Signature of Double Taxation Agreement between Ireland and Vietnam
On 10 March, 2008 Mr Brian Cowen, T.D., Tánaiste and Minister for Finance and Mr. Tran Xuan Ha, Deputy Minister for Finance of the Socialist Republic of Vietnam, signed in Dublin an "Agreement Between The Government of Ireland 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".
The signing of a Double Taxation Agreement by Ireland and Vietnam is expected to have a positive impact on trade and investment between both countries. Vietnam is at present an emerging economy anxious to promote economic ties with other countries. Ireland too is increasingly outward looking in terms of corporate investment. The Agreement will remove or substantially reduce potential fiscal obstacles to such business and investment decisions.
The Agreement covers taxes on income and gains of individuals and companies. It either grants exclusive taxation rights to one country, or where income remains taxable in both, it provides that each country will relieve any double taxation by allowing a credit for the tax paid in the other. In such cases, the country of residence of the taxpayer will give the credit. The reduction of withholding taxes on dividend, interest and royalty payments is a very important aspect of the Agreement for business and investment.
Other important Articles in the Agreement include the non-discrimination provisions, which protect nationals of each country from discriminatory tax provisions in the other, and also the exchange of information provisions, which are necessary to counter tax evasion.
If, as expected, the Dáil and the Goverment of Vietnam ratify the Agreement before the end of this year, it will enter into force at the beginning of 2009.
Printed copies of the Agreement will be available from the Government Publications Office, Sun Alliance House, Molesworth Street, Dublin 2. The text of the Agreement is also reproduced on the Revenue website.
[Ends 10/03/2008]
Background Note
Irish Double Taxation Agreements
- Double taxation Agreements cover direct taxes on income and capital, which in Ireland’s case are Income Tax, Corporation Tax and Capital Gains Tax.
- The purpose of a double taxation Agreement is, as its title implies, to avoid double taxation and prevent fiscal evasion. Double taxation arises when the same income or capital gain is taxed by two jurisdictions. This normally occurs where income arises in one country and is paid to a resident of another country. Double taxation Agreements seek to allocate taxing rights to one or other country, or where the income or gain remains taxable in both, to provide that the country of residence of the taxpayer will either exempt the foreign income from tax or will grant credit against its own tax for tax paid on the same income or gain in the other country. Double taxation Agreements normally also reduce or eliminate source taxes on passive income flows such as dividends, interest and royalties which arise in one country and are paid to a resident of the other.
- Double taxation Agreements also include non-discrimination provisions, which protect nationals of each country from discriminatory tax provisions in the other. They also provide for the exchange of information between the tax authorities of both countries for the purposes of counteracting tax evasion, in relation to the Agreement itself or the national tax laws of the two countries concerning the taxes covered.
- Ireland currently has Double Taxation Agreements in force with forty-four countries. New Agreements with Georgia, Macedonia and Moldova are set to be signed and ratified before the end of this year, which will allow them to come into effect in 2009. A treaty with Chile, already ratified by Ireland, is awaiting ratification by the Chilean Parliament. There are a number of other negotiations and re-negotiations on-going.