On 7 July 2015, the United States and Vietnam signed an income tax treaty and protocol (the "DTA"), the first ever between the two countries. This is yet another significant step toward further increasing trade relations between the two countries. Though signed, the DTA will not become effective until both countries exchange instruments of ratification. It is unknown at this time when the exchange will occur, especially given the current multi-year delay in treaty ratification within the United States. 

Once effective, the DTA would reduce the dividend withholding rate to 5 percent for intercompany dividends (with 25-percent ownership) and 15 percent otherwise. The interest withholding rate under the DTA generally would be reduced to 10 percent. The royalty withholding rate would be reduced to 5 percent or 10 percent under the DTA, depending upon the nature of the royalty. Like other recent U.S. treaties, the DTA also includes provisions regarding fiscally transparent entities and a limitation on benefits. The limitation on benefits provision is intended to prevent treaty shopping.