New Zealand-Vietnam DTA Goes Into Effect

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HANOI – On May 7th, New Zealand’s double tax agreement (DTA) with Vietnam went into effect. The DTA agreement was originally signed on August 5, 2013.

New Zealand’s Revenue Minister, Todd McClay, stated that “the new double tax agreement which was signed in August 2013 brings our network of tax agreements to 39 DTAs. It also increases our DTA coverage amongst our trading partners in the ASEAN region.”

He continued, “In line with DTAs with our other trading partners, the new agreement will give businesses greater certainty over the tax treatment of cross-border investment income, reduce compliance costs for both New Zealand and Vietnamese investors, and will lower withholding tax rates on dividends, interest and royalties.”

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Mr. McClay explained that DTAs helped strengthen economic ties between countries and promote cross-border trade by preventing businesses and individuals from being taxed twice on income earned in the other country. They also encourage investment by reducing withholding tax rates on interest and dividends.

“Extending and maintaining our network of double tax agreements is a priority for the government as DTAs play an important role in removing obstacles to cross-border trade and investment,” he continued.

Mr. McClay said that double tax agreements were also a highly effective means for closing the net on avoidance and evasion.

Vietnam’s DTA and FTA

Foreign investors in Vietnam can increase tax efficiency with double taxation avoidance agreements (DTAAs) between Vietnam and other countries. As of May 2014, Vietnam has signed DTAAs with over 66 countries and territories including France, China, Italy, Germany, Singapore and Hong Kong.

Vietnam also has a number of free trade agreements, but those of particular interest to foreign companies are those in force with ASEAN, and ASEAN’s FTA with India and China. This means that if a company is manufacturing a product in ASEAN that fits into either China or India’s free trade agreements, the product can be exported to either of those markets duty free.

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Vietnam is also finalizing negotiations for an FTA with the EU. Furthermore, when the Trans-Pacific Partnership (TPP) is concluded, the country will have tariff-free access to some of the largest markets in the world, such as the United States. Additionally, when the Regional Comprehensive Economic Partnership (RCEP) negotiations conclude in 2015, Vietnam and the ASEAN trade bloc will also be able to participate in free trade with China, India, Japan, South Korea, Australia and New Zealand. Because of this, the RCEP is set to be a really exciting opportunity for foreign companies.

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