The Double Taxation Relief (Taxes on Income) (Vietnam) Order 1994

Made: 14th December 1994

At the Court at Buckingham Palace, the 14th day of December 1994 Present, The Queen’s Most Excellent Majesty in Council

Now, therefore, Her Majesty, in exercise of the powers conferred upon Her by section 788 of the said Act, and of all other powers enabling Her in that behalf, is pleased, by and with the advice of Her Privy Council, to order, and it is hereby ordered, as follows:—

1

This Order may be cited as the Double Taxation Relief (Taxes on Income) (Vietnam) Order 1994.

2

It is hereby declared—

• (a) that the arrangements specified in the Agreement set out in Part I of the Schedule to this Order and in the Exchange of Notes constituting an Agreement set out in Part II of that Schedule have been made with the Government of the Socialist Republic of Vietnam with a view to affording relief from double taxation in relation to income tax, corporation tax or capital gains tax and taxes of a similar character imposed by the laws of Vietnam;

• (b) that those arrangements include provisions with respect to the exchange of information necessary for carrying out the domestic laws of the United Kingdom and the laws of Vietnam concerning taxes covered by the arrangements including, in particular, provisions about the prevention of fiscal evasion with respect to those taxes; and

• (c) that it is expedient that those arrangements should have effect.

SCHEDULE

PART I — AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF THE SOCIALIST REPUBLIC OF VIETNAM FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND CAPITAL GAINS

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Socialist Republic of Vietnam;

Desiring to conclude an Agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains;

Have agreed as follows:

Article 1 — Personal scope

This Agreement shall apply to persons who are residents of one or both of the Contracting States.

Article 2 — Taxes covered

Article 3 — General definitions

Article 4 — Resident

Article 5 — Permanent establishment

Article 6 — Income from immovable property

Article 7 — Business profits

Article 8 — Shipping and air transport

Article 9 — Associated enterprises

Article 10 — Dividends

Article 11 — Interest

Article 12 — Royalties

Article 13 — Capital gains

Article 14 — Independent personal services

Article 15 — Dependent personal services

Article 16 — Directors' fees

Directors' fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a resident of the other Contracting State may be taxed in that other State.

Article 17 — Artistes and sportsmen

Article 18 — Pensions

Article 19 — Government service

Article 20 — Students

Payments which a student or business apprentice who is or was immediately before visiting a Contracting State a resident of the other Contracting State and who is present in the first mentioned State solely for the purpose of his education or training receives for the purpose of his maintenance, education or training shall not be taxed in that first mentioned State, provided that such payments arise from sources outside that State.

Article 21 — Other income

Article 22 — Elimination of double taxation

Article 23 — Non discrimination

Article 24 — Mutual agreement procedure

Article 25 — Exchange of information

Article 26 — Members of diplomatic or permanent missions and consular posts

Nothing in this Agreement shall affect any fiscal privileges accorded to members of diplomatic or permanent missions or consular posts under the general rules of international law or under the provisions of special agreements.

Article 27 — Entry into force

Each of the Contracting States shall notify to the other through the diplomatic channel the completion of the procedures required by its law for the bringing into force of this Agreement.This Agreement shall enter into force on the date of the later of these notifications and shall thereupon have effect:

• (a) in the United Kingdom:

• (i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the Agreement enters into force;

• (ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the Agreement enters into force;

• (b) in Vietnam:

• (i) in respect of taxes withheld at source, in relation to taxable amounts paid on or after 1st January following the calendar year in which the Agreement enters into force;

• (ii) in respect of other Vietnamese taxes, in relation to income, profits or gains arising in the calendar year in which the Agreement enters into force.

Article 28 — Termination

This Agreement shall remain in force until terminated by one of the Contracting States.Either Contracting State may terminate the Agreement, through the diplomatic channel, by giving notice of termination at least six months before the end of any calendar year beginning after the expiry of five years from the date of entry into force of the Agreement.In such event, the Agreement shall cease to have effect:

• (a) in the United Kingdom:

• (i) in respect of income tax and capital gains tax, for any year of assessment beginning on or after 6th April in the calendar year next following that in which the notice is given;

• (ii) in respect of corporation tax, for any financial year beginning on or after 1st April in the calendar year next following that in which the notice is given;

• (b) in Vietnam:

• (i) in respect of taxes withheld at source, in relation to taxable amounts paid on or after 1st January following the calendar year in which the notice is given;

• (ii) in respect of other Vietnamese taxes, in relation to income, profits or gains arising in the calendar year in which the notice given.

PART II — EXCHANGE OF NOTES

Mr Alastair Goodlad

Minister of State for Foreign and Commonwealth Affairs

Foreign and Commonwealth Office

LONDON

9th April 1994

Excellency,

I have the honour to refer to the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which has been signed today and to propose on behalf of the Government of the Socialist Republic of Vietnam:

in relation to Article 12 If, before or after the entry into force of this Agreement, Vietnam concludes an Agreement for the Avoidance of double taxation with any other member State of the Organisation for Economic Cooperation and Development and, under the provisions of that Agreement Vietnam may tax royalties arising in Vietnam and paid to a resident of that State but the tax charged is not to exceed a lower percentage of the gross royalties than that specified in paragraph (2) of Article 12, then: where that lower percentage applies, subject to the same exceptions as are provided in Article 12, to income of the same description as that to which paragraph (2) of Article 12 applies, the lower percentage shall be substituted for that specified in paragraph (2) of Article 12 with effect from the date of entry into force of that Agreement or of this Agreement, whichever is the later;

in relation to Article 22 If, before or after the entry into force of this Agreement, Vietnam introduces a withholding tax on dividends or interest that the United Kingdom competent authority will undertake that a provision to promote economic development in Vietnam which grants an exemption from or reduction of that Vietnamese tax will fall to be considered as of a substantially similar character within the meaning of paragraph (4)(b) of Article 22;

in relation to Article 23 For so long as Vietnam continues to grant to investors licences under the Law on Foreign Investment in Vietnam, which specify the taxation to which the investor shall be subject, the imposition of such taxation shall not be regarded as breaching the terms of paragraph (2) of Article 23.

If the foregoing proposals are acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland I have the honour to suggest that the present Note and Your Excellency’s reply to that effect should be regarded as constituting an agreement between the two Governments in this matter.

I take this opportunity to renew to your Excellency the assurances of my highest consideration.

For the Government of the Socialist Republic of Vietnam

Ho Te

Minister of Finance

His Excellency Mr Ho Te

Minister of Finance

8 Phan Huy Chu

Hanoi

9th April 1994

Excellency,

In am in receipt of your Note dated 9th April which states as follows:

I have the honour to refer to the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains which has been signed today and to propose on behalf of the Government of the Socialist Republic of Vietnam: If, before or after the entry into force of this Agreement, Vietnam concludes an Agreement for the avoidance of double taxation with any other member State of the Organisation for Economic Cooperation and Development and, under the provisions of that Agreement Vietnam may tax royalties arising in Vietnam and paid to a resident of that State but the tax charged is not to exceed a lower percentage of the gross royalties than that specified in paragraph (2) of Article 12, then: - where that lower percentage applies, subject to the same exceptions as are provided in Article 12, to income of the same description as that to which paragraph (2) of Article 12 applies, the lower percentage shall be substituted for that specified in paragraph (2) of Article 12 with effect from the date of entry into force of that Agreement or of this Agreement, whichever is the later; If, before or after the entry into force of this Agreement, Vietnam introduces a withholding tax on dividends or interest that the United Kingdom competent authority will undertake that a provision to promote economic development in Vietnam which grants an exemption from or reduction of that Vietnamese tax will fall to be considered as of a substantially similar character within the meaning of paragraph (4)(b) of Article 22; For so long as Vietnam continues to grant to investors licences under the Law on Foreign Investment in Vietnam, which specify the taxation to which the investor shall be subject, the imposition of such taxation shall not be regarded as breaching the terms of paragraph (2) of Article 23.

The foregoing proposals being acceptable to the Government of the United Kingdom of Great Britain and Northern Ireland, I have the honour to confirm that Your Excellency’s Note and this Reply shall be regarded as constituting an agreement between the two Governments in this matter which shall enter into force at the same time as the entry into force of the Agreement.

I take this opportunity to renew to Your Excellency the assurances of my highest consideration.

For the Government of the United Kingdom of Great Britain and Northern Ireland

Alastair Goodlad

Minister of State for Foreign and Commonwealth Affairs

Signed

R. P. Bulling — Deputy Clerk of the Privy Council

Explanatory note

(This note is not part of the Order)

The Agreement with Vietnam is set out in the Schedule to this Order.

The Agreement provides for business profits not arising through a permanent establishment to be taxed only in the country of the taxpayer’s residence.

Profits attributable to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Articles 5 and 7).

Income from immovable property and gains derived from the alienation of such property may be taxed in the country in which the property is situated (Articles 6 and 13).

Air transport and shipping profits are generally to be taxed only in the residence state of the operator (Article 8).

The Agreement includes rules for determining taxable profits when a company in one country is related to a company in the other (Article 9).

The rate of tax imposed in the country of source on dividends derived by a resident of the other country shall not, in general, exceed 7 per cent of the gross amount if the recipient is a company controlling at least 50 per cent of the voting power in the company paying the dividends or has invested at least £7 million in the share capital of the company paying the dividends; 10 per cent of the gross amount if the recipient is a company controlling at least 25 per cent but less than 50 per cent of the voting power in the company paying the dividends; and 15 per cent of the gross amount of the dividends in all other cases (Article 10).

The rate of tax imposed in the country of source on interest derived by a resident of the other country is, in general, not to exceed 10 per cent of the gross amount flowing to the other country. Certain categories of interest (eg interest payable to the Government of the other country) will be exempt from tax in the source state (Article 11).

The rate of tax imposed in the source country on royalties is, in general, limited to 10 per cent of the gross amount of the royalties (Article 12).

Gains arising from the alienation of movable property are normally to be taxed only in the country of the taxpayer’s residence. Gains arising from the alienation of assets of a permanent establishment or fixed base which the taxpayer has in the other country may be taxed in that other country (Article 13).

The earnings of temporary business visitors and some other individuals are, subject to certain conditions, only to be taxed in the country of the taxpayer’s residence (Articles 14 and 15). Fees received by a resident of one country in his capacity as a director of a company resident in the other country may be taxed in the latter country (Article 16). Income derived from the activities of artistes and sportsmen may be taxed in the country in which those activities are performed (Article 17). Occupational pensions (other than those paid in respect of Government service) and annuities are to be taxed only in the recipient’s country of residence (Article 18). Government service remuneration and pensions are normally to be taxed only by the paying Government (Article 19). Certain payments made to visiting students and business apprentices are exempt from tax in the country visited (Article 20). Other income (with the exception of income from trusts and estates of deceased persons under administration) not specified in the Agreement remain taxable only in the recipient’s country of residence (Article 21).

Where income continues to be taxable in both countries credit will be given in the taxpayer’s country of residence for tax imposed by the other country. The credit to be given in the United Kingdom for tax imposed in Vietnam includes credit for tax spared under certain provisions of Vietnamese law. In the case of dividends, the United Kingdom will give credit for the underlying tax paid in Vietnam where the shareholder is a United Kingdom company which controls at least 10 per cent of the voting power in the company paying the dividends (Article 22).

There are provisions safeguarding nationals and enterprises of one country against discriminatory taxation in the other country (Article 23), and for consultation (Article 24) and exchanges of information (Article 25) between the taxation authorities of the two countries.

The Agreement will enter into force on the date of the later of the notifications by each country of the completion of its legislative procedures. The Agreement is to take effect in the United Kingdom on or after 1st April in respect of corporation tax and on or after 6th April for income tax and capital gains tax in the calendar year next following that in which it enters into force. The date of entry into force will in due course be published in the London, Edinburgh and Belfast Gazettes.

Footnotes

[^f00001]: 1988 c. 1; section 788 is extended by section 277 of the Taxation of Chargeable Gains Act 1992 (c. 12).