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 Avoidance Agreements between Vietnam and countries that have signed and are in force in Vietnam.

CIRCULAR

CIRCULAR NO. 59/1998/TT-BTC OF THE MINISTRY OF FINANCE DATED MAY 12, 1998 SUPPLEMENTING CIRCULAR NO. 95/1997/TT-BTC OF THE MINISTRY OF FINANCE DATED DECEMBER 29, 1997 GUIDING AND INTERPRETING THE CONTENTS OF THE PROVISIONS OF DOUBLE TAXATION AGREEMENTS BETWEEN VIETNAM AND OTHER COUNTRIES THAT HAVE BEEN SIGNED AND ARE IN FORCE IN VIETNAM

WHEREAS, the Double Taxation Agreement between Vietnam and Belarus has been in force since December 26, 1997, and the Double Taxation Agreement between Vietnam and the Czech Republic has been in force since February 3, 1998;
WHEREAS, Circular No. 95/1997/TT-BTC dated December 29, 1997 of the Ministry of Finance guiding and interpreting the contents of the provisions of Double Taxation Agreements between Vietnam and other countries that have been signed and are in force in Vietnam;
In order to implement the above-mentioned Double Taxation Agreements, the Ministry of Finance supplements Circular No. 95/1997/TT-BTC dated December 29, 1997 of 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 as set out in Appendix XXIV attached hereto.

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 as set out in Appendix XXV attached hereto.

This Circular takes effect from the date of issuance.

APPENDIX XXIV

DOUBLE TAXATION AGREEMENT BETWEEN VIETNAM AND BELARUS

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

Although there are provisions in Circular No. 95/1997/TT-BTC dated December 29, 1997 of 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 applied to taxes in Vietnam from January 1, 1998;

1. Permanent Establishment:

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

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

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

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

(iii) Pursuant to this Agreement, an insurance organization resident in Belarus conducting premium collection in Vietnam or conducting risk insurance in Vietnam through a non-independent entity, except for reinsurance, shall be considered to carry out business activities in Vietnam through a permanent establishment in Vietnam.

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

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

2. Business Income:

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

3. Dividend Income:

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 income.

4. Interest Income:

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 income from loans.

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

5. Royalty Income:

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 royalty income.

6. Independent Personal Services Income:

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 their independent personal service activities.

7. Pension Income:

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 and vocational trainees:

Under this Agreement, paragraph b Clause 15.2 Section II Circular shall be replaced with the following provision:

For allowances, scholarships, and wages not mentioned in paragraph a Clause 15.2 Section II Circular, students or vocational trainees referred to in Clause 15.2 Section II Circular during their study or training period in Vietnam shall enjoy tax exemption or reduction provisions applicable to residents of Vietnam.

9. Other income:

Under this Agreement, Clause 17 Section II Circular shall be replaced with the following provision:

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

17.2. Pursuant to Article 22, where a resident of Belarus has other income from Vietnam as mentioned in point 17.1, such person shall pay taxes in Vietnam according to the Law on Taxation of Vietnam.

ANNEX XXV

AGREEMENT BETWEEN VIETNAM AND THE CZECH REPUBLIC

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

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 the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital which came into effect on February 3, 1998 and applies to taxes in Vietnam from January 1, 1999:

1. Permanent Establishment:

(i) Pursuant to this Agreement, paragraph a point 3.2 clause 3 section I of the Circular shall be 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, production workshop, mine, oil well or gas well, quarry or mining site or exploration site.

(ii) Under this Agreement, an insurance organization is considered a resident of the Czech Republic if it collects premiums in Vietnam or insures risks in Vietnam through an independent entity, except for reinsurance, will be deemed to carry out business activities in Vietnam through a permanent establishment in Vietnam.

2. Business Income:

Under this Agreement, no profit 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 activities:

(i) Under this Agreement, paragraph d Clause 1 Section I Circular shall be replaced with the following provision:

d. The term "international transportation":

The term "international transportation" is used in the Agreement to refer to the carriage of goods and passengers by airlines and maritime transport companies with actual 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 transport company with actual 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 called international transportation. The term does not apply when the aforementioned Czech transport company carries goods and passengers between Hai Phong Port and Ho Chi Minh City Port (both ports are in Vietnam).

If the actual headquarters of the enterprise is on a ship or vessel, the enterprise will be considered to have its actual headquarters in Vietnam if the main port of the ship or vessel is in Vietnam, or if the enterprise does not have a main port, then the actual headquarters of the enterprise will be in Vietnam if the person managing the ship or vessel is a resident of Vietnam.

(ii) Under this Agreement, paragraph a Point 3.1 Clause 3 Section II Circular shall be replaced with the following provision:

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

4. Income from dividends:

Under Clause 2 Article 10 of this Agreement, the limitation tax rate specified in Point 5.2 Clause 5 Section II Circular is 10% of the total dividend income.

5. Income from interest:

5.1. Under Clause 2 Article 11 of this Agreement, the limitation tax rate specified in Point 6.2 Clause 6 Section II Circular is 10% of the total interest income from loans.

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

6. Income from royalties:

Under Clause 2 Article 12 of this Agreement, the limitation tax rate specified in Point 7.2 Clause 7 Section II Circular is 10% of the total royalty income.

7. Income of artists and athletes:

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

12.4. Where artistic or sports performances by individuals or companies that are residents of the Czech Republic are mainly funded by public funds of the Czech Republic or if these activities are carried out under an agreement or cultural arrangement between Vietnam and the Czech Republic, income from performances in Vietnam by individuals or companies residing in the Czech Republic shall be exempt from tax in Vietnam.

8. Income of students and vocational trainees:

Under this Agreement, paragraph b Clause 15.2 Section II Circular shall be replaced with the following provision:

For allowances, scholarships, and wages not mentioned in paragraph a Clause 15.2 Section II Circular, students or vocational trainees referred to in Clause 15.2 Section II Circular during their study or training period in Vietnam shall enjoy tax exemption or reduction provisions applicable to residents of Vietnam.

9. Income of teachers, professors, and researchers:

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