2 June 2016
The income tax treaty between Portugal and Vietnam was signed on 3 June 2015. The treaty is the first of its kind between the two countries.
The treaty covers Portuguese personal income tax, corporate income tax, and surtaxes on corporate income tax. It covers Vietnamese personal income tax and business income tax.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services in a Contracting State through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.
The following capital gains derived by a resident of one Contracting State may be taxed by the other State:
Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.
Both countries apply the credit method for the elimination of double taxation.
The protocol to the treaty, signed the same date, includes that the benefits of the treaty will not be granted to a resident of a contracting state that is not the beneficial owner of the income. The protocol also includes that that provisions of the agreement will not apply if the main purposes or one of the main purposes of any person concerned with the creation or assignment of the property or right in respect of which the income is paid was to take advantage of those provisions by means of such creation or assignment.
The protocol to the treaty includes that if Vietnam enters into a tax treaty with an EU Member State after the Portugal-Vietnam treaty enters into force, and such other treaty provides for a lower withholding tax rate or exemption for dividends, interest or royalties, such lower rates will automatically replace the rates provided in the Portugal-Vietnam treaty from the date such other treaty enters into force.
The treaty will enter into force 30 days after the ratification instruments are exchanged, and will apply from 1 January of the year following its entry into force.
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