Circular No. 95/2026/TT-BTC on providing guidance on the implementation of Agreements on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital between Vietnam and other countries and territories that are in force in Vietnam; guidance on the implementation of the mutual agreement procedure; and guidance on the application of the advance pricing agreement mechanism for tax administration purposes in respect of enterprises engaged in related-party transactions

 

CIRCULAR

PROVIDING GUIDANCE ON THE IMPLEMENTATION OF AGREEMENTS ON THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL BETWEEN VIETNAM AND OTHER COUNTRIES AND TERRITORIES THAT ARE IN FORCE IN VIETNAM; GUIDANCE ON THE IMPLEMENTATION OF THE MUTUAL AGREEMENT PROCEDURE; AND GUIDANCE ON THE APPLICATION OF THE ADVANCE PRICING AGREEMENT MECHANISM FOR TAX ADMINISTRATION PURPOSES IN RESPECT OF ENTERPRISES ENGAGED IN RELATED-PARTY TRANSACTIONS

Pursuant to the Law on Tax Administration No. 108/2025/QH15;

Pursuant to the Law on International Treaties No. 108/2016/QH13, as amended by Law No. 137/2025/QH15;

Pursuant to the Government’s Decree No. 252/2026/ND-CP elaborating, and providing measures for the implementation of, the Law on Tax Administration;

Pursuant to the Government’s Decree No. 320/2025/ND-CP elaborating, and providing measures for the implementation of, the Law on Corporate Income Tax;

Pursuant to the Government’s Decree No. 255/2026/ND-CP on tax administration for enterprises engaged in related-party transactions;

Pursuant to the Government’s Decree No. 253/2026/ND-CP elaborating some articles of the Law on Personal Income Tax;

Pursuant to the Government’s Decree No. 29/2025/ND-CP defining functions, tasks, powers and organizational structure of the Ministry of Finance of Vietnam, as amended by the Government’s Decree No. 166/2025/ND-CP;

In implementation of the Agreements on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital between Vietnam and other countries and territories that are currently in force;

In implementation of the Agreements on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income between Vietnam and other countries and territories that are currently in force;

In implementation of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting;

In implementation of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters;

At the request of the Director General of the Department of Taxation;

The Minister of Finance of Vietnam promulgates a Circular providing guidance on the implementation of Agreements on the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital between Vietnam and other countries and territories that are in force in Vietnam; guidance on the implementation of the mutual agreement procedure; and guidance on the application of the advance pricing agreement mechanism for tax administration purposes in respect of enterprises engaged in related-party transactions.

Chapter I

GENERAL PROVISIONS

Article 1. Scope

This Circular provides guidance on the following matters:

1. The implementation of, and processing of application dossiers for the application of, Double Taxation Avoidance Agreements, international treaties, and other forms of international tax cooperation as prescribed in Point a Clause 2 Article 58 of the Government’s Decree No. 252/2026/ND-CP.

2. The implementation of the Mutual Agreement Procedure under a Tax Agreement (hereinafter referred to as “MAP”) as prescribed in Clause 3 Article 30 of the Law on Tax Administration No. 108/2025/QH15 and Point a Clause 2 Article 58 of Decree No. 252/2026/ND-CP.

3. The application of the Advance Pricing Agreement (hereinafter referred to as “APA”) mechanism for determining the pricing method for tax administration purposes in respect of enterprises engaged in related-party transactions, as prescribed in Clause 3 Article 30 and Clause 2 Article 31 of the Law on Tax Administration No. 108/2025/QH15 and Point a Clause 2 Article 58 of Decree No. 252/2026/ND-CP.

4. Principles for the provision of mutual administrative assistance in tax matters as prescribed in Point c Clause 1 Article 47 of Decree No. 252/2026/ND-CP.

Article 2. Regulated entities

This Circular applies to:

1. Persons subject to the Tax Agreement, MAP and APA, as prescribed in Clause 1 Article 8, Clauses 1 and 2 Article 54, and Article 66 of this Circular.

2. Tax authorities as prescribed in Point a Clause 2 Article 2 of Decree No. 252/2026/ND-CP.

3. Other relevant regulatory authorities, organizations and individuals involved in the implementation of the Tax Agreement and the application of MAP and APA.

Article 3. Definitions

1. “Double Taxation Avoidance Agreement” (hereinafter referred to as a “Tax Agreement”) includes an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital; an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income; and related instruments constituting, amending or supplementing such Double Taxation Avoidance Agreement.

2. “Other international tax treaties” include the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting; the Multilateral Convention on Mutual Administrative Assistance in Tax Matters; and related instruments constituting, amending or supplementing such other international tax treaties.

3. “Person” includes an individual, a company and any body of persons consisting of individuals, companies or other entities, as defined under the Double Taxation Avoidance Agreement to which Vietnam is a party.

4. “Company” means any legal person or any entity that is treated as a legal person for tax purposes under the laws of Vietnam and the Contracting Party.

5. “competent authority” of Vietnam means the Minister of Finance or his authorized representative as prescribed by the Vietnamese law.

6. “Contracting Party” means a country or territory that has concluded a Tax Agreement with Vietnam.

Article 4. Application principles

1. Principles for the application of a Tax Agreement

a) When imposing or determining tax liability in each case, reference shall be made to the specific provisions of the relevant Tax Agreement and other international tax treaties;

b) Where a Tax Agreement and domestic tax laws contain different provisions on the same matter, the provisions of the Tax Agreement shall apply. A Tax Agreement shall not give rise to any new, different or more onerous tax liabilities than those provided under domestic tax laws;

c) When applying a Tax Agreement, terms shall be interpreted in accordance with the provisions of such Tax Agreement. Where a term is not defined in the Tax Agreement, such term shall be understood in accordance with Vietnamese law applicable to the taxes covered by the Tax Agreement at the time of application. Where a term is defined differently under tax law and other laws, the definition provided under tax law applicable at the time of application shall apply.

Where a term is not defined in the Tax Agreement and the Vietnamese law contains no provision thereon, the competent authority of Vietnam and the Contracting Party shall consult and agree on the interpretation thereof for application purposes.

2. Principles for the application of MAP and APA

a) MAP shall be applied in accordance with the provisions of the relevant Tax Agreement; ensure the rights of taxpayers; be independent of domestic complaint resolution procedures; be conducted on the basis of good faith and cooperation between the competent authorities; ensure the confidentiality of information; and aim to eliminate double taxation in accordance with the Tax Agreement;

b) The analysis, comparability analysis, selection of independent comparables, and methods for determining the price of related-party transactions within the scope of APA and MAP application in relation to related-party transactions shall be conducted in accordance with the Government’s Decree No. 255/2026/ND-CP. The use of databases for APA application purposes shall be conducted in accordance with the Law on Tax Administration No. 108/2025/QH15.

Article 5. Rights and obligations of taxpayers requesting the application of a Tax Agreement, MAP or APA

1. A taxpayer has the following rights:

a) Receive support, guidance and explanations from tax authorities on the application of a Tax Agreement;

b) Withdraw the request or request the discontinuation of negotiations at any time before the MAP or APA is concluded;

c) Engage or use independent experts or advisory organizations in accordance with Vietnamese law to provide support during the exchange of matters relating to the APA application; the participation of such experts is solely for support and advisory purposes and does not alter the taxpayer’s responsibilities;

d) During the implementation of a unilateral APA, where double taxation arises or an adjustment to taxable income that is adverse to the taxpayer arises as a result of a decision by the tax authority of the Contracting Party, the taxpayer has the right to request the amendment or cancellation of the APA in accordance with this Circular.

2. A taxpayer has the following obligations:

a) Explain and demonstrate the satisfaction of the conditions for entitlement to benefits under the Tax Agreement;

b) Provide complete, timely, truthful and accurate information and data to the tax authority during the processing of an MAP request or an APA application;

c) Bear legal responsibility under Vietnamese law for the completeness and accuracy of the documentation, information and data provided to the tax authority;

d) Retain documentation and records relevant to the process of requesting, reviewing, analyzing, exchanging, negotiating, concluding, circulating and implementing an APA;

dd) Cooperate with the tax authority during the processing of MAP requests and APA applications; and provide acceptance or non-acceptance of the contents of the draft mutual agreement at the request of the tax authority.

Article 6. Tasks and powers of tax authorities in implementing Tax Agreement provisions and processing MAP requests and APA applications

1. Tasks of tax authorities

a) The Department of Taxation, as authorized by the Minister of Finance, shall perform the following tasks:

a.1) Issue documents notifying the entry into force or termination of the validity of each Tax Agreement upon receipt of notification from the Ministry of Foreign Affairs;

a.2) Act as the “competent authority” of Vietnam in handling the following matters:

a.2.1) Receive, examine, process, and provide guidance on the processing of, MAP requests and APA applications, and any matters arising during the implementation of Tax Agreements;

a.2.2) Exchange information with the competent authority of the Contracting Party; exploit and use information provided by foreign competent authorities and ensure the confidentiality of such information in accordance with Vietnamese law, international treaties and international tax agreements to which Vietnam is a party or a signatory, and in accordance with the standards of the Global Forum on transparency and exchange of information for tax purposes;

a.2.3) Implement mutual administrative assistance measures in tax matters as prescribed in Clause 1 Article 47 of Decree No. 252/2026/ND-CP, in accordance with the provisions of the relevant Tax Agreement;

b) Develop, operate and maintain an electronic information system to support the administration of MAP and APA, and ensure its interoperability and integration with the centralized tax administration system and the risk data analytics system.

2. Tax authorities shall manage and inspect the taxpayer’s implementation of a concluded APA in accordance with Clause 9 Article 21 of Decree No. 255/2026/ND-CP.

3. Powers of tax authorities

a) Request the taxpayer to provide such explanations or clarifications as may be necessary in relation to the information and documentation submitted during the processing of the taxpayer’s MAP request or APA application;

b) Terminate the processing of a MAP request in accordance with Article 64 of this Circular; discontinue the processing of an APA application in accordance with Article 75 of this Circular;

c) Temporarily suspend the processing of an APA application in the following circumstances:

c.1) The taxpayer fails to provide the additional information or explanations as requested by the tax authority;

c.2) The taxpayer provides inaccurate, incomplete, or untruthful information or data and fails to provide appropriate grounds or supporting documentation to explain or substantiate such information or data.

d) Apply tax compliance management measures to the taxpayer in accordance with the law on tax administration to ensure the full and proper implementation of the MAP agreement or APA that has been concluded.

Article 7. Method of submission of MAP requests and APA applications

1. The submission of MAP requests and APA applications, as well as explanations, additional information and documentation, and notification of the results of the processing of MAP requests and APA applications, shall be made by electronic means in accordance with Article 50 of Decree No. 252/2026/ND-CP.

2. Where any information or documentation is of a large size, in a specialized technical format, or does not meet the technical requirements of the electronic system, the taxpayer may submit it in paper form.

Chapter II

TAX AGREEMENTS

Section 1. PERSONS COVERED AND SCOPE OF APPLICATION OF TAX AGREEMENTS

Article 8. Persons covered by Tax Agreements

1. A Tax Agreement shall apply to persons who are residents of Vietnam, the Contracting Party, or both Vietnam and the Contracting Party.

2. The term “a resident of a Contracting Party” referred to in Clause 1 of this Article means:

a) any person who is liable to tax in the Contracting Party under the laws of that Contracting Party and satisfies one of the following two conditions:

a.1) In the case of an individual, such individual has a home, place of residence, or any other criterion of a similar nature in that Contracting Party;

a.2) in the case of a company or any body of persons consisting of individuals, companies or other entities, such company or body of persons has its place of management, registered office, place of incorporation, or any other criterion of a similar nature in that Contracting Party;

b) The State, a political subdivision or a local authority of a Contracting Party, where the Tax Agreement so provides;

c) Depending on the applicable Tax Agreement, the term “a resident of a Contracting Party” does not include persons who are liable to tax only in respect of income from sources in, or of capital in, that Contracting Party.

3. Residents of Vietnam under Vietnamese law include:

a) A resident individual as defined in Article 4 of the Government’s Decree No. 253/2026/ND-CP;

b) A company or any body of persons consisting of individuals, companies or other entities established or registered under Vietnamese law;

c) The State or a local authority of Vietnam, where the Tax Agreement so provides;

d) Depending on the applicable Tax Agreement, a resident of Vietnam does not include persons who are liable to tax only in respect of income from sources in, or of capital in, Vietnam.

A resident of Vietnam referred to in this Clause shall be determined as a resident under the Tax Agreement if such resident satisfies the conditions set out in Points a.1 and a.2 of Clause 2 of this Article.

4. Where a person is determined to be a resident of Vietnam under Clause 3 of this Article and is also determined to be a resident of the Contracting Party under the law of that Contracting Party, the status of residence of that person shall be determined based on the following criteria:

a) For an individual:

The determination of whether an individual is a resident of Vietnam shall be made sequentially based on the following criteria:

a.1) Such individual has a permanent home (owned, rented, or otherwise at such individual’s disposal) in Vietnam;

a.2) Such individual has a permanent home in both Vietnam and the Contracting Party, but has closer economic relations in Vietnam, such as employment, place of business, place of management of personal assets, or other economic relations; or has closer personal relations in Vietnam, such as family or social relations;

a.3) Such individual has a permanent home in both Vietnam and the Contracting Party, and it cannot be determined where his economic or personal relations are closer, or such individual has no permanent home in either Vietnam or the Contracting Party, but has an habitual abode in Vietnam during the tax year;

a.4) Such individual has an habitual abode in both Vietnam and the Contracting Party or in neither of them, but is a national of Vietnam;

a.5) Such individual is a national of both Vietnam and the Contracting Party, or of neither of them, in which case the competent authority of Vietnam shall settle the individual’s status of residence through the mutual agreement procedure with the competent authority of the Contracting Party.

Where, under the laws of Vietnam and the Contracting Party, an individual is considered a resident of both Vietnam and the Contracting Party in the same tax year, but the tax years of the two countries differ, such individual shall be treated as a resident of Vietnam if, during the tax year, he primarily works and resides in Vietnam. For the period at the beginning of Vietnam’s tax year that falls within the preceding tax year of the Contracting Party due to the difference in tax years between the two countries, such individual shall be treated as a resident of the Contracting Party for the purposes of tax finalization in Vietnam and the Contracting Party.

b) For a person other than an individual:

Depending on the applicable Tax Agreement, a person other than an individual shall be considered a resident of Vietnam if any of the following conditions is satisfied:

b.1) It is established, incorporated, or registered in Vietnam;

b.2) It has its head office in Vietnam;

b.3) It has its place of effective management in Vietnam (“the place of effective management” means the place where senior management personnel or the board of directors of an enterprise conduct meetings, review, discuss and make management decisions or business decisions, or where the most important accounting records are maintained);

b.4) Where the person is incorporated or registered in both countries, or has its head office or place of effective management in both countries, the competent authority of Vietnam and the competent authority of the Contracting Party shall settle the status of residence of that person so that the person shall be considered a resident of only one of the two countries through the mutual agreement procedure. Where Vietnam and the Contracting Party fail to reach such mutual agreement, such person shall not be entitled to the benefits of the Tax Agreement as a resident of either country.

The foregoing provisions on residents are set out in the Resident Article of the Tax Agreement.

Article 9. Taxes Covered by Tax Agreements

The taxes covered by a Tax Agreement are the taxes on income and on capital specified in such Tax Agreement.

1. In the case of Vietnam, the taxes covered by a Tax Agreement are:

a) Corporate income tax;

b) Personal income tax.

2. In the case of a Contracting Party, the taxes covered by a Tax Agreement are specified in Article 2 of such Tax Agreement.

Section 2. DENIAL OF APPLICATION OF TAX AGREEMENT

Article 10. Cases of denial of application of Tax Agreement based on principle of entitlement to Tax Agreement benefits

Unless otherwise provided in the Tax Agreement regarding limitation on benefits provisions, the Vietnamese tax authority shall deny a request for application of a Tax Agreement in the following cases:

1. The person requests application of the Tax Agreement in respect of tax liabilities arising more than three years before the date of the request. The date of the request for application of the Tax Agreement is the date on which the requesting person submits a complete application in accordance with Circular No. 89/2026/TT-BTC of the Minister of Finance elaborating certain Articles of the Law on Tax Administration and Decree No. 252/2026/ND-CP.

2. The main purpose of the contracts or arrangements is to obtain exemption from, or reduction of, tax under the Tax Agreement.

3. The person requesting application of the Tax Agreement is not the beneficial owner of the income for which exemption from or reduction of tax is requested under the Tax Agreement. The beneficial owner may be an individual, a company or an organization that has ownership and control over the income, property, or rights giving rise to such income. In determining whether a person is a beneficial owner, the tax authority shall consider all relevant factors and circumstances relating to such person based on the principle of “substance over form”, since the purpose of a Tax Agreement is to avoid double taxation, prevent tax evasion, and not create opportunities for non-taxation in both Contracting Parties.  A person requesting application of the Tax Agreement shall not be regarded as the beneficial owner in any of the following cases:

a) Where the requesting person is a non-resident that pays more than 50% of its income to a resident of a third country within 12 months of receiving such income;

b) Where the requesting person is a non-resident that has no (or virtually no) business activity other than ownership of property or rights giving rise to such income;

c) Where the requesting person is a non-resident that carries out business activities, but the level of its assets, scale of business, or number of employees is disproportionate to the income received;

d) Where the requesting person is a non-resident that has no (or virtually no) control or power of disposal and bears no, or only very limited, economic risks in respect of the income, property, or rights giving rise to such income;

dd) Where loan, licensing, or technical service arrangements between the requesting person, being a non-resident, and persons in Vietnam contain terms and conditions that are replicated in another arrangement between the requesting person and a third party, under which the requesting person is the recipient of the loan, royalty, or technical service;

e) Where the requesting person is a resident of a country or territory that does not levy income tax, or levies income tax at a low rate (below 10%), other than pursuant to investment incentives provided for in the Tax Agreement;

g) Where the requesting person is an agent or an intermediary company (except where the agent or intermediary company requests application of the Tax Agreement on behalf of, and under the authorization of, the beneficial owner).

An agent or an intermediary company is a company incorporated in a Contracting Party solely as a legal vehicle for the purpose of avoiding or reducing tax or shifting profits, without engaging in essential business activities such as manufacturing, trading, or the provision of services.

Section 3. INCOME FROM IMMOVABLE PROPERTY

Article 11. Definition of immovable property

1. For the purposes of a Tax Agreement, the term “immovable property” shall be defined in accordance with the law of Vietnam or the Contracting Party in which the property in question is situated. The term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture and forestry, rights to which the provisions of general law respecting landed property apply, rights to use immovable property, and rights to payments as consideration for the exploitation of, or the right to exploit, natural resources.  Ships, boats and aircraft shall not be regarded as immovable property.

2. Under Clause 1 of this Article, immovable property in Vietnam includes:

a) Property falling within the definition of immovable property under the Civil Code, the Law on Land, the Law on Real Estate Business, and other relevant laws, including the value of land use rights, lease rights under land lease contracts, and future real estate;

b) Property accessory to the immovable property referred to above;

c) Livestock and equipment used in agriculture and forestry;

d) Rights to which the provisions of Vietnam’s laws on land apply;

dd) Rights to payments as consideration for the exploitation of, or the right to exploit, natural resources.

Article 12. Determination of tax liability on income from immovable property

Under a Tax Agreement, all income derived by a resident of the Contracting Party from the direct use, exploitation, or letting of immovable property situated in Vietnam, including immovable property of an enterprise or of an individual performing independent personal services, shall be subject to income tax in Vietnam in accordance with the tax laws of Vietnam.

The foregoing provisions governing the taxation of income from immovable property are set out in the Income from Immovable Property Article of the Tax Agreement.

Section 4. BUSINESS PROFITS

Article 13. Definition of business profits

For the purposes of a Tax Agreement, “business profits” are the profits derived by enterprises of the Contracting Party (hereinafter referred to as “foreign enterprises”) from their production and business activities in Vietnam, excluding the categories of income referred to in Section 3 and Sections 5 through 19 Chapter II of this Circular.

Article 14. Determination of tax liability on business profits

1. Tax liability of a foreign enterprise conducting production and business activities through a permanent establishment situated in Vietnam.

Under a Tax Agreement, the business profits of a foreign enterprise shall be taxable in Vietnam only if such enterprise carries on business through a permanent establishment situated in Vietnam and those profits are directly or indirectly connected with that permanent establishment.  In such case, the enterprise shall be taxable in Vietnam only on the portion of the profits attributable to that permanent establishment.

2. Definition of a permanent establishment

a) For the purposes of a Tax Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

An enterprise of a Contracting Party shall be regarded as having a permanent establishment in Vietnam if it simultaneously satisfies the following three conditions:

a.1) It maintains in Vietnam a “place of business”, such as a building, an office or part of such building or office, a facility or equipment, including a location, facility, or equipment owned, leased, or otherwise at the disposal of the enterprise, including where the enterprise does not own such place of business but has it actually at its disposal to carry on business;

a.2) The place of business is of a fixed nature, meaning that it is established at a specific location and/or maintained on a continuous basis. The fixed nature of a place of business does not necessarily depend on whether such place of business is attached to a specific geographic location for a particular length of time;

a.3) The enterprise carries on all or part of its business through such place of business.

An e-commerce platform or digital platform through which a foreign enterprise carries on all or part of its activities of supplying goods or services in Vietnam shall be regarded as a permanent establishment of the foreign enterprise in Vietnam, as it satisfies the three conditions for a permanent establishment specified in Point a Clause 2 of this Article.

b) An enterprise of a Contracting Party shall be regarded as carrying on business through a permanent establishment in Vietnam primarily in the following cases:

b.1) It has in Vietnam: a place of management, a branch (such as a branch of a law firm, a branch of a foreign entity, a branch of a tobacco company, or a bank branch), an office (including a commercial representative office if it negotiates or concludes commercial contracts), a factory, a workshop, a mine, an oil or gas well, a warehouse for goods delivery, a place for the exploration or extraction of natural resources, or equipment or facilities used for the exploration or extraction of natural resources in Vietnam;

b.2) It has in Vietnam a building site, a construction, installation or assembly project, or carries out supervisory activities connected with such sites or projects, provided that such sites, projects or supervisory activities last for longer than the period specified in the relevant Tax Agreement;

A building site, construction or installation project includes a site or project for the construction of buildings, roads, bridges, installation of pipelines, excavation, or dredging of rivers. The period is counted from the date on which the contractor commences preparatory work for the construction project in Vietnam, such as establishing a construction office or preparing a construction plan, until the project is completed and fully handed over in Vietnam, including any period during which the project is interrupted for any reason.

Subcontractors engaged by an enterprise of the Contracting Party participating in the above construction, installation or assembly projects shall also be regarded as carrying on business in Vietnam through a permanent establishment if they meet all of the conditions specified at Point a Clause 2 of this Article.

The period of project execution for determining a permanent establishment of the main contractor shall include the aggregate period of execution of the contractual portions performed by subcontractors and the period of execution by the main contractor.

b.3) It provides services, including consultancy services, in Vietnam through its employees or another person, provided that such service activities, for the same project or a related project, are carried on in Vietnam for a period or periods aggregating more than 183 days in any 12-month period;

Where the provision of services does not continue for more than 183 days in a 12-month period but nevertheless satisfies the three conditions for a permanent establishment specified in Point a Clause 2 of this Article, such provision of services shall be regarded as constituting a permanent establishment in Vietnam.

b.4) It has in Vietnam a broker, a commission agent, or any other agent, if such agent devotes the whole or the greater part of its activities to the enterprise (a dependent agent).

b.5) It authorizes a person in Vietnam:

b.5.1) To habitually exercise the authority to negotiate and conclude contracts in the name of the enterprise, or to sign contracts in the name of that person that create obligations or liabilities for the enterprise; or

b.5.2) Not to have authority to negotiate or conclude contracts, but to habitually have authority to represent the enterprise in delivering goods in Vietnam.

c) A foreign enterprise shall not be regarded as having a permanent establishment in Vietnam in the following cases:

c.1) It uses facilities solely for the purpose of storing or displaying its goods;

c.2) It has in Vietnam a warehouse used solely for the purpose of storing or displaying goods, or for processing by another enterprise;

c.3) It has in Vietnam a fixed place of business solely for the purpose of purchasing goods or collecting information for the enterprise;

c.4) It has in Vietnam a fixed place of business solely for the purpose of carrying on preparatory or auxiliary activities for the enterprise.

d) Where a company that is a resident of a Contracting Party controls, or is controlled by, a company that is a resident of Vietnam, or carries on business in Vietnam (whether through a permanent establishment or otherwise), this fact shall not of itself constitute either company a permanent establishment of the other.

However, where a company that is a resident of a Contracting Party makes a capital contribution to establish a joint-venture enterprise or a wholly foreign-owned enterprise in Vietnam (including an export-processing enterprise), that company shall be regarded as having a permanent establishment in Vietnam if:

d.1) The joint-venture enterprise or the wholly foreign-owned enterprise habitually negotiates and concludes contracts in the name of that company, or signs contracts in the name of the joint-venture enterprise or the wholly foreign-owned enterprise that create obligations or liabilities for the foreign company; or

d.2) The joint-venture enterprise or the wholly foreign-owned enterprise habitually acts on behalf of the foreign company in delivering goods in Vietnam; or

d.3) The foreign company has the right to dispose of the physical and technical facilities of the joint-venture enterprise or the wholly foreign-owned enterprise in the course of production and business activities (that is, the foreign company’s use of the physical and technical facilities of the joint-venture enterprise or the wholly foreign-owned enterprise in Vietnam (if any) in the course of production and business activities in Vietnam is not conducted on an arm’s-length basis).

3. Determination of taxable income attributable to a permanent establishment

a) The taxable income of a permanent establishment of a foreign enterprise (other than a foreign bank branch in Vietnam) shall be determined in accordance with the documents providing guidance on corporate income tax applicable to foreign organizations and individuals conducting business in Vietnam without establishing a legal entity, or deriving income in Vietnam;

b) In determining expenses allocated by the head office or other offices of a foreign enterprise to a permanent establishment in Vietnam, the permanent establishment shall be treated as a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently of the head office or other offices of the foreign enterprise. In all cases, the following amounts allocated by the head office or other offices of the foreign enterprise to a permanent establishment in Vietnam shall not be accepted as deductible expenses:

b.1) Royalties or similar payments for the use of patents or similar rights;

b.2) Commissions for services or for management services;

b.3) Interest on loans in any form.

c) The determination of the taxable income of a foreign bank branch in Vietnam shall be carried out in accordance with the guidance on determination of taxable income for corporate income tax purposes applicable to legal entities in Vietnam. In all cases, the following amounts allocated by the head office or other offices of a foreign bank to its branch in Vietnam shall not be accepted as deductible expenses:

c.1) Royalties or similar payments for the use of patents or similar rights;

c.2) Commissions for services or for management services.

The foregoing provisions on taxation of business profits are set out in the Business Profits Article of the Tax Agreement.

Section 5. INCOME FROM INTERNATIONAL TRAFFIC

Article 15. Definition of international traffic

For the purposes of a Tax Agreement, the term “international traffic” means any transport of goods or passengers by ship or aircraft and, under certain Tax Agreements, may also include means of transport by road, rail or inland waterways (hereinafter referred to as “means of transport”), operated by an enterprise of Vietnam or of the Contracting Party, except where such transport is carried on solely between places within the territory of Vietnam or of the Contracting Party.

Article 16. Determination of enterprise carrying on international traffic

Depending on the relevant Tax Agreement, an enterprise of Vietnam or of the Contracting Party carrying on international traffic shall be determined based on the following criteria:

1. An enterprise managed by a resident of Vietnam or of the Contracting Party; or

2. An enterprise with its place of effective management in Vietnam or in the Contracting Party;

provided that such enterprise owns or has the right to use at least one means of transport in its entirety and uses such means of transport to carry passengers and/or goods in international traffic (hereinafter referred to as “a means of transport directly operated by the enterprise”).

Article 17. Determination of income from international traffic

Depending on the provisions of the relevant Tax Agreement, income from international traffic of the enterprises specified in Article 16 of this Circular shall be exempt from tax or entitled to tax reduction in Vietnam or in the Contracting Party.

The scope of tax exemption or reduction in Vietnam applicable to an enterprise of the Contracting Party includes:

1. Income from international traffic by means of transport directly operated by the enterprise, and from ancillary activities directly connected with such international traffic. To be specific:

a) Revenue from international traffic by means of transport directly operated by the enterprise itself, supported by transport documents (tickets, bills of lading, or manifests for the carriage of passengers and goods);

b) Revenue from the leasing of part of the capacity of a means of transport (also known as space chartering) or the leasing of an entire means of transport on a voyage basis, where such means of transport is directly operated by the enterprise itself;

c) Revenue from the carriage of goods or passengers under a consortium arrangement for the operation of an international traffic route, provided that the enterprise participates in the consortium by contributing means of transport directly operated by itself, or by contributing to the operating costs of means of transport directly operated by the consortium, and the parties issue separate transport documents. In this case, revenue shall be determined based on transport documents issued by the enterprise as a consortium member, but shall not exceed the capacity entitlement allocated to the enterprise under the consortium agreement;

d) Revenue from the carriage of passengers or goods for which the enterprise issues international transport documents, transported on a means of transport operated by another enterprise, under either of the following conditions:

d.1) The leg of carriage forms part of an international traffic journey by ship or aircraft directly operated by the enterprise itself and is recorded in a transport document issued by the enterprise itself;

d.2) The carriage is performed under a slot-swap arrangement whereby the enterprise directly operates part of a means of transport in exchange for the right to use a corresponding part of a means of transport operated by another enterprise. In this case, revenue shall be determined based on transport documents issued by the enterprise itself, but shall not exceed the capacity entitlement available to the enterprise free of charge on the partner carrier’s means of transport under the slot-swap agreement.

dd) Income from the short-term leasing of containers where such leasing is ancillary to the operation of means of transport directly operated by the enterprise, where the Tax Agreement so provides.

The ancillary nature of the short-term leasing of containers shall be determined where the containers travel together with the means of transport calling at a port in Vietnam, contain imported goods being transported, and the cost of using the containers is included in the freight charges. Income from the short-term leasing of containers arises where the consignee retains the containers beyond the free-use period.

e) Revenue from the bareboat chartering of ships or aircraft (hereinafter referred to as “bareboat charter”), where such chartering is ancillary to the international traffic activities of means of transport directly operated by the enterprise, where specifically provided for in the Tax Agreement and where all of the following three conditions are simultaneously satisfied:

e.1) The means of transport is being used by the enterprise in international traffic;

e.2) The total charter period is shorter than the period during which the means of transport is used for the enterprise’s own international traffic activities within a 12-month period beginning or ending in a calendar year;

e.3) The charterer is not permitted to change the name or livery of the means of transport.

A bareboat charter is a form of chartering under which the shipowner provides the charterer with a specific vessel without crew.

The revenue referred to in Points dd and e of this Clause shall not be regarded as revenue from ancillary activities associated with international traffic for the purposes of applying the Tax Agreement if the enterprise does not derive any revenue referred to in Points a, b, c or d of this Clause.

2. Where two or more enterprises form a consortium or a partnership arrangement without legal personality to carry on international traffic by means of transport directly operated by the consortium or partnership, and transport documents are issued in the name of the consortium or partnership, the scope of tax exemption or reduction under the Tax Agreement shall be determined separately for each member of the consortium or partnership under the Tax Agreement concluded between Vietnam and the country where such member is a resident or where such member has its place of effective management, as applicable. The basis for determining revenue eligible for tax exemption or reduction shall be determined in accordance with the principles set out in Clause 1 of this Article and allocated according to the share of revenue attributable to each member under the consortium or partnership contract or agreement.

For tax declaration purposes, such enterprises must separately account for the above income for the purposes of applying corporate income tax exemption or reduction in accordance with the provisions on income from international traffic. In all cases, the revenue eligible for tax exemption or reduction shall not exceed the revenue attributable to international traffic activities for corporate income tax purposes under the relevant regulations.

The foregoing provisions governing the taxation of income from international traffic are set out in the International Traffic Article of the Tax Agreement.

Section 6. INCOME FROM DIVIDENDS

Article 18. Definition of dividends

For the purposes of a Tax Agreement, “dividends” means amounts distributed from the after-tax income of a limited liability company or a joint-stock company to its members or shareholders; amounts distributed from the after-tax income of a joint-venture enterprise or a wholly foreign-owned enterprise to the foreign party; income from (indirect) investment activities abroad (other than income in the form of loan interest specified in Section 7 Chapter II of this Circular) derived by residents of Vietnam; and income distributed from outbound direct investment activities of Vietnamese enterprises that is treated for tax purposes by the Contracting Party as dividends.

Article 19. Determination of tax liability on income from dividends

1. Under a Tax Agreement, Vietnam may tax dividends arising in Vietnam. Where the beneficial owner of the dividends is a resident of the Contracting Party, the tax rate applied in Vietnam shall not exceed the maximum tax rate specified in the Tax Agreement.

2. Where a resident of Vietnam receives dividends from a company that is a resident of the Contracting Party, that Contracting Party may tax such income in accordance with Clause 1 of this Article. Vietnam may also tax such income in accordance with current Vietnamese tax law, while applying measures to avoid double taxation in respect of such income in accordance with Section 20 of this Chapter.

3. Where a resident of the Contracting Party receives dividends and current Vietnamese tax law does not provide for taxation of such income, or taxes such income at a rate lower than that specified in the Tax Agreement, such resident shall be subject to tax in accordance with current Vietnamese tax law.

Article 20. Determination of the beneficial owner of dividends

1. Under a Tax Agreement, the tax provisions on dividends shall apply only to residents who are simultaneously the recipients and the beneficial owners of the dividends – that is, shareholders.

2. In addition to certain cases where Tax Agreement benefits are denied under Article 10 of this Circular, the reduced tax rates on dividend income provided for in a Tax Agreement shall not apply to:

a) A person who receives dividend payments but is neither a shareholder nor a resident of Vietnam or of the Contracting Party;

b) Dividends paid by a company that is a resident of Vietnam to a permanent establishment in Vietnam of a resident of the Contracting Party;

c) Dividends paid by a company that is a resident of Vietnam to a permanent establishment of another Vietnamese company in the Contracting Party.

3. The foregoing provisions governing the taxation of income from dividends are set out in the Dividends Article of the Tax Agreement.

Section 7. INTEREST INCOME 

Article 21. Definition of interest

For the purposes of a Tax Agreement, the term “interest” means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and, in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures.

Article 22. Determination of tax liability on interest income

1. Under a Tax Agreement, Vietnam may tax interests arising in Vietnam. Where the beneficial owner of the interest is a resident of the Contracting Party, the tax rate applied in Vietnam shall not exceed the maximum tax rate provided for in the Tax Agreement.

Interest shall be deemed to arise in Vietnam where it is borne and payable by a resident of Vietnam, including interest borne and payable by the Government of Vietnam and Vietnamese local authorities, or by a permanent establishment or fixed base in Vietnam of a resident of the Contracting Party.

2. Where a resident of Vietnam derives interest arising in a Contracting Party, such Contracting Party may tax such interest income in accordance with Clause 1 of this Article. Vietnam may also tax such income in accordance with current Vietnamese tax law, while applying measures to avoid double taxation in respect of such income in accordance with Section 20 of this Chapter.

3. Where current Vietnamese tax law does not provide for taxation of such income, or taxes such income at a rate lower than that specified in the Tax Agreement, such resident shall be subject to tax in accordance with current Vietnamese tax law.

Article 23. Determination of the beneficial owner of interest income

1. Under a Tax Agreement, the provisions governing the taxation of interest apply only to persons who directly make the loan, directly receive the interest, and are the beneficial owners of such interest, namely, the lenders.

2. In addition to certain cases where Tax Agreement benefits are denied under Article 10 of this Circular, the reduced tax rates or exemption in respect of interest provided for in a Tax Agreement shall not apply to:

a) A person who receives the interest payment but is not the lender;

b) Interest arising in Vietnam and paid to a permanent establishment in Vietnam of a resident of the Contracting Party;

c) Interest arising in Vietnam and paid to a permanent establishment of another Vietnamese company situated in the Contracting Party;

d) Interest arising in Vietnam and paid to a permanent establishment situated in the Contracting Party of an enterprise of a third country;

dd) The loan proceeds are not transferred directly from the account of the lender who is a resident of the Contracting Party.

3. The foregoing provisions governing the taxation of interest income are set out in the Interest Article of the Tax Agreement.

Section 8. INCOME FROM ROYALTIES

Article 24. Definition of royalties

For the purposes of a Tax Agreement, the term “royalties” means payments for the use of, or the right to use:

1. Copyright in a literary, artistic or scientific work, including cinematograph films and films or tapes used for radio or television broadcasting.

2. A patent.

3. A trademark.

4. A design, model, plan, secret formula or process.

5. Computer software.

6. Industrial, commercial or scientific equipment.

7. Information concerning industrial, scientific or commercial experience.

Article 25. Determination of tax liability on income from royalties

1. Under a Tax Agreement, Vietnam may tax royalties arising in Vietnam. Where the beneficial owner of the royalties is a resident of the Contracting Party, the tax rate applied in Vietnam shall not exceed the maximum tax rate provided for in the Tax Agreement.

Royalties shall be deemed to arise in Vietnam where they are borne by and payable by any resident of Vietnam, including royalties borne by and payable by the Government of Vietnam and Vietnamese local authorities, or by a permanent establishment or fixed base in Vietnam of a resident of the Contracting Party.

2. Where a resident of Vietnam derives royalties arising in a Contracting Party, that Contracting Party may tax such income in accordance with Clause 1 of this Article. Vietnam may also tax such income in accordance with current Vietnamese tax law, while applying measures to avoid double taxation in respect of such income in accordance with Section 20 of this Chapter.

3. Where current Vietnamese tax law does not provide for taxation of such income, or taxes such income at a rate lower than that specified in the Tax Agreement, such resident shall be subject to tax in accordance with current Vietnamese tax law.

Article 26. Determination of the beneficial owner of income from royalties

1. Under a Tax Agreement, the provisions governing the taxation of royalties apply only to persons who directly receive and are the beneficial owners of such royalty income, namely, the persons having the right to own, use and exploit the copyright or the relevant rights.

2. The provisions governing the taxation of royalty income shall not apply in any of the following cases:

a) The person receiving the royalty payment is not the person having the right to own, use and exploit the copyright or the relevant rights;

b) Royalties arising in Vietnam are directly connected with a permanent establishment situated in Vietnam of the beneficial owner, who is a resident of a Contracting Party;

c) Royalties arising in Vietnam are paid to a permanent establishment of another Vietnamese company situated in a Contracting Party.

3. The foregoing provisions governing the taxation of royalties are set out in the Royalties Article of the Tax Agreement.

Section 9. INCOME FROM PROVISION OF TECHNICAL SERVICES

Article 27. Definition of technical service fees

For the purposes of a Tax Agreement, the term “technical service fees” means payments of any kind made to any person, other than an employee of the person making the payment, for services of a technical, managerial or consultancy nature.

Article 28. Determination of tax liability on income from provision of technical services

1. Under a Tax Agreement, Vietnam may tax technical service fees arising in Vietnam. Where the beneficial owner of the technical service fees is a resident of a Contracting Party, the tax rate applied in Vietnam shall not exceed the maximum rate provided for in the Tax Agreement.

Technical service fees shall be deemed to arise in Vietnam where they are, in any form, borne by and payable by a resident of Vietnam, including fees borne by and payable by the Government of Vietnam and Vietnamese local authorities, or by a permanent establishment or fixed base in Vietnam of a resident of the other Contracting Party.

2. Where a resident of Vietnam derives technical service fees arising in a Contracting Party that has concluded a Tax Agreement with Vietnam, that Contracting Party may tax such income in accordance with Clause 1 of this Article; Vietnam may also tax such income in accordance with current Vietnamese tax law, while applying measures to avoid double taxation in respect of such income in accordance with Section 20 of this Circular.

The foregoing provisions governing the taxation of technical service fees are set out in the Technical Service Fees Article of the Tax Agreement.

Section 10. CAPITAL GAINS FROM THE ALIENATION OF PROPERTY

Article 29. Definition of capital gains from alienation of property

For the purposes of a Tax Agreement, “capital gains” means income, in any form, derived from the sale, transfer (in whole or in part) or exchange of property and rights in property, including where property is contributed to a business in exchange for rights in that business.

Article 30. Determination of tax liability on capital gains

1. Tax liability on gains from the alienation of immovable property in Vietnam

Under a Tax Agreement, Vietnam may tax, in accordance with the current Vietnamese tax law, gains derived by a resident of the Contracting Party from the alienation of immovable property situated in Vietnam.

2. Tax liability on gains from the alienation of business property of a permanent establishment in Vietnam

Under a Tax Agreement, Vietnam may tax, in accordance with the current Vietnamese tax law, gains derived by a resident of the Contracting Party from the alienation of business property of a permanent establishment situated in Vietnam or from the alienation of such permanent establishment.

3. Tax liability on gains from the alienation of ships, boats or aircraft operated in international traffic

Under a Tax Agreement, gains derived from the alienation of ships, boats or aircraft operated in international traffic (as prescribed in Article 16 of this Circular) by an enterprise of the Contracting Party engaged in international traffic shall not be subject to tax in Vietnam.

4. Tax liability on gains from the (direct or indirect) alienation of capital by foreign investors in foreign-invested enterprises, a trust or partnership, the value of whose property consists mainly of immovable property

Most Tax Agreements between Vietnam and other countries provide that Vietnam may tax income where a foreign party alienates capital in enterprises, trusts or partnerships that are residents of Vietnam, the value of whose property consists mainly of immovable property.

The proportion of the value of immovable property in the total value of the assets of an enterprise shall be the simple average of the proportions of the value of immovable property in the total value of the remaining assets of the enterprise whose capital is directly or indirectly alienated, determined at the time of the alienation, and at the beginning and the end of the tax year immediately preceding the year of alienation. The value of immovable property shall be determined based on the audited financial statements of the enterprise at the beginning and the end of the tax year immediately preceding the year of alienation and the financial statements prepared by the enterprise at the time of the alienation.

In such case, the predominant proportion of the value of immovable property in the total assets of the enterprise shall be determined as follows:

a) Where the Tax Agreement specifies a proportion or a threshold for determining the predominant proportion, such proportion or threshold shall apply as provided for in the Tax Agreement;

b) Where the Tax Agreement does not specify a proportion or a method for determining the predominant proportion, the predominant proportion shall be determined as exceeding 50%.

This provision shall not apply to Tax Agreements that do not refer to a predominant-proportion criterion but only generally provide for the taxing right of the country in which the immovable property is situated.

5. Tax liability on gains from the (direct or indirect) alienation of shares in a company in Vietnam

Some Tax Agreements provide that gains derived from the alienation of shares by a resident of the Contracting Party in a company that is a resident of Vietnam shall be subject to tax in Vietnam.

6. Tax liability on gains from the alienation of other property in Vietnam

Under a Tax Agreement, gains derived by a resident of the Contracting Party from the alienation in Vietnam of property other than the property specified in Clauses 1 to 5 of this Article shall not be subject to income tax in Vietnam.

The foregoing provisions governing the taxation of capital gains from the alienation of property are set out in the Capital Gains Article of the Tax Agreement.

Section 11. INCOME FROM INDEPENDENT PERSONAL SERVICES

Article 31. Definition of income from independent personal services

For the purposes of a Tax Agreement, income from independent personal services means income derived by an individual who is a resident of the Contracting Party from independent activities for the provision of professional services, such as scientific, literary, artistic, educational or teaching services, including the independent practice of physicians, lawyers, engineers, architects, dentists, accountants and auditors.

Income from independent personal services does not include employment (as provided for in the Dependent Personal Services Article), directors’ fees (as provided for in the Directors’ Fees Article), pensions (as provided for in the Pensions Article), government service (as provided for in the Government Service Article), income of students (as provided for in the Students Article), income of teachers and professors (as provided for in the Teachers, Professors and Researchers Article), or independent performance activities of entertainers and sportspersons (as provided for in the Entertainers and Sportspersons Article).

Article 32. Determination of tax liability on income from independent personal services

Under a Tax Agreement, a resident of the Contracting Party who performs independent personal services in Vietnam shall be subject to personal income tax in Vietnam in the following cases:

1. The individual carries on independent practice through a fixed base.

The term “fixed base” refers to a place or location of a regular or stable nature within the territory of a State through which an individual provides professional services (such as a medical consulting room, or the office of an architect or lawyer, etc.). The principles for determining a “fixed base” are similar to those for determining a “permanent establishment” of an enterprise as provided in Clause 2, Article 14 of this Circular.

2. The individual is present in Vietnam for 183 days or more during the tax year or within any 12-month period commencing from the date of arrival in Vietnam, as applicable under the relevant Tax Agreement.

3. The individual derives an aggregate amount of income from the performance of independent personal services in Vietnam during a specified period, as applicable under the relevant Tax Agreement.

The foregoing provisions governing the taxation of income from independent personal services are set out in the Independent Personal Services Article of the Tax Agreement.

Section 12. INCOME FROM DEPENDENT PERSONAL SERVICES

Article 33. Definition of income from dependent personal services

For the purposes of a Tax Agreement, income from dependent personal services means income in the form of remuneration derived by an individual who is a resident of the Contracting Party from employment in Vietnam, and vice versa. Income from dependent personal services does not include income derived by individuals acting as independent practitioners (as provided for in the Independent Personal Services Article), members of the board of directors of an enterprise (as provided for in the Directors’ Fees Article), entertainers and sportspersons (as provided for in the Entertainers and Sportspersons Article), employees of a foreign Government (as provided for in the Government Service Article), or remuneration in the form of pensions (as provided for in the Pensions Article).

Article 34. Determination of tax liability on income from dependent personal services

1. Under a Tax Agreement, an individual who is a resident of the Contracting Party and derives income from employment in Vietnam shall be subject to personal income tax in Vietnam on such employment income in accordance with the current Vietnamese personal income tax law.

2. Where the individual referred to in Clause 1 satisfies all three of the following conditions, remuneration derived from employment exercised in Vietnam shall be exempt from income tax in Vietnam:

a) The individual is present in Vietnam for a period or periods not exceeding 183 days in any 12-month period commencing or ending in the tax year concerned;

b) The employer is not a resident of Vietnam, regardless of whether the remuneration is paid directly by the employer or through a person acting on behalf of the employer;

c) The remuneration is not borne by and payable by a permanent establishment that the employer has in Vietnam.

3. The term “employer” referred to in Point b Clause 2 of this Article means the actual employer of the individual. In general, a person shall be regarded as the actual employer if it has the following rights and obligations:

a) It has the right to the products and services created by the employee and bears the responsibility and risks associated with the work performed by the employee;

b) It provides instructions to and provides the means of work for the employee;

c) It has the right to control and bears responsibility for the place of work.

4. Where a Vietnamese individual who is a resident of the Contracting Party derives no income from employment exercised in Vietnam but only income from employment exercised abroad, such individual shall not be subject to income tax in Vietnam in respect of such remuneration.

5. An individual serving as a member of the crew of a ship, boat or aircraft operated in international traffic by an enterprise that is a resident of, or has its place of effective management in, Vietnam shall be subject to income tax in Vietnam in accordance with Vietnamese law.

The foregoing provisions governing the taxation of income from dependent personal services are set out in the Dependent Personal Services Article of the Tax Agreement.

Section 13. INCOME FROM DIRECTORS’ FEES

Article 35. Definition of directors’ fees

For the purposes of a Tax Agreement, the term “directors’ fees” means income derived in Vietnam by a resident of the Contracting Party in the capacity of a member of the board of management, the board of directors, or a person holding a senior management position in an enterprise that is a resident of Vietnam, and vice versa. Such income does not include remuneration received by such members for performing other functions in the enterprise, such as those of an employee, consultant or adviser, or remuneration received by foreign individuals holding positions in representative offices of foreign companies in Vietnam. Such remuneration shall be treated as income from dependent personal services (as provided for in Section 12 Chapter II of this Circular).

Article 36. Determination of tax liability on income from directors’ fees

Section 14. INCOME FROM PERFORMANCE ACTIVITIES OF ENTERTAINERS AND SPORTSPERSONS

Article 37. Definition of income from performance activities of entertainers and sportspersons

For the purposes of a Tax Agreement, income from the performance activities of entertainers and sportspersons means income derived from artistic or sporting activities performed in Vietnam by entertainers or sportspersons who are residents of the Contracting Party, and vice versa.

Article 38. Determination of tax liability on income from performance activities of entertainers and sportspersons

1. Notwithstanding the provisions of Sections 11 and 12 Chapter II of this Circular, where an individual who is a resident of the Contracting Party carries on artistic or sporting activities in Vietnam and derives income from such activities, such individual shall be subject to income tax in Vietnam in accordance with Vietnamese law.

2. Notwithstanding the provisions of Sections 4, 11 and 12 Chapter II of this Circular, where income from artistic or sporting activities carried on in Vietnam by an individual who is a resident of the Contracting Party is paid not to the performing individual but to another person, such income shall be subject to tax in Vietnam in accordance with Vietnamese law.

3. Where the artistic or sporting activities of an individual or a company that is a resident of the Contracting Party are carried out under a cultural exchange programme between the Governments of the two countries or are supported by public funds of the Contracting Party, the income derived from such activities in Vietnam by such individual or foreign company shall be exempt from tax in Vietnam, if the Tax Agreement between Vietnam and that Contracting Party so provides.

The foregoing provisions governing the taxation of the income of entertainers and sportspersons are set out in the Entertainers and Sportspersons Article of the Tax Agreement.

Section 15. INCOME FROM PENSIONS

Article 39. Definition of income from pensions

For the purposes of a Tax Agreement, income from pensions means a pension received by a resident of the Contracting Party in respect of past employment in Vietnam, and vice versa. Pension income referred to in this Article does not include pensions paid by the Government or a local authority of Vietnam or of the Contracting Party, as such income is treated as income from government service (as provided for in Section 16 Chapter II of this Circular).

Article 40. Determination of tax liability on pension income

1. Depending on the relevant Tax Agreement, pension income shall be taxable:

a) Only in the State of which the pension recipient is a resident; or

b) Only in the State in which the pension is paid; or

c) In both the State of residence of the pension recipient and the State in which the pension arises, where the payer of the pension is a resident of, or has a permanent establishment in, that State.

2. The foregoing provisions governing the taxation of pension income are set out in the Pensions Article of the Tax Agreement.

Section 16. INCOME FROM GOVERNMENT SERVICE

Article 41. Definition of income from government service

For the purposes of a Tax Agreement, income from government service means remuneration, including salaries, wages and other similar remuneration, or pensions paid by the Government or a local authority of the Contracting Party to an individual in respect of services rendered to that Contracting Party.

Article 42. Determination of tax liability on remuneration from government service

1. Where a foreign individual is sent by the Government of the Contracting Party to work in Vietnam for agencies of that Government located in Vietnam, or for economic or cultural cooperation programmes or aid programmes between the two countries, the remuneration paid by the foreign Government to such individual shall be exempt from income tax in Vietnam, even if such individual becomes a resident of Vietnam as a result of performing such services.

2. Remuneration paid by the Government of a Contracting Party shall be taxable only in Vietnam where such remuneration is paid to an individual who is a resident of Vietnam in respect of services rendered to that foreign Government in Vietnam, and such individual satisfies one of the following two conditions:

a) Such individual is a Vietnamese national;

b) Such individual was a resident of Vietnam before rendering such services in Vietnam to the foreign Government.

Article 43. Determination of tax liability on pensions from government service

Where an individual receives a pension paid from a fund established by the State of Vietnam or Vietnamese local authorities (hereinafter collectively referred to as the “State of Vietnam”), or paid directly by the State of Vietnam in respect of past employment with the State of Vietnam, such pension shall be taxable only in Vietnam, unless such individual is both a resident of and a national of the Contracting Party, in which case such pension income shall be taxable only in that Contracting Party.

Article 44. Determination of tax liability on remuneration and pensions from government business activities

Notwithstanding the provisions of Articles 42 and 43 of this Circular, the taxation of salaries, wages, other similar remuneration or pensions paid by a foreign Government to an individual in connection with the business activities carried on by that foreign Government in Vietnam, such as the activities of a railway transport enterprise, postal enterprise or State performance company, shall be governed by Sections 12, 13, 14 and 15 Chapter II of this Circular, as the case may be.

The foregoing provisions governing the taxation of income from government service are set out in the Government Service Article of the Tax Agreement.

Section 17. INCOME OF STUDENTS, TRAINEES AND APPRENTICES

Article 45. Definition of income of students, trainees and apprentices

For the purposes of a Tax Agreement, the income of foreign students, trainees and apprentices in Vietnam in connection with their education, research or training in Vietnam, which falls within the scope of this Article, includes only:

1. Income received from sources outside Vietnam for the purpose of their education and living expenses in Vietnam.

2. Income received from employment in Vietnam directly connected with their education, research or training in Vietnam (where the Tax Agreement so provides). Under certain Tax Agreements, such income is exempt from tax only to the extent of a specified amount.

Article 46. Determination of tax liability on income of students, trainees and apprentices

Where a foreign student, trainee or apprentice was, immediately before coming to Vietnam for the purpose of studying, conducting research or receiving training, a resident of the Contracting Party, such student, trainee or apprentice shall be exempt from income tax in Vietnam in respect of the income specified in Article 45 of this Circular.

The foregoing provisions governing the taxation of income of students, trainees and apprentices are set out in the Students, Trainees and Apprentices Article of the Tax Agreement.

Section 18. INCOME OF TEACHERS, PROFESSORS AND RESEARCHERS

Article 47. Definition of income of teachers, professors and researchers

Certain Tax Agreements contain specific provisions on the tax treatment of income derived by foreign teachers, professors and researchers from teaching, lecturing or research activities in Vietnam. Such income includes income arising from teaching, lecturing or research activities carried out at universities or educational institutions recognized by the Government of Vietnam.

Article 48. Determination of tax liability on income of teachers, professors and researchers

1. Income derived by foreign teachers, professors and researchers from teaching, lecturing or research activities in Vietnam as specified in Article 47 of this Circular shall be exempt from tax in Vietnam (for the period specified in the Tax Agreement) where the following conditions are simultaneously satisfied:

a) Immediately before coming to Vietnam to teach, lecture or conduct research, the foreign teacher, professor or researcher was a resident of the Contracting Party;

b) The teaching, lecturing or research activities are carried out at a university or educational institution recognized by the Government of Vietnam.

2. The tax exemption under Clause 1 of this Article shall not apply where the teaching or research activities are carried out primarily for the private benefit of an individual or a private organization.

The foregoing provisions governing the taxation of income of teachers, professors and researchers are set out in the Teachers, Professors and Researchers Article of the Tax Agreement.

Section 19. OTHER INCOME

Article 49. Definition of other income

Article 50. Determination of tax liability on other income

1. Depending on the relevant Tax Agreement, a resident of the Contracting Party deriving other income arising in Vietnam shall be subject to tax in accordance with current Vietnamese tax laws. However, certain Tax Agreements provide for an exemption from tax in Vietnam in respect of such other income.

2. Where an item of other income is connected with a permanent establishment in Vietnam of a resident of the Contracting Party, Vietnam has the right to tax such income in accordance with current Vietnamese tax laws and the provisions of Section 4 or 11 Chapter II of this Circular, as the case may be.

The foregoing provisions on the taxation of other income are set out in the Other Income Article of the Tax Agreement.

Section 20. MEASURES FOR ELIMINATION OF DOUBLE TAXATION IN VIETNAM

Under a Tax Agreement, where a taxpayer who is a resident of Vietnam derives income from the Contracting Party and has paid tax in that country (in accordance with the Tax Agreement and the laws of that country), Vietnam may still have the right to tax such income. However, Vietnam is also obliged to apply measures for the elimination of double taxation so that such taxpayer is not subject to taxation twice. Vietnam may apply one or a combination of the measures for the elimination of double taxation specified in Articles 51, 52 and 53 of this Circular.

Article 51. Tax credit method

Where a resident of Vietnam derives income and has paid tax in the Contracting Party, and the Tax Agreement provides that Vietnam applies the tax credit method, such resident shall, when declaring income tax in Vietnam, include such income in taxable income in Vietnam in accordance with current Vietnamese tax law, and the amount of tax paid in the Contracting Party shall be credited against the tax payable in Vietnam. The tax credit shall be applied in accordance with the following principles:

1. The tax paid in the Contracting Party that is eligible for credit shall be the tax specified in the Tax Agreement.

2. The amount of tax credit shall not exceed the amount of tax payable in Vietnam calculated on the income derived from the Contracting Party under current Vietnamese tax law.

3. The amount of tax paid in the Contracting Party eligible for credit shall be the tax incurred during the period falling within the tax year in Vietnam.

Article 52. Tax-sparing credit for tax incentives (tax exemption or reduction) granted by the Contracting Party

Where a resident of Vietnam derives income that is subject to tax in the other Contracting Party (at a rate exempted or reduced as a special incentive measure), and the Tax Agreement provides that Vietnam shall apply the tax-sparing credit mechanism in respect of the tax exempted or reduced in that Contracting Party, then, when such resident declares income tax in Vietnam, such income shall be included in the taxable income in Vietnam in accordance with current Vietnamese tax laws, and the amount of tax spared in that Contracting Party shall be credited against the amount of tax payable in Vietnam. The tax spared in that Contracting Party shall mean the amount of tax that the resident of Vietnam would have been liable to pay in that Contracting Party on the income arising in that Contracting Party but for the application of a tax exemption or reduction granted as a special incentive measure under the laws of that Contracting Party.

The tax credit shall be applied in accordance with the following principles:

1. The tax paid or deemed paid in the Contracting Party that is eligible for credit shall be the tax specified in the Tax Agreement.

2. The amount of tax credit shall not exceed the amount of tax payable in Vietnam calculated on the income derived from the Contracting Party under current Vietnamese tax law.

3. The amount of tax paid in the Contracting Party eligible for credit shall be the tax incurred during the period falling within the tax year in Vietnam.

Article 53. Indirect tax credit method

1. Where a resident of Vietnam derives income from the Contracting Party and such income has been subject to corporate income tax before being distributed to that resident, and the Tax Agreement provides that Vietnam applies the indirect tax credit method, such resident shall, when declaring income tax in Vietnam, include such income in taxable income in Vietnam in accordance with current Vietnamese tax law, and the underlying tax paid in the Contracting Party shall be credited against the tax payable in Vietnam. However, in all cases, the amount of tax credit shall not exceed the amount of tax payable in Vietnam calculated on the foreign-source income under current Vietnamese tax law.

The underlying tax eligible for credit shall be the tax paid by a joint-stock company that is a resident of the Contracting Party in the form of corporate income tax before the distribution of dividends to the Vietnamese resident, provided that the Vietnamese resident directly controls a minimum percentage of the voting rights of the joint-stock company, as specified in the relevant Tax Agreement.

2. Notwithstanding the above provisions, although Vietnam applies the indirect tax credit method where such application is provided for in the Tax Agreement, where, under Vietnamese law, foreign-source income of a Vietnamese resident is eligible for an indirect tax credit, such provision shall continue to apply.

Notwithstanding the above provisions on the application of measures for the avoidance of double taxation, where, under the Tax Agreement, foreign-source income of a Vietnamese resident is exempt from tax in Vietnam, such income shall be exempt from tax and no credit shall be allowed for the tax paid in the foreign country (that is, such income shall be taxed only once and no measure for the avoidance of double taxation shall be applied).

The foregoing provisions on measures for the avoidance of double taxation are provided for in the Article on the Elimination of Double Taxation of the Tax Agreement.

Section 21. SPECIAL PROVISIONS

Article 54. Resolution of disputes arising from application of Tax Agreement

1. For residents of a Contracting Party to a Tax Agreement with Vietnam

a) Where a resident of a Contracting Party (hereinafter in this Article referred to as the “complainant”) considers that the Vietnamese tax authority has determined its tax liability in a manner not in accordance with the provisions of the Tax Agreement, that person may request the competent authority of the Contracting Party of which that person is a tax resident to initiate the mutual agreement procedure in accordance with the Tax Agreement.

This provision shall not preclude the complainant from lodging a complaint in accordance with Vietnamese laws on complaint resolution or administrative litigation;

The competent authority of Vietnam shall not consider a complaint where: the complaint is pending before or has been adjudicated by a court; or the complaint has been lodged after the time limit prescribed in Clause 3 of this Article.

b) To lodge a complaint under Point a of this Clause, the complainant must have fulfilled all due obligations notified in the tax decisions (i.e., administrative tax decisions and tax notices) issued by the tax authority, both before and during the complaint process. Where the complaint concerns the amount of tax calculated or assessed by the tax authority, the complainant must still pay such amount of tax in full, unless a competent State agency decides to suspend the implementation of the tax calculation decision or tax assessment decision issued by the tax authority.

2. For residents of Vietnam

Where a resident of Vietnam considers that a Contracting Party has determined its tax liability in a manner not in accordance with the Tax Agreement, that person may request the competent authority of Vietnam to initiate the mutual agreement procedure under the Tax Agreement. Before making such request to the competent authority of Vietnam, the complainant must have fulfilled all obligations notified in the tax decisions issued by the Vietnamese tax authority and by the Contracting Party, as required under the laws of that Contracting Party.

3. A request under Clauses 1 and 2 of this Article must be submitted within three years from the date of the first notification by the tax authority giving rise to the tax treatment that the complainant considers not to be in accordance with the Tax Agreement.

4. The order and procedures for resolving MAP under a Tax Agreement shall be carried out in accordance with the guidance provided in Chapter III of this Circular.

Article 55. Exchange of Information

1. Principles for the exchange of tax information under a Tax Agreement, other international tax treaty to which Vietnam is a party, or international tax arrangement entered into by Vietnam

a) The collection, provision and exchange of tax information between the Department of Taxation and the competent authorities of other jurisdictions shall be carried out on a reciprocal basis and in accordance with the relevant Tax Agreement, other international tax treaty, or international tax arrangement;

b) The exchange of tax information shall be carried out strictly within the scope, manner, conditions and confidentiality requirements specified in the relevant Tax Agreement, other international tax treaty, or international tax arrangement, ensuring that the information is used for its intended purposes and in compliance with Vietnamese law.

2. Collection and exchange of information under a Tax Agreement

a) The collection and exchange of information under a Tax Agreement shall be carried out through the exchange of information mechanism between the competent authorities of the Contracting Parties for the purposes of administering and enforcing the domestic tax laws or the provisions of the Tax Agreement, as the case may be;

b) The information to be exchanged shall be information that is foreseeably relevant to:

b.1) The administration or enforcement of the domestic tax laws or the provisions of the Tax Agreement, as the case may be;

b.2) The administration and determination of tax liabilities;

b.3) The prevention of tax fraud and tax evasion.

c) During the processing of a bilateral or multilateral MAP or APA case, where the competent authority of a Contracting Party requests the provision of information or clarification thereof, the taxpayer shall provide the requested information to the tax authority to facilitate its exchange with the foreign tax authority in accordance with the law on tax administration;

d) The tax authority may use information received from a foreign tax authority for the purposes of analysis, assessment, and negotiations in the course of processing a MAP or APA case, in accordance with the relevant Tax Agreement and Vietnamese law;

dd) Requests for, and the provision or exchange of, information shall not be made in respect of requests that are speculative, of a general or indiscriminate nature, lack reasonable grounds, or do not have a clear nexus to tax administration or the determination of the tax liabilities of the relevant taxpayer.

3. Domestic collection and verification of information

a) For the purposes of fulfilling the obligation to exchange information under a Tax Agreement and facilitating the processing of MAP and APA cases, the tax authority may require State authorities, organizations, individuals, and taxpayers to provide relevant information in accordance with regulations of law;

b) State authorities, organizations, and individuals shall cooperate with the tax authority, and, at its request, provide information, clarifications, or additional information in accordance with regulations of law;

c) The tax authority may adopt appropriate measures as prescribed by law to:

c.1) Collect information;

c.2) Examine, cross-check, and verify information;

c.3) Require the provision of clarifications or additional information.

d) The collection of information for the purposes of exchange of information under a Tax Agreement shall not be subject to whether such information is required for domestic tax purposes;

dd) The information requested may include information held by organizations or individuals, including:

dd.1) Banks;

dd.2) Credit institutions and financial institutions;

dd.3) Trustees and agents;

dd.4) Other organizations or individuals holding such information in accordance with regulations of law.

e) The provision of information under this Article shall not be declined solely because the information constitutes customer confidential information held by a credit institution or a foreign bank branch;

g) The tax authority may exercise its information-gathering powers under Vietnamese law for the purposes of fulfilling the obligation to exchange information under a Tax Agreement;

h) In the case of a bilateral or multilateral APA, the taxpayer shall provide the tax authority with information corresponding to that submitted to the tax authority of the other Contracting Party to ensure that the competent authorities of the Contracting Parties have a sufficient basis for processing the APA case;

i) Where the tax authority has exercised all lawful measures necessary to obtain the requested information but determines that such information no longer exists under the applicable record-retention requirements, or cannot be obtained under Vietnamese law, the Department of Taxation shall notify the competent authority of the Contracting Party that the requested information cannot be provided.

4. Automatic exchange of tax information

a) The collection, administration, and exchange of tax information through automatic exchange shall be carried out in accordance with the relevant Tax Agreement, other international tax treaty, or international tax arrangement relating to the exchange of tax information;

b) The tax authority shall carry out the automatic exchange of tax information in accordance with the scope, persons subject to exchange, exchange procedures, timelines, data formats, and technical requirements specified in the relevant Tax Agreement, other international tax treaty, international tax arrangement, and Vietnamese law;

c) Relevant State authorities, organizations, and individuals shall provide information in accordance with regulations of law for the purposes of implementing automatic exchange of information mechanisms.

5. Confidentiality and use of information

a) Information received or exchanged under a Tax Agreement, other international tax treaty, or international tax arrangement shall be kept confidential in accordance with Vietnamese law and the relevant Tax Agreement, other international tax treaty, or international tax arrangement;

b) Exchanged information shall be used only for the following purposes and in accordance with the relevant Tax Agreement, other international tax treaty, or international tax arrangement:

b.1) The application of the provisions of the Tax Agreement;

b.2) The administration and determination of tax liabilities;

b.3) The verification and investigation of violations of the tax laws;

b.4) The resolution of tax complaints, disputes, or judicial proceedings;

b.5) The conduct of MAP or APA procedures.

c) Exchanged information may be disclosed only to:

c.1) Foreign tax authorities;

c.2)  Competent State authorities;

c.3) Competent authorities conducting legal proceedings;

c.4) Authorities, organizations, and individuals directly involved in the assessment, collection, enforcement, or recovery of taxes, or the resolution of tax disputes. Such authorities, organizations, and individuals shall keep the information confidential in accordance with regulations of law.

d) Information received from a foreign tax authority shall be maintained and protected under the same confidentiality safeguards as information collected by the Vietnamese tax authority under Vietnamese law;

dd) Information may be used for a purpose other than those specified in Point b Clause 5 of this Article only where such use is permitted under the laws of both Contracting Parties and is authorized by the competent authority of the Contracting Party providing the information, except where the relevant Tax Agreement or other international tax treaty permits such use without the consent of the Contracting Party providing the information.

Article 56. Assistance in tax collection

Vietnam and the Contracting Party shall provide mutual assistance in the collection of taxes in accordance with the provisions on assistance in the collection of taxes under the relevant Tax Agreements concluded by Vietnam, on the following principles:

1. Vietnam may request the Contracting Party to assist in facilitating the collection of outstanding tax liabilities owed by an individual, enterprise, or organization in Vietnam where such individual, or the legal representative of such enterprise or organization, is resident in the Contracting Party.

2. At the request of the Contracting Party, the Vietnamese tax authority may assist in facilitating the collection of outstanding tax liabilities owed by an individual, enterprise, or organization in the Contracting Party where such individual, or the legal representative of such enterprise or organization, is resident in and carrying on business activities in Vietnam, in accordance with the law on tax administration and the tax administration practices of Vietnam.

3. The Vietnamese tax authority shall assist the Contracting Party in the collection of taxes by notifying the taxpayer of, and facilitating the collection of, the outstanding tax liabilities in respect of which the Contracting Party has requested assistance in collection.

4. In providing assistance in the collection of taxes, the Vietnamese tax authority shall give priority to the collection of outstanding tax liabilities arising in Vietnam.

5. The Vietnamese tax authority shall not provide assistance in the collection of taxes at the request of the Contracting Party in the following circumstances: The tax claim in respect of which assistance is requested is subject to dispute; providing the requested assistance would require the application of administrative measures that are contrary to, or inconsistent with, the laws or administrative practices of Vietnam or of the Contracting Party; providing the requested assistance would be contrary to Vietnamese law; the Contracting Party has not taken reasonable measures available under its laws to recover or preserve the tax claim; or the administrative burden imposed on Vietnam would be clearly disproportionate to the benefit to be derived by the Contracting Party.

6. The Vietnamese tax authority shall establish a temporary collection account with the State Treasury and coordinate with the State Treasury in establishing procedures for the collection and remittance of amounts collected under the assistance in the collection of taxes mechanism.

Article 57. Fiscal privileges for members of diplomatic missions and consular posts

1. Nothing in a Tax Agreement shall affect the fiscal privileges of members of diplomatic missions or consular posts under the provisions of international agreements to which the Socialist Republic of Vietnam is a Party.

2. The foregoing provisions governing the fiscal privileges of members of diplomatic missions and consular posts are set out in the Members of Diplomatic Missions and Consular Posts Article of the relevant Tax Agreement.

Chapter III

MUTUAL AGREEMENT PROCEDURE (MAP)

Section 1. CASES OF REJECTION OF MAP REQUEST

Article 58. Cases in which the competent authority of Vietnam may reject an MAP request

1. The MAP request does not fall within the jurisdiction of the competent authority of Vietnam.

2. The MAP request is submitted after the expiry of 03 years (or 02 years, as provided for in the relevant Tax Agreement) from the date on which the Vietnamese tax authority or the Contracting Party, as the case may be, issued the first notification of the action taken resulting in taxation that the resident of Vietnam or the Contracting Party considers not to be in accordance with the provisions of the relevant Tax Agreement.

3. The person requesting MAP has not fully complied with the obligations specified in the tax treatment decisions issued by the Vietnamese tax authority or the Contracting Party, as the case may be, before and during the MAP process, unless a competent State authority has decided to suspend the implementation of the tax assessment decision or tax imposition decision issued by the tax authority.

4. The person requesting MAP or a related party is subject to a tax audit and no official tax audit report has been issued.

5. There are grounds to determine that the person requesting MAP has abused, or is requesting, MAP with the purpose of obtaining a tax benefit contrary to the object and purpose of the Tax Agreement, or for the purpose of tax avoidance or tax evasion.

6. The Department of Taxation determines that the tax liability of the person requesting MAP is in accordance with the provisions of the relevant Tax Agreement.

Where a MAP request is rejected, the competent authority of Vietnam shall issue a Notice of Rejection of the MAP Request using Form No. 03/MAP set out in the Appendix to this Circular (or a letter rejecting the MAP request addressed to the competent authority of the Contracting Party).

Section 2. PROCEDURES FOR PROCESSING MAP REQUESTS

Article 59. Procedures for processing MAP requests

The MAP request processing procedure comprises the following stages:

1. Receipt of the MAP request (from the taxpayer and the foreign tax authority).

2. Review and analysis of the MAP request.

3. Exchange of views, MAP discussions and negotiations, and written confirmation of the outcome of the MAP discussions by the taxpayer.

4. Conclusion and implementation of the MAP outcome.

Article 60. Receipt of MAP requests

1. Receipt of an MAP request from a taxpayer that is a resident of Vietnam:

a) The taxpayer shall submit the MAP request to the Department of Taxation. Such an MAP request includes:

a.1) A written request for application of the mutual agreement procedure, using Form No. 01/DTA-MAP set out in the Appendix to this Circular;

a.2) Financial statements and relevant tax returns relating to the MAP request;

a.3) Documents relating to the notice of tax liability determination issued by the foreign tax authority or the Vietnamese tax authority;

a.4) The taxpayer’s transfer pricing documentation for the tax period covered by the MAP request (in the case of an MAP request relating to transfer pricing);

a.5) Information, documents, contracts, and a detailed description of the facts and circumstances relating to the transactions or activities relevant to the determination of tax liability, together with the grounds and analysis provided by the person requesting MAP regarding the provisions of the Tax Agreement that the foreign tax authority has applied inconsistently with the Tax Agreement;

a.6) Evidence of tax payment, where the person requesting MAP has paid the tax amount relevant to the MAP request;

a.7) A copy of the MAP request and accompanying documents, where the person requesting MAP has submitted, or will submit, an MAP request to the foreign tax authority;

a.8) A copy of any complaint request and accompanying documents, where the person requesting MAP has submitted, or will submit, a complaint under another dispute resolution mechanism in or outside Vietnam, together with the outcome of such complaint (if any).

b) Upon receipt of a complete MAP request from a taxpayer that is a resident of Vietnam, the Department of Taxation shall process the MAP case with the foreign tax authority in accordance with the relevant Tax Agreement and the procedures prescribed in this Circular.

Where the taxpayer is unable to provide sufficient information or documents required for the MAP request, the taxpayer shall submit a written explanation using Form No. 01/DTA-MAP set out in the Appendix to this Circular for the Department of Taxation’s consideration and decision.

2. Receipt of an MAP request from the tax authority of the Contracting Party:

Where the competent authority of Vietnam receives an MAP request submitted by the tax authority of the Contracting Party, the competent authority of Vietnam shall send a letter to the competent authority of the Contracting Party confirming receipt of the MAP request.

Article 61. Review and analysis of MAP requests

1. For an MAP request submitted by a taxpayer:

a) Review of the MAP request

The Department of Taxation shall examine the completeness and validity of the MAP request and clarify the information and documents necessary to determine whether the MAP request falls within the scope of, and meets the conditions for, MAP under the relevant Tax Agreement.

Upon completion of the review, the Department of Taxation shall:

a.1) Notify the taxpayer in writing of the acceptance of the MAP request using Form No. 02/MAP set out in the Appendix to this Circular; or

a.2) Notify the taxpayer of the rejection of the MAP request using Form No. 03/MAP set out in the Appendix to this Circular; or

a.3) Issue a Notice requesting additional information or documents using Form No. 01/TB-BSTT-NNT issued together with Circular No. 89/2026/TT-BTC.

b) The Department of Taxation shall analyze the MAP request by comprehensively considering the information and documents provided by the taxpayer and comparing them with the provisions of the Tax Agreement and domestic tax laws in order to assess the reasonableness, completeness, and supporting basis of the MAP request. In conducting such analysis, the Department of Taxation may request the taxpayer or the competent authority of the Contracting Party to the relevant Tax Agreement to provide additional information or documents. The Department of Taxation may also proactively coordinate with relevant units within the tax administration, as well as relevant agencies, organizations, and individuals, to collect, examine, and verify factual information and evidence, and to refer to international practices and experience in handling similar MAP cases, in order to ensure that the MAP request is processed objectively, in accordance with the law and international standards.

2. For an MAP request from the tax authority of the Contracting Party

a) The Department of Taxation shall consult with the tax authority of the Contracting Party in processing the MAP request in accordance with the relevant Tax Agreement;

b) Taxpayers in Vietnam and relevant agencies, organizations, and individuals shall provide information and documents at the request of the Department of Taxation for the purposes of processing the MAP request.

Article 62. Unilateral resolution of an MAP request

1. Unilateral resolution means that the Department of Taxation determines that the MAP request submitted by a taxpayer that is a resident of Vietnam is in accordance with the provisions of the relevant Tax Agreement and that no exchange of positions or negotiations with the tax authority of the Contracting Party is required.

2. The Department of Taxation shall notify the taxpayer and the competent authority of the Contracting Party where the MAP request has been resolved unilaterally.

Article 63. Exchange of positions, MAP negotiations, and taxpayer’s views

1. Exchange of positions: The Department of Taxation shall exchange positions with the competent authority of the Contracting Party in order to resolve taxation not in accordance with the provisions of the relevant Tax Agreement.

2. MAP negotiations: Following the exchange of positions, where no agreement has been reached through written communications, the Department of Taxation shall conduct MAP negotiations with the competent authority of the Contracting Party in person, by videoconference, or by telephone.

3. Where the MAP request is submitted by the taxpayer: Upon completion of the exchange of positions and MAP negotiations, and where the competent authorities have reached a mutual agreement, the Department of Taxation shall request the taxpayer, in writing, to indicate whether it objects to the proposed mutual agreement.

Where the mutual agreement does not eliminate the double taxation or other taxation not in accordance with the provisions of the relevant Tax Agreement in respect of the taxpayer’s case, the Department of Taxation shall notify the taxpayer in writing.

The taxpayer may not accept only part of the proposed mutual agreement (for example, only certain issues or certain tax periods covered by the proposed mutual agreement). In complex cases, where the Department of Taxation and the competent authority of the Contracting Party consider that it is difficult to reach a mutual agreement on all issues, the proposed mutual agreement may be divided into separate parts.

Article 64. Closing an MAP Request

An MAP request shall be closed in the following circumstances:

1. Unilateral resolution of the MAP request in accordance with Article 62 of this Circular.

2. Withdrawal of the MAP request:

a) The Department of Taxation shall close an MAP request where the taxpayer submits a written request to withdraw the MAP request, or upon receipt of a notification from the competent authority of the Contracting Party that the taxpayer of the Contracting Party has withdrawn the MAP request;

b) An MAP request may be withdrawn at any time before the mutual agreement is concluded.  The taxpayer may not withdraw only part of the MAP request.

3. Conclusion of the MAP proceedings on the basis of the outcome of negotiations between the competent authority of Vietnam and the competent authority of the Contracting Party.

4. Any other circumstance in which the MAP request cannot be resolved, including where the taxpayer becomes bankrupt, is dissolved, or otherwise ceases to exist, or where, although a mutual agreement has been reached, it cannot be implemented in accordance with the relevant Tax Agreement or the domestic tax law of either Contracting Party.

Upon closing an MAP request, the Department of Taxation shall issue a Notice to the taxpayer using Form No. 04/MAP set out in the Appendix to this Circular.

Section 3. IMPLEMENTATION OF MAP

Article 65. Implementation of mutual agreement, and monitoring and supervision of its implementation

On the basis of the mutual agreement reached in writing between the two competent authorities and accepted by the taxpayer, the mutual agreement shall be implemented as follows:

1. The Department of Taxation shall send a written request to the taxpayer’s supervisory tax authority, requesting it to implement the relevant tax administration measures in accordance with the applicable regulations, and shall concurrently send a copy to the relevant taxpayer for information and implementation.

2. The taxpayer’s supervisory tax authority shall make adjustments to the tax base or implement such other tax administration measures as may be necessary in accordance with the written instructions of the Department of Taxation. The relevant taxpayer shall comply with the instructions of the tax authority.

3. Where implementation of the mutual agreement results in the amount of tax, other amounts collectible under the law on tax administration, late-payment interest, or administrative penalties already paid exceeding the amount payable, the tax authority shall adjust the taxpayer’s tax liability, determine the overpaid amount, and process such overpayment in accordance with the provisions of the law on tax administration regarding the treatment of overpaid tax, other collectible amounts, late-payment interest, and administrative penalties.

4. The Department of Taxation shall be responsible for monitoring and supervising the implementation of the mutual agreement.

5. The mutual agreement shall apply only to the specific case and the relevant tax periods, and shall not constitute a precedent for application to other cases, taxpayers, or tax periods.

Chapter IV

ADVANCE PRICING AGREEMENT (APA) MECHANISM

Section 1. APA APPLICATION

Article 66. Persons eligible to submit an APA application

An organization producing or trading goods or services that is a corporate income taxpayer under the declaration method, conducts transactions with related parties, and requests the tax authority to apply an APA may submit an APA application.  Related parties are prescribed in Article 5 of Decree No. 255/2026/ND-CP.

Article 67. Transactions covered by an APA application

1. Transactions covered by an APA application are related-party transactions as prescribed in Clause 1 Article 4 of Decree No. 255/2026/ND-CP.

2. A transaction covered by an APA application as prescribed in Clause 1 of this Article must satisfy all of the following conditions:

a) The transaction has actually arisen in the taxpayer’s production and business activities and will continue during the period covered by the APA application;

b) There is a basis for determining that the substance of the transaction determines the tax liability, and for analyzing, comparing, and selecting independent comparables in accordance with Articles 6 and 7 of Decree No. 255/2026/ND-CP, based on the information and data specified in Clause 3 Article 31 of the Law on Tax Administration No. 108/2025/QH15;

c) The transaction is not subject to a tax dispute or complaint in respect of such related-party transaction;

d) The transaction is conducted transparently and is not intended for tax evasion, tax avoidance, or abuse of the Tax Agreement.

Article 68. Types of APA

1. A unilateral APA is an agreement concluded between the Vietnamese tax authority and the taxpayer submitting an APA application.

2. A bilateral APA is an agreement concluded between the Vietnamese tax authority and the tax authority of the other Contracting Party, on the basis of a Tax Agreement, to determine the transfer pricing method applicable to the related-party transactions covered by the taxpayer’s APA application.

3. A multilateral APA is an agreement concluded between the Vietnamese tax authority and multiple tax authorities of other Contracting Parties, on the basis of a Tax Agreement, to determine the transfer pricing method applicable to the related-party transactions covered by the taxpayer’s APA application.

Article 69. Authority to process APA applications

1. Bilateral and multilateral APAs:

a) The Department of Taxation shall take the lead in receiving APA applications, reviewing and analyzing them, and formulating plans for negotiation, conclusion, amendment, extension, revocation, or cancellation of APAs.

Where an APA is complex, involves multiple countries, or involves matters within the management scope of multiple State agencies, the Department of Taxation shall report to the Ministry of Finance for its opinion on the APA negotiation plan before conducting formal exchanges and negotiations with the tax authority of the other Contracting Party;

b) The supervisory tax authority of the taxpayer submitting an APA application shall be responsible for inspecting and supervising the implementation of the concluded APA.

2. Unilateral APAs: The authority to receive, review, analyze, and process unilateral APA applications shall be determined by the Department of Taxation that shall assign relevant units within the tax authority to carry out such tasks in accordance with regulations.

Section 2. PROCEDURES FOR PROCESSING APA APPLICATIONS

Article 70. Procedures for processing APA Applications

Before submitting a formal APA application, the taxpayer may request the tax authority to hold a pre-filing consultation to discuss, on a preliminary basis, the scope of the covered transactions, the proposed transfer pricing method, and the documents, information and data relevant to the APA application. A pre-filing consultation is not a mandatory requirement for submitting a formal APA application.

The APA application processing procedures shall comprise the following stages:

1. Submission of the formal APA application.

2. Review and analysis of the APA application, and preparation of the negotiation position.

3. Discussion and negotiation of APA terms.

4. Conclusion and issuance of the APA.

Article 71. Submission of a formal APA application

1. The taxpayer shall submit a formal APA application using Form No. 01/APA-DN provided in the Appendix to this Circular.

2. The APA application shall be prepared in Vietnamese. In the case of a bilateral or multilateral APA application, the APA application shall be prepared in Vietnamese and accompanied by an English translation. Original documents prepared in a foreign language must be submitted together with a Vietnamese translation and, in the case of a bilateral or multilateral APA application, an English translation. The taxpayer shall sign and affix its seal to the translated documents and shall bear legal responsibility for the accuracy of the contents thereof.

Where an APA application contains a large number of supporting documents and it is impracticable to translate the entire contents of such documents into Vietnamese within the same time limit for submission of the APA application, the taxpayer shall summarize the contents, provide an explanation of the reasons, and specify the location and method of storage of such supporting documents so that the tax authority may access and review such documents upon request.

3. For bilateral or multilateral APAs, the information and data contained in the APA application submitted to the Vietnamese tax authority and the foreign tax authority(ies) must be consistent and must contain information and data that are no less complete than those required under this Article.

Article 72. Review and analysis of APA applications 

1. The tax authority shall review and analyze the taxpayer’s APA application in order to examine, verify and assess the completeness, accuracy, legality, reasonableness and validity of the information and data provided by the taxpayer. Based on such review and analysis, the tax authority shall determine the appropriate transfer pricing method and appropriate comparables for determining the price, profit margin or profit allocation ratio applicable to the transactions covered by the APA application.

2. During the review and analysis of the APA application, the tax authority may apply the following measures:

a) Request the taxpayer and other relevant organizations and individuals to provide explanations and clarifications regarding the information contained in the APA application;

b) Apply tax administration measures to the taxpayer to verify the completeness, accuracy, legality, reasonableness and validity of the information and documents provided by the taxpayer.

3. During the review and analysis of the APA application, any meetings or on-site visits conducted by the tax authority at the taxpayer’s premises shall be documented in written Minutes jointly prepared by the tax authority and the taxpayer. Such Minutes shall be signed by the tax authority’s official responsible for processing the APA application or, where applicable, the head of the on-site visit team.

4. In the case of a bilateral or multilateral APA application, where the tax authority of a Contracting Party requests the taxpayer to provide or clarify any information or documents (whether included in the original application or submitted subsequently), the taxpayer shall provide such information or documents to the tax authority to ensure that the competent authorities of the tax authorities participating in the APA proceedings are furnished with consistent and sufficient information for the resolution of the APA case.

5. Where, in the course of processing the APA application, the tax authority considers it necessary to exchange information with the tax authority of a Contracting Party, the taxpayer shall be informed, in general terms, of the subject matter of the information exchanged. Information received through such exchange may be used as supporting documents and evidence for the negotiation and conclusion of the APA, except where disclosure to the taxpayer is prohibited under the provisions governing exchange of information in the Tax Agreement. Any information exchanged shall be treated as confidential in accordance with Clause 5 Article 55 of this Circular.

Article 73. Mutual agreement procedure

1. Where a taxpayer that is a resident of Vietnam for tax purposes applies for a bilateral or multilateral APA and requires the Vietnamese tax authority to communicate and negotiate with the tax authority of a Contracting Party, the taxpayer shall, upon submission of the formal APA application, complete Form No. 01/APA-DN set out in the Appendix to this Circular, including the following information:

a) An explanation of the reasons for requesting a bilateral or multilateral APA;

b) A summary of the reasons for requesting the mutual agreement procedure;

c) Relevant documents issued by the tax authority of the Contracting Party (including, but not limited to, notices or decisions on additional tax assessments or adjustments to tax liabilities that may give rise to double taxation of income arising from related-party transactions).

2. Upon receipt of the request for the mutual agreement procedure and the formal APA application, the competent authority of the Department of Taxation shall communicate and exchange information with the competent authority of the tax authority of the Contracting Party in accordance with the mutual agreement procedure under the relevant Tax Agreement.

Article 74. Discussion and negotiation of APA terms

1. The tax authority shall conduct discussions and negotiations with the taxpayer, in the case of a unilateral APA application, or with the competent authority of the Contracting Party, in the case of a bilateral or multilateral APA application, with a view to reaching agreement on the transfer pricing method, comparables, critical assumptions, and other matters within the scope of the APA.

Discussions and negotiations may be conducted through meetings, face-to-face discussions, telephone, videoconference, or written correspondence. The results of each discussion or negotiation shall be recorded in writing by the participating parties.

2. During bilateral or multilateral discussions and negotiations between the relevant tax authorities, where necessary and subject to the agreement of the Department of Taxation and the tax authority of the Contracting Party, the taxpayer may designate a representative to attend, at the invitation of the tax authority, for the purpose of providing explanations on relevant matters.

The tax authority shall keep the taxpayer informed of the progress of the APA application and may provide the taxpayer with a summary of the outcome of the negotiations, subject to the applicable confidentiality requirements and the scope of information exchanged with the tax authority of the Contracting Party. The tax authority may also request the taxpayer to provide explanations on relevant matters.

3. During discussions and negotiations in relation to a new APA application or an application for the extension of an APA, the tax authority may take into account the information, data and matters exchanged during the processing of a previous APA application, where relevant to the taxpayer’s actual circumstances and the proposed APA period.

Article 75. Discontinuation of processing of an APA application prior to conclusion

1. The tax authority shall discontinue the processing of an APA application where any of the following circumstances arises:

a) Continued processing of the APA application would no longer satisfy the principles for the application of an APA set out in Article 4 of this Circular;

b) The relevant parties fail to reach agreement on the terms of the APA before the end of the APA application process;

c) Through the application of tax administration measures, the tax authority discovers that the taxpayer has provided inaccurate, incomplete or untruthful information that affects the determination of the transfer pricing method or the outcome of the APA, and the taxpayer fails to provide appropriate grounds or documents to explain or substantiate such information;

d) The taxpayer or the tax authority of the other Contracting Party requests discontinuation of the processing of the APA application.

2. The tax authority shall notify the taxpayer of the discontinuation of the processing of the APA application (in the case of a unilateral APA), or shall notify the taxpayer and notify or confirm such discontinuation with the foreign tax authority (in the case of a bilateral or multilateral APA).

Article 76. Conclusion and issuance of the APA

1. A draft APA, after all of its terms have been agreed by the tax authority and the taxpayer, or by the relevant tax authorities, shall be regarded as the final version of the APA and shall be concluded and issued.

2. The final version of the APA shall include, at a minimum, the following contents:

a) Names and addresses of the related parties participating in the APA;

b) A description of the related-party transactions covered by the APA;

c) The transfer pricing method applicable for tax determination purposes, and the method for determining and calculating relevant amounts, including prices, gross profit margins, net profit margins and profit allocation ratios used as the basis for tax determination in relation to the related-party transactions covered by the APA (including the arm’s-length range, where applicable);

d) Critical assumptions that may materially affect, or are expected to affect, the implementation of the APA (including relevant analyses and forecasts);

dd) Provisions setting out the responsibilities and obligations of the taxpayer;

e) Provisions setting out the responsibilities and obligations of the tax authority;

g) Provisions on the validity period of the APA;

h) Other provisions consistent with applicable legal requirements relating to the performance of tax obligations in connection with the APA;

i) Appendices (if any).

3. In the case of a unilateral APA, the final version of the APA shall be sent by the tax authority together with a written notice regarding its formal conclusion. The legal representative of the taxpayer shall sign and affix the taxpayer’s seal (if applicable) to the final version of the APA and return it to the tax authority for signature and issuance.

4. In the case of a bilateral or multilateral APA, the Department of Taxation shall prepare the final version of the APA based on the terms agreed between the Department of Taxation and the tax authority of the Contracting Party, and send it to the taxpayer together with a written request for the taxpayer’s confirmation of acceptance of the final version of the APA. The competent authorities of the tax authorities participating in the APA shall sign the bilateral or multilateral APA. The Department of Taxation shall be responsible for notifying and implementing the bilateral or multilateral APA.

5. The official language of a unilateral APA shall be Vietnamese. The official language of a bilateral or multilateral APA shall be English, accompanied by a Vietnamese translation.

Section 3. IMPLEMENTATION OF AN APA

Article 77. Adjustment of taxable income during the implementation of an APA

1. During the validity period of an APA, the taxpayer shall make adjustments to taxable income so that it is consistent with the price, gross profit margin, net profit margin, or profit allocation ratio specified in the APA for the purpose of tax declaration and payment in accordance with applicable regulations.

2. Where, during the implementation of an APA, events arise that result in changes to, or non-compliance with, the critical assumptions of the concluded APA, the taxpayer shall promptly report such events to the tax authority and request amendment or cancellation of the APA in accordance with Articles 79 and 80 of this Circular.

3. During the period in which the APA is in effect, the taxpayer shall periodically provide an APA compliance report and relevant information and documents to enable the tax authority to monitor compliance with the APA within the time limit for submission of the corporate income tax finalization dossier in accordance with regulations of the law on tax administration. The annual APA compliance report shall include, at a minimum, the following contents:

a) The application of the transfer pricing method and the implementation of the terms of the APA during the tax period;

b) The results of transactions within the scope of the APA compared with the price, profit margins, profit allocation ratio, or other indicators agreed in the APA;

c) Financial information, financial and operational results, and other information relevant to the transactions within the scope of the APA, in accordance with the terms of the concluded APA;

d) Continued compliance with the critical assumptions of the APA and any material changes (if any) affecting the APA.

Article 78. Extension of an APA

1. An APA may be extended for a period not exceeding 03 years.

2. An APA may be considered for extension where:

a) There are no material changes to the scope of the related-party transactions or the related parties;

b) There are no material changes to the critical assumptions;

c) The arm’s-length range or profit margin used as the basis for the comparability analysis remains appropriate for continued application during the proposed extension period based on the critical assumptions of the APA.

3. Procedure for APA extension:

a) A taxpayer requesting an extension of an APA shall submit a request using Form No. 01/APA-DN set out in the Appendix to this Circular and submit an APA extension application to the tax authority at least 6 months before the concluded APA expires;

b) The procedure for processing an APA extension application shall be carried out in the same manner as the procedure for processing a formal APA application.

Article 79. Amendment of an APA

1. Amendment of an APA may be initiated at the request of the taxpayer or the tax authority.

2. An APA may be amended in the following cases:

a) There is a change to a critical assumption that affects the implementation of the APA;

b) Changes in applicable laws affect the APA;

c) The competent authority of the tax authority of the Contracting Party requests amendment of the APA and the Department of Taxation agrees.

3. The procedure for processing an APA amendment application shall be carried out in the same manner as the procedure for processing an APA application.

Article 80. Cancellation of an APA

1. An APA may be cancelled in the following cases:

a) The taxpayer or any related party involved in the related-party transactions fails to comply with the terms and conditions of the APA;

b) The taxpayer has made material errors or provided materially incorrect information in the APA application that affects the implementation of the APA;

c) The taxpayer and the tax authority fail to reach agreement on the amendment of the APA;

d) The taxpayer fails to fulfill its obligations to report or provide information as required under the APA, affecting the monitoring, supervision, or implementation of the APA;

dd) The tax authority of the other Contracting Party requests cancellation of the APA and the Department of Taxation agrees;

e) The taxpayer submits an application for cancellation of the APA on reasonable grounds.

2. A taxpayer requesting cancellation of an APA shall submit a request using Form No. 01/APA-DN set out in the Appendix to this Circular.

3. The tax authority shall issue a written notice of the cancellation of the APA. Such a notice shall include:

a) The reasons for cancellation;

b) The effective date of the cancellation of the APA.

4. The taxpayer shall fulfill tax liabilities arising from transactions covered by the cancelled APA in accordance with applicable transfer pricing regulations from the effective date of the cancellation of the APA.

Article 81. Revocation of an APA

1. An APA may be revoked in the following cases:

a) The taxpayer intentionally provides false information or engages in fraudulent conduct affecting the determination, conclusion, or implementation of the APA;

b) The tax authority of the other Contracting Party requests revocation of the APA and the Department of Taxation agrees;

2. The tax authority shall issue a written notice of the revocation of the APA. Such a notice shall include:

a) The reasons for revocation;

b) The effective date of the revocation of the APA (which shall be counted from the first day of the period of application of the APA).

3. The taxpayer shall fulfill tax liabilities arising from transactions covered by the scope of the revoked APA in accordance with applicable transfer pricing regulations from the effective date of the revocation of the APA.

Article 82. Confidentiality of information

1. The tax authority, the taxpayer, and other relevant agencies and organizations shall maintain the confidentiality of information and data used throughout the processing of an APA case in accordance with the provisions on confidentiality of taxpayer information in Article 7 of the Law on Tax Administration No. 108/2025/QH15, relevant documents providing guidance on its implementation, and applicable Tax Agreements.

2. Information and data provided by the taxpayer during the process of applying for, discussing, negotiating, concluding, amending, extending, and implementing an APA shall be managed and used by the tax authority for the purpose of processing, monitoring, and supervising the implementation of the APA. Such information and data shall not be directly used as evidence, supporting documents, or grounds for conducting tax audits or making tax assessments in respect of the taxpayer, except where such information or data has been publicly disclosed by the taxpayer or collected by the tax authority from independent sources in accordance with applicable regulations of law.

Article 83. Validity of an APA

1. A concluded APA shall be binding on the tax authority and the taxpayer.

2. The taxpayer may request application of an APA for a continuous period of up to 05 tax years commencing from the year in which the APA application is submitted or the immediately following tax year, but not exceeding the number of years the taxpayer has actually conducted business operations, and declared and paid corporate income tax in Vietnam.

3. The validity period of a concluded APA shall not exceed 03 tax years commencing from the tax period in which the APA is concluded or the immediately following tax year, as agreed by the tax authority and the taxpayer in the APA.

Chapter V

IMPLEMENTATION PROVISIONS

Article 84. Effect

1. This Circular comes into force from July 01, 2026.

2. This Circular replaces the Circular No. 205/2013/TT-BTC dated December 24, 2013 of the Minister of Finance, and the Circular No. 45/2021/TT-BTC dated June 18, 2021 of the Minister of Finance.

3. Procedures for applying a Tax Agreement shall be carried out in accordance with the Law on Tax Administration and Circular No. 89/2026/TT-BTC.

4. Where an APA application has been submitted before the effective date of this Circular, and the APA has not yet been concluded while the proposed APA period has not ended as of the effective date of this Circular, such APA application shall continue to be processed in accordance with the Law on Tax Administration No. 108/2025/QH15 and this Circular.

5. Difficulties that arise during the implementation of this Circular should be promptly reported to the Ministry of Finance of Vietnam for consideration./.