On 7 July 2015, officials from the U.S. and Vietnam signed an income tax treaty. The treaty is the first of its kind between the two countries.
The treaty covers U.S. Federal income taxes imposed by the Internal Revenue Code (excluding social security and unemployment taxes), and the Federal taxes imposed on the investment income of foreign private foundations. It covers Vietnam personal income tax and business income tax.
The treaty includes the provision that a permanent establishment will be deemed constituted when a resident of a Contacting State furnishes services in the other State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
The treaty includes a substantial article limiting the benefits of the treaty; Article 23 (Limitation on Benefits). The Article includes the provision that the benefits of the treaty will only be available for a resident of a Contracting State if the resident is a qualified person, which includes:
Subject to certain conditions, however, a resident that is not a qualified person may still be eligible for the treaty benefits.
Both countries generally apply the credit method for the elimination of double taxation.
The treaty will enter into force once the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force. However, the provisions of Article 27 (Exchange of Information and Administrative Assistance) will apply from the date of its entry into force.
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