Details of the income tax treaty and protocol between Slovak Republic and Vietnam, signed on 27 October 2008, have become available. The treaty was concluded in the Slovak, 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:
|-||10% on dividends in general, but 5% if the beneficial owner is a company which controls directly at least 70% of the voting power in the company paying the dividends;|
|-||10% on interest, subject to exceptions;|
|-||15% on royalties in general, but 5% for any patent, design, or model, plan, secret formula or process, or for information concerning industrial or scientific experience, or for industrial, commercial or scientific equipment, and 10% for a trade mark or for information concerning commercial experience; and|
|-||7.5% for service fees (consultancy, managerial and technical).|
Deviations from the OECD Model Convention include that:
|-||a building site, construction, assembly or installation project or supervisory activities in connection therewith constitutes a permanent establishment (PE) only if such site, project or activities last for more than 6 months (Art. 5(4) of the treaty);|
|-||the furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purposes constitute a PE only where activities of that nature continue (for the same or a connected project) for a period or periods aggregating more than 6 months within any 12-month period (Art. 5(4) of the treaty);|
|-||the exploration for or exploitation of natural resources directly constitutes a PE, i.e. without any time periods (Art. 5(3) of the treaty);|
|-||Art. 5 (PE) of the treaty, generally, corresponds to the UN Model Convention;|
|-||the treaty contains provisions corresponding to the UN Model Convention in accordance with which royalties shall be deemed to arise in a state when the payer is a resident of that state (Art. 12(5) of the treaty);|
|-||the treaty does not contain a provision on the taxation of capital gains from alienation of shares deriving more than 50% of their value from immovable property, i.e. a provision similar to Art. 13(4) of the OECD Model Convention; and|
|-||the treaty does not provide for assistance in collection of taxes.|
Both states generally provide for the credit method to avoid double taxation. In addition, Slovak Republic grants a credit for a period of 10 years from the entering into force date for the underlying tax if dividends received by a Slovakian company which controls directly or indirectly at least 10% shares having full voting rights in the Vietnamese company paying the dividends.
The treaty will apply for a minimum period of 5 years.
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