Notice of entry into force of the second Protocol governing the Agreement on the avoidance of double taxation and the prevention of tax evasion with respect to taxes on income between Vietnam and Singapore

ANNOUNCEMENT

ABOUT THE INTERNATIONAL AGREEMENT COMING INTO FORCE

Executing the provisions set out in Clause 3, Article 47 of the Law on signing, acceding and implementing International Agreement in 2005, the Ministry of Foreign Affairs announces:

The second protocol amending the agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Singapore for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed in Hanoi on March 2, 1994, signed in Singapore on September 12, 2012 coming into force since January 11, 2013.

The Ministry of Foreign Affairs respectfully sends the copy of the Protocol according to the provisions of Article 8 of the abovementioned law.

SECOND PROTOCOL

 AMENDING THE AGREEMENT BETWEEN THE GOVERNMENT OF THE SOCIALIST REPUBLIC OF VIETNAM AND THE GOVERNMENT OF THE REPUBLIC OF SINGAPORE FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME SIGNED IN HANOI ON MARCH 2, 1994

The Government of the Socialist Republic of Vietnam and the Government of the Republic of Singapore, Desiring to amend the Agreement between the Government of the Republic of Singapore and the Government of the Socialist Republic of Vietnam for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income signed in Hanoi on March 2, 1994 (hereinafter referred to as “the Agreement”), Have agreed as follows

ARTICLE I

With respect to Article 2 (Taxes Covered) of the Agreement:

1. Clause 3(a) shall be deleted and replaced by the following:

“(a) in Vietnam:

(i) the personal tax income; and

(ii) enterprise income tax;

(hereinafter referred to as “Vietnamese tax”);

ARTICLE II

With respect to Article 5 (Permanent Establishment) of the Agreement:

Clause 3 shall be deleted and replaced by the following:

“3. The term “permanent establishment” also encompasses:

(a) A building site or construction or installation project constitutes a permanent establishment only if it lasts more than 6 months; and

(b) The furnishing of services, including consultancy services, by an enterprise through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting State for a period or periods aggregating more than 183 days within any twelve-month period;”

ARTICLE III

Article 9 (Associated Enterprises) of the Agreement shall be deleted and replaced by the following:

 “1 Where -

(a) an enterprise of a Contracting State participates directly or indirectly in the management, control or contribution of capital to an enterprise of the other Contracting State, or

(b) the same persons participate directly or indirectly in the management, control or contribution of capital to an enterprise of a Contracting State and to an enterprise of the other Contracting State,

and in either case, conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

2. Where a Contracting State includes, in accordance with the provisions of Clause 1, in the profits of an enterprise of that State - and taxes accordingly – profits on which an enterprise of the other Contracting State has been charged to tax in that other State and where the competent authorities of the Contracting States agree, upon consultation, that all or part of the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of the tax charged therein on those agreed profits.

 In determining such adjustment, fair considerations shall be given to the other provisions of this Agreement.”

ARTICLE IV

With respect to Article 10 (Dividends) of the Agreement:

1. 1. A new Clause 9 shall be inserted:

“The exemption provided under Clause 3 of Article 10 shall not apply to dividends derived by the Government of Singapore from the carrying on of commercial activities.”

ARTICLE V

With respect to Article 11 (Interest) of the Agreement:

1. Clause 4(b)(i) shall be deleted and replaced by the following:

“(i) The Monetary Authority of Singapore;”

2. A new Clause 9 shall be inserted:

“With respect to the taxation of interest as provided under Clause 2 of Article 11, if Vietnam, in any agreement for the avoidance of double taxation with any other State, provides for a rate of less than 10 percent on the gross amount of interest, the same lower rate shall apply for the purposes of Clause 2 of Article 11.”

ARTICLE VI

With respect to Article 12 (Royalties) of the Agreement:

1. Clause 2(b) shall be deleted and replaced by the following:

“(b) 10% of the gross amount of royalties in all other cases”

ARTICLE VII

With respect to Article 13 (Capital Gains) of the Agreement:

Clause 4 shall be deleted and replaced by the following:

“Gains derived by a resident of a Contracting State from the alienation of shares, other than shares of a company posted on a recognized stock exchange of one or both Contracting States, deriving more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State may be taxed in that other State.

5. Gains from the alienation of any property other than that referred to in Clauses 1, 2, 3 and 4 shall be taxable only in the State of which the alienator is a resident.”

ARTICLE VIII

With respect to Article 14 (Independent Personal Services) of the Agreement:

Clause 1 shall be deleted and replaced by the following:

“1. Income derived by an individual who is a resident of a Contracting State in respect of professional services or other activities of an independent nature shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State:

(a) if he has a fixed base regularly available to him in the other State for the purpose of performing his activities; in that case, only the income as is attributable to that fixed base may be taxed in that other State; or

(b) If his stay in the other State is for a period or periods exceeding in the aggregate 183 days within any twelve month period; in that case, only the income as is derived from his activities performed in that other State may be taxed in that other State;

ARTICLE IX

Article 23 (Limitation of Relief) of the Agreement shall be deleted and the subsequent articles shall not be renumbered

ARTICLE X

With respect to Article 25 (Non-Discrimination) of the Agreement:

1. Clause 2 shall be deleted and replaced by the following:

“2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favorably levied in that other State than the taxation levied on enterprises of that other State carrying out the same activities.”

2. Clause 5 shall be deleted and replaced by the following:

“5. Where a Contracting State grants tax incentives to its nationals designed to promote economic or social development in accordance with its national policy and criteria, it shall not be construed as discrimination under this Article.”

ARTICLE XI

Article 27 (Exchange of Information) of the Agreement shall be deleted and replaced by the following:

“1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Agreement or to the administration or enforcement of the domestic laws concerning taxes of every kind imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Agreement.  The exchange of information is not restricted by Articles 1 and 2.

2. Any information received under Clause 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative agencies) concerned with the assessment or collection of, the enforcement or prosecution, or the determination of appeals in relation to the taxes specified in Clause 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

3. In no case shall the provisions of Clauses 1 and 2 be construed so as to impose on a Contracting State the obligation:

(a) to carry out administrative measures at variance with the laws and administrative practice of that or the other Contracting State;

(b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

(c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy.

4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes.  The obligation contained in the preceding sentence is subject to the limitations of Clause 3 of this Article but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information.

5. In no case shall the provisions of Clause 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.”

ARTICLE XII

The Protocol (1994) of the Agreement shall be deleted.

ARTICLE XIII

Each of the Contracting States shall notify the other Contracting State of the completion of the procedures required by the law of the respective Contracting State for bringing into force this Protocol. This Protocol shall come into force on the date of the later of these notifications and shall thereupon have effect:

(a) in Vietnam:

(i) in respect of taxes withheld at source, in relation to taxable amounts as derived on or after the first day of January following the calendar year in which the Protocol comes into force, and in subsequent calendar years;

(ii) in respect of other Vietnamese taxes, in relation to income, profits, gains or capital arising on or after the first day of January following the calendar year in which the Protocol comes into force, and in subsequent calendar years; and

(iii) in respect of Article XI, to request made on or after the date of entry into force of the Protocol;

(b) in Singapore:

(i) in respect of tax chargeable for any year of assessment beginning on or after January 1 in the second calendar year following the year in which the Protocol comes into force;

(ii) in respect of Article XI, to request made on or after the date of entry into force of the Protocol.

ARTICLE XIV

This Protocol, which shall form an integral part of the Agreement, shall remain in force as long as the Agreement remains in force and shall apply as long as the Agreement itself is applicable.

IN WITNESS WHEREOF, the undersigned, being duly authorized by their respective Governments have signed this Protocol.

DONE in duplicate at Singapore on September 12, 2012 in Vietnamese and English, both being equally authoritative.

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