International Tax. international tax developments in the Asia Pacific region. February 2015

Transcription

1 International Tax A Hong Kong perspective on key international tax developments in the Asia Pacific region February 2015

2 An overview of key international tax developments and structuring considerations Understanding the challenges of today s tax environment Theory vs practice International considerations 1

3 Agenda Key tax developments Asia Pacific Base Erosion and Profit Shifting ( BEPS ) overview Tax information sharing The transfer pricing landscape International structuring from a Hong Kong perspective Key features of the Hong Kong tax system Challenges to Hong Kong s attractive tax regime Future proofing Case study BEPs motivated restructure Q&A section 2

4 Key tax developments 3

5 Key tax developments OECD Base Erosion and Profit Shifting ( BEPS ) The Study Group on Asian Tax Administration and Research (SGATAR) Task force to support taxation regionally Increased collaboration among tax administrations 4

6 APAC BEPS overview No engagement on BEPS Generally follow international tax trends restrained by domestic capabilities Partial involvement and interest may adopt some measures Involvement and interest voluntary adoption of many guidelines 100% involvement and adoption Brunei Cambodia Myanmar Papua New Guinea Sri Lanka Macau Laos Malaysia Mongolia Taiwan Vietnam Fiji Thailand Singapore Hong Kong Pakistan G20 countries - China Indonesia India OECD countries - Australia Japan Korea New Zealand BEPS Action Plan: Which items will succeed in APAC? Hybrid mismatch tax planning Widespread acceptance among APAC countries that should be curtailed Preventing treaty abuse Introduction of limitation of benefits clauses, minimum shareholding periods or cancelling treaties Counter harmful tax practices more effectively How to improve transparency through compulsory spontaneous exchange on rulings related to preferential regimes Transfer pricing of intangibles Clarify the definition of intangibles, and provide guidance on identifying intangible transactions Addressing the digital economy Unlikely significant global reforms in this area will proceed given the complexity and lack of consensus internationally Transfer pricing documentation Common template for country-by-country reporting of income, earnings, taxes paid and certain measures of economic activity Develop a multilateral instrument Countries to implement BEPS measures without having to renegotiate each of their existing bilateral tax treaties 5

7 Tax information exchange Exchange of Information Information upon request Scope of information Can be administratively cumbersome for tax authorities Common reporting standard Game changer standardised, cost effective model Potentially facilitated through financial intermediaries 6

8 The transfer pricing landscape key regional trends Increased regulation (retrospective application India, Australia) Increased enforcement Tax authorities in the region are becoming increasingly sophisticated Australia is proactive in regional education Divergent views across the region in relation to marketing intangibles, location savings and market premiums Establishment of Advance Pricing Agreement (APA) programs India Hong Kong Vietnam 7

9 Key features of the Hong Kong tax system Non DTA Countries Returns from Investments Hong Kong Company Dividends: 0% WHT Royalties: 4.95% WHT (IPRs used in HK) Interest: 0% WHT The DTA Network Dividends fully exempt Interest is taxed based on source (DIPN 13) Capital gains are exempt 16.5% Corporate Tax Taxation of revenue profits based on territoriality No tax on capital gains DIPN 21 on Locality of Profits DIPN 13 Taxation of Interest No VAT Stamp duty 28 effective DTAs, primarily with Asia and the EU Particularly beneficial treaties with China, Indonesia and Japan Good treaties for accessing Europe (Luxembourg, UK) and Canada 8

10 Challenges to Hong Kong s attractive tax regime Practical difficulties in obtaining tax treaty relief what does this mean for passive income companies (i.e. holding companies, IP companies etc.) Ultimately t l a shift towards alignment of holding company with business operations BEPS should start considering the implications Tax information exchange reduced privacy of financial information Transfer pricing in the spotlight What has worked in the past may not work now 9

11 Future proofing Understand and assess the extent of tax risk Is the level of tax risk acceptable from a business perspective? Restructuring Transfer pricing can be the solution and the problem Understand the tax and transaction costs of addressing the problem 10

12 Case study BEPS motivated restructure 11

13 Case study BEPS motivated restructure Current Structuret IP Holding Co (BVI) Brand owner License unrestricted right to use and modify IP Brand License Co (NL) Brand licensing intermediary Charges for the use of the IP Operating Companies Local operating companies 12

14 Case study BEPS motivated restructure Restructure t Transfer IP License unrestricted right to use and modify IP for a nominal fee Charges for the use of the IP IP Holding Co (BVI) NEW IP Holding Co (BVI) Brand License Co (HK) Previous brand owner New brand owner Brand licensing intermediary entity (economic owner) Operating Companies Local operating companies 13

15 Q&A section

16 Thank you Presentation by John Timpany Contact Details: Tel: Mobile: Fax:

17 2015 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Printed in Hong Kong. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).