ASEAN Incentives to Counter COVID-19 Impact
- Several ASEAN countries have issued incentives to counter the economic impact of the coronavirus (COVID-19) outbreak.
- These come in the form of fiscal and non-fiscal incentives as well as cash handouts.
- Investors should seek help from qualified local advisors to better understand how to benefit from these incentives.
Since the onset of the COVID-19 outbreak, ASEAN nations have seen their supply chains disrupted and experienced economic slowdowns.
The impact was heightened because ASEAN is China’s second-largest trading partner, overtaking the US in 2018, at the height of the US-China trade war. Total trade between China and ASEAN was valued at more than US$500 billion in 2019 and the two regions even set an ambitious target to reach US$1 trillion worth of trade in 2020 – difficult to achieve now due to the pandemic.
Investors should seek help from qualified local advisors to better understand how to benefit from these incentives.
Indonesia released two stimulus packages to counter the impact of the COVID-19 pandemic. The first package was introduced in February 2020 totaling US$725 million, and the second package was issued in March 2020 totaling US$8 billion.
Through the first package, US$6 million was designated to local airlines and travel agencies and more than US$10 million was allocated towards marketing and promotion activities for Indonesian tourism destinations.
The package also provided US$27 million worth of discounts for domestic tourists visiting one of the 10 tourist destinations promoted by the government. This equated to a 30 percent discount for flights from March to May 2020.
Hoteliers and restaurants located in one of these 10 destinations will also have their taxes waived for the next six months.
In addition to the tourism industry, the package prepared US$324 million for the government’s Affordable Food Program to help some 15 million low-income households purchase staple foods at discounted prices.
Further, US$104 million went into the subsidized housing program, which is expected to help finance the building of 175,000 new homes.
The second stimulus package was launched to protect the economy and small- and medium-sized enterprises (SMEs), particularly in the manufacturing sector.
Corporate income tax (CIT) was reduced by 30 percent for businesses in 19 selected manufacturing industries for the next six months.
Businesses in these 19 sectors are also eligible for deferral on import tax payments for the next six months, and the government will also relax value-added tax (VAT) refunds for the same time period.
Employees within these 19 sectors earning an annual income below 200 million rupiah (US$13,000) will be exempt from paying income tax for six months.
The non-fiscal incentives provided in the stimulus package include the simplification of import and export activities, in particular for the import of raw materials. The government will scrap some 749 Harmonization Codes (HS) products, consisting of 443 HS codes to achieve this.
Businesses that are deemed ‘reputable traders’ by the government will be assisted in the quick approval of import and export license applications.
SMEs that have a good credit history are eligible for loans of up to 10 billion rupiah (US$655,000).
For more information read our articles: Indonesia Unveils Stimulus Package to Combat Coronavirus Impact and Indonesia Issues Second Stimulus Package to Dampen COVID-19 Impact
Singapore introduced incentives to support businesses affected by COVID-19 through its 2020 State Budget.
The government pledged S$800 million (US$570 million) to contain the virus and to support frontline medical personnel.
Other incentives are aimed at helping businesses through a CIT rebate for the 2020 financial year at a rate of 25 percent and capped at S$15,000 (US$10,700) per company. The goods and services tax (GST), will no longer be increased in 2021, remaining at seven percent.
Read more on our article: Singapore’s 2020 Budget: Salient Features
Malaysia issued a stimulus package in February 2020, worth an estimated US$4.8 billion. The package implements strategies to mitigate the immediate impact of the outbreak, spur economic growth, promote investments, and encourage local businesses to adopt digitalization and automation in their processes.
Mitigating the immediate impact
To mitigate the immediate impact of the virus, banks have been ordered to restructure and reschedule loans, as well as offer moratoriums.
Businesses in the tourism industry, hotels, airlines, and travel agencies will be given a deferment of their monthly tax installments for six months starting April 1, 2020. There is also travel discount vouchers worth 500 million ringgit (US$113 million) to encourage more domestic tourism.
The central bank has also allocated 2 billion-ringgit (US$453 million) worth in loans for SMEs, with each SME eligible to receive up to 1 million ringgit (US$226,000).
The government has also provided 100 million ringgit (US$45 million) to help businesses upgrade the skills of their workers.
Encouraging economic growth
Measures to spur economic growth include providing cash handouts of 200 ringgit (US$45) to low-income households and implementing small-scale infrastructure projects totaling 2 billion ringgit (US$450 million).
Other measures involve assisting the food production industry through 1 billion ringgit (US$226 million) in loans.
A total of 300 million ringgit (US$68 million) in loans is available for SMEs looking to adopt digitalization or automation into their business, and some 500 million ringgit (US$113 million) has been allocated for early-stage and growth-stage local companies.
To know more, read our article: Malaysia Issues Stimulus Package to Combat COVID-19 Impact
The government is preparing to issue incentives worth VND27 trillion (US$1.16 billion) to dampen the economic fallout of the virus.
The incentives are in the form of tax breaks, delayed tax payments, and delayed land-use fees for businesses.
The government will delay the tax payment deadline for companies in agriculture, footwear, automotive, aviation, textiles, electronics, food processing, and tourism, among others, for five months. This is estimated to be worth VND23 trillion (US$974) million in taxes.
The delay of land-use fees will cost an estimated VND4.5 trillion (US$194 million).
Further, Vietnam’s central bank, State Bank of Vietnam, has already cut interest rates by 0.5- 1 percentage points and has scrapped transaction fees. The central bank has also ordered local commercial banks to follow suit and they have offered VND293 trillion (US$12.4 billion) worth in preferential credit to affected businesses.
For more information, read more in our article: Vietnam to Issue Incentives to Counter COVID-19 Impact
In February 2020, the Cambodian government issued regulations to support enterprises impacted by not only COVID-19 but also from the partial withdrawal of ‘Everything but Arms’ (EBA) status by the European Union (EU).
The General Department of Customs and Excise (GDCE) will also be more lenient in facilitating the import of raw materials, parts, and accessories, used for textile and garment production. Companies severely affected by the disruption caused COVID-19 will be given tax holidays of six months to one year.
Hotels and guesthouses in important tourism areas will be exempted from paying tax from February to May 2020.
The government has suspended the four percent stamp duty tax on the transfer of residential properties from February 2020 to January 2021, and US$50 million in low-interest loans have been allocated to help SMEs in the agriculture sector.
Read more in our article: Cambodia Issues Regulations for Businesses Impacted by COVID-19 and EBA
ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in Singapore, Hanoi, Ho Chi Minh City and Jakarta. Please contact us at firstname.lastname@example.org or visit our website at www.dezshira.com
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