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Treaty between Austria and Vietnam – details

Details of the newincome and capital tax treaty and protocol between Austria and Vietnam, signed on 2 June 2008, have become available. The treaty was concluded in the German, Vietnamese and English languages, each text having equal authenticity. In the case of divergence, however, the English text prevails. The treaty generally follows the OECD Model Convention.

The maximum rates of withholding tax are:

-   15% on dividends in general, 10% in case of qualifying companies holding directly at least 25% of the capital of the company paying the dividends, and 5% in case of qualifying companies holding directly at least 70% of the capital of the company paying the dividends;
-   10% on interest in general, but no withholding tax may be levied if the interest is paid by or to a contracting state or central bank or on interest on a loan or credit made, guaranteed or insured by the Oesterreichische Kontrollbank AG or the Vietnam Development Bank. However, as long as Austria does not levy a tax at source on interest paid to a resident in Vietnam, the withholding tax is reduced to 5%; and
-   10 % on royalties, and 7.5 % in the case of fees for technical services
Deviations from the OECD Model include that:
-   a building site, a construction, assembly or installation project or supervisory activities in connection therewith constitutes a permanent establishment, but only where such site, project or activities continue for a period of more than 6 months;
-   Art. 13 provides that the source state may tax capital gains from the alienation of more than 25% of the shares of a company resident therein;
-   a most-favoured-nation (MFN) clause in respect of Arts. 10, 11 and 12 is included in the protocol, providing that if Vietnam signs a treaty with another EU Member State, which contains lower withholding rates than those provided in this treaty, these rates will automatically apply also in relation to Austria; and
-   the protocol explicitly deals with the question of supply of goods by the head office.

Austria generally provides for the exemption-with-progression method to avoid double taxation. For passive income, however, Austria provides for the ordinary credit method, coupled with a tax sparing credit limited at the relevant treaty rates.

Vietnam generally provides for the ordinary credit method to avoid double taxation.

The treaty and protocol make no specific reference to special tax regimes in either Austria or Vietnam, and it is assumed that they apply to entities qualifying for any such regimes.

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