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Portugal-Vietnam

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Update - Tax Treaty between Portugal and Vietnam

The income tax treaty between Portugal and Vietnam was signed on 3 June 2015. The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Portuguese personal income tax, corporate income tax, and surtaxes on corporate income tax. It covers Vietnamese personal income tax and business income tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting 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.

Withholding Tax Rates

  • Dividends -
    • 5% if the beneficial owner is a company that directly owns at least 70% of the paying company's capital;
    • 10% if the beneficial owner is a company that directly owns at least 25% of the paying company's capital;
    • Otherwise 15%
  • Interest - 10%
  • Royalties - 10%
  • Technical Fees (managerial, technical or consultancy services) - 7.5%

Capital Gains

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

  • Gains from the alienation of immovable property situated in the other State;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State;
  • Gains from the alienation of shares or comparable interests in a company, the property of which consists directly or indirectly of more than 50% of immovable property situated in the other State; and
  • Gains from the alienation of shares or comparable interests representing a participation of at least 25% in a company resident in the other State

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Double Taxation Relief

Both countries apply the credit method for the elimination of double taxation.

Limitation on Benefits

The protocol to the treaty, signed the same date, includes that the benefits of the treaty will not be granted to a resident of a contracting state that is not the beneficial owner of the income. The protocol also includes that that provisions of the agreement will not apply if the main purposes or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of those provisions by means of such creation or assignment.

MFN Clause

The protocol to the treaty includes that if Vietnam enters into a tax treaty with an EU Member State after the Portugal-Vietnam treaty enters into force, and such other treaty provides for a lower withholding tax rate or exemption for dividends, interest or royalties, such lower rates will automatically replace the rates provided in the Portugal-Vietnam treaty from the date such other treaty enters into force.

Entry into Force and Effect

The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.

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