Tax & Accounting

Taxation in ASEAN: An Introduction

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By Dezan Shira & Associates

The Association of Southeast Asian Nations (ASEAN) represents a highly integrated economic region when compared to other parts of the world. Yet, in terms of taxation, there is a wide variation among its 10 member states namely, Brunei, Laos, Cambodia, Indonesia, Myanmar, Malaysia, Philippines, Singapore, Thailand, and Vietnam. Apart from the reduction of import tariffs, ASEAN tax coordination is limited to the elimination of certain withholding taxes and the completion of the network of double tax treaties among all ASEAN countries. Companies that are looking to enter emerging markets in ASEAN must take note of the various taxes they may be subject to, and their variation across the region. Applicable taxes for foreign businesses include Corporate Income Tax (CIT), Personal Income Tax (PIT), Withholding Tax, as well as indirect taxes such as Value Added Tax (VAT), and Goods and Services Tax (GST). The impact of the different taxes, tax rates and tax bases on the effective tax burdens, however, may differ according to the type of investment, the source of finance and the profitability of an investment.

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Key Highlights of Cambodia-China Double Taxation Treaty

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By Dezan Shira & Associates
Editor: Vasundhara Rastogi

Recently, China’s State Administration of Taxation (the SAT) released an announcement, setting out the effectiveness of the new China-Cambodian Double Taxation Treaty (DTT) and the associated protocol. The new DTT – signed on October 13, 2016 – entered into force on January 26, 2018, and will be applicable to income received on or after January 1, 2019. 

The treaty aims to create a clear legal framework built on increased fiscal transparency that will improve the tax collection mechanism between the two countries and increase cross-border trade and investment.

It is important to note that the DTT does not apply to Hong Kong or Macau, as these regions have a separate tax system and do not fall under the taxation laws of the People’s Republic of China.

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Corporate Taxes in the Philippines

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By Dezan Shira & Associates
Editor: Vasundhara Rastogi

In the Philippines, all companies – domestic or foreign – are liable to pay corporate income tax (CIT). The tax liability for a corporation is determined by its residency status and is based on the net income it obtains while carrying out its business activity, normally during one business year.

Residency status of a company

A company is regarded as a resident if it is incorporated under the tax laws of the Philippines or as a foreign resident corporation that is duly licensed by the Philippine Securities and Exchange Commission (SEC) to engage in trade or business in the Philippines.

While a domestic company is taxed on its worldwide net taxable income, a foreign company – resident or non-resident -, is taxed only on income that is received in the Philippines, or that arises or is deemed to accrue in the country. Non-resident foreign corporations, however, are taxed on gross income derived from the Philippines.

Income tax does not include dividends received from domestic corporations; interest on Philippine currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements; and other passive income previously subject to final taxes.

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The 2018/19 ASEAN Tax Comparator – New Issue of ASEAN Briefing Magazine

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ASB 2018 04_600cover (002) resizedThe latest issue of ASEAN Briefing Magazine titled, “The 2018/19 ASEAN Tax Comparator“, is out now and available to subscribers as a complimentary download in the Asia Briefing Publication Store.

In this issue of ASEAN Briefing

  • Taxation in ASEAN: An Introduction
  • Comparing Tax Rates Across ASEAN
  • Tax Compliance in ASEAN in 2018

 

 

 

 

 

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Indonesia Eases Tax Holiday Policy for New FDI Projects

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ASEAN Regulatory BriefBy Dezan Shira & Associates

In a bid to attract more investment to support the country’s economic growth, Indonesia recently issued a new regulation granting a 100 percent Corporate Income Tax (CIT) cut to new FDI-backed businesses.

Further, the new regulation grants tax holidays to new investors in any of the 17 pioneer industries including transportation, telecommunications, robotic components, oil and gas refinery, train engines, medical devices, pharmaceutical raw materials, power plant machinery, and processing of metals and agricultural products among others. Pioneer industries are those that create added value, introduce advanced technology and have strategic value for the national economy. Previously, the provision was available to only eight such industries.

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Cambodia’s DTAs with Singapore and Thailand Come into Effect

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By Dezan Shira & Associates
Editor: Vasundhara Rastogi

On January 1, 2018, Cambodia’s two Double Tax Agreements (DTAs) – with Singapore and Thailand – came into effect. The DTA with Singapore – Cambodia’s first income tax treaty – was signed on March 20, 2017, whereas the DTA with Thailand was signed on September 7, 2017.  The two DTAs aim to clarify taxation rights on all forms of income arising from cross-border economic activities between the signatory jurisdictions in respect of tax on profit, including withholding tax, additional profit tax on dividend distribution and capital gains tax; and tax on salary while minimizing double taxation. The agreements also provide for reduction or exemption of tax on certain types of income, lowering barriers to cross-border investment and encouraging bilateral trade.  

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The Philippines’ New Tax Reform Package Approved

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By Dezan Shira & Associates
Editor: Vasundhara Rastogi

On December 19, 2017, the Philippines’ much awaited tax reform package or Tax Reform for Acceleration and Inclusion (TRAIN) was signed into law, paving the way for a simpler and fairer tax regime in the country. The revised law provides for personal income tax cuts and revises several other decade-old tax provisions that will have important implications for taxpayers and businesses in the Philippines.

In this article, we highlight the key changes introduced in the new Act.

Tax exemptions
  • Personal Income Tax exemption for lowest earners

TRAIN exempts those earning an annual income of up to ₱250,000 (US$4,975) from Personal Income Tax (PIT), and raises the tax exemption for 13th-month pay and other bonuses to ₱90,000 (US$1,791). In addition, it lowers income tax rates for those earning up to ₱8 million (US$159,200).  After 2022, the income tax rates will further be reduced for all taxpayers, except those earning an annual income above ₱8 million. 

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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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