January 21, 2022
Vietnam initiates review of policies governing tax treaties
Vietnam recently published Decision 2072/QD-TTg1 of the Prime Minister (the Decision) on policies governing its tax treaty framework. The Decision approved the proposal to "Review the effectiveness of the agreements for the avoidance of double taxation with respect to Vietnam's tax environment and development direction" (the Proposal) issued by the Ministry of Finance (MoF).
The Decision provides MoF the authority and budget to work on improvement of the current framework for negotiation and execution of new tax treaties, renegotiation of the existing tax treaties and amendment of domestic tax administration policies in adherence with international standards.
This Alert provides an update on the key features of the Decision.
The Decision approved the Proposal focusing on Vietnam's policies with respect to its tax treaty network and aligning with international tax practices and developments. The objectives of the Proposal include: (i) improving the framework for negotiation and execution of tax treaties to align with the development of Vietnam's economy; (ii) adhering to international standards and Vietnam's commitments under international agreements; and (iii) enhancing the consistency and transparency of Vietnam's taxation.
The Proposal includes the following key tasks:
The tasks and timelines stipulated in the Decision constitute an important step towards revamping Vietnam's tax treaty policy framework and aligning it with the international tax standards and commitments. Considering that Vietnam has signed tax treaties with around 80 countries, multinational enterprises with operations in Vietnam should monitor upcoming developments with respect to Vietnam's tax treaty network, the related domestic tax administration rules and mechanisms for international tax dispute resolution and exchange of information.
For additional information with respect to this Alert, please contact the following:
EY Consulting Vietnam JSC
Ernst & Young LLP (United States), Vietnam Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago
1 The Decision was published on 10 December 2021.
2 Timelines stated under the Decision 2071/QD-TTg are understood to be in line with MoF's proposal submitted for approval in 2021.
3 Organization for Economic Cooperation and Development.
4 The OECD/G20 Base Erosion and Profit Shifting Project.
5 The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
6 The revised timeline has yet to be prescribed.