Legal & Regulatory
Myanmar: Hefty Fines for flouting building regulations
From April 1, building owners in Mandalay will face hefty fines if their buildings violate government regulations or have been constructed without a valid permit. As per the Mandalay City Development Committee (MCDC) building rules section 10 (a), (b), (c), the new fine rates for buildings constructed beyond the permit stipulations or without approval are US$10.89 (K15,000) per square foot for reinforced concrete buildings and US$7.26 (K10,000) per square foot for brick nogging buildings. The penalty for business and contract buildings will be US$10.89 (K15,000) per square foot, while for other buildings it will be US$5.81 (K8,000) per square foot.
Earlier, builders violating the norms could easily pay a small fine and continue flouting guidelines. The MCDC hopes that the new fines will force builders to construct in accordance with the regulations. In some cases, the fines can be higher than the value of the building depending on the violation. The MCDC also stipulated that buildings for business use should include parking lots, fire extinguishers, and automated fire extinguishing systems.
An Introduction to Doing Business in Singapore 2017, the latest publication from Dezan Shira & Associates, is out now and available for complimentary download through the Asia Briefing Publication Store.
As the Association of Southeast Asian Nations (ASEAN) continues upon its path towards closer economic integration in 2017, Singapore’s role as the de facto financial and commercial capital of Southeast Asia will be unassailable. Having already established its competitive niche as a destination for establishing regional headquarters, branch offices and holding companies in Asia, Singapore’s legal and tax regimes continue to be among the most business-friendly in the world.
Offering foreign investors access to a highly skilled workforce, English-speaking business environment, immense logistics and transportation capacities, and over 70 double taxation avoidance agreements (DTAs), Singapore has firmly established its role as the gateway to ASEAN, China, India, and the whole of emerging Asia for foreign investors.
Philippines: Central bank tightens rules on money lending
In a move to fight money laundering, the Philippines’ central bank Bangko Sentral ng Pilipinas (BSP) tightened rules on money service businesses (MSBs). MSBs include remittance and transfer companies (RTCs), money changers, and foreign exchange dealers. As per the new rules, large payouts of more than US$10,036 (PHP 500,000) or its foreign currency equivalent in any single transaction with customers will only be allowed via check or direct credit to deposit accounts. Money changers and foreign exchange dealers will be allowed to sell foreign currency in an amount not exceeding US$10,000 and not exceeding US$50,000 per month per customer. Exemption will only be given once an application is made to the BSP depending on the nature of the business.
RTCs and MSBs will also need to notify the BSP when they commence operations as well as for new accreditation of remittance of sub-agents. The new rules will limit MSBs’ ability to transact in cash while also placing a cap on the amount of foreign currency that can be sold to money changers. The development comes after anti-money laundering investigators said that around US$81 million stolen from a Bangladesh central bank was transferred by a Philippines remittance company.
By Dezan Shira & Associates
Editor: Harry Handley
Following Thailand’s 2014 coup, there were suggestions that the incoming military-led government would implement protectionist policies that would restrict investment into the country by foreign firms. However, in the years that followed there was a significant shift in the outlook of Thailand’s leaders. Barriers were lowered and restrictions reduced in a number of industries; this resulted in over US$9 billion of inward foreign direct investment (FDI) in 2015.
Research from the Economist Intelligence Unit suggests that Thailand will continue to encourage inward investment over the next few years in order to push the economy towards high income status. This is highlighted by recent amendments made (and further amendments scheduled for 2017) to the Foreign Business Act – the predominant legislation governing foreign investment in Thailand. This article will outline the key points of the Foreign Business Act, including the recent update, and what this means for potential entrants.
Indonesia: New rules for transfer pricing
The Indonesian government approved a new Minister of Finance regulation, MoF 213/2016, on new rules for transfer pricing documentation, effective January 2017. The new decree stipulates that firms doing cross-border transactions with affiliates must prepare transfer pricing documents detailing their global structure and payments. The move aims to match global standards and curb tax avoidance. Multinationals with annual turnover of at least US$822.74 million (IDR 11 trillion) must prepare a country-by-country (CbC) report with information about their affiliates, revenue, profits, income tax paid in different jurisdictions, retained earnings, and assets. The companies are also required to prepare a master file and a local file, which should include its Indonesian company details, structure, assets, and transactions.
Companies with annual gross revenue of more than US$377,000 (IDR 50 billion) or accumulated transactions of more than US$150,800 (IDR 20 billion) for tangible assets and US$37,700 (IDR 5 billion) for intangible assets need to prepare only the master and local files. Transactions with tax residents in countries with a lower statuary rate than that of Indonesia’s 25 percent are also required to prepare the master and local files. The government is also offering companies to settle previous tax disputes by paying a penalty under an amnesty program until March 2017.
Philippines: Policy on labor contractualization approved
The Philippines government approved a new Department of Labor and Employment (DOLE) regulation, Order No. 168 on contractualization, after it was submitted on December 29, 2016. The new law amends the provisions of the labor code and legalizes subcontracting or outsourcing labor through third party agencies. This will allow principal employers to hire contractual labor, but only through service providers. These providers will be responsible for regularizing workers rather than the employer. Higher financial requirements will be imposed on service providers to eliminate unreliable subcontractors and ensure payments for laborers. The government believes that the change will address issues of labor abuse.
Several labor groups have opposed the directives, believing the change will only further legitimize contractualization in a different form and not eliminate it. The groups are lobbying for direct hiring and to prohibit third party hiring by banning fixed-term employment. They have asked President Rodrigo Duterte not to implement the directive and to issue an order banning all forms of fixed employment contracts, thereby fulfilling his campaign promise of eliminating contractualization. In the first five months of Duterte’s term, the government regularized 25,000 contractual workers, which is less than 10 percent of the total workforce.
By Dezan Shira & Associates
Editor: Harry Handley
Since the implementation of the Foreign Business Act of 1999, foreign businesses set up in a range of industries in Thailand must have a Thai majority shareholder. One line of business that is exempt from this is import/export trading. This exemption, along with developed infrastructure and a solid legal framework, have made Thailand a hub for cross-border traders. In 2015, US$212 billion of goods were exported from Thailand, the 22nd highest value in the world. Imports in the same year totaled US$177 billion, making Thailand the world’s 25th largest importer.
According to the World Bank, the time and cost of both importing and exporting in Thailand is significantly lower than the average for neighboring countries in the East Asia and Pacific region. In recent years, import/export procedures have been streamlined further through the implementation of the online e-Customs system. This electronic system provides a one-stop service for all stakeholders in cross-border trade. Procedures such as issuing licenses and paying duties and taxes have been made paperless and can be completed using the central e-Customs system.
Once a company has been set up in Thailand, including Value Added Tax (VAT) registration and corporate bank account establishment, the import and export processes can begin. This article will outline the procedures required when trading goods to and from Thailand.
Cambodia: New Tax Regulations for Multi-activity Businesses
The Ministry of Economy and Finance (MEF) in October introduced notification Prakas 1127 detailing updated requirements for companies carrying multiple business activities including one or more Qualified Investment Projects (QIP). A QIPs is an investment project that has been issued a Final Registration Certificate (FRC). In order to qualify as a QIP, the investor has to register the project with the Council for the Development of Cambodia (CDC) or Provincial Municipals Investment Sub-Committee (PMIS) to receive the FRC. Businesses that will be affected include those that have more than one QIP, those that carry out more than one business activity subject to different rates of tax on profit and companies that are involved in QIP and non-QIP business activities.
This notification also applies to businesses carrying out the aforementioned activities that were incorporated before October 11. Such businesses will have to register their business activities separately with the General Department of Taxation (GDT) within 15 days of starting the activity and get a separate Value Added Tax (VAT) and Tax Identification Number (TIN). These business will also have to submit monthly and annual tax returns for the registered business activity.
Singapore: Financial Information Sharing Agreement Signed with Canada, Finland
The Inland Revenue Authority of Singapore (IRAS) has signed an agreement with Canada and Finland on Automatic Exchange of Financial Account Information. As per the agreement, the first reporting year will be 2017 and the first exchange of information will be completed by September 2018. The automatic exchange of information (AEOI) based on the Common Reporting Standard (CRS) refers to regular exchange of financial information between countries for tax purposes to identify tax evasion by taxpayers through the use of offshore bank accounts. Singapore is committed to the CRS. Singapore-based Financial Institutions (SGFIs) will be required to submit financial information of account holders from jurisdictions they have agreements with. Singapore has similar agreements with nine other countries.
Philippines: Government Considers Mandatory Disaster Coverage
The Philippines government is considering a mandatory household and business insurance cover against natural disasters. While some individuals take out policies against natural threats, the Philippine Insurers and Reinsurers Association (PIRA) state that a mandatory scheme allows for the significant amount of funds required to meet the large claims that are likely to be made.
The developments come in the context of the Philippines being prone to natural disasters like typhoons and flooding. The Super Typhoon Haiyan, three years ago, cost the economy around US$ 14 billion, out of which only US$ 2 billion was covered by insurance. A study by international insurer Lloyd’s City Risk Index 2015-25 showed that around half of Manila’s GDP of US$ 201 billion is at risk of being lost due to a natural calamity without any insurance coverage. The proposal is backed by private sector insurers as well as the World Bank. If passed, the bill would boost the insurance industry.