Agreement to avoid double taxation in Vietnam: Enterprises in Singapore that meet the conditions without a permanent establishment in Vietnam will be exempt from CIT?
What does double taxation in Vietnam mean?
Double taxation in Vietnam is an adverse phenomenon involving having to pay taxes twice on the same subject of taxation in Vietnam, such as income or property. Double taxation in Vietnam is often associated with income taxes and property taxes.
Tax the income and profits in the country where the income is generated and tax it again when these income and profits are repatriated to the home country of the earner.
What is the Agreement on Avoiding Double Taxation in Vietnam?
Agreement on the avoidance of double taxation in Vietnam is an international treaty concluded between two subjects of international law (mainly a state) to avoid double taxation in Vietnam and prevent tax evasion and evasion on income and taxes. property tax.
This Treaty shall apply to persons who are residents of one or both of the Contracting Parties.
This Convention applies to taxes levied by a Contracting Party on income and on property, regardless of the manner in which such taxes are levied.
Agreement to avoid double taxation in Vietnam: Enterprises in Singapore that meet the conditions without a permanent establishment in Vietnam will be exempt from CIT? (Image from the internet)
Enterprises in Singapore that meet the conditions that do not have a permanent establishment in Vietnam are exempt from CIT?
Pursuant to the guidance in Official Dispatch 30943/CTHN-TTHT in 2022, guiding CIT exemption for enterprises in Singapore as follows:
“Responding to Official Letter No. 2118/PTI-TCKT dated May 27, 2022 of the Post and Telecommunications Insurance Corporation (hereinafter referred to as the Company) asking about the application of the Double Taxation Avoidance Agreement between Vietnam and Vietnam. Singapore, Hanoi Tax Department has the following comments:
- Pursuant to the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Singapore on the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income (hereinafter referred to as the "Agreement"). double taxation avoidance between Vietnam and Singapore):
+ Clause 3, Article 2 stipulates the taxes included in the Agreement: “3. The current taxes to which this Agreement applies are: (a) in Vietnam: (i) personal income tax; and (ii) corporate income tax; (hereinafter referred to as “Vietnam tax”);”. + In Article 5, regulations on permanent establishments:
“1/ For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the enterprise carries on all or part of its business.
2/ The term "permanent establishment" mainly includes:
a, executive headquarters;
b, branch;
c. office,
d. factory; . .
e. workshop;
and f. mines, oil or gas wells, quarries or any other place of extraction of natural resources.
3. The term “permanent establishment” also includes:
(a) A construction site or construction or installation project will constitute a permanent establishment only as long as the site or structure is prolonged. 6 months, and
(b) The provision of services, including consulting services, by an enterprise through its employees or other persons assigned by the enterprise to perform the above activities, but only when the activities activities of the aforesaid nature lasting for the same or a related project) in a Contracting State for a period or periods meet again more than 183 days in any 12-month period,
…
+ In Article 7 on corporate profits:
"first. The profits of an enterprise of a Contracting State shall be taxable only in that State, unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in that other State, but only so much of them as is attributable to that permanent establishment.
- Pursuant to Article 11 of Circular No. 205/2013/TT-BTC dated December 24, 2013 of the Ministry of Finance guiding the implementation of the Agreement on avoidance of double taxation and prevention of tax evasion and fraud with respect to taxes. Taxes on income and assets between Vietnam and other countries and territories are effective in Vietnam. Guidelines for determining tax liability for income from business activities:
…
Based on the above provisions, the Hanoi Tax Department has the following comments:
In case the Income Insurance Co-operative Limited in Singapore is a foreign contractor that generates income in Vietnam on the basis of a contract, agreement, or commitment between the foreign contractor and a Vietnamese organization or individual, incomes of foreign contractors subject to contractor tax as prescribed in Article 1 of Circular No. 103/2014/TT-BTC.
In case NTUC Income Insurance Co-operative Limited in Singapore meets the conditions of not having a permanent establishment in Vietnam as prescribed, it will be exempt from corporate income tax under the Agreement on avoidance of double taxation between Vietnam and Singapore.
To determine whether NTUC Income Insurance Co-operative Limited in Singapore has a permanent establishment in Vietnam, it is recommended that the Company study the provisions of Article 5 of the Agreement on avoidance of double taxation between Vietnam and Singapore and provide guidance. in Article 11 of Circular 205/2013/TT-BTC above, compared with the actual arising situation to comply with regulations.
Procedures for application for tax exemption and reduction under the Agreement on avoidance of double taxation in Vietnam shall comply with the guidance in Article 62 of Circular No. 80/2001/TT-BTC of the Ministry of Finance mentioned above.
Accordingly, in case an enterprise in Singapore meets the conditions of not having a permanent establishment in Vietnam as prescribed, it will be exempt from CIT under the Agreement on Avoiding Double Taxation in Vietnam between Vietnam and Singapore.
See the full Official Dispatch 30943/CTHN-TTHT 2022: Click here.
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