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8/17/2019 Asean Tax Guide v2
1/92
8/17/2019 Asean Tax Guide v2
2/92
CONTENTS
THEASEANECONOMICCOMMUNITY 2
OVERVIEW 10
BRUNEIDARUSSALAM 12
CAMBODIA 18
INDONESIA 26
LAOS 33
MALAYSIA 40
MYANMAR 48
PHILIPPINES 54
SINGAPORE 64
THAILAND 74
VIETNAM 81
KPMGASEANCONTACTS 90
1ASEAN Tax Guide© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity Member firms of the KPMG network of independent firms are affi iated with KPMG International KPMG International provides no client servicesNo member firm has any authority to obligate or bind KPMG International or any other member firm vis à vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm All rightsreserved
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1 AssociationofSoutheastAsianNations(2013).ASEANEconomicCommunity.[online]Retrievedfrom:http://www.asean.org[Accessed:21Oct2013].
TheASEANEconomicCommunity
In2007,the10states
comprisingTheAssociation
ofSouthEastAsianNations
(ASEAN)signedtheASEAN
EconomicCommunity(AEC)Blueprint(theBlueprint),
agreeingtoforman
economiccommunity,which
willtransformASEANintoa
singlemarketandproduction
basewithfreemovementof
goods,services,investment,
skilledlabour,andfreerflow
ofcapital,withapopulation
ofover600millionpeople.1
2 ASEAN Tax Guide © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity Member firms of the KPMG network of independent firms are affiliated with KPMG International KPMG International provides no client servicesNo member firm has any authority to obligate or bind KPMG International or any other member firm vis à vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm All rightsreserved
http:///reader/full/http://www.asean.orghttp:///reader/full/http://www.asean.org
8/17/2019 Asean Tax Guide v2
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OtherkeycharacteristicsofAECinclude:
l Acompetitiveeconomicregion
l Aregionofequitableeconomicdevelopment
l Aregionfullyintegratedintotheglobaleconomy
AECisscheduledforestablishmentbyDecember
2015(arecentshiftfromJanuary2015),althoughcommentatorsandexpertsagreethatafullyintegratedeconomiccommunityintheregionwillnotexistfor
sometime–2015isjustthebeginning.
AECpresentsanopportunityforASEANmemberstates
tocreateacompetitiveregionalenvironment,anditholdsthepotentialtotransformASEANintotheworld’snexteconomicpowerhouse.
IntraASEANtradeandinvestmentisexpectedto
increasesignificantly,anditiswidelyanticipatedthatglobalcompaniescurrentlyoperatingintheAsiaPacific
regionwillbegintoshiftcertainfunctionsintoASEAN,inordertocapitalizeonAEC’svariousbenefits.ItiscrucialthatbusinessesbegintoconsiderASEANintheirstrategicplanning;bothasapotentialmarket,
andfortheopportunitytocreateefficienciesinAsianoperations.
ASEANgovernmentsmustalsoplanforexpectedchanges.Governmentsfaceextensivetodolistsin
anticipationofAEC2015–theBlueprintoutlinesmanylegislativeandpolicychangesexpectedofASEANmemberstatesbeforetheregioncanfullyintegrate.
TheBlueprintisfairlyquietfromataxationpointofview,
withtaxonlymentioneddirectlytwice:
l Enhancethewithholdingtaxstructure,wherepossible,topromotethebroadeningofinvestor
baseinASEANdebtissuance(Item31,Actioniv,AECBlueprint)
l ASEANmembercountriesshouldcompletethenetworkofbilateralagreementsonavoidance
amongallmembercountriesby2010(Item58,AECBlueprint).
Despitethis,thereareanumberofotherchangesexpectedwherewecaninferamendmentstotax
policies,including:
l Therecognisationofintellectualpropertyasamajordeterminantoflocalvalueaddedandexternalcompetitiveness(Item44)
l Acalltoharmonisethepolicyandlegal
infrastructureforecommerce(Item59)
l Anobjectivetorealizeamorecomprehensive
investmentagreementwhichwouldincreaseinvestorconfidenceinASEAN(Item26)andprovideenhancedprotectiontoallinvestorsand
investments(Item27).
SowhiletheBlueprintdoesnotcallforanylarge
transformativetaxreformsintheregion,thereareanumberofchangesthatwecanexpectorarealready
seeing.Letusexploreafewofthese.
Corporatetax
Putsimply,harmonisationoftaxationiswhenmemberstatesinaregionagreetoadoptthesametaxtreatment,eliminatingtheincentivefortaxpayerstoshift
fromonehightaxjurisdictiontoalowtaxjurisdiction.Harmonisationisheraldedasamodelforregional
integration,buttypicallyitsdownfallisthatitlimitsmemberstates’sovereigntybyrestrictingtheabilitytodecidetheirowntaxratesasamatterofnationalpolicy.
ManycommentatorshavediscussedtheimplementationofharmonisationinAEC,butitssuccess
requiresparadigmshiftsinthewaymemberstatesdeterminetheirnationalpolicies.ThesameissuehasariseninthecontextoftheEuropeanUnion(EU),and
despitesignificantdebate,harmonisationoftaxationhasnotbeenimplementedtodateintheEU.Giventhatthe
EUhasstillnotcometoadoptthemodel,weanticipateittobealongwayoffinAEC.
Absenttheharmonisationoftaxes,taxbecomesapointofdifferentiationbetweenmemberstateswho
3
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continuetocompeteagainsteachotherforforeigndirectinvestment.ASEANnationshave,andwillcontinueto,respondtoprospectiveinvestmentwiththemanipulation
oftaxratestocompetewiththeirneighbours.
AlookatthetrendsincorporatetaxratesinASEANshowsanoveralldecreaseinratesoverthelastfifteenyears,withanobviousfallinratesin2007on
thesigningoftheAECBlueprint.MostoftheASEANnationsimposegeneralcorporatetaxratesthatare
allwithinafewpercentagepointsofthe23.1percentaverage,butthe30percentrateinthePhilippinesisnearlydoublethe17percentrateofSingapore.
Trendsshowapossibleconvergenceofcorporatetaxratesat20percent,withtheexceptionofSingapore
whichisalreadylower.Whether20percentisthe‘magicnumber’atwhichrateswillbegintoleveloutremainstobedetermined.
Ofcourse,it’snotallabouttax.Thereareahostofotherconsiderationsacorporatetakesintoaccountbefore
investing,andthesearepertinentconsiderationsin
thecontextofASEAN:predictabilityofthetaxsystem;bureaucracy;processingtimes;corruption;protectionofintellectualproperty;andtransparencyinguidelines,tonameafew.
WhatisclearisthatsincethesigningoftheAECBlueprint,manyofthemembernationshavereduced
theircorporatetaxrates.Inaddition,anumberofstatesoffercorporatetaxincentives,suchasexemptions
fromorreductionsincorporatetaxforcertainperiods.Whetherthisissimplypartofaglobaltrendindecreasingcorporaterates,oramethodofcompetition
intraASEAN,onecanonlysurmise.
Indirecttax
VAT/GST
Theflipsideofadecreaseincorporatetaxratesis
thatgovernmentsbecomemorereliantonindirecttaxesforrevenue.Ascorporatetaxrateshavetumbled
worldwide,indirecttaxrateshaveincreasedgloballyby0.17percenttoa15.5percentaveragesinceJanuary2012.2InAsia,theaverageratesmovedupby0.4
percentto12.24percent.3
AECwillopenupamarketofover600millionpeopleincountrieswheretheaverageGDPgrowthis5.4
percent.4DisposableincomesacrossallofSouthEastAsiaareexpectedtoincrease,andthiswillpush
consumerexpenditureintheregiontoapredictedUSD
1.5trillionby2020.5
Furtherdrivingspendingistheincreasingprevalenceof
amiddleclasssegmentandgrowingaffluenceofuppermiddleclass,particularlyinMalaysiaandSingapore,whichdrivesdemandforhighvalueproductsand
services.6
Inbrief,greaterexpenditureintheregionprovidesincentivesforgovernmentstofocuseffortsonindirect
taxregimesandlegislation.Weexpectthatindirecttaxwillbecomeanimportantrevenuegatheringtool;thiswillbeachievedwiththeintroductionofcomprehensive
VATorGSTsystems,increasesinheadlinerates,andperhapssimultaneouslybybaseexpansion.
Customs
Therequirementforfreedomoftrade,byitsvery
nature,requiresareduction,andultimatelycessation,ofcustomstariffsandduties.Thisisrecognizedby
theBlueprint,whichcalledfortheeliminationofallimportduties(exceptforthoseontheSensitiveandHighlySensitiveLists)by2010forASEAN6(comprising
Brunei,Indonesia,Malaysia,Philippines,Singapore,andThailand),andby2015forCLMV(Cambodia,Laos,
Myanmar,andVietnam),assetoutintheCommonEffectivePreferentialTariffsforASEANFreeTradeArea(CEPTAFTA)Agreement.
TheSensitiveListandHighlySensitiveListarecountryspecificlistsofunprocessedagriculturalproductswhich
areofferedalongertimefortheimplementationoftariffelimination.
2 KPMGInternational.January2013.CorporateandIndirectTaxSurvey2012,2.3 Ibid.4 Worldbank(2013).DataextractedfromGDPgrowth(annual%).[online]Retrievedfrom:http://data.worldbank.org[Accessed:5August2013].5 AsiaResearchOnline(2011).SEAsia–opportunitiesacrossadiverserangeofconsumergroups.[online]Retrievedfrom:http://asiaresearch.net[Accessed:19September
2013].6 AssociationofSoutheastAsianNations(n.d).TradeandFacilitation,1.[online]Retrievedfrom:http://www.asean.org[Accessed:16September2013].
4
http:///reader/full/http://data.worldbank.orghttp:///reader/full/http://asia-research.nethttp:///reader/full/http://www.asean.orghttp:///reader/full/http://data.worldbank.orghttp:///reader/full/http://asia-research.nethttp:///reader/full/http://www.asean.org
8/17/2019 Asean Tax Guide v2
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KEY 0 =
In force
(NF)
=
Not n force
Source: International Bureau
of
Fiscal Dcoumentat ion [IBFD), 2013
As it stands, tariffs
are
down to zero on 99.65 percent
of traded lines for the ASEAN-6, and
are
between
zero
to five percent on 98.86 percent of ines for CMLV.
7
This
significantly lowers the import value
of
commodities
for businesses, but
marks
a significant revenue
loss
for governments. By way ofexplanation,
CEPT-AFTA
required the elimination of tariffs on 7,881 tariff lines
for
ASEAN-6.
The 2008 import value of commodities
traded in these
7,881
tariff lines
was US$22.66
billion.
8
The
average
tari ff rate
was
reduced from 0.79 percent
in 2009 to
0.05
percent in
2010.
9
All things equal,
this represents a drop in revenueof approximately
US$168 million
in
one year. It begs the question- will
the increased trade and spending compensate for the
governments' revenue, or will the revenue have to be
gathered from elsewhere?
Withholding tax Double Tax
Treaties
One of only two direct mentions of tax in the AEC
Blueprint
was
to encourage the completion of the
network
of
double tax treaties among member countries
by 2010.
Since the Blueprint
was
signed, w ~ v e witnessed
member countries hurrying
to
negotiate new treaty
terms and conclude treaties.
But
despite the 2010
deadline having
passed
, there remain
gaps
in treaty
coverage in the region, as the table above shows.
10
Cambodia, for example, has to date no treaties in
force,
although it
is
anticipated that this will change before
AEC's2015 target.
Free flow of trade and capital requires the elimination of
withholding taxes. This was recognised
in
the Blueprint,
which also
calls
for enhancement of the withholding
tax structure to promote the broadeningof the investor
base in ASEAN debt
issuance.
The network,as it currently
stands,
somewhat
discourages trade between ASEAN member
states,
and
instead promotes the movement of monies offshore
to countries where bilateral agreements
are
in place.
Further, withholding taxes within the region
are
higher
than withholding taxes in bilateral agreements with
parties outside the region; again promoting trade
external to the region.
•
Uy
,
v
(2013).
Zerotarift'3 for
Asean-6
starting
January
1.inquirer [onllne]31 Dec
ember 2009
.
Retrieved
from: http:
giobaination.lnquirer.net
[Accessed:
16
September 2013].
•
Assoc
iation of Southeast
Asian
Nations (n.d). Trade and Facilitation,
1.
[online] Retrieved from: http:
/l
www.asean.o
rg [Ac
c
essed
: 16 September 2013).
•
IBFD (2013)
.
Data
extracted from
Tax Research
Platform. [online] Retrieved
frorru
http:
online.ibfd.org
[Accessed
5 August
2013].
••
Plummer
, M. (2009). The ASEAN Economic Community and the European Experience. Asian Development
Bank.
[online] Retrieved from: http://www.adb.org [Accessed: 6
Aug2013].
201JI(PMGII Mmmlt10rd o o p ~ (ICJMG l n ~ o M I ) , • S w i ~ ' ('f'ltjty Mctnber f i r m ~ t l f t h t I(J'MG l ' l d ' W o r k o f i ~ t ,.,_, tfliielled
* lh
(J'M;;;. h 1 ~ M I K I ' M G I M ~ e m t t i > n t l p r o w 1 d c ~
n o d ~
$tf 'iet
Nomtmbet fin n l w u n y t u l h o l l t y i i O o b l i ~ o r b n d K f M G I M ~ e t ~ W t i O . . I or tnycthet
e t " n ~ T m W I S t , . j, hild ptrties rw>r doesKPMGinwnttiorellwolrc
ny-...:hauthontyiiO
0r
bin
8/17/2019 Asean Tax Guide v2
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TheexistenceofmorefavourabletreatytermsforexternaltradeoverintraASEANtradewasnotalwayswithoutbasis.HistoricallyintraASEANtradewasonly
25percentofthetotaltradeinASEAN.11Bynecessity,ASEANhadtoretainanoutwardfocus.Thesedays,
intraASEANtradeistwothirdsoftotalASEANtrade12,withthesinglemarketin2015expectedtounlockadditionalregionaltradingopportunities.Regionaltrade
incentivesshouldnowbeapriority.
Themosteffectivemeansofachievingregionalintegrationisamultilateraltreatyamongmembercountries,buttherehasbeenlittletalkofimplementing
this.WeanticipatethattheregionwillsupportintraASEANtradethroughcontinuingtoclosegapsintheASEANtreatynetwork,andnegotiatingmorefavourable
treatyterms.AsisthecaseinmuchofASEAN’staxenvironment,thesituationisevolving,andrequiresacarefuleyetokeepabreastofthechanges.
Antiavoidancelegislation
Easiermovementofprofitsandcapitalenhancesthe
abilityfortaxpayerstostructureinvestmentstobesttakeadvantageoffavourabletaxratesandregulations.
Withoutspecificantiavoidancemeasuresinplace,memberstatesmightfindthemselvesavictimofabuseofthetaxregimes.
WiththeexceptionofMalaysiaandSingapore,ASEAN
countrieshistoricallyhavelackedantiavoidancelegislation.Certainstatesarebeginningtointroducetransferpricingregimes,controlledforeigncorporation
rules,andthincapitalizationrules,but,onthewhole,thereremainsscarceprotectioninspecificantiavoidancemeasures.MalaysiaandSingaporearethe
onlytwoASEANcountrieswithgeneralantiavoidancerulesinplace.
Manysmallerstatessimplylacktheresourcesorabilitytointroducecomplextaxlaws,butwiththecurrent
spotlightonattractinginvestmentinASEAN,andtheexternalglobalfocusontaxmoralityandgoodcorporatebehaviour,onewouldanticipateantiavoidancerulesto
beonpoliticalagendasaroundtheregion.
Adjustinglocallegislation
forAEC
Asidefromtherequiredregionalmeasures,ASEANcountrieswillneedtoconsideradjustingtheirlocaltaxlawstosuitthenewmarketconditionsofAEC2015.
TherearenumerousexamplesofincompatibilitiesbetweenlocallawsandtheconceptofAEC.Thailand,
forexample,stilltaxesaThaiindividualworkingoverseaswhereincomeispaidlocallyinThailand,leadingtothe
taxationofthatincomeamounttwice.GiventhatAEC2015willallowfreermovementofskilledlabour,thislawissomewhatconflictingwiththeaimsofAEC2015.
GovernmentsshouldalsoreflectontheavailabilityoftaxasapublicbehaviordeterminantunderAEC.Freedomof
trademeansthereismoreavailabilityofcertainproductsandwiththiscomesareductioninagovernment’scontroloverthoseproducts.
Take,forexample,tobacco.Thereislittlepointinone
membercountryapplyingtobaccotaxestodeterconsumptionifconsumerscansimplygetitinaneighbouringcountryforless.Theusabilityoftaxesasa
publicdeterrenttoolislesseffectivewhenaconsumercansimplypurchasetheproductelsewhere. Thesearejustacoupleofconsiderationsfacing
governmentswhoarereadyingthemselvesforAEC2015.Overtime,inconsistenciesbetweenlocallaws
andtheobjectivesofAECwillbeironedout.Nationallegislationandpolicieswillbeunderreview,andwecanexpectsomelocalchangestocomplyorfitwiththe
expectedenvironmentpost2015.
IntellectualProperty
AscompaniesshiftorexpandoperationsintoASEAN,
amajorconsiderationformanywillbetheprotectionanddevelopmentofIntellectualProperty(IP).AEChasrecognizedtheneedforacohesivesetofIPlawsinthe
region,andhassoughttocraftanapproachtoIPthattakesintoaccountthediverseneedsandvaryinglevelsofcapacityofitsmemberstates.13
11 InternationalMonetaryandFinancialCommittee(2013).MinutesoftheTwentyseventhmeeting.20April2013.[online]Retrievedfrom:http://www.imf.org[Accessed:6
August2013].12 IBFD(2013).DataextractedfromTaxResearchPlatform.[online]Retrievedfrom:http://online.ibfd.org[Accessed5August2013].13 AssociationofSoutheastAsianNations(2007).ASEANEconomicCommunityBlueprint.[online]Retrievedfrom:http://www.asean.org /[Accessed:16September2013].Item
44.
6
http:///reader/full/ASEAN.11http:///reader/full/ASEAN.11http:///reader/full/states.13http:///reader/full/states.13http:///reader/full/http://www.imf.orghttp:///reader/full/http://online.ibfd.orghttp:///reader/full/http://www.asean.orghttp:///reader/full/ASEAN.11http:///reader/full/states.13http:///reader/full/http://www.imf.orghttp:///reader/full/http://online.ibfd.orghttp:///reader/full/http://www.asean.org
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However,theconceptsofIPareonlyjustbeingtackledinASEAN’sdevelopingstates,andarestillevolvinginmanyofthemoredevelopednations.AstheBlueprint
pointsout,IPpolicycaninfluencethevolumeandqualityofexternaltradeandinvestment.14Investors
arelikelytofocusoncountrieswhereIPisadequatelyprotected.Singapore,forexample,hasconcentratedonpositioningitselfasanIPhubinAsiaforanumber
ofyears.Significantthoughthasgoneintothedevelopmentoflawsandregulationsfortheprotection
ofIP,aswellasincentivesforIPandResearchandDevelopmentactivities.Singapore’sstrengthinthisareabringsadistinctadvantage,and,aspointedout
intheBlueprint,isamajordeterminantofexternalcompetitiveness.15
Fromataxperspective,IPisoneofthemajordeterminantsofvalue.ThelocationofIPcansubstantiallyalteracompany’staxposition.Thisshould
becarefullyconsidered,withregardhadtoIPincentivesofferedbycertaincountries,aswellaseffectivetaxrates.However,therealityforacompanywith
significantIPisthat,regardlessoftaxdrivenincentives,
strongIPprotectionisacrucialdeterminativefactorinachoiceoflocation.
Ecommerce
TheBlueprinttoAECdiscussestheadoptionofa
commonframeworkofstandardsandregulationsforecommerce.16In2001,ASEANadoptedtheeASEANReferenceFrameworkforElectronicCommerceLegal
Infrastructure,whichassistedcountrieswiththedraftingoftheirecommercelaws.TheBlueprintisafurthercommitmentbymemberstatestoharmonise
ecommercelawsaroundelectroniccontractinganddisputeresolutionby2015.
WhatisnotmentionedbytheBlueprintisastandardframeworkfortaxationofecommerce.AsiaPacific
ecommercebusinessgrew23percentinthelastyearandIndonesiawasleadingtheregionwithgrowthof71percent.17InternetpenetrationinASEANiscurrently
about33.5percent,18andisescalating,withgrowthof9.2percentbetween2009and2012.19Withapopulationofover600million,ecommerceisrisingasasignificant
businessspaceinASEAN.
Thetaxationofecommerceisaconceptthatisbeinggrappledwiththroughouttheworld.Theconceptsaremuddyandthelegalpositionchangesdependingon
veryspecificfactscenarios.AddtothismixtherelativeinfancyofecommerceinmanyofASEAN’sdeveloping
nations,anditmakesforcomplications.Givenitsrisingprominence,ecommerceisanareawhereweexpectsignificanttaxationchangesintheforthcomingyears.
InvestmentProtection
TheAECBlueprintmakesnumerousreferencestoeffortstoachievefreeandopeninvestment.Further,itcalledforareviewofthetwoexistinginvestment
agreements,inordertorealizeamorecomprehensiveinvestmentagreementthatwouldincreaseinvestor
confidenceinASEAN.ThenewagreementistheASEAN
ComprehensiveInvestmentAgreement(ACIA),signedin2009,broughtintoeffectin2012,whichisbasedon
internationalbestpractices.
WhiletheACIAfocusesonpromotingforeigndirect
investment,animportantfeatureistheprotectiongiventointraASEANinvestmentwithnondiscrimination
provisions.Inparticular,nationaltreatmentoffersanASEANinvestorthesameabilitytoinvestasalocalinvestorinotherASEANmemberstates.Further,the
ACIAmaintainsmostfavourednationprovisions,wherepreferentialtreatmentgrantedbyanymemberstatemustbeextendedtoallothermemberstates.
TheACIAisastepforwardinpromotingintraASEANinvestmentandanimportantindicationoftheregion’s
commitmenttoAEC.Viewedinlightofother,lesssupportive,barrierstointraregionalinvestment,ACIAis
apositivesignthattherequiredstepstoachievinganintegratedregionareunderway.
14 Ibid.15 Ibid.,Item59,Action5.16 Emarketer.com(2013).B2CEcommerceClimbsWorldwide,asEmergingMarketsDriveSalesHigher.[online]Retrievedfrom:http://www.emarketer.
com[Accessed:19Sep2013].17 Worldbank(2013).DataextractedfromInternetusers(per100people).[online]Retrievedfrom:http://data.worldbank.org /[Accessed:5August2013].18 Ibid.19 DatafromWorldBank.
7
http:///reader/full/investment.14http:///reader/full/investment.14http:///reader/full/competitiveness.15http:///reader/full/competitiveness.15http:///reader/full/e-commerce.16http:///reader/full/e-commerce.16http:///reader/full/percent.17http:///reader/full/percent.17http://www.emarketer/http:///reader/full/http://data.worldbank.orghttp:///reader/full/investment.14http:///reader/full/competitiveness.15http:///reader/full/e-commerce.16http:///reader/full/percent.17http://www.emarketer/http:///reader/full/http://data.worldbank.org
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LessonsfromtheEU
TheEuropeanUnion(EU)actssomewhatasacomparisonforAEC.Notforgettingthehistoricaland
economicdifferencesbetweenthetworegions,alotcanbelearnedorpredictedfromtheexperiencesin
Europe,providinginsightintowhatwemightexpecttooccurintheAECcontext.
Thecomparisonalreadystartsatthefoundingprinciples
ofcreatingaregionalblockandinternalmarketbyintroducingthefundamentalfreedomsforgoods,
capital,servicesandpeople.ThesefreedomshavemadetheEUexperienceasignificantsuccessin
economicgrowthoftheregionformanydecades,evenwhentheEUmemberswereatdifferentstagesofeconomicdevelopment.
ThecurrentEUchallengesrelatingtothemonetaryunionandthesinglecurrencyalsoprovidevaluable
lessonsontheeconomicmarketintegrationandwhetherornotmonetarypolicyforregionalblocks
shouldbeincluded.
Lookingahead
Asitstands,ASEANisheadingdownthepathofachievingafullyintegratedregionaleconomy.Therehavebeensignificantinroadsmadeintocertain
directivesfromtheBlueprint–suchasthereductionofcustomstariffsandenhancingthenetworkofbilateral
agreementsbutthereremainsawaytogo.
Fromataxpointofview,harmonisationoftaxlaws
andmultilateraltreatiesareunlikelybefore2015,whichleavesitopenformemberstatestousetaxasa
competitivefactorinattractinginvestmentagainsttheirneighbouringcountries.Wearelikelytoseereducingcorporatetaxrates,aswellasincentivestoattract
foreigninvestment.
Inaddition,considerableamendmentstolocaltaxlegislationandtheimplementationofneworupdateddoubletaxtreatiesaretobeexpectedasmember
statesprepareforthenewenvironmentpost2015.
Asidefromtax,ASEANgovernmentswillneedtoensurethatlegislation,infrastructure,andthegeneralcommercialenvironmentiscompatiblewiththe
expectedinfluxoftradeandinvestment.Therearelikelytobeteethingproblems,anditverymuchisa‘watch
thisspace’environmentfornow.
Butwhiletherewillbechallenges,theyareoffsetwith
enormouspotential.
Taxwise,AEChasbeenacatalystindecreasingin
corporatetaxrates,withholdingtaxrates,andcustomstariffs;reducingtaxcostsandthecostsofinputsfortaxpayers.
Thearrivalofnewlegislationprovidespossible
opportunitiesforcorporatestoinfluencetheshapeofnewlegislation,bygettinginvolvedinconsultationinthe
policymakingprocess.
Mostsignificantly,AECprovidesanopportunitytostreamlinebusinessoperationsandstructurestobest
takeadvantageofthenewmarket.WithinvestmentprotectionaffordedunderACIA,inadditiontovariousotherbenefitspresentedbyAEC,strategicconsideration
shouldbegiventoASEANasapotentialbaseforAsiaPacificoperations,apossiblemarket,orpartofthe
supplychain.
WhatisclearisthatthelandscapeinASEANwillbe
evolvingoverthenextfewyears.Newlawsaround
antiavoidance,IP,andecommerceareexpected;existinglawswillbetailoredtofitwithAEC’saims;and
asmentioned,treatyratesandbaselinetaxratesareexpectedtochange.
8
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Inresponse,companiesneedtobetrackingchangesinthebusinessenvironment,andbewellpositionedtoadaptandrespondquicklytonewopportunities.
Astrategicfocusonplanningforpossiblebusiness
restructureorseekingopportunitiestoexpandwithnewmarketsortradingpartnersisaproactiveapproachtowinninginASEAN.
WarrickCleine BrahmaSharmaAsiaPacificRegionalLeader,Tax KPMGAsiaPacificTaxCentreLeaderCEO,KPMGinVietnam
9
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OVERVIEW
Standard corporate
income tax rate
Top personal income
tax rate
Non-resident withholding tax rates
Dividends Royalties Interest Indirect Tax (i.e. VAT /
GST ) Standard RateCapital gains
Brunei 20 percent No personal tax on
individuals
None 10 percent 15 percent No VAT or consumption
based tax systemNo capital gains tax
Cambodia 20 percent 20 percent 14 percent 14 percent 14 percent 10 percent No separate capital gains
tax. Capital gains are treated
as taxable income and
subject to 20 percent profit
tax.
Indonesia 25 percent 30 percent 20 percent 20 percent 20 percent 10 percent Subject to tax
Laos 24 percent 24 percent 10 percent 5 percent 10 percent 10 percent No capital gains tax
Malaysia 25 percent. Reduces to 24
percent from YA 2016.
26 percent. Reduces to 25
percent from YA 2015.
None
(assuming
single tier
dividend)
10 percent 15 percent Service tax: 6 percent. Sales
tax: Generally 5 percent or
10 percent.
GST of 6 percent will be
introduced from 1 April
2015.
No capital gains tax other
than on the disposal of
interests in Malaysian real property
or shares in a Real Property
Company.
Myanmar 25 percent – company
35 percent – branch
20 percent –
employment income
30 percent – other
income
35 percent – non
resident foreigners
None 20 percent 15 percent No standard rate. 5
percent for services.
Between 3 percent
and 100 percent for
goods
Subject to tax at 10 percent for
resident taxpayers and 40 percent
for non-resident taxpayers
Philippines 30 percent 32 percent 30 percent 30 percent 30 percent 12 percent Capital gains on the disposal, sale,
or exchange of shares,
and land and buildings are subject
to tax
Singapore 17 percent 20 percent None 10 percent 15 percent 7 percent No capital gains tax
Thailand 20 percent (for two
accounting periods
beginning on or after
1 January 2013).
37 percent. This is
expected to be
reduced to 35 percent
from the 2013 tax year.
10 percent 15 percent 15 percent 10 percent, although
a reduced 7 percent
rate applies to 30
September 2014
No separate capital gains
tax. Capital gains are
treated as taxable income.
Vietnam 25 percent. This is to
be reduced to 22percent from 1 January
2014, and 20 percent
from 1 January 2016.
35 percent None for
corporateinvestors.
Five percent
for individual
investors.
10 percent 5 percent 10 percent Capital gains tax is applied
to both corporate andindividual investors.
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Tax Losses R&D Incentives Other incentives Transfer Pricing
regime
Thin Capitalisation regime
Brunei Can be carried forward
for six years and back
one year
R&D activities may be classified
as qualifying activities for pioneer
service companies, which are
provided certain tax exemptions.Certain approved R&D expenditure
is allowed as deductible
expenditure.
Pioneer industry tax exemption; Tax relief for
capital expenditure in excess of BND 1 million;
Withholding tax exemptions for interest on
certain loans from non-residents.
Yes None
Cambodia Can be carried forward
for five years subject to
continuity of ownership
provisions. Cannot be
carried back.
None Tax on Profits exemption; Accelerated
depreciation on manufacturing assets; Import
duty exemption on production equipment, raw
materials and inputs to manufacturing; Right to
employ foreign labour.
None. However,
it is generally
accepted that
cross-border
transactions
must
be arm’s length.
None. However, interest
expenditure allowable as a
deduction is limited to an
amount equal to the total
interest income plus 50 percent
of net non-interest profit earned
for the year.
Indonesia Can generally be carried
forward for five years
(not subject to continuity
of ownership). Cannot becarried back
R&D expenditure undertaken
in Indonesia is deductible
expenditure.
Incentives are available for certain entities in
specific industries.
Yes The law allows the tax authority
to issue a decree defining the
maximum ratio of debt to equity
in determining deductibleinterest. However, such a decree
has not yet been finalised.
Laos Can be carried forward
for three years. Cannot
be carried back
Tax incentives under the Law on
Investment Promotion (see right)
may apply to scientific research
and development expenditure.
The Law on Investment Programme provides tax
incentives for certain investors.
None None
Malaysia Can be carried forward
indefinetly, provided the
company is not dormant
(in which case the
continuity of ownership
test must be met).
Cannot be carried back.
R&D tax incentive scheme
includes tax exemptions and
double deductions for certain
R&D expenditure incurred in Malaysia.
Tax incentives are available for a wide range
of companies and industries, as well as
specific activities promoted by the M alaysian
Government.
Yes Malaysia has thin capitalisation
legislation, but implementation
of the regime has been deferred.
Myanmar Can be carried forward
for three years, but cannot
be carried back. Losses
from capital assets cannot
be carried forward or
offset against gains on
other assets.
None Companies registered under the Myanmar
Foreign Investment Law can be granted a
wide range of tax incentives. Incentives are
also available to foreign investors carrying out
business in a Special Economic Zone.
None None. However, the deductibility
of interest is limited.
Philippines Can be carried forward
for three years, subject to
continuity of ownership.
Cannot be carried back.
A multinational company may
establish a Regional Operating
Headquarters (ROHQ) to render
R&D services and product
development to affiliates,
branches or subsidiaries.
Incentives are available for enterprises
engaged in preferred areas of investment and
registered with the Board of I nvestments (BOI)
or the Philippine Economic Zone Authority
(PEZA). Further, tax incentives are available for
regional headquarters, enterprises operating in
developing regions and special economic zones.
Yes None. However, guidelin es
which identify thin capitalisation
and earning stripping have been
issued.
Singapore Losses can be carried
forward indefinitely,
subject to the continuity
of ownership test. Limited
losses can be carried back
one year.
An R&D tax incentive regime provides
for enhanced R&D deductions.
Intellectual property incentives available for
acquisition or licensing costs, or costs for
protection of intellectual propery. Tax incentives
for activities that enhance economic or
technological development are available.
In addition, international and regional
headquarter tax incentives are available.
Yes None
Thailand Can be carried forward for
five years. Cannot be
carried back.
Tax exemptions on license fees
under the Board of I nvestment,
and a double deduction for
qualified R&D expenses.
Tax-related relief and other incentives are
granted to Thai and foreign companies investing
in Board of Investment promoted projects.
Yes None. However, if a tax
incentive has been granted by
the Board Of Investment, the
thin capitalisation ratio cannot
exceed 3:1.
Vietnam Can be carried forward
continuously and entirelyfor five years. Cannot be
carried back.
Corporate taxpayers incorporated
under Vietnamese laws can set aside afund of up to 10 percent of its annual
taxable income for R&D purposes and
deduct the same amount from its
taxable income.
Intellectual property incentives are available
for certain high technology projects; scientificresearch; technology development projects; and
software production projects. Other preferential
tax treatments are limited to encouraged sectors
and encouraged special economic zones, or
areas with difficult socio-economic conditions.
Yes None. However, certai n
restrictions to the same effectcan be found in the regulations
on foreign loans and corporate
income tax.
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BRUNEIDARUSSALAM
CorporateIncomeTax
Corporateincometax Incometax
Taxrate Thetaxrateforresidentandnonresidentcompaniesis20percent.
Residence Acompany,whetherincorporatedlocallyorabroad,isconsideredtoberesidentinBruneiDarussalamfortaxpurposesifthecontrolandmanagementofitsbusinessareexercisedinBruneiDarussalam.The
controlandmanagementofacompanyarevestedinitsdirectorsandacompanyisnormallyregardedasresidentinBruneiDarussalamif,among
otherthings,itsdirectors’meetingsareheldinBruneiDarussalam.
Aresidentcompanyistaxedonitsworldwideincome,whereasanon-residentcompanyistaxedsolelyonincomethathasasourceinBrunei
Darussalamoronprofitsfrombusiness(es)inBruneioperatedthroughabranchorpermanentestablishment.
Compliancerequirements Fromthe2012yearofassessment,theassessmentsystemisselfassessment.
AllfilingisrequiredtobedoneonlineunderasystemintroducedbytheRevenueDivisionoftheMinistryofFinanceknownasTheSystemforTax
AdministrationandRevenueServices(STARS).STARSwasintroducedin2012.
Filingduedate:30Juneoftheyearofassessment.
Internationalwithholdingtax DividendsarenotsubjecttowithholdingtaxinBruneiDarussalam.
ratesRoyaltiespaidtoanonresidentaresubjecttowithholdingtaxatarateof10percent.Thismaybereducedunderataxtreaty.
Interestpaymentsmadetoanonresidentaresubjecttowithholdingtaxatarateof15percent.Thismaybereducedunderataxtreaty.
Otherwithholdingtaxratesonpaymentstononresidentsinclude
technicalassistanceandservicefees(20percent),managementfees(20percent),rentofmovableproperty(10percent)anddirector’sremuneration(20percent).
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Holdingrules Dividendsaccruingin,derivedfrom,orreceivedinBruneiDarussalambyacorporationareincludedinitstaxableincome,withtheexception
ofdividendsreceivedfromacorporationtaxableinBruneiDarussalam.NotaxisdeductedatsourceondividendspaidbyaBruneiDarussalamcorporation(i.e.BruneiDarussalamdoesnotimposeanywithholdingtax
ondividends).
Therearecurrentlynodividendstrippingrulesorparticipationexemption
rulesinBruneiDarussalam.
ThereisnocapitalgainstaxinBruneiDarussalam.However,whereitcan
beestablishedbythetaxauthoritythatthegainsformpartofthenormaltradingactivitiesofthebusiness,thegainsbecometaxableasrevenuegains.
Taxlosses Taxlossescanbecarriedforwardforsixyearsandthelossoffsetisnot
restrictedtothesametrade.
Unabsorbedcapitalallowancescanbecarriedforwardindefinitely,butmustbeoffsetagainstincomefromthesametrade.Thereisno
requirementregardingcontinuityofownershipofthecompany.
Foreigntaxlossesincurredbyalocallyincorporatedcompanycanbeoffsetagainstthelocalprofit,orcarriedforwardandoffsetagainstfuture
profitsforuptosixyears.
Taxlossescanbecarriedbackoneyear.
Taxconsolidation/grouprelief Therearenoprovisionsintheexistingtaxlegislationforthefilingofgroup
taxreturnsorgrouprelief.
Transferofshares StampdutyisrequiredtobepaidforsharetransfersinaccordancewiththeStampAct.Thisisadvaloremandispayableat10centsforevery
BND100orpartthereofwhenthenameofthetransfereeisfilledinpriortoexecutionofthetransfer;or30centsforeveryBND100orpartthereofwhenthenameofthetransfereeisnotfilledinpriortoexecutionofthe
transfer.
Transferofassets Stampdulyisapplicablefortransferofproperty.Therateofstampdutyvariesdependsonthenatureoftheasset.
CFCrules ThereisnoCFCregimeinBruneiDarussalam.
Transferpricing Transactionsinvolvingrelatedresidentandnonresidententitiesmustbeconductedonanarm’slengthbasis.
Thincapitalisation ThereisnothincapitalisationregimeinBruneiDarussalam.
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Generalantiavoidance ThereiscurrentlynolegislationongeneralantiavoidanceinBruneiDarussalam.
SincethereisnopersonalincometaxinBruneiDarussalam,thereare
obviousadvantagesfordirectors,whoarealsoshareholders,toreceivegeneroussalariesandbenefits.However,thetaxauthoritywillattemptto
disallowpaymentswhichitconsidersexcessive,asbeingnotwhollyandexclusivelyincurredinproducingincome.
Antitreatyshopping ThereisnolegislationregardingantitreatyshoppinginBruneiDarussalam.
Otherspecificantiavoidance
rules
None.
Rulings TherearenoformalorpublishedrulingsinBruneiDarussalam.
Intellectualpropertyincentives TherearecurrentlynointellectualpropertyincentivesavailableinBruneiDarussalam
R&Dincentives TheInvestmentIncentiveOrder,2001hasaprovisionforR&Dactivitiestobeclassifiedasqualifyingactivitiesforpioneerservicecompanies(seebelow).UndertheIncomeTaxAct,approvedR&Dexpenditure(subject
tocertainconditions),isallowedasadeductioninderivingchargeableincome.
Otherincentives Pioneerstatusisanincentiveallowingtaxholidaystobegrantedfor
betweenfiveand20years,dependantoncertaincriteriabeingmet.
Bruneitaxlawalsoprovidesthefollowingtaxincentives:
l Pioneerindustrytaxexemption
l TaxreliefforcapitalexpenditureinexcessofBND1million
l Withholdingtaxexemptionsforinterestoncertainloansfromnon-residents
Hybridinstruments ThereisnolegislationregardinghybridinstrumentsinBruneiDarussalam.
Hybridentities ThereisnolegislationregardinghybridentitiesinBruneiDarussalam.
Specialtaxregimesforspecificindustriesorsectors
Speciallegislationexistsinrespectofincomefrompetroleumoperations,whichistaxableundertheIncomeTax(Petroleum)Act1963.ThislegislationfollowsthegeneralpatternofmostMiddleEastoilproducing
countries.
Thepetroleumtaxrateisafixedrateof55percent.
Insurancecompanies(otherthanlifecompanies),aretaxedonadifferent
basis,undertheIncomeTaxAct.
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IncomeTaxTreatiesfortheAvoidanceofDoubleTaxation
InForce Bahrain Japan Malaysia Singapore
China Laos Oman UnitedKingdom
HongKong Kuwait Pakistan Vietnam
Indonesia
Negotiated,notyetinforce
attimeofpublication
AtreatywithTheRepublicofTajikistanandTheStateofQatarwassigned
onwassignedon3April2010and17January2012respectivelybutatthetimeofwritingisnotyetinforce.
Source:RevenueDivision,MinistryofFinance,BruneiDarussalam
IndirectTax(i.e.VAT/GST)
Indirecttax ThereiscurrentlynoVATorequivalentconsumptionbasedtaxinBruneiDarussalam.
Furtherinformation Formoredetailedindirecttaxinformation,referto:
KPMG’sVAT/GSTEssentials
PersonalTaxation
Incometax ThereisnopersonaltaxonindividualsinBruneiDarussalam(residentsandnonresidents).
Socialsecurity TherearenosocialsecuritytaxesinBruneiDarussalam.However,all
citizensandpermanentresidentsofBruneiDarussalammustcontribute5percentoftheirsalarytoaStatemanagedprovidentfund(TabungAmanahPerkerja(TAP)).Theemployerwillhavetoalsocontributethesame
amountforitsemployeestotheprovidentfund.Inadditiontotheabove,allcitizensandpermanentresidentsofBruneiDarussalammustalsocontribute3.5percentoftheirsalarytoa
SupplementalContributoryPensionScheme(SCP).TheemployerwillhavetoalsocontributethesameamountforitsemployeestotheScheme.
However,boththeemployer’sandemployee’smonthlycontributionsarecappeduptoasalaryof$2,800permonth.
Furtherinformation Formoreinformationregardingthepersonaltaxregimesrelevanttovariouscountriesaroundtheworld,see
KPMG’sThinkingBeyondBorders
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OtherTaxes
Customsduty Importdutiesvarydependingonthenatureofthegoods.Ingeneral,basic
foodstuffsandgoodsforindustrialuseareexemptfromimportduties.Cigarettesandmanufacturedtobaccoaredutiableitemsand,importerswillhavetopaymorethan200percentdutyfortheseitems.
Bruneihasnoexportduty.
Exciseduty TheExciseActcoversretailsaleofliquor.However,asBruneiDarussalamprohibitsthesaleofanyformofalcohol,therearenoexciseduties.
Stampduty Stampdutiesareleviedonavarietyofdocuments.Certaintypesof
documentsattractanadvaloremduty,whereaswithotherdocuments,thedutyvarieswiththenatureofthedocuments.
Propertytaxes Propertiesundercommercialusearesubjecttopropertytaxbasedonthe
estimatedvalueoftheproperty.Therateisdecidedbythelocalmunicipalboard.
Estateduty Estatedutiesrangefrom1percentonanestateworthbetween
BND3,000andBND5,000uptoamaximumof20percentforanestate
ofoverBND10million.EstatedutyisleviedonallimmovablepropertyinBruneiandmovableproperty(whereversituated)forpersonsdomiciledin
BruneiDarussalamattimeofdeath;andonallpropertysituatedinBruneiDarussalamforpersonsnotdomiciledinBruneiDarussalamattimeof
death.
However,witheffectfrom1January2013,estatedutieshavebeenabolished.
FreeTradeAgreements
Inforce ASEANFreeTradeAgreements
BruneiJapanEconomicCoorperationPartnershipAgreement(BJEPA)
ASEANJapanComprehensiveEconomicPartnership(AJCEP)
ASEANChinaFreeTradeArea(ACFTA)
ASEANKoreaFreeTradeArea(AKFTA)
ASEANIndiaFreeTradeArea(AIFTA)
ASEANAustraliaNewZealandFreeTradeArea(AANZFTA)
TransPacificStrategicEconomicPartnershipAgreement(TPSEP/P4)
Source:MinistryofForeignAffairsandTrade,BruneiDarussalam
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TaxAuthority
Taxauthorities CollectorofIncomeTax,MinistryofFinance
MinistryofFinance
Taxauditactivity Thetaxauthoritycanauditeverycompanyannually.ItisthecurrentpracticeoftheCollectorofIncomeTaxtorequestinformationand
clarificationwithoutcommencingaformalauditprocess.Itisoftenthecasethatsuchenquiriescanberesolvedoraddressedwithouttheneedforaformalauditprocess.KPMGinBruneiDarussalamisnotawareof
anycompanybeingsubjecttoaformaltaxaudit.
Appeals AllappealscanbemadetotheCollectorofIncomeTax.Ifnoagreementcanbeenreached,furtherappealscanbemadeattheHighCourtsof
BruneiDarussalam.
Taxgovernance TheCollectorofIncomeTaxexpectsallcompaniestopaytheirshareoftaxfromtheirbusinessoperationsinBruneiDarussalamasgoodcorporatecitizens.
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CAMBODIA
CorporateIncomeTax
Corporateincometax CorporateIncomeTax(CIT)/TaxonProfit(ToP)
Taxrate TheCIT/ToPtaxrateis20percent,withtheexceptionof:
l 30percentfortheprofitrealisedunderanoilornaturalgasproductionsharingcontractandtheexploitationofnaturalresourcesincluding
timber,ore,goldandpreciousstones
l 0percentfortheprofitofQIPduringthetaxexemptionperiodasdeterminedbyCDC
l 5percentongrosspremiumsreceivedinCambodiaforinsurancecompaniesengagedintheinsuranceorreinsuranceoflife,propertyorotherrisksand20percentonnoninsuranceincome
MinimumTax MinimumtaxisaseparateanddistincttaxtoToP,andispayableby
taxpayers(withcertainexceptions)regardlessofwhethertheyareinaprofitorlosssituation.Minimumtaxiscalculatedat1percentofannual
turnoverinclusiveofalltaxes,exceptVAT.
IftheToPliabilityexceedstheminimumtaxliability,theminimumtaxwillnotbeapplicable.Incontrast,iftheminimumtaxliabilityexceedstheToP
liability,theminimumtaxwillbepayable.
Residence AresidenttaxpayerisprimarilyanenterprisethatisorganisedandmanagedinCambodiaoritsprincipalplaceofbusinessisCambodia.
AnonresidenttaxpayerisanenterprisethatderivesCambodiasourcedincome,butdoesnothaveaplaceofmanagementinCambodia.Anon-residenttaxpayerwillbedeemedtobeaCambodianresidentfortax
purposesifitisfoundtohaveapermanentestablishmentinCambodia.
AresidenttaxpayerissubjecttoCIT/ToPonincomederivedfrombothCambodianandforeignsources,whereas,anonresidenttaxpayeris
subjecttoCIT/ToPinrespectofitsCambodiansourcedincomeonly.
Compliancerequirements CambodiahasaselfassessmentsystemforthefilingofCIT/ToPreturns.
CIT/ToPreturnsarefiledannually,andaredueon31Marchoftheyear
followingtheincometaxyear.
Internationalwithholdingtaxrates
Dividends,royalties(includingrentandotherpaymentsconnectedwiththeuseofproperty)andinterestpaidtoanonresidentaresubjectto
withholdingtaxof14percent.
Othernonresidentpaymentsincludecompensationformanagementortechnicalservices,andarealsosubjecttowithholdingtaxof14percent.
Cambodiaisnotapartytoanydoubletaxagreements.Accordingly,notaxtreatyrelieffromwithholdingtaxisavailable.
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Holdingrules Dividendsreceivedfromresidentcompaniesarenotsubjecttoincome
tax.DividendsreceivedfromnonresidentcompaniesaresubjecttoincometaxinCambodia.However,acreditfortaxpaidoverseasonforeignsourceincome,isgenerallyallowed.
AdditionalProfitTaxonDividendDistribution(APTDD)isapplicableonthedistributionofretainedearnings/annualprofitaftertaxthatweresubjectto
thefollowingrates:
TaxonProfitRate AdditionalProfitTaxonDividendDistribution
0% 20%
9%* 12%*
20%–30% 0%
DividenddistributionstoCambodianresidenttaxpayers,afterpaymentoftheAPTDDareexemptincomeinthehandsoftheCambodianresidenttaxpayer.
* The12percentrateisapplicabletoonlyaCompanywhichhaditsprofit taxedat9percentToP.The
9percentrateexpiredin2010.
Taxlosses Lossescanbecarriedforwardforamaximumoffiveyears.Taxlosses
maybeforfeiteduponachangeinownershipofthebusinessorifthereisachangeinbusinessactivity.Taxlosseswillalsobeforfeitedintheeventataxpayerissubjecttoaunilateraltaxassessment.
Thereisnorestrictionontheamountof taxableincomethatcanbeoffsetbytaxlosses–allofthetaxlossesavailablecanbeusedtooffsetagainstthetaxableincomeofoneyear.
Lossescannotbecarriedbacktopriorperiods.
Taxconsolidation/grouprelief TherearenogroupingprovisionsinCambodia.
Transferofshares Allrealizedgains(includingcapitalgains)aretreatedasincome.
Registrationtax(stampduty)of0.1percentappliestothevalueofsharestransferred.
Transferofassets Cambodiadoesnotimposeaseparatetaxoncapitalgains.Gainsarisingfromthedisposalofrealpropertyandotherassetsaretreatedasordinary
incomeandarethereforesubjecttotaxattheprevailingCIT/ToPrate.
Inaddition,thereisa4percentpropertytransfertaxonthetransferoftitle
ofcertainassets,suchasland,buildingsandvehicles.The4percenttaxisimposedonthetransferredvalueandpayablebythepartyacquiringtheasset(withinthreemonthsfromthedateofexecutionoftheagreement
totransferthetitle).
CFCrules ThereisnoCFCregimeinCambodia.
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Transferpricing ThereisnospecificTransferPricinglegislationinCambodia.
However,therelatedpartyprovisiongiveswidepowertothetaxauthoritytoredeterminerelatedpartytransactions.Thetaxauthoritymayre-determinerelatedpartytransactions.Thisprovisionisgenerallyapplied
toimposepricingthat“arm’slength”partieswouldhavecontractedforinthetransaction.
Arelatedpartyrelationshipisonewheretheentitieshavecommonalityofshareholdingof20percent.
CambodiahasnoAPAorMAPregime.
Thincapitalisation Cambodiahasnospecificthincapitalizationlegislation.
However,interestexpenditureallowableasadeductionislimitedtoanamountequaltothetotalinterestincomeplus50percentofnetnoninterestprofitearnedfortheyear.Netnoninterestprofitisthegross
income,otherthaninterestincome,lessallowablenoninterestexpenses. Theexcessinterestexpensecanbecarriedforwardtofutureyears.
Generalantiavoidance ThereisnogeneralantiavoidanceprovisioncontainedinCambodiantax
law.
Antitreatyshopping Cambodiaisnotapartytoanydoubletaxagreements.
Rulings ThereisnoformalorbindingrulingsysteminCambodia.
Ataxpayercansubmitaletterseekingaruling,buttheTaxOfficeisusually
reluctanttorespond,ordoesnotrespondatall.ObtainingarulingrequestfromtheTaxOfficeislikelytobeatimeconsumingprocess.
Likewise,thetaxauthorityisreluctanttogiveaninformalopinionorruling.
ThereisnopublicrulingsysteminCambodia.
Intellectualpropertyincentives TherearenointellectualpropertyincentivesavailableinCambodia.
R&Dincentives TherearenoR&DincentivesavailableinCambodia.
Otherincentives Cambodiaprovidesanumberofinvestmentincentives.Theseincentives
areavailabletoallsectors,exceptthosethatareincludedonthe“negativelist”andgenerallyinclude:
l ToPexemptionforuptonineyears(specificconditionsapply)
l Accelerateddepreciationonmanufacturingassets
l Importdutyexemptiononproductionequipment,rawmaterialsandinputstomanufacturing
l Righttoemployforeignlabour
Hybridinstruments Therearenospecialrulesapplicabletohybridinstruments.
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Hybridentities Therearenospecialrulesapplicabletohybridentities.
Specialtaxregimesforspecificindustriesorsectors
Therearecurrentlynospecialtaxregimesforspecificindustriesorsectors.
Petroleumandminingtaxlawsarecurrentlybeingdrafted,howeverfurtherdelaysareexpected.
IncomeTaxTreatiesfortheAvoidanceofDoubleTaxation
InForce Cambodiadoesnothaveanybilateralormultilateralinternationaldoubletaxtreatiescurrentlyinforceatthetimeofwriting.
Negotiated,notyetinforceattimeofpublication
TreatynegotiationsareanticipatedbetweenCambodiaandanumberoftheotherAssociationofSouthEastAsianNations(ASEAN)countries,includingThailand,aheadoftheplannedeconomicareain2015.
Source:IBFD
IndirectTax(i.e.VAT/GST)
Indirecttax ValueAddedTax(VAT)
Standardrate ThestandardrateofVATis10percent.
Zeroratedsuppliesincludeexportsofgoods,andcertainchargesinrelationtointernationaltransportationofpeopleandgoods.Inaddition,certainitemsareexemptfromVAT.
Furtherinformation Formoredetailedindirecttaxinformationacrossvariouscountries,refer
to:
KPMG’sVAT/GSTEssentials
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PersonalTaxation
Incometax Personaltax/taxonsalary
Toprate 20percent(residentsandnonresidents)
Socialsecurity NationalSocialSecurityFund(NSSF)
Everymonth,anemployer(witheightormorestaff)shallreportthe
numberofworkerstheyemploy,andpaythecontributionof0.8percentoftheaveragemonthlywageofworkerstotheNSSF,bythe15thofthefollowingmonth.
AnemployeeisnotrequiredtomakecontributionstotheNSSF.
Internationalsocialsecurityagreements
Cambodiahasnosuchagreements.
Furtherinformation Formoredetailedpersonaltaxationinformationacrossvariouscountries,
referto:
KPMG’sThinkingBeyondBorders
OtherTaxes
Residentwithholdingtax AresidenttaxpayerisrequiredtowithholdingtaxfromcertainpaymentsofCambodiansourceincometoaresidententity,including:
l Paymentforservicestoaphysicalperson(15percent)
l Paymentsofroyaltiesforintangibleassetsandinterestsinminerals,oil,ornaturalgas(15percent)`*
l Interestpayments(variousratesdependingontherecipient)
l Incomefromrentalormoveableorimmovableproperty(10percent)
* Interestpaidtodomesticbanksorsavinginstitutionsisexemptfromwithholdingtax.
Patenttax PatenttaxisanannualbusinessregistrationtaxwhichallenterprisescarryingonbusinessactivitiesinCambodiaarerequiredtopayby31
March.A“patenttaxcertificate”willbeissuedbytheTaxOfficeuponregistration.
Ifanenterprisecarriesoutdifferenttypesofbusinesses,aseparatepatenttaxcertificateisrequiredforeachdistinctbusinessactivity.Likewise,ifataxpayercarriesoutbusinessindifferentcitiesorprovinces,aseparate
patenttaxcertificateisrequiredforeachlocation.ThestandardpatenttaxpaymentisKHR1,140,000(approximatelyUSD285).
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Customsduty CustomsdutyisleviedoncertaingoodsenteringCambodia.Theratesvarydependingonthetypeofgoods.
Currently,thedutyratesare0percent,7percent,15percent,and35percent.ExemptionscanalsobeobtainedaspartofthetaxincentivesofferedinCambodia.
AsamemberofASEAN,CambodiaalsoimplementstheCommonEffectivePreferentialTariffSchemefortheASEANFreeTradeArea(CEPTforAFTA).
Specifictaxregime Specifictaxoncertainmerchandisesandservices(STCMS)isaformof“excisetax”thatappliestotheimportationordomesticproductionandsupplyofcertaingoodsandservices,including:
l Domesticandinternationaltelephoneservices(3percent)
l Domesticandinternationalairticket(10percent)
l Entertainmentservices(10percent)
l Cigarettes(10percent)
l Cigars(25percent)
l Beers(25percent)
PaymentofSTCMSisdueonthe15thdayofthefollowingmonth.
Registrationtax Registrationtax(stampduty)of0.1percentappliestoatransferofshares.
0.1%registrationtaxalsoappliesonthegovernmentcontractvaluerelatedtothesupplyofgoods/servicesthatareusedunderthestatebudget.
RegistrationtaxappliestothefollowinglegaldocumentsataflatrateofKHR1,000,000(approximatelyUSD250):
l Companyformation
l Companymerger
l Dissolutionofa“Company”
Taxonunusedland Ataxisleviedonunusedlandandtheregisteredownerofthelandisresponsibleforthepaymentofthetax.Taxonunusedlandisbasedon2percentofthemarketpricepersquaremeterasdeterminedbythe
CommitteefortheValuation
Taxonunusedlandandisduetobepaidannuallyby30September.
Taxonimmovableproperty
(TIP)
TIPwascreatedinthe2010LawonFinancialManagement(LFM)andis
imposedoncertainimmovableproperties.Theterm“immovableproperty”isdefinedasland,houses,buildingsandconstructionsthatarebuiltontheland.
TIPwillbecollectedannuallyattherateof0.1percentonthevalueof
immovablepropertythatismorethanthethresholdofKHR100,000,000(approximatelyUSD25,000).Thevalueoftheimmovablepropertyis
assessedbytheAssessmentCommittee,whichissetupbytheMinistryofEconomyandFinance.
ThedeadlineforpayingtheTIPison30Septembereachyear.
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FreeTradeAgreements
Inforce CambodiaisamemberoftheASEANFreeTradeAreaTradeAgreement
Membercountries:
Brunei Malaysia Singapore
Cambodia Myanmar Thailand
Indonesia Philippines Vietnam
Laos
Cambodiaispartytobilateralagreementswiththefollowingjurisdictions:
China Laos Switzerland
Germany Malaysia Thailand
Indonesia Singapore Vietnam
Japan Korea(Republicof)
Source:WTOInternationalCentre
TaxAuthority
Taxauthority GeneralDepartmentofTaxation
GeneralDepartmentofTaxation
Taxauditactivity Ataxauditcanbeconductedwithinthreeyearsofthedateatax
declarationwasrequiredtobesubmitted,orwithin10yearsofthedatethetaxdeclarationwasrequiredtobesubmittedifthereisevidenceofthe“obstruction”oftheimplementationoftaxprovisions.TheTaxOffice
defines“obstruction“verybroadly,andthepracticalrealityisthata10yeartimeframefortaxauditactivityisenforced.
Themajorityofcompaniescanexpecttobeauditedbythetaxauthorityeverytwoorthreeyearsofbusinessoperations.
Therearethreetypesoftaxaudits;deskaudit,limitedaudit,and
comprehensive/finaltaxaudit.
Deskandlimitedtaxaudits
Thedeskandlimitedauditsshouldbeconductedonlimitedcertainitems
ofaparticulartaxyear.However,thismaynotbethecaseinpracticeaswhatisauditedbythedeskandlimitedauditsisoftenoutofthescopeofwhatissupposedtobeaudited.
Inourexperience,ifadeskauditisconductedonparticulartaxyear,thelimitedauditwillnotbeconductedinthattaxyearandviceversa.Thetax
yearwhichhasalreadybeenauditedbythedeskorlimitedauditisstillsubjecttobeauditedbyacomprehensivetaxaudit.
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Taxauditactivity(cont’d) Comprehensive/finaltaxaudit
ThefinalauditisconductedtoreviewthedetailoftheCompany’s
transactionsandwould“closeoff”thetaxyear.Acomprehensiveorfinalauditcanincludetwoorthreeyearsofpriorreturnsinoneaudit.Inourexperience,theTaxOfficepredominantlyadoptsariskbasedapproach,
andthesizeoftheCompany’soperationsisacriteriononwhichtheTaxOfficedetermineswhethertoconductataxaudit.
Ataxyearwhichhasbeenauditedbythecomprehensive/finaltaxauditis
consideredas“closed”.
Auditprocess
Atypicalauditcommenceswithanotificationtoconductthetaxaudit
fromtheTaxOffice,togetherwiththelistoftherequireddocuments. Taxpayersareadvisedtocontacttheirtaxadvisorimmediatelywhena
taxauditcommencesoranyauditrelatedcorrespondenceisreceivedfromthetaxauthority.Therewillbeanauditvisitatthetaxpayers’officetodiscussandobtaindocumentsinrelationtothetaxaudit.Thereafter,
therewillbeadiscussionorclarificationfromthetaxpayerstothetaxauthorityeitherattheCompany’sofficeorTaxOfficeafterthereviewofthedocuments.Eachauditcantakeuptooneortwoyears.
Keyfocusareasforthetaxauthorityintaxauditsconductedinrecent
yearshaveincluded:l Relatedpartytransactions
l Withholdingtaxobligations–particularlyoncrossborderpaymentsformanagementandtechnicalservices
l Incomerecognitionperaccountsandtaxdeclarationpurposes
Appeals Thereisanobjectionprocess,butthereisnoindependenttaxcourtortribunal.AppealsarefinallydecidedbytheTaxOffice.
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INDONESIA
CorporateIncomeTax
CorporateIncomeTax Incometax
TaxRate Thecorporatetaxrateis25percent.
Listedcompanieswhichmeetcertainconditionsareeligibleforafivepercentreductioninthecorporatetaxrate.
AcompanywithgrossturnoveroflessthanIDR50billion(approximately
USD5.5million)iseligiblefora50percentreductioninthecorporatetaxrateontheproportionoftaxableincomewhichresultswhenIDR4.8
billionisdividedbythegrossannualturnover.WheregrossturnoverisbelowIDR4.8billion,thereductionappliesonalltaxableincome.
Residence AcompanywillberesidentinIndonesiaifitisincorporatedinIndonesia.
Nonresidentcompaniesarethosewhichareincorporatedoverseas,butreceiveoraccrueincomefromIndonesia.Nonresidentsareobligedtoregisterfortaxpurposesiftheyhaveapermanentestablishment(“PE”)in
Indonesia.
RepresentativeOfficesofforeigncompaniesarealsorequiredtoregisterastaxpayers,eventhoughtheymaynotbeaPE.Thisisnecessaryasthe
RepresentativeOfficewillhavetowithholdtaxonpaymentstoemployeesandthirdpartiesandlodgerelevanttaxreturns.
Compliancerequirements Companiesarerequiredtoselfassessandlodgeannualcorporateincome
taxreturns.TheannualcorporatetaxreturnsmustbelodgedwiththerelevantTaxOfficewithinfourmonthsaftertheendofthecalendaryearortaxyear,andthisdeadlinemaybeextendedfortwomonthsbynotifying
theDirectorGeneralofTaxation.
InternationalWithholdingTaxRates
Withholdingtaxisimposedat20percentonvariousamountspayabletononresidents(e.g.dividends,interestandroyalties),unlessthenon-
residenthasapermanentestablishmentinIndonesia,wherebytheratesapplicabletopaymentstoresidentsapply.
Thewithholdingtaxratemaybereducedwheretheforeignresidentis
exemptoreligibleforareducedratebyvirtueofataxtreaty.Inordertoqualifyforanyreliefunderarelevanttaxtreaty,nonresidentsmustprovideacertificatefromthetaxauthorityintheircountryofresidence
(FormDGT1formosttaxpayers).Inmostcases,thewithholdingliabilityariseswhentheexpenseisincurred,notwhenthepaymentismade.
PermanentEstablishment’sofforeignenterprisesarealsosubjecttoanadditional20percentBranchProfitstaxontheiraftertaxincome,unlesseligibleforareducedratebyvirtueofataxtreaty.
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Holdingrules DividendspaidfromanIndonesianresidentsubsidiarytoanonresidentparentwillbesubjectto20percentwithholdingtaxorareducedrateif
thenonresidentparentresidesinataxtreatycountryandcanmeettherequirementstoutilizethetaxtreatyprovisions.
Capitalgains,regardlessofthereasonforthedisposaloftheasset,are
taxable.
Certaintaxtreatiesprovideexemptiononcapitalgainsonsaleofunlistedsharesbythenonresidentshareholders,providedthatFormDGT1is
available.Inthecasethatnoexemptionisavailable,thesaleofunlisted
sharesissubjecttofivepercentwithholdingtaxonthetotaltransactionvalue(grossproceeds)andinthiscase,anindependentappraisalreportisrequiredtodemonstratethatthetransactionvalueisanarmslengthprice.
TaxLosses Lossescanbecarriedforwardforaperiodoffiveyears.However,incertaincircumstancesthismaybeextendedto10yearsunderspecial
facilitiesavailableforcertainregionsand/orindustries.
Changesinshareholdersdonotaffectthevalidityofthecarriedforward
losses.Capitallossesaretreatedthesameasoperatinglossesprovidedthatthelossesarereasonablebasedonsoundmarketpractice.Noforeignlossescanbeincludedinthetaxcomputation.
TherearenolosscarrybackprovisionsinIndonesiantaxlaw.
TaxConsolidation/Grouprelief NoprovisionexistsforgroupingorconsolidationunderIndonesianlaw.
Transferoflistedshares TransfersofshareslistedontheIndonesianstockexchangearesubjecttoafinaltransfertaxof0.1percent.Foundersharesaresubjecttoan
additionalfinaltaxof0.5percentonlisting.
Transferofassets Onthetransferoftitleoflandandbuildings,fivepercentincometax(final)andfivepercenttitletransfertaxwillapply.
CFCrules IndonesiahasaCFCregime.
ACFCisdefinedasaforeignunlistedcorporationinwhichIndonesianresidentindividualorcorporateshareholders,eitherindividuallyorasagroup,hold50percentormoreofthetotalpaidincapital.Listed
corporationsarenotCFCs.TheIndonesianshareholdersshallbedeemedtoreceivedividendswithinfourmonthsafterfilingthetaxreturn;orseven
monthsaftertheendofthefiscalyearwherethereisnoobligationtofileanannualtaxreturn,orthereisnospecificdeadlineoffilinginthecountryofresidenceoftheCFC.
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TransferPricing Indonesiahastransferpricingprovisions.
Wherethetaxauthorityconsidersthattransactionshavenotbeen
conductedatarm’slengthduetotheexistenceofa“specialrelationship”betweentheparties,theconsiderationpaidmaybeadjusted.Thetaxauthority’spowerextendstoalldomesticandcrossbordertransactions.
Thelimitedregulations/guidelineswhichhavebeenissuedwithregardtotransferpricingarenowlargelyinlinewiththe2010OECDTransferPricingGuidelines,althoughguidancetoauditorsandtherulespriortoNovember
2011suggestthatahierarchicalapproachshouldbetakentotheselection
ofmethodology,andthelimitednatureoftheOECDGuidelinesallowsforbroadinterpretations.
TheIndonesianTaxOffice(ITO)mayenterintoAdvancePricingAgreements(APA)onpriceswithcompaniesandothertaxjurisdictions.TheITOhasissued
aregulationcoveringthepoliciesandprocedurestobefollowedinestablishingsuchAPAs.
MutualAgreementProcedure(MAP)applicationscanbeprocessed
simultaneouslywithataxpayer’ssubmissionofanobjection,appeal,orapplicationforthereductionorcancellationofataxassessmentnotice.
ThinCapitalisation Wherea“specialrelationship”existsbetweenparties,interestmaybe
disallowedasadeductionwheresuchchargesareconsideredexcessive,suchasinterestratesinexcessofcommercialrates.Interestfreeloansfromshareholdersmay,incertaincases,createariskofdeemedinterest
beingimposed,givingrisetowithholdingtaxobligationsfortheborrower.
Thelawallowsthetaxauthoritytoissueadecreedefiningthemaximumratioofdebttoequityindeterminingdeductibleinterest.However,sucha
decreehasnotyetbeenfinalised(thedraftproposalwasfora5:1ratio).Specialrulesontaxdeductibilityofinterestapplyinthemining,andoil
andgassectors.
GeneralAntiavoidance Nogeneralantiavoidancerulesapply.
Antitreatyshopping Forutilizingthetaxtreatyprovisions,thenonresidentmustconfirminFormDGT1thatthetransactionhaseconomicsubstanceandisnotsolely
designedtotakeadvantageoftaxtreatybenefits.
Otherspecificantiavoidancerules
Nootherspecificantiavoidanceregimesrulesapply.
Rulings Indonesiahasarulingsysteminplace.However,taxrulingsarenot
generallypublished,andareonlyapplicabletotherelevanttaxpayerthatrequestedsuchruling.
IntellectualPropertyIncentives None
R&DIncentives ResearchanddevelopmentundertakeninIndonesiaisdeductibleexpenditure.
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Otherincentives Othertaxincentivesareavailableforcertainentitiesinspecificindustries,including:
l Taxholidays
l Taxexemptionsforcertaintransactions,e.g.mergerandspinoff,andnewlyestablishedforeignownedcompany
l Incometaxreliefoninvestmentincertainbusinessand/orcertainregionsintheformofadditionaldeductions,acceleratedtaxdepreciation,andextendedlosscarryforwardperiods.
HybridInstruments Thetreatmentofhybridinstrumentsfortaxpurposeswillgenerallyfollowtheaccountingtreatment,andtherelatedtaxobligationswillbedeterminedbasedonsuchaccountingtreatment.
Hybridentities TherearenospecificrulesthatapplytohybridentitiesinIndonesia.
Specialtaxregimesforspecific Incometaxreliefisavailableforinvestmentsin25selectedsectors(52industriesorsectors subsectors)and/or15selectedlocations(77sublocations).Theselected
businesssectorsareeconomicsectorsthathavehighpriorityona
nationalscale,particularlyinrespectofboostingexports.Theselectedregionsareremoteregions,whichareeconomicallypotentiallyworthyof
development,butwhoseeconomicinfrastructureisgenerallyinadequate,andwhereaccessbypublictransportisdifficult.Thisincludesmaritimewaterswithadepthofover50meterswheretheseabedhasmineral
reserves,includingnaturalgas.
InternationalTreatiesfortheAvoidanceofDoubleTaxation
InForce Algeria
Australia
Hungary
India
NewZealandNorway
Austria Iran Pakistan
Bangladesh
Belgium
Brunei
Italy
Japan
Jordan
Philippines
Poland
Portugal
Bulgaria
Canada
Korea(Democratic
People’sRepublic)
Qatar
Romania
China Korea(Republicof) Russia
CzechRepublic Kuwait Seychelles
Denmark Luxembourg Singapore
Egypt Malaysia SlovakRepublic
Finland Mexico SouthAfrica
France Mongolia SpainGermany Morocco SriLanka
HongKong Netherlands Sudan
Sweden
Switzerland
Syria
Taiwan
Thailand
Tunisia
Turkey
Ukraine
UnitedArabEmirates
UnitedKingdom
UnitedStates
Uzbekistan
VenezuelaVietnam
Source:http://www.pajak.go.id /
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IndirectTax(i.e.VAT/GST)
IndirectTax ValueAddedTax(VAT)
StandardRate ThestandardrateofVATinIndonesiais10percentandappliestogoods,
servicesandimportsinIndonesia.
ExportsofgoodsaresubjecttozeropercentVAT,howeverandonlycertain
exportsofservicesareentitledtozeropercentVAT.
Furtherinformation KPMG’sVAT/GSTessentials
Personaltaxation
IncomeTax Personaltax
TopRate Thetopmarginalpersonaltaxrateis30percentandappliestotaxableincomeexceedingIDR500million.
SocialSecurity Socialsecurityinsurance
Employerscontributetothefollowingsocialsecurityinsurancefunds:
l Worker’soldagecompensation:3.7percent
l Worker’sdeathcompensation:0.3percent
l Worker’shealthinsurance(optional):Threepercentforasingleorsixpercentforacouple
l Worker’saccidentinsurance:0.24percent–1.74percent
Employerscontributiontoworkers’healthcompensationispayableonlywheretheemployerdoesnotprovideequivalentorbetterhealth
provisions.
Employeesarerequiredtocontributetoworker’soldagecompensation
fundattwopercent.
Furtherinformation KPMG’sThinkingBeyondBorders
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OtherTaxes
Customsduty CustomsdutiesareimposedonitemsimportedintoIndonesia,generally
onanadvalorembasis.
DutiesarepayablebasedontheHarmonizedSystem(HS)classification.Dutiesarebasedonthecost,insuranceandfreight(CIF)valueofthe
importeditemand,ingeneral,areimposedatratesofzeropercentto20percentformostgoods,25percentto80percentforcars,and170percentforalcoholicdrinks.TheIndonesiancustomsproceduresare
baseduponGeneralAgreementonTariffsandTrade(GATT)principles.
Exciseduty Excisedutiesareleviedonspecificproductswhoseconsumptionisrestrictedorcontrolled,namelyalcoholicbeveragesandtobaccoproducts.
Stampduty AstampdutytaxofeitherIDR3,000orIDR6,000ischargedoncertaindocumentssuchasreceipts,agreements,powersofattorneyandotherlegaldocuments.
Taxonlandandbuildings ThisisataxleviedontheholdingoflandorbuildingswithinIndonesia.The
taxauthority,orinpractice–delegatedregionalauthorities,willinitiallydeterminewhothetaxpayerisandissuea‘reportonthetaxobject’to
thatproperty.Normally,theownerisresponsibleforpayingthetaxdue. Taxiscurrentlyimposedat20percentor40percentofthefullstatutoryrate,whichis0.5percentofthesalesvalueofthetaxobject.Thus,the
actualtaxrateis0.1percentor0.2percent.Thesalesvalueistheactualtransactionpriceor,intheabsenceofatransaction,thepriceofasimilarobjectcanbeused.Thelawprovidesthatthesalesvalueistobefixed
everythreeyears,exceptforcertainareaswhereitisfixedannually.
Propertytitletransfertax Atransfertaxispayableoneverytransferoftitleofland,orlandandbuildings.Thetaxpayeristherecipientoftherights.Thetaxisfivepercent
ofthetransferpriceandthereisanontaxableamountofIDR60million. Theamounttobetaxedistheacquisitioncost.Ifthedeemedsalevaluedeterminedforlandandbuildingstaxpurposesishigher,thatamountwill
beusedasthebasisforthetransfertax.
Certainreductionsandexemptionsapply.
Regionalandlocaltaxes Regionalandlocaltaxesinclude;entertainmenttax,advertisementtax,
motorvehicletaxes,hotelandrestauranttax,streetlightingtax,andtaxontheuseofundergroundandsurfacewater.
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FreeTradeAgreements
Inforce l TheASEANTradeinGoodsAgreement(ATIGA)
l ASEAN–ChinaFreeTradeAgreement
l ASEAN–KoreaFreeTradeAgreement
l Indonesian–JapanFreeTradeAgreement/Indonesia–Japan
EconomicPartnershipAgreement(IJEPA)
l
ASEAN–IndiaFreeTradeAgreementl ASEAN–AustraliaNewZealandFreeTradeAgreement
l Indonesia–PakistanFreeTradeAgreement
TaxAuthority
TaxAuthority DirektoratJenderalPajak
DirektoratJenderalPajak
Taxauditactivity Thetaxauthoritypredominantlyadoptsariskbasedapproachtothe
selectionofreturnsforaudit,andcanalsoselectcandidatesforauditbyrandomselection.Refundsoftaxwillusuallyresultinataxauditbeingopened.Mostlistedcompaniesaresubjecttoanannualtaxaudit.
Atypicaltaxauditcommenceswithasitevisitfollowedbysubmittingalltherequiredinformation.Thetaxauditorwillalsoaskquestionsandrequireadditionaldocumentsforthetaxpayerresponse,including
reconciliationsbetweenthetaxreturnsandthefinancialstatements.Auditsintoanygivenreturngenerallylast12months.
Thetaxauthority’sapproachtotaxauditsislargelyamanualapproach,
includingdetailedconsiderationofinvoicesandkeydocuments.
Keyfocusareasforthetaxauthorityintaxauditsconductedinrecent
yearshaveincluded:
l Transferpricing
l Deductibilityofexpensesandtaxabilityofincome
l Compliancewithwithholdingtaxobligation
l CompliancewithVATobligation
Appeals Ifthereisanydisputewiththetaxassessments,ataxpayerisallowedtofileanobjection.AtaxpayercanthensubmitanappealtotheTaxCourt
onthedisputedtaxauditresults.Eachprocesswilltake12monthstocomplete,butanappealsprocesscanbeextendedfurther.
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LAOS
CorporateIncomeTax
Corporateincometax Profittax,and(forSMEs)lumpsumtax.
Taxrate The24percentprofittaxrateappliestobothdomesticandforeign
businesses,exceptforcompaniesregisteredintheLaoStockExchange,whichbenefitfromafivepercentreductionofthenormalrateforaperiod
offouryearsfromthedateofregistrationintheStockExchange.Afterthisperiod,thenormalprofittaxrateapplies.
A26percentprofittaxrateappliestocompanieswhosebusinessisto
produce,import,andsupplytobaccoproducts.TwopercentofthetaxpaidbytobaccocompaniesshallcontributetotheCigaretteControlFund(Article46oftheLawonTobaccoControl).
MinimumtaxwasabolishedbytheimplementationoftherevisedTaxLaw2011.
Smallandmediumenterprisespaylumpsumtaxatprogressiverates
betweenthreepercentandsevenpercent,dependingonthenatureofthebusinessanditsrevenue.Ataxexemptionisprovidedwheretheannual
revenueislessthanLAK12million.
Residence ThereisnodefinitionofresidencefortaxpurposesinLaos.Allcompanies(i.e.allformsoflegalentity)thatareregisteredunderLaolaw,orthatareincorporatedunderforeignlawandcarryingonbusinessinLaos,are
subjecttoLaoprofittax.
Compliancerequirements Profittaxpaymentsshallbemadeonaquarterlybasisasfollows:
– 1stQuarter:onorbefore10April–basedonselfassessmentbythe
entitysubmittedtotaxauthority
– 2ndQuarter:onorbefore10July–basedonselfassessmentbytheentitysubmittedtotaxauthority
– 3rdQuarter:onorbefore10October–basedonselfassessmentbytheentitysubmittedtotaxauthority
– 4thQuarter:onorbefore10Marchofthefollowingyear–basedon
selfassessment(taxreturn)bytheentitysubmittedtotaxauthorityorassessmentbytaxauthority
Thequarterlyliabilityforprofittaxiscalculatedbasedononeofthe
following:
– Theprofittaxpaidduringthepreviousyear
– Theactualprofitduringthecurrentyear
– Theprofitofaprojectasstatedinthetaxpaymentplan.
Iftheprofittaxpaidwithintheyearisnotcalculatedbasedontheactual
currentyearprofit,andexceedstheactualannualprofittaxpayable,the
excessprofittaxshallbeoffsetagainstprofittaxpayableinthefollowingyear.Iftheamountpaidduringtheyearislessthantheactualamount
due,theextrawillbeaddedtotheyearendassessment.
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Internationalwithholdingtaxrates
Dividendspaidtononresidentsaresubjecttowithholdingtaxattherateof10percent.
Royaltiespaidtononresidentsaresubjecttowithholdingtaxattherateoffivepercent.
Interestpaidtononresidentsissubjecttowithholdingtaxattherateof
10percent.
Thesewithholdingtaxratesmaybereducedunderanapplicabletaxtreaty.AsthereislimitedoutwardinvestmentfromLaos,thetaxtreaty
provisionsforrelieftendtofollowtheapproachtakenbytheothercountrythatisapartytothetaxtreaty.
Holdingrules Dividendsforresidentsandnonresidentsaresubjecttoincometaxatthe
rateof10percentofthegrossdividendreceived.
ThereisnoseparatecapitalgainstaxinLaos.Capitalgainsaretaxedinthesamemannerasotheroperatingprofits.
Taxlosses Losses(whichareagreedtobytheNationalAuditAuthorityoranindependentauditcompany,withacknowledgmentofthetaxauthorities)maybecarriedforwardforthreeyears.
Lossescannotbecarriedback.
Taxconsolidation/grouprelief TherearenogroupingprovisionsinLaos.
Transferofshares SharesaleandpurchaseagreementsaresubjecttostampdutyataraterangingfromLAK15,000toLAK100,000dependingonthepurchase
value.
Incomefromsaleofsharesissubjecttoincometaxattherateof10percent.
Transferofassets Agreementsforthetransferofassetsaresubjecttostampduty.Theratesvarydependingontheassettypeandthepurchasevalue.
Incomefromthetransferoflandandbuildingsissubjecttoincometaxattherateoffivepercent.
CFCrules TherearenoCFCrulesinLaos.
Transferpricing TherearenotransferpricingrulesinLaos.
Thincapitalisation Laosdoesnothaveathincapitalisationregime.
Allinterestpaymentsmustbesupportedbyrelevantdocumentationshowingthatthepaymentsarecommerciallyreasonable;otherwise,thetaxauthoritiesmayseektodisallowanelementoftheinterestexpense.
Generalantiavoidance TherearenogeneralantiavoidanceprovisionsunderLaotaxlaw.
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Antitreatyshopping ThereisnoantitreatyshoppingprovisioninLaos.
Otherspecificantiavoidancerules
TherearenootherspecificantiavoidancerulesinLaos.
Rulings ThereisnoformalrulingsysteminLaos.
Ataxpayerwhoseeksclarificationregardingtaxpaymentsortaxlawmaysubmitaproposalletterforclarificationtothetaxauthority.Aclarification
letterfromthetaxauthoritymaybegivenonacasebycasebasis.A
clarificationletterisnotbinding,butthelettercanbeusedinfuturenegotiationswiththeauthority.
Clarificationlettersfromthetaxauthority,giventoaparticulartaxpayer,arenotmadepubliclyavailable.
Intellectualpropertyincentives TherearenointellectualpropertyincentivesavailableinLaos.
R&Dincentives TaxincentivesundertheLawonInvestmentPromotion(discussedinthe
‘OtherIncentives’sectionbelow)mayapplytoscientificresearchanddevelopmentexpenditure.
Otherincentives TheLawonInvestmentProgrammeprovidesspecialtaxincentivesfor
investorsinLaos.Theseincentivesaresummarizedbelow:
l ReducedtaxratesforacompanythathasaninvestmentagreementwiththeGovernmentofLaos
l Certaininvestmentincentivesmaybemadeavailabletoinvestorswheretherelevantprojectrelatestoencouragingspecificsectorsorislocatedincertainregions
l Ifaforeignenterpriseisgrantedaninitialtaxexemptionperiodoftwotofouryearsandsufferslossesinthatperiod,itmaybepermittedto
carrythelossesforward.Thelossesmaythenbedeductedfromtaxesleviedonprofitsinthefollowingyear,orcarriedforwarduptothreeyears.
l Rawmaterialsandintermediatecomponentsthatareimportedinordertoachieveimportsubstitutionareeligibleforspecialdutyreductions.
Hybridinstruments ThereisnoconceptofhybridinstrumentsinLaos.
Hybridentities ThereisnoconceptofhybridentitiesinLaos.
Specialtaxregimesforspecific Therearenospecialtaxregimeswhichapplytospecificindustriesorindustriesorsectors sectors.
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IncomeTaxTreatiesfortheAvoidanceofDoubleTaxation
InForce Brunei Korea(Republicof) Myanmar Vietnam
China Malaysia Thailand
Negotiated,notyetinforce TreatieswithIndonesia,Luxemburg,Kuwait,andRussiahavebeenattimeofpublication negotiatedbutarenotinforceatthetimeofwriting.
Source:IBFD
IndirectTax(i.e.VAT/GST)
Indirecttax ValueAddedTax(VAT)
Standardrate ThestandardrateofVATis10percent.
VATappliestoawiderangeofproducts,includingelectricity,water,fuel,
andallimportedproducts,unlesstheyreceiveanexemptionfromtheGovernmentofLaos.
Furtherinformation Formoredetailedindirecttaxinformationonvariouscountries,referto:KPMG’sVAT/GSTEssentials
PersonalTaxation
Incometax Incometax
Toprate Thetoprateofincometaxis24percent.
EmployeeswhoseemployerhasacontractsignedwiththeGovernmentofLaos(e.g.investorswithconcessionagreements)beforePresidential
DecreeNo.001/PSof1March2011,willbesubjecttopersonalincometaxataflatrateof10percentuntilthecontractexpiresorisrenewed/extended.
Socialsecurity TheSocialSecurityDecreeappliestoallofthefollowing:
l Employeesofstateownedenterprises,privateenterprisesandjointenterprises
l Enterprisesthatemploy10ormoreemployees
l Anenterprisethathaslessthan10employees,butisabranchofalargerenterprise.
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Socialsecurity(cont’d) Thedecreerequiresadeductionfromgrosssalaryasfollows:
l 5percenttobepaidbytheemployer
l 4.5percenttobepaidbytheemployee.
AnysalarymoniesoverLAK2,000,000permontharenottakenintoaccountwhencalculatingSocialSecuritypayments(thiswasincreased
fromLAK1.5millionon1January2013).Asaresult,themaximummonthlysocialsecuritypaymentwillbeLAK100,000permonthforemployersandLAK90,000permonthforemployees.
Internationalsocialsecurityagreements
Laoshasnointernationalsocialsecurityagreements.
Furtherinformation Formoredetailedpersonaltaxationinformationforvariouscountries,referto:
KPMG’sThinkingBeyondBorders
OtherTaxes
Customsduty Dutiesareleviedonalltypesofimportedandexportedcommoditiesat
varyingratesfromfivepercentto40percent.Administrativefeesareleviedatfivepercentadvaloremonequipmentandmaterials.
Exciseduty Excisetaxiscollectedoncertaintypesofgoods,includingfuel(fivepercentto25percent),alcohol(50percentto70percent),carbonateddrinksandinvigoratingdrinks(fivepercentto10percent),tobacco
products(60percent)andcosmetics(20percent).
Importsofequipment,meansofproduction,spareparts,andother
materialsusedintheoperationofforeigninvestors’projectsorintheirproductiveenterprisesaretaxedatauniformflatrateofonepercentoftheimportedvalue.Rawmaterialsandintermediatecomponents,
importedforthepurposeofprocessingandthenexported,areexempt
fromsuchimportduties.
Stampduty Stampdutyratesvarydependingonthetypeofinstrument.
Propertytax Landtaxesvarydependingonthelocationandthetypeoftheland.The
calculationoflandtaxisbasedonboththelocationandthesizeofthelandandisleviedatannualratespersquaremeter.Landtaxispayableinthefirstquarteroftherelevantcalendaryear.
Inheritancetax ThereisnoinheritancetaxinLaos.
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Prizeorlottery PrizesorlotterywinsinLaosexceedingLAK1millionaresubjecttoincometaxattherateof10percent.
Taxonnaturalresources Naturalresourcestaxappliestotheoilandgasindustryandbusinesses
involvedintheexploitationofrareandpreciousresources,includingoilshale/petroleumandnaturalgas,metallic/nonmetallicminerals,
constructionmaterials,peat,anthracite,hydroelectricpowerandlandconcessions.Tobacco,coffee,tea,andflowerseedsarealsosubjecttonaturalresourcestax.
Theapplicableratesvaryfromfivepercentto25percentofthesaleorexportpriceorarebasedonataxpercubicmeter.Forwood,thetaxesvarydependinguponthetypeofwood.
EnvironmentTax Appliestoindividuals,legalentities,andorganisationslicensedtoconductactivitiesdeemedtobedamagingtotheenvironment,ecology,orpeople’shealth. Detailsaretobeannounced.
FreeTradeAgreements
Inforce ASEAN–
BruneiDarussalam
Cambodia
Indonesia
ASEAN–China
Laos
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
ASEAN–India
ASEAN–Japan
ASEAN–SouthKorea
ASEAN–Australia–NewZealand
Negotiated,notyetinforceattimeofpublication
Luxembourg
Innegotiation ASEAN–Japan–S.Korea–China,
ASEAN–Japan–S.Korea–China–Australia–NewZealand–India.
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TaxAuthority
Taxauthority MinistryofFinance–TaxDepartment,TaxDivisionofVientianeCapitaland
TaxDistrict
MinistryofFinance–TaxDepartmentWebsite
Taxauditactivity Thetaxauthoritypredominantlyadoptsariskbasedapproachtothe
selectionofreturnsforaudit.Asamatterofpractice,largerentitiesaregenerallyauditedannually.
Ataxauditmaybeopenedintoanytaxreturnfiled.Inourexperience,the
majorityofcompaniescanexpecttobeauditedbythetaxauthorityeachyear.
Atypicaltaxauditcommenceswithanofficialletterrequestingprovision
ofsupplementaryanalysisorinformation.Theauditwillincludeasitevisittoinspectrecords,includingtheabovementionedsupplementaryinformation,andtoenquireaboutanyunclearissuesorpossible
disagreements.
Taxpayersareadvisedtocontacttheirtaxadvisorimmediatelywhena
taxauditcommencesoranycorrespondenceisreceivedfromthetaxauthority.Auditsintoanygivenreturngenerallylast10daysbutitcan
takelongertoreacharesolutioninmorecomplexcases.
Keyfocusareasforthetaxauthorityintaxauditsconductedinrecentyearshaveincluded:
l Revenueandexpensespertaxcalculation
l Taxdeductibleandnondeductibleexpenses
l VATforconstruction,importexportgoodsandservices
l AllIncomeandbenefitsofoutsourcedlabour.
Thetaxauthority’sapproachtotaxauditsislargelymanual,includingdetailedconsiderationofinvoicesandkeydocuments.
Appeals ThereisnoformaltaxappealprocessinLaos.However,ataxpayerwhodoesnotagreewiththetaxauditbytheofficermaysubmitaproposal
lettertothetaxauthorityforreinvestigation.
Taxgovernance Therearenospecificschemesorincentivesofferedwhichencouragetaxpayerstoadoptbestpracticesintermsoftaxgovernanceorcontrols.
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MALAYSIA
CorporateIncomeTax
IncomeTax Corporateincometax
TaxRate CorporatetaxratesforcompaniesresidentinMalaysia:
l 25percent(24percentfromYA2016)
SpecialtaxratesforcompaniesresidentinMalaysiawithordinarypaidup
sharecapitalofMYR2.5millionandbelowatthebeginningofthebasis
periodforayearofassessment(providednotmorethan50percentoftheordinarypaidupsharecapitalofthecompanyisdirectlyorindirectly
ownedby(orlinkedto)arelatedcompanywhichhasanordinarypaidupsharecapitalofmorethanMYR2.5millionatthebeginningofthebasisperiodforayearofassessment):
l 20percentonthefirstMYR500,000(19percentfromYA2016)
l 25percentoneveryringgitexceedingMYR500,000(24percentfromYA2016)
Residence AcompanywillbeaMalaysiantaxresidentifatanytimeduringthebasis
year,themanagementandcontrolofthecompany’sbusinessoranyoneofitsbusinessesareexercisedinMalaysia.
Compliancerequirements Assessmentsystem–Selfassessment
Estimateoftaxpayablemustbemade1monthbefore