ASEAN Regulatory Brief: Singapore – Russia DTA Updates, Malaysian GST Revisions, Philippine Customs, and e-Commerce Regulation in Indonesia

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Singapore: DTA with Russia Amended

Media reports indicate that Russian President Vladimir Putin signed a law ratifying the Protocol to amend the 2002 Russia-Singapore double taxation agreement (DTA) on June 23. The amendment reduces withholding tax from five percent to zero percent on dividends if the beneficial owner is the government of the other contracting state. The amendment also reduces the withholding rate on interest from 7.5 percent to zero percent. For royalties, tax is also reduced from 7.5 percent to five percent. The Protocol amends several treaty articles including taxes covered, permanent establishment, pensions, and exchange information. Investors should study the amended protocol and be prepared to make changes in their businesses accordingly.

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Malaysia: Customs Department Revises GST Guide

The Malaysia customs department has revised the Goods and Service Tax (GST) guide in June. The guide focuses on two areas: Imports and Tax Invoice & Record Keeping.

For Imports (revised on June 24 and replacing the May 12 edition), the new text now reads that a service acquired from overseas which is directly related to financial services and benefits a person who belongs in Malaysia, even though the service is consumed overseas, is to be treated as an imported service.

For Tax Invoice & Record Keeping (revised on June 30): section 33 GSTA provides that every registered person who makes any taxable supply of goods or services in the course or furtherance of any business in Malaysia shall issue a tax invoice containing the prescribed particulars. Failure to issue a tax invoice is an offense.

Investors in Malaysia or providing services to Malaysian nationals should note the amendments to the GST guide and implement the new procedures to their tax and accounting books to avoid any fines.

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Philippines: Customs Bill Becomes Law

Former President of the Philippines, Benigno Aquino III, signed the Customs Modernization and Tariff Act (CMTA) or the Republic Act (RA) 10863 on May 27. The new law is set to be a major overhaul of the Bureau of Customs. Changes are in line with the standards and practices of the Revised Kyoto Convention (RKC) making it easier for traders, importers, and exporters to comply with border controls. The CMTA will also impose higher fines for smuggling.

Some of the highlights include: Filipinos that have stayed in a foreign country for at least 10 years and are returning to the Philippines will be exempted for taxes on all personal and household items up to US$7,400 (PHP 350,000) in value. Overseas foreign workers (OFWs) will also be permitted to send up to three boxes worth US$3,100 (PHP 150,000) tax free in a year as long as the goods are not intended for commercial usage or sale. In addition, the CMTA has raised the value of tax and duty free goods, and the minimum cost of goods required for formal Customs entry from the present US$0.2 (PHP 10) to US$211 (PHP 10,000). The law aims to make the processes more transparent while also increasing revenue collection.

Indonesia: New Regulations for e-Commerce

Indonesia plans to allow expanded FDI in e-commerce related business as the country prepares to accommodate what many project to be the world’s fastest expanding pool of internet users. The Investing Coordinating Board (BKPM) is preparing a draft for the foreign e-commerce investment. The new regulations are expected to allow 100 percent foreign ownership for e-commerce businesses with a minimum investment of US$7 million (Rp 100 billion) or businesses that create 1,000 jobs. However, foreign ownership will be limited to 49 percent for businesses investing below US$7 million (Rp 100 billion).

In another development, the government plans to introduce a special tariff for small and medium enterprises (SMEs) that generate revenue through online retailing. Thus, individuals or companies generating revenue through online retailing (including Facebook or Instagram pages) will have to report their income and pay taxes. Tax authorities will find it difficult to monitor such transactions, however, as many of these businesses are not legal entities and do not have taxpayer identification numbers (NPWP).


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