ASEAN Regulatory Brief: GST and Income Tax Exemptions, FTA, Tightening Inheritance and Gift Tax Regulations

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In this ASEAN Regulatory Brief, we look at some of the important regulatory changes taking place in Malaysia, Indonesia, the Philippines, and Thailand during the month of July.

  • List of GST-exempt items could be expanded

The Malaysian government has announced that it may expand the number of items that are not subject to the country’s goods and services tax (GST). According to Deputy Finance Minister Datuk Ahmad Maslan, the budget committee is currently analyzing the economic impacts of expanding the list. As of now, around 900 items are exempt from GST, these include bread, coffee, tea, fruits, essential services, and certain types of fuel. Future items that may be included in the list include prayer items and quails.

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Under the GST-exemption process, a zero tax rate is imposed on consumers, whereas businesses throughout the supply chain (except retailers) are able to claim back input tax that has arisen during the production process.

  • More individuals to be exempt from income tax

In an attempt to spur economic growth and increase the purchasing power of the public, beginning this July, the Indonesian government will raise the threshold at which individuals must pay income tax. The government expects the tax exemption to increase the country’s economic growth by 0.1 percent.

Those individuals earning an annual income of rupiah 36 million (~US2,700) will now be exempt from the country’s income tax. The previous level for the tax exemption was set at individuals earning rupiah 24.3 million.

The new exemptions will cover income tax paid since the beginning of 2015. The rupiah 36 million threshold is for unmarried taxpayers, those who are married, and are filing joint tax returns, will be eligible for a rupiah 50 million threshold.

The Philippines
  • Possible FTA between the Philippines and Canada

The Philippines and Canada have entered into exploratory discussions as to whether the two countries should sign a free trade agreement (FTA). A tentative deadline of 2016 has been set for the end of negotiations.

Canada sees the Philippines as being a key gateway into the ASEAN region – the Philippines is Canada’s sixth largest trading partner in Southeast Asia. With a market of over 100 million consumers, a GDP of around US$315 billion, and one of the fastest growth rates in Asia, the Philippines is an increasingly attractive trade destination for countries such as Canada. 

  • Thailand cracks down on inheritance and gift tax evaders

Thailand’s government has announced that anyone attempting to pass on their assets via off-market transfers before the country’s new inheritance and gift tax can be implemented will find themselves subject to the maximum personal income tax rate of 35 percent. The move comes as Thailand begins the implementation of its new tax, which has resulted in many affluent people attempting to transfer their assets to their heirs before the tax takes effect.

Professional Service_CB icons_2015 RELATED: Dezan Shira & Associates’ Tax and Compliance Services

Under the new regime, taxable assets will include residences, land, vehicles, bonds, equities and deposits in financial institutions. Bequests from deceased donors that are over 100 million baht will be subject to a 10 percent tax, however, if the recipients are parents or children, they will be only be liable for a five percent tax. Spouses will be exempt from any tax. If the donors are still alive, then the recipients are subject to a five percent tax on bequests over 20 million baht; spouses are again exempt.


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