Double tax agreements (DTAs) are bilateral agreements between two countries that aim to prevent taxpayers from being taxed twice on the same income. Singapore and Vietnam are two countries that have a DTA in place, and it is important for businesses operating between these two countries to have a clear understanding of how the agreement works.

The DTA between Singapore and Vietnam was signed on March 24, 1994, and has been revised twice, in 2002 and 2018, to reflect changes in the tax laws of both countries. The agreement covers income tax, including personal income tax and corporate income tax, and applies to residents of both countries.

Under the DTA, income earned in one country by a resident of the other country is taxable only in the country of residence. This means that if a Singaporean company operates in Vietnam and earns income there, it will only be taxed in Singapore. Similarly, if a Vietnamese company operates in Singapore and earns income there, it will only be taxed in Vietnam.

The DTA also provides for reduced tax rates on certain types of income. For example, dividends paid by a company in one country to a resident of the other country are subject to a maximum tax rate of 5%. Similarly, royalties, interest, and capital gains are subject to reduced tax rates under the DTA.

The DTA also provides for a mechanism to resolve disputes between the tax authorities of the two countries. In case of a dispute, the taxpayer can make a request for mutual agreement procedure (MAP), which involves the tax authorities of both countries working together to resolve the issue.

For businesses operating between Singapore and Vietnam, the DTA provides clarity and certainty on the tax implications of their operations. By preventing double taxation and providing for reduced tax rates, the DTA helps to promote trade and investment between the two countries.

In conclusion, the double tax agreement between Singapore and Vietnam is an important agreement that provides clarity and certainty on the tax implications of operations between the two countries. Businesses operating in both countries should have a clear understanding of how the agreement works to ensure compliance with tax laws and to take advantage of the benefits provided by the agreement.