Beneficial ownership in Vietnam's tax treaties: why intermediary holding structures get challenged

Treaty relief on interest, royalties and dividends is generally available only to the beneficial owner of the income — the person that has the right to use and enjoy it, and is not obliged to pass it on to someone else. Vietnam applies this test on substance. An entity that receives a payment from Vietnam, is resident in a treaty country and holds a valid residence certificate can still be refused relief if, in reality, it passes the income through to another party, has no real business of its own, or exists mainly to obtain the treaty benefit.

This matters for foreign-invested companies because group structures often route funding, licences or holdings through regional companies in third countries. Some of those companies are genuine regional headquarters with staff and decisions; others are holding vehicles with a registered address and nothing else. This guide explains how the concept works, the indicators Vietnamese guidance has used, and how a genuine recipient prepares its evidence. It is not a guide to building structures to pass the test — an arrangement set up mainly to obtain treaty relief is exactly what the rules are designed to refuse.

Where the concept comes from

Vietnam's treaties, following the international models, restrict the tax Vietnam may levy on dividends, interest and royalties paid to a resident of the other state if that resident is the beneficial owner. The treaty does not define the term in detail. Vietnamese tax administration guidance has long set out how the tax authority assesses it, and the procedure for claims now sits within the 2026 tax administration documents — Decree 252/2026/NĐ-CP guiding the Law on Tax Administration (Law 38/2019/QH14) and Circular 89/2026/TT-BTC. Check the current text for the assessment criteria; we describe them in principle.

Many treaties have also been read, or amended, to include a broader anti-abuse rule: relief can be denied where obtaining it was one of the principal purposes of an arrangement or transaction. The two tests overlap but are not the same. An entity can be the beneficial owner and still be caught by an anti-abuse rule if the arrangement as a whole was designed around the benefit.

Indicators that point away from beneficial ownership

Vietnamese guidance has used a set of indicators to decide that a recipient is not the beneficial owner. None is decisive alone; together they build a picture:

• An obligation to pass on the income. The recipient must distribute most of what it receives to residents of a third country within a short period, by contract or in practice.
• Little or no business activity. The entity does no substantive business beyond holding the asset or the right that produces the income.
• Thin resources. Few or no employees, no premises of its own, capital or assets small compared with the income it receives.
• No real control. Decisions on the asset or the income are taken by someone else; the directors sign what they are sent.
• Low or no tax on the income. The recipient pays little or no tax on the income in its country of residence, especially where the income is then passed on.
• Back-to-back arrangements. A loan or licence to the Vietnamese company mirrored by a loan or licence from another group company on almost identical terms.

Guidance has also recognised situations treated more favourably, such as certain listed companies and government bodies. Check the current text before relying on any such category.

Three recipients, three likely outcomes

These are illustrations, not rules. The same label can hide very different facts, and the tax office will look at the facts.

A worked example

Hypothetical example. Suppose a Vietnamese subsidiary pays royalties for a trademark to a group company resident in a treaty country with a favourable royalty article. The group company acquired the trademark from the ultimate parent in a third country and pays the parent an almost identical royalty. It has two part-time directors employed by a corporate services provider, no marketing or brand staff, and its accounts show royalty income in and royalty expense out.

The Vietnamese payer lodges a treaty notification with a valid residence certificate. On review, the tax office asks for evidence of the recipient's functions, decision-making and use of the income. The answers show a pass-through. Relief under the treaty with the intermediate country is refused, and the royalty is taxed at the domestic rate, with late-payment interest on the difference if the reduced rate had already been applied. Whether relief is available under the treaty with the parent's country, if any, is a separate question with its own conditions and procedure.

What a genuine recipient should be ready to show

A group company that really earns the income can support its position with ordinary business records:

1. Its residence certificate for the relevant year and its tax returns showing the income taxed in its country.
2. An organisation chart and employee list for the functions connected to the income — brand management, research, treasury.
3. Board minutes and approvals showing decisions on the asset or the loan were taken by its own management.
4. Financial statements showing how the income is used, not only that it is received.
5. The agreements under which it holds the asset or funds the loan, and any onward agreements, with an explanation of their commercial terms.

If the honest answer is that the recipient does not have these, the right course is to apply the domestic rate rather than lodge a claim that will not stand. Recharacterising a pass-through as a business after the fact is not a remedy the rules accept.

Reviewing existing arrangements

Many foreign-invested companies inherited payment flows set up years ago, before anyone in Vietnam looked at beneficial ownership. A calm review is better than waiting for an audit to do it:

1. List every flow on which a treaty rate is applied — interest, royalties, dividends and any service fees relying on a treaty — with the recipient, its jurisdiction and the treaty relied on.
2. Collect the facts for each recipient against the indicators above: staff, premises, decision-making, onward payments, tax paid on the income.
3. Sort the flows into those with a solid file, those needing more evidence, and those where the honest answer is that the recipient is a pass-through.
4. Correct going forward for the last group by applying the domestic rate from the next payment, and discuss past periods with your adviser. Supplementary returns filed voluntarily for open periods are generally treated better than amounts found in an audit, and late-payment interest stops running once the tax is paid.
5. Tell the group. Treasury and legal teams abroad often do not know that a regional entity's lack of substance costs the Vietnamese subsidiary tax; the review gives them the facts to decide.

What the Vietnamese payer should do

• Ask for the beneficial ownership evidence before the first payment on which a reduced rate is applied, not after a review notice arrives.
• Read the intercompany agreement for obligations to pass the income on, and for back-to-back terms.
• Keep the recipient's responses with the treaty notification file, since the payer is the one assessed if relief is refused.
• Align the transfer pricing documentation with the same facts. A royalty recipient described as a mere holder in one document and as a brand manager in another invites questions; Decree 255/2026/NĐ-CP now governs tax administration for enterprises with related-party transactions from 1 July 2026.

To see what has been filed, check the company's e-tax account for foreign contractor tax returns on which a treaty rate was applied, and confirm the managing tax office in the taxpayer information lookup — since 1 July 2025 part of a three-tier administration across 34 provinces and centrally run cities. Treaty texts, including any protocols with anti-abuse provisions, are published by the Ministry of Finance and the tax authority.