To approve the Project "Reviewing and evaluating the effectiveness of double taxation avoidance agreements, the impacts on Vietnam's tax policy space and orientation for adjustment"

Published on 13 - 12 - 2021

On 10/12/2021, the Prime Minister issued the Decision No. 2072/QD-TTg approving the Project "Reviewing and evaluating the effectiveness of double taxation avoidance agreements, the impacts on Vietnam's tax policy space and orientation for adjustment".

According to the Decision, the objective of the Project is to perfect the policy of negotiating and signing the Agreement on avoidance of double taxation (hereinafter referred to as the Tax Agreement) in accordance with the economic development trend of Vietnam, approaching the internationally advanced standards and in harmony with international commitments, ensuring the synchronization, consistency, publicity and transparency; the tax agreement negotiation strategy in the current economic integration conditions of Vietnam, in addition to the goal of attracting foreign direct investment to Vietnam, the policy of encouraging and supporting Vietnamese enterprises to invest abroad must be insured, bringing maximum benefits to Vietnam in the division of taxation rights between Vietnam and the contracting party to the Agreement, improving the efficiency of handling international tax disputes and combating tax evasion and avoidance.

The main solutions of the Project are as follows:

+ To develop a strategy for negotiating and signing a Tax Agreement in the period of 2021-2030:

- To analyze the situation of foreign investment in Vietnam and investment from Vietnam to abroad in the coming time to identify priority partners based on the criteria of political, diplomatic, trade and investment relations..., which need negotiating and signing in the near future. Ministries, sectors, corporations and businesses associations have to assess the actual conditions and impacts of signing each article of the Tax Agreement to develop an appropriate strategy and negotiation plan.

- To develop a master negotiation plan for the period of 2021 - 2030, including a specific roadmap, prioritizing strategic partners who need to negotiate and sign to support overseas investment activities of Vietnamese enterprises.

- To innovate Vietnam's negotiation promotion method, instead of initiating negotiations from partners, Vietnam will proactively propose negotiations with countries that can both ensure Vietnam's taxation rights and create momentum for economic development and favorable conditions for Vietnamese investors to do business abroad.

+ To renew the tax agreement negotiation policy with new partners:

- To research international trends in the proposal of new provisions of the Tax Agreement, especially related to the issues of combating the abuse of the Tax Agreement, the formation of a permanent establishment, income digital economy, bilateral agreement procedures. On that basis, propose countermeasures to Vietnam's tax agreement for each contracting partner, ensuring optimal efficiency when participating in tax agreement negotiations.

- To propose a Code of Principles for Tax Agreement Negotiation in the new context on the basis of a comprehensive assessment of international trends and the economic situation of both Vietnam and the partner country. The set of negotiation principles is specifical and detailed to be applied to each group of partners signing the Tax Agreement.

- To develop an Open Tax Agreement Template that can be used flexibly for partner countries that have signed a Tax Agreement with different economic characteristics, geographical locations, domestic policies, etc. For partner countries belonging to the group of developed, developing or underdeveloped countries, there will be options for each article of the Tax Agreement which are corresponding and suitable for each specific object of negotiation.

+ To implement renegotiation for signed tax agreements:

- To review all signed tax agreements; analyze and evaluate provisions that are no longer relevant to the new situation of each Agreement. From there, propose to add provisions not available in the Agreement, amend or cancel provisions that are no longer appropriate in each signed tax agreement in the form of negotiation and signing of the Protocol to amend and supplement the signed Tax Agreement.

- To assess the ability of the partner country to accept renegotiation to develop an appropriate negotiation plan (if it is necessary to evaluate other terms in case the terms need adding, modifying or removing with a high degree of materiality).

- To actively promote renegotiation with partner countries that have signed tax agreements to propose amendments, supplements or cancellations of a number of provisions in a number of signed tax agreements.

+ To formulate the terms of the Agreement on income from digital economic activities:

- To study the recommendations of the Organization for Economic Cooperation and Development (OECD) and the United Nations on regulations for income from digital economic activities. At the same time, analyzing and evaluating the proposal to sign provisions for this type of income, the moves of countries that have carried out many digital economic activities in Vietnam.

- To develop a new provision of the Tax Agreement on income from digital economic activities.

- To make a negotiation plan (renegotiation and new negotiation) for this clause with countries that Vietnam has received and provided these activities.

- To actively promote negotiations immediately with partner countries that have direct influence on Vietnam to ensure no loss of tax revenue and minimize potential disputes.

+ To make adjustments to the provisions of the domestic law due to the impact of the Tax Agreement:

- To research concepts and principles according to international standards on tax administration that have been recognized and applied by countries in tax agreements to propose adjustments to a number of relevant provisions in the domestic law.

- To review the provisions of the domestic law and propose amendments to the relevant legal documents.

In addition, the Decision also gives opinions, objects, scope, some other solutions, organization of implementation of the Project.

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