The Ministry of Strategy and Finance agreed to revise current double taxation treaty with Vietnam at the meeting with the Vietnamese authority held on 8-10 August in Vietnam. The revised tax treaty will be effective after signing a formal agreement and ratification of both countries. The main contents of the proposed and agreed revisions are as follows:
■ Offshore Income
The offshore income (excluding service income) of Korean companies generated from the activities performed outside of Vietnam will not be taxed in Vietnam.
■ Gains from Share Transfer
Gains derived from transfer of stocks in a corporation will be taxed in the source country if 50% or more of the company’s assets are composed of real estate. Except for this case, gains from alienation of stocks will be taxed only in the resident country.
Withholding tax rate on royalties will be reduced to 10% (down from 15%), but royalty for technical and engineering services can be taxed in the source country at 7.5%. Withholding tax rate on patents will remain unchanged at 5%.
■ Information Exchange
Korea and Vietnam will exchange financial and tax related information of the residents for prevention of tax evasion based on the OECD guideline.
■ Prevention of Granting Treaty Benefits
Exclusion rules will be added to the treaty in order to prevent tax treaty benefits for any tax avoidance attempts.