Vietnam has 81 double tax treaties in force — one of the widest networks in the region. But the network’s real value is shifting toward tighter benefit conditions: the Multilateral Instrument (MLI) brings the principal purpose test (PPT) into treaties, and Circular 95/2026/TT-BTC, effective from 1 July 2026 replacing Circular 205/2013/TT-BTC, rewrites the beneficial ownership determination rules in Vietnam. Investors benefiting through conduit structures need to understand which conditions their position now stands on.
The change map: new and amended treaties and the anti-abuse layer
The biggest change of this period is not the count of newly signed treaties — the 81-treaty network is already fairly complete, and new negotiations are mainly amendments and protocols to existing treaties — but the anti-abuse layer being spread over the whole network. Through the MLI, which Vietnam has signed, the PPT clause enters covered treaties: the tax authority may deny treaty benefits if obtaining the benefit was one of the principal purposes of the transaction arrangement. The PPT does not require the enterprise to have “cheated” — it needs only that a tax purpose was one of the principal purposes of the structure.
At the domestic layer, Circular 95/2026/TT-BTC prescribes treaty application procedures, in which Article 10 on determining the beneficial owner is the main filter for dividends, interest and royalties received through an intermediary: a recipient that is merely a conduit — with no power to decide the use of the income, obliged to pass on nearly all of it, and lacking real activity and risk — will not be recognised as the beneficial owner and loses treaty rate benefits. Limitation-on-benefits (LOB) clauses in the detailed-listing style appear rarely in Vietnam’s treaties; the main tools are the PPT plus the beneficial ownership test, and investors should review their structures against exactly those two tools rather than against other countries’ LOB templates.
Impact on dividend, interest and royalty rates
When treaty benefits are denied through the PPT or the beneficial ownership test, the income returns to the domestic frame: dividends received by a foreign organisation from Vietnam are currently not withheld domestically (a distinction worth noting: the treaty advantage for dividends in Vietnam lies mainly on the recipient-country side and in foreign tax credit mechanics, not in a Vietnamese source rate), while loan interest and royalties are the two items where treaty ceilings genuinely differ from the domestic rates under Decree 320/2025/ND-CP (royalties 10 percent, loan interest 5 percent of contractor taxable revenue). In other words, conduit structures built to benefit on interest and royalties carry the largest tightening risk in this period.
A common review error is checking the treaty at the initial investment date and closing the file forever. The treaty network changes in both dimensions: amending protocols raise or lower rate ceilings, and the anti-abuse layer changes benefit conditions without changing a single rate figure. A structure valid in 2020 may no longer be valid in 2027 even though the paper rates are unchanged.
Reviewing conduit structures: the checklist
A proper conduit structure review has five checks: existence and force status of the treaties with the intermediary country and the ultimate investor’s country (including how far the treaty is covered by the MLI); the intermediary’s beneficial ownership quality under the Article 10 criteria of Circular 95/2026/TT-BTC (decision power over the income, pass-on ratio, real personnel presence, assets and risk); the structure’s non-tax business purpose file (created when the structure was built, not rewritten when asked); consistency between the tax structure and actual cash flows and contracts; and a fallback plan if treaty benefits are denied (gross-up, restructuring to direct investment or through a country with a sturdier treaty).
The decisive point is sequence: economic substance must exist before the tax authority asks; it cannot be added retroactively. An enterprise with a “thin” conduit structure should invest in thickening substance now (real decision-makers, real governance activity in the intermediary country) or proactively simplify the structure to a direct form — the cost of either option is smaller than denied treaty benefits across years of accumulated payments.
Frequently Asked Questions
1. Which treaties are under new negotiation or amendment?
The main change is not the number of new treaties but the anti-abuse layer spread over the existing 81-treaty network: the PPT through the MLI Vietnam has signed, amending protocols for certain existing treaties, and domestically Circular 95/2026/TT-BTC (replacing Circular 205/2013 from 1 July 2026) rewriting application procedures and the beneficial ownership test.
2. What changes to contractor tax, dividend and interest rates?
Treaty rate ceilings for dividends, interest and royalties change only through amending protocols to each specific treaty. The bigger impact comes from benefit conditions: if denied through the PPT or the beneficial ownership test, interest and royalties return to domestic rates under Decree 320/2025/ND-CP (royalties 10 percent, interest 5 percent), while foreign organisations’ dividends are not withheld in Vietnam anyway, so the difference sits in the recipient-country mechanism.
3. How are anti-abuse clauses (PPT/LOB) being added?
The PPT (principal purpose test) enters through the MLI: treaty benefits are denied if obtaining them was one of the principal purposes of an arrangement. LOB (detailed-list limitation on benefits) clauses appear rarely in Vietnam’s treaties; the main domestic tool is the PPT combined with the beneficial ownership test under Article 10 of Circular 95/2026/TT-BTC.
4. How should investors review investment structures through intermediary countries?
Review five points: force status and MLI coverage of the relevant treaties; the intermediary’s beneficial ownership quality (decision power over income, pass-on ratio, real personnel and risk); the non-tax business purpose file created when the structure was built; consistency between the structure and actual cash flows; and a fallback plan if benefits are denied. Economic substance must pre-exist; it cannot be added retroactively.
This article has been quality-reviewed by the FLAW AI Legal Council