Malaysia Announces 70% Tax Exemption for Shipping Industry

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By: Dezan Shira & Associates

Malaysia’s Ministry of International Trade and Industry revealed tax incentives on August 9th targeting the shipping industry. Incentives will be applied with immediate effect and will be available for periods of five years.

Understanding Incentives

Shipbuilding incentives will be applied to both shipbuilding companies as well as those involved in supporting industries such as ship repair. In terms of their structure, incentives target both existing and prospective investors. Those involved or considering investment in the aforementioned industries should make note of the following incentive particulars:

  • First time investors will be eligible for pioneer status in Malaysia for a period of five years. Under this status, investors may exempt up to 70 percent of their statutory income from corporate income taxation.
  • Existing and first time investors will be allowed to deduct 60 percent of all capital expenditure for a period of five years. It should be noted, however, that first time investors will be required to choose between capex deductions and pioneer deductions.
  • Applying for incentives: All applications will be evaluated on an individual basis by the Malaysian Investment Development Authority.  

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An Introduction to Malaysian GST

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Malaysian GSTBy: Dezan Shira & Associates 
Editor: Marquise Clarke

Malaysia’s recent addition of a Goods and Service Tax (GST), which was passed by the government during the third quarter of 2011 but delayed until April 2016, has been the cause of much confusion within ASEAN’s second most developed economy. The hope and purpose of GST is to replace the sales and service tax which has been used in the country for several decades. However, with the rollout of the tax seeing delays and numerous clarifications, questions remain over what GST is and how it will impact business costs. 

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ASEAN Market Watch: Malaysian Double Taxation, Property in Myanmar, and Investment Initiatives in the Philippines

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Malaysia and Ukraine Sign Double Tax Avoidance Agreement

The Malaysian and Ukrainian governments signed a double tax avoidance agreement (DTAA) on August 4 to improve business and further attract investors. The agreement was signed during Ukrainian President Petro Poroshenko’s official visit to Malaysia.

The DTAA will cap the following withholding tax rates:

  • Dividends – 5 percent if the beneficial owner is a company holding at least 20 percent of the paying company capital; 15 percent otherwise
  • Interest – 10 percent
  • Royalties – 8 percent

Once the DTAA is implemented, it will replace the 1987 DTAA between Malaysia and the Soviet Union which continues to apply with respect to Ukraine and Malaysia in certain cases. The Ukrainian government is also keen to jointly participate with Malaysia in several sectors including space programs, supply of food and medicines, and the provision of transport aircrafts for the defense industry. In addition, Poroshenko is looking to jumpstart a Ukraine-Malaysia trade commission.

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The Benefits of Regional Management in Thailand

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IHQ ThailandBy: Dezan Shira & Associates
Editor: Eugenia Lotova

For companies with several offices, whether regionally or globally, it is important to identify a headquarters that provides management, support, financial assistance, and other services to offices and operations. As a variety of Southeast Asian economies continue to experience rapid growth and barriers between nations are reduced, the advantages of multi-jurisdictional supply chains grows ever greater. Establishing a regional headquarters in a Southeast Asian country can prove to be a worthwhile investment because it will allow the company to have access to the massive (Association of Southeast Asian Nations) ASEAN market.

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The Philippines Export Development Plan: Addressing Obstacles to Trade

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Philippines Export Development Plan

By: Dezan Shira & Associates
Editor: George Llewellyn-Jones 

Seeking to maximize its position within ASEAN and make up for poor economic performance in recent quarters, the Philippines has implemented stimulus measures aimed at readjusting its export sector. The most significant actions that have been implemented or planned to date are outlined in the recently passed Philippine Export Development Plan (PEDP). For those currently considering the Philippines as a destination for foreign investment, the success of reforms will likely play a significant role in the island nation’s business landscape in the coming months. 

Lagging Economic Growth as an Impetus for Reform

A significant catalyst behind the island nation’s drive for reform stems from lagging economic conditions found within the country. In addition to GDP growth slowing to 5.8 percent in 2015 – a far cry from the government’s 8 percent target – exports have also posted significant declines. January 2016 alone saw sales to overseas markets fall 3.9 percent compared to a year prior.

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Investment Protection in ASEAN – Part 1: The ASEAN Comprehensive Investment Agreement

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ASEAN Comprehensive Investment AgreementBy: Dezan Shira & Associates
Editor: Alexander Chipman Koty 

For companies seeking to expand operations in South East Asia, the region’s rising stature in manufacturing, ICT, and other areas of production remains tempered by regulatory uncertainty. Although legal continuity will likely emerge over the long term, rapidly developing regulatory infrastructure in many of ASEAN’s member states mandates a clear understanding of national policy objectives as well as risk mitigation techniques. 

The first in a two part series, this article will assess the protection afforded to investors as part of the agreement. For more information on how the agreement compares to bilateral investment agreements in place between states such as Japan, the United States, and the EU, stay tuned for the second half of this article – to be released within the coming week.  

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Foreign Exchange Volatility in ASEAN: Assessing Exposure & Managing Risk

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By Dezan Shira & Associates 
Editor: Maxfield Brown

Exchange rate volatility has emerged as a pressing challenge for investors seeking to establish and scale regional production chains within ASEAN. 2015 survey data from the Economist indicates these fluctuations have overtaken regulatory compliance as the single greatest impediment to profit maximization in South East Asia – with nearly 50 percent of respondents voicing concerns. Understanding that this volatility is likely to be a long term risk associated with regional production, the following article overviews the issues surrounding foreign exchange within ASEAN and highlights market entry strategies which can be utilized to reduce operational exposure.

Should any questions arise, and for more in depth analysis on how to assess and manage your FX exposure within ASEAN, please contact our Business Intelligence specialists

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The ASEAN Trade in Goods Agreement (ATIGA): Local Content Requirements

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ASEAN Supply ChainsBy: Dezan Shira & Associates
Editors: Anais Robin

In light of significant reductions in tariffs between ASEAN members and the steady harmonization of regulation through the ASEAN Economic Community, regionally oriented value chains have risen significantly in terms of profitability. For those considering investments of this nature, it’s important to understand not only the tariff reduction schedules that have been negotiated, but more importantly, the conditions under which exports and imports may benefit from reduced rates.

Within the vast majority of trade agreements, rules of origin are included to prevent third parties from freeriding on the sacrifices made by those party to the agreements. These rules set out who may qualify for benefits of a given agreement and under which circumstances these parties may do so.

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Minimum Wages in ASEAN – All You Need to Know in 2016

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By: Mareike Entzian

It is important to evaluate current minimum wages across ASEAN every couple of years, as they often fluctuate heavily and impact productivity, profits and ultimately investor decisions. With recent shifts towards a “China Plus” strategy within APAC at large, examining minimum wages across ASEAN is an increasingly useful strategy. Although wages alone will not determine the utility of given markets, minimum wage trends provide valuable insight on whether a country is likely to be a sourcing, production, or sales market for a given product. Trends show sustained inflationary pressures on wages within the region as ASEAN-5 members make an effort to bolster middle class growth and transition their economies away from traditionally export led growth.

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Indonesian ROs: Easy Steps for Successful Establishment

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By: Winnindo Business Consult
 Mourme Taruna Halim

With a total population exceeding 250 million, Indonesia is a great market opportunity for foreign companies seeking to expand their consumer base and bolster production. The majority of Indonesians are middle class and, at 28 years of age, the average citizen is at the height of their productivity and nearing peak consumption years.

Firms seeking to increase their global footprint – in particular, through the establishment of regional production hubs – should therefore strongly consider Indonesia as an exciting entry point to ASEAN and the region at large.

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Meet the firm behind our content. Dezan Shira & Associates have been servicing foreign investors in China, India and the ASEAN region since 1992. Click here to visit their professional services website and discover how they can help your business succeed in Asia.

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