Vietnam

SECTION
90 OF THE INCOME-TAX ACT, 1961—DOUBLE TAXATION AGREEMENT AGREEMENT FOR
AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION WITH FOREIGN
COUNTRIES—WITH VIETNAM

Notification
No. 9758 [F. NO. 503/7/91—FTD], dated 28-4-1995

Whereas
the annexed Agreement between the Government of the Republic of India 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
has come into force on the 2nd day of February, 1995 after the notification by
both the Contracting States to each other of the Completion of the procedures
required under their laws for bringing into force of the said Agreement in
accordance with Article 29 of the said Agreement;

Now,
therefore, in exercise of the powers conferred by section 90 of the Income-tax
Act, 1961 (43 of 1961), the Central Government hereby directs that all the
provisions of the said Agreement shall be given effect to in the Union of
India.

ANNEXURE

AGREEMENT
BETWEEN THE REPUBLIC OF INDIA AND THE SOCIALIST REPUBLIC OF VIETNAM FOR THE
AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT
TO TAXES ON INCOME

The
Government of the Republic of India and the Government of the Socialist
Republic of Vietnam, desiring to conclude an Agreement for the avoidance of
double taxation and the prevention of fiscal evasion with respect to taxes on
income, have agreed as follows:

Article
1: PERSONAL SCOPE

This
Agreement shall apply to persons who are residents of one or both of the
Contracting States.

Article
2: TAXES COVERED

1.     This Agreement shall
apply to taxes on income imposed on behalf of a Contracting State or of its
political subdivisions or local authorities, irrespective of the manner in
which they are levied.

2.     There shall be
regarded as taxes on income all taxes imposed on total income or on elements of
income, including taxes on gains from the alienation of movable or immovable
property, taxes on the total amounts of wages or salaries paid by enterprises.

3.     The existing taxes to
which the Agreement shall apply are:

a.     in India:

the
income-tax including any surcharge thereon;

(hereinafter
referred to as “Indian tax”);

a.     

b.    in Vietnam:

                     
i.       

the
personal income-tax;

                    
ii.       
the
profit tax; and

                   
iii.       
the
profit remittance tax;

(hereinafter
referred to as “Vietnamese tax”).

1.      

2.      

3.      

4.     The Agreement shall
also apply to any identical or substantially similar taxes which are imposed
after the date of signature of this Agreement in addition to, or in place of,
the existing taxes. The competent authorities of the Contracting States shall
notify each other of substantial changes which have been made in their
respective taxation laws.

Article
3: GENERAL DEFINITIONS

1.     In this Agreement,
unless the context otherwise requires:

a.     the term
“India” means the territory of India and includes the territorial sea
and airspace above it, as well as any other maritime zone in which India has
sovereign rights, other rights and jurisdictions, according to the Indian law
and in accordance with international law or the U.N. Convention on the Law of
the Sea;

b.    the term
“Vietnam” means the Socialist Republic of Vietnam; when used in a
geographical sense, it means all its national territory, including its
territorial sea and any area beyond and adjacent to its territorial sea, within
which Vietnam, by Vietnamese legislation and in accordance with international
law, has sovereign rights of exploration for and exploitation of natural
resources of the sea bed and its sub-soil and superjacent watermass;

c.     the terms “a
Contracting State” and “the other Contracting State” mean India
or Vietnam as the context requires;

d.    the term
“company” means any body corporate or any entity which is treated as
a company or body corporate under the taxation law in force in the respective
Contracting States;

e.     the term
“competent authority” means:

                     
i.       
in
the case of India, the Central Government in the Ministry of Finance
(Department of Revenue) or their authorized representative; and

                    
ii.       
in
the case of Vietnam, the Minister of Finance or his authorized representative;

a.      

b.      

c.      

d.      

e.      

f.     the terms
“enterprise of a Contracting State” and “enterprise of the other
Contracting State” mean respectively an enterprise carried on by a
resident of a Contracting State and an enterprise carried on by a resident of
the other Contracting State;

g.    the term “fiscal
year” means:

                     
i.       
in
the case of India, “previous year” as defined under section 3 of the
Income-tax Act, 1961; and

                    
ii.       
in
the case of Vietnam, the accounting year comprising of a twelve-month period;

a.      

b.      

c.      

d.      

e.      

f.      

g.      

h.     the term
“international traffic” means any transport by a ship or aircraft
operated by an enterprise of a Contracting State, except when the ship or
aircraft is operated solely between places in the other Contracting State;

i.      the term
“national” means any individual, possessing the nationality of a Contracting
State and any legal person, partnership or association deriving its status from
the laws in force in the Contracting State;

j.      the term

“person” includes an individual, a company, a body of persons and any
other entity which is treated as a taxable unit under the taxation laws in
force in the respective Contracting States;

k.     the term
“tax” means Indian tax or Vietnamese tax, as the context requires,
but shall not include any amount which is payable in respect of any default or
omission in relation to the taxes to which this Agreement applies or which
represents a penalty imposed relating to those taxes.

1.      

2.     As regards the
application of the Agreement by a Contracting State, any term not defined
therein shall, unless the context otherwise requires, have the meaning which it
has under the law of that State concerning the taxes to which the Agreement
applies.

Article
4: RESIDENT

1.     For the purposes of
this Agreement, the term “resident of a Contracting State” means any
person who, under the laws of that State, is liable to tax therein by reason of
his domicile, residence, place of management, place of registration or any
other criterion of a similar nature.

2.     Where by reason of
the provisions of paragraph 1, an individual is a resident of both Contracting
States, then his status shall be determined as follows:

a.     he shall be deemed to
be a resident of the State in which he has a permanent home available to him;
if he has a permanent home available to him in both States, he shall be deemed
to be a resident of the State with which his personal and economic relations are
closer (centre of vital interests);

b.    if the State in which
he has his centre of vital interests cannot be determined, or if he has no
permanent home available to him in either State, he shall be deemed to be a
resident of the State in which he has an habitual abode;

c.     if he has an habitual
abode in both States or in neither of them, he shall be deemed to be a resident
of the State of which he is a national;

d.    if he is a national
of both States or of neither of them, the competent authorities of the Contracting
States shall settle the question by mutual agreement.

1.      

2.      

3.     Where by reason of
the provisions of paragraph 1, a person other than an individual is a resident
of both Contracting States, then it shall be deemed to be a resident of the
State in which its place of effective management is situated.

Article
5: PERMANENT ESTABLISHMENT

1.     For the purposes of
this Agreement, the term “permanent establishment” means a fixed
place of business through which the business of the enterprise is wholly or
partly carried on.

2.     The term
“permanent establishment” includes especially:

a.     a place of management;

b.    a branch;

c.     an office;

d.    a factory;

e.     a workshop;

f.     a mine, an oil or gas
well, a quarry or any other place of extraction of natural resources;

g.    a warehouse, in
relation to a person providing storage facilities for others; and

h.     a building site or
construction or assembly project or supervisory activities in connection
therewith; but only where such site, project or activity continues for a period
of more than six months.

1.      

2.      

3.     Notwithstanding the
preceding provisions of this Article, the term “permanent establishment”
shall be deemed not to include:

a.     the use of facilities
solely for the purpose of storage, display or occasional delivery of goods or
merchandise belonging to the enterprise;

b.    the maintenance of a
stock of goods or merchandise belonging to the enterprise solely for the
purpose of storage, display or occasional delivery;

c.     the maintenance of a
stock of goods or merchandise belonging to the enterprise solely for the
purpose of processing by another enterprise; (d) the maintenance of a fixed
place of business solely for the purpose of purchasing goods or merchandise or
of collecting information for the enterprise;

d.    the maintenance of a
fixed place of business solely for the purpose of carrying on, for the
enterprise, any other activity of a preparatory or auxiliary character.

1.      

2.      

3.      

4.     Notwithstanding the
provisions of paragraphs 1 and 2, where a person—other than an agent of an
independent status to whom paragraph 5 applies—is acting in a Contracting
State on behalf of an enterprise of the other Contracting State, that
enterprise shall be deemed to have a permanent establishment in the
first-mentioned Contracting State in respect of any activities which that
person undertakes for the enterprise, if such a person:

a.     has and habitually
exercises in that State an authority to conclude contracts in the name of the
enterprise, unless the activities of such person are limited to those mentioned
in paragraph 3 which, if exercised through a fixed place of business, would not
make this fixed place of business a permanent establishment under the
provisions of that paragraph; or

b.    has no such
authority, but habitually maintains in the first-mentioned State a stock of
goods or merchandise from which he regularly delivers goods or merchandise on
behalf of the enterprise.

1.      

2.      

3.      

4.      

5.     An enterprise of a
Contracting State shall not be deemed to have a permanent establishment in the
other Contracting State merely because it carries on business in that State
through a broker, general commission agent or any other agent of an independent
status, provided that such persons are acting in the ordinary course of their
business. However, when the activities of such an agent are devoted wholly or
almost wholly on behalf of that enterprise, he will not be considered an agent
of an independent status within the meaning of this paragraph.

6.     The fact that a
company which is a resident of a Contracting State controls or is controlled by
a company which is a resident of the other Contracting State, or which carries
on business in that other State (whether through a permanent establishment or
otherwise), shall not of itself constitute either company a permanent
establishment of the other.

Article
6: INCOME FROM IMMOVABLE PROPERTY

1.     Income derived by a
resident of a Contracting State from immovable property (including income from
agriculture or forestry) situated in the other Contracting State may be taxed
in that other State.

2.     The term
“immovable property” shall have the meaning which it has under the
law of the Contracting State in which the property in question is situated. The
term shall in any case include property accessory to immovable property,
livestock and equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply, usufruct of
immovable property and rights to variable or fixed payments as consideration
for the working of, or the right to work, mineral deposits, sources and other
natural resources. Ships, boats and aircraft shall not be regarded as immovable
property.

3.     The provisions of
paragraph 1 shall also apply to income derived from the direct use, letting, or
use in any other form of immovable property.

4.     The provisions of
paragraphs 1 and 3 shall also apply to the income from immovable property of an
enterprise and to income from immovable property used for the performance of
independent services.

Article
7: BUSINESS PROFITS

1.    
The
profits of an enterprise of a Contracting State shall be taxable only in that
State unless the enterprise carries on business in the other Contracting State
through a permanent establishment situated therein. If the enterprise carries
on business as aforesaid, the profits of the enterprise may also be taxed in
the other State but only so much of them as is attributable directly or
indirectly to that permanent establishment.

The
words “directly or indirectly” mean, for the purposes of this
Article, that where a permanent establishment takes an active part in
negotiating, concluding or fulfilling contracts entered into by the enterprise,
then notwithstanding that other parts of the enterprise have also participated
in those transactions, there shall be attributed to the permanent establishment
that proportion of profits of the enterprise arising out of those contracts as
the contribution of the permanent establishment to those transactions bears to
that of the enterprise as a whole.

1.      

2.     Subject to the provisions
of paragraph 3, where an enterprise of a Contracting State carries on business
in the other Contracting State through a permanent establishment situated
therein, there shall in each Contracting State be attributed to that permanent
establishment the profits which it might be expected to make if it were a
distinct and separate enterprise engaged in the same or similar activities
under the same or similar conditions and dealing wholly independently with the
enterprise of which it is a permanent establishment.

3.     In determining the
profits of a permanent establishment, there shall be allowed as deductions
expenses which are incurred for the purposes of the business of the permanent
establishment, including executive and general administrative expenses so incurred,
whether in the State in which the permanent establishment is situated or
elsewhere in accordance with the provisions of and subject to the limitations
of the tax laws of that State.

4.     Nothing in this
Article shall affect the application of any law of a Contracting State relating
to the determination of the tax liability of a person in cases where
information is not available to the competent authority of that State in order
to determine the profits to be attributed to a permanent establishment, provided
that law shall be applied consistently with the principles of this Article.

5.     Insofar as it has
been customary in a Contracting State to determine the profits to be attributed
to a permanent establishment on the basis of an apportionment of the total profits
of the enterprise to its various parts, nothing in paragraph 2 shall preclude
that Contracting State from determining the profits to be taxed by such an
apportionment as may be customary. The method of apportionment adopted shall,
however, be such that the result shall be in accordance with the principles
contained in this Article.

6.     No profits shall be
attributed to a permanent establishment by reason of the mere purchase by that
permanent establishment of goods or merchandise for the enterprise.

7.     For the purposes of
the preceding paragraphs, the profits to be attributed to the permanent
establishment shall be determined by the same method year by year unless there
is good and sufficient reason to the contrary.

8.     Where profits include
items of income which are dealt with separately in other Articles of this
Agreement, then the provisions of those Articles shall not be affected by the
provisions of this Article.

Article
8: SHIPPING AND AIR TRANSPORT

1.     Profits derived by an
enterprise of a Contracting State from the operation of ships or aircraft in
inter-national traffic shall be taxable only in that State.

2.     For the purposes of
this Article, profits from the operation of ships or aircraft in international
traffic include:

a.     income from the lease
of ships or aircraft; and

b.    profits from the use,
maintenance or rental of containers (including trailers and related equipment
for the transport of containers).

Where
such lease or such use, maintenance or rental, as the case may be, is
incidental to the operation of ships or aircraft in international traffic.

1.      

2.      

3.     The provisions of
paragraph 1 shall also apply to profits from the participation in a pool, a
joint business or an international operating agency.

4.     For the purposes of
this Article, interest on funds connected with the operation of ships or
aircraft in international traffic earmarked for the purpose of payments of all
kinds of wages and maintenance of ships or aircraft and their crew shall be
regarded as income or profits derived from the operation of such ships or
aircraft and the provisions of Article 11 shall not apply in relation to such
interest.

Article
9: ASSOCIATED ENTERPRISES

Where—

a.     an enterprise of a
Contracting State participates directly or indirectly in the management,
control or capital of an enterprise of the other Contracting State, or

b.    the same persons
participate directly or indirectly in the management, control or capital of an
enterprise of a Contracting State and an enterprise of the other Contracting
State,

and
in either case conditions are made or imposed between the two enterprises in
their commercial or financial relations which differ from those which would be
made between independent enterprises, then any profits which would, but for
those conditions, have accrued to one of the enterprises, but, by the reason of
those conditions, have not so accrued, may be included in the profits of that
enterprise and taxed accordingly.

Article
10: DIVIDENDS

1.     Dividends paid by a
company which is a resident of a Contracting State to a resident of the other
Contracting State may be taxed in that other State.

2.     However, such
dividends may also be taxed in the Contracting State of which the company
paying the dividends is a resident and according to the laws of that State, but
if the recipient is the beneficial owner of the dividends, the tax so charged
shall not exceed 10 per cent of the gross amount of the dividends. This
paragraph shall not affect the taxation of the company in respect of the
profits out of which the dividends are paid.

3.     The term

“dividends” as used in this Article means income from shares or other
rights, not being debt-claims, participating in profits, as well as income from
other corporate rights which is subjected to the same taxation treatment as
income from shares by the laws of the State of which the company making the
distribution is a resident.

4.     The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the dividends,
being a resident of a Contracting State, carries on business in the Other
Contracting State of which the company paying the dividends is a resident
through a permanent establishment situated therein, or performs in that other State
independent personal services from a fixed base situated therein, and the
holding in respect of which the dividends are paid is effectively connected
with such permanent establishment or fixed base. In such case, the provisions
of Article 7 or Article 15, as the case may be, shall apply.

5.     Where a company which
is a resident of a Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the dividends
paid by the company, except insofar as such dividends are paid to a resident of
that other Contracting State or insofar as the holding in respect of which the
dividends are paid is effectively connected with a permanent establishment or a
fixed base situated in that other State, nor subject the company’s
undistributed profits to a tax on the company’s undistributed profits, even if
the dividends paid or the undistributed profits consist wholly or partly of
profits or income arising in such other State.

Article
11: INTEREST

1.     Interest arising in a
Contracting State and paid to a resident of the other Contracting State may be
taxed in that other State.

2.     However, such
interest may also be taxed in the Contracting State in which it arises and
according to the laws of that State, but if the recipient is the beneficial
owner of such interest the tax so charged shall not exceed 10 per cent of the
gross amount of the interest.

3.     Notwithstanding the
provisions of paragraph 2,—-

a.     interest arising in a
Contracting State shall be exempt from tax in that State provided it is derived
and beneficially owned by:

                     
i.       
the
Government, a political sub-division or a local authority of the other
Contracting State; or

                    
ii.       
the
Central Bank of the other Contracting State;

a.     

b.    interest arising in a
Contracting State shall be exempt from tax in that Contracting State to the
extent approved by the Government of that State if it is derived and
beneficially owned by any person [other than a person referred to in
sub-paragraph (a)] who is a resident of the other Contracting State provided that
the transaction giving rise to the debt-claim has been approved in this regard
by the Government of the first-mentioned Contracting State.

1.      

2.      

3.      

4.     The term
“interest” as used in this Article means income from debt-claims of
every kind, whether or not secured by mortgage and whether or not carrying a
right to participate in the debtor’s profits, and in particular, income from
Government securities and income from bonds or debentures, including premiums
and prizes attaching to such securities, bonds or debentures. Penalty charges
for late payment shall not be regarded as interest for the purpose of this
Article.

5.     The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the interest,
being a resident of a Contracting State, carries on business in the other
Contracting State in which the interest arises, through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein and the debt-claim in
respect of which the interest is paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 15, as the case may be, shall apply.

6.     Interest shall be
deemed to arise in a Contracting State when the payer is that Contracting State
itself, a political sub-division, a local authority or a resident of that
State. Where, however, the person paying the interest, whether he is a resident
of a Contracting State or not, has in a Contracting State a permanent
establishment or a fixed base in connection with which the indebtedness on
which the interest is paid was incurred, and such interest is borne by such permanent
establishment or fixed base, then such interest shall be deemed to arise in the
State in which the permanent establishment or fixed base is situated.

7.     Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the interest, having regard to the
debt-claim for which it is paid, exceeds the amount which would have been
agreed upon by the payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to the
last-mentioned amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State, due regard
being had to the other provisions of this Agreement.

Article
12: ROYALTIES

1.     Royalties arising in
a Contracting State and paid to a resident of the other Contracting State may
be taxed in that other State.

2.     However, such
royalties may also be taxed in the Contracting State in which they arise and
according to the laws of that State, but if the recipient is the beneficial
owner of the royalties, the tax so charged shall not exceed 10 per cent of the
gross amount of the royalties.

3.     The term ”
royalties ” as used in this Article means payments of any kind received as
a consideration for the use of, or the right to use, any copyright of literary,
artistic or scientific work including cinematograph films, or films or tapes
used for radio or television broadcasting, any patent, trade mark, design or
model, plan, secret formula or process, or for the use of, or the right to use,
industrial, commercial or scientific equipment, or for information concerning
industrial, commercial or scientific experience.

4.     The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties,
being a resident of a Contracting State, carries on business in the other
Contracting State in which the royalties arise, through a permanent
establishment situated therein, or performs in that other State independent
personal services from a fixed base situated therein, and the right or property
in respect of which the royalties are paid is effectively connected with such
permanent establishment or fixed base. In such case, the provisions of Article
7 or Article 15, as the case may be, shall apply.

5.     Royalties shall be
deemed to arise in a Contracting State when the payer is that State itself, a
political sub-division, a local authority or a resident of that State. Where,
however, the person paying the royalties, whether he is a resident of a
Contracting State or not, has in a Contracting State a permanent establishment
or a fixed base in connection with which the liability to pay the royalties was
incurred, and such royalties are borne by such permanent establishment or fixed
base, then such royalties shall be deemed to arise in the State in which the
permanent establishment or fixed base is situated.

6.     Where, by reason of a
special relationship between the payer and the beneficial owner or between both
of them and some other person, the amount of the royalties, having regard to
the use, right or information for which they are paid, exceeds the amount which
would have been agreed upon by the payer and the beneficial owner in the
absence of such relationship, the provisions of this Article shall apply only
to the last-mentioned amount. In such case, the excess part of the payments
shall remain taxable according to the laws of each Contracting State, due
regard being had to the other provisions of this Agreement.

Article
13: TECHNICAL FEES

1.     Technical fees
arising in a Contracting State which are derived by a resident of the other
Contracting State may be taxed in that other State.

2.     However, such
technical fees may also be taxed in the Contracting State in which they arise,
and according to the laws of that State; but if the recipient is the beneficial
owner of the technical fees, the tax so charged shall not exceed 10 per cent of
the gross amount of the technical fees.

3.     The term
“technical fees” as used in this Article means payments of any kind
to any person, other than to an employee of the person making the payments, in
consideration for any services of a technical, managerial or consultancy
nature.

4.     The provisions of
paragraphs 1 and 2 shall not apply if the beneficial owner of the technical
fees, being a resident of a Contracting State carries on business in the other
Contracting State in which the technical fees arise through a permanent
establishment situated therein, or performs in that other State independent
personal services, and the technical fees are effectively connected with such
permanent establishment or such services. In such case, the provisions of
Article 7 or Article 15, as the case may be, shall apply.

5.     Technical fees shall
be deemed to arise in a Contracting State when the payer is that State itself,
a political sub-division, a local authority or a statutory body thereof, or a
resident of that State. Where, however, the person paying the technical fees,
whether he is a resident of a Contracting State or not, has in a Contracting
State a permanent establishment in connection with which the obligation to pay
the technical fees was incurred, and such technical fees are borne by that
permanent establishment, then such technical fees shall be deemed to arise in
the Contracting State in which the permanent establishment is situated.

6.     Where, by reason of a
special relationship between the payer and the recipient or between both of
them and some other person, the amount of the technical fees paid, exceeds for
whatever reason, the amount which would have been agreed upon by the payer and
the beneficial owner in the absence of such relationship, the provisions of
this Article shall apply only to the last-mentioned amount. In such case, the
excess part of the payments shall remain taxable according to the law of each
Contracting State due regard being had to the other provisions of this
Agreement.

Article
14: CAPITAL GAINS

1.     Gains derived by a
resident of a Contracting State from the alienation of immovable property,
referred to in Article 6, and situated in the other Contracting State may be
taxed in that other State.

2.     Gains from the
alienation of movable property forming part of the business property of a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State or of movable property pertaining to a fixed base
available to a resident of a Contracting State in the other Contracting State
for the purpose of performing independent personal services, including such
gains from the alienation of such a permanent establishment (alone or together
with the whole enterprise) or of such fixed base, may be taxed in that other
State.

3.     Gains from the
alienation of ships or aircraft operated in international traffic or movable
property pertaining to the operation of such ships or aircraft shall be taxable
only in the Contracting State of which the alienator is a resident.

4.     Gains from the
alienation of share of the capital stock of a company the property of which
consists directly or indirectly principally of immovable property situated in a
Contracting State may be taxed in that State.

5.     Gains from the
alienation of shares other than those mentioned in paragraph 4 in a company
which is a resident of a Contracting State may be taxed in that State.

6.     Gains from the
alienation of any property other than that mentioned in paragraphs 1, 2, 3, 4
and 5 shall be taxable only in the Contracting State of which the alienator is
a resident.

Article
15: INDEPENDENT PERSONAL SERVICES

1.     Income derived by a
resident of a Contracting State in respect of professional services or other
independent activities of a similar character shall be taxable only in that
State except in the following circumstances when such income may also be taxed
in the other Contracting State:

a.     if he has a fixed
base regularly available to him in the other Contracting State for the purpose
of performing this activities; in that case, only so much of the income as is
attributable to that fixed base may be taxed in that other Contracting State;
or

b.    if his stay in the
other Contracting State is for a period or periods amounting to or exceeding in
the aggregate 183 days in the relevant fiscal year concerned; in that case,
only so much of the income as is derived from his activities performed in that
other State may be taxed in that other State.

1.      

2.     The term
“professional services” includes independent scientific, literary,
artistic, educational or teaching activities, as well as the independent
activities of physicians, surgeons, lawyers, engineers, architects, dentists
and accountants.

Article
16: DEPENDENT PERSONAL SERVICES

1.     Subject to the
provisions of Articles 17, 18, 19, 20, 21 and 22, salaries, wages and other
similar remuneration derived by a resident of a Contracting State in respect of
an employment shall be taxable only in that State unless the employment is
exercised in the other Contracting State. If the employment is so exercised,
such remuneration as is derived therefrom may be taxed in that other State.

2.     Notwithstanding the
provisions of paragraph 1, remuneration derived by a resident of a Contracting
State in respect of an employment exercised in the other Contracting State
shall be taxable only in the first-mentioned State if:

a.     the recipient is
present in the other State for a period or periods not exceeding in the
aggregate 183 days in the relevant fiscal year; and

b.    the remuneration is paid
by, or on behalf of, an employer who is not a resident of the other State; and

c.     the remuneration is
not borne by a permanent establishment or a fixed base which the employer has
in the other State.

1.      

2.      

3.     Notwithstanding the
preceding provisions of this Article, remuneration derived in respect of an
employment exercised aboard a ship or aircraft operated in international
traffic by an enterprise of a Contracting State shall be taxable only in that
State.

Article
17: DIRECTORS’ FEES

Directors’
fees and similar payments derived by a resident of a Contracting State in his
capacity as a member of the Board of Directors of a company which is a resident
of the other Contracting State may be taxed in that other State.

Article
18: INCOME EARNED BY ENTERTAINERS AND ATHLETES

1.     Notwithstanding the
provisions of Articles 15 and 16, income derived by a resident of a Contracting
State as an entertainer such as a theatre, motion picture, radio or television
artists, or a musician, or as an athlete, from his personal activities as such
exercised in the other Contracting State may be taxed in that other State.

2.     While income in
respect of personal activities exercised by an entertainer or an athlete in his
capacity as such accrues not to the entertainer or athlete himself but to
another person, that income may, notwithstanding the provisions of Articles 7,
15 and 16, be taxed in the Contracting State in which the activities of the
entertainer or athlete are exercised.

3.     Notwithstanding the
provisions of paragraph 1, income derived by an entertainer or an athlete who
is a resident of a Contracting State from his personal activities as such
exercised in the other Contracting State, shall be taxable only in the
first-mentioned Contracting State, if the activities in the other Contracting
State are supported wholly or substantially from the public funds of the
first-mentioned Contracting State, including any of its political sub-divisions
or local authorities.

4.     Notwithstanding the
provisions of paragraph 2 and Articles 7, 15 and 16, where income in respect of
personal activities exercised by an entertainer or an athlete in his capacity
as such in a Contracting State accrues not to the entertainer or athlete
himself but to another person, that income shall be taxable only in the other
Contracting State, if that other person is supported wholly or substantially
from the public funds of the other State, including any of its political
sub-divisions or local authorities.

Article
19: REMUNERATION AND PENSIONS IN RESPECT OF GOVERNMENT SERVICE

1.      

a.     Remuneration, other
than a pension, paid by a Contracting State or a political sub-division or a
local authority thereof to an individual in respect of services rendered to
that State or sub-division or authority shall be taxable only in that State.

b.    However, such
remuneration shall be taxable only in the other Contracting State if the
services are rendered in that other State and the individual is a resident of
that State who:

                     
i.       
is
a national of that State; or

                    
ii.       
did
not become a resident of that State solely for the purpose of rendering the
services.

1.      

2.    

a.     Any pension paid by,
or out of funds created by a Contracting State or a political sub-division or a
local authority thereof to an individual in respect of services rendered to
that State or sub-division or authority shall be taxable only in that State.

b.    However, such pension
shall be taxable only in the other Contracting State if the individual is a
resident of, and a national of that other State.

1.      

2.      

3.     The provisions of
Articles 16, 17 and 20 shall apply to remuneration and pensions in respect of
services rendered in connection with a business carried on by a Contracting
State or a political sub-division or a local authority thereof.

Article
20: NON-GOVERNMENT PENSIONS AND ANNUITIES

1.     Any pension, other
than a pension referred to in Article 19, or any annuity derived by a resident
of a Contracting State from sources within the other Contracting State shall be
taxed only in the first-mentioned Contracting State.

2.     The term
“pension” means a periodic payment made in consideration of past
services or by way of compensation for injuries received in the course of
performance of services.

3.     The term
“annuity” means a stated sum payable periodically at stated times during
life or during a specified or ascertainable period of time, under an obligation
to make the payments in return for adequate and full consideration in money’s
worth.

Article
21: PAYMENTS RECEIVED BY STUDENTS AND APPRENTICES

1.     A student or business
apprentice who is or was a resident of one of the Contracting States
immediately before visiting the other Contracting State and who is present in
that other State solely for the purpose of his education or training, shall be
exempt from tax in that other State on:

a.     payments made to him
by persons residing outside that other State for the purposes of his
maintenance, education or training; and

b.    remuneration from
employment in that other State, in an amount not exceeding US $ 2,000 or its
equivalent in respective currencies during any fiscal year, as the case may be,
provided that such employment is directly related to his studies or is
undertaken for the purpose of his maintenance.

1.      

2.     The benefits of this
Article shall extend only for such period of time as may be reasonable or
customarily required to complete the education or training undertaken, but in
no event shall any individual have the benefits of this Article for more than
five consecutive years from the date of his first arrival in that other
Contracting State.

Article
22: PAYMENTS RECEIVED BY PROFESSORS, TEACHERS AND RESEARCH SCHOLARS

1.     A professor or
teacher who is or was a resident of one of the Contracting States immediately
before visiting the other Contracting State for the purpose of teaching or engaging
in research, or both, at a university, college, school or other approved
institution in that other Contracting State shall be exempt from tax in that
other State on any remuneration for such teaching or research for a period not
exceeding two years from the date of his arrival in that other State.

2.     This Article shall
not apply to income from research if such research is undertaken primarily for
the private benefit of a specific person or persons.

3.     For the purposes of
paragraph 1, “approved institution” means an institution which has
been approved in this regard by the competent authority of the concerned
Contracting State.

Article
23: OTHER INCOME

1.     Subject to the
provisions of paragraph 2, items of income of a resident of a Contracting
State, wherever arising, which are not expressly dealt with in the foregoing
Articles of this Agreement, shall be taxable only in that Contracting State.

2.     The provisions of
paragraph 1 shall not apply to the income, other than income from immovable
property as defined in paragraph 2 of Article 6, if the recipient of such
income, being a resident of a Contracting State, carries on business in the
other Contracting State through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed base
situated therein, and the right or property in respect of which the income is
paid is effectively connected with such permanent establishment or fixed base.
In such case, the provisions of Article 7 or Article 15, as the case may be,
shall apply.

3.     Notwithstanding the
provisions of paragraphs 1 and 2, items of income of a resident of a
Contracting State not dealt with in the foregoing Articles of this Agreement
and arising in other Contracting State may also be taxed in that other State.

Article
24: AVOIDANCE OF DOUBLE TAXATION

1.     The laws in force in
either of the Contracting States will continue to govern the taxation of income
in the respective Contracting States except where provisions to the contrary
are made in this Agreement.

2.     Where a resident of a
Contracting State derives income which, in accordance with the provisions of
this Agreement, may be taxed in the other Contracting State, the
first-mentioned Contracting State shall allow as a deduction from the tax on
the income of that resident an amount equal to the income-tax paid in the other
Contracting State whether directly or by deduction. Such deduction shall not,
however, exceed that part of the income-tax (as computed before the deduction
is given) in the first-mentioned Contracting State which is attributable to the
income which may be taxed in the other Contracting State.

3.     The tax paid in the
other Contracting State mentioned in paragraph 2 of this Article shall be
deemed to include the tax which would have been payable but for the tax
incentives granted under the laws of that Contracting State and which are
designed to promote economic development.

Article
25: NON-DISCRIMINATION

1.     Nationals of a
Contracting State shall not be subjected in the other Contracting State to any
taxation or any requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which nationals of
that other State in the same circumstances are or may be subjected.

2.     The taxation on a
permanent establishment which an enterprise of a Contracting State has in the
other Contracting State shall not be less favourably levied in that other State
than the taxation levied on enterprises of that other State carrying on the
same activities in the same circumstances. This provision shall not be
construed as preventing a Contracting State from charging the profits of a
permanent establishment which an enterprise of the other Contracting State has
in the first-mentioned State at a rate higher than that imposed on the profits
of a similar enterprise of the first-mentioned Contracting State, nor as being
in conflict with the provisions of paragraph 3 of Article 7 of this Agreement.

3.     Nothing contained in
this Article shall be construed as obliging a Contracting State to grant to
persons not resident in that State any personal allowances, reliefs, reductions
and deductions for taxation purposes which are by law available only to persons
who are so resident.

4.     Enterprises of a
Contracting State, the capital of which is wholly or partly owned or
controlled, directly or indirectly by one or more residents of the other
Contracting State, shall not be subjected in the first-mentioned Contracting
State to any taxation or any requirement connected therewith which is other or
more burdensome than the taxation and connected requirements to which other
similar enterprises of that first-mentioned State are or may be subjected in
the same circumstances.

5.     The provisions of
paragraphs 2 and 4 of this Article shall not apply to the Vietnamese profit
remittance tax, which in any case shall not exceed 10 per cent of the gross
amount of profits remitted, and the Vietnamese taxation in respect of
agricultural production activities.

6.     In this Article, the
term “taxation” means taxes which are the subject of this Agreement.

Article
26: MUTUAL AGREEMENT PROCEDURE

1.     Where a resident of a
Contracting State considers that the actions of one or both of the Contracting
States result or will result for him in taxation not in accordance with this
Agreement, he may, notwithstanding the remedies provided by the national laws of
those States, present his case to the competent authority of the Contracting
State of which he is a resident. This case must be presented within three years
of the date of receipt of notice of the action which gives rise to taxation not
in accordance with the Agreement.

2.     The competent
authority shall endeavour, if the objection appears to it to be justified and
if it is not itself able to arrive at a satisfactory solution, to resolve the
case by mutual agreement with the competent authority of the other Contracting
State, with a view to the avoidance of taxation not in accordance with the
Agreement. Any agreement reached shall be implemented notwithstanding any time
limits in the national laws of the Contracting States.

3.     The competent
authorities of the Contracting States shall endeavour to resolve by mutual
agreement any difficulties or doubts arising as to the interpretation or
application of the Agreement. They may also consult together for the
elimination of double taxation in cases not provided for in the Agreement.

4.     The competent
authorities of the Contracting States may communicate with each other directly
for the purpose of reaching an agreement in the sense of the preceding
paragraphs. When it seems advisable in order to reach agreement to have an oral
exchange of opinions, such exchange may take place through a Commission
consisting of representative of the competent authorities of the Contracting
State.

Article
27: EXCHANGE OF INFORMATION

1.     The competent
authorities of the Contracting States shall exchange such information
(including documents) as is necessary for carrying out the provisions of the
Agreement or of the domestic laws of the Contracting States concerning taxes
covered by the Agreement, insofar as the taxation thereunder is not contrary to
the Agreement, in particular for the prevention of fraud or evasion of such
taxes. Any information received by a Contracting State shall be treated as
secret in the same manner as information obtained under the domestic laws of
the State. However, if the information is originally regarded as secret in the
transmitting State, it shall be disclosed only to persons or authorities
(including courts and administrative bodies) involved in the assessment or
collection of, the enforcement or prosecution in respect of, or the
determination of appeals in relation to, the taxes which are the subject of the
Agreement. Such persons or authorities shall use the information only for such
purposes but may disclose the information in public court proceedings or in
judicial decisions. The competent authorities shall, through consultation,
develop appropriate conditions, methods and techniques concerning the matters
in respect of which such exchange of information shall be made, including,
where appropriate, exchange of information regarding tax avoidance.

2.     The exchange of
information or documents shall be either on a routine basis or on request with
reference to particular cases or both. The competent authorities of the
Contracting States shall agree from time to time on the list of the information
or documents which shall be furnished on a routine basis.

3.     In no case shall the
provisions of paragraph 1 be construed so as to impose on a Contracting State
the obligation:

a.     to carry out
administrative measures at variance with the laws or administrative practice of
that or of the other Contracting State;

b.    to supply information
or documents which are not obtainable under the laws or in the normal course of
the administration of that or of the other Contracting State;

c.     to supply information
or documents which would disclose any trade, business, industrial, commercial
or professional secret of trade process of information the disclosure of which
would be contrary to public policy.

Article
28: DIPLOMATIC AGENTS AND CONSULAR OFFICERS

Nothing
in this Agreement shall affect the fiscal privileges of diplomatic or consular
officers under the general rules of international law or under the provisions
of special agreements.

Article
29: ENTRY INTO FORCE

Each
of the Contracting State shall notify to the other the completion of the
procedures required by its law for the bringing into force of this Agreement.
This Agreement shall enter into force on the date of the latter of these
notifications and shall thereupon have effect:

a.     in India, in respect
of income arising in any previous year beginning on or after the first day of
April next following the calendar year in which the latter of the notifications
is given;

b.    in Vietnam:

             
i.       
in
respect of taxes withheld at source, in relation to taxable amount paid on or
after 1 January following the calendar year in which the Agreement enters into
force;

            
ii.       
in
respect of other Vietnamese taxes, in relation to income, profits or gains
arising in the calendar year following the calendar year in which the Agreement
enters into force, and in subsequent calendar years.

Article
30: TERMINATION

This
Agreement shall remain in force indefinitely but either of the Contracting
States may, on or before the thirtieth day of June in any calendar year
beginning after the expiration of a period of five years from the date of its
entry into force, give the other Contracting State through diplomatic channels,
written notice of termination and, in such event, this Agreement shall cease to
have effect:

a.     in India, in respect
of income arising in any previous year beginning on or after the first day of
April next following the calendar year in which the notice is given;

b.    in Vietnam:

             
i.       
in
respect of taxes withheld at source, in relation to taxable amount paid on or
after 1 January following the calendar year in which the notice of termination
is given;

            
ii.       
in
respect of other Vietnamese taxes, in relation to income, profits or gains
arising in the calendar year following the calendar year in which the notice of
termination is given, and in subsequent calendar years.

In
witness whereof
the
undersigned, being duly authorized thereto by their respective Governments,
have signed the present Agreement.

Done in duplicate at
Hanoi this 7th day of September one thousand nine hundred and ninety four in
Hindi, Vietnamese and English languages. In case of divergence of
interpretation, the English text shall prevail.

(Sd.)…………

For
the Government of the Republic of India

(Sd.)…………

For
the Government of the Socialist Republic of Vietnam.

 

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