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Turkey-Vietnam

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Update -Tax Treaty between Turkey and Vietnam Signed

On 8 July 2014, officials from Turkey and Vietnam signed and income tax treaty The treaty is the first of its kind between the two countries.

Taxes Covered

The treaty covers Turkish income tax and corporation tax, and 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 of one Contracting 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.

Withholding Tax Rates

  • Dividends - the rate depends on the ownership/investment as follows:
    • 5% if the beneficial owner is a company directly holding at least 50% of the paying company's capital or has invested more than USD 10 million, or equivalent in Turkish or Vietnamese currency, in the capital of the paying company;
    • 10% if the beneficial owner is a company directly holding at least 25% but less than 50% of the paying company's capital;
    • otherwise 15%
  • Interest - 10%
  • Royalties - 10%
  • Capital gains - the following gains derived by a resident of one Contracting State may be taxed by the other State:
    • Gains from the alienation 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 whose assets consist wholly or principally of immovable property situated in the other State, and
    • Gains from the alienation of shares issued by a company resident in the other State, if the beneficial owner of the shares directly holds less than 25% of the capital of that company and if the period between acquisition and alienation does not exceed one year

Double Taxation Relief

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

MFN Clause

A protocol to the treaty, signed the same date, includes the provision that if Vietnam enters into an agreement with any other country that provides for a longer period of time before a construction PE is deemed constituted, then such longer period will apply for the purpose of the Turkey-Vietnam tax treaty.

The protocol also includes the provision that if Vietnam enters into an agreement after 23 October 2009 with an OECD Member State that provides for lower withholding tax rates for dividends, then such lower rates will apply for the purpose of the Turkey-Vietnam tax treaty.

Entry into Force and Effect

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.

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