ASEAN INVESTMENT & TAX NEWS

Transcription

1 ISSUE 3/ ASEAN INVESTMENT & TAX FEATURE ARTICLE READ MORE Page 2-3 READ MORE Page 3-8 FOREWORD It is my sincere pleasure to welcome you once again to BDO s ASEAN Investment & Tax News. This is our third issue of the quarterly newsletter which seeks to bring you key recent updates on tax and business developments in the ASEAN region. South East Asia (SEA) represents one of the fastest-growing regions in the world today. My BDO colleagues and I believe that there are a lot of possibilities as to long-term investments in SEA including regional collaborations that would create further investment opportunities not just within the region but the global economy as a whole. Just recently, Kuala Lumpur played host to Bursa Malaysia s flagship annual event Invest Malaysia Kuala Lumpur. The 2014 conference in June was aptly themed ASEAN s Multinational Marketplace which showcased the importance of the region. Besides displaying the diversity of Malaysia s capital market, the conference provided the platform to introduce key MNCs and global players that are set to drive economic growth within the ASEAN marketplace. The platform brings together leaders of capital market under one roof, including fund managers both locally and globally, key management of listed companies, government officials and other key capital market players together. As you know, by 2015, the ASEAN Economic Community (AEC) with the goal of regional economic integration for the ASEAN countries is envisaged to transform the region into one with free movement of goods, services, investment, skilled workers and capital. As ASEAN countries prepare for the opening of the floodgates, companies with regional ambitions needs to be ready. With this in mind, in this issue, our feature article is focussed on the tax developments in Vietnam in the last 12 months. We felt it would be good to review where recent tax updates are as the economy enters its third-year macroeconomic stability. Despite the growth pace being below the highs of 7-8% achieved in , the economic growth of 5.4% in 2013 on the back of lower inflation, strong external trade and capital flow, is commendable. Other tax counterparts from BDO regional offices will also shed some light on some of the key development in investment and tax policies through the news articles in this publication. CONTENTS P1 FOREWORD P2 FEATURE ARTICLE u Tax Developments in Vietnam Over the Past 12 Months P3 u Lao PDR Concluded Double Tax Agreement with Luxembourg u Taxation of Investors on Income from a Foreign Fund Management Company in Malaysia u Singapore Goods And Services Tax (GST) Updates for the Fund Management Industry u Myanmar: Five New Tax Laws u Indonesia's New Negative List of Investment: A Red Carpet? u Positive Developments in Investment and Tax Policies in Thailand We hope you find this issue of BDO s ASEAN Investment & Tax News newsletter (AITN) useful. Do feel free to contact us should you require more details on the articles and news published in this issue and/or would like to have more in-depth advice on tax and investment related topics. My colleagues and I in the region are here to deliver seamless quality services across the region. May we take the opportunity to wish all who will be observing the fasting month very soon, a blessed Ramadhan. DATO GAN AH TEE Regional Senior Partner

2 2 ASEAN INVESTMENT & TAX FEATURE TAX DEVELOPMENTS IN VIETNAM OVER THE PAST 12 MONTHS by Mdm Mai Lan Phuong Managing Partner, BDO Vietnam Changes in regulation(s) in Vietnam are frequent and are to be expected given that it is a robust developing country. Over the past 12 months, the three (3) main tax laws in Vietnam have been amended. These laws are the Law on Corporate Income Tax (CIT), Law on Value Added Tax (VAT) and Law on Personal Income Tax (PIT). In addition, regulations on Advance Pricing Agreement (APA) were issued. Amendments were also made to the Law on Tax Management and anti-treaty shopping regulations. We will expound below on some of the more notable changes. Corporate Income Tax Update One of the notable changes was the reduction in CIT rate to 22% with effect from 2014 and this will be reduced further to 20% from In addition, companies with turnover of less than VND20 million will enjoy a concession tax rate of 20% with effect from 2014 and 17% from This brings Vietnamese tax rates closer to tax rates of neighbouring ASEAN countries such as Thailand (20%), Cambodia (20%) and lower than that of its other ASEAN members, such as Myanmar (25%/35%), Malaysia (25%), Indonesia (25%), Phillipines (30%) and Laos (24%). Another change to encourage more investors to Vietnam is the reintroduction of tax incentives for business expansion, incentives for large manufacturing and incentives for establishing a project in industrial zones. To encourage the construction of more houses, projects relating to social housing will enjoy a tax rate of 10%. This is in addition to the incentives already available for projects implemented in encouraged locations and/ or encouraged sectors. Another notable change is in the tax deduction rules. Currently, deductible expenses must: relate to the company s business activities; be substantiated with appropriate supporting documents; and is not listed as non-deductible in the regulations. A new requirement that has been added is that expense in excess of VND20 million (approximately USD950) must settled via a bank or other approved payment methods (except for cash). Value Added Tax Update In Vietnam, all businesses are subject to VAT and companies are allowed to pay VAT based on either a fixed percentage depending on the nature of business as prescribed under the regulations ( deemed method ); or net VAT payable based on output VAT less input VAT ( credit method ). Most foreign-owned enterprises would declare VAT based on the credit method. However, from 2014, entities with turnover of below VND1 billion will automatically declare their VAT based on deemed method, unless they opt otherwise by 31 December For companies established after 1 January 2014, the credit method can be applied if the capital expenditure exceeds VND1 billion. Otherwise, the deemed method apply and this can be changed after a period of 2 years and if the turnover exceeds VND1 billion. In relation to the application of zero-rated VAT for export of services, previously, one of the conditions to be fulfilled is that the service recipient must not have any permanent establishment in Vietnam. This permanent establishment requirement is removed and from 2014 onwards, the tax payer must demonstrate that the services are consumed outside Vietnam or in nontariff zones. Personal Income Tax Update The last change in the PIT rate was back in 2009, when the highest tax bracket was reduced from 40% to 35%. One of the key changes in the last 12 months for PIT is the increase in reliefs for personal and dependent, which is now VND9 million and VND3.6 million respectively, up from VND4 million and VND1.6 million previously. In addition, a new deduction has been introduced, which is for contribution to approved retirement funds, capped at VND1 million per month. Despite these changes, the effective tax rate for expatriates in Vietnam remains as one of the highest amongst ASEAN countries. Tax Administrative Changes There have been changes under the tax management regulation to reduce the filing requirement but at the same time penalties provision have been toughened. For the filing of monthly returns for VAT and PIT (including payroll taxes and expatriates tax return), taxpayers that meet certain condition will not be required to file and pay tax monthly, but instead these will be changed to quarterly. While the above reduces the compliance obligation of taxpayers, the penalty provisions are now more stringent, i.e. Late payment interest is increased from 0.05% per day to a two tier rate of 0.05% per day for the first 90 days and 0.07% per day for more than 90 days; Penalty for under declaration of tax is increased from 10% previously to 20%; For under declaration of custom duty, 10% penalty is imposed, but an increased penalty of 20% is applied if such under declaration is discovered by the authorities during an audit; and Violation of tax procedures now faces administration penalties of up to VND200 million (for corporate taxpayer) and VND100 million (for individual). This was increased from the previous penalty amount of VND100 million for all taxpayers. The statutory limitation has also been changed, from unlimited previously, to: 10 years for a tax registered entity; and indefinite for a non-registered entity.

3 ASEAN INVESTMENT & TAX 3 FEATURE TAX DEVELOPMENTS IN VIETNAM OVER THE PAST 12 MONTHS (continued) Transfer Pricing (TP) TP regulations were first issued in 2006, with the latest update made in The tax authorities are currently active in TP and are increasingly requesting entities to submit documentation, carrying out surveys, developing their own internal database as well as coordination and crosschecking of database with customs authorities. In addition, the authorities have issued a circular providing guidance on APA which took effect from 5 February The regulation is not substantially different from APA regulations in neighbouring countries. The implementation of the circular on APA is a significant positive step in Vietnam s TP regulatory framework. Other Developments Anti-Treaty Shopping Provisions The previous circular providing guidance on implementation of Double Tax Agreement (DTA) lacks clarity and there were uncertainty on the effectiveness of the said regulations. A new circular introduced is largely consistent with the previous regulations with notable changes relating to beneficial ownership rules and general anti-avoidance provisions. DTA benefits will be denied if the following beneficial ownership rules apply and the purpose of the arrangement is to obtain DTA benefits: Recipient is obligated to distribute more than 50% of the income to an entity in a third country within 12 months; Recipient have little or no substantive business activities; Recipient have little or no right to control or no risk on the assets or rights that generate the income; Recipient is a resident of a low tax jurisdiction (below 10%); Back-to-back arrangement is put in place; and Recipient is an intermediary company for the sole purpose of treaty shopping. Given the above, current structure and transactions that benefits from DTA provision should be reviewed. Special Relief For Victims Of Riots Relief measures have been introduced for companies affected by the recent riots, including extension of time for filing returns, deferral of tax payment without penalties, relaxation in customs procedures and exemption on import/ export duties, allowing tax deduction losses not covered under insurance as well as reduction or exemption on land rental. In summary, although the reduction in CIT rate makes Vietnam tax rate one of the lowest amongst ASEAN countries, its effective PIT rate on salary remains one of the highest. It is hoped that there will be a reduction in PIT rates in future which would augur well with investors as this would reduce personnel cost for the company. As of May 2014, the Vietnamese government is looking at making changes to the Enterprise Law and Investment Law, with the aim at making the process of setting up a company in Vietnam easier and less restrictive. We will consider featuring these changes once they have been finalized and approved by the Vietnamese government in future issues of the AITN. LAO PDR LAO PDR CONCLUDED DOUBLE TAX AGREEMENT WITH LUXEMBOURG Lao PDR or Laos, has signed a Double Tax Agreement (DTA) with Luxembourg, the first European Union (EU) Member State to do so. The DTA will take effect from 1 January The salient features of the DTA are as follows: Dividends Laos subjects dividend payments to a 10% withholding tax under its domestic law. Under the DTA, the withholding tax will be reduced to 5% provided that the beneficial owner is a company and holds directly at least 10% of the company paying the dividends. Interest A 10% withholding tax is levied on payment of interest to non-residents under its domestic law. The DTA provides that the withholding tax will be reduced to nil if the interest payment is made to the state, the central bank, a local authority or a financial institution. Royalties Laos imposes a 5% withholding tax on payment of royalty to a non-resident under its domestic law. The DTA does not provide any reduction to the above withholding tax rate.

4 4 ASEAN INVESTMENT & TAX MALAYSIA TAXATION OF INVESTORS ON INCOME FROM A FOREIGN FUND MANAGEMENT COMPANY The Inland Revenue Board of Malaysia (IRBM) on 28 April 2014 issued a Public Ruling (PR No. 2/2014) on the tax treatment on income received by foreign and local investors that engage the services of a foreign fund management company. The Government s objective for providing a concessionary tax treatment is to encourage growth of the capital market and services centres in Malaysia. Under PR No 2/2014, a foreign fund company is defined as a company licensed under the Capital Markets and Services Act 2007 where more than 50% of its paid-up capital is owned by foreign equity. The taxation of foreign fund management company is governed by section 60G of the Income Tax Act 1967 whereby the company enjoys a concessionary tax rate of 10% on its chargeable income derived from the provision of fund management services to foreign investors. Foreign investors under PR No 2/2014 are defined as: individuals who are not resident and not citizens of Malaysia; companies where the entire issued share capital is beneficially owned, directly or indirectly by persons who are not resident and not citizens of Malaysia; and trust funds where the entire interest in the fund is beneficially held, directly or indirectly by foreign investors, where: ú the fund is created outside Malaysia; and ú the trustees of the fund are not resident and not citizens of Malaysia. Conversely, local investors are defined as individuals, companies or trust funds that are not foreign investors. According to PR No 2/2014, the following types of income received by foreign investors that are exempted from tax are: dividends and interest from investments outside Malaysia; single tier dividends from investments in Malaysia; interest derived in Malaysia and are paid or credited by: ú Banks or financial institutions licensed under the Financial Services Act 2013 and the Islamic Financial Services Act or by any institutions approved by the Minister of Finance; ú Bank Kerjasama Rakyat Malaysia Berhad; interest received, other than interest accruing to a place of business of such company in Malaysia in respect of: ú securities issued by the Government or Islamic securities or debentures issued in Ringgit Malaysia, other than convertible loan stock approved by the Securities Commission; interest derived in respect of: ú Islamic securities originating from Malaysia, other than convertible loan stock issued in any currency other than Ringgit Malaysia and approved by the Securities Commission or Labuan Financial Services Authority; interest or discounts derived by individuals, unit trusts and listed closedend funds from: ú securities or bonds issued or guaranteed by the Government; ú debentures or Islamic Securities, other than convertible loan stock, approved by the Securities Commission; ú Bon Simpanan Malaysia issued by the Central Bank of Malaysia; gains from the realisation of investments outside Malaysia; and gains from the realisation of investments within Malaysia (other than real property or shares in real property companies which may be subject to real property gains tax). The key benefit of setting up a foreign fund management company in Malaysia is that the income derived from the provision of management services to investors is entitled to be taxed at a concessionary tax rate of 10%. In addition, foreign management company will get to enjoy non-fiscal incentives such as operating one or more foreign currency accounts for crediting foreign currency funds from investors and income arising from foreign investments with no limit of overnight balances. It is however important for foreign management companies to note that the income derived from the provision of management services to foreign investors and local investors are treated as two distinct and separate business sources. Hence, capital allowances and losses arising from each business source cannot be utilised against the other business source.

5 ASEAN INVESTMENT & TAX 5 SINGAPORE GOODS AND SERVICES TAX (GST) UPDATES FOR THE FUND MANAGEMENT INDUSTRY Singapore has established itself as a thriving financial centre of international repute. Singapore s financial centre offers a broad range of financial services including banking, insurance, fund management and administration. To further strengthen Singapore s position as a centre for fund management and administration, the Monetary Authority of Singapore (MAS) issued a circular that extends the GST remission on expenses for qualifying funds managed by prescribed fund managers to 31 March In the circular, the MAS provided updates on how to determine whether a fund is considered belonging in Singapore for GST purposes. HOW THE UPDATES AFFECT THE FUND MANAGEMENT INDUSTRY GST remission for funds GST is normally chargeable at 7% on fund management, custodian and other services supplied by GST-registered suppliers to funds belonging in Singapore. Only GST-registered funds making taxable supplies are able to claim the GST incurred on their expenses. As some of the funds are not eligible for GST registration because of the type of investment activities they are into, the GST incurred on the fees charged is an irrecoverable business cost to these funds. A GST remission was introduced on 22 January 2009 to allow qualifying funds that are managed by a prescribed fund manager in Singapore to claim GST incurred on all expenses related to the fund s investment activities (other than specifically disallowed expenses) at an annual recovery fixed rate determined by the MAS. The remission was originally provided for expenses incurred from 22 January 2009 to 31 March 2014 inclusive. In the 2014 Singapore Budget Statement, it was announced that the GST remission would be extended to 31 March The circular confirms and provides the details of the extension. To qualify for the GST remission, the following conditions must be met: The fund must satisfy conditions for income tax concessions in Singapore as a Section 13C, 13G, 13R, 13X fund, 13CA fund (with effect from 1 January 2014), or it must be a designated unit trust or a unit trust included under the CPF Investment Scheme (CPFIS) as at the last day of its preceding financial year; and The fund must be managed or advised by a prescribed fund manager in Singapore. (Prescribed fund managers are those that hold a capital markets license under the Securities and Futures Act (Cap. 289) for fund management and those that are exempt under the Securities Futures Act from holding such a license.) In the circular, the MAS has set the fixed recovery rate for 1 January 2014 to 31 December 2014 at 90%. Funds that meet the qualifying conditions are required to file a quarterly statement of claims to make the claims based on their financial year end. This allows funds that are not eligible for GST registration to mitigate the GST incurred while doing business in Singapore. Determination of "Belonging" status of a fund Under the GST legislation, zero-rating (GST at 0%) generally applies to services (for example, fund management services) that are supplied under a contract with, and for the direct benefit of, persons who belong in a country other than Singapore at the time the services are performed. The 7% GST is applicable on services (for example, fund management or custodian services) supplied to funds belonging in Singapore. In the circular, the MAS has clarified how you determine whether a fund (other than trust fund) is treated as belonging in Singapore. According to the MAS, a fund is considered to be belonging in Singapore if: the fund has an administration office with employees in Singapore; the fund does not have any employees or an administration office of its own in any country and the fund relies solely on a Singapore fund manager to carry on its business activities (in other words, a Singapore fund manager has overall responsibility to oversee and carry out the activities of the fund and that manager is the sole contracting fund manager for the fund); and the fund does not conduct board meetings at a fixed location outside Singapore on a permanent basis. The rules take effect from 1 April With the updates to the rules, certain services (for example, fund management services) supplied to offshore funds that were incorporated outside Singapore (which used to be subject to 0% GST before the updates), may now have to be standard-rated and charged with 7% GST. Where the fund qualifies for the GST remission, it is possible to mitigate the GST costs as the fund will be able to recover a percentage of the GST (based on the annual recovery fixed rate) that was charged by the service providers. Given the updates to the GST rules, service providers and fund managers should review the belonging status of funds that were incorporated outside Singapore (especially if the fund has fund managers in Singapore that have discretionary authority to act for the fund). Penalties will apply for incorrect returns filed and for any late payment made to the Inland Revenue Authority of Singapore (IRAS). The updates to the GST rules are also important considerations for offshore funds that intend to engage Singapore service providers (for example, a Singapore fund manager) and for incorporating a new fund in Singapore.

6 6 ASEAN INVESTMENT & TAX MYANMAR FIVE NEW TAX LAWS The Myanmar Government introduced and passed five new tax laws on 28 March 2014 which took effect from 1 April The new laws essentially changed the rates of income tax and corporate tax which was previously determined based on the Notifications by the Minister of Finance and Revenue. Other changes arising from the new tax laws are centred on the Income Tax Act, Stamp Duty Act, Commercial Tax Act and the Court Fee Act. Some brief highlights of the changes made: Personal Income Tax Under the new law, the top tier-rate for personal income tax has increased from the present 20% to 25%. The existing 12 income bands have now been reduced to only 5. The new rates are applicable to resident individuals deriving income from profession, business and property. There is no change to the income tax rate for nonresident individuals which remain at 35%. Personal reliefs in respect of spouse and child have increased slightly to Myanmar Kyats (MMK)500,000 and (MMK)300,000 respectively. Commercial Tax (CT) All types of goods are subject to CT ranging from 0% to 100%. CT rate of 5% is applicable to all types of services unless they are specifically exempted. The exempt list comprises of 26 types of services under the Union Revenue Law of 2014 are as follows: House rental service Car parking services Life insurance services Microfinance services Healthcare services Education services Transportation of goods Services of employee agencies Banking services Customs clearing services Renting out objects such as tables, chairs or crockery for social functions Licensed slaughtering of animals Contract manufacturing Funeral services Container transport services Child nursery services Capital Gains Tax Oil and gas operators are subject to capital gains tax from 0% to 40% on gains derived from transfer of shares and capital assets. Tax rate bands are denominated in US Dollar (USD) or equivalent. Under the proposed amendments, the tax rates bands remain the same but, shall be denominated in Myanmar Kyats (MMK) instead of US Dollar (USD). The fluctuation in currency exchange between MMK and USD will have an impact on the amount of tax payable notwithstanding the tax rates remaining unchanged. Stamp Duty The government has harmonised the stamp duty rates for instruments denominated in foreign currency and MMK. Previously, foreign currency denominated instruments will attract stamp duty rate of 1%. Under the new amendments to the Myanmar traditional massage/ massage performed by a blind person Moving services Services for which a road toll is charged Animal healthcare services Services relating to the provision of public toilets Outbound air transport services Services concerning culture and art Information technology service Technology & management consultancy services Public transport services (bus, railway and ferry) Stamp Act, ad valorem rate will be used for stamping purposes. Share transfer agreement Previously, different rates are used on share transfers that are denominated in foreign currency. Under the new amendments, a 0.3% stamp duty rate is applicable to all share transfers. Foreign currency denominated instrument Foreign currency denominated instruments will have to apply ad valorem rate for stamping purposes. The foreign currency denominated instrument will need to be converted to MMK based on the exchange rate issued by the Central Bank of Myanmar at the date of calculating the stamp duties payable. Lease agreement 1.5% stamp duty rate is applicable to all foreign and local denominated currency lease agreements having a lease period of between 1 and 3 years. Lease agreements whose lease period exceeds 3 years will be subject to a stamp duty rate of 3% (based on the average annual value of rent). The 3% rate also applies to premium paid in addition to the annual lease rental. Instrument for transfer of immoveable property 3% stamp duty rate is applicable to agreement for transfer of immoveable property. An additional 2% stamp duty is payable if the immoveable property is situated in the City of Yangon, Nay Pyi Taw and Mandalay. Payment of advance income tax Payment of advance income tax must be made before the end of each quarter of the calendar year.

7 ASEAN INVESTMENT & TAX 7 INDONESIA NEW NEGATIVE LIST OF INVESTMENT: A RED CARPET? The Indonesian government has finally released the latest negative list of investment (NLI) through the issuance of Presidential Regulation No. 39/2014 on 24 April The regulation revokes the earlier negative list of investment issued in As an overview, the Indonesian NLI divides the business sectors into closed and open with requirements for investments. The requirements are further divided into SMEs and cooperatives, partnership, limited share ownership, particular investment locations, and those requiring special licenses. The new NLI is expected to increase investment in Indonesia and to execute the ASEAN Economic Community (AEC) in Higher foreign ownerships are offered to heavy capital investment industries and those that support the public interest. What is new? Under the new regulation, any businesses not listed in the list are open for foreign investment without requirements. This provides clarity, as this was not clearly stipulated by the earlier regulation. However, prior consultation with the authorities is still recommended in light of the different interpretations often encountered in practice. Higher limits for foreign ownership Infrastructure power plant with more than 10 megawatt capacity, power transmission, and power distribution can be wholly owned by foreign investors through a public-private partnership scheme (or KPS Kerjasama Pemerintah Swasta) during the concession period or 95% without KPS scheme (previously at a maximum of 95% without KPS scheme). Transportation a maximum of 95% of foreign ownership under KPS scheme for port facilities including docks, building and terminals) during the concession period or 49% without KPS scheme (previously 49% without KPS scheme). Also, activity of routine tests of vehicles is open for a maximum of 49% foreign ownership (previously was closed to local and foreign investors). Telecommunication A maximum of 65% of foreign ownership for fixed telecommunication network (previously 49%). Venture capital a maximum of 85% foreign ownership (previously 80%). Pharmaceutical foreign ownership is allowed at a maximum of 85% (previously 75%). Reduced limit of foreign ownership Agricultural A maximum foreign ownership of 30% for horticulturalrelated businesses, including seeding, cultivation, processing industry, research, agro-tourism and other relevant fields (previously not regulated). Oil and gas some of the supporting activities which were not regulated under the old regulation are now closed to foreign investors, while some others are open with foreign ownership capped at 49%, except construction with platform at a maximum of 75% foreign ownership. Please refer to the table for further details. Public works a maximum foreign ownership of 95% for the processing and waste disposal (previously not regulated). Trading some trading activities that were not regulated under the old regulation, namely: ú Distributor and warehousing: a maximum of 33% of foreign ownership. ú Cold storage: maximum foreign ownership at 33% for investment within Sumatra, Java and Bali, and 67% maximum for investment within Kalimantan, Sulawesi, Nusa Tenggara, Maluku and Papua. ú Futures broker: a maximum of 95% foreign ownership. ú Closed to foreign investors: retail trade not within supermarket, minimarket or department store; textile; toys; cosmetics; footwear, electronics; e-commerce; food and beverages; polling survey and market research (except for ASEAN investors at 51% maximum see the ASEAN Economic Community Section); photocopying and the like; and alternative trading system. ú Transportation - Particular related activities that were not regulated, namely: construction of terminal and multimodal transportation with a maximum of 49% foreign ownership. ú Telecommunication integrated telecommunication services at a maximum of 65% foreign ownership (previously not regulated). Data communication system and interconnected internet as well as other multimedia services, at 49% maximum foreign ownership (previously at 95% and 65%, respectively). ASEAN Economic Community (AEC) In light of the ASEAN Economic Community in 2015, the government provides relaxation in determining the limit of ownership by ASEAN investors within certain businesses, as follows: Trading Polling survey and market research can be owned at a maximum of 51% by ASEAN investors. Tourism Motels can be owned at a maximum of 70% by ASEAN investors (compared to non-asean investors at 49% to 51%). Sports arena located in Java and Bali at 70% for ASEAN investors (previously at 51% by ASEAN investors). Advertising A maximum of 51% ownership by ASEAN investors (while it is closed to non-asean investors). Medical Hospital services, clinic specialised for medical services and dental services can be owned at a maximum of 70% ownership by ASEAN investors with business operation within the eastern region of Indonesia not including Makassar and Manado (while it is open for a maximum of 67% for non-asean investors, applicable for all the regions in Indonesia under certain location requirements). Nursing services can be owned at a maximum of 70% by ASEAN investors with business operation within the eastern region of Indonesia and 51% within Makassar and Manado (while it is open for a maximum of 49% for non-asean investors, applicable for all the regions within Indonesia under certain location requirements). How does the regulation affect your business? The new regulation shall come into effect for new incoming investments since the enactment of the regulation. Therefore, it does not apply to existing investments unless the new NLI provides higher limit of foreign ownership. The new NLI does not apply to indirect investment or portfolio transactions conducted through the local capital market.

8 8 ASEAN INVESTMENT & TAX In the event of a rights issue, the foreign ownership restrictions must be complied with within 2 years from the transaction date by transferring/selling the shares to local shareholders or through treasury stock. THAILAND POSITIVE DEVELOPMENTS IN INVESTMENT AND TAX POLICIES Following the recent military coup in Thailand and establishment of the National Council for Peace and Order (NCPO), a number of initiatives have been proposed to revive the country's economy. On the tax front, the Thai Revenue Department has made proposals to the NCPO regarding future tax policies that include keeping corporate income tax, personal income tax and value added tax rates at their current levels. Corporate Income Tax (CIT) As reported in the last edition of the AITN, Thailand has reduced its corporate income tax rate to 20% as part of an effort to improve the kingdom s competitiveness in preparation for the coming ASEAN Economic Community (AEC) in The 20% rate applies for accounting periods commencing on or after 1 January 2013 and by 31 December 2014, but the Thai Revenue Department has now proposed that the 20% rate be made permanent. Personal Income Tax (PIT) The Revenue Department has proposed that the new personal income tax rates that took effect from 1 January 2013 and which is also applicable in 2014 be extended for another year. Reviews are also underway to lower the highest marginal tax rate of 35%. Value Added Tax (VAT) Thailand's general VAT rate is 7% and has been kept at that rate since Legislation currently in place could result in the VAT rate returning to 10% from 1 October The Thai Revenue Department has proposed that the 7% rate be extended for another year to 30 September Excise Tax The Excise Tax Department has also recently announced a proposal to base excise tax on retail prices rather than exfactory prices. Such a move would likely increase the price of luxury goods and goods that have an environmental impact. Investment initiatives A delay in the appointment of new members to Thailand's Board of Investment (BOI) since October 2013 saw a hold up in the approval of applications for investment promotion estimated to be worth USD22 billion. The BOI spearheads Thailand's drive to attract foreign investment into the Kingdom and the NCPO has swiftly appointed a new board in order to clear the backlog. The criteria for approving projects for promotion, as well as the investment incentives offered, including tax holidays, were meant to be the subject of a major overhaul in We understand that the criteria and incentives for promotion will continue as before for the time being. The NCPO has put on hold some of the larger infrastructure projects such as the high speed railway and the water management schemes, whilst announcing intentions to speed up other projects such as the dual-track train project and investment projects along Thailand's borders. CONTACTS For more information, please contact the following BDO offices in ASEAN. BRUNEI Tel: Fax: info@bdo-bn.com CAMBODIA Tel: Fax: info@bdo.com.kh INDONESIA Tel: Fax: bdoidn@bdo.co.id MALAYSIA Tel: Fax: bdo@bdo.my MYANMAR Tel: +95(0) Fax: +95(0) myanmar@bdo.my PHILIPPINES Tel: Fax: cpas@bdo.net.ph SINGAPORE Tel: Fax: info@bdo.com.sg THAILAND Tel: Fax: bdo@bdo.co.th VIETNAM Tel: +84 (0) Fax: +84 (0) bdo@bdo.vn LAO PDR Please contact BDO Cambodia... This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Tax Services to discuss these matters in the context of your particular circumstances. BDO Tax Services, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it. BDO International Limited is a UK company limited by guarantee. It is the governing entity of the international BDO network of independent member firms ( the BDO network ). Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with its statutory seat in Brussels. Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms of the BDO network is a separate legal entity and has no liability for another such entity s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network. BDO is the brand name for the BDO network and for each of the BDO member firms.