Executive summary

Circular No. 95/2026/TT-BTC (Circular 95) introduces important updates to Vietnam's guidance on the application of double-taxation avoidance agreements (DTAs), replacing Circular No. 205/2013/TT-BTC (Circular 205) from 1 July 2026.

To date, Vietnam has signed DTAs with more than 80 jurisdictions.

Circular 95 updates and clarifies certain aspects of Vietnam's guidance on the application and interpretation of DTAs as discussed below.

Changes to DTA preamble

Circular 95 states that a DTA is intended to (1) eliminate double taxation and prevent tax evasion and tax avoidance, and (2) prevent the creation of opportunities for non-taxation in both contracting jurisdictions.

Vietnam's existing DTAs each contain a preamble explaining that the DTA is aimed at eliminating double taxation and preventing fiscal evasion. However, most of them do not discuss preventing non-taxation in both contracting jurisdictions as one of the DTA's purposes.

The latter purpose originates from Article 6 of the Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI), which entered into force in Vietnam on 1 September 2023. Through its competent authority, Vietnam has identified to the Organisation for Economic Co-operation and Development as the MLI Depositary only 75 DTAs as covered tax agreements under the MLI. Accordingly, taxpayers may need to further clarification regarding whether the expanded treaty purpose reflected in Circular 95 should be considered applicable to all DTAs concluded by Vietnam, or only to the DTAs that have been modified by the MLI or otherwise contain similar anti-abuse language.

Changes to interpretation of permanent establishment (PE) definition

Circular 95 comments on the basic definition of a PE found in most DTAs and concludes that a PE includes an e-commerce platform or digital platform through which a foreign enterprise carries on all or part of its business activities involving the supply of goods or services in Vietnam. The Circular states that such an e-commerce or digital platform satisfies the conditions (including the condition of having a fixed place of business in Vietnam) for constituting a PE. However, Circular 95 does not elaborate on the basis for this conclusion or explain how those conditions would be met in practice.

In addition, the Circular clarifies that a representative office engaged in the negotiation or conclusion of commercial contracts may constitute a PE in Vietnam. This appears to reinforce Vietnamese tax authorities' position that the activities of a representative office should be assessed based on their substantive functions.

Multinational enterprises with digital business operations or a representative office model in Vietnam should therefore assess the potential impact of these changes on their Vietnam tax position.

Guidance on applying capital gains tax exemption under DTAs containing an immovable property ratio clause

Circular 95 provides guidance on determining whether an entity derives the majority of its value from immovable property for the purposes of applying DTAs that include such a condition in their provisions on gains from the transfer of shares or comparable interests. Similar to Circular 205, Circular 95 prescribes a methodology based on the average ratio of the value of immovable property to the total value of assets at specified points in time, using the relevant financial statements as the basis for the calculation. However, Circular 95 does not require the financial statements prepared at the time of the transfer to be audited.

Notably, Circular 95 expressly refers to direct and indirect transfers in the context of determining the immovable property ratio. However, for an indirect transfer, the Circular does not clearly specify whether the immovable property ratio should be assessed at the level of the Vietnamese entity or at the level of the foreign entity that directly transfers its shares. This lack of clarity may give rise to interpretative questions in transactions involving multi-tier holding structures.

Guidance on determining Vietnam's taxing rights over capital gains

The heading of Article 30(5) of Circular 95 reads: "Tax treatment of gains derived from the direct or indirect transfer of shares in a company resident in Vietnam." The article itself simply says: "Certain tax treaties provide that gains derived by a resident of another Contracting State from the transfer of shares in a company that is a resident of Vietnam may be taxed in Vietnam."

Although the article itself is a statement of fact, the wording in the heading could be construed as implying that Vietnam may tax gains arising from indirect transfers, even if the relevant DTA grants Vietnam taxing rights only over gains derived from the transfer of shares in a company resident in Vietnam (which may be understood to refer only to a direct-share transfer). It will be interesting to monitor how the tax authorities interpret this article in practice.

Limitation period for tax treaty relief claims

Circular 95 continues to provide a three-year limitation period for claiming tax treaty relief in Vietnam. However, Article 10(1) now clarifies that the treaty application date is the date on which a complete application dossier is submitted in accordance with Circular 89/2026/TT-BTC and Decree 252/2026/ND-CP, which provide guidance on the implementation of the Law on Tax Administration No. 108/2025/QH15, effective from 1 July 2026.

This clarification may have implications in practice. If the tax authorities consider an initial submission to be incomplete, and the taxpayer only provides further information after certain period of time, the treaty relief claim could be denied, in part or entirely, on the grounds that a complete application was not submitted within the statutory time limit.

Implications

Given the expanded treaty purpose, broader PE interpretation and further guidance on capital gains and treaty relief procedures under Circular 95, taxpayers may face practical uncertainty in interpreting and applying DTA provisions. Businesses should therefore: carefully assess the relevant transaction structure, PE exposure, immovable property ratio position and supporting documentation; ensure treaty relief applications are submitted on a timely and complete basis within the applicable limitation period; and monitor further guidance and practice from the tax authorities. Businesses should consider seeking professional advice before applying DTA benefits or treaty relief positions to specific transactions.