Asia Tax Bulletin - Summer 2026

Denial of tax treaty reduced dividend withholding tax rate

Chinese tax authorities are increasingly challenging cross-border dividend flows that rely on a reduced withholding tax rate under a tax treaty. This is especially true in respect of the China-Hong Kong tax arrangement to benefit from the preferential withholding enterprise income tax (WHT) rate of 5%. If a Hong Kong intermediary holding company is viewed as a conduit without real commercial substance, the Chinese authorities will deny treaty benefits.

Under China's Enterprise Income Tax Law, dividends paid by a PRC resident enterprise to a foreign shareholder are generally subject to 10% WHT. A reduced 5% rate may apply under the Tax Arrangement with Hong Kong provided that the foreign shareholder: (i) is a qualifying Hong Kong tax resident; (ii) is the beneficial owner of the dividends; and (iii) holds at least 25% of the PRC company.

SAT Public Notice [2018] No. 9, issued by the PRC State Taxation Administration on 3 February 2018, frames beneficial ownership as a commercial substance test for treaty/arrangement benefits on dividends, interest and royalties. It highlights adverse indicators for the foreign shareholder such as limited control over income, lack of substantive activities, low taxation, back-to-back arrangements, and a mismatch between functions, risks, and assets.

The PRC tax authorities focus on whether the Hong Kong company has the ability to exercise independent control and bear meaningful risk. Red flags are raised if there is limited governance (a single director appointed by the ultimate foreign controller) and the rapid upstreaming of dividends—funds are transferred to the foreign-listed parent within a few working days—suggesting a pass-through or conduit arrangement.

China tax authorities assess whether Hong Kong holding companies used in multinational group structures have genuine substance to support entitlements under applicable tax treaties or bilateral arrangements. Where a Hong Kong entity merely sits between the China operating company and the ultimate offshore parent—without independent decision-making, people, premises, or risk-bearing capacity—it will generally be treated as a conduit. The practical consequences are denial of the 5% rate, recalculation at 10%, and potential exposure to back taxes, interest, and wider compliance issues. Without substance, the China-sourced dividends received by the Hong Kong entity may further be subject to profits tax in Hong Kong under the FSIE regime.

Multinational groups using Hong Kong holding companies should:

• Review beneficial ownership positions for all Hong Kong intermediary holding companies receiving China-sourced dividends;
• Assess commercial substance and business nature of the Hong Kong holding company: governance, strategic decision-making authority, adequate number of qualified employees, operating expenditure, and premises;
• Ensure contemporaneous documentation (e.g., board minutes, treasury policies, cash management records);
• Review cash flows: avoid automatic/rapid upstreaming; document retention and use of funds in Hong Kong;
• Check historic dividends for potential WHT exposure and quantify interest risk; and
• Address gaps before future distributions (e.g., strengthen personnel, governance, and local treasury).

Tax-treaty benefits must be supported by genuine commercial substance. Multinational groups seeking to enjoy the reduced 5% WHT rate on dividends should be prepared to demonstrate real decision-making, real people and operations, and a meaningful ability to bear risk. Otherwise, they may face tightened scrutiny and potential reassessments and interest charges. It also suggests that structures already visible in publicly available filings and disclosures may attract greater attention going forward.

Tariff exemptions for imports from Africa and Canada

From 1 May 2026 to 30 April 2028, a 0% tariff will apply to imports from 20 African countries: Algeria, Botswana, Cape Verde, Cameroon, the Republic of the Congo, Côte d'Ivoire, Egypt, Equatorial Guinea, Gabon, Ghana, Kenya, Libya, Mauritius, Morocco, Namibia, Nigeria, Seychelles, South Africa, Tunisia and Zimbabwe. A 147-page list specifies the products eligible for the zero-tariff treatment and forms part of the Announcement.

From 1 March 2026 to 31 December 2026, the additional 100% tariffs on oil residue products and peas, as well as the additional tariffs of 25% on lobsters and crabs originated from Canada, are repealed.

Stamp duty

Intra-group exemption

As announced in the 2026-27 Budget, the Hong Kong government plans to relax the criteria for stamp duty relief on intragroup transfers of assets within enterprise groups, thereby expanding the scope of associated bodies corporate eligible for relief under section 45 of the Stamp Duty Ordinance. A paper outlining the proposals has been presented to the Legislative Council Panel on Financial Affairs on 6 July 2026, and the Government plans to introduce the amendment bill in October 2026. If enacted, the changes will take retrospective effect from 25 February 2026.

Increase on high value residential properties

The Legislative Council has passed the Stamp Duty (Amendment) Bill 2026, introducing a higher ad valorem stamp duty (AVD) rate for high-value residential property transactions in line with the proposal announced in the 2026/2027 Budget.

The AVD rate applicable to residential property transactions with an amount or value of consideration, whichever is higher, exceeding HKD 100 million has been increased from 4.25% to 6.5%. The revised rate applies retrospectively to instruments executed on or after 26 February 2026.

The Bill was passed on 20 May 2026 and the legislation was gazetted on 29 May 2026.

Automatic exchange of information

The Government welcomed the passage of the Inland Revenue (Amendment) (Automatic Exchange of Information) Bill 2026 by the Legislative Council on 17 June 2026 to enhance the administrative framework for the automatic exchange of information in tax matters (AEOI) in Hong Kong.
      
Since 2018, Hong Kong has been conducting automatic exchange of financial account information in relation to tax matters with partner tax jurisdictions on an annual basis, in accordance with the Common Reporting Standard developed by the Organisation for Economic Co-operation and Development (OECD) and on the premise of data confidentiality and security. This enables the relevant tax authorities to conduct assessments on their tax residents for detecting and combatting cross-border tax evasion. 
      
In light of the comments made by the OECD after conducting the peer review on Hong Kong's implementation of the AEOI regime earlier, the Government agrees that there is a need to enhance the relevant administrative framework. Starting from 1 January 2027 new requirements will be implemented, including requiring reporting financial institutions to register with the Inland Revenue Department (IRD) for strengthening identification, enhancing the requirements on financial institutions for keeping due diligence records, and raising the penalties to increase deterrence.
      
The Secretary for Financial Services and the Treasury, Mr. Christopher Hui, said, "Hong Kong has all along been supporting international efforts in enhancing tax transparency and combatting cross-border tax evasion. As an international financial centre, Hong Kong has an obligation to enhance the AEOI administrative framework to address the OECD's views. This will also help Hong Kong maintain a favourable rating in the peer review and boost the confidence of other tax jurisdictions in Hong Kong's tax system. This will be conducive to Hong Kong's expansion of the Comprehensive Avoidance of Double Taxation Agreement network, which will provide Hong Kong businesses with greater tax certainty and avoidance of double taxation when expanding their businesses overseas."
      
To assist the industry in adapting to the new requirements and enhance tax certainty, the IRD will issue relevant guidance and maintain communication with the industry to provide technical support and answer enquiries.

Corporate Treasury Centre tax incentives

On 9 June 2026, Hong Kong's Secretary for Financial Services and the Treasury unveiled the Action Plan to Promote the Development of Corporate Treasury Centres in Hong Kong (Action Plan) at the Corporate Treasury Centre Forum. The Action Plan sets out targeted strategies to strengthen Hong Kong as a premier hub for multinational corporate treasury centres (CTCs), elevating Hong Kong as a major base for CTCs and reinforcing its role as a platform for "bringing in and going global."

Jointly formulated by the Financial Services and the Treasury Bureau (FSTB), the Inland Revenue Department (IRD), the Hong Kong Monetary Authority (HKMA) and Invest Hong Kong (InvestHK), the Action Plan has two major objectives, namely to attract more multinational corporations to establish CTCs in Hong Kong, and to enable existing CTCs operating in Hong Kong to scale up their operations and fully leverage the city's comprehensive financial ecosystem.

The Action Plan adopts a "4T" framework to encourage multinational corporations from around the world to centralise their fund management, asset allocation and risk management in Hong Kong. Key highlights include:

• Tax revamp: The Government will revamp the existing tax concession regime applicable to corporate treasury activities and introduce a more competitive tiered system. Measures include refining the existing concession regime and introducing a pre-approval mechanism. Approved CTCs and their associated companies will enjoy more favourable tax benefits, greater tax certainty and enhanced compliance flexibility. The Government will conduct a public consultation within this year, with a target of submitting legislative amendment proposals to the Legislative Council in the first half of next year.
• Tax agreements: The Government has signed Comprehensive Avoidance of Double Taxation Agreements with 57 economies to date, and will continue to expand the network, with a particular focus on engaging economies along the Belt and Road. This will provide Hong Kong-based enterprises with greater tax certainty and avoidance of double taxation when expanding their businesses overseas.
• Targeted promotion: The Government will take a proactive approach in conducting targeted market promotion, with strategic focus on enterprises from the Chinese Mainland and Asia, particularly those in new economy sectors.
• Talent and dialogue: The Government will work with the industry to strengthen the training of professional talent, as well as build a high-quality talent pool for the long-term development of the sector through continuous market education and professional development. At the same time, the Government will engage with the industry more closely to keep a full grasp of the market pulse and provide more comprehensive support to the industry.

Expansion of tax deductions for intellectual property transactions

The Government has proposed a series of legislative amendments to expand the scope of deductions related to the acquisition and use of intellectual property (IP) as part of its broader strategy to develop Hong Kong into a regional IP trading centre.

The proposals were outlined in a Paper submitted to the Legislative Council Panel on Commerce, Industry, Innovation and Technology on 19 May 2026, following a two-month public consultation concluded in early 2026. The government plans to introduce an amendment bill within the year, with the new rules applying to IP purchases or licensing rights on or after 1 April 2026. These changes will give effect to the measure announced in Budget 2026/27.

IP purchases from associated companies

To prevent tax avoidance, no deduction is currently allowed for IP purchased from related parties. This restriction will be relaxed, allowing deductions for capital expenditure incurred for the purchase of IP from associated companies, both local and overseas.

To address potential abuse, the proposal includes safeguard mechanisms such as:

• A "main purpose test" denying deductions where obtaining a tax benefit is the main purpose or one of the main purposes of the purchase of the IP;
• Limitations on deductible amounts in domestic intra-group transfers of IP; and
• Mandatory third-party independent valuations for intra-group cross-border purchases of IP from non-Hong Kong associated companies that exceed a specified threshold.

Upfront licence fees

Currently, upfront licence fees (i.e., a lump sum payment to be paid initially) that are in general regarded as capital in nature cannot be deducted. Under the proposal, expenditures on licence fees, irrespective of whether they are capital or revenue in nature, will be deductible, provided they are incurred in producing assessable profits. This covers patent rights, know-how rights and specified IP rights.

Safeguards empower the Commissioner of Inland Revenue to determine arm's-length prices, request valuation reports and allocate consideration. A deeming provision will treat sums received by or accrued to a Hong Kong licensor as trading receipts chargeable to profits tax.

IP used outside Hong Kong

A tax deduction of expenditure for IP used offshore is currently disallowed in line with Hong Kong's territorial source principle. An exception will be introduced where income derived from such IP is taxable in Hong Kong under the foreign-sourced income exemption (FSIE) regime. In such cases, a proportionate deduction for the corresponding capital expenditure incurred for the purchase of the IP would be allowed.

Shipping tax incentives

On 12 June 2026, Hong Kong gazetted the Inland Revenue (Amendment) (Tax Concessions for Shipping-related Activities and Physical Commodity Trading) Bill 2026 to enhance the existing tax concessions for shipping-related activities and to introduce a new tax concession regime for physical commodity trading.

The Bill introduces an optional 15% concessionary tax rate (instead of the statutory profits tax rate of 16.5%) for qualifying shipping-related entities within in-scope (Pillar 2) multinational enterprise groups to be elected on an annual basis. As noted in the government's press release, this measure is intended to facilitate compliance with the OECD global minimum tax requirements by reducing the complexity of tax calculations regarding their operations in Hong Kong and related compliance costs.

In addition, the Bill proposes a concessionary profits tax rate of 8.25% for qualifying physical commodity trading activities in Hong Kong. The regime also includes an option for eligible taxpayers to elect for the 15% rate to ensure compatibility with the global minimum tax framework.

Carried interest, fund tax exemption rules and family-owned investment holding companies

Following an industry consultation conducted from November 2024 to January 2025, as well as further engagement sessions in June 2025, the long-awaited bill introducing enhancements to the Carried Interest Tax Concessions, the Unified Fund Exemption (UFE) Regime, and the Family-owned Investment Holding Vehicles (FIHV) Regime ("Bill") was gazetted on 12 June 2026.

The Bill covers amendments to the Inland Revenue Ordinance in areas such as: (i) expanding the definition of "fund"; (ii) expanding the scope of qualifying investments; (iii) removing the 5 per cent threshold requirement for incidental transactions; (iv) relaxing the tax exemption treatment for special purpose entities (SPEs) and family-owned SPEs; and (v) introducing a series of enhancement measures to the tax regime for carried interest. The Bill will also introduce, under the unified tax regime for funds, a tax reporting mechanism as well as economic substance requirements similar to those under the tax concession regime for FIHVs.

As a transitional administrative measure, the IRD has stated on 12 June 2026 that taxpayers who are eligible for the tax exemption or concession proposed under the Bill may submit their tax returns for the year of assessment 2025/26 on that basis. 

International tax developments

Cyprus. On 12 June 2026, Hong Kong signed a double tax treaty with Cyprus.

New income tax law takes effect

On 1 April 2026, India implemented the transition to the Income Tax Act, 2025, which replaced the aging 1961 legislation. This major rewrite condenses sections, unifies tax years, and simplifies compliance. The newly implemented Income Tax Act, 2025 aims to improve the ease of doing business by condensing over 700 sections into 536 and establishing a single, streamlined "tax year." We refer to the previous editions of this publication for details about the new income tax law.

Foreign Institutional Investors exempt from tax on interest, capital gains on government securities

The Ministry of Law and Justice has issued the Income-Tax (Amendment) Ordinance granting tax exemptions on interest and capital gains income earned by foreign institutional investors (FIIs) and banks for international settlements (BIS) from investments in government securities with effect from 1 April 2026.

The Ordinance amends Schedule IV to the Income-tax Act, 2025 by exempting the following categories of income derived by FIIs and BIS from specified government securities:

• Any interest earned (previously taxed at 20%); and
• Any capital gains arising from the sale, exchange or transfer of such security (previously, long-term capital gains were taxed at 12.5%).

The tax exemption is subject to information being provided by FIIs and BIS in such form and manner as prescribed. The Ordinance does not apply to non-resident Indians (NRIs) investing in government securities.

Transfer pricing

A new safe harbour regime has simplified global operations and reduced recurring transfer pricing audits, especially for multinational enterprises like global capability centres.

Secondment of personnel to Indian affiliate creates permanent establishment

The Delhi High Court (HC) has ruled, in the case of Ernst & Young U.S. LLP, that where a US taxpayer (EY US) seconded employees to its Indian associates (EY India entities), the seconded personnel continued to be employees of EY US. Further, they satisfied the "make available" test under article 12 of the India-United States Income Tax Treaty (1989) as they transferred techniques and skills required for the operation of business. Accordingly, such services were taxable in India.

EY US, a tax resident of the United States, provided assurance and advisory services to its clients across the globe, including India. For the relevant tax years, EY US received payments from EY India entities for the secondment of its employees.

EY US argued that since the secondees were employees of EY India entities, payments made by the Indian entities were in the nature of reimbursement and were not taxable in India. The tax authorities, however, contended that the secondees continued to be employees of EY US, and the services provided by them to EY India entities fell within the ambit of fees for technical services (FTS) under the Income-tax Act, 1961 and fees for included services (FIS) as per article 12(4)(b) of the Treaty.

The lower court ruled in favour of EY US. The tax authorities appealed before the HC.

The HC examined whether the payment received by EY US on account of the secondment of its employees to EY India entities was in the nature of FIS services under article 12(4)(b).

The HC ruled in favour of the tax authorities. It observed that as per the terms of the deputation agreement:

• The secondees were working in EY India entities during the period of assignment.
• They continued to maintain their lien with EY US and were entitled to all available benefits, including social security, from EY US.
• EY India entities did not have the right to terminate the services of the secondees; they only had the right to undertake legal or disciplinary action against misconduct, fraud, wilful negligence or any illegal action.

Based on the above, the secondees never ceased to be employees of EY US, and EY US retained an overarching control over them.

Further, the secondees satisfied the "make available" test under article 12(4)(b) as they transferred techniques and skills required for the operation of business, i.e. soft intellectual property.

Accordingly, the HC held that the seconded personnel continued to be employees of EY US, and the services provided by them to EY India entities were in the nature of FIS under the Treaty. The HC relied on the judgment in Centrica India Offshore Pvt. Ltd. vs CIT [2014] 364 ITR 336 (Delhi) which had been upheld by the Supreme Court in Special Leave to Appeal (C) No.22295/2014 vide order dated 10 October 2024.

Tax incentive for domestic placements of natural resources export proceeds

The Ministry of Finance has introduced a tax incentive for income derived from the placement of foreign exchange proceeds from natural resources exports (Devisa Hasil Ekspor Sumber Daya Alam), in designated financial instruments under Government Regulation No. 21 of 2026, effective 1 June 2026. The incentive is intended to encourage exporters to retain export proceeds within the domestic financial system.

Under the new policy, exporters that make qualifying placements of export proceeds from natural resources funds in Indonesia are eligible for preferential income tax treatment on income derived from such placements. The tax rate may be reduced to as low as 0%, depending on the duration of the placement.

The incentive applies to income generated from designated financial instruments used for placements of foreign exchange proceeds from natural resource exports funds held in domestic accounts.

By offering more favourable tax treatment, the government aims to enhance the attractiveness of retaining export proceeds onshore and to increase foreign exchange liquidity in the domestic financial system. It forms part of a broader policy framework that combines mandatory repatriation and retention requirements with supportive tax measures, with the objective of strengthening exchange rate stability and supporting national economic resilience.

Final income tax for Small Scale Taxpayers

On 22 April 2026, the Government issued GR-201, amending GR-552, concerning the implementation of the Income Tax Law. This regulation mainly revises the final income tax regime for certain taxpayers with a gross turnover of less than IDR 4.8 billion per year (approx. USD 267,000).

GR-20 confirms that business income earned by certain domestic taxpayers with gross turnover not exceeding IDR 4.8 billion during a fiscal year (FY) is eligible for the final income tax at 0.5%. This means that its gross turnover (except for certain components of its, discussed below) will be subject to 0.5% income tax, regardless of whether the company made a profit or suffered a loss during the year. The key changes related to the final tax regime are summarised below.

Narrower scope of eligible taxpayers

Eligible taxpayers are now limited to:

• Individual taxpayers; and
• Corporate taxpayers in the form of single-shareholder limited liability companies (perseroan perorangan) and cooperatives.

Corporate taxpayers in the form of limited partnerships (Commanditaire Vennootschap/CV), firms (firma), village-owned enterprises (Badan Usaha Milik Desa/BUMDes Bersama), and limited liability companies (other than perseroan perorangan) are no longer eligible for the 0.5% final income tax regime.

Eligible period

Individual taxpayers and single-shareholder companies may apply the 0.5% final income tax regime indefinitely, whilst cooperatives can apply it only for a four-year period from their registration.

Non-eligible income

As under the previous regulation, GR-55, income from independent personal services, foreign income that has been subject to tax outside Indonesia, other final-taxed income earned in Indonesia, and income not subject to tax are not eligible for the final tax regime under this regulation.

GR-20 further provides a more detailed classification of professions regarded as independent professional services, including traditional professions as well as a broader range of creative and digital occupations, such as content creators, influencers, bloggers, vloggers, and similar professions.

Non-eligible taxpayers

Taxpayers excluded from the final tax regime have already been introduced under previous regulations, i.e., taxpayers opting to apply the ordinary income tax regime, corporate taxpayers granted income tax facilities, and permanent establishments (i.e., businesses operating in Indonesia not as a PT) of foreign companies.

In addition to these existing exclusions, GR-20 provides that the following taxpayers are also excluded:

• Single-shareholder companies established by individuals possessing specific expertise and providing services similar to independent professional services as set out in the non-eligible income section;
• Individuals and their related single-shareholder companies whose combined gross turnover exceeds IDR 4.8 billion in a FY; and
• Cooperatives that have exceeded the four-year eligibility period from registration.

Taxpayers referred to in the last two bullet points above will no longer be eligible for the final income tax regime in subsequent FYs.

Aggregation rules for gross turnover threshold introduced to prevent fragmentation

GR-20 introduces clearer rules for determining the IDR 4.8 billion gross turnover threshold. Gross turnover must now take into account:

• The total gross turnover from business income and income derived from independent professional services within one year, based on the last FY preceding the relevant FY, whether subject to final or non-final income tax, including turnover earned abroad; and
• Consideration (in cash or cash equivalents) received from business and independent professional services before deducting sales discounts, cash discounts, and/or similar reductions.

For married taxpayers with separate assets/income, or where a wife independently exercises her tax rights and obligations, turnover must be determined based on the combined turnover of the husband and wife. In addition, where relevant, the turnover of single-shareholder companies established by the husband and/or wife must also be aggregated.

Pillar 2: Global Minimum Tax

For companies who are affiliates of a global group with a turnover of EUR 750 million or more for at least two out of the last four years, the so-called global minimum tax provisions apply and the following should be noted. The Directorate General of Taxes (DGT) issued DGT Regulation No. PER6/PJ/2026 (PER-6). PER-6 was issued on 4 May 2026 and entered into force on the same day. It establishes the administrative and procedural framework for implementing the global minimum tax under MoF Regulation No. 136 of 2024.

PER-6 provides detailed rules governing the exercise of rights and fulfilment of obligations arising under the GloBE rules. It applies to large multinational enterprise (MNE) groups meeting the GloBE threshold, generally those with consolidated annual revenue of at least EUR 750 million. PER-6 supports Indonesia's implementation of the OECD/G20 Pillar Two framework, which seeks to ensure that large MNE groups are subject to a minimum effective tax rate of 15%, including through the imposition of top-up tax where necessary.

In-scope entities must apply for GloBE taxpayer status through the DGT's electronic system. The application must be submitted within 9 months after the end of the first GloBE tax year. Where an entity fails to apply, the DGT may designate the entity as a GloBE taxpayer ex officio based on administrative review.

PER-6 introduces a comprehensive annual reporting framework comprising the following:

• The GloBE annual income tax return;
• The Domestic Minimum Top-up Tax (DMTT) return.; and
• The Under-taxed Payment Rule (UTPR) return.

These returns must be filed electronically within four months after the end of the GloBE tax year, with a possible two-month extension in the first year of implementation.

The returns must include detailed information on GloBE income or loss, covered taxes and the computation and allocation of any top-up tax under the applicable rules.

Ultimate parent entities are required to submit a GloBE Information Return (GIR) in electronic format (XML). The GIR must be filed within 15 months after the end of the GloBE tax year, or 18 months for the first year.

Entities that are not required to submit the GIR must nevertheless comply with notification requirements, and proof of submission must be attached to the annual tax return.

PER6 sets out the procedures for the payment of top-up tax arising under Pillar Two rules, including the Income Inclusion Rule, the UTPR and DMTT. Any additional tax due must be settled by the end of the relevant GloBE tax year, using prescribed tax payment codes.

PER-6 also sets out procedures for amendments and corrections of returns, post-filing adjustment and administrative processes relating to overpayment or underpayment.

The DGT is granted broad authority to ensure compliance, including conducting monitoring and data requests, tax audits and examinations and the application of administrative remedies and dispute mechanisms, such as objections and appeals. 

Supreme Court rules foreign-currency-to-foreign-currency transactions trigger taxable FX gains

Courtesy of Nishimura & Asahi it was reported that on 16 June 2026, the Supreme Court of Japan held that when a Japanese resident uses one foreign currency to acquire another foreign currency or a foreign-currency-denominated security, the yen-converted amount of the acquired asset at the transaction time is the "amount to be received" under article 36(1) of the Income Tax Act. The difference between that amount and the yen cost of the foreign currency used is taxable income and the foreign exchange (FX) gain or loss is realized at that moment.

The taxpayer, a Japanese resident, remitted JPY 10.5 billion to a private bank in Switzerland on 27 May 2014 and entered into a discretionary investment arrangement on 18 July 2014. Between July 2014 and December 2015, the bank, acting for the taxpayer, exchanged foreign currencies (e.g. EUR for USD) and used foreign currency to acquire foreign-currency-denominated securities (e.g. USD to buy US stock). On 26 September 2018, the tax authorities reassessed the taxpayer's 2014 and 2015 income tax and imposed underpayment penalties, treating the FX gains as realized taxable income.

The issue was whether the acquisition of another foreign currency or a foreign-currency-denominated security using a foreign currency, prior to any reconversion into JPY, triggers realization of FX gains and losses for Japanese individual income tax purposes.

The taxpayer argued that FX gains remain unrealized because exchange-rate risk persists after such transactions, but the Court rejected this argument. The Court interpreted article 36(1) as taxing only realized gains, recognized when the income-generating right accrues. The Income Tax Act expresses various deductions in JPY amounts and sets forth that foreign-currency transactions are translated into JPY for income calculation purposes; the Act therefore presupposes JPY as the unit of account for measuring income. When a foreign currency is exchanged for another foreign currency or a foreign-currency-denominated security, the economic value of the foreign currency paid, previously fluctuating against JPY, is fixed by the value of the foreign currency or security acquired. The excess over the cost of the foreign currency paid is realized, and the right to the acquired foreign currency or security is the income-generating right that accrues.

A supplementary opinion, joined by three of the five judges on the bench, expresses concern that the absence of specific provisions on FX gains and losses in the Income Tax Act undermines tax certainty. It observes that the framework warrants fundamental reconsideration and urges legislative action.

International tax developments

Philippines. On 28 May 2026, the Japan-Philippines Income Tax Treaty was signed, in Tokyo. Once in force and effective, the new treaty will replace the current Japan-Philippines Income Tax Treaty concluded in 1980. Further developments will be reported as they occur.

Tax Administration Support for Foreign-Invested Companies

Courtesy IBFD, it was reported that the National Tax Service (NTS) has recently announced new tax administration measures aimed at encouraging foreign investment and youth employment in Korea. The announcement was made during a meeting with major foreign chambers of commerce, including the American Chamber of Commerce in Korea (AMCHAM), the European Chamber of Commerce in Korea (ECCK), the German Chamber of Commerce and Industry in Korea (KGCCI), the French Korean Chamber of Commerce and Industry (FKCCI), the British Chamber of Commerce in Korea (BCCK), the Seoul Japan Club (SJC), the Chinese Chamber of Commerce in Korea (CCCK) and the Australian Chamber of Commerce in Korea (AustCham).

Under the new measures, foreign-invested companies that increase domestic investment or youth employment by at least 10% compared to the previous year will be exempt from certain international tax-related corporate tax filing reviews for one year, except in cases involving clear tax evasion concerns.

The NTS also introduced several additional support measures, including:

• Priority processing of advance reviews for research and development tax credits;
• Dedicated consultation channels for foreign-invested companies through the tax offices in Seoul, Jungbu and Incheon;
• Expanded guidance and one-on-one consultation services relating to Korea's Global Minimum Tax (GMT) regime; and
• Simplified "fast-track" renewal procedures for certain Advance Pricing Agreements (APAs).

The NTS stated that these measures are intended to improve Korea's investment environment and provide greater certainty for foreign businesses operating in Korea.

Global Minimum Tax filing requirements

Courtesy IBFD, it was reported that the Inland Revenue Board (IRB) has recently updated the frequently asked questions (FAQs) on the implementation of the Global Minimum Tax (GMT) in Malaysia, clarifying that in-scope constituent entities (CE) must file a Domestic Top-up Tax (DTT) Return in Malaysia even where no top-up tax is payable.

• Malaysian CEs are not required to submit any GMT-related filings for financial years beginning before 1 January 2025 in Malaysia. However, if the CEs have operations in jurisdictions that implemented GMT from 2024, they remain subject to the filing requirements in those jurisdictions.
• Even where the effective tax rate (ETR) for all Malaysian CEs exceeds 15%, in-scope entities are still required to submit an annual DTT Return.
• For purposes of the GMT status field in the tax return forms, taxpayers must select "YES" if they fall within the scope of GMT, even if their DTT or Multinational Top-up Tax is expected to be nil for that financial year.
• Where the GMT status fields in Form C (Items H9a and H9b) are not accessible via e-Filing due to a mismatch in accounting periods (i.e. where the company's accounting period begins in 2024 but is included in the Ultimate Parent Entity's (UPE) consolidated financial statements for the financial year beginning on 1 January 2025), the taxpayer must notify the IRB via email to confirm that the company is subject to Part XI of the Income Tax Act 1967, and specify the name and jurisdiction of the UPE.

Service Tax on construction works and property maintenance charges

Courtesy IBFD it was reported that the Royal Malaysian Customs Department has recently issued service tax policies in relation to the service tax treatment of construction work services carried out on completed residential buildings, and maintenance charges and sinking fund contributions for non-residential buildings charged by Joint Management Bodies (JMB) or Management Corporations (MC).

Service Tax Policy No. 2/2026 (Service Tax Treatment on Construction Work Services Carried Out on Completed Residential Buildings)

The Minister of Finance has granted an exemption from service tax from 1 July 2025 on any construction work services carried out on residential buildings that have been completed during the period before the amendments to the Service Tax Regulations 2018 are approved and gazetted, subject to conditions. This exemption is applicable to the occupants or owners of residential buildings and service providers.

A registered person who has charged and collected service tax on construction work services carried out on completed residential buildings may claim a refund on the service tax that has been declared and paid, subject to conditions. The claim must be submitted before or on 30 June 2026 and must be made by the construction work services provider after refunding all service tax amounts that have been collected to the recipient of the construction work services.

Service Tax Policy No. 3/2026 (Service Tax Treatment on Maintenance Charges and Sinking Fund for Non-Residential Premises/Buildings Charged by JMB or MC)

The Minister of Finance has stipulated that maintenance or repair services, including maintenance management services related to premises/buildings for non-residential use provided by any JMB or MC, are not a taxable service.

As such, prior to the amendment of the Service Tax Regulations 2018, property owners are exempted from the payment of service tax on maintenance charges and sinking fund contributions for non-residential premises or buildings charged by a JMB or MC. This exemption is effective from 1 July 2026, until the date the amendment to the Service Tax Regulations 2018 is gazetted.

Service Tax Policy No. 3/2026 clarifies that there will be no service tax exemption on maintenance charges and sinking fund contributions for non-residential premises or buildings charged by a JMB or MC for the period prior to 1 July 2026.

Where a JMB or MC acquires any taxable services from a third party with payment made via the maintenance charges and sinking fund contributions, the JMB or MC is required to pay the service tax charged on these services.

Service Tax Policy No. 2/2026 and Service Tax Policy No. 3/2026 were issued on 22 June 2026 and 25 June 2026, respectively.

Tax incentive for employers implementing flexible work arrangements

Courtesy of IBFD, it was reported that the Ministry of Finance has gazetted the income tax rules allowing an additional 50% deduction for expenditure incurred by an employer for the implementation of flexible work arrangements, effective from the year of assessment (YA) 2025. This incentive was previously announced in the Budget for 2025.

The key features of the Income Tax (Deduction for the Costs of Implementation of Flexible Work Arrangements) Rules 2026 (PU(A) 225/2026) of 16 June 2026 are summarized as follows:

• The expenditure incurred by the employer that qualifies for the additional 50% deduction must be related to the cost of capacity development, including training costs for employees, and the cost for the acquisition of software.
• The expenses incurred for capacity development and software acquisition must be verified by the Talent Corporation Malaysia Berhad (TalentCorp), and the total amount of expenditure allowed must not exceed MYR 500,000 and will only be allowed once.
• To qualify for the deduction, the TalentCorp must verify the employer's implementation of flexible work arrangements and must receive the employer's application for the implementation of flexible work arrangements on or after 1 January 2025 but not later than 31 December 2027.
• The cost of capacity development for the implementation of flexible work arrangements relates to:
  • the fee for training courses or programmes;
  • the fee for internal trainers;
  • the cost for training material;
  • the cost for the rental of training space;
  • the fee for examinations; and
  • travel expenses incurred by the employees and trainers in relation to training, which are limited such that for travel from Malaysia to outside Malaysia, the cost is capped at the equivalent of an economy class air fare, while for travel within Malaysia, the cost is limited to the equivalent of an economy class air fare if travelling by air, or the actual cost incurred if travelling by land or water. In addition, accommodation costs are capped at MYR 300 per day and meal expenses at MYR 150 per day.
• This deduction is not applicable to an employer that has claimed a deduction in relation to the amount of expenditure for the implementation of flexible work arrangements under the following Rules:
  • the Income Tax (Deduction for Consultation and Training Costs for the Implementation of Flexible Work Arrangements) Rules 2015 (PU(A) 134/2015); or
  • the Income Tax (Deduction for the Costs of Implementation of Flexible Work Arrangements) Rules 2021 (PU(A)377/2021).

Pillar Two recommendations

The Congressional Policy and Budget Research Department of the Philippines' House of Representatives has recently published a discussion paper on "The Future of Philippine Fiscal Incentives under OECD Pillar Two."

Among other matters, the paper discusses changes made to the country's fiscal incentive regime following the enactment of the CREATE Act in 2021 and refinements introduced under the CREATE MORE Act in 2024, both of which were intended to modernize and rationalize the country's fiscal incentives toolbox.

The paper also addresses how income-based tax incentives, which play an important role under the CREATE Act and CREATE MORE Act, may be affected by the Pillar Two framework. In addition, it explores how Pillar Two may reshape the future importance and design of tax incentives in the context of the Philippines.

The paper also puts forward proposals that Congress may consider in the short, medium and long term, including the adoption of a qualified domestic minimum top-up tax (QDMTT), qualified refundable tax credits (QRTCs) and a shift of strategy towards non-tax measures as proposed by the OECD and the IMF.

Meanwhile, the tax authorities have begun making preparations for the potential implementation of the proposed domestic minimum top-up tax regime.

Local taxes on companies with tax incentives

Courtesy Cruc Marcelo and Tenefrancia, it was reported that the Department of Interior and Local Government, Department of Finance, and Department of Trade and Industry have issued Joint Memorandum Circular No. 01 dated 23 March 2026, which provide for the Guidelines on the Imposition of Local Taxes, Fees, and Charges on Registered Business Enterprises ("RBEs") Availing of Tax Incentives.

Transitioning Pre-CREATE RBEs

Transitioning Pre-CREATE RBEs refer to RBEs granted incentives prior to the effectivity of Republic Act (RA) No. 11534, otherwise known as the "CREATE Act" and subject to the rules provided under the concerned Investment Promotion Agency (IPA) charter and Section 311 of the National Internal Revenue Code, as amended.

These RBEs shall continue to enjoy the incentives granted to their project or activity, subject to the following conditions:

Pre-CREATE RBEs availing of income tax holiday (ITH) only and are certified either as pioneer or non-pioneer shall be exempt from local business taxes for six to four years, respectively, from the date of registration. In the event that the concerned local government unit (LGU) imposes a Registered Business Enterprise Local Tax (RBELT), the Pre-CREATE RBEs may annually elect to avail of either the exemption from local business tax or the LGU-imposed RBELT. The RBELT refers to a tax imposed by an LGU at a rate not exceeding 2% of the RBE's gross income during the period of its availment of ITH and Enhanced Deductions Regime (EDR), which shall be in lieu of all local taxes, fees, and charges. Where two or more LGUs cover the same RBE, the total RBELT to be imposed shall not exceed 2% of the gross income of the RBE's project or activity. The RBEs shall be deemed to have elected to avail of the RBELT unless they expressly signify their intention not to avail thereof. The election, once made, shall be irrevocable for the entire year.

Pre-CREATE RBEs availing of ITH and/or followed by the 5% gross income tax shall be subject to the foregoing rule (item 1) during the remaining period of the ITH. After the expiration of the ITH and during the availment of the 5% gross income tax, Pre-CREATE RBEs shall be exempt from all local taxes, fees, and charges until 31 December 2034. In no case shall the LGUs impose the RBELT during the period of availment of the 5% gross income tax.

Pre-CREATE RBEs availing of the 5% gross income tax only shall be exempt from all local taxes, fees, and charges until 31 December 2034. In no case shall the LGUs impose the RBELT during the period of availment of the 5% gross income tax.

Transitioning CREATE RBEs and RBEs Granted Incentives under CREATE MORE

CREATE RBEs refer to RBEs granted incentives during the effectivity of the CREATE Act and subject to the rules provided under Section 31 of RA No. 12066, otherwise known as "CREATE MORE." CREATE RBEs and RBEs granted incentives under CREATE MORE and are certified either as pioneer or non-pioneer shall be exempt from local business tax for six to four years, respectively, from the date of registration.

In the event that the concerned LGU imposes an RBELT, such RBEs may annually elect to avail of either the exemption from local business tax or the LGU-imposed RBELT. The RBEs shall be deemed to have elected RBELT unless they expressly signify their intention not to avail thereof. The election, once made, shall be irrevocable for the entire year.

CREATE RBEs and RBEs granted incentives under CREATE MORE availing of ITH or EDR may be subject to local taxes, fees, and charges imposed by the LGU, except under the following instances:

• When the LGU has granted tax exemptions, incentives, or reliefs; or
• When the transaction is expressly exempted under existing laws, rules, regulations.

CREATE RBEs and RBEs granted incentives under CREATE MORE availing of the 5% gross income tax/special corporate income tax (SCIT) shall be exempt from all local taxes, fees, and charges for the duration of the period specified under the terms of such grants. The LGUs shall not impose RBELT during the period of availment of the 5% SCIT.

Prima Facie Evidence of Entitlement The Certificates of Incentive, Certificates of Registration, Certificates of Registration and Tax Exemption, or other equivalent documents issued by the concerned IPA shall be prima facie evidence of entitlement to incentives, including exemption from local taxes, fees, and charges. The presentation of the said documents to the LGU shall be deemed sufficient to avail of the tax exemption/incentives.

International tax developments

Japan. On 28 May 2026, the Japan - Philippines Income Tax Treaty was signed in Tokyo. Once in force and effective, the new treaty will replace the current Japan - Philippines Income Tax Treaty. Further developments will be reported as they occur.

Singapore signs the Global Minimum Tax information exchange agreement

On 14 April 2026, Singapore signed the Multilateral Competent Authority Agreement on the Exchange of GloBE Information (GIR MCAA), under Pillar Two of the OECD/G20 Inclusive Framework's Two-Pillar Solution.

The Global Anti-Base Erosion (GloBE) Model Rules require annual filing of a GloBE Information Return (GIR). The GIR MCAA facilitates the automatic exchange of GloBE information with relevant jurisdictions and is considered a Qualifying Competent Authority Agreement as defined in the GloBE Model Rules. Further developments will be reported as they occur.

Following the announcement in the 2024 Budget Statement, Singapore has implemented the following taxes effective for Financial Years beginning on or after 1 January 2025.

Pillar 2: Global Minimum Tax - Continued

The Inland Revenue Authority of Singapore (IRAS) has updated its website to state that Singapore will implement the Side-by-Side (SbS) package in accordance with the agreement reached by the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework (IF) on Base Erosion and Profit Shifting (BEPS) on 5 January 2026.

On 8 June 2026, the Ministry of Finance (MOF) launched a public consultation on the proposed Finance (Income Taxes) Bill 2026 (Draft Bill). The Draft Bill includes amendments to the Multinational Enterprise (Minimum Tax) Act 2024 (MMTA) relating to the implementation of the SbS Safe Harbour and the Global Anti-Base Erosion (GloBE) Information Return (GIR) exchange framework. The consultation was open until 1 July 2026.

Global Minimum Tax registration

Multinational Enterprise Top-up Tax (MTT) (also known as the Income Inclusion Rule or IIR under the Global Anti-Base Erosion (GloBE) Model Rules) applies to low-taxed profits of group entities located outside Singapore. Domestic Top-up Tax (DTT) applies to low-taxed profits of group entities located in Singapore. The above taxes aim to ensure that large Multinational Enterprise (MNE) groups are subject to a minimum effective tax rate of 15% under Pillar Two of the Base Erosion and Profit Shifting (BEPS) 2.0 initiative and are imposed under the Multinational Enterprise (Minimum Tax) Act 2024 ("MMT Act").

Under the MMT Act, all in-scope MNE groups are required to register for MTT, DTT, and the filing of the GloBE Information Return (GIR). The registration process will begin in May 2026.

On 8 June 2026, IRAS published the following information to help MNE groups prepare for registration.

Who needs to register

An MNE group is required to be registered under the MMT Act if all the following conditions are met:

• The MNE group has annual revenue of €750 million or more, as reported in the consolidated financial statements of the Ultimate Parent Entity (UPE) for at least two out of the four financial years immediately preceding the tested FY; and
• The MNE group has at least one Constituent Entity (CE) or a Joint Venture located in Singapore, or at least one Reverse Hybrid Entity that is incorporated or registered in Singapore.

Registration requirements

Where the MNE group is required to be registered under the MMT Act:

• The UPE of an MNE group must notify the Comptroller of Income Tax by submitting the group's information through an online registration form. Please submit your registration form via this LINK.
• The registration form must be submitted within six months after the end of the group's first financial year to which the MMT Act applies. For example, the MNE group's first financial year to which the MMT Act applies is 1 January 2025 to 31 December 2025.The MNE group must submit the registration form by 30 June 2026 (i.e. six months from the group's FYE of 31 December 2025).
• For MNE groups with a financial year of less than 12 months that begins and ends in 2025 and is unable to submit the registration form within six months after its financial year end, please email IRAS_PillarTwo_Compliance@iras.gov.sg, with the subject header "Request for extension for registration under the MMT Act". The request will be granted on a case-by-case basis.
• If the UPE wishes to appoint a representative to register the MNE group on its behalf, the representative (i.e. an individual) may be either from a CE of the MNE group located in Singapore or a local tax agent.
• The representative appointed by the UPE must submit the registration form together with a Letter of Authorisation. This letter, issued on the UPE's company letterhead, must explicitly state that the representative's organisation is authorised to submit the registration form and to act on behalf of both the UPE and the MNE group in all registration-related matters.

Required information to file the notification

The following information must be prepared before the submission to ensure a smooth registration process:

• Tax identification number (TIN) of all entities of the MNE group that are incorporated, registered or located in Singapore;
• Covered Entities (including Permanent Establishments).;
• Joint Ventures and Joint Venture subsidiaries;
• Minority-owned CEs;
• Investment entities or insurance investment entities;
• Reverse Hybrid Entities;
• Excluded Entities;
• For each entity of the MNE group, provide its TIN, jurisdiction of tax residency and the date of change in tax residency. This requirement applies only to entities incorporated or registered in Singapore that had shifted their tax residency from Singapore to a foreign jurisdiction after 30 November 2021;
• TIN and name of the CE located in Singapore to be appointed as both:
  • the Designated Local GloBE Information Return (GIR) Filing Entity (GFE);
  • the Designated Local DTT Filing Entity (DFE);
  • name, designation and contact details of the contact person of the GFE and the DFE; and
  • start and end dates of the MNE group's first Financial Year to which the MMT Act applies.

What to expect after registering

IRAS will process the registration within one month from receiving complete information. The processing time may take longer if there is incomplete information. Upon receipt of the registration form, IRAS will send an email notification to the UPE or, where applicable, the UPE's appointed representative. When the registration is approved, IRAS will mail letters of notification on the registration to the following entities:

DTT

• All CEs, joint ventures, joint venture subsidiaries and excluded entities located in Singapore, including the CE designated as the GFE and the DFE.
• All reverse hybrid entities registered or incorporated in Singapore.

MTT (if applicable)

• All responsible members (RMs) located in Singapore. A responsible member refers to:

• The UPE of the MNE group that is not an excluded entity.
• An intermediate parent entity of the MNE group if no other member of the MNE group that owns a controlling interest in the entity is a responsible member (e.g. the UPE).
• A partially-owned parent entity of the MNE group if it is not wholly-owned by another partially-owned parent entity of the MNE group that is a responsible member.

• A Corppass Administrator. 

For DTT and GIR purposes: once registered successfully, the MNE group will be assigned with a Group Identification Number (Group ID). The filing of the DTT return and the GIR will be done via digital services in myTax Portal using the Group ID. To streamline the process, IRAS will designate the Corppass Administrator (CPA) of the DFE/GFE as the CPA for the Group ID by default, i.e. the CPA for the Group ID is the same as the CPA for the DFE/GFE. The role of the CPA for the Group ID is to authorise the relevant personnel or tax agent to handle the DTT and GIR matters in myTax Portal from January 2027.

IRAS will inform the DFE once the CPA of the Group ID has been appointed based on the DFE's CPA under its Unique Entity Number (UEN). Interested parties are invited to email IRAS at IRAS_PillarTwo_Compliance@iras.gov.sg, with the subject header "Request for change in Corppass Administrator of (Group ID)" if the DFE wishes to change or add new CPA for the Group ID. Under Corppass rules, an entity can appoint up to 2 individuals as CPAs.

The filing of the MTT return will be done via digital services in myTax Portal using the UEN of the RM.

The RM is not required to submit any application to appoint the CPA as it would already have a CPA under its UEN. The CPA under a UEN is responsible for authorising designated personnel to access and transact with government digital services on the entity's behalf, including interactions with IRAS on corporate income tax and MTT matters.

The CPA of the RM can authorise its personnel or a tax agent to handle the tax matters for MTT in myTax Portal using its UEN from January 2027.

Surcharge for failure to notify

A 10% surcharge on DTT and MTT (if applicable) may be imposed if an in-scope MNE group fails to notify the Comptroller of its registration liability under the MMT Act.

Transfer pricing guidelines

On 4 June 2026, the IRAS published the ninth edition of its transfer pricing guidelines. The latest edition contains, inter alia, a clarification on employee-share-based compensation costs. Such costs, whether incurred, uncharged or notional, should be included in the cost base for calculating arm's-length intercompany service fees. IRAS also introduces some 'practical considerations' for uncharged and notional share-based compensation costs. From Year of Assessment 2026 (generally calendar year 2025) uncharged and notional share-based compensation costs must still be included in the base for the mark-up. However the cost themselves no longer need to be recharged as service income. In other words, the cost is in the mark-up base but does not have to be recharged as an underlying cost.

International tax developments

Tanzania. On 9 June 2026, Singapore signed a double tax treaty with Tanzania in Dar es Salaam. The treaty provides that, under article 5 (Permanent Establishment), residents of a contracting state may be deemed to have a taxable presence in the other contracting state where certain time thresholds are exceeded, namely a period of six months for construction-related activities and 183 days in any twelve-month period for the furnishing of services. In addition, article 5A (Income from the Exploration for, or Exploitation of, Natural Resources) establishes a taxable presence where activities connected with such exploration or exploitation exceed 90 days in any 12-month period. The treaty further limits withholding tax rates to 7.5% on dividends (article 10) and 10% on interest (article 11), royalties (article 12) and fees for technical services (article 12A). 

Taxation of foreign special professionals

In response to the September 2025 amendments to the "Act for the Recruitment and Employment of Foreign Professionals" (the "Act"), the Taxation Administration of the Ministry of Finance amended the "Regulations Governing Reduction and Exemption of Income Tax of Foreign Specialist Professionals" (the "Regulations") on 2 March 2026, with retroactive effect from 1 January 2026.

These amendments of the Regulations primarily align with Article 4, Paragraph 2 of the Act by expanding the scope of "specific expertise" for foreign special professionals to include the fields of digital technology, environmental protection, and biotechnology. In addition, following the establishment of the Ministry of Sports, the "physical education" category has been revised to "sports." The amendments also relax eligibility requirements for applying for tax incentives to better reflect practical needs.

Where a foreign specialist professional engages in the same professional work under the same employment contract and applies for a foreign special professional work permit or Employment Gold Card, and also applies (either simultaneously or subsequently) for other work permits, if such other work permit is obtained first, then upon subsequently obtaining the foreign specialist professional permit or Gold Card, the individual may be deemed retroactively qualified as a foreign specialist professional from the date of obtaining the earlier work permit, and may apply for the tax incentives accordingly (Article 3, Paragraph 4 of the Regulations).

In recognition that overseas compatriot and foreign students are key targets for recruitment and retention, the Regulations clarify that, for purposes of determining whether an individual qualifies as a "individual residing in the territory" (i.e., staying in Taiwan for 183 days or more in a taxable year) under Article 7, Paragraph 2, Subparagraph 2 of the Income Tax Act—as referenced in Article 3, Paragraph 1, Subparagraph 3 and Paragraph 2 of the Regulations—the period during which such individuals study in Taiwan, as well as any extended residency permitted under Article 12 of the Act, shall not be counted toward the 183-day threshold. This is intended to strengthen incentives for such individuals to remain and work in Taiwan after obtaining their degrees (second half of Article 3, Paragraph 5 of the Regulations).

If a foreign specialist professional changes employer or position during the five-year tax incentive period, the remaining period may still qualify for continued application of the tax incentives (Article 4, Paragraph 4 of the Regulations).

The Regulations specify the legal consequences where a foreign specialist professional fails to apply for the tax incentives within the prescribed period or fails to provide supplementary documentation within the required timeframe (Article 5, Paragraphs 2 and 3 of the Regulations).

Since the Act came into force on February 8, 2018, provisions relating to the Employment Gold Card and tax incentives have been key areas of concern for both domestic enterprises and foreign professionals. Taiwanese companies should pay close attention to these amendments to the Regulations, as the relaxed eligibility criteria for tax incentives are expected to enhance the recruitment of foreign professionals and increase their willingness to remain in Taiwan on a long-term basis.

Pillar 2: Global Minimum Tax

Courtesy PDLegal it was reported that on 16 June 2026, the Thai Cabinet approved in principle two significant international tax measures that mark a major step forward in Thailand's participation in the global effort to implement a minimum corporate tax rate. The approvals relate to Thailand's engagement with the Organisation for Economic Co-operation and Development (OECD)'s Global Anti-Base Erosion (GloBE) Rules—the legal framework underpinning the 15 percent Global Minimum Tax (GMT) agreed by over 135 jurisdictions. These developments carry significant implications for multinational enterprise (MNE) groups with global turnover equivalent to EUR 750 million, operating in or through Thailand.

The Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) is a comprehensive multilateral treaty developed jointly by the OECD and the Council of Europe, now covering over 140 jurisdictions. Annex A of the MAC specifies the categories of taxes covered by the Convention for each signatory country. By notifying the OECD to amend Annex A to include the Qualifying Domestic Minimum Top-up Tax (QDMTT) and/or the Income Inclusion Rule (IIR) top-up taxes, Thailand formally brings the GMT mechanisms within the scope of its existing treaty framework for administrative cooperation in tax matters.

In practice, this means that the Thai Revenue Department will be able to request and exchange information, conduct simultaneous tax examinations, and engage in other cooperative administrative measures with treaty partners specifically in respect of the GMT top-up taxes—a necessary step to ensure the effective enforcement of GloBE rules once implemented.

The Multilateral Competent Authority Agreement on the Exchange of GloBE Information Returns (MCAA GIR) is a multilateral agreement among tax authorities that establishes an automatic exchange framework for GloBE Information Returns (GIRs). Under the GloBE Rules, the ultimate parent entity of a large MNE group (with annual consolidated revenue of EUR 750 million or more) is required to file a GloBE Information Return with its local tax authority. That return sets out the group's global income, taxes paid and effective tax rates by jurisdiction. The MCAA GIR enables participating countries' tax authorities to automatically exchange these returns with each other, facilitating coordinated enforcement without the need for individual bilateral agreements.

Thailand's entry into the MCAA GIR is a critical enabling step: without it, Thailand's Revenue Department would lack access to the information infrastructure needed to assess and collect top-up taxes on the profits of in-scope MNE groups operating in Thailand.

Thailand has been actively aligning its tax framework with the OECD/G20 Inclusive Framework on BEPS (Base Erosion and Profit Shifting), of which Thailand is a member. The GloBE Rules, forming Pillar Two of the BEPS 2.0 initiative, establish a global floor of 15 percent effective tax rate for large MNEs. A jurisdiction may implement:

• A Qualified Domestic Minimum Top-up Tax (QDMTT) allowing Thailand to collect any top-up tax on locally low-taxed profits before other jurisdictions can do so under their own rules.
• An Income Inclusion Rule (IIR) requiring a parent entity in Thailand to pay top-up tax on its low-taxed subsidiaries' income.
• An Undertaxed Profits Rule (UTPR) acting as a backstop where other rules have not been applied.

Thailand has been working on domestic legislation to implement the GloBE Rules. The Cabinet's approval on 16 June 2026 of the MAC Annex A amendment and MCAA GIR participation provides the international treaty and information-exchange architecture essential for that domestic legislation to function in practice.

The Cabinet's approval is described as "in principle" approval. The formal next steps outlined by the Thai government are:

• Formal notification to the OECD to amend Thailand's Annex A under the MAC to include the GMT top-up taxes within the scope of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters; and
• Completion of the domestic procedural requirements necessary to activate the exchange of GloBE Information Returns under the MCAA GIR, which will involve treaty action and, potentially, further subordinate legislation.

Businesses should also monitor the progress of Thailand's domestic GloBE legislation, which will determine the exact scope, timing and mechanics of top-up tax obligations in Thailand.

International taxation 

The Vietnam Ministry of Finance has released a draft Circular (the "Draft Circular") for public consultation. The Draft Circular is intended to replace Circular 205/2013 on double taxation agreements (DTAs), Circular 45/2021 on advance pricing agreements (APAs), and the mutual agreement procedure (MAP)-related provisions under Circular 80/2021. It will consolidate guidance on DTAs, MAP and APAs into a single regulatory instrument, and is expected to take effect on 1 July 2026.

Advance Pricing Agreement (APA)

The Draft Circular clarifies the delegation of roles among tax authorities in the APA process. The Tax Department leads the handling of bilateral and multilateral APAs, while provincial tax departments and specialised sub-tax departments (Large Enterprises and E-commerce) oversee implementation and compliance. Complex cases are escalated to the Ministry of Finance. In addition, for unilateral APA applications, the Tax Department may delegate their processing to relevant tax units. This marks a significant step forward in streamlining APA procedures in Vietnam, reducing administrative complexity and shortening approval timelines. The shift in approval authority from the Ministry of Finance to the Tax Department enhances the efficiency and flexibility.

Currently, APA applications are required to be submitted in hard copy, which increases the administrative burden on the taxpayer. Under the Draft Circular, APA applications are required to be submitted electronically. This introduces a more streamlined approach, enabling taxpayers to simplify the submission process and significantly reduce the effort associated with hard copy filings, in line with the broader digital transformation agenda of the Ministry of Finance and the tax authorities.

Consistent with the current regulations, APA application dossiers must still be prepared in Vietnamese. For bilateral and multilateral APAs, dossiers must be submitted in Vietnamese with an accompanying English translation, and any original documents in other languages must be translated into Vietnamese (and English for bilateral/multilateral APAs), with taxpayers being responsible for the accuracy of the translations. However, a notable improvement under the Draft Circular is the introduction of a more practical approach to reduce the administrative burden of translation. Where supporting documents are too extensive to be fully translated, taxpayers may provide Vietnamese summaries, explanations, and 3 details on how the documents can be accessed by the tax authorities.

While the Draft Circular introduces several positive developments, there remain a number of areas that require further clarification and potential refinement to ensure a more robust APA framework that is better aligned with international practices, including OECD guidance and regional approaches.

The maximum APA term remains capped at three tax years, which is slightly shorter than the duration commonly seen in many other jurisdictions and under OECD guidance. In addition, the Draft Circular does not include provisions for APA rollback, a feature available in many jurisdictions such as the United States, Japan, Korea and various European countries. These limitations may reduce the flexibility and effectiveness of the APA framework in addressing practical business needs. In this regard, consideration could be given to extending the APA term and introducing rollback mechanisms, in order to enhance alignment with international practices and provide greater certainty for taxpayers.

Under the Draft Circular, where the proposed APA period expires and the parties have not reached an agreement on the APA terms, the tax authority may discontinue the processing of the APA application. This approach may create practical challenges for taxpayers, particularly in maintaining continuity and predictability in relation to the years intended to be covered under the APA. Under the Draft Circular, it remains unclear whether the originally submitted application, which is still under negotiation at the time of expiry, can continue to be considered in parallel with the new application. This is an area that warrants further consideration by the tax authorities to address practical challenges and ensure continuity and greater certainty for taxpayers pursuing APA arrangements.

As compared with the previous rulings, the Draft Circular does not set out specific timeframes, or even indicative timelines, for each stage of the review process. As a result, taxpayers may face challenges in understanding when additional information is required, how long the tax authorities will take to process submissions, and when feedback may be expected at each stage. In this regard, greater clarity on timelines or the introduction of indicative milestones for each stage of the review process would enhance transparency and support a more efficient and predictable APA application process for taxpayers.

The Draft Circular applies a single APA process regardless of the size of the taxpayer or the complexity of the transactions involved. Many jurisdictions have introduced simplified or streamlined APA tracks for SMEs or transactions that meet low-risk/limited functional profile criteria, reducing the compliance burden for these groups while allowing tax authority resources to focus on higher risk cases. The absence of such a mechanism in the Draft Circular is a gap worth considering in the finalisation process.

The Draft Circular requires taxpayers to adjust taxable income in line with the agreed APA pricing during the APA period, but does not specify the practical mechanics for making such adjustments. In addition, where a taxpayer's profit margin exceeds the agreed arm's-length range for a given year, it remains unclear whether a downward adjustment to align with the agreed range under the APA would be permitted. In this regard, greater clarity on the procedural aspects of implementing such adjustments would be beneficial ahead of implementation.

Corporate income tax changes

On 12 March 2026, the Minister of Finance issued Circular No. 20/2026/TT-BTC ("Circular 20"), detailing several articles of the Corporate Income Tax Law No. 67/2025/QH15 ("CIT Law") and Decree No. 320/2025/ND-CP ("Decree 320"). Circular 20 took effect on 12 March 2026 and applies from the 2025 tax year.

Circular 20 provides detailed regulations on the following:

• Corporate income tax (CIT) liabilities of foreign enterprises;
• Further guidance on conditions for internal restructuring transactions exempt from CIT;
• Timing for determining taxable revenue in certain specific cases for foreign enterprises;
• Deductible expenses;
• Notification obligations related to registered investment capital for expanded investment projects; and
• Implementation and effective date of Circular 20.

CIT liabilities of foreign enterprises

Circular 20 repeals several provisions of Circular No. 103/2014/TT BTC, which previously governed the CIT calculation of the foreign contractor withholding tax. Under the new framework, CIT calculation for foreign contractors is governed by Decree 320 and Circular 20.

Circular 20 introduces a new rule for calculating withholding CIT, under which taxable revenue is inclusive of VAT. This differs from the previous rule under Circular 103, pursuant to which CIT taxable revenue was exclusive of VAT.

Contracts with foreign contractors that are currently applying the hybrid method under Circular 103 and were executed prior to 12 March 2026 will continue to determine CIT in accordance with the regulations in effect at the time of contract execution.

Further guidance on CIT obligations for capital transfers by foreign corporate sellers

Under the CIT Law and Decree 320, foreign corporate sellers are subject to 2% CIT on sale proceeds from both direct and indirect capital transfers, except for ownership restructuring transactions within a group that (i) do not change the ultimate parent company of the parties involved that directly or indirectly own enterprises in Vietnam after the restructuring, and (ii) do not generate income ("Exception").

Circular 20 clarifies the conditions for the Exception as follows:

The Exception applies to the following internal restructuring transactions within a group:

• Company division or split-off;
• Consolidation or merger;
• Share swaps;
• Capital contributions in the form of shares.;
• Distribution of profits or dividends in shares within the group.; and
• Other transactions involving direct or indirect changes in ownership of Vietnamese enterprises.

Condition of "not generating income"

The condition of "not generating income" is considered satisfied if all of the following requirements are met:

• No change in the ultimate beneficial owner. The transfer price does not exceed the book value or the value of the initial contributed capital.
• No value difference is created; specifically, the value stated in the restructuring dossier approved by the competent authority is not higher than the value recorded at the time of the capital transfer.
• The transferee inherits all capital values, obligations, and rights related to the transferor's investment.

Timing for determining taxable revenue in certain specific cases for foreign enterprises

For capital transfers by foreign corporate sellers, the timing for determining taxable revenue is the effective date of the original capital transfer contract. However, Circular 20 does not define what constitutes an "original capital transfer contract," which may lead to inconsistent interpretations by local tax authorities in practice.

For transfers of securities or certificates of deposit, taxable revenue is determined at the time of transfer.

For transfers of derivative securities in the form of futures contracts, taxable revenue is determined at the time the investor's buy or sell order is matched on the Stock Exchange's trading system, or at the contract's maturity date.

Deductible expenses

Circular 20 provides further guidance by specifying documentation requirements that enterprises must prepare and retain to claim tax deductibility for certain expenses incurred for production and business activities that are not yet associated with revenue in the relevant period (e.g., bid participation costs, market and product research expenses, land rental, and enterprise establishment expenses).

Enterprises are required to maintain and produce complete supporting documentation for these expenses for tax audits, inspections, examinations, and other procedures as required by law.

Notification obligation on registered investment capital for expanded investment projects

Enterprises must notify the tax authority of the registered investment capital of any expanded investment project when filing the CIT finalisation return, and no later than the tax year in which the expanded investment project is implemented.

Any changes to the registered investment capital during project implementation must be promptly reported to the tax authority through an updated notification.

Implementation and effective date of Circular 20

Circular 20 took effect on 12 March 2026 and applies from the 2025 tax year.

For deductible expenses incurred before 12 March 2026, where Circular No. 96/2015/TT BTC already prescribes the applicable conditions and supporting documentation, enterprises will continue to apply Circular 96 for the 2025 tax year.

The rules under Circular 20 on non-cash payment supporting documentation and capital transfers apply from 15 December 2025.

Scope of VAT Exempt transactions has been expanded

The government has issued Decree No. 144/2026/ND-CP (the Decree) amending and supplementing several articles implementing the VAT Law, specifically concerning VAT-exempt transactions and input tax deduction. The Decree amends provisions of Decree No. 181/2025/ND-CP, as amended and supplemented by Decree No. 359/2025/ND-CP and has taken effect from 20 June 2026.

The Decree supplements and clarifies the scope of insurance services that are not subject to VAT, including reinsurance services in accordance with the insurance law, as well as other specified insurance services.

In addition, it expands the scope of VAT-exempt debt trading services to expressly cover the trading of certificates of deposit in addition to the trading of accounts payable and accounts receivable.

Revenue from goods and services and commission earned by a business from acting as a sales agent for VAT-exempt goods and services, and revenue from insurance brokerage commission relating to VAT-exempt insurance services is excluded from turnover subject to VAT.

Broader Definition of 'Total Turnover' for VAT Deduction Purposes

Where it is impossible to separate creditable input tax (from non-creditable input tax), such amount is calculated based on the percentage of turnover from goods and services liable to VAT to total turnover from goods and services sold in the tax period. Total turnover now clearly includes taxable turnover, non-taxable turnover, value added from gold, silver, and gemstone trading (except negative values) and turnover from special activities (if any) under article 40 of Decree No. 181/2025. This also extends to turnover from certain goods and services that are not subject to VAT declaration and payment under article 5.1 of the VAT Law.

Increased Flexibility on Input Tax Deduction for Purchases on Instalment and Deferred Payments

For purchases made under instalment or deferred-payment contracts valued at VND 5 million or more, input VAT may be provisionally deducted based on the written contract, the available VAT invoice or non-cash payment document. Where the non-cash payment evidence is not yet available solely because the payment is not due, the deduction remains allowable. However, if a non-cash payment is not made when due, the previously deducted input VAT must be adjusted downward. The input VAT may be deducted again once valid non‑cash payment evidence is obtained.

In terms of the VAT treatment of exported products, appendices I and II issued with Decree No. 181/2025/ND-CP on export-restricted unprocessed and processed minerals are replaced under the Decree.

Renewable energy projects tax incentives

Courtesy IBFD it was reported that the Appellate Court – the Supreme People's Court in Da Nang –ruled that renewable energy projects qualify for tax incentives even without an investment permit.

The plaintiff, Company A Co., Ltd., invested more than VND 12.885 billion to build a rooftop solar power system with a capacity of 749.7 kWp in Khanh Hoa Province. It began operations in 2020. The company self-assessed and applied preferential corporate income tax (CIT) incentives, including a 10% tax rate for 15 years, a four-year tax exemption, and a 50% tax reduction for the subsequent 9 years.

However, in 2023, a local tax office (under the Khanh Hoa provincial tax authority) conducted an inspection and concluded that the company is not eligible for these incentives. The tax authority argued that this is a conditional business sector and that the company had violated regulations by failing to obtain an investment registration certificate (IRC) or to report to the investment registration authority. As a result, it issued a tax reassessment and imposed penalties totalling VND 246,410,083.

The issues were (i) whether a rooftop solar power project of a domestic investor qualified as a renewable energy project eligible for special investment incentives, and (ii) whether administrative investment procedures (such as obtaining an IRC) is a prerequisite for enjoying CIT incentives.

The Court rejected the tax authority's arguments based on the following grounds:

• On the plaintiff's eligibility for incentives: under the Law on Investment and its guiding decrees, renewable and clean energy production is classified as a sector eligible for special investment incentives. Company A's solar power project fully meets this definition.
• On administrative investment procedures: according to article 36.2(a) of the 2014 Law on Investment, projects of domestic investors are not required to obtain an IRC. In such cases, pursuant to article 17.2 of the same law, investors are entitled to self-determine applicable incentives based on actual conditions with the tax authority without the need for a certificate. The company's application of preferential CIT rates under the amended 2013 Law on Corporate Income Tax, including a 10% rate for 15 years (under article 1(7).1), a tax exemption of up to four years, and a 50% reduction for up to the next nine years (under article 1.8(1)), for CIT finalisation since 2020, is consistent with legal regulations.
• On the nature of the business activity: under article 11 of Decree 31/2021/ND-CP and article 34.1 of the 2004 Electricity Law, for a capacity of 749.7 kWp (i.e., less than 1 MWp), the company's project is exempt from the requirement to obtain an electricity operation licence. Therefore, the stricter business conditions cited by the tax authority were not consistent with the law.

The Court concluded that the tax authority's determination that Company A was not entitled to tax incentives lacked legal basis. Accordingly, the Court annulled the tax authority's penalty decisions and decisions on complaint resolution, while upholding the first-instance judgment in favour of the company.

International tax developments

Cyprus. On 1 June 2026, the tax treaty between Vietnam and Cyprus will enter into force. The treaty generally applies from 1 January 2027 for withholding and other taxes.

Luxembourg. On 14 April 2026, the amending protocol, signed on 4 May 2023, to the Luxembourg - Vietnam Income and Capital Tax Treaty (1996) entered into force. The protocol replaces article 27 (Exchange of information) of the treaty and generally applies from 1 January 2027.