how do you manage employees’ personal costs and compliance ...€¦ · planning 2015 16th annual...

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16 October 2014Shangri-La Hotel

MaximiseShareholderValue throughEffective TaxPlanning 2015

16th Annual Conference

How do you manage employees’personal costs and compliance riskswhile structuring for growth?

PwC

Agenda

• Personal income tax and immigration updates

• Why business should focus on employee benefit packages?

• Awareness of 4 major benefits offered by MNCs to its mobile

employees

• Sharing issues/concerns on Myanmar tax/immigration arising from

employment of expatriates

Slide 216 October 201416th Annual Conference Maximise Shareholder Value through Effective TAX Planning 2015

PwC

Personal income tax and immigrationupdates


PwC

Tax privilege - The cabinet and the council agreed on

16 September 2014

Unchanged: Retirement mutual fund (RMF)

Under consideration: Long term equity Fund (LTF) - end in 2016

PIT rate: Extend for another year personal income tax (PIT) (0-35%)

and corporate income tax (CIT) (20%)

from 1 January 2015 until 31 December 2015.

Tax: Law & Regulation UPDATE


PwC

Update PIT rate: AEC

Countries PIT rate Tax year

Resident Non-resident

1 Brunei 0% 0% -

2 Cambodia 0-20% 20% Calendar year

3 Indonesia 0-30% 20% Calendar year

4 Lao PDR 0-24% 0-24% Calendar year

5 Malaysia 0-26% 26% Calendar year

6 Myanmar 0-25% 35% 1 April – 31 March

7 Philippines 0-32% 0-32% Calendar year

8 Singapore 0-20% 15%/0-20%(whichever is

higher)

Calendar year

9 Thailand 0-35% 0-35% Calendar year

10 Vietnam 0-35% 20% Calendar year


PwC

Drafting

Inheritance tax: Flat tax rate 10%

• Inheritance which is worth more than 50 MB

• Residences, land, vehicles, bonds, equities and deposits at financialinstitutions

Tax deduction for travel expenses: During…through 31 Dec’15

• Actual expenses @ Max 15,000

• Pay as service fees to tourism operators and guides or hotelaccommodation charges to hotel business operators under the lawgoverning hotels for domestic tourism

• Evidence requested; receipt shown Taxpayer Name

Tax: Law & Regulation UPDATE


PwC

Immigration: Law & Regulation UPDATE

BOI

• Employment certificate from previous employers are required toapply for individual placement

• Work process of obtaining pre-approval letter may change if expat’sdependant accompanying him/her

• Individual placement applications must be filed with BOI at least 15days before visa expiry date


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Immigration

• Original certified true copy of marriage/birth certificate requestedby Immigration Department at Chaengwattana

• Order of Royal Thai Police No. 327/2557 replacing the Order ofRoyal Thai Police No. 777/2551

• Transit visa (ผ 30) permitted travelers can stay for another 30 days

(total 60 days)

• Visa on arrival/Transit visa (TR 15); permitted travelers can stay foranother 7 days (total 22 days)


PwC


Labour Department

• New work permit application must be submitted within 15 days fromthe date of BOI approval for an individual’s placement

• Urgent work permit is waived for the following activities:

1. Attending a meeting or seminar

2. Visiting an exhibition or trade fair

3. Visiting or attending a business negotiation meeting

4. Attending a special seminar and/or academic talk

5. Participating in technical training and seminar

6. Buying goods at a trade fair


PwC

Why businesses should focus onemployee benefit packages


PwC

Need to get more for less

Focus on reducing costs and measuring returnson investment from international assignments

Expats typically cost 3 to 5 times that

of a local hire


PwC

Employee benefits encompass a broad range ofbenefits:

Mandatory benefits

• Income required bylabour law

• Basic Medicare

• Social security

Optional benefits

• Incentives

- Annual incentives

- Long-term incentives(equity based compensation)

• Private pension fund

• Flexible benefit plan

(cafeteria plan)

• Additional benefits for expats


PwC

Executive vs. Managerial Pay Structures

Pay Component Executive Manager

Salary Smaller % of overall pay Larger % of overall pay

Annual Incentives(short-term incentive/Bonus)

Larger % of overall pay

Generally available to all execsand tied to overall companyperformance

Smaller % of overall pay

Generally available to all seniormanagement and mostmanagers but may be tied toperformance of companyoverall, business unit, and/orindividual metrics.

Long-term Incentives(equity based comp)

Larger % of overall pay

Generally available to all execs

May be in multiple forms (e.g.,stock, options, cash, etc.)

Smaller % of overall pay

Availability depends oncompany but most managersand higher eligible

Limited in forms


PwC

Awareness of 4 major benefits

• Annual incentive (bonus)

• Long-term incentive

• Social security fund

• Pension


PwC

Annual incentive (bonus) - Awareness

Concerns Inboundassignment

Outboundassignment

Source of income √ √

Remittance rules √ √

Trailing liability √ √

Double tax payment √ √


PwC

Long-term Incentive Plan(Equity-based Compensation)

Different types

of equity

awards –

differing tax

treatments?

Stockoptions

Stockawards

Restrictedstock unit

Stockpurchase

plan

Stockappreciation

rights

Phantomplans

The Board of Taxation has issued ruling no. 28/2538 – Taxable event is when the share ownership is transferred.

EJIP


PwC

Employee Joint Investment Programme (EJIP)

What is EJIP?

• Employees (EE) invest in company shares at discount

• Funds are deducted from EE payroll every month

• Employer (ER) also contributes an equal amount to buy thecompany’s shares

• ER shares will be forfeited if employment condition is not met

Tax position:

• Amount contributed by ER is subject to tax

• Issues occur if the employment condition is not met and shares haveto be forfeited but the EE have already paid taxes on the full value ofthe shares


PwC

Employee Joint Investment Program (EJIP)

Claiming tax refund may not be possible (Tax ruling no. Gor Khor

0706/6667 dated 9 September 2005)

What’s next?

• Employees’ voice

• Employer’s revisiting scheme


PwC

Equity taxation - Awareness


Outboundassignment

Source of income √ √

Taxing point DependsType of scheme

DependsType of scheme

Taxing period/Timing mismatch

Domestic tax Domestic tax

Tax Treaty Depends Depends

Trailing liability √ √

Double tax payment Depends Depends


PwC

Global regulatory compliance

Be aware of

local regulatory

compliance in

home and host

locations

Securitieslaw

Exchangecontrols

Planregistration

Accountingand cross

re-charges


PwC

Social security fund – Awareness

Thailand: No totalisation agreement


Outboundassignment

Monthly contribution required √ Depends but preferable

EE’s contribution by ER toThai SSF

Taxable N/A

Foreign social security plan Depends Depends on host country law

EE’s voice N/A √


PwC

Pension fund – Awareness


Outboundassignment

Monthly Thai PF contribution Depends Preferable

ER’s contribution to Thai PF Not taxable Not taxable

ER’s contribution to foreignplan

Depends Depends on host country

Trailing liability Possible Possible

Double tax payment Possible Possible


PwC

Myanmar Income Tax andImmigration Issues


PwC

What you should know when sending your staff towork in Myanmar

Tax

SocialSecurity Immigration/

Labour


PwC

Current Practice of Thai Co. – SecondmentArrangement

Thai Co.

Thai Co

Taxed in Thailand

Myanmar Co.

Salary/Bonus

AllowancePer diem

Taxed in Myanmar


PwC

Scope of Taxation

Taxation of income depends on individual’s residential status in Myanmar

Resident status Taxation

Resident nationals Worldwide income

Resident foreigners Worldwide income(in practice not taxed on their non-Myanmar sourced

income including employment income)

Non-resident foreigners Income sourced within Myanmar


PwC

Residency

Myanmar citizens are treated as resident nationals

Resident Foreigner

Foreigners who reside in Myanmar for at least 183 days during anincome year, or

Foreigners working for companies set up under the MyanmarForeign Investment Law (MFIL), regardless of the period of stay inMyanmar

Note: Income tax year in Myanmar runs from 1 April to 31 March


PwC

Myanmar Personal Income Tax Rates

Tax Rates on Employment Income

Status 1 April 2012 –31 March 2014

1 April 2014 onwards

Myanmar citizen0% to 20%

progressive rates0% to 25%

progressive ratesResident foreigner

Non-resident foreigner(DTA applicable for certaincountries)

35% flat rate (no personal relief)


PwC

Taxable Income - Employment Income

Definition of taxable employment income: Normal interpretation e.g.salary, wages, pension, gratuity, and any fees, commissions or perquisitesreceived in lieu of or in addition to any salary and wages.

Specific valuation guidelines: Accommodation benefits

Tax issues

1 Employer’s contribution to pension fund

2 Bonus received during the Myanmar assignment thatrelated to performance in a prior year

3 Equity based compensation

4 Relocation expense

5 Expenses related to business


PwC

Employer’s Reporting Requirements

ER reporting requirement Timing

Monthly WHT requirement Within 7 days after payment

Annual salary statement Before/on 30 June


PwC

Social Security Law

Governed under the Social Security Act 1954

Note: Applicable only where entity has hired at least 5 employeesContribution must be in MMK

Social Security Contributions

Rate (% of wages) Monthly Cap (MMK)

Employer 3% 9,000

Employee 2% 6,000

After4 April 2014


PwC

Current Practice of Thai Co. – Service Arrangement

Thai Co.

Thai Co

Taxed in Thailand

Myanmar Co.

Salary/Bonus

AllowancePer diem

No tax paid inMyanmar


PwC

Employee’s Reporting Requirements

EE reporting requirement When

No requirement If WHT has been applied on income

Advance payment(quarterly basis)

If no WHT has been applied on income


PwC

Double Tax Agreement Network

No. Country Date DTA Signed Effective Date

1 Bangladesh 7 Oct 2008 Not effective

2 India 2 Apr 2008 1 Apr 2009

3 Indonesia 2 Apr 2003 Not effective

4 Laos 20 Nov 2009 WHT : 1 Apr 2011, Others: 1 Apr 2012

5 Malaysia 9 Mar 1998 1 Apr 2009

6 Republic of Korea 22 Feb 2002 1 Apr 2004

7 Singapore 23 Feb 1999 1 Apr 2010

8 Thailand 7 Feb 2002 WHT: 1 Apr 2012; Others: 1 Apr 2013

9 United Kingdom 13 Mar 1950 13 Mar 1950

10 Vietnam 12 May 2000 1 Apr 2004


PwC

Immigration Requirement

Business VisaStay Permit &

Multiple Re-EntryVisa

Work Permit*

Prior to arrival inMyanmar

After arrival in Myanmar

* As applicable


PwC

Next stepsManaging compliance for mobile employees

Know your taxobligation asan employer

Understandingthe law and its

application

Communicatewith youremployees

Ensure thatyou keep

abreast withany changes in

the tax law

Conductperiodic

reviews on thelevel of

compliance

Other non-taxconsiderations

andconsistencies

Be mindful ofpenalties

Connecting allrelevant

stakeholders


PwC

Contact

Jiraporn ChongkamanontDirector – Practice LeaderTel: +66 (0) 2344 [email protected]

Napaporn SaralaksanaSenior ManagerTel: +66 (0) 2344 [email protected]


Thank you

© 2014 PricewaterhouseCoopers Legal & Tax Consultants Ltd. All rights reserved.'PricewaterhouseCoopers' and/or 'PwC' refers to the individual members of thePricewaterhouseCoopers organisation in Thailand, each of which is a separate andindependent legal entity. Please see www.pwc.com/structure for further details.

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