Profits earned — how to bring them home? Dividends from China and Vietnam face different withholding taxes, and the Vietnam–China tax treaty (DTA) caps dividends, interest and royalties at 10%. This article compares both countries’ procedures.
1. Conditions for paying dividends: after-tax profits
- Rule: only distributing — after-tax profits;
- Obligations: completing — fiscal obligations to the state;
- Reserves: allocating — statutory funds;
- Decision: the owner/board — deciding;
- Both countries: a common principle — similar;
- Audit: audited statements — as the basis.
2. Dividend withholding tax in China
- Principle: withholding at source — on payments to foreign entities;
- Rate: under domestic law — ask tax advisers (qualitative);
- DTA: reduced to 10% — under the Vietnam–China treaty;
- DTA condition: beneficial ownership;
- Procedure: DTA-claim dossiers — filed with tax authorities;
- Practice: preparing early — before distribution.
3. Tax on dividends in Vietnam
- Frame: tax policy — ask advisers on current rules;
- Foreign entities: separate rules — under tax law;
- DTA: a 10% cap — the Vietnam–China treaty;
- Procedure: notification/withholding — per regulations;
- Transfer: banks — foreign-exchange procedures;
- Note: updating — tax policies change.
4. The Vietnam–China DTA: key points
- Scope: avoiding double taxation — Vietnam and China;
- Dividends: 10% — maximum rate;
- Interest: 10% — likewise;
- Royalties: 10% — likewise;
- Condition: tax residence — of the recipient;
- Procedure: residence certificates — and dossiers.
5. Transferring dividends abroad from Vietnam
- Distribution decision: written — by the owner;
- Tax: declaring and paying — related taxes;
- Bank: transferring — through licensed banks;
- Dossier: decisions, audit reports;
- FX: complying — with FX management;
- Time: preparing — before the transfer window.
6. Transferring dividends abroad from China
- Decision: the board/shareholders — deciding;
- Tax: withholding and paying — before transfer;
- FX: SAFE — China’s FX administration;
- Bank: transferring via banks — designated;
- Dossier: complete — audits, decisions;
- Details: ask advisers — in China.
7. Beneficial ownership
- Concept: the true beneficiary — not an intermediary;
- Purpose: anti-treaty-shopping;
- Review: tax authorities — examining;
- Shell companies: no DTA benefits;
- Proving: real substance;
- Structure: designing — with substance.
8. Dividend timing: tax optimisation
- Timing: fiscal year-end — usual;
- Interim: interim dividends — mid-year;
- Plan: cash flow — of the parent;
- Tax: calculating — before deciding;
- FX: exchange rates — at transfer;
- Advice: tax + FX — coordinated.
9. Alternatives to dividends for moving profits
- Service fees: the parent providing — services;
- Royalties: royalty payments — DTA 10%;
- Interest: parent loans — DTA 10%;
- Transfer pricing: complying — arm’s length;
- Compare: total tax — per option;
- Risk: anti-avoidance — scrutiny.
10. Side-by-side: the two countries
- DTA rates: the same 10% — both directions;
- Procedures: China tighter — on FX (qualitative);
- Vietnam: relatively simpler — (qualitative);
- Common: complete dossiers — needed;
- Recommend: planning — from year-start;
- Advice: tax advisers in both — coordinated.
11. DTA-benefit dossiers
- Residence certificate: the home tax authority — issuing;
- Forms: prescribed — forms;
- Contracts: proving — relationships;
- File: before or when — paying dividends;
- Keep: copies — complete;
- Update: annually — residence papers.
12. Double-taxation risks
- Cause: not applying the DTA — in time;
- Fix: crediting — foreign-paid tax;
- Procedure: proof — of tax paid;
- Deadlines: limited — for claims;
- Prevention: applying the DTA at once;
- Advice: international tax — specialists.
13. Audits and financial statements
- Mandatory: independent audits — for FDI enterprises;
- Basis: audited profits — confirmed;
- Time: after year-end — completing;
- Quality: reputable — audit firms;
- Keep: reports — for years;
- Plan: scheduling — early audits.
14. Foreign exchange: moving money abroad
- Vietnam: licensed banks — executing;
- Dossier: distribution decisions — tax papers;
- China: SAFE monitoring — strict;
- Rates: fluctuating — calculating;
- Fees: transfer fees — banks;
- Comply: fully — avoiding breaches.
15. Stock vs cash dividends
- Cash: common — repatriating;
- Stock: increasing capital — no cash moved;
- Tax: different treatment — ask advisers;
- Purpose: retaining capital — reinvesting;
- Procedure: registering capital increases — for stock;
- Choose: by cash needs.
16. Pillar 2 (global minimum tax) impact
- Frame: a 15% global minimum — tax;
- Vietnam: QDMTT — from 01/01/2024;
- Impact: tax incentives — may be topped up;
- Dividends: after-tax cash flows — recalculated;
- Large groups: thresholds — revenue;
- Advice: international — tax specialists.
17. Common mistakes
- Distributing at a loss: ineligible — breaching;
- Forgetting the DTA: paying more tax — than needed;
- Missing dossiers: banks refusing — transfers;
- Late audits: missing — dividend windows;
- Ignoring FX: breaching — regulations;
- DIY: international tax is complex — get advice.
18. Annual dividend roadmap
- Q1: completing audits — prior year;
- Q2: deciding distributions — meetings;
- Q2–3: executing transfers;
- DTA dossiers: preparing early — Q1;
- Track: calendars — annually;
- Review: learning — each year.
19. Dividend repatriation checklist
- Audited after-tax profits?
- Distribution decision — issued?
- DTA dossier — prepared?
- Tax — declared and paid?
- Bank — transfer dossier?
- FX — complied?
20. When to retain profits
- Reinvest: expanding — production;
- Reserve: risks — markets;
- Tax: comparing — retain vs distribute;
- Cash: the parent’s — needs;
- Strategy: long-term — deciding;
- Advice: finance + tax — coordinated.
21. Dividend access for different shareholder types
- Corporate: parent companies — standard route;
- Individuals: higher rates — often;
- Funds: fund structures — treaty access;
- Check: shareholder type — matters;
- Plan: holding structures — accordingly;
- Advise: tax advisers — consulted.
22. Currency controls: practical tips
- Banks: relationship — with FX banks;
- Timing: avoiding year-end — rushes;
- Documents: complete files — first time;
- Follow up: tracking — transfers;
- Backup: alternative banks — designated;
- Learn: each transfer — smoother.
23. Dividend policy in shareholder agreements
- Agree: distribution policy — upfront;
- Minority: minority rights — to dividends;
- Deadlock: deadlock provisions — distributions;
- JV: joint ventures — negotiated;
- Document: written — policies;
- Review: periodic — reviews.
24. Tax residency certificates: practicalities
- Apply: home tax authority — early;
- Validity: one year — usually;
- Renew: annually — renewing;
- Keep: originals — filed;
- Translate: certified — translations;
- Calendar: renewal reminders — set.
25. Withholding agents: who withholds?
- Payer: the distributing company — withholds;
- Liable: liability — for errors;
- Deadlines: payment deadlines — observed;
- Penalties: late payment — fines;
- Systems: accounting systems — set up;
- Train: finance staff — trained.
26. Dividend reinvestment plans
- Concept: reinvesting — dividends automatically;
- Use: group cash — management;
- Tax: deemed distribution — may apply;
- Document: board resolutions — recording;
- Compare: vs retention — analysed;
- Advise: tax counsel — consulted.
27. Cross-border dividend calendars
- Sync: subsidiary calendars — aligned;
- Parent: parent cash needs — scheduled;
- FX: rate windows — watched;
- Buffer: contingency time — allowed;
- Review: annual — reviews;
- System: treasury systems — used.
28. Dealing with tax audits on dividends
- Prepare: complete files — ready;
- Respond: timely — responses;
- Explain: beneficial ownership — evidenced;
- Appeal: appeal rights — known;
- Learn: audit findings — applied;
- Prevent: robust documentation — maintained.
29. Keeping dividend records inspection-ready
- File: per-distribution — files;
- Index: clear indexes — maintained;
- Retain: multi-year — retention;
- Access: quick retrieval — ensured;
- Review: annual — completeness checks.
30. Adviser coordination checklist
- Tax: both countries — advisers;
- FX: bank contacts — ready;
- Legal: corporate lawyers — engaged;
- Sync: joint timeline — agreed.
Contact us
FLAT Law Firm advises Chinese investors throughout the Vietnam investment cycle — from deal structuring and licensing to operations and compliance. Contact us for advice tailored to your project.
This article has been quality-reviewed by the FLAW AI Legal Council
