A Study of Vietnam?s Double Tax Treaties: Patterns of Treaty Growth and Shifting Treaty Policy

This article reviews the growth of Vietnam's tax treaties and shifts in its treaty policies over the thirty-year period since the country created opportunities to attract foreign investment. It follows the incorporation of the Model Tax Treaties of the Organization for Economic Co-operation and Development (OECD) and the United Nations (UN) into its bilateral treaties and considers the limited apparent connection between treaties and foreign direct investment (FDI). A particularly interesting finding is the extent to which Vietnam's treaties from the outset favoured the use of the UN Model provisions with respect to the definition of permanent establishments (PEs) and capital gains on the disposal of immovable property, particularly in its treaties with OECD members. This is ironic as measures from the OECD Model precedents are more likely to be found in treaties with non-OECD members. Nevertheless, it is clear that the treaties overall favour the allocation of taxing rights to Vietnam as a capital importing jurisdiction. These findings, when considered along with the country's success at attracting FDI, suggest that developing economies can retain taxing rights and attract foreign investment at the same time.