Australian Tax Treaties
Vietnamese Agreement
AGREEMENT BETWEEN THE GOVERNMENT OF AUSTRALIA AND THE GOVERNMENT OF THE SOCIALIST REPUBLIC OF VIETNAM FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME
ARTICLE 23
Methods of Elimination of Double Taxation
(1)
Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle of this Article), Vietnamese tax paid under the law of Vietnam and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Vietnam shall be allowed as a credit against Australian tax payable in respect of that income.
(2)
Where a company which is a resident of Vietnam and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in paragraph 1 shall include the Vietnamese tax paid by that firstmentioned company in respect of that portion of its profits out of which the dividend is paid.
(3)
For the purposes of paragraphs 1 and 2, Vietnamese tax paid shall include an amount equivalent to the amount of any Vietnamese tax forgone.
(4)
In paragraph 3, the term " Vietnamese tax forgone " means, subject to paragraphs 5 and 6, the total amount which, under the law of Vietnam relating to Vietnamese tax and in accordance with this Agreement, would have been payable as Vietnamese tax on income but for an exemption from, or reduction of, Vietnamese tax on that income (which total amount shall be deemed to be no greater than 20 per cent of the Vietnamese taxable income that relates to the income the subject of the exemption or reduction), less the actual amount of Vietnamese tax payable on that income.
(5)
Paragraph 4 shall apply only in respect of exemptions or reductions resulting from the operation of:
(a)
(b) any other provision which may subsequently be made granting an exemption from, or reduction of, Vietnamese tax which the Treasurer of Australia and the Minister of Finance of Vietnam determine from time to time in letters exchanged for this purpose to be provisions to which this paragraph applies. Subject to its terms, such a determination of applicable provisions shall be valid for as long as those provisions are not modified after the date of that determination or have been modified only in minor respects so as not to affect their general character.
(6)
Paragraph 4 shall apply only to the extent that the exemption or reduction is granted in respect of Vietnamese tax on income from the following activities:
(a) construction of infrastructure facilities including communications, power production and supply, construction of infrastructure facilities for the export processing and industry intensive zones and information and telecommunication facilities in mountainous areas in which naturally and socio-economically difficult conditions exist; or
(b) plantation of new forests for commercial exploitation; or
(c) extremely important activities listed in the investment portfolio announced by the Vietnamese State Committee for Co-operation and Investment for each period; or
(d) exploitation of natural resources except oil, gas or rare and precious natural resources; or
(e) heavy industry projects including metallurgy, mechanical engineering production, base chemical production, cement production, electrical and electronic materials manufacturing, fertiliser manufacturing and anti epidemic medicines for use in animal production or forestry; or
(f) plantation of long-term industrial crops; or
(g) activities in mountainous areas in which naturally and socio-economically difficult conditions exist including hotel undertaking projects; or
(h) any project satisfying at least 2 of the following criteria:
(j) projects carrying out infrastructure activities within a definite time period in which the foreign partner transfers the infrastructure to the Vietnamese Government without any compensation.
(7)
Notwithstanding the operation of paragraph 4, Vietnamese tax forgone shall not be deemed to have been paid in respect of income derived from:
(a) banking, insurance, consulting, accounting, auditing and commercial services of any kind; or
(b) the operation of ships or aircraft, other than ships or aircraft operated principally from places in Vietnam and used solely in carrying on a business in Vietnam; or
(c) any scheme entered into by an Australian resident with the purpose of using Vietnam as a conduit for income or as a location of property in order to evade or avoid Australian tax through the exploitation of the Australian foreign tax credit provisions or to confer a benefit on a person who is neither a resident of Australia, nor of Vietnam.
(8)
Paragraphs 4, 5, 6 and 7 shall not apply in relation to income derived in any year of income after the year of income that ends on:
(a) 30 June 2003; or
(b) any later date that may be agreed by the Treasurer of Australia and the Minister of Finance of Vietnam in letters exchanged for this purpose,
(9)
Where a resident of Vietnam derives income, profits or gains which under the law of Australia and in accordance with this agreement may be taxed in Australia, Vietnam shall allow as a credit against its tax on the income, profits or gains an amount equal to the tax paid in Australia.
As amended by the Vietnamese Notes (No 1) and the Vietnamese Exchange of Letters
The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI) has modified the application of this tax treaty. A synthesised text of the MLI and this tax treaty is available to facilitate the understanding of how the MLI modifies this tax treaty.
Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle of this Article), Vietnamese tax paid under the law of Vietnam and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Vietnam shall be allowed as a credit against Australian tax payable in respect of that income.
(2)
Where a company which is a resident of Vietnam and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly not less than 10 per cent of the voting power of the firstmentioned company, the credit referred to in paragraph 1 shall include the Vietnamese tax paid by that firstmentioned company in respect of that portion of its profits out of which the dividend is paid.
(3)
For the purposes of paragraphs 1 and 2, Vietnamese tax paid shall include an amount equivalent to the amount of any Vietnamese tax forgone.
(4)
In paragraph 3, the term " Vietnamese tax forgone " means, subject to paragraphs 5 and 6, the total amount which, under the law of Vietnam relating to Vietnamese tax and in accordance with this Agreement, would have been payable as Vietnamese tax on income but for an exemption from, or reduction of, Vietnamese tax on that income (which total amount shall be deemed to be no greater than 20 per cent of the Vietnamese taxable income that relates to the income the subject of the exemption or reduction), less the actual amount of Vietnamese tax payable on that income.
(5)
Paragraph 4 shall apply only in respect of exemptions or reductions resulting from the operation of:
(a)
(i) Articles 38, 39, 42 and 48 (to the extent that Article 48 relates to Articles 38 and 39) of the Law on Foreign Investment in Vietnam of 1996; or
(ii) Articles 53, 54, 55, 56 and 59 of the Government Decree No. 12/CP dated 18 February 1997 on the implementation of the Law on Foreign Investment in Vietnam or Articles 45, 46, 47, 48 and 51 of the Government Decree No.24/2000/ND-CP dated 31 July 2000 on the implementation of the Law of Foreign Investment in Vietnam; or
(iii) Circular No. 48-TC-TCT on Profits Tax Rates and Exemption from and Reduction of Profits Tax dated 30 June 1993; or
(iv) Part A of Part II of Circular No. 51-TC-TCT on Taxation of Foreign Investment in Vietnam dated 3 July 1993; or
to the extent those provisions were in force on, and have not been modified since, the date of this Note, or have been modified only in minor respects so as not to affect their general character; or
(v) Decree No. 87-CP on Build-Operate-Transfer (BOT) Contracts dated 23 November 1993 and the regulations issued with that Decree,
(b) any other provision which may subsequently be made granting an exemption from, or reduction of, Vietnamese tax which the Treasurer of Australia and the Minister of Finance of Vietnam determine from time to time in letters exchanged for this purpose to be provisions to which this paragraph applies. Subject to its terms, such a determination of applicable provisions shall be valid for as long as those provisions are not modified after the date of that determination or have been modified only in minor respects so as not to affect their general character.
(6)
Paragraph 4 shall apply only to the extent that the exemption or reduction is granted in respect of Vietnamese tax on income from the following activities:
(a) construction of infrastructure facilities including communications, power production and supply, construction of infrastructure facilities for the export processing and industry intensive zones and information and telecommunication facilities in mountainous areas in which naturally and socio-economically difficult conditions exist; or
(b) plantation of new forests for commercial exploitation; or
(c) extremely important activities listed in the investment portfolio announced by the Vietnamese State Committee for Co-operation and Investment for each period; or
(d) exploitation of natural resources except oil, gas or rare and precious natural resources; or
(e) heavy industry projects including metallurgy, mechanical engineering production, base chemical production, cement production, electrical and electronic materials manufacturing, fertiliser manufacturing and anti epidemic medicines for use in animal production or forestry; or
(f) plantation of long-term industrial crops; or
(g) activities in mountainous areas in which naturally and socio-economically difficult conditions exist including hotel undertaking projects; or
(h) any project satisfying at least 2 of the following criteria:
(i) employing at least 500 Vietnamese; or
(ii) applying advanced technology which satisfies the requirements listed in Article 4 of the Ordinance on the Transfer of Foreign Technology dated 5 December 1988, subject to the approval of the Ministry of Science and Technology and Environment; or
(iii) exporting at least 80% of the products manufactured by the project itself; or
(iv) the prescribed capital or contributed capital for the implementation of the business co-operation contract is at least US $10 million dollars; or
(j) projects carrying out infrastructure activities within a definite time period in which the foreign partner transfers the infrastructure to the Vietnamese Government without any compensation.
(7)
Notwithstanding the operation of paragraph 4, Vietnamese tax forgone shall not be deemed to have been paid in respect of income derived from:
(a) banking, insurance, consulting, accounting, auditing and commercial services of any kind; or
(b) the operation of ships or aircraft, other than ships or aircraft operated principally from places in Vietnam and used solely in carrying on a business in Vietnam; or
(c) any scheme entered into by an Australian resident with the purpose of using Vietnam as a conduit for income or as a location of property in order to evade or avoid Australian tax through the exploitation of the Australian foreign tax credit provisions or to confer a benefit on a person who is neither a resident of Australia, nor of Vietnam.
(8)
Paragraphs 4, 5, 6 and 7 shall not apply in relation to income derived in any year of income after the year of income that ends on:
(a) 30 June 2003; or
(b) any later date that may be agreed by the Treasurer of Australia and the Minister of Finance of Vietnam in letters exchanged for this purpose,
whichever is the later in time occurring.
(9)
Where a resident of Vietnam derives income, profits or gains which under the law of Australia and in accordance with this agreement may be taxed in Australia, Vietnam shall allow as a credit against its tax on the income, profits or gains an amount equal to the tax paid in Australia.
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