Korea, Vietnam Sign Provisional Amendment to Double Tax Avoidance Agreement
The Ministry of Strategy and Finance announced on August 25 that the Korean and Vietnamese governments provisionally signed a revised double tax avoidance agreement during the fourth round of negotiations. The amended agreement takes effect early next year, through official signing and ratification in the near future.
According to the revision, Korean enterprises running permanent establishments in Vietnam will not be taxed by Vietnam on income is generated in a region other than Vietnam. The new rule is not applied to service income though.
When it comes to stock transfer income, the taxable shares in the source country are limited to cases when realty accounts for over 50 percent of corporate assets. Still, stock transfer income from all shares, excluding real estate stocks, is taxable in the source country the same as it is now.
The limited tax rate for royalty income is lowered from 15 percent to 10 percent, while a technical service fee is subject to taxation at a limited tax rate of 7.5 percent in the source country. At the same time, new clauses were drawn up to prevent the application of the agreement to transactions aiming at tax avoidance.
