When to Refuse the Application of the Double Taxation Avoidance Agreement?

Circular 205/2013/TT-BTC stipulates that unless otherwise specified under the Agreement regarding the limitation of benefits of the Agreement, the Vietnamese Tax Authority shall deny the request to apply the Agreement in the following cases:

Source: Internet

- The applicant requests to apply the Agreement for taxes incurred more than three years before the time of the application to apply the Agreement.- When the main purpose of contracts or agreements is to obtain tax exemption or reduction according to the Agreement.- The applicant for the application of the Agreement is not the beneficial owner of the income for which the related tax is requested to be exempted or reduced under the Agreement. The beneficial owner may be an individual, a company, or an organization but must have ownership and control over the income, assets, or rights generating the income. When considering determining an entity as a beneficial owner, the Tax Authority will review all relevant factors and circumstances regarding that entity based on the principle of "substance over form" to achieve the objective of the Agreement to avoid double taxation and prevent tax evasion. In the following cases, an entity will not be considered a beneficial owner:

- When the applicant is a non-resident entity obliged to distribute more than 50% of its income to a resident entity of a third country within 12 months from the receipt of the income;- When the applicant is a non-resident entity that has little or no business activities other than the ownership of assets or rights generating income;- ...

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See the full text of the regulation at Circular 205/2013/TT-BTC effective from February 6, 2014.

Thu Ba

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