Circular No. 59/1998/TT-BTC supplements Circular No. 95/1997/TT/BTC dated December 29, 1997 of the Ministry of Finance. It provides guidance and explains the contents of the Double Taxation Agreement between Vietnam and countries that have signed and are in force in Vietnam.

CIRCULAR

Supplement Circular No. 95/1997/TT-BTC dated December 29, 1997, issued by the Ministry of Finance, guiding and explaining the contents of the clauses of the Double Taxation Agreement between Vietnam and countries that have signed and are in force in Vietnam.

and explaining the contents of the clauses of the Double Taxation Agreement between Vietnam and countries that have signed and are in force in Vietnam.

Regarding the Double Taxation Agreement between Vietnam and Belarus which came into effect on December 26, 1997, and the Double Taxation Agreement between Vietnam and the Czech Republic which came into effect on February 3, 1998;

Based on Circular No. 95/1997/TT-BTC dated December 29, 1997, issued by the Ministry of Finance, guiding and explaining the contents of the clauses of the Double Taxation Agreements between Vietnam and countries that have signed and are in force in Vietnam;

To implement the two Double Taxation Agreements mentioned above, the Ministry of Finance supplements Circular No. 95/1997/TT-BTC dated December 29, 1997, issued by the Ministry of Finance, as follows:

1. The provisions of the Double Taxation Agreement between Vietnam and Belarus shall be implemented according to the guidance provided in Circular No. 95/1997/TT-BTC of the Ministry of Finance. In cases where the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital contains provisions not covered by Circular No. 95/1997/TT-BTC or provisions different from those in the Circular, specific provisions for the Agreement between Vietnam and Belarus will be applied based on Appendix XXIV attached to this Circular.

2. The provisions of the Double Taxation Agreement between Vietnam and the Czech Republic shall be implemented according to the guidance provided in Circular No. 95/1997/TT-BTC of the Ministry of Finance. In cases where the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Czech Republic on Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital contains provisions not covered by Circular No. 95/1997/TT-BTC or provisions different from those in the Circular, specific provisions for the Agreement between Vietnam and the Czech Republic will be applied based on Appendix XXV attached to this Circular.

This Circular takes effect from the date of signature./. 

APPENDIX NUMBER XXIV

AGREEMENT BETWEEN VIETNAM AND BELARUS

(Attached to Circular No. 59/1998/TT-BTC dated May 12, 1998, issued by the Ministry of Finance supplementing Circular No. 95/1997/TT-BTC dated December 29, 1997, issued by the Ministry of Finance)

Although there are provisions in Circular No. 95/1997/TT-BTC dated December 29, 1997, issued by the Ministry of Finance, the following guiding provisions shall be applied when implementing the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, which came into effect on December 26, 1997, and was applied to taxes in Vietnam from January 1, 1998;

1. Permanent Establishment:

(i) According to this Agreement, paragraph a point 3.2 clause 3 section I of the Circular is replaced by the following provision:

a. The enterprise has in Vietnam: headquarters, branch, office (including foreign traders' representative offices in Vietnam authorized to conclude commercial contracts), factory, workshop, mine, oil well or gas well, site for exploiting natural resources, place for selling goods or property to enterprises, or equipment, means of transportation serving exploration of natural resources.

(ii) According to this Agreement, paragraph d point 2.3 clause 2 section I of the Circular is replaced by the following provision:

d. The enterprise has in Vietnam an agent, commission agent, or any other type of agent, if such agents devote all their agency activities exclusively to the enterprise (dependent agent).

(iii) According to this Agreement, an insurance organization resident in Belarus that collects premiums in Vietnam or carries out insurance risks in Vietnam through a non-independent entity, except in the case of reinsurance, shall be considered to carry out business activities in Vietnam through a permanent establishment in Vietnam.

(iv) According to this Agreement, paragraph a point 3.3 clause 3 section I of the Circular is replaced by the following provision:

a. The enterprise uses means solely for storage, display, or delivery of goods or property to enterprises.

2. Income from Business Activities:

According to this Agreement, no profit is allocated to a permanent establishment of a Belarusian enterprise in Vietnam if the permanent establishment merely purchases goods or property for the enterprise.

3. Income from Dividend Interest:

According to Clause 2 Article 10 of this Agreement, the limitation tax rate specified in point 5.2 clause 5 section II of the Circular is 15% of the total dividend interest.

4. Income from Interest on Loans:

4.1. According to Clause 2 Article 11 of this Agreement, the limitation tax rate specified in point 5.2 clause 5 section II of the Circular is 10% of the total interest from loans.

4.2. In cases where Vietnam levies income tax on interest from loans paid by Vietnamese organizations and individuals to residents of foreign countries, interest from loans paid to the National Bank of Belarus shall be exempted from tax in Vietnam.

5. Income from Royalties:

According to Clause 2 Article 12 of this Agreement, the limitation tax rate specified in point 7.2 clause 7 section II of the Circular is 15% of the total royalties.

6. Income from Independent Personal Services:

According to Clause 3 Article 14 of this Agreement, the term "fixed base" means a fixed place such as an office or a room, or any place through which an individual can regularly perform part or all of his independent personal service activities.

7. Income from Pensions:

According to Clause 2 Article 18 of this Agreement, amounts received by an individual who is a resident of Belarus from social insurance schemes under Vietnamese law shall only be taxed in Vietnam.

8. Income of Students, Apprentices:

8. Income of vocational students and pupils:

Pursuant to this Agreement, Clause 15.2(ii) of Circular shall be replaced with the following provision:

For allowances, scholarships, and wages for labor not mentioned in Clause 15.2(i) of Circular II, students or vocational learners referred to in Clause 15.2(ii) of Circular II will enjoy tax exemption or reduction regulations as those applicable to resident subjects of Vietnam during their study or training period in Vietnam.

9. Other income:

Pursuant to this Agreement, Clause 17 of Circular II shall be replaced with the following provision:

17.1. Article 22 provides for the taxation of other income not covered by other provisions of the Agreement.

17.2. In accordance with Article 22, where a resident subject of Belarus has other income from Vietnam as mentioned in Point 17.1, such income shall be taxed in Vietnam in accordance with the Law on Taxation of Vietnam.

ANNEX XXV

AGREEMENT BETWEEN VIETNAM AND THE CZECH REPUBLIC

Although there are provisions in Circular No. 95/1997/TT-BTC dated December 29, 1997, issued by the Ministry of Finance, the following guiding provisions shall be applied when implementing the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, which came into effect on December 26, 1997, and was applied to taxes in Vietnam from January 1, 1998;

Although there are provisions in Circular No. 95/1997/TT-BTC dated December 29, 1997 of the Ministry of Finance, the following guidelines shall be applied in implementing the Agreement between the Government of the Socialist Republic of Vietnam and the Government of the Czech Republic on Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital which came into effect on February 3, 1998 and applied to taxes in Vietnam from January 1, 1999:

(i) According to this Agreement, paragraph a point 3.2 clause 3 section I of the Circular is replaced by the following provision:

a. The enterprise has in Vietnam: headquarters, branch, office (including foreign traders' representative offices in Vietnam authorized to conclude commercial contracts), factory, workshop, mine, oil well or gas well, site for exploiting natural resources, place for selling goods or property to enterprises, or equipment, means of transportation serving exploration of natural resources.

a. The enterprise has in Vietnam: management office, branch, office (including foreign traders' representative offices in Vietnam authorized to conclude commercial contracts), factory, production workshop, mine, oil well or gas well, quarry or natural resource exploration site.

(ii) Pursuant to this Agreement, an insurance organization shall be considered to carry out business activities through a permanent establishment in Vietnam if it collects premiums in Vietnam or insures risks in Vietnam through a non-independent entity, except in the case of reinsurance.

According to this Agreement, no profit is allocated to a permanent establishment of a Belarusian enterprise in Vietnam if the permanent establishment merely purchases goods or property for the enterprise.

Pursuant to this Agreement, no income shall be allocated to a permanent establishment of a Czech enterprise in Vietnam if such permanent establishment merely purchases goods or assets for the enterprise.

3. Income from international transportation operations:

(i) Pursuant to this Agreement, Point d Clause 1 Section I of the Circular shall be replaced with the following provision:

d. The term "international transportation":

The term "international transportation" in the Agreement refers to the carriage of goods and passengers by air carriers or maritime transporters with actual management headquarters in Vietnam or the Czech Republic, between a location in a contracting state and a location in another contracting state.

For example, if a transporter with actual management headquarters in the Czech Republic carries goods and passengers between Hai Phong Port and Hong Kong Port or a port in the Czech Republic, such activity is considered international transportation. The term does not apply when the aforementioned Czech transporter carries goods and passengers between Hai Phong Port and Ho Chi Minh City Port (both ports located in Vietnam).

If the actual management headquarters of an enterprise is on a ship, the enterprise shall be deemed to have its actual management headquarters in Vietnam if the main port of the ship is in Vietnam, or if the enterprise does not have a main port, then the actual management headquarters of the enterprise shall be in Vietnam if the person managing the ship is a resident subject of Vietnam.

(ii) Pursuant to this Agreement, Point a Subpoint 3.1 Clause 3 Section II of the Circular shall be replaced with the following provision:

a. A transportation enterprise with actual management headquarters in the Czech Republic (where the enterprise sets up a management body to organize, manage, and make decisions on production and business operations) shall be exempt from corporate income tax in Vietnam for income derived from transporting goods and passengers between a location in Vietnam and a location in the Czech Republic or between two locations outside the country.

4. Income from share dividends:

Pursuant to Clause 2 of Article 10 of this Agreement, the maximum tax rate specified in Point 5.2 Clause 5 Section II of the Circular is 10% of the total amount of share dividends.

5. Income from interest on loans:

5.1. Pursuant to Clause 2 of Article 11 of this Agreement, the maximum tax rate specified in Point 6.2 Clause 6 Section II of the Circular is 10% of the total amount of loan interest.

5.2. a. Where Vietnam levies income tax on interest from loans paid by Vietnamese organizations or individuals to resident subjects of foreign countries, such interest shall be exempt from tax in Vietnam if:

(i) Such interest is received and enjoyed by the Government of the Czech Republic, an agency, or local government of the Czech Republic; or

(ii) Such interest is received and enjoyed by the Central Bank of the Czech Republic;

b. Where Vietnam levies income tax on interest from loans paid by Vietnamese organizations or individuals to resident subjects of foreign countries, the Government of Vietnam may also consider exempting tax on interest received and enjoyed by any subject (except those mentioned in points (i) and (ii) above) who is a resident subject of the Czech Republic, provided that the business operation generating the debt is permitted by the Government of Vietnam.

6. Income from royalties:

Pursuant to Clause 2 of Article 12 of this Agreement, the maximum tax rate specified in Point 7.2 Clause 7 Section II of the Circular is 10% of the total amount of royalties.

7. Income of artists and athletes:

Pursuant to this Agreement, Point 12.4 Clause 12 Section II of the Circular shall be replaced with the following provision:

12.4. Where artistic or sports performances by individuals or companies that are resident subjects of the Czech Republic are mainly funded by public funds of the Czech Republic or conducted under an agreement or cultural arrangement between Vietnam and the Czech Republic, income from such performances in Vietnam by individual or company resident subjects of the Czech Republic shall be exempt from tax in Vietnam.

8. Income of vocational students and pupils:

Pursuant to this Agreement, Clause 15.2(ii) of Circular shall be replaced with the following provision:

For allowances, scholarships, and wages for labor not mentioned in Clause 15.2(i) of Circular II, students or vocational learners referred to in Clause 15.2(ii) of Circular II will enjoy tax exemption or reduction regulations as those applicable to resident subjects of Vietnam during their study or training period in Vietnam.

9. Income of teachers, professors, and researchers:

The provisions regarding income of teachers, professors, and researchers as stipulated in Clause 16, Section I of the Circular shall not be applicable under this Agreement./.