{"id":13499,"date":"2025-12-19T11:14:24","date_gmt":"2025-12-19T04:14:24","guid":{"rendered":"https:\/\/cdlaf.vn\/?p=13499"},"modified":"2025-12-19T11:26:17","modified_gmt":"2025-12-19T04:26:17","slug":"reviewing-payment-terms-under-double-taxation-agreements","status":"publish","type":"post","link":"https:\/\/cdlaf.vn\/en\/reviewing-payment-terms-under-double-taxation-agreements\/","title":{"rendered":"Reviewing payment terms under double taxation Agreements"},"content":{"rendered":"<p>In the context of Vietnam&#8217;s increasing integration into the international tax system, the application of Double Taxation Agreements (DTAs\/DTTs) has become one of the most critical issues when reviewing payment clauses in cross-border commercial and service contracts or related-party transactions. Errors in determining the obligations for Foreign Contractor Tax (FCT), Withholding Tax, or in proving the tax residency of a foreign partner can expose businesses to significant risks: being subjected to tax arrears (back taxes), penalties for late payment, disallowance of valid expenses, or being assessed as non-compliant during a tax inspection.<\/p>\n<p>In practical consulting experience for Foreign Direct Investment (FDI) enterprises and multinational corporations, one of the most common weak points lies in the inconsistent application of the DTA with the payment clauses stipulated in the contract. Many businesses only consider the agreement at the stage of tax finalization, whereas the DTA should be reviewed from the time of negotiation, drafting, and approval of the payment terms. It is the misunderstanding or inadequate application during this initial phase that leads to severe legal and tax consequences later on.<\/p>\n<p>This article provides a general, systematic, and practical guide on how to apply the Double Taxation Agreement when reviewing payment terms, helping foreign investors and FDI enterprises optimize tax, comply with Vietnamese law, and mitigate risks in cross-border transactions.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-medium wp-image-13102\" src=\"http:\/\/cdlaf.vn\/wp-content\/uploads\/2025\/10\/Cambodia-610x400.jpg\" alt=\"\" width=\"610\" height=\"400\" srcset=\"https:\/\/cdlaf.vn\/wp-content\/uploads\/2025\/10\/Cambodia-610x400.jpg 610w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2025\/10\/Cambodia-1220x800.jpg 1220w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2025\/10\/Cambodia-768x504.jpg 768w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2025\/10\/Cambodia-1536x1008.jpg 1536w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2025\/10\/Cambodia-2048x1343.jpg 2048w\" sizes=\"auto, (max-width: 610px) 100vw, 610px\" \/><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of contents:<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #a32411;color:#a32411\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #a32411;color:#a32411\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/cdlaf.vn\/en\/reviewing-payment-terms-under-double-taxation-agreements\/#1_Foreign_Contractor_Tax_FCT\" >1. Foreign Contractor Tax (FCT)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/cdlaf.vn\/en\/reviewing-payment-terms-under-double-taxation-agreements\/#2_Recording_PriceFeeCommission_in_the_Contract\" >2. Recording Price\/Fee\/Commission in the Contract<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/cdlaf.vn\/en\/reviewing-payment-terms-under-double-taxation-agreements\/#3_Responsibility_for_Providing_Withholding_Documents\" >3. Responsibility for Providing Withholding Documents<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/cdlaf.vn\/en\/reviewing-payment-terms-under-double-taxation-agreements\/#SEND_CONSULTATION_REQUEST\" >SEND CONSULTATION REQUEST<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"1_Foreign_Contractor_Tax_FCT\"><\/span>1. Foreign Contractor Tax (FCT)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Foreign Contractor Tax is one of the issues that needs attention when carrying out international commercial transactions. Transactions that are likely to give rise to FCT obligations for foreign partners and require enterprises to pay attention include: contracts for the transfer of trademark usage rights with a foreign element, construction contracts where the construction site is in Vietnam, contracts for the lease of machinery and equipment in Vietnam, etc.<\/p>\n<p>In reality, the amount of tax payable in Vietnam will increase transaction costs and reduce the profits derived from transactions in Vietnam for foreign traders. Therefore, Vietnam&#8217;s participation in Double Taxation Agreements<strong> (&#8220;Agreements&#8221;)<\/strong> aims to eliminate double taxation by: (a) exempting or reducing the tax payable in Vietnam for residents of the contracting state; or (b) crediting the tax paid by a Vietnamese resident in the contracting state against the tax payable in Vietnam.<\/p>\n<p>Based on the advantages afforded by the diplomatic policies of the Vietnamese government and countries worldwide, companies and individuals should also pay attention to apply these provisions to protect their rights and interests in contracts with foreign elements, especially when agreeing upon payment terms that comply with the law and International Treaties between the parties.<\/p>\n<p>Some notes that CDLAF highlights regarding issues that enterprises and individuals need to consider are as follows:<\/p>\n<p><strong>Firstly, <\/strong>determining whether the foreign contractor has a Permanent Establishment (PE). Currently, depending on the specific Agreement, a separate definition of PE may be provided. However, based on Article 1 of Circular 205\/2013\/TT-BTC, the term &#8220;resident&#8221; can be understood as follows:<\/p>\n<p>According to the Agreement, the term \u201cresident of a Contracting State<strong>\u201d<\/strong> means any person who, under the laws of that State, is liable to tax therein by reason of:<\/p>\n<ul>\n<li>His domicile, residence, or other criterion of a similar nature in the case that the person is an individual; or,<\/li>\n<li>His place of management, place of registration, or place of incorporation, or other criterion of a similar nature in the case that the person is an organization (entity);<\/li>\n<\/ul>\n<p>According to current tax law regulations in Vietnam, the following subjects are considered <strong>residents of Vietnam<\/strong>:<\/p>\n<p><strong>For Individuals:<\/strong><\/p>\n<ul>\n<li>Being present in Vietnam for 183 days or more calculated in a calendar year or in 12 consecutive months from the first date of presence in Vietnam.<\/li>\n<li>An individual&#8217;s presence in Vietnam as specified at this point is the physical presence of that individual in the territory of Vietnam.<\/li>\n<li>Having a permanent place of abode in Vietnam in one of the two following cases: Having a registered permanent residence according to the law on residence; or having a rented house for accommodation in Vietnam according to the law on housing, with the duration of the lease contracts being 183 days or more in the tax year.<\/li>\n<\/ul>\n<p><strong>For Organizations:<\/strong> Established and operating under Vietnamese law.<\/p>\n<p>Furthermore, most Agreements may define a certain construction site or service provision location as a Permanent Establishment, for example: A construction site, a construction or installation project will constitute a PE only if the site or project lasts for more than six months (Double Taxation Avoidance and Evasion Prevention Agreement on Income Tax).<\/p>\n<p>The determination of whether the foreign partner has a Permanent Establishment or not will lead to the allocation of tax payment responsibility between the parties in the Contract. If the foreign partner has a PE in Vietnam, that PE is responsible for declaring and paying tax. If the partner does not have a PE, the domestic enterprise involved in the transaction is responsible for declaring, withholding, and remitting tax on behalf of the foreign partner.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"2_Recording_PriceFeeCommission_in_the_Contract\"><\/span>2. Recording Price\/Fee\/Commission in the Contract<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>This is a crucial and potentially risky clause. The parties need to clarify whether these payments <strong>already include FCT<\/strong>. At the same time, it must be specifically determined which party bears this FCT amount, as well as the responsibility for tax declaration and payment as regulated. Looseness in agreeing on this clause will lead to the risk of bearing hidden costs for the parties, especially the Vietnamese enterprise transacting with the foreign partner.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"3_Responsibility_for_Providing_Withholding_Documents\"><\/span>3. Responsibility for Providing Withholding Documents<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As a general principle of the Agreements, the party subject to FCT in one country will be entitled to a credit for the tax paid in their home country. However, they must provide full documentation, such as: Contract, invoice, payment voucher, receipt, tax withholding certificate, documents proving tax payment, etc. Therefore, the foreign enterprise or individual needs to include a clause in the agreement requiring the withholding party to fully provide the aforementioned documents as a basis for tax credit.<\/p>\n<p>If the Contract established between the parties falls under the case of tax exemption or reduction according to the Agreement, the parties must specifically agree on which party is responsible for carrying out the tax exemption or reduction procedures for the foreign contractor. The composition of the dossier and the procedures for tax exemption\/reduction are regulated under Article 62 of Circular 80\/2021\/TT-BTC.<\/p>\n<p>Nevertheless, it should be noted that in this case, the tax exemption or reduction will only be implemented upon acceptance by the tax authority. Therefore, the parties should agree that, should the tax authority issue a different decision, one or both parties have the right to request renegotiation of the payment terms to ensure a balance of rights and interests of the parties in the contract.<\/p>\n<p><strong><em>Time<\/em><\/strong><strong><em> of writing<\/em><\/strong><em>: 11\/11\/2025<\/em><\/p>\n<p><em>The article contains general information which is of reference value, in case you want to receive legal opinions on issues you need clarification on, please get in touch with our Lawyer \u00a0at\u00a0 <a href=\"https:\/\/mail.google.com\/mail\" target=\"_blank\" rel=\"noopener\"><strong>info@cdlaf.vn<\/strong><\/a><\/em><\/p>\n<div class=\"content-post-nd\">\n<div style=\"text-align: center;\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-5519 size-full aligncenter\" src=\"http:\/\/cdlaf.vn\/wp-content\/uploads\/2023\/05\/CHUONG-TRINH-THANG.png\" alt=\"\" width=\"1080\" height=\"600\" srcset=\"https:\/\/cdlaf.vn\/wp-content\/uploads\/2023\/05\/CHUONG-TRINH-THANG.png 1080w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2023\/05\/CHUONG-TRINH-THANG-720x400.png 720w, https:\/\/cdlaf.vn\/wp-content\/uploads\/2023\/05\/CHUONG-TRINH-THANG-768x427.png 768w\" sizes=\"auto, (max-width: 1080px) 100vw, 1080px\" \/><\/div>\n<\/div>\n<div class=\"content-post-nd\">\n<p><strong>Why choose CDLAF\u2019s service?<\/strong><\/p>\n<ul class=\"li-content\">\n<li>We provide effective and comprehensive legal solutions that help you save money and maintain compliance in your business;<\/li>\n<li>We continue to monitor your legal matters even after the service is completed and update you when there are any changes in the Vietnamese legal system;<\/li>\n<li>Our system of forms and processes related to labor and personnel is continuously built and updated and will be provided as soon as the customer requests it;<\/li>\n<li>As a Vietnamese law firm, we have a thorough understanding of Vietnam&#8217;s legal regulations, and grasp the psychology of employees, employers, and working methods at competent authorities;<\/li>\n<li>CDLAF&#8217;s team of lawyers has many years of experience in the field of labor and enterprises, as well as human resources and financial advisory.<\/li>\n<li>Strict information security procedures throughout the service performance and even after the service is completed.<\/li>\n<\/ul>\n<\/div>\n<p><strong style=\"color: #a32411;\">You can refer for more information:<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/cdlaf.vn\/en\/procedures-for-handling-delayed-capital-contribution-in-an-investment-project\/\">Procedures for handling delayed capital contribution in an Investment project<\/a><\/li>\n<li><a href=\"https:\/\/cdlaf.vn\/en\/legal-issues-arising-from-delays-in-extending-the-operational-term-of-investment-projects\/\">Legal issues arising from delays in extending the Operational term of Investment Projects<\/a><\/li>\n<li><a href=\"https:\/\/cdlaf.vn\/en\/foreign-investors-and-how-to-establish-a-technology-company-in-vietnam-part-2\/\">Foreign investors and how to establish a technology company in Vietnam <\/a><br \/>(Part 2)<\/li>\n<li><a href=\"https:\/\/cdlaf.vn\/en\/foreign-investors-and-how-to-establish-a-technology-company-in-vietnam-part-1\/\">Foreign investors and how to establish a technology company in Vietnam <\/a><br \/>(Part 1)<\/li>\n<\/ul>\n\n<div class=\"wpcf7 no-js\" id=\"wpcf7-f2681-o1\" lang=\"en-US\" dir=\"ltr\" data-wpcf7-id=\"2681\">\n<div class=\"screen-reader-response\"><p role=\"status\" aria-live=\"polite\" aria-atomic=\"true\"><\/p> <ul><\/ul><\/div>\n<form action=\"\/en\/wp-json\/wp\/v2\/posts\/13499#wpcf7-f2681-o1\" method=\"post\" class=\"wpcf7-form init\" aria-label=\"Contact form\" novalidate=\"novalidate\" data-status=\"init\">\n<fieldset class=\"hidden-fields-container\"><input type=\"hidden\" name=\"_wpcf7\" value=\"2681\" \/><input type=\"hidden\" name=\"_wpcf7_version\" value=\"6.1.5\" \/><input type=\"hidden\" name=\"_wpcf7_locale\" value=\"en_US\" \/><input type=\"hidden\" name=\"_wpcf7_unit_tag\" value=\"wpcf7-f2681-o1\" \/><input type=\"hidden\" name=\"_wpcf7_container_post\" value=\"0\" \/><input type=\"hidden\" name=\"_wpcf7_posted_data_hash\" value=\"\" \/>\n<\/fieldset>\n<h2 class=\"tt-form\"><span class=\"ez-toc-section\" id=\"SEND_CONSULTATION_REQUEST\"><\/span>SEND CONSULTATION REQUEST\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><label>Full name<\/label><br \/>\n<span class=\"wpcf7-form-control-wrap\" data-name=\"full-name\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-text wpcf7-validates-as-required\" aria-required=\"true\" aria-invalid=\"false\" value=\"\" type=\"text\" name=\"full-name\" \/><\/span><br \/>\n<label>Email<\/label><br \/>\n<span class=\"wpcf7-form-control-wrap\" data-name=\"email\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-email wpcf7-validates-as-required wpcf7-text wpcf7-validates-as-email\" aria-required=\"true\" aria-invalid=\"false\" value=\"\" type=\"email\" name=\"email\" \/><\/span><br \/>\n<label>Phone Number<\/label><br \/>\n<span class=\"wpcf7-form-control-wrap\" data-name=\"phone\"><input size=\"40\" maxlength=\"400\" class=\"wpcf7-form-control wpcf7-tel wpcf7-text wpcf7-validates-as-tel\" aria-invalid=\"false\" value=\"\" type=\"tel\" name=\"phone\" \/><\/span><br \/>\n<label>Message<\/label><br \/>\n<span class=\"wpcf7-form-control-wrap\" data-name=\"coment\"><textarea cols=\"40\" rows=\"10\" maxlength=\"2000\" class=\"wpcf7-form-control wpcf7-textarea\" aria-invalid=\"false\" name=\"coment\"><\/textarea><\/span><br \/>\n<input class=\"wpcf7-form-control wpcf7-submit has-spinner btn-yellow\" type=\"submit\" value=\"Send\" \/>\n<\/p><div class=\"wpcf7-response-output\" aria-hidden=\"true\"><\/div>\n<\/form>\n<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>In the context of Vietnam&#8217;s increasing integration into the international tax system, the application of Double Taxation Agreements (DTAs\/DTTs) has become one of the most critical issues when reviewing payment clauses in cross-border commercial and service contracts or related-party transactions. Errors in determining the obligations for Foreign Contractor Tax (FCT), Withholding Tax, or in proving&#8230;<\/p>\n","protected":false},"author":4,"featured_media":13102,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[64],"tags":[],"class_list":["post-13499","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles"],"acf":[],"_links":{"self":[{"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/posts\/13499","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/comments?post=13499"}],"version-history":[{"count":2,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/posts\/13499\/revisions"}],"predecessor-version":[{"id":13501,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/posts\/13499\/revisions\/13501"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/media\/13102"}],"wp:attachment":[{"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/media?parent=13499"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/categories?post=13499"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cdlaf.vn\/en\/wp-json\/wp\/v2\/tags?post=13499"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}