ASEAN Market Watch: Malaysian Double Taxation, Property in Myanmar, and Investment Initiatives in the Philippines
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.
Myanmar: Property Market Set to Improve, but Challenges Remain
Myanmar’s residential real estate market is set to improve in the second half of the year. After slow growth in the first half, the Asian Development Bank has forecasted an 8.4 percent expansion of the country’s economy; demand for the real estate market is likely to be further strengthened by political stability after the recent elections. Supply of residential units is expected to be spread unevenly throughout the country, however. Reports indicate that developers have built a considerable amount of luxury units in recent years, which has created an overstock. Meanwhile, there is a shortage of low-cost and midrange accommodation, as 25.6 percent of the population is still below the poverty line. At the beginning of 2016, there were more than 6650 high-end residential units, double the figure for 2014.
Developers hope to clear the overstock due to a recent regulation which allows foreigners to own 40 percent of a building. Nevertheless, the government will also need to make financial reforms to rejuvenate the property market. While the government has yet to ease access to finance, officials have tightened regulations on construction and the property market. Earlier in the year officials ordered construction on high rise buildings to stop for inspections, which affected more than 200 projects. Analysts have stated that while this may affect the industry in the short-term, the regulations are a positive step to ensure that buildings that are constructed are in compliance with relevant norms and international standards, which will benefit the sector in the long-term.
Philippines: Government to Invest in FDI Schemes
In a bid to boost foreign direct investment (FDI) into the Philippines, the government plans to ease restrictions and regulatory requirements to make the country one of the top three destinations in Southeast Asia for FDI by 2022. The government is planning to update the Foreign Investment Negative List (FINL) – a list that excludes certain sectors from FDI. The FINL includes mass media, retail trade enterprises, cooperatives, private security agencies, small-scale mining, marine resources, and nuclear weapons. Earlier in June, the government removed some sectors such as lending firms, investment houses, and financing companies from the FINL.
The government aims to implement more reforms, increasing FDI by four percent this year to a value of US $6.3 billion. Apart from reforms, the government is also looking to change bureaucratic processes and improve investments in infrastructure. It also plans to reduce corporate and personal income tax, which are currently among the highest in ASEAN. The UN Conference on Trade and Development (UNCAD) stated in its 2016 World Investment Report that the Philippines is expected to be the top 15 FDI destination in the next three years. The development bodes well for foreign investors looking to invest in the Philippines over the coming years.
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