DTAA Between India And Vietnam: Benefits, Double Tax Relief, TDS Rules and Provisions

The DTAA between India and Vietnam helps prevent double taxation and enables smooth financial transactions between the two nations. Under this agreement, income such as salary, business profits, dividends, and interest is taxed only once, either in India or Vietnam, depending on the rules. This tax treaty is beneficial for NRIs, business owners, and companies with cross-border operations, providing greater clarity, lawful tax savings, and fair compliance while earning in both places.

Objective of the DTAA Between India and Vietnam 

The primary aim of the agreement is to foster a stable and attractive fiscal environment to promote investment and trade liberalization between India and Vietnam. [2]

• Avoidance of Double Taxation: The fundamental purpose is to prevent an income from being taxed entirely in either country while clearly defining the taxation norms.  
• Prevention of Fiscal Evasion: The agreement, strengthened by a 2017 protocol, includes provisions that allow tax authorities of both nations to exchange information, helping to curb tax evasion and improve cross-border compliance.
• Encouragement of Bilateral Trade: By removing the financial barriers created by dual taxation, the DTAA enhances businesses' competitive advantage and encourages higher trade volumes.

Significance of DTAA for India and Vietnam 

The India-Vietnam tax treaty is a key pillar in the bilateral economic structure, supporting the growth of Vietnam's emerging manufacturing sector and India's technology exports. [2]

• Boosts Foreign Direct Investment (FDI): The tax certainty provided by the DTAA encourages more Indian companies to invest in Vietnam's growing manufacturing and infrastructure projects, and vice versa.
• Legal Certainty for Taxpayers: The treaty provides clear guidelines, enabling taxpayers to assess their tax liabilities and plan their finances with confidence.
• Facilitates Technology and Services Transfer: The specific provisions covering technical fees and royalties streamline the tax treatment of intellectual property, promoting the exchange of technology and knowledge between the two countries.
• Strengthens Compliance Framework: The DTAA's provision for assistance in tax collection enhances transparency and cooperation between the respective tax administrations, thereby ensuring a robust enforcement mechanism.

India-Vietnam DTAA Tax Rates 

The DTAA establishes maximum withholding tax (WHT) rates for specific types of passive income earned by a resident of one country from a source in the other. [2]

Taxation on Capital Gains under the DTAA Between India and Vietnam 

The DTAA contains specific rules governing the taxation of capital gains, influencing the transfer and sale of assets between the two countries.

• Income from Immovable Property: Capital gains arising from the sale of immovable property (such as land or buildings) are taxed in the country where the property is physically situated. This plays a crucial role for NRIs looking to understand TDS on property sales. 
• Gains from Movable Property: For movable property forming part of the business assets of a permanent establishment (PE), the profits derived from the sale of such property may be taxed in the country where the PE is located.
• Gains from Ships and Aircraft: Gains arising from the sale of ships or aircraft used in international traffic are taxable only in the country where the effective management of the enterprise is situated.

Taxation on Employment Income Under DTAA 

The provisions dealing with employment income are critical for individuals temporarily working in another country, providing clarity on where their salary is liable to tax. [1] [2]

• General Rule (Taxed Where Work is Performed): The general rule states that income derived from employment is taxable in the country where the services are physically rendered.
• The '183-Day Rule' Exception: The DTAA allows employment income to remain taxable only in the employee's country of residence if three specific conditions are met, including the employee's presence in the host country not exceeding 183 days during a fiscal year.
• Benefit for Personal Activities: Income derived by a resident of one country through professional or personal activities in the other country is generally taxable only in the resident's state, unless specific conditions regarding the duration of stay are breached.

What documents are required to claim DTAA TDS? 

To legally claim the reduced tax rates or tax credit under the DTAA between India and Vietnam, specific documents must be maintained and submitted to the tax authorities.

• Tax Residency Certificate (TRC): A certificate issued by the tax authority of the country of residence (India or Vietnam) confirming the taxpayer’s residency status for the relevant financial year.
• Form 10F: A self-declaration form providing mandatory details about the taxpayer, which must be submitted to the Indian payer for reduced TDS deduction.
• PAN Card: The Permanent Account Number (PAN) is necessary for all financial transactions in India.
• Passport & Visa Copies: Documents proving the taxpayer's residential status and period of stay in the host country.
• Form 15CA and 15CB: These forms are mandatory before remitting certain types of income out of India, particularly applicable for NRIs selling property.

How to Claim DTAA Benefits? 

The primary method for claiming relief under the DTAA is by either paying the tax at the reduced treaty rate or claiming a credit for the tax already paid in the host country.

• In India (for Indian residents earning in Vietnam): Indian residents must declare their global income, including earnings from Vietnam. They can then claim a credit for the tax already paid in Vietnam against the tax liability in India. This is the Tax Credit Method.
• In Vietnam (for Vietnamese residents earning in India): Vietnamese residents can provide a Tax Residency Certificate (TRC) to the Indian payer. The Indian payer can then deduct TDS at a lower, mutually agreed rate (e.g., 10% on dividends), thereby reducing the tax at source.
• Compliance for NRIs: NRIs receiving rental income or selling property in India must ensure they use the correct forms and declare their status to benefit from the treaty provisions under income tax for NRI.

DTAA Impact on NRIs, Investors, and Businesses 

The DTAA provides crucial clarity that supports investment and minimizes the administrative burden for cross-border entities.

• Legal Certainty: The agreement outlines the precise legal mechanisms for resolving common tax disputes, providing investors with certainty about their tax obligations.
• Streamlined Procedures: It facilitates the exchange of information and mutual assistance in tax matters, increasing administrative effectiveness for both countries.
• Reduced Compliance Burden: Taxpayers benefit from simple compliance procedures and the potential for lower tax rates on certain types of income, such as royalties and interest.
• Encourages Investment Flow: India’s different DTAA with countries support the flow of capital and promote economic engagement.

How NoBroker Helps With Tax Documentation for DTAA Claims 

Managing international tax compliance and securing the treaty benefits requires expert guidance and meticulous documentation. NoBroker assists individuals and businesses by simplifying the DTAA claim process between India and Vietnam. We provide support in obtaining the necessary Tax Residency Certificate (TRC), assist with preparing and filing mandatory forms such as Form 15CA/15CB, and conduct meticulous documentation review, ensuring your claims for tax relief are accurate, compliant, and processed swiftly.

Know More How DTAA Works in India with Different Countries: