Income repatriation to Thailand Sebastian Pawlita Partner 20 February 2014

Transcription

1 Income repatriation to Thailand Sebastian Pawlita Partner 20 February 2014

2 MYANMAR: Payment of dividends Foreign Exchange Management Law of 10 August, rather vague; no implementing guidelines yet Foreign Investment Law takes precedence over the Foreign Exchange management law

3 MYANMAR: Payment of dividends It is possible to repatriate profits after tax If the company operates under an MIC permit, the Foreign Investment Rules provide an explicit procedure. Submit audited financial statements and bank account balance statement to the MIC in order to obtain approval for the money transfer If the company does not operate under an MIC permit, there is no explicit procedure. Submit company registration certificate, BoD resolution, audited financial statements and to local bank; the local bank may ask the Central Bank for approval

4 MYANMAR: Payment of dividends It is legal to exchange kyats into foreign currency in order to make dividend payments. In practice, however, there may be problems if big amounts have to be exchanged.

5 MYANMAR: Payment of dividends Presently, no withholding tax on dividends Should dividend withholding tax be introduced: protection under double taxation treaties Treaty rate according to DTT Myanmar/Thailand: 10%

6 MYANMAR: Other payments E.g., Subsidiary pays interest on an interest-bearing shareholder loan Subsidiary pays a services fee to the parent company

7 MYANMAR: Other payments Loans from abroad: If borrower operates under an investment permit from the Myanmar Investment Commission ( MIC permit ): Before the loan agreement is signed, the borrower has to obtain: approval from the Central Bank opinion from the Union Attorney General s Office on the loan agreement recommendation from the Economic Relations Department of the Ministry of National Planning and Economic Development approval from the MIC If borrower does not operate under an MIC permit: Before the loan agreement is signed, the borrower has to obtain approval from the Central Bank

8 MYANMAR: Other payments Withholding taxes in Myanmar if the recipient of the payment is non-resident for tax purposes: Interest: 20% (treaty rate DTT Myanmar/Thailand: 10%) Royalties: 15% (treaty rate DTT Myanmar/Thailand: 5, 10 or 15%) Services fees: 3.5% (treaty rate DTT Myanmar/Thailand: 0%; 10% for managerial or consultancy services)

9 MYANMAR: Other payments The homepage of the Ministry of Finance and Revenue lists double taxation agreements with the following countries: India, South Korea, Malaysia, Thailand, United Kingdom, Vietnam, Singapore, Laos

10 MYANMAR: Other payments Section 31 Income Tax Law: When the Union Government enters into an agreement with any foreign state A relating to income tax and if the agreement is notified, the terms of the said agreement shall be followed, notwithstanding anything contained in any other provision of the law. Such agreement may be published in the Union of Myanmar Gazette notwithstanding anything contained in any other provisions of the law. Prior consultation with the revenue office in charge!!

11 MYANMAR: Other payments No transfer pricing rules, but tax authorities have discretion to disallow the deduction of expenses that are incommensurate with the size of the business of the taxpayer No thin cap rules, but loans not stated in the investment schedule require additional approval from the MIC

12 MYANMAR: Selling shares Income tax on capital gain of a capital asset (= land, building, shares, bonds, any capital asset connected with the enterprise ) if seller is a resident individual or company: 10% Income tax on capital gain if seller is a non-resident individual or company: 40% (treaty rate according to DTT Myanmar/Thailand if seller is Thai resident: 0%, but only if the Thai seller held less than 35% of the shares of MyanmarCo)

13 MYANMAR: Selling shares Income tax on capital gain if shares in an oil or gas project are sold (irrespective of the residence status of the seller): 40% (capital gain up to USD 100 million) 45% (capital gain more than USD 100 million and less than USD 150 million) 50% (capital gain more than USD 150 million)

14 MYANMAR: Selling shares Vodafone scenario? Advantageous double taxation agreement with Singapore(simplified description) Myanmar must not tax if seller (Singapore resident) held less than 35% of the shares of a company whose assets do not principally consist in immovable property Myanmar capital gains tax must not exceed if seller (Singapore resident) sold shares in a company whose assets principally consist in immovable property, or if seller (Singapore resident) held 35% or more of the shares

15 VIETNAM: Payment of dividends Circular 186/2010/TT-BTC Distribution once per year Maximum distributable amount: Annual pre-tax profit minus losses carried forward for corporate income tax purposes minus the amount of corporate income tax

16 VIETNAM: Payment of dividends Example: 2012: Loss of VND 400 million 2013: Profit of VND 300 million 2014: Profit of VND 700 million Distributable profit: 2012: distributable profit: zero (as losses were made) 2013: distributable profit: zero (as profit is eaten up by losses carried forward from 2012) - remaining losses carried forward to 2014: VND 100 million 2014: distributable profit: VND 480 million ( )-( ) x 20%

17 VIETNAM: Payment of dividends It is possible to convert VND into foreign currency (in practice: sometimes difficulties to obtain large amounts of USD); amounts in foreign currency must be remitted within 30 days after conversion from VND

18 VIETNAM: Payment of dividends Requirements for distribution: Submission of the subsidiary s audited financial statements and annual corporate income tax return ( CIT finalization declaration ) Payment of corporate income tax At least 7 days prior to planned distribution date: Notification of the tax authorities Confirmation from the tax authorities that dividends can be distributed required?

19 VIETNAM: Payment of dividends Presently, no withholding tax on dividends Should dividend withholding tax be introduced: Protection under double taxation treaties Treaty rate according to DTT Vietnam/Thailand: 15%

20 VIETNAM: Other payments E.g. Subsidiary pays interest on an interest-bearing shareholder loan Subsidiary pays a services fee to the parent company Withholding tax ( foreign contractor tax, Circular 60/2012/TT-BTC: Interest:VAT 0%; CIT 5% Royalties: VAT 0%; CIT 10% Services: VAT 5%; CIT 5%

21 VIETNAM: Other payments Treaty relief in only available for the CIT portion of the foreign contractor tax DTT Vietnam/Thailand: Treaty rates for interest and royalties higher than the domestic Vietnamese rates, so no treaty relief in Vietnam Vietnam should exempt services fees from CIT if the services are provided by a Thai company with no permanent establishment in Vietnam Exemption requires the filing of an application 15 days before payment; otherwise only refund available

22 VIETNAM: Other payments Vietnam has started implementing a transfer pricing regime in 2010 Documentation required At-arm s length principle has to be observed Services paid for by the subsidiary must have been (i) required for the subsidiary s business and (ii) actually provided

23 VIETNAM: Other payments Thai tax treatment of dividend income vs. interest income / income from royalties / income from services A loan with a term of more than one year provided by a foreign entity has to be registered with the State Bank of Vietnam Payments concerning long-term loans (the law is silent on short-term loans) and disbursement of capital or dividends to foreign shareholders has to flow through the capital account of the subsidiary

24 VIETNAM: Other payments No thin cap rules in Vietnam. However, the subsidiary cannot take up higher loans that the investment amounts specified in the application for the investment certificate. If higher amounts are required, the investment certificate has to be changed

25 VIETNAM: Selling shares Selling shares in the Vietnamese subsidiary involves complicated procedures in Vietnam (amendment of the investment certificate) If the seller of shares in a Vietnamese company is a If the seller of shares in a Vietnamese company is a foreigner and the buyer a Vietnamese, it is complicated in practice to transfer the purchase price out of the country

26 VIETNAM: Selling shares Tax rates on capital gain: CIT: 20% or 22%; no VAT Exemption from CIT according to DTT Vietnam/Thailand if seller is a Thai resident. However, it is necessary to apply for the exemption 15 days before the seller has to declare the capital gain; otherwise, only a refund may be obtained.

27 VIETNAM: Selling shares Circular 123/2012/TT-BT If seller is a foreign company and purchaser is Vietnamese: Purchaser has to withhold Vietnamese CIT from the purchase price If both seller and purchaser are foreigners: Vietnamese target company is responsible to pay Vietnamese CIT on the capital gain on behalf of the foreign seller No stamp duty on transfer of shares

28 VIETNAM: Selling shares If possible: Try to sell shares in foreign holding company instead of Vietnamese subsidiary (procedure less complicated) Conditions for avoiding a Vodafone scenario (Official Letter 2268/TCT-CS dated 28 June 2012): The shares are transferred outside of Vietnam between two non- Vietnamese entities The direct shareholding in VietCo is not changed Foreign HoldCo and VietCo do not generate any income from the transaction The investment certificate of VietCo remains unchanged

29 CAMBODIA: Payment of dividends, other payments, selling shares No restrictions on the transfer of funds into and out of the country through banks Withholding tax on payments to non-residents: 14% (dividends, interest, royalties, fees for technical and managerial services) Additional profit tax on dividend distribution: Normal profit tax: 0% (during exemption period), 20%, 30% (exploitation of natural resources) Additional profit tax of 20% on profits during exemption period which is to be distributed as dividends

30 CAMBODIA: Payment of dividends, other payments, selling shares Stamp duty 0.1% on transfer of shares; capital gain taxed at 20% No double taxation treaties

31 Myanmar