Asean Tax Guide v2

8/17/2019 Asean Tax Guide v2

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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

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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

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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

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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 ~

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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

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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.

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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.

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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.

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Inresponse,companiesneedtobetrackingchangesinthebusinessenvironment,andbewellpositionedtoadaptandrespondquicklytonewopportunities.

Astrategicfocusonplanningforpossiblebusiness

restructureorseekingopportunitiestoexpandwithnewmarketsortradingpartnersisaproactiveapproachtowinninginASEAN.

WarrickCleine BrahmaSharmaAsiaPacificRegionalLeader,Tax KPMGAsiaPacificTaxCentreLeaderCEO,KPMGinVietnam

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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.

11


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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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15/92

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.

14


16/92

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

15


17/92

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

16


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TaxAuthority

Taxauthorities CollectorofIncomeTax,MinistryofFinance

MinistryofFinance

Taxauditactivity Thetaxauthoritycanauditeverycompanyannually.ItisthecurrentpracticeoftheCollectorofIncomeTaxtorequestinformationand

clarificationwithoutcommencingaformalauditprocess.Itisoftenthecasethatsuchenquiriescanberesolvedoraddressedwithouttheneedforaformalauditprocess.KPMGinBruneiDarussalamisnotawareof

anycompanybeingsubjecttoaformaltaxaudit.

Appeals AllappealscanbemadetotheCollectorofIncomeTax.Ifnoagreementcanbeenreached,furtherappealscanbemadeattheHighCourtsof

BruneiDarussalam.

Taxgovernance TheCollectorofIncomeTaxexpectsallcompaniestopaytheirshareoftaxfromtheirbusinessoperationsinBruneiDarussalamasgoodcorporatecitizens.

17


19/92

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.

18


20/92

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.

19


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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.

20


22/92

Hybridentities Therearenospecialrulesapplicabletohybridentities.

Specialtaxregimesforspecificindustriesorsectors

Therearecurrentlynospecialtaxregimesforspecificindustriesorsectors.

Petroleumandminingtaxlawsarecurrentlybeingdrafted,howeverfurtherdelaysareexpected.


InForce Cambodiadoesnothaveanybilateralormultilateralinternationaldoubletaxtreatiescurrentlyinforceatthetimeofwriting.

Negotiated,notyetinforceattimeofpublication

TreatynegotiationsareanticipatedbetweenCambodiaandanumberoftheotherAssociationofSouthEastAsianNations(ASEAN)countries,includingThailand,aheadoftheplannedeconomicareain2015.

Source:IBFD


Indirecttax ValueAddedTax(VAT)

Standardrate ThestandardrateofVATis10percent.

Zeroratedsuppliesincludeexportsofgoods,andcertainchargesinrelationtointernationaltransportationofpeopleandgoods.Inaddition,certainitemsareexemptfromVAT.

Furtherinformation Formoredetailedindirecttaxinformationacrossvariouscountries,refer

to:

KPMG’sVAT/GSTEssentials

21


23/92

PersonalTaxation

Incometax Personaltax/taxonsalary

Toprate 20percent(residentsandnonresidents)

Socialsecurity NationalSocialSecurityFund(NSSF)

Everymonth,anemployer(witheightormorestaff)shallreportthe

numberofworkerstheyemploy,andpaythecontributionof0.8percentoftheaveragemonthlywageofworkerstotheNSSF,bythe15thofthefollowingmonth.

AnemployeeisnotrequiredtomakecontributionstotheNSSF.

Internationalsocialsecurityagreements

Cambodiahasnosuchagreements.

Furtherinformation Formoredetailedpersonaltaxationinformationacrossvariouscountries,

referto:


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).

22


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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.

23


25/92

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 /

29

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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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InForce Brunei Korea(Republicof) Myanmar Vietnam

China Malaysia Thailand

Negotiated,notyetinforce TreatieswithIndonesia,Luxemburg,Kuwait,andRussiahavebeenattimeofpublication negotiatedbutarenotinforceatthetimeofwriting.

Source:IBFD


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:


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

Asean Tax Guide v2

Documents

Transcript of Asean Tax Guide v2