We wish to inform you that on 15 December 2025, the Republic of Cyprus and Vietnam signed a new Double Tax Treaty (DTT) aimed at strengthening economic cooperation and preventing double taxation. The treaty broadly follows the principles of the OECD and UN Model Conventions.

 

1. Permanent Establishment (PE)

In addition to the standard fixed place of business and agency PE rules, the treaty introduces specific thresholds:

• Construction PE – Projects or related supervisory activities lasting at least 6 months.
• Services PE – Provision of services, including consultancy, for 6 months or more within any 12‑month period.
• Natural Resources PE – Exploration or exploitation activities constitute a PE regardless of duration.

2. Dividends

The treaty caps withholding tax (WHT) on dividends as follows:

• 5% WHT where the beneficial owner (BO) is a company holding at least 70% of the capital of the dividend‑paying company or has invested USD 10 million or more.
• 10% WHT in all other cases.

3. Interest

Interest payments to a beneficial owner will be subject to WHT not exceeding 10%.

4. Royalties

Royalty payments to a beneficial owner will be subject to WHT not exceeding 10% of the gross amount.

5. Capital Gains

Beyond the standard OECD‑aligned allocation rules, the treaty includes special provisions:

• The source State may tax gains from the disposal of shares in property‑rich companies.
• The source State may tax gains from the alienation of shares representing more than 15% of the capital of a company resident in that State.

6. Underlying Tax Credit

Where dividends are paid from a company resident in one contracting State to a company resident in the other:

• The receiving company may claim a credit for withholding tax on dividends and underlying corporate tax paid by the dividend‑paying company.
• To qualify, the dividend recipient must hold at least 10% of the voting power in the company distributing the dividends.

7. Entry Into Force and Effective Date

The treaty will enter into force once both Cyprus and Vietnam complete and exchange their ratification notifications. Its provisions will take effect from 1 January of the year following entry into force.

8. Expected Impact

The conclusion of this treaty is anticipated to enhance tax cooperation, support cross‑border business activity, and further strengthen the economic relationship between Cyprus and Vietnam.