Tax & Accounting

ASEAN Regulatory Brief: Malaysia GST, Thailand Foreign Labor Regulation, and Myanmar FDI

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Malaysia: GST exempted for supplies directly related to exported goods

Malaysia’s finance ministry recently issued an order exempting suppliers from the need to charge Goods and Services Tax (GST) on certain goods and services directly connected to exports. The GST relief, which came into effect from July 1, 2017, will apply to four broad categories of services and supplies directly connected to exports and export processing. These include handling or storage services related to goods for export; services provided by a company with licensed manufacturing warehouse status or a business operating in a free zone; research and development (R&D) services related to goods for export; and tools or machines which are highly specialized in nature and used for the manufacture of goods in Malaysia for export.

To qualify for the GST waiver, the recipient of the goods and services must be an overseas customer of foreign nationality, who is resident abroad at the time of receiving the goods and services, and who does not own a business entity in Malaysia. Certain categories of the aforementioned goods will require the approval of Malaysia’s Director General of Customs to avail of the GST waiver. Further, the goods for which the supplies are made must be exported within a period of 60 days from the date of the completion of the services.

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ASEAN Regulatory Brief: Malaysia Tourism Tax, Thailand Land Windfall Levy, and Philippines Excise Tax

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Malaysia: Tourism tax comes into effect from August 1

Malaysia’s customs department has announced that with effect from August 1, foreign visitors as well as domestic tourists will have to pay a tourism tax to operators of different types of accommodation. The tax, which has to be paid regardless of business or leisure travel, has been fixed at RM20 (US$5) for five-star hotels, RM10 (US$2.5) for four-star, RM5 (US$1.25) for three-star, and RM2.5 (US$0.62) for non-rated accommodation.

Accommodations such as traditional kampong stays and homestays as well as premises with less than 10 rooms are exempted from the new tax. The tourism tax will be levied over and above the goods and services tax and service charges.

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Thailand’s New Personal Income Tax Structure Comes Into Effect

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By Dezan Shira & Associates
Editor: Alexander Chipman Koty

Thailand’s updated personal income tax (PIT) structure officially came into effect on January 1, 2017, with the aim to ease tax burdens and boost disposable income. The revision, Revenue Code Amendment Act (No 44) BE 2560, was gazetted on January 27, officially instituting the changes. The new rates apply for all income collected as of January 1 for filing in 2018. The revised income tax scheme was initially approved by the Thai Royal Cabinet on April 19, 2016.

The new structure revises the income tax bands subject to 30 percent and 35 percent tax, and increases deductibles, and doubles allowances. The lower income tax bands and their respective rates remain unchanged. The revision also raises the minimum thresholds for mandatory tax filing.

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Philippines’ Finance Secretary Recommends 7 Percent Corporate Income Tax Cut

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By: Dezan Shira & Associates

The Philippines’ Finance Secretary, Carlo Dominguez, has recommended a corporate income tax rate of 25 percent, reduced from the current 32 percent.

The proposal would be implemented as part of the Government’s Comprehensive Tax Reform Program (CTRP). Dominguez made the announcement at the 5th Manila Times Business Forum in Davao last Friday. 

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Evaluating Cambodia’s Tax Reform

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By Dezan Shira & Associates
Editor: Alexander Chipman Koty

Cambodia’s updated Law on Financial Management for 2017 reflects the government’s ongoing efforts to revamp the country’s tax system and bring more businesses operating in the informal sector into the formal tax regime by offering incentives for small taxpayers. The amended laws, which came into effect on January 1, offer lower tax rates for small and medium sized enterprises and tax exemptions for firms that uphold quality accounting. The new rules continue a tax reform initiative that began in 2013 to increase the government’s tax revenue collection capabilities and better regulate Cambodia’s significant informal economy. Successful implementation will better equip foreign investors to compete with domestic firms in the informal sector that are able to offer lower rates for their services by avoiding tax obligations.

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Understanding Taxation of 13th Month Pay and Christmas Bonuses in the Philippines

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By Dezan Shira & Associates
Editor: Harry Handley

Philippine pesosWith the Christmas season and year-end fast approaching, annual issues surrounding 13th month pay and Christmas bonuses in the Philippines raise their head once again. One key topic that often prompts questions is the distinction between 13th month pay and Christmas bonuses, also known as a year-end bonuses, and the tax rules surrounding them. Though the two systems of bonus payments are distinct, they can interact to create diverse tax outcomes. Effectively optimizing bonus structures not only reduces employers’ overall tax burden, but also fosters an environment in which employees are rewarded for their labor and given incentives for strong productivity.

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Malaysia Airport Tax Hikes Scheduled for 2017

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By: Dezan Shira & Associates

Malaysia is set to implement a series of tax increases for both domestic and international bound flights starting in 2017. Although undergoing finalization, it has been confirmed that all tax increases have been approved by Malaysia’s legislature. With rates confirmed, criticism and outcry from the nation’s aviation industry has been growing as many worry about the ramifications for domestic carriers as well as Malaysia’s position as a regional aviation hub. 

Professional Service_CB icons_2015RELATED: Tax Compliance Services from Dezan Shira & Associates
New Aviation Rates

Set to be implemented from January 1st, 2017, the following flat rates will be applied to individual tickets dependent upon their destination. 

  • RM11 (US$2.66) for domestic flights
  • RM35 (US$8.47) for flights to ASEAN countries
  • RM73 (US$17.66) for international flights

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Philippine Tax Amnesty Proposed in a Bid to Increase Revenue Collection

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By: Dezan Shira & Associates

A Philippine tax amnesty program has been proposed by senate minority leader Ralph Recto in an effort to increase state collections and mitigate reduced revenues that are projected to come in the wake of planned corporate tax reductions. Announced formally on the 20th of September, changes will now be considered by the national assembly prior to their implementation. If passed, the amnesty will take effect 15 days from this date and be available for six months from this date.

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Indirect Taxation Across ASEAN

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By: Dezan Shira & Associates

Among a myriad of factors which determine competitiveness within ASEAN member states, rates of taxation are a particularly salient judge of character for the treatment of foreign investment. In recent years, corporate income tax (CIT) has become the standard bearer for tax benchmarking, however, foreign investors will be faced with a variety of different taxes in the event that capital is committed. For those importing and exporting, indirect taxation, including value added taxation (VAT) and goods and services tax (GST) are significant forms of tax that should not be disregarded. 

In essence, an indirect tax adds to the price of a purchasable product or a payable service, thereby increasing the cost of that product or service and causing consumers to indirectly pay its rate of taxation. Indirect taxes thus differ from other forms of taxation, such as corporate income and individual income tax; both of which require a business or an individual to pay the applicable amount directly to a government.

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The Philippines Resumes Tax Audits Following Internal Review

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By: Dezan Shira & Associates

The Philippines has announced the implementation of Circular 91-2016 resuming field audits and other field operations of the Bureau of Internal Revenue (BIR). With effect from September 1st, the circular overrules a previous suspension of BIR field capabilities issued on July 1st under Revenue Memorandum Circular (RMC) No. 70-2016.

Understanding the Previous Suspension

The suspension has been touted as a means of fine tuning the BIRs capabilities and increasing government revenue. Outlined under RMC No. 70-2016 the suspension has by all accounts been used to address lengthy processing times for audits and investigations, as well as a chance to investigate claims that authorities within the BIR were abusing their positions for financial gain. While suspension of audits and investigations were rolled out as part of this internal review, administration officials have constantly maintained that they have not been canceled outright.

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