CIRCULAR

SUPPLEMENTING CIRCULAR No.95/1997/TT-BTC OF DECEMBER 29, 1997 OF THE MINISTRY OF FINANCE GUIDING AND INTERPRETING THE CONTENTS OF THE PROVISIONS OF THE DOUBLE TAXATION AVOIDANCE AGREEMENTS ALREADY CONCLUDED BETWEEN VIETNAM AND OTHER COUNTRIES AND ENFORCED IN VIETNAM

Pursuant to the double taxation avoidance agreement between Vietnam and Belarus which came into force from December 26, 1997 and the double taxation avoidance agreement between Vietnam and Czech which came into force from February 3, 1998;
Pursuant to Circular No.95/1998/TT-BTC of December 29, 1997 of the Ministry of Finance guiding and explaining the contents of the provisions of the double taxation avoidance agreements already signed between Vietnam and other countries and enforced in Vietnam;
For the implementation of the two above-mentioned double taxation avoidance agreements, the Ministry of Finance hereby guides the supplements to its Circular No. 95/1997/TT-BTC of December 29, 1997 as follows:

1. The provisions of the double taxation avoidance agreement between Vietnam and Belarus shall be implemented under the guidance in Circular No.95/1997/TT-BTC of the Ministry of Finance. In cases where the agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on avoidance of double taxation and prevention of tax evasion regarding taxes on income and property contains provisions not yet guided elsewhere in Circular No.95/1997/TT-BTC or provisions different from the provisions of the above-mentioned Circular, the specific provisions on the agreement between Vietnam and Belarus in Appendix No. XXIV attached to this Circular shall apply.

2. The provisions of the double taxation avoidance agreement between Vietnam and Czech shall be implemented under the guidance in Circular No.95/1997/TT-BTC of the Ministry of Finance. In cases where the agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Czech on avoidance of double taxation and prevention of tax evasion regarding taxes on income and property contains provisions not yet guided elsewhere in Circular No.95/1997/TT-BTC or provisions different from the provisions of the above-mentioned Circular, the specific provisions on the agreement between Vietnam and Czech in Appendix No. XXV attached to this Circular shall apply.

This Circular takes effect from the date of its signing.

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APPENDIX NO. XXIV

THE AGREEMENT BETWEEN VIETNAM AND BELARUS
(attached to Circular No.59/1998/TT-BTC of May 12, 1998 of the Ministry of Finance supplementing Circular No. 95/1997/TT-BTC of December 29, 1997 of the Ministry of Finance)

Notwithstanding the provisions of Circular No.95/1997/TT-BTC of December 29, 1997 of the Ministry of Finance, the following provisions shall apply to the implementation of the agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Belarus on avoidance of double taxation and prevention of tax evasion regarding taxes on income and property which came into force from December 26, 1997 and shall apply to various taxes in Vietnam from January 1st, 1998:

1. Permanent establishment:

(i) Under this Agreement, Paragraph a, Point 3.2, Clause 3, Section I of the Circular is replaced with the following provision:

a) Such enterprise has in Vietnam: an executive head office, branch(es), office(s) (including Vietnam-based trade representative offices of foreign traders in case of authorization to sign commercial contracts), factory(ies), manufacturing workshop(s), mine(s), oil or gas well(s), natural resource exploiting location(s), place for sale of goods or property belonging to the enterprise, or equipment and means used for the exploration of natural resources.

(ii) Under this Agreement, Paragraph d, Point 2.3, Clause 2, Section I of the Circular is replaced with the following provision:

d) Such enterprise has in Vietnam a broker, a general commission agent or any other agent, if such agent devotes all its activities to the enterprise (dependent agent).

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(iv) Under this Agreement, Paragraph a, Point 3.3, Clause 3, Section I of the Circular shall be replaced with the following provision:

a. Such enterprise uses facilities only for the purposes of storage, display or delivery of goods or property belonging to the enterprise.

2. Income from business activities

Under this Agreement, no profit shall be attributed to a permanent establishment of a Belarussian enterprise in Vietnam if such permanent establishment merely purchases goods or property for the enterprise.

3. Income from dividends:

According to Clause 2, Article 10 of this Agreement, the maximum tax rate mentioned in Point 5.2, Clause 5, Section II of the Circular shall be 15% of the total amount of dividends.

4. Income from loan interests:

4.1. According to Clause 2, Article 11 of this Agreement, the maximum tax rate stated in Point 5.2, Clause 5, Section II of the Circular shall be 10% of the total amount of loan interests.

4.2. In cases where Vietnam levies income tax on loan interests paid by Vietnamese organizations or individuals to foreign residents, the loan interests paid to the National Bank of Belarus shall be exempt from tax in Vietnam.

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According to Clause 2, Article 12 of this Agreement, the maximum tax rate stated in Point 7.2, Clause 7, Section II of the Circular shall be 15% of the total amount of royalties.

6. Income from independent professional activities:

According to Clause 3, Article 14 of this Agreement, the term "fixed base" means a fixed place such as an office or a room or any place where an individual may regularly undertake some or all independent personal service activities.

7. Income from pensions:

According to Clause 2, Article 18 of this Agreement, payments received by in individual being a resident of Belarus from various social insurance forms in accordance with the provisions of Vietnamese laws shall be taxed only in Vietnam.

8. Income of students and apprentices:

Under this Agreement, Paragraph b, Clause 15.2, Section II of the Circular shall be replaced with the following provision:

For allowances, scholarships or remuneration not mentioned in Paragraph a, Clause 15.2, Section II of the Circular, the students or apprentices mentioned in Clause 15.2, Section II of the Circular shall, throughout their study or training period in Vietnam, be entitled to the provisions on tax exemption or reduction like thoss applicable to residents of Vietnam.

9. Other income:

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17.1. Article 22 stipulates the taxation of other income not yet mentioned in other articles of the Agreement.

17.2. According to Article 22, in cases where a resident of Belarus has other income sources derived from Vietnam as mentioned in Point 17.1, he/she shall have to pay tax in Vietnam in accordance with the provisions of the taxation legislation of Vietnam.

APPENDIX NO. XXV

THE AGREEMENT BETWEEN VIETNAM AND CZECH
(attached to Circular No.59/1998/TT-BTC of May 12, 1998 of the Ministry of Finance supplementing Circular No.95/1997/TT-BTC of December 29, 1997 of the Ministry of Finance)

Notwithstanding the provisions of Circular No.95/1997/TT-BTC of December 29, 1997 of the Ministry of Finance, the following guiding provisions shall apply to the implementation of the agreement between the Government of the Socialist Republic of Vietnam and the Government of the Republic of Czech on avoidance of double taxation and prevention of tax evasion regarding taxes on income and property which took effect from February 3, 1998 and shall apply to various taxes in Vietnam from January 1st, 1999:

1. Permanent establishment:

(i) Under this Agreement, Paragraph a, Point 3.2, Clause 3, Section I of the Circular is replaced with the following provision:

a) Such enterprise has in Vietnam: an executive head office, branch(es), an office(s) (including Vietnam-based trade representative office(s) of foreign traders in case of authorization to sign commercial contracts), factory(ies), manufacturing workshop(s), mine(s), oil or gas well(s), quarry(ies), natural resource exploration or exploration place(s).

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2. Income from business activities:

Under this Agreement, no profit shall be attributed to a permanent establishment of a Czech enterprise in Vietnam if such permanent establishment merely purchases goods or property for the enterprise.

3. Profits from international transportation:

(i) Under this Agreement, Paragraph d, Clause 1, Section I of the Circular is replaced with the following provision:

d) The term "international transportation":

The term "international transportation" used in the Agreement to imply the cargo or passenger transportation by airlines or maritime shipping firms which have actual executive offices in Vietnam or Czech between a place in one contracting State and a place in the other contracting State.

For example, a shipping firm has an actual executive office in Czech transports cargoes and passengers between Hai Phong port and a port in Hong Kong or a port in Czech, such activity shall be called international transportation. The term shall not apply to cases where the above-mentioned Czech shipping firm transports cargoes and passengers between the Hai Phong port and a port of Ho Chi Minh City (both ports are in Vietnam).

If the actual executive office of the enterprise is on a ship or a boat then the enterprise shall be regarded as having an actual executive office in Vietnam if the main port of such ship or such boat is situated in Vietnam, or if the enterprise has no main port, its actual executive office shall be in Vietnam if the operator of such ship or such boat is a resident of Vietnam.

(ii) Under this Agreement, Paragraph a, Point 3.1, Clause 3, Section II of the Circular shall be replaced with the following provision:

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4. Income from dividends:

According to Clause 2, Article 10 of this Agreement, the maximum tax rate mentioned in Point 5.2, Clause 5, Section II of the Circular shall be 10% of the total amount of dividends.

5. Income from loan interests:

5.1 According to Clause 2, Article 11 of this Agreement, the maximum tax rate stated in Point 5.2, Clause 5, Section II of the Circular shall be 10% of the total amount of loan interests.

5.2. a/ In cases where Vietnam levies income tax on loan interests paid by Vietnamese organizations or individuals to foreign residents, the loan interests shall be exempt from tax in Vietnam if:

(i) Such interests are received and actually enjoyed by the Czech Government, an agency or a local government of Czech; or

(ii) Such interests are received and actually enjoyed by the Central Bank of Czech;

b/ In cases where Vietnam levies income tax on loan interests paid by Vietnamese organizations or individuals to foreign residents, the Government of Vietnam may also consider tax exemption for interests received and actually enjoyed by any subjects (except for the subjects mentioned in Points (i) and (ii)) above that are residents of Czech provided that the business operations from which the debt arises is permitted by the Government of Vietnam.

6. Income from copyright royalties:

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7. Income of artists and athletes:

Under this Agreement Point 12.4, Clause 12, Section II of the Circular is replaced with the following provision:

12.4. In cases where the artistic or sport performance by an individual or company being a resident of Czech mainly funded by a public fund of Czech or if such performance is carried on under a cultural treaty or agreement between Vietnam and Czech, income derived from the performance in Vietnam by resident individual or company of Czech shall be exempt from tax in Vietnam.

8. Income of students and apprentices:

Under this Agreement, Paragraph b, Clause 15.2, Section II of the Circular is replaced with the following provision:

For allowances, scholarships or remuneration not mentioned in Paragraph a, Clause 15.2, Section II of the Circular, the students or apprentices mentioned in Clause 15.2, Section II of the Circular shall, throughout their study or training period in Vietnam, be entitled to the provisions on tax exemption or reduction like those applicable to residents of Vietnam.

9. Income of teachers, professors and researchers:

The provision of Clause 16, Section I of the Circular on income of teachers, professors and researchers shall not be applied in this Agreement.-