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Inaugural edition:
Incentives in ASEAN
region 2012(Manufacturing and Regional Corporate
Support/Headquarter)
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ContentsOpening 01
Overview of incentives
Indonesia 03
Malaysia 06
Philippines 08
Singapore 10
Thailand 12
Vietnam 14
BIA team and services 17
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before making an informed choice on the country that best
suits their needs.
Investors into the ASEAN countries typically focus on
manufacturing operations and / or regional corporate
support headquarter activities. We have therefore focused
this inaugural edition on the incentives for these two
areas1. ASEAN countries are also starting to place more
importance on high technology industries, green activities
and research and development (R&D) activities2to boost
productivity and build capabilities. We will briey discuss
these upcoming trends.
Given the relatively positive outlook on the ASEAN
economy as well as the increasing attractiveness of the
incentive landscape, it is expected that investments into
the region will continue to grow. There is government
competition for FDIs and incentives are continually being
changed, typically enhanced. It is a critical part of an
investment decision to analyse and compare currently
available incentives.
We trust that this inaugural edition will be a good starting
point to help you better understand the key incentives
available in the ASEAN region and evaluate your
investment options.
1 Please note that each country may have a range of incentives available for other activities, and this edition is by no means an exhaustive list.2 Please refer to our 2011 Asia-Pacic R&D incentives publication for an overview of the incentives available to companies engaging in R&D activities in
the key Asia-Pacic countries.
Welcome to our inaugural edition of the ASEAN incentives publication.
OpeningWith a population of almost 600 million (based on the ASEANEconomic Community Scorecard released by the Associationin 2010), the 10 Southeast Asian nations that make upASEAN, are increasingly being viewed as an importanteconomic bloc. According to the World Investment Report2011 issued by the United Nations Conference on Trade
and Development, foreign direct investment (FDI) inows to
ASEAN amounted to US$79 billion in 2010. Compared withChinas US$105.7 billion and Indias US$24.6 billion, this level
of FDIs inow is reective of investors increasing focus in
the ASEAN region.
In the recent Organisation for Economic Co-operation and
Development (OECD) Southeast Asian Economic Outlook
issued in November 2011, it is forecasted that the Gross
Domestic Product (GDP) growth for the six Southeast Asian
economies, Indonesia, Malaysia, the Philippines, Singapore,
Thailand and Vietnam, will remain robust at about 5% to 6%.
With this favourable economic outlook, governments in the
ASEAN countries have been stepping up efforts to enhanceand develop initiatives to continue attracting FDIs. Such
initiatives include investment incentives in the area of tax,
subsidies, relaxation of regulatory requirements as well as
land use concessions.
For example, the introduction of the Tax Holiday incentive
by Indonesia in late 2011, which offers corporate income
tax exemption of up to 10 years followed by an additional
2-year partial tax exemption, has caught the attention
of multinational companies considering the country as a
potential manufacturing location.
In the same year, Malaysia launched the Global Incentivesfor Trading (GIFT) programme that awards, amongst other
benets, an appealing 3% corporate tax rate on chargeable
income. This is a bid to draw the interest of potential global/
regional trading petroleum companies.
Benets aside, it is equally important to factor in the costs of
qualifying for the incentives. All incentives come with specied
conditions and requirements. In a number of the ASEAN
countries, the rules may not necessarily be transparent,
clearly dened or consistently applied. All these present risks
and uncertainties which investors need to consider and weigh
Adrian BallManaging Partner - TaxASEAN Sub-Area
Tel: +65 6309 8787
Tan Bin EngDirector - Business Incentives Advisory
Tel: +65 6309 [email protected]
March 2012
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Singapore
Malaysia
Indonesia
Philippines
Thailand
Cambodia
Brunei
LaosMyanmar
Vietnam
ASEAN countries are increasingly
playing a leadership role in theregion. ASEAN itself has thepotential to be a very positiveforce in global affairsBarack Obama
(President of United States)
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Overview of incentives in
Introduction
The presence of tax incentives in Indonesia is relatively short,
with the rst Tax Allowance incentive introduced in 2007.
Since then, the Indonesian government has continued to
explore and develop new incentives while rening its existing
tax incentives. A number of statutory incentives were introduced
in the 2008 reform of Income Tax Law and reduced corporate
tax regimes were made available to certain companies listed
on the Indonesian stock exchange, as well as small/medium-
scale companies. More recently, the Tax Holiday incentive was
established in 2011 with the objective of attracting foreign
direct investments into Indonesia, in particular manufacturing
industries that have extensive interconnections, high value-add,
introduces new technology, and is of strategic importance for
the nation-wide economy.
Incentive categories and administering bodyIncentives in Indonesia can be broadly categorised into
discretionary and statutory incentives. Discretionary incentives
include the Tax Allowance incentive and Tax Holiday incentive,
which require approvals from the Ministry of Finance.
Administration of these tax incentives are usually carried out
together with other relevant government agencies such as the
Ministry of Industry and the Indonesia Investment Coordinating
Board. Taxpayers who are awarded the Tax Allowance Incentive
are not eligible for the Tax Holiday incentive and vice versa.
Statutory tax incentives include incentives for listed companies
and small/medium scale companies, and the conditions and
requirements are specically dened under the Income Tax Law.
For listed companies, reduction of corporate income tax rate
by ve percentage points is available as long as at least 40% of
their paid-up capital is traded on the Indonesian stock exchange.
For small/medium-scale companies, those having annual gross
turnover of up to IDR 50 billion are entitled to a 50% reduction
of the corporate tax rate on taxable income up to IDR 4.8 billion.
Claims for the benets under such incentives are made through
the annual tax return without the need for a separate application
process and approval from the government authorities.
Indonesia
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3 Based on exchange rate of US$1:IDR8,936 as at 14 February 2012.
the request for the Tax Holiday incentive to Ministry
of Finance must be made within three years from the
date of enactment of the Tax Holiday regulation, which is
15 August 2011. There is no requirement under the existingtax regulations for the investment to be made only after
approval for the relevant incentives has been obtained.
However in practice, we typically see applications for tax
incentives being made before the investment or commercial
operation commences.
General application process for discretionary incentives
Key tax incentives
The key available tax incentives in Indonesia are focused on export-oriented industries, manufacturing industries and sophisticated
technology industries, and there have not been any tax incentives to promote headquarter activities to-date.
The table below provides an overview of key available tax incentives for manufacturing industries available through application with
the relevant government agencies and/or the Indonesia Investment Coordinating Board:
Activity Manufacturing
Name of Incentive Tax Allowance Tax Holiday
Corporate tax
benefts
Investment allowance in the form of reduction of net
income by 30% of the actual amount invested in land and
buildings, and plant and equipment. Following the 2011
amendment, the Tax Allowance can only be utilised once
80% of the investment plan is attained. This allowance
may be claimed at a rate of 5% each year over a 6-year
period.
Accelerated tax depreciation and amortisation.
Carry-forward of tax loss up to a period of 10 years,
subject to certain conditions, as compared to 5 years
for non-incentivised companies.
Corporate income tax exemption on income derived from
qualied business activities for a period of ve to ten
years, starting from the commencement of commercial
operations followed by a corporate income tax reduction
of fty percent for two years
Other tax benefts Reduced tax rate of 10% for dividends paid
to nonresidents.
None
Other tax benefts None None
Scope of coverage
of incentive
Companies investing in certain types of businesses or
region (currently 52 categories of business sectors and
77 categories of types of industries in designated areasand provinces, generally outside Java. Please refer to
Annex A for examples of the business sectors.)
Engaged in pioneer industries, which currently include
basic metals, oil renery, communication equipment,
industrial machinery and renewable resources.
Key assessment
parameters
The investment must be a new investment or an
investment for the purpose of expanding a current
business, with certain exceptions.
Have new approved investment plans of at least IDR1
trillion (approx US$112 million3)
Deposit at least 10% of total investment plan in
Indonesian banking system without any withdrawal until
commercial production begins.
Applicable to Indonesian legal entity established after
15 August 2010 (i.e. 12 months before the issuance
of the Regulation)
Businesses applying for the Tax Allowance/Tax Holiday incentives
are required to submit an application to the relevant government
agency and/or the Indonesia Investment Coordinating Board,
which will evaluate the applicants eligibility for the incentiveand submit a recommendation to the Directorate General of
Taxation/Minister for Finance for nal approval.
For the Tax Allowance incentive, the Minister for Finance is
required to accept or reject the request within ten working days
from the receipt of a complete and valid request. Submission of
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Future outlook
While the Indonesian government has been proactively
expanding the list of business sectors qualifying for the
Tax Allowance incentive, it is expected that the government
will continue to develop the qualifying list for both theTax Holiday incentive and Tax Allowance incentive to keep up
its efforts in attracting inbound investments into Indonesia.
Annex A4
1. Plantations, livestock, hunting, and related activities
2. Forestry and logging
3. Coal and Lignite mining
4. Geothermal
5. Food industry
6. Textile industry
7. Oil and natural gas renement and purication
8. Chemicals industry
9. Rubber industry
10. Cosmetics ingredients industry
11. Pharmaceuticals industry
12. Base metals industry
13. Metal goods industry
14. Electronics industry
15. Electrical equipment industry
16. Machinery industry
17. Vehicle industry
18. Other transport equipment industry
19. Machinery and equipment installation and repair services
20. Power supply, supply of natural gas
21. Water supply
22. Waste treatment and recycling
23. Civil building construction
24. Land transportation and pipeline transportation
25. Computer programming activities
26. Real estate
Ben Koesmoeljana
PartnerTel: +62 21 5289 5030
4 Source: News article on Indonesia Infrastructure Initiative website (http://www.indii.co.id/news_daily_detail.php?id=2780)
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Overview of incentives in
5 Source: 2010 Media Statement on MIDA website (http://www.mida.gov.my/env3/uploads/PerformanceReport/2010/MediaStatement.pdf)
Introduction
Malaysia has developed and offered incentives to attract
investments and spur economic activity in key sectors for over
20 years. Historically, these incentives were aimed at attracting
investments for the manufacturing sector; however, there is a
growing focus towards developing the services sector. In 2010,
over 900 manufacturing projects were granted incentives.
In comparison, more than double the number of projects in
the services sector were awarded incentives during the
same period5.
Incentive categories and administering body
There are two broad categories of incentives in Malaysia
discretionary and statutory.
Statutory incentives, such as the Reinvestment Allowance (RA)
incentive for manufacturing or agricultural projects that reinvest
capital for expansion, modernisation or automation purposes,
are available under the Income Tax Act. Such incentives do not
require prior approval and are claimed through the submission
of the annual corporate tax return.
Discretionary incentives require negotiations and applications
to the relevant authorities. The principal agency that administers
discretionary incentives and promotes key manufacturing
and service sectors is the Malaysian Investment Development
Authority (MIDA).
Discretionary incentives are available for products and activitiesthat the Malaysian government has identied a need to
encourage. A list of promoted products and activities and their
standard qualifying conditions for different manufacturing and
service sectors are available at the MIDA website. Based on the
latest list published on the MIDA website in 2011, the promoted
products and activities includes manufacture of rubber
products, petrochemicals, electrical and electronic products and
components, professional, medical, scientic and measuring
devices / parts, etc, and manufacturing related services such
as operational headquarters, regional distribution centres,
international procurement centres, etc.
Malaysia
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There are also additional incentives available for projects that
the Malaysian government considers to be of national and
strategic importance, beyond what is currently specied in the
legislation. There are no standard eligibility criteria for such
additional incentives, although factors such as investment value,
introduction of new technology, development and employmentof highly skilled staff (often referred to as knowledge workers),
and introduction or increase in level of value-added activities
(such as research and development) are typically taken into
consideration in the negotiations with the authorities.
Future outlook
During the 2011 Budget speech, there was special mention
on the importance of the services sector and it is currently the
largest contributor to Malaysias GDP (almost 58%). In the same
Budget, the Malaysian government announced a number of new
tax incentives for the services sector covering tourism, nancial
services and education. With the objective set under the 10th
Malaysia Plan to grow the services sectors GDP contribution to
60% by 2015, the trend towards incentivising and developing the
services sector is expected to continue.
General application process
The application process generally takes between three to six
months from preparing the application submission package,
clarifying information with the authorities to the tabling of the
report to the National Committee on Investments, a central body
for facilitating foreign capital inows set up by MIDA in 2010,
for approval.
It is important to note that incentive applications should be
submitted before the project commences.
Key tax incentives
The table below provides an overview of key available tax incentives in Malaysia available through application with the relevant
government agencies:
Activity Manufacturing Provision of corporate support /Headquarter services
Available taxincentives
Pioneer status6(PS) Investment tax allowance6(ITA)
Note that the PS and ITA are mutually exclusive forthe same project
Operational Headquarters (OHQ) International Procurement Centres (IPC) Regional Distribution Centres (RDC)
Corporatetax benefts
Partial (50%/70%) / full (100%) income tax exemptionfor a period of up to 10 years (PS)
An allowance of 60% to 100% of qualifying capitalexpenditure available for offset against 70% to 100%of statutory income (ITA)
Full income tax exemption on qualifying income streams for10 years
Other taxbenefts
Import duty exemptions [For information, a companymay also enjoy the import duty exemptions on astandalone basis, i.e. without PS/ITA]
Expatriates are taxed only on the number of days they arephysically in Malaysia
Non-taxbenefts
Approval of expatriate positions Approval of expatriate positions Flexibility on Foreign Exchange Administration rules
Keyassessmentparameters
Whether the product / activity is on the promotedlist
Investment value Whether new technology is being introduced Number of knowledge workers Level of value-added activities (such as research and
development)
All Qualifying services/activities Minimum annual operating expenditure
IPC/RDC only Minimum annual sales turnover Incremental usage of local ports and airports
OHQ only Headcount Minimum number of entities being served
Amarjeet Singh
Partner
Tel: +60 3 7495 [email protected]
6 Also available for activities beyond manufacturing such as services.
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Overview of incentives in
Introduction
The Philippines has had a long history of using scal incentives
in pursuit of the countrys industrial, sectoral and regional
development strategy. Specically, the Philippines government
has enacted a number of incentive laws to encourage the
placement of investments in the country. The major incentive
laws are implemented by the Board of Investments (BOI) and
the Philippine Economic Zone Authority (PEZA). As a result of
the incentive laws in place, investments committed to the
BOI and PEZA amounted to P657.24 billion (approximately
US$15 billion) in 2011, a 30% rise from 2010.
Incentive categories and administering body
Business incentives may be applied for and granted under
the various incentive laws, the more popular of which are the
Omnibus Investments Code of 1987 and the Special Economic
Zone Act of 1995.
The Omnibus Investments Code of 1987 is administered by
the BOI. It provides for a comprehensive set of incentives for
local and foreign enterprises engaged in activities considered
by the government as high priority for national development,
as set forth in an annual Investment Priorities Plan (IPP).
The activities listed in the latest IPP recently released in late
2011 include agriculture/agribusiness and shery, creative
industries/knowledge-based services, shipbuilding, energy,
infrastructure, research & development, green projects, etc.
The Special Economic Zone Act of 1995, on the other hand,
is administered by the PEZA and was passed to encourage
economic growth through the development of special economic
zones in the Philippines called Ecozones. It grants incentives to
qualied enterprises that are located in an Ecozone. As at
31 December 2011, there were 252 operating economic zones
identied, comprising 15 Agro-Industrial Economic Zones,
159 IT Parks / Centres, 64 Manufacturing Economic Zones,
2 Medical Tourism Parks / Centres, and 12 Tourism
Economic Zones.
Philippines
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General application process
Depending on the incentive law to be invoked, an applicant
will le its application with the BOI, PEZA or other incentive
administering body, as the case may be. The application will
then be evaluated, with the authorities potentially conducting
Future outlook
There is presently a move to consolidate all the incentives laws
into one law to rationalise the granting and administration of
scal and non-scal incentives given by the various incentive
bodies. The Philippines government is seeking to create a
uniform policy on the issuance of scal incentives to avoid
redundancies that could lead to revenue leakages. This is the
subject of House Bill No. 4935, the proposed Investments and
Incentives Code of the Philippines, which is currently pending
in the Philippine Senate. The authorities are hopeful that this
measure will be passed into law in 2012. Through this bill,
investors will only need to apply with one government agency
for incentives that they may enjoy in the Philippines. With the
Key tax incentives
The table below provides an overview of key available tax incentives in Philippines available through application with the relevant
government agencies:
Activity Manufacturing Provision of corporate support / Headquarter services
Name ofIncentive
PEZA/BOI privileges Regional Operating Headquarters (ROHQ)
Corporatetax benefts
Full tax exemption for 4 to 6 years (Income TaxHoliday [ITH])
Preferential tax rate of 5% of gross income in lieuof all national and local taxes after ITH period (forPEZA-registered enterprises)
Tax exemption on remittance of branch prots (forPEZA-registered enterprises)
Tax credit on raw materials, supplies and semi-manufactured products used for the manufactureof export products and forming part thereof(For BOI-registered enterprises)
Preferential income tax rate of 10% while the branch isregistered as an ROHQ
Preferential tax rate of 15% on remittance ofbranch prots
Exemption from local taxes, fees or charges imposed bya local government unit, except real property tax on landimprovements and equipment
Other taxbenefts
Exemption from wharfage dues, export taxes,imposts or fees
Tax and duty free importation of imported spareparts
15% withholding tax on compensations, remunerationsreceived by expatriates employed by ROHQ holdingmanagerial or technical positions
Non-taxbenefts
Other non-scal benets such as importationand unrestricted use of consigned equipment,privilege to operate bonded warehouse
Importation of brand new motor vehicle but subject topayment of taxes and duties
Keyassessmentparameters
Type of business conducted Technology involved in manufacturing process Paid-up capital Job generation
Type of business activities conducted: qualifyingservices (e.g. general administration and planning,sourcing / procurement, corporate nance advisory,research and development, etc.) provided to overseasafliates, branches or subsidiaries
Fidela I. Reyes
Partner
Tel: +63 2 894 8204
site visits. Depending on the completeness of the documentary
requirements submitted by the applicant, the application may
take from one to six months.
envisaged streamlining of the application and registrationprocess, investors could expect a higher level of efciency and
increased transparency when applying for incentives.
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Overview of incentives in
Introduction
Since its independence, the Singapore government has used
scal incentives to promote economic development in the
country. In order to create a robust and diversied economy,
consisting manufacturing and services sectors, a number of
key tax incentives under both the Income Tax Act (ITA) and the
Economic Expansion Incentives (Relief from Income Tax) wereintroduced to attract foreign direct investments in manufacturing
and headquarters activities into Singapore.
The success of this targeted approach is evident from the strong
ow of investments into Singapore over the past few years.
Based on the World Investment Report 2011, FDI inows to
Singapore more than doubled from US$15.5 billion in 2005 to
US$38.6 billion in 2010.
Incentive categories and administering body
The incentives in Singapore can be divided into two broad
categories, i.e. discretionary and statutory incentives. Conditionsand requirements for statutory incentives are dened in the ITA.
They are available to all taxpayers to claim, typically through
their annual tax returns. The administration and compliance
of the statutory incentives are typically carried out by the tax
revenue authority of Singapore, sometimes in collaboration with
associated government agencies.
The discretionary incentives are administered by various
government statutory boards based on industry segmentation.
This includes the Monetary Authority of Singapore for the
nancial sector, the Maritime Port Authority of Singapore for the
shipping sector and the Singapore Economic Development Board
and International Enterprise Singapore for the rest. The specicconditions, level of support and duration of the incentive(s) are
typically based on a negotiated outcome with the designated
government statutory board.
General application process
For the application of discretionary incentives, the typical
engagement process with the authorities can last between
three to six months, starting from early contact, business plan
presentation and review, negotiations, and nally agreement
on incentive conditions.
Generally, the incentive negotiations should commence before
companies embark on the projects.
Singapore
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Future outlook
Going forward, two key trends are expected to dominate the
incentive landscape in Singapore for the next couple of years.
Firstly, on the back of strong growth in 2010 and 2011 and
the governments focus in improving the productivity of the
Singapore workforce, it is anticipated that the application of
existing incentive programmes and introduction of new ones will
be more targeted to attract higher value-added activities andjobs into Singapore. Secondly, the government is expected to
take on a cautious outlook coming into 2012 as the uncertainties
in the global economy due to the European debt crisis lingers
and it prepares itself for the need of a stimulus programme
to preserve jobs and support the economy as it previously did
during the global nancial crisis of 2008/2009. In this respect,
Key tax incentives
The table below provides an overview of key tax incentives in Singapore that are available for manufacturing activities and
provision of headquarter functions. These are all discretionary incentives that are available through application and negotiations
with the relevant government agencies:
Activity Manufacturing Provision of corporate support / Headquarter services
Name of
Incentive
Pioneer
Development & Expansion Incentive (DEI)
Investment Allowance (IA)
Note that the IA and the concessionary tax rateunder the Pioneer/DEI are typically mutuallyexclusive for the same project
Headquarters Programmes:
International HQ (IHQ)
Regional HQ (RHQ)
Tax benefts 0% up to 15 years on qualifying income7(Pioneer)
Not less than 5% (typically 5% or 10%) on
qualifying income up to 20 years (DEI) Typically, additional 30% or 50% allowance
on qualifying capital expenditure (IA) againsttaxable prots
Customised incentive packages with lower concessionary
tax rates (typically 0%, 5% or 10) for IHQ
15% (up to 5 years) on qualifying income for RHQ
Non-tax
benefts
None None
Key
assessment
parameters
Incremental headcount
Incremental local business spending
Incremental xed asset investment
Technology involved in manufacturing process
Other qualitative factors
Incremental headcount
Prole of headcount
Incremental local business spending
Types of activities conducted, include:
Strategic business planning and development
General management and administration
Marketing control, planning and brand management
Intellectual property management
Sourcing, procurement and distribution
Research, development and test bedding of new concepts
Other qualitative factors such as geographical coverage ofheadquarter functions, type of R&D activities carried out,ownership of intellectual property, etc.
Tan Bin Eng
Director
Tel: +65 6309 8738
we should expect enhancements to or introduction of incentives
to be even more targeted in stimulating certain aspects of the
Singapore economy which are likely to be hardest hit.
7 Qualifying income includes sales, royalties and service/management fees. Note that under the DEI and RHQ programs (as well as in specied IHQ situations),the qualifying income that exceeds the base income would be eligible for the concessionary tax rate. The base income refers to the average correspondingincome for the 3 years immediately preceding the commencement date of the incentive (unless specied otherwise by the authority) and is subject to thenormal corporate tax rate.
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Introduction
To stay competitive in the ever-changing business landscape,
the Thai government has issued various incentives to attract
foreign investments into Thailand. Major incentives include
the Board of Investment (BOI) incentives for manufacturing
companies, and the Regional Operating Headquarter (ROH)
for service companies.
Incentive categories and administering body
Generally, incentives in Thailand are provided by two
organisations; the BOI and the Revenue Department
(RD). The BOI provides tax and non-tax benets mostly
to manufacturing companies in certain industries,
while the RD offers tax incentives to the ROH which is
a Thai-incorporated company providing managerial,
administrative, and technical services as well as other
supporting services to its associated enterprises.
General application process
An application process for BOI incentives usually takes
2 to 6 months depending on project size, starting from
early contact, business plan presentation and review, and
nal approval on incentive conditions. For the ROH incentives,
eligible companies will typically self-assess that they have
met the assessment criteria and proceed to collate the
requisite documents for submission to the RD to register
for the ROH status. Approval of the ROH status can be
completed within a week upon complete submission of all
required documents to the RD.
Thailand
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Key tax incentives
The table below provides an overview of key available tax incentives in Thailand for manufacturing and headquarter services,available through application and approval from the relevant government agencies:
Activity Manufacturing Provision of corporate support / Headquarter services
Name of Incentive BOI privileges8 ROH incentive
Corporate taxbenefts
Exemption of corporate income tax for up to8 years (depending on activity or zone) Zone 1: 3 years Zone 2: 3years but extendable to 7 years if located
within promoted industrial zones Zone 3: 8 years exemption (50% reduced rate for
additional 5 years given to companies located incertain provinces in Zone 3).
Double deductions for costs of transportation,electricity, and water supply
Exemption of corporate income tax on qualifying incomefrom overseas for 15 years
10% corporate income tax rate on qualifying income fromThailand, certain interest income and royalty income
Tax exemption on certain dividends paid to overseascorporate shareholders and dividends received fromassociated enterprise
Other tax benefts Import duty exemption/reduction on machineryand raw material
Withholding tax exemption on dividend distributedout of BOI prots during the tax exemption period
Personal Income Tax rate reduction forqualied expatriates
Non-tax benefts Opportunity of 100% foreign equity ownership Permission of land ownership rights for foreign-majority-owned companies Permission of unlimited number of expatriates hired
Key assessmentparameters
Types of activities Agriculture and agricultural products Mining, ceramics, basic metals Light industries Metal Products, machinery, transport equipment Electronics Industry and Electric Appliances Chemicals, paper, plastics Services and Public Utilities
Zone (business location) Zone 1: Bangkok, Samut Prakan, Samut Sakhon,
Pathum Thani, Nonthaburi and Nakhon Pathom Zone 2: Samut Songkhram, Ratchaburi,
Kanchanaburi, Suphanburi, Ang Thong,Ayutthaya, Saraburi, Nakhon Nayok,Chachoengsao, Chon Buri, Rayong and Phuket
Zone 3: All other Thailand provinces notmentioned above
Investment amount Debt-to-equity ratio
Qualifying services Business management and administration Sourcing of raw materials, parts and nished products Research & development Technical assistance Marketing and sales promotion Regional human resources training Business advisory services Investment feasibility studies and analyses Credit management and control Other services, subject to approval, on a
case-by-case basis Minimum number of associated enterprises being
serviced by the headquarter company Minimum paid-up capital At least 50% of total income must be derived from
qualifying services income Minimum amount of operating expense or capital
expenditure paid to Thai recipients Prole of headcount Minimum salary for key employees
Future outlook
A recent key trend for incentives lies in the governments
attempt to promote adoption of green technologies and
innovations. In 2010, the BOI issued investment promotionpolicies for sustainable development and offered special
tax incentives to attract investment in activities related to
manufacturing of eco-friendly products, alternative energy
(e.g., solar farm), and high-tech industries. The features of such
special tax incentives are generally similar to that under the BOI
privilege for Zone 3; however, there may be certain variations
in the benets depending on the specic circumstances.
Pathira Lam-ubol
Associate DirectorTel: +66 2 264 0777 ext. 21015
Yupa Wichitkraisorn
PartnerTel: +66 2 264 0777 Ext. 55003
Additional measures have been implemented to encourage
companies to reduce energy consumption or use renewable
energy. The BOI also grants additional incentives to supportcompanies in investing in reducing environmental impacts
or alleviating environmental problems. Therefore, it can be
anticipated that going forward, one of the key trends for
investment incentives in Thailand would continue to revolve
around boosting sustainable environmentally friendly projects.
8 Also available for other activities beyond manufacturing. Refer to Key Assessment Parameters for the list of activities which are eligible for BOI privileges.
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Overview of incentives in
Introduction
In 1986, Vietnam started economic reforms aimed at moving
from a planned to a market economy. Since then, there has been
tremendous progress on the economic development front, and
the country has become one of the fastest growing economies
in the world. As part of its efforts to attract investment activities
and mobilise capital in Vietnam, incentives were introduced since
2005 under the relevant tax laws and such incentives include
full/partial exemption from corporate tax, import duty exemption
and land use concessions. As a result of the economic reform
initiatives put in place, registered foreign direct investments
have increased annually and are expected to reach about
US$ 15 billion in 2012.
Incentive categories and administering body
Current available incentives are in the form of tax incentives such
as reduced corporate tax rates, tax-free periods or tax reductions
during the start-up phase, and import duty exemptions as well as
non-tax incentives such as the right to rent land.
Tax incentives are granted based on the location of the
investment (i.e. in difcult or especially difcult social-economic
locations, economic zones, and high-tech zones) or regulated
encouraged sectors (such as high-technology and infrastructure).
Before incentives can be availed of, investment projects must
rst be registered and approved by the relevant licensing
authority such as the local Peoples Committees or Industrial
Management Authorities depending on where the project
is located.
General application process
In order to avail of tax incentives, the company will need
to apply for the Investment Certicate with the relevant
licensing authority.
Depending on the business sector that the project relates to or
the volume of investment capital involved, there are two routes
in which one can apply for the Investment Certicate, beingregistration route or evaluation route. By law, the registration
Vietnam
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route will take 15 working days, while the evaluation route
will take 45 workings days due to additional information
and approval required.
In order to apply for the Investment Certicate, the foreign
investor has to submit an application dossier with prescribed
forms to the licensing authority. Based on information to be
provided in the application dossier i.e. business sector that the
project will relate to and the location that the project will be
located in, the licensing authority will determine the incentive
applicable to such project (if any). If all conditions are met and
the project is approved, the licensing authority will issue an
Investment Certicate to the investor. Depending on the local
licensing authority, the Investment Certicate may or may
not specically state the applicable incentive. More often than
not, the Investment Certicate would refer to the relevant tax
regulations in which the tax incentive is applicable and the
investor will make a self-assessment in its annual corporate taxling on this basis.
As tax incentives are provided under the relevant tax regulations,
the investor may enjoy the applicable tax incentive as long as the
project meets the requirements under the specied regulations
and the Investment Certicate has been obtained in this regard.
Key tax incentives
The key available tax incentives in Vietnam are mainly focused on industries in the areas of technology, socialisation and agricultural
activities or projects which are based in certain specied locations. Currently, headquarter activities are not incentivised.
The table below provides an overview of key available tax incentives for manufacturing industries available through application with
the relevant licensing authority:
Activity Manufacturing
Tax incentives9 Corporate tax exemption forrst 4 years
50% corporate tax reduction fornext 5 to 9 years
10% reduced corporate tax ratefor remaining incentive period
Corporate tax exemption forrst 2 years
50% corporate tax reduction fornext 4 years
20% reduced corporate tax ratefor remaining incentive period
20% reduced corporate tax ratefor remaining incentive period
Non-tax benets9 Exemption of import duty on equipment, raw materials, supplies and semi-nished products
Exemption on repatriation of prots Able to rent land No or reduced rent payable Exemption from land use fees
Coverage of incentive Income generated from business activities licensed under the Investment Certicate
Key evaluation parameters
Specied locationOr
Newly established enterprisesin difcult socio-economicconditions, Economic Zones,High Tech Zone establishedunder the Prime Ministersdecision. At the time of thispublication, Economic Zones
include the following: Chu Lai Dung Quat Nhon Hoi Chan May Lang Co Phu Quoc Nam An Thoi Vung Ang Van Phong Nghi Son Van Don Dong Nam Nghe An Dinh Vu Cat Hai Nam Phu Yen Hon La Dinh Anh
Nam Can
Newly established enterprisein areas of difcult socio-economic conditions
NA
9 Incentives also available beyond manufacturing. Refer to key evaluation parameters.9 Incentives also available beyond manufacturing. Refer to key evaluation parameters.
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Activity Manufacturing
Key evaluation parameters
Specied sector Newly established enterprisesin high technology, scienticresearch and technology
development, investmentin development of speciallyimportant infrastructurefacilities of the State,production of software products
Enterprise operating in the eldof socialisation (i.e. education training, occupationaltraining, health care, culture,sport and the environment).Different incentive durationapplies if located in difcult orspecial difcult socio-economicconditions.
NA Agricultural servicecooperatives and peoplescredit fund
Future outlook
Recently, the Vietnam government expressed its ambition
to restructure the economy and shift its model of growth to
ensure rapid but sustainable development. Its goal is to enhance
productivity, product quality, efciency and competency on
both domestic and international markets to allow Vietnams
economy to participate in high value-added stages of regional
and global production supply chains. In line with these goals,
the government introduced high-tech incentives involving
the renewal of technology by enterprises and will continueto focus on the development of the science and technology
market through strong incentives to projects that apply new
technologies or facilitate the establishment of research and
development centres.
The Gia Tran
Director
Tel: +84 4 3831 5100
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Business Incentives
Advisory (BIA) teamand servicesThe Business Incentives Advisory (BIA) team in Ernst & Young Solutions LLP
is dedicated to assisting clients across all industries in relation to their
incentive matters.
The BIA team has extensive experience dealing in areas relating to taxation
and incentive negotiations with the Singapore government. With a network of
highly experienced incentive professionals in the ASEAN region, the BIA team
will work with you to evaluate the appropriate incentives as well as advise you
in the negotiations with and applications to the relevant authorities in the
ASEAN countries to optimise your nancial benets.
Our services include the following:
Evaluation and identication of possible incentive packages based on specic
project parameters
Comparative analyses of incentives across jurisdictions for purposes of site
location studies / competitive benchmarking
Assisting companies in strategising on approach, negotiations and
applications for relevant incentives with the governments in the respective
countries
Assisting companies in identifying and maximising their R&D claims
Assisting companies with health-checks e.g. incentive reporting obligations
and identication of risk areas in incentive compliance
Assisting companies in areas of process design on incentive maintenance,tracking and reporting obligations
Tan Bin Eng
Director, Business Incentives Advisory
Tel: +65 6309 8738
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