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1. DOUBLE TAXATION ARRANGEMENT ("DTA") BETWEEN HONG KONG AND OVERSEAS JURISDICTIONS
1.5 DTA WITH VIETNAM
This is a comprehensive avoidance of double taxation arrangement signed between HKSAR government and Vietnam on 16 December 2008 and it takes into effect on 1 April 2009 in Hong Kong side whereas it takes into effect on 1 January 2009 in Vietnam side. According to the DTA, it adopts the concept of permanent establishment. Take the provision of service by an enterprise as an example, the period in which the enterprise provides service longer than 180 days in any 12-month period, the enterprise is regarded as having a permanent establishment in that contracting side.
1.51 UNDER THE AGREEMENT, TAX TREATMENTS ON DIVIDENDS, INTERESTS AND ROYALTY ARE SUMMARIZED AS FOLLOWS
There are the major areas to be entitled to the tax benefit on dividend received and royalty income received if certain criteria are satisfied:
(i) the withholding tax rate on the dividend is normally subject to 10% under the DTA;
(ii) the withholding tax rate on the interest is 10% whereas it is tax free if payable to the government of HKSAR or recognized institutions
(iii) the lower withholding tax rate on the royalty.
1.52 CAPITAL GAINS TAX EXEMPTION UNDER DTA (“CG”)
According to DTA - HK/Vietnam, CG derived by a HK resident through the disposal of shares in a Vietnam company less than the prescribed amount, and to the Vietnam company in which holds more than 50% of the immovable asset value physically located in Vietnam. In which case, the CG is NOT subject to tax.
1.53 HONG KONG EMPLOYEE CAN BE EXEMPT FROM TAX
For expatriates working in Vietnam, General speaking,the income tax rate subject to the employment income is 20%.
Under the DTA, if they do not spend longer than 183-day in any 12-month period in any calendar year in Vietnam. The employment income is tax free if fulfilling certain criteria.
If you have problem regarding the tax planning or intend to minimize your tax liabilities, please feel free to contact us.
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