Asia Tax Bulletin – Summer 2018

The last three months have seen many countries fine-tuning and regulating existing tax incentives and announcing new tax incentives in accordance with the OECD’s BEPS action reports, we refer to the sections in this Bulletin on China, Hong Kong (R&D), Indonesia (prescribed pioneer industries), Singapore (IP) and Thailand (wide range of incentives). China is looking to reform the individual income tax law which will inter alia remove the existing five-year tax facility for foreigners living in China and it has reduced VAT rates for specified services and goods.

Hong Kong has now gazetted the new legislation introducing tax exemptions for qualifying privately offered open-ended fund companies. Also, Hong Kong is relaxing its taxation rules for qualifying investments in intellectual property (more about this in the next edition of this Bulletin, where we will report details about the ability to claim tax depreciation allowances on a wider range of IP assets). India has passed into law the tax changes proposed in its budget released at the end of January of this year. Notably, foreign companies doing business with India will be deemed to have a taxable presence in the country if their turnover exceeds certain thresholds.

Japan’s parliament has approved the anti-avoidance provisions included in the multilateral tax treaty proposed by the OECD (the so called Multilateral Instrument, MLI), which will cause the anti- avoidance provisions in the MLI to automatically apply to most of its existing tax treaties. Malaysia’s new government has immediately acted on its election promise to effectively abolish the unpopular GST in June 2018 and announced the reintroduction of the Sales and Service Tax in September of this year. Finally, in June, Thailand issued the draft transfer pricing provisions in order to provide the statutory basis for its transfer pricing guidelines, which will introduce reporting obligations of related party transactions.