Short answer: The double tax treaty between Vietnam and France — one of Vietnam’s earliest bilateral tax treaties — caps source-state withholding at three different levels. Dividends (Article 10): paid by a Vietnamese company — 7% if the recipient holds more than 50% of the capital, 10% for holdings of 25% or more, 15% otherwise; paid by a French company — 5% if the recipient is a company holding at least 10%, 15% otherwise. Royalties (Article 11): capped at 10%. Interest: this treaty has no separate interest article — interest falls under Article 20 (other income), taxable only in the recipient’s state of residence, i.e., 0% withholding in Vietnam under the treaty text (but the tax authority may reject this — Official Letter 4554/CT-CS; see Practical Note). Claiming these rates requires completing Vietnam’s treaty-application procedures and passing the anti-abuse principal purpose test (PPT) under the MLI Convention.
Dividends: three rate tiers by ownership percentage
Article 10 deliberately discriminates by payer country and ownership stake:
Dividends paid by a Vietnamese company to a French resident:
– 7% — if the beneficial owner is a company holding directly or indirectly more than 50% of the distributing company’s capital;
– 10% — for holdings of at least 25%;
– 15% — all other cases.
Dividends paid by a French company to a Vietnamese resident:
– 5% — if the beneficial owner is a company holding at least 10% of the capital;
– 15% — all other cases.
A distinctive feature in Article 10(3): a Vietnamese resident receiving dividends from a French company may claim a refund of the avoir fiscal (tax credit) actually borne by the French company — a mechanism of the French tax system recognized by the treaty, and a detail many Vietnamese investors into France overlook.
Royalties: the 10% cap — and interest: 0%
Royalties (Article 11): source-state tax may not exceed 10% of the gross royalties, provided the recipient is the beneficial owner. The treaty’s royalty definition is broad: copyrights, patents, trademarks, designs, secret processes, rights to use industrial/commercial/scientific equipment, and industrial experience information. Compared with Vietnam’s 10% foreign-contractor CIT on royalties without a treaty, the treaty rate is no lower — but the real benefit lies in escaping the cumbersome contractor-tax machinery and accessing French credit mechanisms.
Interest: the most distinctive feature of the Vietnam–France treaty — there is no separate interest article. Under the Protocol, interest falls within Article 20 (other income): taxable only in the recipient’s state of residence. Consequence: a Vietnamese company paying interest to a French resident withholds nothing in Vietnam (0% under the treaty text) — see the Practical Note on the risk that the tax authority rejects this position — instead of the usual 5% contractor tax. Note: the excess over an arm’s-length amount (from special relationships) does not enjoy this treatment.
Three gates before the preferential rates apply
- Residence (Article 4): the recipient must be a French tax resident; dual-residence cases follow the tie-breaker (permanent home → centre of vital interests → habitual abode → nationality).
- Beneficial ownership: the caps apply only if the recipient is the true beneficial owner — a French “conduit” company inserted to harvest treaty benefits is disqualified.
- The MLI principal purpose test: Vietnam ratified the Multilateral Instrument (instrument deposited May 23, 2023; in force for Vietnam since September 1, 2023). Treaty benefits are denied where tax authorities find obtaining the benefit was a principal purpose of the arrangement. Routing investments “through France” purely for the 5%/7% rates will not survive this gate.
Additionally, Article 5 on permanent establishment sets the construction-site PE threshold at more than 183 days — French contractors working in Vietnam should note this.
Treaty-application procedures in Vietnam
Article 23(5) lets the two states set application procedures, including presentation of a certificate of residence stating the source and gross amount of the income, certified by the residence state’s tax authority. In Vietnam, this runs under current tax-administration law — Law on Tax Administration 108/2025/QH15 (replacing Law 38/2019 from July 1, 2026) and its guidance. In practice:
- The treaty-application dossier goes to the directly managing tax office before the income is paid (to withhold at treaty rates from the start), or a refund is claimed afterward;
- No French residence certificate (or equivalent) means domestic rates apply — no treaty caps;
- Vietnamese tax authorities increasingly test beneficial-ownership substance — files must evidence actual cash flows and disposal rights.
Double taxation relief mechanics
For Vietnam (Article 22(1)): the credit method — tax paid in France is credited against Vietnamese tax, capped at the Vietnamese tax on that income. For France (Article 22(2)): a mix of exemption-with-progression and credit; notably, France grants tax sparing — Vietnamese tax incentives are deemed paid for French credit purposes where income benefited from Vietnamese investment incentives in force since the treaty’s signature. This is a major plus for French investors in Vietnam: Vietnamese tax holidays are not “clawed back” when profits return to France.
Practical note: risk that the tax authority rejects the 0% position on interest
The 0% reading rests on the treaty text — but enforcement practice carries a material risk. Under Official Letter 4554/CT-CS dated 21 October 2025, the tax authority takes the view that the Vietnam–France treaty has no separate interest provision and therefore no treaty basis exists for an exemption; on this view, interest paid to French residents is subject to corporate income tax in Vietnam under domestic law (the foreign-contractor tax mechanism).
In other words: 0% is what the treaty text says; the tax authority on audit may apply domestic rates and collect back taxes. Before applying 0%, companies should assemble a full evidence file (French residence certificate, beneficial-ownership proof, treaty-article analysis) and take tax advice to quantify the exposure to back-tax assessments and penalties.
Frequently asked questions
What tax applies when a Vietnamese company pays dividends to its French parent?
7% if the parent holds more than 50% of the capital, 10% for 25% or more, 15% otherwise (Article 10) — provided the parent is the beneficial owner and treaty-application procedures are completed.
Must interest paid to a French counterparty be withheld on?
Under the treaty text: no — 0% (interest falls under Article 20, taxable only in France). But enforcement risk exists: under Official Letter 4554/CT-CS (21 October 2025), the tax authority denies any treaty basis for exemption and treats the interest as subject to CIT in Vietnam under domestic law — see the Practical Note above.
What is the royalty withholding rate to a French company?
Capped at 10% under Article 11 (the recipient must be the beneficial owner).
What documents are needed to claim treaty rates?
A French tax-residence certificate (certified by the French tax authority) and a treaty-application dossier filed with the Vietnamese tax office — under the procedures of Law on Tax Administration 108/2025.
How does the MLI affect the Vietnam–France treaty?
Both states are MLI parties (in force for Vietnam since September 1, 2023). Treaty benefits must pass the principal purpose test — arrangements designed mainly to harvest tax benefits will be denied.
This article has been quality-reviewed by the FLAW AI Legal Council