-month period from the first date of arrival;
Obtained and registered for permanent residence status; or
Leased a residence in Vietnam with a lease term of 183 days or more in the tax assessment year. Applicable residences include hotels, and rented houses.

Organizations are considered residents of Vietnam if they have established a business in Vietnam and operate under Vietnamese law; This includes Limited Liability Companies (LLCs), joint-stock companies, private enterprises, state companies, and cooperatives.

List of Double Tax Avoidance Agreements

No.	DTA partners	Interest (%)	Royalties (%)
1	Algeria (Not yet in effect)	15	15
2	Australia	10	10
3	Austria	10	7.5/10
4	Azerbaijan	10	10
5	Bangladesh	15	15
6	Belarus	10	15
7	Belgium	10	5/10/15
8	Brunei Darussalam	10	10
9	Bulgaria	10	15
10	Cambodia	10	10
11	Canada	10	7.5/10
12	Croatia	10	10
13	China	10	10
14	Cuba	10	10
15	Czech Republic	10	10
16	Denmark	10	5/15
17	Egypt (Not yet in effect)	15	15
18	Estonia	10	7.5/10
19	Finland	10	10
20	France	0	10
21	Germany	10	7.5/10
22	Hong Kong	10	7/10
23	Hungary	10	10
24	Iceland	10	10
25	India	10	10
26	Indonesia	15	15
27	Iran	10	10
28	Ireland	10	5/10/15
29	Israel	10	5/7.5/15
30	Italy	10	7.5/10
31	Japan	10	10
32	Kazakhstan	10	10
33	North Korea	10	10
34	South Korea	10	5/15
35	Kuwait	15	20
36	Laos	10	10
37	Latvia	10	7.5/10
38	Luxembourg	10	10
39	Macao	10	10
40	Macedonia (Not yet in effect)	10	10
41	Malaysia	10	10
42	Malta	10	5/10/15
43	Mongolia	10	10
44	Morocco	10	10
45	Mozambique	10	10
46	Myanmar	10	10
47	Netherlands	10	5/10/15
48	New Zealand	10	10
49	Norway	10	10
50	Oman	10	10
51	Pakistan	15	15
52	Palestine	10	10
53	Panama	10	10
54	Philippines	15	15
55	Poland	10	10/15
56	Portugal	10	7.5/10
57	Qatar	10	5/10
58	Romania	10	15
59	Russia	10	15
60	San Marino	10/15	10/15
61	Saudi Arabia	10	7.5/10
62	Serbia	10	10
63	Seychelles	10	10
64	Singapore	10	5/10
65	Slovakia	10	5/10/15
66	Spain	10	10
67	Sri Lanka	10	15
68	Sweden	10	5/15
69	Switzerland	10	10
70	Taiwan	10	15
71	Thailand	10/15	15
72	Tunisia	10	10
73	Turkey	10	10
74	Ukraine	10	10
75	United Arab Emirates	10	10
76	United Kingdom	10	10
77	United States (Not yet in effect)	10	5/10
78	Uruguay	10	10
79	Uzbekistan	10	15
80	Venezuela	10	10

How do DTAAs apply?

Principles of application

DTAA’s apply in the following circumstances:

When there is a direct conflict between domestic tax laws and the tax provisions in a DTAA, those in the DTAA will prevail;
When the relevant tax obligations included in the DTAA do not exist in Vietnam or when the tax rates in the agreement are more than the domestic tax rates, domestic tax laws will prevail. For example, if a signatory country is entitled to impose a type of tax that Vietnam does not recognize, then Vietnam’s tax laws will apply.

Exceptions for diplomats

The provisions of a DTA will not affect the rights or immunities of members of diplomatic and consular missions, as per international treaties, which Vietnam has signed or to which it has acceded.

Types of taxable income covered by DTAA’s

Personal income

Nationals of countries that have a DTAA with Vietnam, that earn income in Vietnam, and who are deemed to be a resident of Vietnam, are required to pay income taxes subject to Vietnam’s personal income tax laws; These residents of Vietnam may be exempted from taxation in their native country under the terms of the DTAA which has been signed.

These individuals may be exempted from taxation in Vietnam if they satisfy all of the following conditions:

The individual is resident in Vietnam for fewer than 183 days over a 12-month period of any taxable year;
The resident’s employer is not a resident of Vietnam, regardless of whether the wages are paid directly by the employer or through the employer’s representative; and
The wages are not paid by the PE of the employer in Vietnam.

Income from Independent services

Foreign individuals that earn income by provisioning independent services must pay the relevant income taxes.

Personal income that is raised by provisioning independent services with a business license is subject to corporate income taxes.
If individuals or companies provide independent services without a business license, they are also required to pay personal income taxes.

Corporate income

Investors with a permanent establishment, such as a foreign-invested enterprise (FIE) that is licensed to conduct business in Vietnam, is subject to the laws of the prevailing corporate income taxes in Vietnam.

A permanent establishment is defined as a fixed place of business where operations are wholly or partially carried out. An FIE is said to be a PE in Vietnam if it maintains a building, office or equipment (either wholly or in part) that must be set up at a specified place and/or maintained permanently.

For foreign-invested enterprises (FIEs), corporate income is what is earned from carrying out production and business activities in Vietnam.

The tax obligations of FIEs are determined as follows:

Legal entities (e.g., wholly foreign-owned enterprises or joint ventures) – Taxed on incomes arising from business activities according to the corporate income tax law and its standard applicable rates.
Non-legal entities – (e.g.: those who operate without forming legal entities) - Subject to withholding tax or partially taxed if they own a permanent establishment (PE) in Vietnam to which income can be directly or indirectly attributed.

Foreign Contractors Withholding Tax

Parties that conduct business under a contract with a Vietnamese organization or individual will be subject to paying withholding taxes according to foreign contractor withholding tax regulations.

Other income sources subject to taxation

Dividends

No treaty benefit applies to dividends under DTAAs as there is no withholding tax on dividends in Vietnam. Companies are required to fulfill their financial and tax obligations in Vietnam before remitting dividends to their overseas parent companies. This means that the remitted dividends are after-tax profit which can be taxed again in the other signatory countries. Most tax and revenue jurisdictions allow tax offset for tax paid in other countries on dividends received.

Interest & royalties

Interest & royalties are taxed at 5 percent and 10 percent respectively. Tax on the interest is usually exempt under most DTAA while tax in royalty income is often reduced and ranges from 5 percent to 15 percent.

Technical, management, and consulting services

Tax on service fees is often withheld at 10 percent, in which 5 percent is of value-added tax (VAT) and the other 5 percent portion is CIT. Under DTAAs, only the CIT portion is subject to an exemption.