Korea - Vietnam Tax Treaty


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.



■ Royalties

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.