asia pacific tax update lam fong kiew 7 th june 2014

ASIA PACIFIC TAX UPDATE

Lam Fong Kiew7th June 2014

Myanmar(The Golden Land)

Permitted EnterprisesNo. Industry Value of sector

(USD in mil)%

1 Power 19,300 43.62 Oil and Gas 14,400 32.53 Manufacturing 3,600 8.24 Mining 2,800 6.45 Hotel and tourism 1,800 4.16 Real Estate 1,200 2.87 Livestock and fisheries 360 0.88 Transportation and communication 300 0.79 Industrial Estate 190 0.410 Agriculture 190 0.4

Total 44,200 100

Myanmar Key Industries

Source: Information as of 31/12/2013 by the Directorate of Investment and Company Administration, Ministry of National Planning and Economic Development, Myanmar

Permitted EnterprisesNo. Industry USD in mil %

1 China 14,200 32.02 Thailand 10,000 22.63 Hong Kong 6,500 14.64 UK 3,100 7.15 Republic of Korea 3,000 6.96 Singapore 2,800 6.47 Malaysia 1,600 3.78 Vietnam 500 1.29 France 500 1.110 Japan 300 0.7

Total 42,600 96.2

Foreign Investments by Country


Number

Myanmar Company 35,671Foreign Company / Branches 2,584Partnership 1,072Joint Venture Company 71Association 79

39,477

Registered Companies and Business Organizations


Tax Regime

Corporate Taxation

Residence

• A company is resident if formed under the Myanmar Companies Act or any other laws of Myanmar and where the control, management and decision-making of its affairs are situated and exercised wholly in Myanmar.

• Companies registered under the Myanmar Foreign Investment Law (MFIL) are treated as resident companies.

• Branches of foreign companies are generally deemed to be non-resident.

Basis of Taxation

• Resident companies are taxed on a worldwide basis.

• However, resident companies registered under MFIL are not taxed on foreign income.

• Non-resident companies are taxed only on income from sources within Myanmar.

Tax Regime

Corporate Tax Rates

Taxpayer category Tax Rate

Companies incorporated in Myanmar under the Myanmar Companies Act

25%

Entities operating under the MFIL 25% #

Non-resident foreign entities, including Myanmar registered branches 35%

Capital gains• Resident taxpayer• Non-resident taxpayer• Transfer of shares in oil and gas companies

10%40%

40%-50%

# 5 years corporate tax holidays can be enjoyed

Tax Regime

Withholding Tax Rates

Type of Income Rate applicable to resident recipients

Rate applicable to non-resident recipient

Dividends - -

Interest - 15%

Royalties 15% 20%

Technical service fees 2% 3.5%

Other Taxes- Individual tax rates range between 1 to 35%- No VAT but commercial tax of 5%, or 8% to 100%- Customs duties range between 0% to 40%- Stamp duties

International Holding Structure

• Concluded 10 DTAs with:Bangladesh, India, Indonesia, Korea, Laos, Malaysia, Singapore, Thailand, UK, Vietnam

Double Tax Agreements (“DTA”)

Shareholders

Holding Company

Project CompanyMyanmar

Which country is suitable?- Dividend withholding tax- Capital gains, etc.

China Tax Developments


BEPS China’s first official position on BEPS released by Jiangsu State Tax

Bureau on 29th April

Offshore Indirect Equity Transfer GAAR, Circular 698 announced in 2009 but effective 1st January 2008 Re-characterize indirect equity transfer by disregarding the existence of

the corporate vehicle/target company SAT publicized its official reply to Shenzhen State Tax Bureau on indirect

equity transfer New way to impose China tax on offshore indirect equity transfer Chinese Tax Resident Enterprise (“TRE”) concept


US Fund

Cayman Co

HK listed Co

Hold Co

China Cos

US listed

Offshore

China

Facts of the case:• US Fund owns Cayman Co (seller)

which held shares in HK listed Cayman Co (target co) which indirectly held China Cos

• Seller sold target co to US listed buyer => indirect disposal of equity interest in China Cos

• Seller reported transaction to State Tax Bureau

• Difficult to disregard target co based on Circular 698 as listed in HK and economic substance

• Place where overall management and control over production and business for target co is located in China

• Deem target co as a TRE and impose tax on direct transfer


Simplified application approval of Chinese TRE SAT delegates approval power on granting TRE status of Chinese-capital

controlled foreign companies (CCCFCs) to provincial-level tax bureaus for year 2013 and beyond

Opportunity or challenge?

Permanent Establishment Circular 19 was issued in 2013 on secondment related PE issues Main test: which entity bears the liability and risk associated with the

work of the secondee, and evaluates the performance of the secondee Other tests: whether there is a mark-up on the reimbursement, whether

the secondee pays Chinese individual income tax on the full income, etc. Normal stewardship activities would not create PE

India Tax Developments


General Anti-Avoidance Rule (“GAAR”) Effective from 1st April 2015 (FY2015-2016), burden of proof is on taxpayer

Main purpose of an arrangement is to obtain a tax benefit

AND

Not for bonafide purpose

Lacks commercial substance

Not at arms length

Abuse/Misuse of tax provisionsOR OR OR

Impermissible Avoidance Arrangement

Denial of tax treaty benefit

Look through corporate structure

Disregard whole/part of arrangement, recharacterise

Reassign place of residence,

location of asset or transaction

Reallocate capital, revenue,

expenditure, deduction, etc.


Non-resident transactions CBDT has prescribed additional information to be furnished by a non-

resident claiming treaty benefits in India (retrospective effect from 1st April 2013)

CBDT has also clarified that WHT liability applies only on the taxable portion of income payable to a non-resident and not on the entire sum payable to a non-resident.

Transfer Pricing Key to reducing controversies is via signing of Advance Pricing

Agreement (“APA”) The Indian APA program has been the fastest to sign initial APAs within

one year of application

Regional Indirect Tax updates

Major Updates in Asia Pacific

GST countdown for Malaysia

Malaysia SingaporeEffective date 1st April 2015 1st April 1994

GST rate 6% 3%, 4%, 5%, 7% (effective 1st July 2007)

Why implement GST Avoid bankruptcy, reduce fiscal deficit Shift reliance from direct taxes to indirect taxes

Income tax rate:CorporateIndividuals

25%26% (max)

17%20% (max)

Scope of charge Supplies of goods and services in Singapore, as well as the importation of goods and services into Singapore

Supplies of goods and services in Singapore, as well as the importation of goods into Singapore

Threshold for GST registration

RM500,000 S$1,000,000

Transitional Provisions Repeal of sales tax and service tax but Customs will still enforce matters where tax is due and payable

Nothing in place before implementation of GST


Australia Proposals to restrict GST exemption (currently AUD1,000) for goods purchased from

overseas via internet

Proposals to implement changes to the application of GST to cross-border transactions

China Expansion of “modern services” to include radio, film, and television services

Telecommunications services is subject to VAT of 11% and 6% on 1st June 2014

Administrative measures on VAT exemption for cross-border services

New VAT grouping rules for branches

VAT treatment for the transfer of a business as a going concern

India Attempt to create a conducive / simpler tax environment

GST may be implemented in a year’s time or so, no official timeline


Indonesia Increase in the minimum threshold for registration from IDR 600 million (USD 55,000) to IDR

4.8 billion (USD 436,000)

Japan CT has been increased from 5% to 8% on 1st April 2014 and scheduled to increase to 10% on

1st October 2015

Proposals to reduce CT rate for certain food products and daily essentials

Proposals for outbound payments from Japanese consumers to foreign service providers to be subject to CT

Korea Complete overhaul of VAT Act on 7th June 2013 to clarify key VAT concepts

Vietnam Expansion of goods eligible for 0% VAT to include goods sold to a local buyer but delivered

and accepted outside Vietnam (third country sales)

China . Malaysia . Myanmar . SingaporeTHANK YOU!

asia pacific tax update lam fong kiew 7 th june 2014

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