Scenario: an Indian group has subsidiaries in Pune (India) and Dong Nai (Vietnam). The chief accountant notes: since 2020 India abolished the Dividend Distribution Tax (DDT) and moved to taxing dividends in shareholders’ hands — a major change many managers still have not absorbed. This article compares both directions under the new frame.
Vietnam → India: 0% in Vietnam
Dividends from the Dong Nai subsidiary to the Indian corporate parent suffer 0% withholding in Vietnam. The Vietnam–India DTA (signed 1994) caps dividends at 10% in Article 10 — domestic 0% is lower, so 0% applies.
Vietnamese-side procedure: audited statements, finalised CIT, no arrears, no accumulated losses (Enterprise Law 59/2020/QH14); notify the tax office before remitting (customary 7 working days); transfer via the ICA under Circular 38/2026/TT-NHNN (issued 31 July 2026, effective 18 August 2026 — replacing Circular 06/2019/TT-NHNN, which expired the same day). The account regime applies uniformly to foreign investors and foreign-invested economic organisations, including establishments predating their Investment Registration Certificate.
India → parent: DDT gone; dividends taxed in hands + source deduction
From 01/4/2020, India abolished the Dividend Distribution Tax — moving to the classical system: dividends taxed in the recipient’s hands at applicable rates, with the paying company deducting tax at source (TDS). The commonly published domestic TDS is 20% for foreign corporations — but the Vietnam–India treaty caps at 10% in Article 10, so a Vietnamese parent receiving Indian dividends can cut TDS from 20% to 10% with treaty paperwork (Certificate of Domicile + India’s Form 10F).
Indian FX procedure: the FEMA (Foreign Exchange Management Act) frame. Profit and dividend remittances go through an Authorised Dealer (AD) bank with: dividend resolution, audited statements, chartered accountant certificate and tax filings. No Reserve Bank of India approval is needed for current-account transactions like dividends — but the AD bank vets documents rigorously.
The biggest difference: “single tax” vs “two-tier with deduction”
- Vietnam: single taxation at the corporate-profit stage (20% CIT), 0% on distribution — a “clean” outflow with a standardised ICA procedure.
- India: the company pays CIT, then dividends are taxed again in the recipient’s hands + TDS at source — even with DDT gone, the overall burden has two layers (treaty cutting TDS to 10%).
- Practical takeaway for the Indian group: the Dong Nai flow is the cheapest (0%); the Pune flow needs 10% TDS (treaty) budgeted and treaty paperwork prepared before the dividend cycle — claiming treaty relief after 20% was withheld means a time-consuming Indian refund process.
Frequently Asked Questions
What Vietnamese tax on dividends to India?
0% withholding (corporate shareholder). The Vietnam–India DTA (1994) Article 10 caps at 10%, but domestic 0% is lower, so 0% applies.
Does India still levy Dividend Distribution Tax?
No. From 01/4/2020 India abolished DDT, moving to the classical system: dividends taxed in recipients’ hands, with TDS by the payer — commonly 20% for foreign corporations domestically, cut to 10% under the Vietnam–India DTA (Article 10) with paperwork.
What is India’s procedure for outward dividends?
Under FEMA, through an Authorised Dealer bank with: dividend resolution, audited statements, CA certificate, tax filings. Dividends are current-account transactions needing no RBI approval, but the AD bank vets documents rigorously.
What treaty paperwork cuts Indian TDS?
Vietnam’s Certificate of Domicile plus India’s Form 10F, filed before the dividend cycle. Claiming after 20% withholding means a lengthy refund process.
This article has been quality-reviewed by the FLAW AI Legal Council