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SPRING 2002 EDITION OF THE LOYENS & LOEFF ASIA NEWSLETTER

The information below is produced by the offices of Loyens & Loeff in Singapore and Tokyo. It is designed to alert those(interested in) doing business in the Asian region to recent developments in the region. Such developments are discussed inbrief terms and are based on generally available information. The materials contained in this publication should not be regardedas a substitute for appropriate detailed professional advice. The information below was assembled based on informationavailable as at 31 March 2002. In case of questions, please contact:-

Loyens & Loeff’s Asia Team

We would like to introduce to you Loyens & Loeff’s As

attorneys, tax advisers and civil law notaries with exte

international clients who invest in or from Asia. It offe

Europe one-stop assistance on areas of law such as ta

We advise these clients on relevant aspects of Dutch,

particular focus on tax structuring, corporate structur

securities law, employment law and regulatory law. C

matters concerning their investments in Asia.

Investments in or through the Benelux

Traditionally, the Netherlands is an appropriate jurisd

or trade can be channelled. The Netherlands offers an

infrastructure and a regulatory framework which is ge

success of Schiphol Airport and the Port of Rotterdam

Netherlands is renowned for its excellent tax treaty ne

fiscal policies. Dutch corporate and partnership law h

allows business partners to translate their business o

SINGAPORE80 Raffles Place# 14-06 UOB Plaza 1Singapore 048624Telephone +65 532 30 70Fax +65 532 30 71Contact: Pieter de [email protected]

TOKYO6F, Feliz Building2-3-14 KajichoChiyoda-kuTokyo 101-0044, JapanTelephone +81 3 325 881 10Fax +81 3 325 881 15Contact: Pieter [email protected]

ia Team. The Asia Team groups together

nsive experience in advising Asian clients and

rs Asian clients who invest in or trade with

x, corporate, anti-trust, labour law and others.

Belgian, Luxembourg and European law, with a

ing, M&A and joint ventures, banking and

onversely, we assist clients with legal and tax

iction through which international investments

open economy, with a well-developed IT

ared towards facilitating foreign investment. The

are evidence of this approach. Above all, the

twork and its favorable and highly transparent

as developed into a flexible mechanism, which

bjectives into accessible documentation.

2/46

As the country that is home to the European Union institutions, Belgium is increasingly becoming the

centre for legislation affecting businesses throughout Europe. More and more rules and policies are

determined on a European scale in areas as diverse as company and financial law, antitrust

enforcement and the regulation of international trade or the utilities industries. This is also the reason

that an ever greater number of professional organisations and industry-wide interest groups maintain

a presence in Belgium and focus their lobbying efforts on the EU institutions. The financial incentives

of the Co-ordination Centre legislation provide additional appeal to Belgium as a centre for European

headquarters of large international groups. Complementing the Loyens & Loeff office in Brussels, is

the Antwerp office which caters specifically to the international trade and business that is attracted by

the Port of Antwerp.

The office in Luxembourg focuses on the international financial business based in Luxembourg,

concerning investment funds and related operations. Furthermore, Luxembourg serves as a suitable

base for intermediate and top holding companies for European investments. Luxembourg holding

companies are often set up in combination with a Dutch company to resolve the international tax

problems encountered by a multinational business. Our Luxembourg office provides for a highly

specialised tax and legal practice to optimise the tax burden on international structures or

international transactions. Complex financial instruments such as hybrids, derivatives and synthetics

are sometimes employed to achieve the best results.

Loyens & Loeff Asian presence

In Asia, Loyens & Loeff currently operates from two offices, i.e. in Singapore and in Tokyo.

Since the start of its operations in 1983, Loyens & Loeff’s Singapore office has established a strong

reputation as an expert in Asian tax matters, covering most countries between China down to

Indonesia and the Philippines, including India. Our client base comprises reputable companies from

all over the world with business interests in the Asian region.

On the inbound side of the practice, we advise multinational companies on the most efficient tax and

legal structuring for their business interests in Asia and help them to understand the tax and legal

environment in relevant Asian countries. We have an extensive range of contacts with the best local

advisers throughout the region and have a wealth of experience in obtaining and co-ordinating advice

from these specialists. Accordingly, the Singapore office is uniquely placed to provide investors with

one-stop regional advice for investments in Asia. On the outbound side of the practice, we advise

Asian companies on the structuring of their investments in Europe and other parts of the world.

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The Tokyo office of Loyens & Loeff is unique in Japan. We are the only firm that offers fully integrated

advisory services in matters of Dutch and European civil law and tax law. Our practice in Tokyo

advises Japanese companies that invest in or trade with Europe, including the financial structuring of

their international operations in or through the Benelux and cross-border transactions involving the

Benelux, especially M&A, joint ventures and private offerings. In these areas we have built up an

excellent track record and in Japan Loyens & Loeff boasts a broad client base of industry leading

multinationals. On the inbound side of the practice, through our network of local firms we assist a

number of international non-Japanese clients with organising their investments in Japan.

Our offices in Singapore and Tokyo allow us to effectively deal with time zone complications and thus

enhance our firm’s reach in serving our clients.

Loyens & Loeff’s Asia Team comprises:

Pieter de Ridder (Singapore) (65) 6532 3070 (65) 6532 3071 [email protected]

Pieter Stalman (Tokyo) (81) 3 325 881

10

(81) 3 325 881 15 [email protected]

John Versantvoort (Tokyo) (81) 3 325 881

10

(81) 3 325 881 15 [email protected]

Ewout Stumphius (Rotterdam) (31) 10 224 6224 (31) 10 412 5839 [email protected]

Hans de Groot (Rotterdam) (31) 10 224 6224 (31) 10 412 5839 [email protected]

Willem Jarigsma (Amsterdam) (31) 20 578 5785 (31) 20 578 5800 [email protected]

Jacques Berk (Amsterdam) (31) 20 578 5785 (31) 20 578 5800 [email protected]

Koen Platteau (Brussels) (32) 2 743 4353 (32) 2 743 4340 [email protected]

Roel Nieuwdorp (Brussels) (32) 2 743 4353 (32) 2 743 4340 [email protected]

Teun Akkerman (Luxembourg) (352) 46 62 30 (352) 46 62 34 [email protected]

Australia

Special note

We would like to thank the taxation lawyers of Allens Arthur Robinson in Sydney for their contribution to the Australian section of

this newsletter.

New Tax Consolidation Regime

mailto:pieter.stalman@loyensloeff

mailto:[email protected]



4/46

• Under current law Australian companies which share 100% common ownership can benefit

from various tax concessions, including the following:

tax losses can be transferred from a loss making company to another group company

with taxable profits to reduce the amount of tax payable by that company;

assets can be transferred within a wholly owned group without crystallising a tax

liability by electing for roll-over relief to apply; and

tax free dividends can be paid between companies within a wholly owned group.

• It is intended that from 1 July this year, wholly owned groups of companies, trusts and

partnerships will be able to consolidate for Australian tax purposes. The Australian

Government has recently released the second exposure draft of the legislation which will

implement this measure. The following discussion provides an overview of the key aspects of

the proposed consolidation regime.

• From 1 July, wholly owned groups will be able to elect to form a consolidated group for tax

purposes. Although consolidation is optional, many groups will need to consolidate because

once the consolidation regime commences, all the existing concessions available to wholly

owned groups (including those mentioned above) will be abolished.

• The fundamental concept behind the proposed consolidation regime is that a consolidated

group will be treated as a single taxpayer and all intra-group transactions will be ignored for

Australian tax purposes. The ultimate holding company of the consolidated group will be

responsible for the income tax obligations of the entire group and will lodge a single income

tax return covering the entire group. Once an election to consolidate has been made, it can

never be revoked. Some of the basic membership rules which will apply to the composition of

a consolidated group include:

• only entities which are 100% owned can be members of a consolidated group.

• all entities which are eligible to be members of a consolidated group will be automatically

included in that group if an election to consolidate is made. It is not possible to exclude

certain wholly owned entities from a consolidated group.

• non-resident entities cannot be included in a consolidated group, even if they are 100%

owned.

• trusts can be included in a consolidated group, provided that all of the beneficiaries or

potential beneficiaries of the trust are members of the consolidated group.

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• partnerships can be included in a consolidated group provided that all of the partners are

members of the consolidate group.

• It is intended that the ultimate Australian holding company of the consolidated group will be

solely responsible for the tax liability of the entire group. However, rules are to be introduced

to make other members of the consolidated group liable, on some basis, for the tax liability of

the entire group if the holding company defaults on its obligation to pay the group's tax

liability.

• Complex rules will govern:

• whether a company can take carry forward tax losses into a consolidated group and, if so,

the rate at which those losses can be utilised by the consolidated group; and

• the calculation of the cost base of assets which enter or leave a consolidated group. The

draft legislation implementing the new tax consolidation regime is extremely complex and

incomplete in some important respects. It is expected that another exposure draft of the

legislation will be released before 30 June. Notwithstanding that the regime is intended to

commence on 1 July 2002, it seems doubtful whether the legislation will be finalised and

passed by the Australian Parliament by that time.

Access to superannuation for departing non-residents

• Australian employers are obliged to make compulsory contributions to an Australian

superannuation fund on behalf of their employees. Under current law, employees cannot,

generally, access those contributions until they retire. Therefore, expatriates who have been

working in Australia and who permanently depart Australia cannot currently access the

superannuation contributions which have been made on their behalf by their Australian

employer until they reach the statutory retirement age. This may be some time off for the

departing expatriate.

• The Australian Government has announced that from 1 July 2002, non-residents who

permanently depart Australia will be allowed to access their superannuation benefits which

accumulated during the period they were employed in Australia.

• Under the proposed new rules, non-residents who work in Australia under a temporary

residence visa will be able to withdraw their superannuation benefits which have accumulated

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during their period of employment in Australia when they permanently depart Australia

(subject to withholding of tax concessions which have applied to those benefits). It is

intended that the measure will benefit many temporary residents, including those who have

already permanently departed Australia and those that may depart in the future.

Exclusion of certain royalties from Australian royalty withholding tax

• Amendments have been introduced into the Australian Parliament to exclude domestic law

royalty payments from the scope of the royalty withholding tax provisions in cases where the

payments are not treated as royalties under the Royalties Article definition of a Double Tax

Treaty. This will be achieved by extending the existing rules that apply where a Double Tax

Treaty excludes royalties derived through a permanent establishment from the Royalties Article.

• Australia's Double Tax Treaties generally allow Australia to charge 10% tax on the gross amount

of royalties paid to a person resident in a treaty partner country. Different treatment applies,

however, where the person derives royalties through a permanent establishment or fixed base in

Australia. Such royalties are included in the calculation of profits attributable to the permanent

establishment or fixed base and may be taxed in Australia at full rates. Outgoings must, however,

be allowed in determining the profits and thus the profits are only taxable on a net basis. Rules

currently apply to exclude these royalties from taxation on a gross basis under the royalty

withholding tax provisions.

• The recently signed Protocol to the Australia/United States Double Tax Treaty will exclude

equipment royalties paid to US residents from the treaty definition of ‘royalties’ and thus result

in the payments being either exempt or, where derived through a permanent establishment,

taxable on a net basis. The current exclusion from the royalty withholding tax provisions will not

apply because the payments, while royalties for domestic law purposes, are not treated as

royalties for treaty purposes.

• The amendments will address collection difficulties that could arise if amounts taxable on a net

basis were subject to the royalty withholding tax provisions. Such difficulties could arise because

the correct amount of tax to be withheld on net amounts generally could not be determined when

the withholding obligation arose. Payers would be likely to withhold too much tax because they

would be personally liable for any shortfall.

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Tax treatment of tax indemnification payments paid to a non-resident lender

• The Australian Commissioner of Taxation (the Commissioner) has issued Taxation Ruling

TR 2002/4 which contains his views on the implications of the decision of the Full Federal Court

in FCT v Century Yuasa Batteries 98 ATC 4380. It was held in that case that amounts paid to a

non-resident lender by a borrower under an indemnification of tax clause were neither interest,

nor amounts in the nature of interest, but rather were an indemnity against the non-resident’s

liability for income tax. Accordingly, the payments were not subject to interest withholding tax.

• The Commissioner does not dispute this conclusion as it relates to interest withholding tax

(although care needs to be taken in drafting the tax indemnification clause to ensure this

outcome).

• However, the Commissioner does express the view in TR 2002/4 that where a non-resident

lender carries on a business of lending and a loan is made in the course of the lender’s business,

the indemnification amounts paid to that lender under an indemnification of tax clause will be

ordinary income in the hands of the lender. Where the indemnification payment has a source in

Australia, it will be included in the assessable income of the non-resident lender unless the

lender is a resident of a country with which Australia has concluded a Double Tax Treaty.

• The source of income is a practical, hard matter of fact. The Commissioner considers that the

relevant factors in the context of a tax indemnification payment will include the place at which

the relevant contract is negotiated and made, where it is performed, where the indemnification

payment is made, the location of the funds out of which the indemnification payment is made,

the event occasioning the indemnification payment (ie the liability to Australian withholding tax)

and the residence of the payer.

• Where an indemnification payment has a source in Australia and a Double Tax Treaty applies,

Australia will only have taxing rights over the indemnification payment under the business profits

article of the relevant Treaty if:

• the income is business profits;

• the enterprise is carrying on business in Australia at or through a permanent stablishment;

and

• the profits made are attributable to that permanent establishment.

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• Assuming the indemnification payment has the necessary connection with the borrower’s income

earning activities in Australia, the Commissioner is of the view that it will be tax deductible to the

borrower on the basis that indemnification payments are similar to interest outgoings by

borrower in that they are periodic payments made by the borrower to secure the use of the

borrowed money during the term of the loan.

International Tax Developments

• Renegotiation of Australia/United Kingdom Double Tax Treaty. Treasury and tax officials from

Australia and United Kingdom met during March to commence renegotiations of the Double Tax

Treaty between the two countries. The existing Treaty and an amending Protocol were signed in

1967 and 1980 respectively and require updating to accommodate modern business practice

and treaty policy.

• New Protocol to the Australia/Canada Double Tax Treaty. The Australian Government has signed

a new Protocol to the Australia/Canada Double Tax Treaty which substantially updates the 1980

Double Tax Treaty between the two countries. One of the most significant changes resulting from

the Protocol will be the adoption of a split-rate dividend withholding tax provision. Under the

new Protocol certain non-portfolio dividends will be taxed at a maximum rate of 5% as opposed

to the current maximum rate of 15%. In addition, the Protocol reduces the maximum interest

withholding tax rate from 15% to 10% in both countries. It is not yet known when the new

Protocol will enter into force.

China

Stock transactions

• The head of the State Tax Bureau announced on 3 April that the PRC will not levy personal

income tax on stock transactions until the stock market recovers, the head of the P.R.C.'s tax

office said on 3 April 2002.

Restrictions on foreign investment relaxed

• A new Industry Catalogue for Foreign Investment was issued by the P.R.C. Ministry of Foreign

Trade and Economic Cooperation. With it, a new road map for foreign investors in China

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became effective 1 April 2002. It seems that the Chinese government's attitude toward foreign

investment has become much more open.

• The most prominent change is in the service industries. Software programming, apartment

property development, wholesale and retail sales of ordinary commodities, logistics,

warehousing, and higher education have been added to the list of encouraged industries. In

addition, telecom services and the supply network for water, gas, and heat in cities have been

released from the "Prohibited" category, although they still are subject to certain restrictions

under the "Restricted" category. Similarly, the manufacture of general consumer goods has

been changed from a restricted to a permitted industry.

• The foreign shareholding caps for various industries, such as telecom, wholesale, and retail,

gradually will be lifted in accordance with the World Trade Organization's market access

timetable.

• Flexibility has been increased for foreign investors with the introduction of the concept of

"relatively Chinese majority shareholding." In some industries, such as water supply, the

aggregate shareholding of foreign investors may exceed the shareholding of Chinese partners,

provided that the shareholding of Chinese partners is bigger than the share of any one

individual foreign investor.

Taxation of foreign real estate developers

• On 4 March 2002 it was reported that State Tax Bureau has issued a circular that revises and

clarifies the tax treatment of foreign real estate developers.

• Previously, foreign real estate developers were subject to tax on a quarterly basis under the

percentage-of-completion method. The tax was calculated by reference to a deemed mark-up

on the costs incurred in relation to the project. Developers were able to obtain a final

settlement of their tax liability only after the last unit or piece of property was transferred and

the relevant sale recognized.

• Under the recently issued circular, developers will continue to be taxed on a deemed profit

basis during the course of the project, as units are completed. However, the final settlement of

tax has been brought forward for each unit to the earliest of: the date the property project

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qualification certificate is issued by the relevant government authority; the date the right to

use the property is transferred; or the date that title to the property is transferred.

Wholly owned subsidiaries possible for US consulting companies

• It was reported on 22 February 2002 that U.S. companies in various consulting and service

industries, including management consulting, engineering or architectural services, computer

and related services, human resource services, real estate services, can establish wholly

owned subsidiaries in the PRC under special regional programs available in Shanghai,

Shenzhen, and Beijing on a limited basis. Subsequent expansion opportunities also may be

available through branches or offices throughout China.

Centralisation of collection of Chinese income tax

• Chinese Premier Zhu Rongji announced on 5 March 2002 that China would centralise the

collection of income tax, sharing a fixed proportion of it with local governments. Previously

income tax has been collected locally, under a regime instituted in 1994, and the Ministry of

Finance has then had to negotiate with each province for a share of the money. Since income tax

is the main source of revenue for provinces, this has resulted in a mismatch of resources, with the

government unable to transfer wealth from rich parts of the country to poorer regions. The current

system also offers far greater scope for local corruption and misuse of funds.

• "All additional revenue received by the central government from increased income tax receipts will

be used as general transfer payments to local governments, mainly to the central and western

regions," Mr Zhu said. The central Government expects to share half the income tax revenue with

local governments this year and 60 per cent next year.

• Value-added tax, which represents 85% of all tax revenue, is already collected centrally, and

shared out; but income tax is making up a rapidly-growing proportion of revenues, as

individual wealth grows and increasing use of bank accounts makes the tax more collectible.

Tax deductions for branches of foreign banks

• The State Tax Bureau on 10 January 2002 issued a notice concerning the allocation and

deduction of administrative expenses incurred by the head office of PRC branches of foreign

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banks, which took effect retroactively to 1 January 2002. The notice specifies in which cases

PRC branches of foreign banks can claim a tax deduction for the administrative expenses

incurred by their overseas head office and attributable to the PRC branches.

• The notice was issued in accordance with article 20 of the Detailed Rules for Implementation

of the Income Tax Law of the People's Republic of China for Foreign Investment Enterprises

and Foreign Enterprises, which provides that reasonable administrative expenses incurred

outside China by a foreign enterprise with an establishment or place in China in connection

with management of the production or business operations of the establishment or place may

be deducted as expenses for PRC income tax purposes.

• The foreign enterprise has to present to the competent tax authority (i) supporting documents

certifying the overall scope of the administrative expenses, the total amount of administrative

expenses incurred, and the basis or method for allocating the expenses to various branches;

and (ii) a report issued by a certified public accountant in the home jurisdiction of the foreign

enterprise verifying the same.


• Canada. On 18 January 2002 Canada's Finance Minister Paul Martin has announced that

negotiations for the conclusion of a revised income tax treaty between Canada and the PRC

will be held in mid-March 2002. Persons whose interests are affected will have an opportunity

to inform the government of any issues of double taxation that might be resolved in a tax

treaty; the government is particularly interested in learning of any difficulties encountered by

Canadians under China's tax system so that the issues may be taken into account during the

negotiations.

• Oman. In March, the PRC signed a first tax treaty with Oman. Details of the treaty have not yet

been released.

Hong Kong

E-Commerce guidance

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• In February 2002, the Hong Kong Inland Revenue Department (IRD) issued its Departmental

Interpretation and Practice Notes No. 39 on the "Profits Tax Treatment of Electronic

Commerce." The practice note outlines the assessment procedures the IRD will follow

regarding profits derived from electronic commerce.

• In general, most Hong Kong-based electronic commerce businesses will be subject to Hong

Kong profits tax, irrespective of the location of the Web site. For overseas electronic

commerce businesses, a physical presence in Hong Kong will generally determine liability, not

the location of the Web site. Regarding payments for digital products purchased from an

overseas vendor, a Hong Kong payer need only deduct withholding tax if the payment is for

the right to commercially exploit the digital product, for example, by selling it on to third

parties.

Commissions earned offshore taxable?

• On the 5th of February 2002 it was reported that court of first instance, i.e. the Board of

Review, which functions as a fact-finding tribunal, had ruled on the 30th of January 2002 that

the answer to the question whether commissions are taxable in Hong Kong depended on

where the broker’s clients are located. Commissions from clients not based in Hong Kong

were offshore in nature and therefore not taxable, while commissions from Hong Kong-based

clients were onshore and therefore taxable.

Group relief for stamp duty denied

• On the 1st of February 2002 it was reported that the Hong Kong District Court, in Arrowtown

Assets Limited v. Collector of Stamp Revenue, had recently rejected an appeal by a taxpayer

(Arrowtown) that sought relief from stamp duty on the sale of land.

• Stamp duty is generally imposed at a rate of 0.75 to 3.75 percent, depending on the amount

of consideration and the value of the property being transferred. Transfers of assets between

associated companies are subject to relief from the duty. Companies are associated if one

company owns at least a 90 percent beneficial interest in the issued shares of the other

company, or a third party is the beneficial owner of at least 90 percent of the issued shares of

each party.

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• In the Arrowtown case, Shiu Wing Steel Ltd. entered into a nonbinding agreement with the

government in 1996, allowing the relevant property to be redeveloped in return for a

significant premium. Shiu Wing, Sun Hung Kai, Swire, and Calm Seas Developments Ltd., a

joint venture between Sun Hung Kai and Swire, entered into an agreement in early 1997

concerning the redevelopment of the property. Subsequently, a complex series of transactions

were conducted under that agreement.

• Of particular relevance was the fact that the transfer could not be made under an arrangement

in which an outsider (that is, an entity that was not part of the 90 percent group) provided any

part of the consideration, either directly or indirectly. Additionally, the transferor of the land or

its associated company could not, as a consequence of an arrangement involving an outsider,

part with the consideration it received.

• The court held that Calm Seas, an outsider, provided part of the consideration. Under a

deferred compensation agreement, Calm Seas made a contractual promise to Shiu Wing to

repay any overpayment of dividends received from Prepared Holdings Ltd., Arrowtown's

immediate parent company, before completion of the development.

• The court further held that there was an "arrangement" in place, under which Shiu Wing was to

"part with" the consideration arising from the transfer of the land (by way of assignment of a

loan note to an associated company). The fact that the loan note was assigned to an

associated party was irrelevant, the court held. Accordingly, group relief was again denied.

14/46

Offshore income from fund management income taxable in Hong Kong?

• It was reported that the IRD has summoned fund management companies in Hong Kong, to

file Profits Tax returns in respect of the income earned as a result of their fund management

operations. The fund management sector in Hong Kong has subsequently lobied with the Hong

Kong authorities to retract this request, because any tax liability in respect of the fund

management income would make the sector uneconomical for their overseas customers who

entrust them with their funds. Thusfar, the IRD has turned a blind eye to the tax position of

income earned in Hong Kong for overseas customers by fund managers.

India

India’s Budget for 2002

• The Budget for the fiscal year 2002/03 was presented to the Parliament on 28 February

2002. In brief, the most significant tax proposals contained in the Budget are as follows:

the abolition of the 10.2% dividend distribution tax, which is to be replaced by a

dividend withholding tax at a rate of 10%;

the withdrawal of the 2% Gujarat earthquake surcharge and its replacement by a 5%

income tax surcharge to cover increased defence expenditure: as a result, the top

marginal income tax rate for individuals is proposed to be 31.5%, and for Indian

companies as well as partnerships in India will be 36.75%;

the income tax rate for foreign companies in India (branches, permanent

establishments) will be reduced from the current 48% to 42% (which includes the 5%

surcharge mentioned above);

the introduction of a INR 6 surcharge on every litre of petrol and a reduction in the

duty on petrol from 90% to 32%;

a reduction in the top marginal customs duty rate from 35% to 30% (it is proposed by

the year 2004/2005 to reduce this further to 10% for raw materials and 20% for

manufactured goods);

the scope of the Service Tax is enlarged to include inter alia banking services provided

by corporates in India, cargo handling, event management, cable operators and

storage and warehousing services, and

an expansion of the types of services subject to service tax.

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Income tax exemptions for Special Economic Zones

• India has recently proposed a new seven-year tax concession allowing firms in special

economic zones to a full income tax exemption on export profits for the first five years, 50

percent of which would be tax-exempt for the following two years.

• Currently the income tax concession for firms operating in the zones is for 10 years, or until

fiscal 2009-2010, whichever is earlier, The Economic Times reported on 1 April.

• The advantage of the new concession is that it will not be curtailed by an expiration date and

begins when the firm establishes itself in one of the zones, the news service said.

Depreciations and investment allowances

• It was reported on 18 January 2002 that the Madras High Court has held in Commissioner of

Income Tax v. Standard Polygraph Machines (P) Ltd. (171 CTR 152) that the income tax paid

under a technical know-how agreement to acquire know-how, should be treated as a cost of

the plant and machinery, and is eligible for depreciation and investment allowance.

Indonesia

Domestically traded bonds subject to income tax

• In May 2002, Indonesia will impose a 20 percent tax on the interest from bonds traded on the

country's bond exchange, while maintaining the 15 percent tax on interest from bonds

purchased elsewhere.

• The higher tax on bonds has met with criticism from some bond market insiders who see it as

a detriment to BES, the country's main bond market, which lacks liquidity.

• The new ruling means the interest on bonds is now taxed at the same rate as that of time

deposits and applies to all types of bonds, including the government bank recapitalization

bonds, which were previously tax-exempt, according to the Director of the Indonesian Central

Securities Depository.

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• Separately, it is rumoured that the government will also revoke the 0.03 percent capital gains

tax on bond transactions.

Sales tax on motor vehicles

• It was reported on 2 April 2002 that Indonesia will increase the motor vehicle sales tax from

30 percent to 40 percent, with effect from 1 May 2002. The increase is based on a new

regulation 7/2002, which abolished the "luxury goods" classification for certain groups of

taxable items, including motor vehicles.

• Regulation 7/2002 also lowered the tax on wool carpets from 50 percent to 40 percent.


• New tax treaty with the Netherlands. The Netherlands and Indonesia on 29 January 2002

signed a treaty for the avoidance of double taxation on income and capital and for the

prevention of fiscal evasion. The new treaty replaces the Indonesia-Netherlands tax treaty of 5

March 1973. However, both sides agreed to apply the terms of the 1973 treaty until the new

treaty comes into force. If the ratification procedure is completed on time in both countries,

the treaty could enter into force this year. Its provisions would then be applicable as of 1

January 2003.

Under the new treaty, dividends received on direct investments and portfolio dividends are

subject to withholding tax at a rate of 10 percent. A 10 percent withholding tax also may be

imposed on royalties and interest payments, but several categories of interest are exempt.

Pensions, annuities, and social security benefits may be taxed in the source country. Also, at

the Netherlands' request, the treaty also contains provisions for the allocation of head office

costs (cost-sharing provisions), for turnkey projects, for the allocation of taxing rights over

capital gains arising upon the disposition of substantial shareholdings, and for offshore

activities.

The treaty is extremely generous on a number of points. Uniquely, it contains a withholding

tax exemption on loans with a term of at least two years (which would place the Netherlands

on the number one spot for future offshore loans to Indonesia). A possible 'catch' might be

paragraph 5 of article 11, which stipulates that both countries will agree on the mode of

17/46

application of this provision. The treaty exempts capital gains from Indonesia's non-resident

capital gains tax and it exempts qualifying 'technical services' (which includes consultancy

services) from Indonesian withholding tax. Coupled with the 10% dividend withholding tax

rate, the Netherlands would (continue to) be a good holding company jurisdiction for

Indonesian investments (Mauritius still provides a better dividend withholding rate of 5%, but

Mauritius may not always work from an investor's perspective). Engineering projects will not

be taxed if they do not exceed 6 months and services rendered in Indonesia by Dutch

companies will not constitute a permanent establishment in Indonesia if they do not exceed a

total of three months in any 12-months period.

The treaty already contains a protocol, which does not alter the above.

The new treaty will take effect on the 1st of January of the year following that in which the

ratification procedure has been completed; thus the earliest possible date for the new treaty

to take effect is 1 January 2003.

We need to wait and see what will happen in the ratification procedure and how the 'mode of

application' will be agreed upon between the two governments. Based on the current text

however, things look promising.

Japan

Corporate reorganizations

• The National Tax Agency (NTA) recently issued a new corporate tax circular which clarifies certain

issues relating to the tax provisions dealing with corporate reorganizations taxation introduced in

April 2001. Some highlights of the clarifications are as follows.

• Cash distribution in case of a merger: In case of a legal merger between two or more

corporations, it can often happen that shareholders of an acquired (i.e. disappearing)

company are to receive a fraction of a share in an acquirer, depending on an applicable

merger ratio. In that situation, a cash distribution is commonly made to those shareholders in

lieu of issuance of a fraction of the acquirer’s share. Under the corporation tax law provision

introduced last year, a qualified merger should not involve any cash distribution. This

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provision had implied that, in theory, even Yen 1 distribution would jeopardize the book-value

roll-over treatment in respect of the acquired company’s assets and liabilities. It had thus

been a question whether such a distribution of cash in lieu of issuance of a fraction of a share

would also jeopardize an otherwise qualified merger. At this point, the new circular clarifies

that, if a cash distribution takes place in lieu of an issue of a fraction of a share, the former

should be treated as the latter for the purpose of eligibility test for a qualified merger. A

similar provision is also introduced regarding a corporate split or de-merger.

• Disallowance of goodwill recognition due to loss carryovers: Where an acquired company (in

case of a merger) or a de-merging company (in case of a split) has an amount of loss carry-

forward for tax purposes, sometimes an acquiring company or a de-merged company

recognizes a goodwill for accounting purposes. However, the new circular clarifies that such

goodwill recognized based on availability of a loss carry-forward should be disregarded for tax

purposes. Thus, the acquired company or the de-merged company will not be allowed to

amortize the goodwill to create a deductible expense.

• “Principal business” criteria: One of the requirements for a qualified merger is that an

expectation should exist that a “principal business” conducted by an acquired company will

continue to be conducted by the acquirer after the merger. It had been an open question how

one can say a certain business is a principal one or not. In this respect, the new circular states

that various factors, such as (1) amount of revenue, (2) amount of profit and loss, (3) the

number of employees, (4) amount of fixed assets, are to be considered.

Consolidated taxation system

• As reported in the previous edition of this newsletter, the consolidated taxation system is set to

be introduced in 2002. Lawmakers are currently busy with preparing proposed amendments to

the relevant corporate tax laws, and it is anticipated that the law will be enacted in or after June

this year with retroactive effect as from April 1, 2002. Detailed wordings of the proposals are not

yet available.

• One of the items which need attention is a provision aimed at avoiding a double-booking of profit

or loss realized by a consolidated subsidiary (so-called “investment adjustment provision”). The

investment adjustment provision works in the following manner. Suppose a consolidated parent

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company reports a profit of Yen 100 million realized by its consolidating subsidiary in the

consolidated tax return, and the subsidiary shares carry Yen 200 million book value in the

parent’s books. If the parent transfers the subsidiary shares to someone outside the group, the

carrying book value of the subsidiary shares would be adjusted in that the profit already reported

in the tax return will be added up. Thus, in this case, the carrying value of the shares for tax

purposes will be Yen 300 million. If a loss realized by the subsidiary is reported in the parent’s

tax return, the carrying value for tax purposes will be adjusted to be reduced by the amount of

the reported loss.

• Under the US consolidated tax reporting system, it seems that an adjustment to the basis of a

subsidiary’s shares will be required every tax book year. On the contrary, the 2002 Tax Reform

Guideline so far indicates that such an adjustment should take place only as and when the parent

transfers the subsidiary’s shares or the parent ceases to apply the consolidated tax reporting.

• Furthermore, suppose that the consolidated subsidiary has a wholly owned Japanese subsidiary.

This 2nd-tier subsidiary will, by definition, qualify as a consolidated (indirect) subsidiary. In that

case, how should the investment adjustment provision work when the parent transfers the 1st tier

subsidiary’s shares? In this respect, the Guideline indicates that the basis adjustment should take

place with a bottom-up approach. That is, the basis of the 2nd tier subsidiary’s shares will have

to be adjusted by the 1st tier subsidiary in the first place, and then on that basis, the basis of the

1st tier subsidiary’s shares has to be adjusted by the parent company.

Inheritance tax avoidance scheme

• Mr. B, who is Mr. A’s father, borrowed Yen 1,600 million from C bank and contributes the

proceeds to X corporation, a newly incorporated company wholly owned by Mr. B. Then, Mr. B

incorporated Y corporation by contributing 100% shares in X corporation. Around the same time,

Mr. A borrowed Yen 800 million also from C bank, and used the proceeds to purchase 100%

shares in Y corporation from his father. After the sale, Mr. B repays part of the loan outstanding

with the sale proceeds of Yen 800 million. After the above transactions, Mr. B still has Yen 800

million loan payable. But, since he has other assets worth about Yen 800 million, the taxable

estate would be almost zero (i.e. Yen 800 million taxable assets -/- Yen 800 million liability = 0).

Mr. A obtained 100% shares in Y corporation worth Yen 1,600 million and a loan payable worth

Yen 800 million tax-free. A key point in the above scheme is the valuation of shares in Y

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corporation. Mr. A argues that the (old) Inheritance Tax Law Valuation Circular had implied that

50% discount of the value of the Y corporation shares should be allowable as a provision for

future corporation tax obligation. The tax authorities opposed to his argument and issued an

assessment of gift tax in which they argued that the difference between Yen 800 million

consideration paid by Mr. A to his father and Yen 1,600 million “fair market value” of Y

corporation was considered a gift from the father to the son. Mr. A sued the tax authorities.

• The Tokyo District Court held that the purpose of the Inheritance Tax Law Valuation Circular is to

determine a ‘objective exchangeable value’ of an asset in question. It supported the argument of

the tax authorities by stating that if special circumstances arise where the valuation method

stipulated under the circular would result in a unfair outcome, it is allowed to use an alternative

reasonable valuation method other than those stipulated under the circular.

Substance-over-form rule

• A Japanese shipping company (“Aco”) planned to expand its Asian and Russian routes. In view of

fierce price competitions in the industry, Aco needed to cut costs of its operations and part of

such cost-cutting measures was to hire foreign sailors at lower wages. Since the minimum wage

standard required for a Japanese-flag ship was too high for the cost cutting plan, Aco decided to

incorporate a company in Cyprus (“Bco”) and let it own a ship with a Cyprus flag. Bco was a

party to the ship-building contract and paid consideration for the ship as well. Bco financed the

ship-building with funds from Aco. In Aco’s books, Bco was treated as a transparent entity, since

Bco was a paper company. Aco recorded the ship as a fixed asset, and all sales and expenses

related to the operation of the ship were also recorded in the Aco’s books. Those items were also

reported in Aco’s tax returns. However, the tax authorities noticed that one of the deducted

expenses included a special reduction of book value of the ship that would otherwise be allowable

if the ship had been acquired by Aco itself, instead of Bco. So the tax authorities issued an

assessment of corporation tax in which they argued that the reduction of the ship’s book value

was disallowed. Aco sued the tax authorities.

• Aco had argued that Aco should be regarded as the owner of the ship for tax purposes. It based

its argument on article 11 of the corporation tax law, which stipulates a substance-over-form

doctrine should be applied in deciding to which person a profit or loss is to be attributed.

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Economically, it was Aco that bore the entire purchase price of the ship. Therefore, it had argued

that, from the perspective of economic substance, Aco should be treated as the owner and thus

should be entitled to the special reduction of the book value of the ship for the purpose of Aco’s

tax return. The Yokohama District Court did not support Aco’s argument. The court pointed out

that, if a tax is to be imposed purely based on an economic substance, it would impose

additional administrative burdens on the tax authorities in that they would have to figure out first

who receives benefits or bears costs economically rather than legally. That would lead not only to

an substantial increase in tax administration costs on the side of the tax authorities, but also to

jeopardizing predictability and stability of tax consequences that Japanese tax laws are supposed

to provide with taxpayers under the Constitution. So it held that the starting point in determining

tax consequences should be legal consideration. Furthermore, the court found that Bco was a

legal entity duly organized in Cyprus and legal consequences, such as ownership of the ship etc.

were attributable to Bco, rather than Aco. Thus, it concluded that the owner of the ship was Bco

and thus the special reduction of the book value of the ship reported in Aco’s tax return should

be disallowed.

Tokyo bank tax case

• With effect from April 2000, the Tokyo local government introduced a so-called 3% bank gross

revenue tax, to which Japanese banks with a capital of Yen 5 trillion or more are liable. The

introduction of the tax was controversial from the outset, mainly because the tax base is a bank’s

gross revenue, rather than the bank’s profit which is normally calculated after deduction of

various expenses and losses, including write-offs of bad debts. Very simply put, under the

Japanese Local Tax Law, local governments are (with certain exceptions) allowed to impose a

local enterprise tax if its tax base is a profit. However, it also allows that, depending on “business

circumstances” of a certain industry, other measure can be used as a tax base instead of the

profit. When the tax was introduced, the Tokyo government argued that banks’ gross revenue

should be qualifying as such an alternative measure. 21 Japanese banks sued the Tokyo local

government, arguing that the introduction of the gross revenue tax was in violation with the Local

Tax Law.

• The Tokyo District Court supported the argument of the taxpayer in stating that the enterprise tax

base should be a bank’ profit instead of the bank gross revenue. It also determined that the

Tokyo government regulations regarding the banks’ gross revenue tax are illegal and void, as a

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result of which it ordered the Tokyo government to refund Yen 72.4 billion (approx. USD 556

million) that had been collected till now from those plaintiff banks and, in addition, to pay a

penalty of Yen 1.8 billion. The Tokyo governor Mr. Ishihara told that it would appeal to a higher

court.

Korea

Stock options

• The National Tax Tribunal (“NTT”) has decided on the tax treatment on (salary) income arising

from stock options granted by a foreign employer to employees of its Korean subsidiary. The NTT

ruled that the indirect relationship between the foreign parent company and the domestic

employee is a deemed (direct) relationship between the Korean subsidiary and the domestic

employee.

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US criticizes Korean import tax on cars and the Korean tax system

• A US trade delegation criticized Korean’s low number of imported cars during 2001. The US

officials blamed the high Korean import tax on foreign cars and expressed their proposal to

diminish the import tax rate to US levels. The US Chamber of Commerce in Korea criticized the

high individual tax rate and corporate tax rate in Korea, especially compared to its surrounding

countries. The Korea government already announced it would improve its tax environment in

order to attract more multinational corporations establishing their regional head quarters in

Korea. E.g., tax deductions for multinational companies located in Korea with respect to stock

options granted to their employees and tax deduction on living expenses for employees of foreign

companies. Currently, the government only offers tax exemptions on stock options for employees

of listed companies and specific startups. However, lowering the individual tax rates is no issue,

the government already announced.

Major 2002 tax reforms announced

• As from January 1, 2002 a number of amendments to the Income tax act, Corporate income tax

act, the Tax privilege control act and some other tax statutes took effect. The amendments

concern proposals brought forward in 2001, as well as some new provisions.

Individuals

• The most important amendments to the Korean income tax act include the following:-

The scope of “interest income” and “dividend income”, has been broadened to income which

is comparable to interest and dividend, respectively. Income that is similar to

interest/dividend and has the characteristics of interest/dividend payments will be covered by

the newly introduced term ’similar (interest/dividend) income’. In a similar way, pension

income will also include income, which is “similar to pension payments”.

The system of ‘similar income’ is not applicable for “business income”. The coverage of this

kind of income has not been amended.

The applicable income tax rate for world wide income decreased to 9% for income up to KRW

10 million, 18% up to KRW 40 million, 27% up to KRW 80 million and 36% for income

exceeding KRW 80 million.

Tax deductions related to wages and salaries have been increased. Taxes on capital gains for

individuals decreased by 10%.

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• Generally, the tax burden for individuals decreased by the amendments.

Corporate/Business

• The most important changes are the following:-

The corporate tax burden is reduced by the amendments, amongst others by a 1% decrease

of the corporate tax rates to 15% (first tier) and 27% (second tier), respectively.

The additional surtax on capital gains no longer applies, except for capital gains on land and

real estate in designated regions (10% capital gains tax may be levied).

The restrictive regulations regarding the debt-equity ratio (i.e. 4:1) applies to Korean

companies in which the shareholder holds an interest exceeding KRW 100 million as well as to

listed companies. Interest due on debt is only deductible to the extent the debts are in line

within aforementioned thin capitalization ratio.

To the extent the write off for receivables, bonds, stocks in bankrupt companies and bond

issuance discounts are presented in the financial statements, these may be accepted for tax

purposes as well.

Accounting rules for mutual funds have been synchronized with tax rules (i.e. gross income

does not include stock dividends, securities are valued at fair market value and accrued

interest/dividend income is part of gross income).

Tax Privilege Control Act foresees in an exemption on dividend distributions by mutual funds

to resident investors, to the extent these dividends contain capital gains on securities derived

by the mutual fund.

Losses of the target company involved in a corporate merger may be transferred to the

acquiring company, irrelevant of whether both merging companies are affiliates or not. This

regulation will have retroactive effect as from book years starting during the 2001 calendar

year. The requirements regarding the period of continuation of the target company’s spin off

business (3 years) and/or the required period the acquiring company should keep the shares

in the target company (5 years) may be disregarded under certain conditions. The transfer of

the shares within a corporate restructuring is exempt from securities transfer tax.

The possibilities for a corporate restructuring using a Real Estate Investment Trust Company

(“REIT”) have been changed, and now allow a tax deductible dividend distribution at the level

of the REIT provided provided that at least 90% of the retained earnings are distributed.

• Non residents rendering services in Korea on a regular basis within a 2 years period may be

treated as having a deemed permanent establishment (taxable presence), even if within a 12-

month period, the fixed place of business is used for less than a 6-month period.

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• As from July 1, 2002 non residents claiming tax treaty protection must fill in an application form

and provide a certificate of residency (to be filed to the tax authorities by the payer of the income)

prior to the receipt (payment) of the income.

Tax holidays

• The Korean tax authorities intend to assist Korean companies with restructuring their foreign

subsidiaries in which they have a share interest of at least 20%, by granting a conditional

extension of payment for a three years period of tax due on capital gains resulting from the

restructuring.

• In order to stimulate foreign investments in the high tech industry a revised list was issued listing

certain qualifying high tech industries for the foreign investment tax exemption. Tax holidays of up

to 100% exemptions of corporate tax and dividend withholding tax for periods of up to 7 years

(followed by a 50% exemption for a succeeding 3 years period) are possible for Korean

subsidiaries of foreign companies which are engaged in qualifying high tech industries.

• As from January 2003, tax holidays will be reduced for non resident investors, if it concerns an

investment in an existing business. Generally, 30% and 50% tax holiday exemptions may apply

during the next 2 years. As from January 1, 2003 only newly incorporated companies will be

allowed to enjoy tax holidays.

Trade zones

• The southwestern island of Cheju-do has been appointed as a new free trade zone. A tax free

three-year period in respect of 100% of profits, followed by two-year 50% income and corporate

tax exemptions are available for manufacturing and distribution companies investing at least US$

10 million. In addition, duty free consumption and luxury product shops will be established on the

Resort Island. The island of Jeju has also been appointed a free trade zone. Companies investing

more than US$ 20 in hotels and initiate leisure facilities can benefit from a five-year tax

exemption.

Pay tax online

• The Korean Ministry of Finance has announced that in the near future it will enable taxpayers to

pay income tax over the internet. If the proposals are accepted by parliament, the Korean

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National Tax Administration (NTA) would also be able to issue electronic notices to the taxpayers,

upon their request.

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Domestic tax evasion

• The NTA released a report from which it can be understood that around one third of the domestic

companies may have been involved in tax evasion over the past three years in various ways. The

NTS announced it will take appropriate measures against companies which violate the

regulations. Tax audits and penalties were mentioned in this respect. Also the use of corporate

credit cards for personal consumption/benefit, the transfers of funds abroad and acquisitions of

real estate will be examined seriously.

Transfer Pricing - Advance Pricing Agreement (APA)

• Further to our previous reports on transfer pricing developments in Korea, the NTA intends to set

up an APA system in order to handle international transfer pricing issues. The NTA initiated

discussions with foreign companies in Korea as well as foreign based subsidiaries of Korean

companies on this issue. OECD guidelines are the guiding principle.

E-commerce

• The Korean Ministry of Finance announced that it intends to implement a specific tax on

downloaded products and the sale of products ordered over the internet and delivered to the

recipient at home (E-commerce sales), as well as on bonus miles provided by credit card

companies and gas stations which can be used for free or discounted air tickets. Currently it is

being investigated whether and how these taxes can be implemented. It is understood that the

Korean authorities may likely follow the system to be used in the US and/or Europe and

suggestions to be made by the OECD.

Improving investment environment

• Recent discussions regarding the complicated, non-transparent tax regulations within Korea

intensified with a view to improving Korea’s investment environment. The Korean Development

Institute has published an extensive report on the Korean economy, including some

recommendations. The government is investigating how the current corporate tax system can be

restructured, e.g. allowing parent companies to pay combined taxes for its subsidiaries.

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• The Korean government recently announced that it will extend its negotiations with nine countries

this year (Iran, Qatar, Laos, Tajilistan, Iceland, Jordan, Oman, Saudi Arabia, and Ghana). In

addition, Korea initiated discussions with the Unites States regarding a revision of the tax treaty.

• Algeria ratified and published the investment protection agreement signed with Korea on October

12, 1999.

• Korea and Austria signed a protocol to the tax treaty concluded in 1985. Under this protocol -

amongst others- withholding taxes on (some specific) dividends and royalties decreased and

capital gains on shares of a company principally owning real estate are deemed to be capital

gains derived on the alienation of real estate. The credit method applies on such capital gains.

• Korea and Iran have held talks regarding a tax treaty between the two states from which in

particular Iranian and Korean companies operating in the import and export business in both

countries will benefit. The agreement is expected to be initialed shortly.

• Anti-money laundering agreement: Korea and Belgium signed an anti-money laundering accord in

Brussels. Similar accords are intended to be concluded with the US, Japan, Hong Kong and the

UK.

• Free trade agreement intended with Japan. Japanese Prime Minister Koizumi and his Korean

colleague Dae-Jung have announced that both countries intend to conclude a free trade

agreement in order to stimulate trade between Korea and Japan and to co-operate more closely in

economic affairs in the near future. By the agreement, trade barriers in the amount of US$ 43

billion would be abolished.

Malaysia

Malaysia Airports seek tax hike

• Reportedly, Malaysia Airports Holdings has officially submitted a request to the government to

increase passenger service charges (airport tax) by 50%. The request is aimed at making

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Malaysia Airports Holdings more attractive for foreign investors by increasing the revenue and

profits from operating Malaysia’s airports.


• Sweden. A new treaty for the avoidance of double taxation and prevention of fiscal evasion

regarding taxes on income between Malaysia and Sweden was signed on 12 March. The new

treaty provides for avoidance of double taxation on business profits, dividends, interest, and

royalties. Details of the treaty are not yet available.

• Croatia. Malaysia and Croatia signed a treaty for the avoidance of double taxation on 18

February 2002. Details have not yet been released.

Philippines

Failure of bill which included tax breaks for the banking sector

• The Philippines' House of Representatives on 11 March 2002 failed during its second reading

to approve the proposed Special Purpose Asset Vehicle (SPAV) bill because critics said it

offered too many tax breaks to the banking industry. The bill seeks to establish a legislative

framework for an asset management company or SPAV to acquire the banking industry's non-

performing loans, which include loans and real estate properties, at a discount. It will then sell

participation certificates and debt instruments in the form of investment unit instruments to

investors. Several congressmen argued the SPAV bill includes too many tax incentives for the

banking industry, however, which would lead to significant revenue losses for the federal

government.

• One of the bill's main features is the tax exemption covering the sale of non-performing assets

(NPAs) by banks to the SPAV and from the SPAV to the borrower. Those transactions would be

exempt from documentary stamp tax; local land transfer tax; capital gains tax; and the PHP

200,000 or 5 percent discount off mortgage registration fees, filing fees, and land registration

fees. Those tax incentives would still be available to the SPAV only during its seven-year life

span, after which the SPAV can continue to operate but can no longer benefit from the tax

exemptions.

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Filipinos to enjoy retirement plan tax breaks

• The Philippine Department of Finance is reviewing a proposed bill that allows employed

Filipinos to voluntarily establish a retirement fund and enjoy tax-free interest earnings. The bill

also says that all contributions made under a specified limit will be 100 percent deductible

from the contributor's taxable income and that all PERA distributions, earnings, and

withdrawals will be tax exempt. The Department of Finance said in a position paper that the

bill's particulars may be too generous, referring to the system as an "exempt-exempt-exempt"

model. Under that model, income earned from investment and from distribution of benefits

upon retirement are tax exempt. The Philippine National Economic and Development

Authority is also concerned that the new scheme will erode government revenue and urged the

finance committee to weigh the potential gains of the PERA bill and the potential

governmental revenue losses.

• One of the potential gains that could come from the PERA bill is its aim to accelerate capital

market development through its contribution to the growth of government securities and stock

markets, as well as a shift in favor of long-term financing, which promotes both the equity and

bonds markets.

Tax relief cut for entertainment expenses

• The Philippine Bureau of Internal Revenue (BIR) has proposed to impose a 50 percent ceiling

on the amount of entertainment, amusement, and recreation expenses that may be deducted

from gross income for business purposes. The BIR and the Finance Department issued a draft

regulation to exempt salaried individuals from filing an income tax return if the correct

amount of taxes has been properly withheld and remitted to the BIR by the employer.

Exemption from stamp duty for stock lending

• The Philippine Congress issued a proposal to exempt stock borrowing and lending

transactions from the documentary stamp tax to mobilize capital market development.

Regulatory Capital Changes

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• Regulatory capital changes announced by the Central Bank of the Philippines mean that

Philippine banks will be required to set aside funds equivalent to 5 per cent of the value of

their outstanding restructured loans to prevent the erosion of assets. This is against the

background of a dramatic increase in the level of such restructured loans giving rise to fears

that banks are resorting to “window dressing” their existing loans to bring down their non-

performing loans. Philippine banks are currently required to make provisions equal to 25% of

the value of non-secured loans and over 10 per cent of the value of secured loans. The banks

can be expected to pass on the costs of these requirements to their customers.

New reforms will open doors to foreign capital investment

• The Philippines has published a thousand page economic reform agenda to allow 100 per

cent foreign ownership of certain sectors crucial in making the economy globally competitive.

These sectors include public utilities such as power, transportation and telecommunications,

commercial and industrial land, advertising, mass media and educational institutions. Of

particular interest to foreign investors is the proposed scrapping of the mandatory 60/40

local foreign equity structure to allow foreign businessmen 100 per cent ownership.

Interest between connected companies non-deductible

• Where two companies are involved in the payment of interest, the interest is not allowed as a

deduction if more than 50% in value of the outstanding stock of each corporation is owned,

directly or indirectly, by or for the same individual. This interpretation of the Tax Code was

upheld in the recent case of Duvaz Corporation, although on the facts of that case the

Commissioner of Internal Revenue failed to establish that the companies were so connected.

Best Evidence Rule applied to tax cases

• In the recent VAT case of Benguet Corporation the Court of Tax Appeals held that photocopies

of documents are inadmissible under the best evidence rule. In that case, the Bureau of

Customs had in its possession certified true copies of the import entry declarations. The

taxpayer argued that since it was the Bureau itself that had these true copied it should be

allowed to produce photocopies at the VAT hearing. The Court disagreed and ruled that the

photocopies were inadmissible.

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Taxes paid through error or mistake must be returned to the taxpayer

• In the case of Burmeister vs. CIR the principle of “solutio indebiti” was affirmed. This principle

which provides that if something was received when there was no right to demand it, and it

was unduly delivered through mistake, the obligation to return it arises, allowing the taxpayer

to reclaim output tax in circumstances where it did not realise that the services in respect of

which the output tax had been accounted for should have been zero rated.

Singapore

Tax rate reductions

• Singapore's Deputy Prime Minister, Lee Hsien Loong, told Parliament on 4 April that

Singapore will cut corporate and personal income taxes and is considering raising the rate of

the Goods and services Tax (GST, presently levied at 3%) and the Motor Vehicle Tax to offset

the loss of revenue. Mr Lee said that lower taxes are needed to boost Singapore's

competitiveness and to attract investment.

• Singapore's current corporate income tax rate is 24.5 percent, and its top personal income

tax rate is 26 percent. If the government decides to raise the GST, it will do so only when the

economy is on a firmer footing.

• Some financial institutions have said that they expect Singapore to lower the top corporate

income tax rate to 20 or 18.5 percent by the year 2005.

Tax treatment of severance pay

• The Inland Revenue Authority of Singapore in February has published a practice note clarifying

that severance payments received by laid-off employees to compensate for the loss of

employment are not taxable to the employees. However, payments other than compensation

for loss of employment -- such as salary in lieu of notice and gratuities for past services -- are

taxable to the retrenched employee under section 10(1)(b) of the Income Tax Act because

they are considered gains or profits from employment.

Commerzbank wins Ringgit case in landmark ruling

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• Singapore’s Court of Appeal has upheld the right of a bank to make payments in US Dollars for

Ringgit accounts after Malaysia’s introduction of exchange control regulations. The Commerzbank

could not repay the accountholder in Ringgit because the exchange controls disallowed payments in

Ringgit offshore. The decision is likely to put an end to many other disputes that have arisen between

banks and Ringgit accountholders as a result of the exchange control regulations. Some banks,

however, noted that the ruling came too late because a number of cases had been settled with their

Ringgit accountholders for commercial reasons.


• Kuwait. Singapore and Kuwait signed an agreement in Singapore on 21 February 2002 for the

avoidance of double taxation. The treaty will enter into force after ratification by both

countries. The provisions of the treaty will apply to income arising in the year after its entry

into force. Details of the Agreement will be made available after the ratification.

• Amendments to the Singapore – Belgium tax treaty. At Belgium's request, Belgium and

Singapore renegotiated the current tax treaty between the two countries. The amendments

have been submitted to the Belgian Senate on 11 January 2002. Once approved by the

Belgian Senate, the amendments will be sent to the Belgian House of Representatives.

Because Singapore is no longer a qualifying ‘developing country’, the amendments limit the

availability of a tax sparing credit to Belgium tax residents in respect of interest and royalties

derived from Singapore. The tax sparing credit provision in the treaty (article 23) allow a

Belgian resident to claim a tax credit for Singapore taxes on such income, even if no tax was

actually paid in Singapore. Under the amended terms of the treaty, the scope of the tax

sparing provision in respect of interest and royalties is significantly reduced. After a

transitional phase of five years, the tax sparing credit will be terminated entirely. Other

amendments to the treaty include (1) a broader scope of the definition of permanent

establishment, to include services, including advisory services; (2) article 15 of the original

convention, pertaining to members of the board of directors, has been amended so that the

remuneration of actively participating partners is taxable under the same convention clauses

as are applicable to salaried members; (3) the taxation authority was assigned to the source

state for pensions and annuities paid by social security or other government- organized

programs; and (4) paragraph 1 of article 27, pertaining to treasury stock, has been removed.

The provisions of the amended terms of the treaty will have retroactive effect in Belgium for

taxes due at source on income credited or payable on or after 1 January 1997, and for other

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taxes levied on income of taxable periods ending on or after 31 December 1997; and in

Singapore, for all taxes for years of assessment beginning on or after 1 January 1998.

• Romania. Singapore and Romania signed an agreement in Singapore on 21 February 2002 for

the avoidance of double taxation. The treaty will enter into force after ratification by both

countries. The provisions of the treaty will apply to income arising in the year after its entry

into force. Details of the Agreement will be made available after the ratification.

• Japan / Free Trade Agreement. On a visit to Singapore on the 13th of January 2002 during his

formal tour to ASEAN countries, Japanese Prime Minister Junichiro Koizumi signed the free

trade agreement (FTA) between Japan and Singapore, which had been negotiated between the

two countries two years ago. The FTA abolishes customs duties on almost all goods and

products traded between Singapore and Japan. In addition to customs duties, the FTA

provides that the treatment of nationals be uniform in both countries in terms of investments,

and that safety certificates for electrical appliances and communication instruments and

certificates of qualification for business purposes are mutually applicable.

Taiwan

New tax on tobacco and alcoholic drinks introduced

• It is reported that the Executive Yuan has decided to impose a new tax on tobacco and

alcoholic drinks with effect from 1 January 2002. Currently, no tax is imposed on domestically

produced tobacco and alcoholic drinks as there are produced under a government monopoly.

Imported tobacco and alcoholic drinks are, however, subject to substantial taxation. As a

result of Taiwan’s entry into the World Trade Organization (see the January edition of this

newsletter) a new tax on tobacco and alcoholic drinks is to be introduced, regardless of

whether the drinks are produced domestically or imported.

Rates of land increment tax reduced

• The rates of the land value tax have been reduced by 50% by virtue of a President Decree

issued on 31 January 2002. The reduced rates apply for a fixed period from 17 January 2002

to 16 January 2004. As a result, the rates are now 30% (reduced from 60%), 25% (reduced

from 50%) and 20% (reduced from 40%). The applicable rate depends on the amount of the

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capital gain. In addition, the special rate of 10%, which applies to land used by homeowners,

has been reduced to 5%.

• The land value increment tax is a tax on capital gains realized on the transfer of land. Under

the tax law, capital gains on buildings and the land on which buildings are constructed are

taxed separately. Capital gains on buildings are considered to be income and subject to

progressive income tax , whilst capital gains on the transfer of the land are treated as capital

gains and subject to the land value increment tax.

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Tax exemption on royalty payments violates Taiwanese Law

• The Republic of China’s tax police are investigating a large number of high technology

corporations on tax evasion charges involving overseas subsidiaries. According to Taiwan’s

National Tax System, the firms under investigation are suspected of using evasive accounting

procedures by transferring intellectual property rights to an overseas subsidiary and then

repurchasing the rights to make products covered by the patents or trademarks. Taiwanese

firms then apply for a tax exemption on the royalty payments, which violates Taiwanese law.

Administration officials are seeking maximum penalties in those cases to send a strong

message to other corporate tax evaders, but at a minimum, companies found guilty will have

to pay a fine of more than double the amount of taxes owed. The current investigations come

at a time of increased anxiety over corporate accounting practices, exemplified by both the

Enron scandal and recent accusations of insider stock trading by the chairman of Walsin

Lihwa Group.

PRC puts pressure on Taiwan to consider scrapping inheritance tax

• The Ministry of Finance of the PRC is studying whether it should abolish inheritance tax

completely or whether it should simply reduce applicable rates, and thinks Taiwan should do

the same. About 95% of people in Taiwan do not have to pay inheritance tax while only 5 % of

the heirs of rich families currently have to face the levy. Under current rules, a married person

does not have to pay inheritance tax if the inheritance value is under TW 12 million. The tax

revenues from inheritance tax amount to about TW $25 billion each year most of which is

distributed to local government.

Taiwan’s new Finance Minister outlines future policy goals

• Taiwan’s new Finance Minister Lee Ying-sin outlined his future policy goals, which include

reviewing tax preferences in the Taiwanese tax system and raising personal exemptions and

deductions.

VAT due on imports when goods enter the country

• It was reported on the 5th of February 2002 that importers in Taiwan are liable to 5 percent

VAT on imported goods at the time they enter the country, instead of waiting until they are

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sold within Taiwan. The change in the timing of the VAT levy is expected to solve longtime tax

evasion problems, and it brings Taiwan’s VAT regime more in line with the international tax

system.

New mergers and acquisitions law

• The Republic of China's legislative Yuan (Congress) on 15 January 2002 approved the

promulgation of the Enterprises Merger and Acquisition Law. The law provides for merger and

acquisition schemes, simplified procedures, and tax incentives. In addition to traditional

mergers, share acquisitions, and asset acquisitions, the law introduces new concepts, such as

share swaps and company spin-offs. The law provides tax incentives for: asset acquisitions,

under which 65 percent or more of the consideration is shares of the acquiring company;

share swaps (100 percent shares of the disposing company); mergers; and spin-offs.

Tax exemptions for profits earned in the PRC

• It was reported that Taiwan’s parliament on 2 April ratified the latest revisions to a law ending

double taxation for investment in the PRC and opening up the island's declining real estate

market to investors from the mainland, in an effort to encourage the repatriation of profits to

Taiwan.

• Taiwanese investors who secretly invested in the PRC in the past will also be granted a six-

month grace period after the amendments go into effect, during which they can register their

investments with the government without facing penalties, Kyodo News reported.

• Article 24 of the Statute Governing Relations Across the Taiwan Strait will ensure that profits

earned by Taiwanese investors from their investments in the mainland are deductible when

they pay tax in Taiwan, according to Taiwan Economic News.

• Companies in Taiwan will no longer be taxed at home on profits from PRC operations if they

already paid income tax in the PRC or in a third territory. The Taiwanese government hopes

the change will encourage Taiwanese investors to repatriate profits to the island and help stop

capital from flowing out its borders.

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• Reportedly, in principle, investors from the P.R.C. -- whether individuals, companies, or

organizations -- may now also buy and sell real estate in Taiwan, but they still need to apply

for a special permit with Taiwanese authorities.

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Thailand

Extension of 7% VAT rate

• It was announced that the period of the temporary reduction of the VAT rate from 10% to 7%

for the sale of goods, the rendering of services or imports was extended until 30 September

2002. The 10% VAT is currently scheduled to apply again from 1 October 2002 onwards, but

recent statements by government officials strongly suggest that the Thai authorities will

probably extend the period of the 7% rate until the Thai economy has sufficiently recovered

from the economic crisis it has been suffering from since 1997.

Partial business transfers

• It was reported on 5 April 2002 that Thailand has enacted Royal Decree 397 extending the

exemption period for the VAT, single business tax, and stamp duty on partial business

transfers executed between 1 January and 31 December 2002. The exemption period ended

31 December 2001 under expired Royal Decree 384.

Transfer pricing rules

• Reportedly, Thailand's revenue department is currently finalising the long expected transfer

pricing rules for transactions between related parties, and expectations are that the new

transfer pricing provisions will be issued in the course of April 2002. Senior officials have

stated that the new provisions will open the possibility to obtain Advance Pricing Agreements

(APA). The adoption and documentation of accepted transfer pricing methods provides

confidence during tax authority examinations and audits, but will reportedly not provide

certainty to the taxpayer.

Employers in Thailand required to contribute to social security fund

• As of 1 April 2002, employers in Thailand with less than 10 employees will be required to

make monthly contributions to the Social Security Fund. Employees will also be obliged to

make monthly contributions.

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Tax audits of loss making companies

• The director-general of Thailand's Revenue Department, announced on 13 March that the

department is determined to audit 6,000 companies which have reported losses over the last

two years but have not claimed the corresponding tax exemptions. The Revenue department

suspects that the reason for not claiming the losses is that the accounts were manipulated

and that claiming the exemptions would result in closer scrutiny by the Revenue department.

• It was reported on 2 April 2002 that Thailand's Revenue Department has started requesting

transfer pricing documentation in accordance with international audit practices. The Revenue

Department recently distributed letters requesting the following: documents establishing the

reasons for entering into significant international dealings with associated enterprises; pricing

policies, documents relating to product profitability, relevant market information, and the

profit contributions of each party; documents establishing reasons for the company's selection

of a particular pricing method or methods; and other documents relevant in determining

arm's-length consideration (if any).

Foreign actors benefit from preferential 10% tax rate

• On 15 January 2002, the Thai cabinet introduced a 10 % flat tax on 15 January, reducing the

progressive rate of 5 % to 37 % normally applied to foreign actors filming in Thailand.

Thailand presumably attracts some 500 to 600 foreign productions each year, with an average

of 10 major films a year containing budgets of THB 500 million.

Tax rates reductions

• Thailand reduced corporate tax rates for small and medium enterprises as per 31 January 2002.

The rates for accounting periods commencing on or after 1 January 2002 are as follows:

- for taxable profits between Baht 1 and 1,000,000, the applicable rate is 20%,

- for taxable profits between Baht 1,000,000 and 3,000,000, the applicable rate is 25%, and

- for taxable profits exceeding 3,000,000, the applicable rate is 30%.

To be eligible for these rates, a company must have not more than five million Baht in paid-up

capital at the end of the accounting period.

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• Royal Decree No. 387 issued under the Revenue Code reduced the tax rates for companies

registered at the Stock Exchange of Thailand (“SET”) including the Market for Alternative

Investment (“MAI”). The reduced tax rates for listed companies are as follows:

- 25 % for companies registered at the SET prior to 6 September 2001, on net profits not

exceeding Baht 300 million.

- 20 percent for companies registered with the MAI within three years from 6 September 2001.

- 25 percent for companies registered with the SET other than the MAI within three years from 6

September 2001.

• The reduced rates will apply only for five consecutive accounting periods. For companies which

have been listed prior to 6 September 2001, the reduced rates shall first apply for the

accounting period beginning on or after 6 September 2001. For newly listed companies, the

reduced rate shall first apply for the accounting period beginning on or after the listing day.

Conditions apply to prevent companies listed prior to 6 September 2001 from taking advantage

of the lower tax rates granted to newly listed companies. The reduced rates will not be conferred

on companies that de-list and then re-list or newly listed companies that carry on the business

of a company listed prior to 6 September 2001 due to a business transfer or amalgamation.

Tax incentives for Small and medium-sized enterprises

• On 4 April 2002 it was reported that the government of Thailand has released Royal Decrees

394-396 to reduce the tax burden on small and medium-sized enterprises (SME) and to

encourage investment to accelerate the growth of SMEs and the economy as a whole.

• Royal Decree 394 provides for reduced corporate income tax (CIT) rates for SMEs and any other

company with paid-up capital not exceeding THB 5 million at the end of the relevant accounting

period. Royal Decree 395 provides for an initial deduction method for certain SME assets

acquired from 31 January 2002 onward, and Royal Decree 396 exempts Thai venture capital

companies holding stakes in SMEs from the CIT on dividends and capital gains derived from

their SME investments.


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• Myanmar. Thailand and Myanmar signed an historic tax treaty in Myanmar on 7 February

2002. Details of the new treaty are not yet available.

Vietnam

Vietnam makes plans to increase foreign investment

• Vietnam will soon announce a raft of new incentives, tax breaks, and cuts in land rentals in a

bid to boost foreign investments. Among the measures being planned are a reduction of fees

and charges paid by foreign investors under the onerous “dual pricing system”, allowing

foreign-invested enterprises to privatize and enabling them to list on the Vietnamese stock

exchange and creating a one-stop shop for foreign investors in order to simplify investment

formalities and red tape.

Vietnam simplifies corporate tax law

• Vietnam's Finance Ministry recently completed an overhaul of the country's corporate tax

rules, combining a number of regulations into a cohesive framework aimed at cutting out

overlap and inconsistency. The regulatory overhaul also makes corporate income tax law

compatible with recent changes to the laws on foreign investment and other key legal

documents.

• Recent Finance Ministry circulars provide models for taxpayers to follow in calculating their

taxable income and deductible expenses, including examples from particular industries and

sectors.

• Reasonable expenses for deduction include depreciation of fixed assets; the cost of raw

materials on a reasonable usage basis or the ex-warehouse material price; salaries and

allowances; scientific and technical research expenses; the cost of certain services (utilities,

travel allowances); interest on bank loans; advertising expenses and certain taxes.

• There is however a 7 percent cap on deductions that can be claimed for advertising expenses

and other costs related to marketing and promotion. In the case of newly established

enterprises engaged in production, construction, or transportation, the 7 percent cap falls to 5

percent after two years of operation. The basic corporate tax rate is 32 percent, but

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enterprises involved in mining, construction, transportation, and other industries will enjoy a

25 percent rate for three years from January 1999.

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Vietnam enjoys preferential Import Duty rates in ASEAN countries

• On 1 January the six founding member countries of the Association of South East Asian

Nations (ASEAN) began implementing tariff reductions within the ASEAN Free Trade Area.\\

• This creates a considerable trade advantage for Vietnam's exports to the ASEAN region. More

goods from Vietnam will immediately attract low import duty rates well in advance of 1

January 2006 (i.e. the date Vietnam will be obliged to apply the same reduced rates). Also, as

of 1 January, the ASEAN-6 countries have started to apply the ASEAN Integration System of

Preferences (AISP) to the newest ASEAN members -- Cambodia, Laos, Myanmar, and Vietnam.

Each of the original ASEAN members has agreed to provide varying degrees of preferential

treatment to Vietnam under the AISP scheme. Vietnamese export items will enjoy preferential

duty rates of zero to 5 percent immediately upon export to the ASEAN-6 countries.

Vietnam issues guidance on enterprise income tax

• Vietnam's Ministry of Finance recently issued Circular 18, containing new guidance on the

enterprise income tax. The new guidance, which became effective 8 March, does not provide

for any radical changes that could reduce the tax burden for enterprises in 2002.

Tax system shortcomings

• Despite recent improvements in Vietnam's tax system, shortcomings still exist that require

clarification of tax reform objectives, particularly to guarantee revenue sources for the state

budget in the years to come. Vietnam is making every effort to ensure its tax laws are clear,

transparent, and fair in all economic sectors, especially in the foreign-owned sector, but there

is some way to go. It is thought to be the case that new laws, such as the VAT and Land laws,

have contributed significantly to the acceleration of domestic production, the encouragement

of exports, the strengthening of economic accountability, and the attraction of foreign

investment into Vietnam. However, the tax system should be in compliance with international

standards, creating conditions for Vietnam's integration with the rest of the world. The first

step will be the reduction of tax-related administrative formalities.

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Vietnam adopts new personal income tax rates for residents and expatriates

• The Vietnamese government has enacted new rules for the taxation of personal income of both

expatriate and Vietnamese taxpayers. Expatriates who stay in Vietnam for a period longer than

30 days but shorter than 183 days in a taxable year now are subject to a flat tax rate of 25

percent (previously 10 percent). Progressive rates for expatriates who stay in Vietnam for 183

days or longer in a taxable year have not changed. However, the progressive rates have been

reduced for Vietnamese citizens and other individuals permanently resident in Vietnam. The

highest rate in the progressive schedule is now 50 percent, down from 60 percent under the

repealed regulations. In addition, the 30 percent surtax on after-tax income does not apply

unless the after-tax income exceeds VND 15 million. That threshold previously was VND 8

million.

Vietnam offers trade zone preferential tax treatment

• Vietnam will exempt goods and services from VAT within the Lao Bao trade zone as of 26

January. Goods produced, processed, reprocessed, or assembled for export inside the zone

will be exempt from export tariffs. The trade zone is in the central province of Quang Tri,

which borders Laos' Savannaket province. The new decision will also free imports to the zone

from import duties, whether they're made in Vietnam or not. Any foreign-invested business or

foreign company employing business contracts that use profits for reinvestment within the

zone for three years will have their reinvestment tax payment refunded. Any domestic

business operating in the zone is entitled to take loans from the State Development and

Assistance Fund.

Non discrimination

The Ministry of Trade has confirmed in February 2002 that EU and US companies will be treated

equally in terms of commercial business transactions, and that EU companies will receive no less

favourable terms and conditions than their US counterparts under the US-Vietnam Bilateral Trade

Agreement.

ADDRESSES

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GENEVA59, rue de RhoneCH-1204 Geneva, SwitzerlandTelephone +41 22 818 80 00Fax +41 22 312 02 03Contact: Frank Jonker

LONDON26 Throgmorton StreetLondon EC2N 2AN, UKTelephone +44 20 7826 3070Fax +44 20 7826 3080Contact: Marc Klerks

LUXEMBOURG5, rue Eugène RuppertL-2453 Luxembourg, LuxembourgTelephone +352 46 62 30Fax +352 46 62 34Contact: Teun Akkermans/Simon Paul

NEW YORK712 Fifth AvenueNew York, NY 10019, U.S.A.Telephone +1 212 489 06 20Fax +1 212 489 07 10Contact: Mark Doets

PARIS1, avenue Franklin D. Roosevelt75008 Paris, FranceTelephone + 33 1 49 53 91 25Fax +33 1 49 53 94 29 (tax dpt.) +33 1 49 89 14 60 (civil dpt.)Contact: Egbert Jan Jonker/Alfred Hoogveld

SINGAPORE80 Raffles Place# 14-06 UOB Plaza 1Singapore 048624Telephone +65 532 30 70Fax +65 532 30 71Contact: Pieter de Ridder

TOKYO6F, Feliz Building2-3-14 KajichoChiyoda-kuTokyo 101-0044, JapanTelephone +81 3 325 881 10Fax +81 3 325 881 15Contact: Pieter Stalman

ARUBASun Plaza160 L. G. Smith BoulevardOranjestad, ArubaTelephone +297 82 48 37Fax +297 83 52 14

BERLINFriedrichstrasse 20010117 Berlin, GermanyTelefon +49 30 22 33 30 00Fax +49 30 22 33 30 01

BRUSSELSLoyens & VolkmaarsAttorneys at LawWoluwe AtriumRue Neerveldstraat 101/103B-1200 Brussels, BelgiumTelephone +32 2 743 43 43Fax +32 2 743 43 10Contact: Christian Cheruy/Koen Platteau

CURAÇAOTax AdvisersP.O. Box 507J.B. Gorsiraweg 4Willemstad, Netherlands AntillesTelephone +599 9 434 11 00Fax +599 9 465 15 18Contact: Angel Gomez Osorio

FRANKFURTP.O. Box 17 03 3860077 Frankfurt am MainBockenheimer Landstrasse 2360325 Frankfurt am Main, GermanyTelephone +49 69 97 15 70Fax +49 69 971 571 00Contact: Bart Rubbens

AMSTERDAMP.O. Box 711701008 BD AmsterdamFred. Roeskestraat 1001076 ED Amsterdam, The NetherlandsTelephone +31 20 578 57 85Fax +31 20 578 58 00Contact: Willem Jarigsma

ARNHEM (Oosterbeek)P.O. Box 1706860 AD OosterbeekUtrechtseweg 1656862 AJ Oosterbeek, The NetherlandsTelephone +31 26 333 77 00Fax +31 26 333 73 42Contact: Robert de Vries

EINDHOVENP.O. Box 175600 AA EindhovenParklaan 54a5613 BH Eindhoven, The NetherlandsTelephone +31 40 239 44 44Fax +31 40 239 44 40Contact: Etienne Spierts

ROTTERDAMP.O. Box 28883000 CW RotterdamWeena 6903012 CN Rotterdam, The NetherlandsTelephone +31 10 224 62 24Fax +31 10 412 58 39Contact: Hans de Groot

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