SCHEDULE 1(Section 3)Agreement Between the Government of Canada 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 Government of Canada 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:

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

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• 1 This Agreement shall apply to taxes on income imposed on behalf of each Contracting State, irrespective of the manner in which they are levied.

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

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

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• 1 For the purposes of this Agreement, unless the context otherwise requires:

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

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• 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, place of incorporation 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:

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  • (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.

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• 4 Where by reason of the provisions of paragraph 1 a person other than an individual or a company is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Agreement to such person.

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

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• 2 For the purposes of this Agreement, the term “immovable property” shall have the meaning which it has under the taxation 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 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 and aircraft shall not be regarded as immovable property.

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• 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.

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• 2 Where a Contracting State includes in the income of an enterprise of that State — and taxes accordingly — income on which an enterprise of the other Contracting State has been charged to tax in that other State and the income so included is income which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make an appropriate adjustment to the amount of tax charged therein on that income. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.

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• 3 Notwithstanding the provisions of paragraph 2:

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  • (b) interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by any institution, the capital of which is wholly owned by the Government of that other State, which is specified and agreed in letters exchanged between the competent authorities of the Contracting States.

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• 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.

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• 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 royalties or fees for technical services 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 laws of each Contracting State, due regard being had to the other provisions of this Agreement.

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• 4 Notwithstanding anything in this Agreement, alimony and other similar payments arising in a Contracting State and paid to a resident of the other Contracting State who is subject to tax therein in respect thereof, shall be taxable only in that other State.

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

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• 1 In the case of Canada, double taxation shall be avoided as follows:

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  • (c) where, in accordance with any provision of the Agreement, income derived by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income, take into account the exempted income.

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• 2 For the purpose of subparagraph (a) of paragraph 1, tax payable in Vietnam by a company engaged primarily in the manufacturing or natural resources sector which is a resident of Canada in respect of:

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  paid by a company engaged primarily in the same sector which is a resident of Vietnam shall be deemed to have been paid at the rate of 10 per cent of the gross amount of the payment. The provisions of this paragraph shall apply for the first five years for which the Agreement is effective, but the competent authorities of the Contracting States may consult with each other to determine whether this period shall be extended.

• 3 For the purposes of subparagraph (a) of paragraph 1, tax payable in Vietnam by a company which is a resident of Canada in respect of profits attributable to manufacturing activities or to the exploration or exploitation of natural resources carried on by it in Vietnam shall be deemed to include any amount which would have been payable thereon as Vietnamese tax for any year but for an exemption from, or reduction of, tax granted for that year or any part thereof under specific provisions of Vietnamese legislation and provided always that the competent authority of Vietnam has certified that any such exemption from or reduction of Vietnamese tax given under these provisions has been granted in order to promote economic development in Vietnam. Relief from Canadian tax by virtue of this paragraph shall be given for a period of ten years only, beginning with the date on which the Agreement entered into force.

• 4 In the case of Vietnam, double taxation shall be avoided as follows: where a resident of Vietnam derives income which, in accordance with the provisions of this Agreement, may be taxed in Canada, Vietnam shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in Canada. Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, which is attributable to the income which may be taxed in Canada.

• 5 For the purposes of this Article, profits, income or gains of a resident of a Contracting State that may be taxed in the other Contracting State in accordance with this Agreement shall be deemed to arise from sources in that other State.

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

Article 24
Mutual Agreement Procedure

• 1 Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which he is a resident an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the Agreement.

• 2 The competent authority referred to in paragraph 1 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.

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• 4 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.

• 5 The competent authorities of the Contracting States may consult together for the elimination of double taxation in cases not provided for in the Agreement and may communicate with each other directly for the purpose of applying the Agreement.

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• 1 The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this 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. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement in respect of, or the determination of appeals in relation to, taxes. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.

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

• 2 Notwithstanding Article 4, an individual who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State which is situated in the other Contracting State or in a third State shall be deemed for the purposes of the Agreement to be a resident of the sending State if he is liable in the sending State to the same obligations in relation to tax on his total income as are residents of that sending State.

• 3 The Agreement shall not apply to international organizations, to organs or officials thereof and to persons who are members of a diplomatic mission, consular post or permanent mission of a third State or group of States, being present in a Contracting State and who are not liable in either Contracting State to the same obligations in relation to tax on their total income as are residents thereof.

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• 1 Each of the Contracting States shall notify the other Contracting State of the completion of the procedures required by the laws of the respective Contracting State for the bringing into force of this Agreement. This Agreement shall enter into force on the date of the later of these notifications.

• 2 The provisions of the Agreement shall have effect:

  • (a) in respect of tax withheld at the source on amounts paid or credited to non-residents on or after the first day of January in the calendar year following that in which the Agreement enters into force; and

  • (b) in respect of other taxes for taxation years beginning on or after the first day of January in the calendar year following that in which the Agreement enters into force.

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This Agreement shall remain in force until terminated by a Contracting State. Either Contracting State may terminate the Agreement, through the diplomatic channel, by giving to the other Contracting State a written notice of termination on or before June 30 in any calendar year from the fifth year after the year in which the Agreement entered into force. In such event, the Agreement shall cease to have effect:

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IN WITNESS WHEREOF the undersigned, being duly authorized thereto by their respective Governments, have signed this Agreement.

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At the moment of signing the Agreement between the Government of Canada 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 undersigned have agreed that the following provisions shall form an integral part of the Agreement.

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• 3 Nothing in the Agreement shall be construed as preventing:

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• 4 The provisions of the Agreement shall not be construed to restrict in any manner any exemption, allowance, credit or other deduction accorded:

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  • (b) by any other agreement entered into by a Contracting State.

• 5 Nothing in the Agreement shall be construed as preventing a Contracting State from imposing a tax on amounts included in the income of a resident of that State with respect to a partnership, trust, or controlled foreign affiliate, in which he has an interest. For the purposes of this paragraph, the term “controlled foreign affiliate”, at any time, of a person that is a resident of a Contracting State, means a foreign affiliate of that resident that was, at that time controlled by

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• 6 The Agreement shall not apply to any company nor to income derived from such company by a shareholder thereof, trust or partnership that is a resident of a Contracting State and is beneficially owned or controlled directly or indirectly by one or more persons who are not residents of that State, if the amount of the tax imposed on the income or capital of the company, trust or partnership by that State is substantially lower than the amount that would be imposed by that State if all of the shares of the capital stock of the company or all of the interests in the trust or partnership, as the case may be, were beneficially owned by one or more individuals who were residents of that State.

• 7 It is understood that the provisions of Article 23 of the Agreement shall not apply to the Vietnamese taxation of natural resources and agricultural production activities.

• 8 Irrespective of the participation of the Contracting States in international agreements, the Contracting States in their tax relations will be governed by the provisions of this Agreement.

• 9 If, after the date of signature of this Agreement, Vietnam concludes a bilateral Agreement for the avoidance of double taxation with any other member State of the Organisation for Economic Co-operation and Development and, under the provisions of that Agreement, Vietnam may tax royalties arising in Vietnam and paid to a resident of that State but the tax charged is not to exceed a percentage of the gross amount of the royalties which is lesser than the percentage specified in subparagraph (a) of paragraph 2 of Article 12, then the lower percentage shall apply from the date of entry into force of that Agreement; however, such lower percentage shall apply only to royalties to which it applies in that Agreement and only where the payments are for the use of, or the right to use, computer software or, where the payer and the beneficial owner of the royalties are not related persons, for the use of, or the right to use, any patent or for information concerning industrial, commercial or scientific experience (but not including any such information provided in connection with a rental or franchise agreement).

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