Scenario: your US company licenses software to a Vietnamese partner, collecting USD 800,000 in annual royalties. Accounting asks: “Is there a Vietnam–US tax treaty to cut Vietnamese withholding?” The honest answer: no — because the treaty isn’t in force. This article explains why and what US businesses must do.
1. Why the Vietnam–US tax treaty isn’t in force
The Vietnam–US double taxation agreement was signed on 7/7/2015. Vietnam ratified it in 2017. But the US side never secured Senate ratification — and under the US Constitution, tax treaties take effect only after Senate approval. Result: as of 20/10/2026, the Vietnam–US tax treaty is not in force. It is among the rare Vietnamese tax treaties stuck in this state — most others (Singapore, Japan, Korea, Hong Kong…) are fully effective.
2. Consequence: no treaty benefits apply
- Vietnamese withholding applies in full under domestic law: royalties 10% CIT; loan interest 5% CIT; ordinary services 5% CIT + 5% VAT (current contractor-tax framework). No “treaty cap” to invoke.
- No Form 01/HTQT filing: treaty relief procedures (Article 62, Circular 80/2021/TT-BTC) apply only where a treaty is in force — filings citing an ineffective treaty will be rejected.
- Warning: any material “guiding” Vietnam–US treaty claims right now is false — don’t pay for “US treaty benefit” services.
3. What US businesses do: unilateral foreign tax credit
No treaty doesn’t mean inescapable double taxation. The US offers a unilateral foreign tax credit under domestic law:
- Tax withheld in Vietnam (e.g., 10% on royalties) is credited against US tax on the same income — claimed via IRS Form 1118 (corporations) or Form 1116 (individuals).
- Keep full Vietnamese withholding certificates (issued by the Vietnamese party) — the IRS requires them for the credit.
- Monitor ratification: if the US Senate ratifies in the future, the treaty takes effect and benefits become claimable — check periodically; never assume “a treaty exists.”
Frequently asked questions
1. Is the Vietnam–US tax treaty in force?
No. Signed 7/7/2015, ratified by Vietnam in 2017, but never ratified by the US Senate — not in force as of 20/10/2026.
2. Can we claim treaty-reduced withholding?
No — there are no treaty benefits to claim. All Vietnamese withholding follows domestic law in full.
3. Do we file Form 01/HTQT?
No — treaty relief procedures apply only to treaties in force.
4. How is double taxation avoided?
Through the unilateral US foreign tax credit: Vietnamese tax credited against US tax (IRS Form 1118/1116); keep full withholding certificates.
5. When will the treaty take effect?
Upon US Senate ratification — no firm timeline. Monitor periodically; never assume a treaty exists.
This article has been quality-reviewed by the FLAW AI Legal Council