M&A in ASEAN Countries for Tax Planning Perspectives Le Net LNT & Partners www.lntpartners.com
Contents 1. Tax involvement and planning in M&A from decision making 2. Utilizing tax exemption effectively in M&A process 3. Major tax risks related to M&A 4. Key pitfalls and solutions
1. Tax involvement and planning in M&A from decision making a. Merger Surviving Entity and Merged Entity Tax Impliof the Surviving Entity Tax of the Merged Entity b. Acquisition Equity Deal and Asset Deal Equity Deal: Onshore or Offshore Asset Deal: Liquidation or Not Tax implications to Seller and Buyer
1. Tax involvement and planning in M&A from decision making 1. a. Merger 1 Case Study: Cargill Merger Long An and 6 provinces Tax Regimes Customs Regimes Advance Rulings Tax Liquidations What Happened to the Merged Entity?
1. Tax involvement and planning in M&A from decision making 1. a. Merger 2 Advance Notice Compliance from Province Notice to creditors New Tax Code Open new book Current Incentives Expanded Incentives Chinese wall on incentives Current tax debts
1. Tax involvement and planning in M&A from decision making 1.b. Acquisition 1 Equity Deal Onshore Hoan My Hospital Saigon JV Apartments Pho 24 Equity Deal Offshore Metro case Pacific Place
1. Tax involvement and planning in M&A from decision making 1.b. Acquisition 2 Capital Gains Tax Cost: identifiable or not, cosolidated loss? Characterisation: Securities or Not? Capital Surplus tax or not? Debt-Equity Swaps Treaty Shopping Asset Deal Invoice VAT Exchange Gains or Loss
2. Utilizing tax exemption effectively in M&A process (1) Tax exemption in Cambodia Tax exemption in Laos Tax exemption in Brunei Tax emption in East Timor Tax exemption in Indonesia Tax exemption in Philippines Tax exemption in Myanmar Tax exemption in Malaysia Tax exemption in Singapore Tax exemption in Vietnam
2. Utilizing tax exemption effectively in M&A process (2) Surviving Tax Exemption Merger Acquisition Characterising Tax Exemption Debt vs. Equity Securities vs. Shares Group of companies
2. Utilizing tax exemption effectively in M&A process (3) Advance Rulings Implementation Declaration Investigation and Explain Appeal Tax litigation
3. Major tax risks related to M&A 3. a. Acquisition (1) Capital gains tax risks on tax exemption Law changes Sub-law changes Wrong tax opinions Wrong tax advices Wrong investment certificates Capital gains tax risks on tax calculation Gains on USD or VND? Costs on advisory works allowed? (or part of the purchase price) Absorbtion of other loss allowed?
3. Major tax risks related to M&A 3. a. Acquisition (2) Capital gains tax risks on characterisation Collateral transactions Debt vs. Equity Interest vs. Dividend Anti Transfer Pricing Convertible loan Options Discount Related party transaction Group Share swap and gains
3. Major tax risks related to M&A 3. b. Asset Deal (1) Entity shift Tax guarantee not enforceable Wrong invoice issuance: one or many? Absorption of VAT Stamp Duty for ownership registration
3. Major tax risks related to M&A 3. c. Offshore transaction Anti-tax heaven rules Direct vs Indirect transfer Asset-linked share transfer Property tax issues DTA unworkable Lack of certificates Lack of proof of residence Lack of quid pro quo
4. Key pitfalls and solutions (1) Identify risks before transaction Risks un-managable Risks managable Identify the risk taker Seller (guarantee) or Buyer? Underwriter? Identify the right approach Asset or Equity Deal? Onshore or Offshore?
4. Key pitfalls and solutions (2) LDD and FDD to find the risks Tax indemnity clause Time Area Amount Tax litigation and defence Other restriction
4. Key pitfalls and solutions (3) Un-manageable risks Lack of tax control Lack of tax investigation Manageable risks Untransparent tax records Unreliable auditing
4. Key pitfalls and solutions (4) Advance ruling Detailed explanation on cost calculation acceptance of costs Detailed definition on tax exemption Who? Where? What? When? How? What if? E.g.: R&D tax incentives
4. Key pitfalls and solutions (4) Tax complaints and litigation Time bar Managing relationship Finds alliance Focus on the main points Rely on WTO principles Rely on investment treaty
Questions? Comments? Le Net LNT & Partners Vietnam Deal Firm of the Year 2014 by ALB Thomson Reuters Level 21, Bitexco Financial Tower No 2 Hai Trieu, District 1 Ho Chi Minh City, Vietnam Tel: +84 83 8212 357 Email: net.le@lntpartners.com Website: www.lntpartners.com