Asia Tax Bulletin - Winter 2025/2026

Overseas internet platforms tax information reporting

Courtesy of Zhonglun, it was reported that on 20 June 2025, the State Council of the People's Republic of China promulgated the Regulations on Internet Platform Companies' Submission of Tax-related Information (Decree No. 810, hereinafter referred to as the "Regulations"), which came into effect on the same day. Shortly thereafter, on 26 June 2025, the State Taxation Administration (STA) issued the Announcement on Matters Concerning the Submission of Tax-related Information by Internet Platform Enterprises ([2025] No. 15, hereinafter referred to as "Announcement No. 15"), and the Announcement on Several Matters Concerning Internet Platform Companies Handling Withholding Declaration and Proxy Declaration for Practitioners on Their Platforms (hereinafter referred to as "Announcement No. 16").

These legal instruments are closely aligned with the E-commerce Law of the People's Republic of China (effective since 2019). They accommodate the evolving trends of the global digital economy and address the information asymmetry inherent in the platform economy's dynamic and intangible nature. Collectively, these regulations establish and refine China's tax regulatory framework for the platform-based digital economy. A key step forward in China's tax administration of the digital economy, this new series of rules imposes stricter and clearer compliance obligations and challenges on all platform entities, including overseas cross-border internet platform enterprises.

With the Regulations and its accompanying administrative announcements now fully in effect, since 1 October 2025, more than 6,000 domestic and overseas platforms have submitted their basic information, while over 4,000 platforms have agreed to report tax-related information of operators and practitioners using their platforms.

Of particular note, on 13 October 2025, a large e-commerce MNC officially issued a notice titled "Notice on the Requirements for Internet Platform Companies' Submission of Tax-related Information of the People's Republic of China," confirming that it will complete its first submission of tax-related information by 31 October 2025, covering data for the third quarter of 2025 of the identities, earnings and platform charges, among others, of Chinese business operators using the platform.

In addition, other major platforms involving Chinese business operators—including AliExpress, TikTok Shop, Tmall, Taobao, JD, Meituan, and Xiaohongshu (Rednote)—have also issued reminders stating that they will report information about business operators on their platforms to the competent tax authorities in accordance with the Regulations and have opened data-query and verification functions for platform users.

The new rules primarily affect two categories of players in platform business: internet platforms and the operators and practitioners using those platforms.

Entities Responsible for Submission: Internet Platforms

The internet platforms regulated by the new rules refer to e-commerce platform operators as defined under the E-commerce Law of the PRC, as well as other legal persons or unincorporated organisations that provide profit-making services such as online business venues, transaction matching, and information release for online transaction activities. The scope is broad and mainly includes the following seven categories:

• Online commodity sales platforms;
• Online live streaming platforms;
• Online freight platforms;
• Flexible employment platforms;
• Platforms providing services such as education, healthcare, travel, consulting, training, brokerage, design, performance, advertising, translation, agency, technical services, audio-visual information, gaming and leisure, online literature, video and graphic content generation, online lending, etc.;
• Platforms providing aggregation services for internet platforms; and
• Mini-programs, quick apps, etc. that provide profit-making services for operators and practitioners using the platform to engage in online transactions, as well as platforms providing infrastructure services for such mini-programs and quick apps.

For overseas internet platform enterprises, the new rules clearly define the entities responsible for fulfilling the reporting obligations:

• Where an overseas internet platform has established an operating entity within China, and such entity has lawfully obtained a value-added telecommunications business operation permit, the tax-related information shall be submitted by that domestic entity.
• Where none of the operating entities established in China has obtained a value-added telecommunications business operation permit, the domestic operating entity that provides merchant onboarding, store operation, marketing and promotional services for the operators and practitioners using the overseas internet platform shall be responsible for the submission.
• Where an overseas internet platform enterprise has no operating entity established within China, it shall designate a domestic agent to complete the submission of tax-related information.

This provision ensures that, regardless of the operational model adopted by an overseas platform in China, there is always a clearly designated entity responsible for the reporting.

Information to Be Submitted: Platform, Platform Operators, and Practitioners

Regular (Quarterly) Reporting

The new rules divide the tax-related information to be submitted by platforms into two major categories: (a) basic information about the platform itself, and (b) identity and income information of operators and practitioners using the platform. "Operators and practitioners" refer to legal persons, unincorporated organisations, or natural persons who provide profit-making services through the internet platform.

The first reporting period shall run from 1 October to 31 October 2025, covering data from July to September 2025; thereafter, reporting shall be conducted on a regular quarterly basis. The information required to be submitted includes:

• Basic information of the platform enterprises: Internet platform companies shall, within 30 days from the later of the date of implementation of the new rules or from the commencement of internet business operations, submit to their competent tax authorities the platform domain name, business type, unified social credit code, and the name of relevant operating entities, among other information.
• Information of operators and practitioners using the platform: Information concerning all operators on the platform (including unregistered individuals) shall be furnished, including identity information, transaction volumes and amounts, and platform charges. However, tax-related information of operators and practitioners prior to the implementation of the Regulations is not required to be submitted by internet platform enterprises.

It should be noted that overseas internet platform enterprises are not required to submit the identity information of their overseas operators and practitioners.

Exemptions

Where the quarterly cumulative net transaction amount for a single domestic purchaser using the platform does not exceed CNY 5,000, overseas internet platform enterprises may for now be exempt from submitting the income information of overseas operators and practitioners who sell services or intangible assets to that purchaser.

For practitioners engaged in public convenience services such as delivery, transportation, and housekeeping who are eligible for tax incentives or exempt from taxation pursuant to law, internet platform enterprises are not required to submit their income information.

Where internet platform enterprises have already submitted tax-related information when handling withholding declarations or proxy declarations for operators and practitioners pursuant to the relevant provisions, such information need not be resubmitted.

Tax-related information generated before the implementation of the Regulations does not need to be retroactively reported by the platform.

Special Circumstances

Where a store or business on an internet platform has been changed or deregistered by the time of the submission, the platform shall still submit data of the store or business for the relevant data submission period that falls, respectively, before and after the change, or prior to deregistration. Furthermore, the platform must truthfully submit all transaction information and may not exclude or select income data at its own discretion.

For overseas platforms, where an operator is registered in China, its relevant information shall still fall within the purview of China's tax-related information reporting, even if the operator's sales occur only overseas.

In addition, when non-natural-person operators on the platform obtain live streaming-related income through the internet platform and make payments to online streamers or their partners, the platform must submit to the competent tax authority the identity and income information of those streamers and partners.

Legal Liability

Failure to submit tax-related information as required, concealment, false reporting, omission, or inaccuracies resulting from the platform's fault, as well as refusal to submit information, shall be subject to orders for rectification within a specified period, fines ranging from CNY 20,000 to CNY 500,000, and suspension of business operations for rectification, and may also result in inclusion in the tax and fee payment credit evaluation system and public disclosure to society.

Tariffs with the USA

The United States will cut tariffs on fentanyl precursor chemicals from 20% to 10% and suspend the 24% reciprocal tariffs on Chinese imports for one year, under a new trade deal reached by President Donald Trump and Chinese President Xi Jinping during Trump's trip to Asia. In return, China will suspend its export restrictions on rare-earth materials for one year, as both sides seek to ease trade tensions and strengthen cooperation on synthetic drug control.

The agreement, announced following Trump's meetings with regional leaders in Malaysia, Japan, South Korea, and other Indo-Pacific nations, is part of broader US efforts to rebuild economic and security partnerships in the region.

The United States will suspend for one year the "50% rule" under which subsidiaries that are at least 50% owned by blacklisted companies are subject to sanctions.

The United States will also suspend for one year the port fees charged to Chinese vessels and its ongoing Section 301 investigations into China's shipbuilding industries.

The new arrangement follows a series of short-term tariff pauses earlier in 2025, beginning with the Geneva Joint Statement of 12 May 2025 (the US and China agreed to a temporary 90-Day Tariff Reduction, and to slash rates by 115%) and the Stockholm Joint Statement of 11 August 2025 (the tariff pause with China maintaining 10% rate in joint deal). Both agreements temporarily reduced reciprocal tariffs and maintained a 10% baseline rate.

It was reported on 29 December 2025 that the Office of the United States Trade Representative (USTR) has approved new tariffs new tariffs under section 301 of the Trade Act of 1974 targeting China's semiconductor industry citing extensive state control and practices that undermine US commerce.

The tariffs, which took effect on 23 December 2025 at an initial rate of 0%, are scheduled to increase on 23 June 2027. The rate increase amount will be announced at least 30 days in advance. The USTR issued the notice of the determination and tariff action of the determination and tariff action on 22 December 2025. The notice is scheduled for publication in the Federal Register on 29 December 2025.

In its determination, the USTR found that China's state-directed industrial practices aimed at achieving dominance in the semiconductor sector unreasonably burden US commerce. The notice specifically identifies the following practices:

• Extensive state control over the semiconductor industry through political directives, state-owned and state-controlled enterprises, and intervention in private firms;
• Non-market policies that distort competition and displace foreign semiconductor producers; and
• The creation and exploitation of supply chain dependencies that harm foreign competitors and purchasers.

The USTR further concluded that these practices burden or restrict US commerce by:

• Undercutting business opportunities and investment in the US semiconductor industry, and
• Creating economic security risks arising from supply chain dependence in sectors critical to the US economy.

Advance Pricing arrangements

The State Taxation Administration has published the annual report on advance pricing arrangements ("APAs") for the year 2024, in Chinese and English. This is the 16th report China has published on the latest policies, implementation procedures, statistics and development of its APA programme. It also provides an overview of the application and negotiation of APAs and covers APAs concluded from 2005 to 2024.

According to the report, the total number of APAs concluded in China increased to 165 unilateral and 170 bilateral APAs. For the first time, more bilateral APAs than unilateral APAs had been concluded by the end of 2024.

The report is intended to provide guidance to enterprises interested in entering into APAs with the Chinese tax authority, and to serve as a reference for competent authorities of other jurisdictions and the general public to better understand China's APA programme. The report is, however, not legally binding, and taxpayers and tax administrations may not use the report as a legal basis in negotiations of APAs.

Tax arrears and naming and shaming taxpayers

Courtesy of IBFD, it was reported that the State Taxation Administration (STA) has issued an Order updating the measure on tax arrears by "naming and shaming" taxpayers in default. The Order will take effect on 1 March 2026.

According to the Order of the State Taxation Administration [2025] No. 61, published on 26 November 2025, a taxpayer's tax arrears will be made public on a monthly basis. Details of the tax arrears will be published on the information platform of the tax authority, and may also be published through tax offices, media and other channels. Depending on the severity of the case, the tax authorities at or above provincial level are authorized to publicize the tax arrears of certain taxpayers and may provide inquiry services on their websites in respect of tax arrears under their jurisdictions.

The details disclosed will include the name of the taxpayer, identification number, business location, the amount of tax due and late payment fees, the default date and the authority making the announcement.

The provisions of the Order apply equally to withholding agents and guarantors of taxpayers.

Before publication, the tax authority will send the details to the taxpayer for confirmation; the taxpayer is required to confirm them or to submit an objection to the tax authority in case of any incorrect details within three working days.

Disclosure of the following is not allowed:

• Unpaid tax amounts and late payment fees in a bankruptcy process;
• Unpaid tax amounts and late payment fees of an enterprise that has been declared bankrupt, dissolved or deregistered; and
• Unpaid tax amounts and late payment fees under bankruptcy reorganization and settlement procedures.

Disclosure may also not be done where state secrets are involved.

ASEAN free trade agreement

On 28 October 2025, the Association of Southeast Asian Nations (ASEAN) and China signed an amending protocol to update the ASEAN-China Free Trade Area (ACFTA), during the 47th ASEAN Summit in Malaysia. The amending protocol strengthens cooperation in developing fields, enhances connectivity in standards and regulations and advocates for regional trade and inclusive development.

Tax and collection fees during corporate bankruptcy process

Courtesy of IBFD, it was reported that the State Taxation Administration (STA) and the Supreme Court of China have clarified how tax and fee collections are handled during bankruptcy proceedings. Announcement of the State Taxation Administration and Supreme Court of China [2025] No. 24 was issued on 27 November 2025 and took effect on that same date.

Under the Bankruptcy Law, tax authorities must file claims for the taxes (including education fee surcharges and local education surcharges), late payment penalties, fines and interest arising from special tax adjustments, social insurance premiums and their associated late payment fees owed by enterprises with the receiver within the time limit prescribed by the People's Court.

The debts are categorized as follows:

• Taxes and social insurance premiums, which must be filed by the tax authorities separately from other payments and treated as priority debts;
• Late payment fees and interest, which are treated as non-priority debts and are declared as ordinary debt; and
• Late payment fees and fines in respect of social insurance premiums, which are declared according to the relevant specific regulations.

The amount of tax and social insurance premiums owed is determined based on the date the People's Court accepts the bankruptcy application. Where the tax and payment liabilities have been accrued before the acceptance of the bankruptcy application, the enterprise must file the tax returns with the tax authorities in respect of those taxes and fees. After the receipt of the people's ruling accepting the bankruptcy application and the appointment of the receiver, the tax authorities will lift and suspend any law enforcement measures such as sealing and seizure of the enterprise's property. The receiver will assume the responsibilities on behalf of debtor for tax matters in terms of filing tax returns, tax withholding and issuance of invoices.

For taxes and fees arising from unlawful acts of the enterprise, the tax authority will issue administrative decisions and submit the decided taxes, fees and fines as debt claims with the People's Court.

Taxes and fees incurred from the disposal and settling of a debtor's properties are treated as bankruptcy expenses, while those incurred from the continued operations are common benefit debts. These expenses are payable from the debtor's property.

The enterprise that has been declared bankrupt by the People's Court may apply to the tax authority for tax deregistration by submitting the People's Court ruling. The tax authority will issue a tax clearance certificate and deregister the enterprise noting the "dead tax debt."

VAT changes

Courtesy of IBFD, it was reported that China has published the Implementation Regulations of the Value Added Tax Law ("VAT Law"). The Implementation Regulations ("VATIR") contain six chapters and 54 articles and are intended to provide definitions and clarification of the new VAT Law for consistent implementation nationwide. Both the VAT Law and the VATIR have taken effect from 1 January 2026.

Location of Consumption of Services or Intangible Assets

Inbound services and intangible assets sold by overseas entities or individuals to domestic entities or individuals, and services or intangible assets sold by overseas entities or individuals that relate to goods, immovable properties and natural resources located in China, are considered to be used and consumed in China and therefore subject to Chinese VAT.

For example, an engineer in Germany provides a Chinese enterprise with technical advice for machinery in its factory in China. The engineer is liable to Chinese VAT even if the engineer is not in China and the entire advice was drawn up in Germany.

Clarification of Zero-Rated Exported Services and Intangibles

Zero-rated services and intangibles exported by domestic entities and individuals are defined to mean:

• services sold to overseas entities and wholly consumed abroad, including research and development, energy performance contracting, design, radio/film/television production, software, circuit design and testing, information systems, business processes management and offshore outsourcing services;
• transfers of technology to overseas entities that are wholly consumed abroad; and
• international transportation, air transportation and offshore processing, repair and maintenance services.

Input Tax Credit for Long-Term Assets in "Mixed-Use" Situations

The VATIR clarifies the treatment of input VAT on the purchase of "long-term assets," including fixed assets, intangible assets and immovable property.

Generally, input VAT on long-term assets used exclusively for non-creditable items is not creditable. The categories of non-creditable items are those subject to the simplified VAT method, i.e., exempt items and non-taxable supplies.

Taxpayers acquiring "mixed-use" long-term assets, i.e., used for both taxable and non-creditable activities, may offset the full input tax amount against the investment if the original cost of the investment is less than CNY 5 million.

Where the original cost exceeds CNY 5 million, the full amount of input tax may be offset against output tax at the time of purchase, while the non-creditable input tax amount is adjusted annually on the basis of the depreciation or amortization years to recapture the non-creditable portion of input tax that has been offset at the time of purchase.

For example, a taxpayer invests CNY 10 million in machinery (at 13% VAT and a depreciation period of 10 years), 30% of which is used for exempt activities. The offset upon purchase is CNY 1.3 million and the annual recapture adjustment for the non-creditable portion of input VAT is ((CNY 10 million x 13%) /10 years) x 30% = CNY 39,000.

Input Tax on Consulting or Administration Fees in connection with loans Is Non-Creditable

Article 21 of the VATIR provides that input tax on interest, advice on investment and financing, administration and consulting fees in connection with loans cannot be offset against output VAT for the time being. The tax authority will assess the repercussions of the irrevocability of this type of input tax in due course.

More Detailed Rules from Ministry of Finance (MoF) and State Taxation Administration (STA)

At the time of the publication of the VATIR, it was announced that the MoF and STA will issue more detailed operational rules to implement the VAT Law and VATIR. As a result, more rules are expected in 2026.

The new law and regulations are expected to enhance tax certainty and contribute to the improvement of cash-flow management and therefore to a better business environment for both domestic and foreign investors.

Anti-Avoidance assessment on intra-group management fees

Courtesy of IBFD, it was reported that on 30 October 2025 in Chapman Development Ltd. v. Commissioner of Inland Revenue [2025] HKCA 956, the Court of Appeal ruled that the management fees paid by the taxpayer to its British Virgin Islands (BVI) associated company were not deductible as the sole and dominant purpose of the transaction was to obtain a tax benefit in Hong Kong.

Chapman Development Limited (Chapman), a Hong Kong-based company engaged in the manufacturing and trading of fabric and yarn, and the provision of trade-related services, appealed against profits tax assessments for the years of assessment 1997/98 to 2005/06.

The assessments related to management fees paid by Chapman to its associated company, Profit Gain Trading (BVI) Limited (Profit Gain), under a management agreement that appointed Profit Gain as Chapman's management agent for "all knitted and dyed fabric production to be required in China factories;" i.e., two manufacturing entities in China owned by Chapman, and third-party manufacturers. Chapman claimed the management fees, not all of which were calculated according to the written provisions of the management agreement, as a tax deduction. The deductions were denied by both the Inland Revenue Board of Review and the High Court, on the basis that (i) the payments not falling under the written agreement were not deductible expenses, and (ii) while the fees under the written agreement were deductible, the arrangement was primarily aimed at obtaining a tax benefit within the meaning of the general anti-avoidance rule in section 61A of the Inland Revenue Ordinance (IRO). Chapman subsequently appealed to the Court of Appeal.

The issues before the Court were twofold:

1. Whether management fees paid outside the written terms of the agreement (extraneous fees) were deductible under sections 16 and 17 of the IRO, and
2. Whether entering into the management agreement and the payments made under the agreement constituted transactions primarily aimed at obtaining a tax benefit, thereby engaging section 61A of the IRO.

The Court of Appeal dismissed Chapman's appeal, upholding the decisions of the lower authorities. The Court agreed with the lower authorities that there was no evidence of any agreement (written or not) on the extraneous fees, and they were not expenses incurred in the production of Chapman's assessable profits and therefore not deductible.

The Court also agreed that the management fees per the written agreement were deductible expenses, but that the sole or dominant purpose of the management agreement and the payments made under the agreement was to obtain a tax benefit, thus triggering the application of section 61A of the IRO. The Court considered the issue of whether, under the actual transaction, the taxpayer's tax position was better than under an alternative hypothesis in which the taxpayer would have done the production management work itself. Under the alternative hypothesis, no management fees would have been payable and there would have been no claim for deduction of the management fees. Under the actual transaction, the taxpayer had obtained a tax benefit because the management fees per the written agreement were deductible expenses and its tax liability was thereby reduced.

Tax arrangement with the Mainland of China

On the 23 December 2025, the Inland Revenue Department (IRD) published an update on Frequently Asked Questions with respect to the application of the tax arrangement between Hong Kong and the Mainland of China. The update contains helpful clarifications on how to count the days which are relevant for determining whether there is a tax liability in the Mainland or in Hong Kong. It also contains a discussion on how to deal with tax residence questions for individuals.

Aircraft leasing tax treaty protection

Courtesy of Trilegal, it was reported that in a significant decision, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favour of several Irish aircraft leasing companies by holding that tax treaty benefits cannot be denied by invoking the principal purpose test (PPT) provisions under the multilateral instrument (MLI). Relying on the Supreme Court's decision in the case of Nestlé SA, the ITAT held that the PPT provisions introduced by the MLI cannot be applied without a separate notification incorporating the MLI provisions in the tax treaty between India and Ireland ("Treaty"). This ruling provides clarity on the characterisation and tax treatment of aircraft leases.

The matter concerned seven appeals filed by different Irish aircraft leasing companies for the assessment year (AY) 2022-23. Owing to the similarity of facts and issues, the ITAT heard them together and passed a consolidated order, designating the appeal of TFDAC Ireland II Limited ("Taxpayer") as the lead case.

The Taxpayer was an Irish tax resident holding a valid tax residency certificate (TRC) issued by the Irish revenue authorities. The Taxpayer was a part of the global TFDAC Group, engaged in aircraft leasing. In 2019, the Taxpayer had entered into three dry operating lease agreements with InterGlobe Aviation Limited (IndiGo) for leasing aircraft. The Taxpayer filed its tax return declaring nil taxable income on the basis that under the Treaty, the lease rentals constituted business profits taxable exclusively in Ireland, as the Taxpayer did not have a permanent establishment (PE) in India.

In the draft assessment order, the tax officer rejected the Taxpayer's claims and invoked the PPT provisions under the MLI to deny Treaty benefits on the grounds that the mere incorporation of a company in Ireland did not constitute a genuine operational presence in the absence of adequate infrastructure and employees, and that the decision to establish the entity in Ireland was primarily tax-motivated. Consequently, the tax officer treated the lease rentals as "royalty" taxable under the (Indian) Income Tax Act, 1961 (ITA). The tax officer alternatively held that the Taxpayer had a fixed-place PE in India because it retained "ultimate control" over the aircraft and characterised the lease as a finance lease instead of an operating lease. The tax officer also did not allow the benefit of Article 8 of the Treaty, which allocates Ireland the exclusive right to tax profits derived by an Irish enterprise from the operation or rental of aircraft in international traffic. According to the tax officer, the article did not apply as IndiGo was a domestic airline, and the leasing activity was not connected with international traffic. The dispute resolution panel upheld the conclusions of the tax officer, following which the tax officer passed the final assessment order. The Taxpayer thereafter appealed before the ITAT.

At the outset, the Taxpayer contended that it was established in Ireland for genuine commercial reasons, leveraging Ireland's status as a global aircraft leasing hub and not for tax avoidance. Its operational substance was demonstrated by the possession of a valid TRC, the fact that it was managed from Ireland through a licensed corporate services provider in line with the prevalent industry practice, and the existence of operations in other jurisdictions as well.

With regards to the applicability of the PPT provisions, the Taxpayer asserted that the provisions cannot apply without the MLI provisions being specifically incorporated in the Treaty through a separate notification, in line with the ruling in the case of Nestle SA, where the Supreme Court had held any subsequent treaty-based modification of an existing treaty can be enforced under the Indian law only where a specific notification has been issued incorporating the modification into the existing treaty.

The Taxpayer highlighted that the agreement was clearly an operating lease, where the ownership and control of the aircraft remained with the lessor. The characterisation of the lease as operating in nature was also supported by regulatory norms and, crucially, by the Special Bench ruling of the Delhi ITAT in the case of InterGlobe Aviation Ltd., where similar lease arrangements involving the same lessee (i.e., IndiGo) were held to be operating leases.

The Taxpayer also stated that it did not constitute a PE in India since the aircraft were not at its disposal and operational control over the aircraft vested exclusively with the lessee. The rights retained by the Taxpayer—such as periodic inspection, ensuring compliance with maintenance standards, and repossession in the event of default—were standard lessor protections intended to safeguard the value of the asset, and did not indicate that the aircraft were at the disposal of the Taxpayer for carrying on business in India.

Regarding the applicability of Article 8 of the Treaty, the Taxpayer contended that the leased aircraft formed part of IndiGo's integrated fleet and were deployed interchangeably on domestic and international routes, and that such integration necessarily brought them within the scope of "international traffic" as defined in the Treaty. Further, as a specific provision, Article 8 would override Article 7, which provides for taxation of business profits if a PE is constituted.

The tax authorities reiterated the conclusions in the assessment order, i.e.:

• The MLI provisions apply automatically (since the MLI itself was duly notified) and no separate notification is required.
• The Taxpayer was a shell entity in Ireland controlled from the Cayman Islands that lacked economic substance and was incorporated in Ireland solely to gain Treaty benefits.
• The agreement was a finance lease in substance, given that the risks and a substantial portion of the aircraft's economic life were transferred to the lessee. The tax authorities relied on the Irish depreciation rules, under which an aircraft may be depreciated to nil over a period of six to eight years. They argued that any lease exceeding this period must necessarily be treated as a finance lease.
• The Taxpayer constituted a fixed place PE in India since it retained "ultimate control" through inspection and repossession rights.
• Article 8 of the Treaty applies to active airline operations in international traffic. Since the Taxpayer was only a lessor, with no airline business of its own and aircraft largely deployed on domestic routes, Article 8 would not apply. Instead, the income should be taxed as business profits in India if a PE existed, or otherwise as royalty under the ITA.

The ITAT rejected the findings of the tax authorities in the following manner:

Applicability of the MLI and PPT: The ITAT upheld the Taxpayer's contentions that the application of the PPT provisions requires a specific notification incorporating the MLI's modifications into the Treaty. In holding so, the ITAT relied on the Supreme Court's decision in Nestle SA, where the Court had held that treaty modifications altering existing rights or liabilities cannot be judicially enforced in the absence of a specific notification. On merits as well, the ITAT rejected the tax department's contention that the Taxpayer was a "shell" entity. The ITAT concluded that the decision to incorporate the entity in Ireland could not be regarded as tax-motivated, given that Ireland is universally recognised as the epicentre of the global aircraft leasing industry—hosting 19 of the world's 20 largest lessors and accounting for approximately 60% of global leasing activity. The lease arrangement had a genuine commercial purpose, and the tax relief sought was consistent with the stated objective of the Treaty, which is to exempt aircraft leasing income from source-based taxation.

Operating lease v. finance lease: The ITAT overturned the tax department's re-characterisation of the agreements, holding them to be unequivocally dry operating leases. The ITAT's decision was based on overwhelming evidence, including explicit contractual terms where the Taxpayer retained full ownership and offered no purchase option, and a clear distinction between operational risks (borne by the lessee) and ownership risks (retained by the lessor). This finding was further supported by Indian regulatory frameworks that define a finance lease as entailing an eventual transfer of ownership to the lessee for nominal consideration. The invocation of Irish depreciation rules to conclude that any lease exceeding eight years must be classified as a finance lease was flawed, as depreciation norms merely influence the accounting treatment or book value in a given jurisdiction. They do not determine the economic life of an asset—which, in India, is governed by the Directorate General of Civil Aviation (DGCA)—nor do they effect a transfer of title or alter the legal character of the lease agreement. The characterisation as an operating lease was consistent with binding judicial precedents in the lessee's own case for prior years.

Existence of PE in India: The ITAT rejected the tax department's finding that the Taxpayer had a PE in India. The ITAT held that the mere presence of aircraft in India that were controlled operationally by the lessee cannot constitute a fixed place PE of the Taxpayer in India. In its detailed analysis, the ITAT anchored its decision in the principles established by the Supreme Court in cases such as Formula One World Championship Ltd.,⁴ Hyatt International⁵ and E-Funds,⁶ emphasising that the pivotal "disposal test" requires the foreign enterprise to have control over the location for conducting its business, rather than mere ownership or protective rights.

Applicability of Article 8 of the Treaty: The ITAT disagreed with the tax department's narrow reading of Article 8, saying that treaty terms should be understood by their usual meaning, considering the context and purpose of the treaty. Since India and Ireland had deliberately included the word "rental" alongside "operation" in the Article, the wording had to be taken as it is. Requiring the lessor to be an operator in international traffic amounted to adding conditions that were not provided in the treaty. Similarly, a quantitative predominance of international usage was not required in the Treaty provisions. Accordingly, the ITAT held that even if a PE existed, the rental income would not be taxable in India as it would fall under the purview of Article 8 of the Treaty.

Following the Mumbai ITAT's ruling, the Delhi ITAT also delivered a similar decision in the case of Kosi Aviation Leasing Ltd. This matter involved a batch of 75 appeals by several Irish aircraft lessors on the common issues of (i) characterisation of lease for aircrafts as operating or financial; (ii) applicability of the MLI provisions under the Treaty; (iii) applicability of Article 8 of the Treaty, which allocates Ireland the exclusive right to tax profits derived by an Irish enterprise from the operation or rental of aircraft in international traffic; and (iv) whether aircraft leased by the appellants to an Indian lessee constituted a PE of the appellants in India.

The Delhi ITAT affirmed the findings of the Mumbai ITAT that the MLI lacks legal binding force without a specific, country-wise notification under section 90(1) of the ITA. The Delhi ITAT also upheld the characterisation of the aircraft lease as an operating lease, ruled that the lessor did not have a PE in India, and held that the lease rental income was taxable exclusively in Ireland under Article 8 of the Treaty. While the Delhi ITAT largely followed the precedent set by the Mumbai ITAT ruling, it is notable for strengthening the legal position for taxpayers by addressing and dismissing several additional arguments raised by the tax department. Specifically, the Delhi ITAT provided a detailed rebuttal to the tax department's contention regarding the past practice of issuing omnibus notifications for other agreements (like the SAARC agreement and MAAC), noting these instances either predated the Supreme Court's definitive ruling in Nestle SA or were administratively different and could not override the mandatory notification requirement.

The Delhi ITAT also explicitly rejected the tax authorities' argument that international traffic under Article 8 of the Treaty should be assessed on a voyage-by-voyage basis, calling the argument misplaced and unsustainable. By systematically addressing and dismissing these new counterarguments, the Delhi ITAT not only established a consistent judicial view but also fortified the legal precedent, providing a greater degree of tax certainty for the international aircraft leasing industry.

The Mumbai ITAT's landmark judgment provides a multi-layered victory for taxpayers by establishing a crucial procedural safeguard: international agreements, like the MLI, and their anti-abuse provisions are not automatically enforceable in India without specific domestic notification. On merits, the ITAT dismantled the tax department's arguments, validating the choice of a commercially advantageous jurisdiction like Ireland as a legitimate business decision, not a tax avoidance scheme. The ruling also affirmed that standard practices like outsourcing of management functions do not negate substance and that merely leasing an asset into India does not create a PE for a foreign lessor as long as operational control remains with the lessee. The consistency of this view, subsequently reinforced by the Delhi ITAT ruling, establishes a strong and uniform precedent across two of the major benches of the ITAT.

Looking ahead, these decisions create a clear path forward for taxpayers as well as the tax authorities. Taxpayers can rely on these rulings to challenge the premature application of MLI provisions, but must also ensure their corporate structures are backed by genuine commercial substance and robust documentation. The onus now shifts to the government—it will be interesting to see if it formally notifies the integration of MLI provisions into specific tax treaties to enforce them. Based on these rulings, taxpayers may evaluate the applicability of the decisions to their specific fact situations to determine if a view can be taken that, until such notifications are issued, the existing, unmodified terms of the tax treaties will continue to apply. This is particularly relevant since the Nestle SA case has attained finality, with the Supreme Court having dismissed the curative petition filed by Nestle SA.

Virtual PE cannot be a PE under the tax treaty with Singapore

The Delhi High Court (HC) has ruled, in the case of CIT vs Clifford Chance PTE LTD (ITA 353/2025 and ITA 354/2025), that the taxpayer did not have a service permanent establishment (PE) in India as it did not meet the physical presence criteria under article 5 of the India-Singapore Income Tax Treaty (the Treaty). Further, the HC held that the concept of virtual PE cannot be read into the said article in the absence of any amendment to the Treaty.

The taxpayer, a non-resident company engaged in the business of providing legal advisory services, filed zero tax returns in India during two assessment years (YAs), 2020/21 and 2021/22. The tax authorities argued that the taxpayer had a service PE owing to the physical presence of its employees in India, as well as a virtual service PE, for services rendered virtually, in terms of article 5(6) of the Treaty. The Income Tax Appellate Tribunal (ITAT) rejected the tax authorities' arguments and held that the taxpayer did not constitute a PE in India. The tax authorities appealed against the decision of the ITAT.

The HC examined whether the taxpayer had a service PE or a virtual service PE in India so as to be taxed for providing legal advisory services to its clients in India.

Article 5(6) of the Treaty states that an enterprise will be deemed to have a PE in the contracting state through its employees or other personnel only if the activities within the contracting state continue for a period aggregating to 90 days in any fiscal year.

The HC ruled in favour of the taxpayer with the observations set out below.

Calculating Days for Constituting Service PE

As per article 5(6)(a) of the Treaty, the actual performance of services in India by employees physically present in the country is necessary. Since the taxpayer rendered services to its clients for 44 days only, excluding vacation days, business development days and common days spent by its employees in India, it did not meet the 90-day criteria to constitute a service PE in India during AY 2020/21.

Further, for AY 2021/22, the profits were not taxable in India in the absence of a PE, as no employees were present in India.

On Having Virtual Service PE

The tax authorities argued that the taxpayer had a "virtual service PE" in India for services rendered virtually, even without the physical presence of any employees in India. The HC rejected this argument, stressing that article 5(6)(a) mandates that services be furnished "within a Contracting State through employees or other personnel," requiring a physical footprint. The Treaty must be strictly interpreted, and concepts such as virtual PE cannot be judicially read in, regardless of OECD reports or global trends.

International tax developments

Qatar. On 10 September 2025, the India-Qatar Income Tax Treaty entered into force. The treaty generally applies from 1 January 2026 for Qatar and from 1 April 2026 for India for withholding and other taxes. From these dates, the new treaty replaces the India-Qatar Income Tax Treaty (1999).

Clarification on whether one is a tax resident or a non-resident of Indonesia

The tax authority issued Implementation guidelines for determining domestic and foreign tax subjects on 9 December 2025 by issuing DGT Regulation No. PER-231 regarding the Determination of Domestic and Foreign Tax Subjects. PER-23 revokes PER-022 regarding Income Tax Treatment for Indonesian Workers Abroad and PER-433 on similar matters. In general, PER-23 largely adopted the provisions set out in PER-43, as well as the relevant provisions stipulated under Minister of Finance (MoF) Regulation No. PMK-184 and the Income Tax Law (Undang-Undang Pajak Penghasilan/UU PPh), adding some new provisions that primarily serve as confirmation and elaboration, along with examples provided in the appendix.

Noteworthy points to note under PER-23 are:

• The calculation of the 183-day period for being considered a domestic tax subject (Subjek Pajak Dalam Negeri/SPDN) for an individual is being present in Indonesia for more than 183 days within a 12-month period. PER-23 elaborates that "being present" means being physically present in Indonesia, which includes short visits without permanent stay (such as transiting through an Indonesian airport), but does not include virtual presence (such as attending an online meeting to oversee work in Indonesia). Part of a day is considered one day for the purpose of calculating the 183-day period.
• The place of effective management of a company is determined by reference to where its effective place of management is located, which is where the strategic policies or decisions regarding investments or operational activities are carried out. The strategic policies or decisions include decisions on share or asset transfers in lieu of shares or capital participation, decisions on transfer or utilisation of strategic assets, appointment or dismissal of directors, employees, or agents with authority to carry out operational activities or supervision and control over dividend distribution If 50% or most of the board of directors meetings are held in Indonesia, this is also a strong indication that the policies and strategic decisions are made in Indonesia.
• With respect to the definition of immediate family to determine the centre of vital interests of an individual under the tie-breaker rules, PER-23 defines "immediate family" as family members related by blood or marriage, either in a direct line or within one degree of collateral relationship.
• Finally, if one qualifies as a non-resident taxpayer of Indonesia and in order to avoid that he/she will be treated as a resident taxpayer, that person is required to apply for foreign tax subject status (Subjek Pajak Luar Negeri/SPLN) by providing a Certificate of Domicile (Surat Keterangan Domisili/SKD) issued by the foreign tax authority. The SPLN status request must be made within six months after the expiry date of the SKD. If the foreign certificate of domicile does not specify an expiry date, the issuance or signing date shown on the certificate will be deemed as the expiry date period for determining the deadline to submit the SPLN status request.

Multilateral information exchange agreement

On 4 December 2025, Indonesia announced its intention to join the OECD's new tax transparency initiative—the Multilateral Competent Authority Agreement on the Automatic Exchange of Readily Available Information on Immovable Property (IPI MCAA)—by 2029 or 2030.

Following the release of a joint statement by 25 jurisdictions (for previous reporting, see 25 Jurisdictions Commit to Joining IPI MCAA by 2029 or 2030), Indonesia also announced it would adhere to the joint statement, demonstrating a continued commitment to international tax transparency.

Guidance on Global Minimum Tax rules

The National Tax Agency (NTA) has released the updated version of the interpretative guidance on the Japanese global minimum tax laws and regulations. The NTA revised its notice on 26 September 2025 to update or add interpretive positions related to the Japanese global minimum tax, following the March amendments to laws and regulations that incorporated additional administrative guidance released by the OECD.

The update primarily focuses on items addressed in the administrative guidance issued by the OECD in June 2024. For example, it includes updated provisions regarding arm's length price adjustments for transactions between constituent entities and joint ventures located in different jurisdictions, the methodology for calculating the income of a main entity with a loss-making permanent establishment, the computation of push-down of deferred taxes, and detailed rules for applying the five-year deferred tax recapture rule.

As Japan's tax authority, the NTA has publicly notified its interpretive positions on various Japanese tax laws. While the NTA's notice is not legally binding, taxpayers may rely on it, as the NTA will not adopt a different interpretive position until further notice.

Tax authority changes and tax audits

Courtesy of Lee & Ko, it was reported that Korea plans major investments and reforms to deploy AI throughout its tax administration system, improving audit efficiency while simultaneously bolstering delinquency controls and elevating the intensity of compliance enforcement.

On November 3, 2025 the newly appointed National Tax Service (NTS) Commissioner, Mr. Kwang-Hyun Lim, held his first nationwide meeting with regional tax office heads and announced the new Operational Plan for National Tax Administration (the "New Plan"). At the heart of the New Plan lies two pillars:

1. A fundamental overhaul of tax audit procedures aimed at substantially reducing on-site investigations, and
2. The AI-driven Transformation of Tax Administration intended to modernize and streamline taxpayer services.

Taken together, we believe these initiatives mark a decisive shift in Korea's tax administration paradigm: from procedure-heavy, manual practices toward a data-centric and AI-enabled administrative model.

In a rare and politically significant move, President Jae Myung Lee's Administration has appointed sitting National Assembly member Kwang-Hyun Lim as the new Commissioner of the NTS. Commissioner Lim previously served as Commissioner of the Seoul Regional Tax Office and Deputy Commissioner of the NTS, giving him the unusual combination of deep administrative experience and direct legislative exposure through his work on the National Assembly's Strategy and Finance Committee. The appointment of a lawmaker to head the NTS is unprecedented and signals the administration's intent to drive strong policy momentum under the new Commissioner.

Within a month of taking office, Commissioner Lim replaced approximately 70% of managerial posts within the Investigation Bureau, one of the NTS's core departments. This sweeping reorganization effectively brought an end to the leadership vacuum that had persisted during the pre-appointment transition following the snap presidential election in June 2025, and firmly reestablished the Commissioner's authority over the NTS's core investigative functions.

Korea has long been recognized in Asia for its manual labour-intensive and time-consuming tax audit practices. A persistent challenge has been the tug-of-war between the NTS, which seeks to obtain as much information as possible, and taxpayers, who often push back against requests for documents that they believe fall outside the audit's legitimate scope or are irrelevant. The new Commissioner's initiative is aimed squarely at addressing these entrenched inefficiencies and modernizing the country's audit framework.

The NTS announced that the centrepiece of its reform agenda is a full-scale AI transformation. The government intends to streamline and modernize audit procedures by deploying AI tools designed to improve both efficiency and accuracy. Specifically, AI will be utilized to provide tax expert-level guidance to taxpayers and to shift tax-evasion detection and delinquency management from a manual-driven process to an AI-driven system. The plan aims to enhance the existing AI-based Integrated Audit Analysis System (analytics), enabling the NTS to identify high-risk and high-recovery audit targets with significantly greater precision. According to the NTS's published roadmap, the agency will initiate its Information Strategy Plan (ISP) in 2025, secure GPUs and adopt generative-AI models, and fully deploy its AI-driven administrative services by 2028.

Complementing its AI transformation agenda, the NTS has announced a significant reduction in on-site audits, which have long been criticized for placing excessive burdens on taxpayers. Under the new policy:

• Regular tax audits will primarily be conducted at NTS offices, rather than at taxpayers' business premises, and
• On-site visits will be permitted only in limited cases, such as when (i) taxpayers themselves prefer an on-site approach for confidentiality or convenience, or (ii) when audit progress is hindered by non-submission or delayed submission of documents.

Commissioner Lim has underscored that the NTS intends to curtail the burdensome and expensive practice of prolonged onsite investigations that disrupt normal business activities, signalling a decisive shift toward a more streamlined and taxpayer-oriented audit framework.

The new Commissioner's policy signals a clear commitment to modernising Korea's traditionally burdensome audit practices. However, the degree to which these reforms will take hold remains to be seen, as meaningful change in a large administrative bureaucracy often proves difficult to implement in practice in Korea. The shift toward AI-based audits should not be interpreted as signalling a more lenient environment for foreign-invested or foreign-owned companies. To the contrary, delays or failure to provide data necessary for AI-driven analysis may expose taxpayers to the newly introduced Enforcement Penalty, underscoring that the shift is toward greater procedural rigour rather than reduced scrutiny. Previously, refusal to submit data was subject to a one-time fine of up to KRW 50 million. Under the new framework, penalties may now (i) be imposed on a recurring basis until the required information is submitted and (ii) be scaled according to the taxpayer's revenue size. These changes present heightened compliance risk during the course of tax audit, particularly for multinational companies with complex overseas documentation, underscoring the importance of strategic coordination and effective representation by professional advisors.

AI-driven audits are expected to leverage prior audit cases to pre-identify potential risk areas for each taxpayer. While this approach enables the NTS to conduct audits that are more targeted and analytically precise, it also increases the likelihood that issues previously overlooked due to time or resource constraints will now come under scrutiny. Taxpayers should therefore anticipate a broader and more penetrating scope of review and prepare for significantly expanded documentation obligations. As AI reduces subjective discretion among individual auditors, case outcomes are expected to rely more heavily on legal regulations and administrative authorities, including advance rulings, precedents and court cases. Over time, Korea's audit practice may shift toward greater data-driven objectivity and heightened legal consistency, reducing the scope for negotiated or discretionary settlements.

2025 tax amendments

The National Assembly has approved the 2025 tax amendment bills at the plenary session on 2 December 2025 and have subsequently been published in the Official Gazette on 23 December 2025.

One of the notable modifications from the proposed amendments was made to the separate taxation regime for dividend income subject to the newly established brackets. The original proposals introduced a tiered rate structure with a top rate of 35% on dividend income exceeding KRW 300 million. This proposal has been amended as follows:

• Dividend income up to KRW 20 million will be subject to tax at 14%;
• Dividend income of above KRW 20 million but not exceeding KRW 300 million will be subject to tax at 20%;
• Dividend income of above KRW 300 million but not exceeding KRW 5 billion will be subject to tax at 25%; and
• Dividend income exceeding KRW 5 billion will be subject to tax at the rate of 30%.

Single Family Office Tax Incentives

On 3 October 2025, the Ministry of Finance published various exemption orders in relation to corporate income tax, real property gains tax (RPGT) and stamp duty tax incentives under the Single Family Office scheme in Pulau 1 of the Forest City Special Financial Zone (FCSFZ). The tax incentives are on offer till 31 December 2034 if the pertinent conditions are satisfied. Forest City SEZ is located in the state Johor, which is Malaysia's southernmost state, situated across the border with Singapore.

Tax treatment of Asset-Backed Securitization transactions

The Inland Revenue Board (IRB) recently issued a Public Ruling (PR) to clarify the tax treatment relating to transactions of Asset-Backed Securitization (ABS). PR 3/2025 was published on 4 November 2025.

• The PR aims to explain the tax treatment under the Income Tax (Asset-Backed Securitization) Regulations 2014 [PU(A) 170/2014] specifically for special purpose vehicles (SPVs) established solely for the issuance of bonds or asset-backed sukuk, and related Originators. PU(A) 170/2014 applies to Originators and SPVs involved in ABS transactions authorized by the Securities Commission (SC) from 1 January 2013 onwards.
• The Originator refers to the entity that initiates and/or owns the assets to be securitized.

Tax Treatment for Originators

• Revenue or gains from the disposal of trade receivables or stock-in-trade related to a securitization transaction are deemed to have accrued during the period of the securitization transaction and will be treated as the Originator's gross income from that source in the basis period for the relevant year of assessment (YA).
• If the trade receivables or stock-in-trade of the Originator related to a business source have been recognized in the Originator's accounts, any losses from the disposal of such trade receivables or stock-in-trade under a securitization transaction will be allowed as a deduction in determining the Originator's adjusted income from that source in the basis period for the relevant YA.
• In determining the statutory income of the Originator from the disposal of fixed assets under a securitization transaction, any balancing charges or allowances under Schedule 3 of the Income Tax Act 1967 (the Act) arising from that disposal will be deemed to have been made to the Originator within the basis period for the YA relating to the securitization transaction.

Tax Treatment for SPVs

• Any income of the SPV from all sources will be treated as gross income from a single business source within the basis period for a YA.
• Any expenses incurred by the SPV for the acquisition of trade receivables or stock-in-trade under a securitization transaction that qualifies for a deduction under the Act will be deemed incurred throughout the period of the securitization transaction and allowed as a deduction in determining the SPV's adjusted income within the basis period for the relevant YA.
• Several tax exemptions are available under Schedule 6 of the Act to exempt interest income paid or credited to ABS investors, subject to conditions.

Substance requirements for Labuan entities carrying on a Labuan business activity

On 5 November 2025, the Inland Revenue Board (IRB) issued guidelines to provide clarification on the criteria for a "fit and proper" full-time employee of a Labuan entity for the purpose of complying with the substance requirements under the Labuan Business Activity Tax Act 1990 (LBATA) and all subsidiary legislation pertaining to Labuan taxation that impose and elaborate on such substance requirements for such employees. Based on these guidelines, outsourcing individuals to Labuan entities will no longer satisfy the economic substance requirements.

A Labuan entity carrying on a Labuan business activity must employ an adequate number of fit and proper full-time employees and incur a sufficient amount of annual operating expenditure in Labuan.

• The criteria for a full-time employee to meet the substance requirements are as follows:
  • The employee meets the fit and proper criteria;
  • The employee is employed on a permanent or contractual basis by the Labuan entity; and
  • The employee performs his or her work physically for the Labuan entity in Labuan.
• The following conditions must be fulfilled to meet the fit and proper criteria:
  • The work performed by the full-time employee must be relevant to the Labuan business activity carried out by the Labuan entity and should consist of office-related duties rather than general duties;
  • The full-time employee must possess sufficient and appropriate competence and capability in performing his or her duties; and
  • The full-time employee must not have any conflict of interest in performing duties for the Labuan entities.
• A fit and proper full-time employee serving a Labuan entity must have a contract of service with that Labuan entity. Any method of employment through outsourcing, whether for permanent or contractual staff, is not included under the criteria of fit and proper full-time employees for the purpose of meeting the substance requirements.
• As employees must perform their work physically in Labuan, the required physical presence may be substantiated by records such as timesheets, time attendance systems, or other suitable documentation.
• Labuan entities within the same group of companies may operate in Labuan using the shared office premises. However, these Labuan entities must clearly segregate fit and proper full-time employees according to each respective Labuan business activity of each Labuan entity.
• Labuan entities that do not meet the substance requirements in respect of the number and criteria of fit and proper full-time employees will be deemed non-compliant with the substance requirements and will not be entitled to enjoy the 3% tax rate for the Labuan trading activity or the non-chargeability to tax for the Labuan non-trading activity. Consequently, the Labuan entities will be subject to tax at 24% under the Income Tax Act 1967.

Forest City Special Financial Zone tax incentives

Courtesy of Halim, Hong & Quek, it was reported that the Forest City Special Financial Zone (FCSFZ) has reached a major milestone with the official publication of its comprehensive tax incentive package. A total of 11 subsidiary legislations were published in the Federal Government Gazette on 3 October 2025, setting out specific income tax, stamp duty and real property gain tax (RPGT) exemption and remission that applicable to Pulau 1, Forest City.

These published instruments form the legal foundation of the FCSFZ's fiscal framework offering targeted incentives to single family office, financial institutions, digital economy entities and individual property purchasers.

Stamp Duty (Exemption) Order Related to Single Family Fund Company

A Single Family Fund Company refers to a company incorporated under the Companies Act 2016 and resident in Malaysia, which is wholly owned, directly or indirectly, by a member of a single family, which operates in Pulau 1 of FCSFZ and is established solely for the purpose of holding the asset and investment activity for the interest of members of a single family.

This Order grants a full stamp duty exemption in respect of all instruments of transfer of any qualifying asset for the establishment of the Single Family Fund Company or also known as Single Family Office Vehicles (SFOV) within Pulau 1 of FCSFZ.

This exemption applies only to instruments executed between a Single Family Fund Company and the following parties:

1. Any family member within the same family lineage, including spouse, biological child, stepchild, and adopted child in accordance with any written law, or
2. Any company or trust body wholly owned, directly or indirectly, by member of the same family.

To qualify, the instrument of transfer must be executed between from 1st September 2024 till 31st December 2034, and within one year from the date of the certification letter issued by the Security Commission Malaysia (SC). The SC's certification letter must be attached to the instrument of transfer when it is presented for stamping.

It is important to note that this is a one-time stamp duty exemption, applicable only at the point of SFOV establishment and the exemption covers asset transfer specifically listed in the application submitted to the SC only.

Stamp Duty (Exemption) Order Related to Individual

Two Orders have been issued which collectively grant a 50% remission on stamp duty chargeable on the instrument of transfer and the instrument of loan or financing agreements executed by individual(s) with the Developer or approved lenders in respect of purchase of completed residential or commercial units located within Pulau 1 of FCSFZ. Both Orders apply only where all the following conditions are satisfied:

1. The Sale and Purchase (SPA) for the units is executed between a developer and individual purchaser(s).
2. The SPA is executed from 1 September 2024 till 31 December 2034.
3. The property concerned is a completed unit whose construction was completed before 1st September 2024.
4. The remission cannot apply to the same unit if an earlier SPA for that unit had been executed before 1 September 2024 and later cancelled by the same buyer.
5. The Iskandar Regional Development Authority verification is mandatory to confirm the above compliance before the remission can be applied at the stamping stage.

Stamp Duty (Remission) Order Related to Qualifying Person

Another two Orders have been issued which extend similar 50% stamp duty remission to a qualifying person purchasing completed residential or commercial units within Pulau 1 of FCSFZ.

A qualifying person includes the following categories broadly covering regulated financial, capital market and digital economy entities:

• Licensed person under section 10 of the Financial Services Act 2013 or Islamic Financial Services Act 2013;
• Companies holding a Capital Market Services Licence under the Capital Markets and Services Act;
• Recognized market operator registered under section 34 of the Capital Markets and Services Act 2007 other than an individual;
• Registered person registered under section 76 of the Capital Markets and Services Act 2007 other than an individual;
• Person providing capital market services registered under section 76A of the Capital Markets and Services Act 2007 other than an individual;
• Single family fund company verified by the Securities Commission Malaysia;
• Financial technology company, insurance technology company, regulatory financial technology company or Islamic financial technology company with MSC Malaysia Status or Malaysia Digital Status, verified by Malaysia Digital Economy Corporation Sdn. Bhd.;
• Payment system operator established or incorporated in a foreign jurisdiction approved under section 11 of the Financial Services Act 2013 or section 11 of the Islamic Financial Services Act 2013 to operate a payment system in Pulau 1 of Forest City Special Financial Zone; or
• Centralized services entity providing financial global business services with MSC Malaysia Status or Malaysia Digital Status, verified by Malaysia Digital Economy Corporation Sdn. Bhd.

Both Orders apply only when the following conditions are satisfied:

• The Sale and Purchase (SPA) for the units is executed between a developer and a qualifying person;
• The SPA is executed from 1 September 2024 till 31 December 2034;
• The property concerned is a completed unit whose construction was completed before 1st September 2024;
• The remission cannot apply to the same unit if an earlier SPA for that unit had been executed before 1 September 2024 and later cancelled by the same qualifying person; and
• The Iskandar Regional Development Authority verification is mandatory to confirm the above compliance before the remission can be applied at the stamping stage.

Collectively, these Orders mirror the individual(s) purchaser incentives but are tailored for regulated and institutional purchaser such as licensed financial institutions, capital market entities and family office structures.

Real Property Gain Tax (RPGT) Exemption That Relevant to Non-Citizen & Non-Permanent Resident

The Minister of Finance has exempted any individual who is not a Malaysia citizen or permanent resident from the application of Schedule 5 of the RPGT Act 1976 in respect of the disposal of real property located within Pulau 1 of FCSFZ, when such disposal take place:

• In the fourth year after acquisition;
• In the fifth year after acquisition; or
• In the sixth year or any subsequent year after acquisition.

Accordingly, RPGT exemption will be imposed on the chargeable gain arising from disposals made in or after the fourth year of ownership, subject to the conditions set out in the Order.

To qualify for the exemption, the transaction requirements for eligibility:

• The SPA for disposal must be executed between 1 September 2024 to 31 July 2034 and duly stamped before 1 September 2034.
• For conditional contracts that require Federal Government or State Government approval, must be executed between 1 September 2024 to 31 July 2034 ,and the approval must be obtained on or after 1st September 2024.

Service Tax

The Royal Malaysian Customs Department has recently updated its service tax policies, introducing further exemptions, following the expansion of scope to the Sales and Service Tax (SST). The amendments to the policies generally take effect from 1 July 2025, unless otherwise stated.

Financial Services

• Effective 17 October 2025, management services for fixed price funds under Amanah Saham Nasional Berhad, including Amanah Saham Bumiputera and Amanah Saham Malaysia, qualify for service tax exemption.
• Effective 17 October 2025, insurance and takaful companies that acquire reinsurance or retakaful services are eligible for service tax exemption, subject to conditions.

Rental or Leasing Services

• Companies within the same group that provide or receive rental or leasing services, whether in or outside Malaysia, qualify for group relief, subject to conditions.
• Business-to-business (B2B) exemption for the provision of taxable services for the period 1 July 2025 to 31 August 2025 is granted to rental or leasing service providers who newly reach the registration threshold in July 2025 and have applied for service tax registration on or before 31 August 2025, subject to conditions.

Construction Works Services

• Construction of residential buildings and related public facilities within a mixed development project qualifies for service tax exemption.
• Consultancy services provided under a design-and-build construction contract are eligible for the B2B exemption, subject to conditions.

Education Services

• Children and dependents of foreign diplomats are exempted from paying service tax on educational services, subject to conditions.
• Exemption from service tax is granted on education fees or service charges that are fully sponsored by educational institutions, higher learning institutions, companies, foundations or other organizations.

Private Healthcare Services

• Service tax exemption is applicable on consultation fees charged by professional doctors at registered private healthcare facilities, practitioners of traditional and complementary private medical practices and private allied health services, subject to conditions.
• B2B exemption will not be granted to private hospitals that obtain healthcare services from third parties (other private healthcare facilities or other private allied health facilities).
• Healthcare treatment invoices that include medical aids, whether in the same invoice or in separate invoices, are subject to service tax.

New tax on LLP distributions and expansion of capital gains tax

The Finance Bill 2025 and Measures for the Collection, Administration and Enforcement of Tax Bill 2025 was tabled by the Deputy Minister of Finance for the first reading in Parliament on 18 November 2025.

The Bills include amendments to, among other acts, the Income Tax Act 1967 (ITA), Real Property Gains Tax Act 1976 (RPGT Act), Stamp Act 1949, Labuan Business Activity Tax Act 1990 (LBATA), and the Petroleum (Income Tax) Act 1967.

Corporate income tax

• The scope of the tax exemption on dividends from investments and gains from the disposal of capital assets abroad received by resident companies and limited liability partnerships (LLPs) will be expanded to cooperative societies and trust bodies. In addition, the tax exemption incentive will be extended for four years from 1 January 2027 to 31 December 2030 (currently, until 31 December 2026).
• Companies will be allowed to claim Accelerated Capital Allowance (ACA) with an initial allowance of 20% and an annual allowance of 40% for qualifying capital expenditures (QCEs) in plant, machinery and ICT equipment incurred between 11 October 2025 and 31 December 2026.
• ACA with an initial allowance of 20% and an annual allowance of 80% will be given on expenditure for the purchase of speed limitation devices for heavy vehicles, up to MYR 4,000 per unit, subject to conditions, for device installations carried out from 1 January 2026 to 31 December 2026.
• A tax deduction of up to MYR 1.5 million on listing expenses for technology-based companies and micro, small and medium-sized enterprises (MSMEs) will be expanded to include MSMEs in the energy and utilities sectors and extended to the years of assessment (YA) 2026 to 2030.
• The income tax exemption under the Sustainable and Responsible Investment Sukuk and Bond Grant Scheme will be enhanced by increasing the exemption for external review expenses to 100% (up to MYR 300,000), expand eligibility to instruments aligned with the ASEAN Taxonomy for Sustainable Finance, and extend the income tax exemption for three years, covering applications received by the Securities Commission from 1 January 2026 to 31 December 2028.
• The tax deduction given to employers hiring ex-convicts will be extended to employers hiring prisoners released on licence under the Prisons Act 1995, as well as drug or substance dependants and misusers undergoing treatment and rehabilitation, subject to conditions, with effect from YA 2026 to 2030.
• The tax deduction for employers hiring senior citizens will be extended for another five years, from YA 2026 to 2030.
• Companies implementing food security projects are eligible for 100% tax exemption on statutory income for up to 10 YAs, for applications received from 1 January 2026 to 31 December 2030.
• The tax deduction for companies investing in subsidiary companies that commercialize non-resource-based research and development findings by public research institutions, public institutes of higher learning, and private higher education institutions will be extended for five years, for applications received by the Malaysian Investment Development Authority from 1 January 2026 to 31 December 2030.
• The tax incentives proposed for the tourism and cultural sectors are as follows:
  • Tourism project operators carrying out renovation and refurbishment of business premises will be granted tax deductions on qualifying expenses of up to MYR 500,000;
  • Tour operators will be given a 100% income tax exemption on the increase in income derived from inbound tour packages to Malaysia;
  • Companies, associations or organizations will qualify for a 100% income tax exemption on statutory income for organizing international-level conferences, trade exhibitions or incentive events; and
  • Companies that organize international arts, cultural, tourism and sports or recreational events involving foreign participants are eligible for 50% income tax exemption on statutory income.
• Existing venture capital tax incentives will be enhanced for 10 years through the granting of a special tax rate and tax exemption on dividend income.
• Micro, small and medium-sized enterprises (MSMEs) are eligible for an additional 50% tax deduction on qualifying training expenses incurred for artificial intelligence (AI) and cybersecurity.
• Companies that utilize green technology products within locally made supply chains recognized by the MyHIJAU Mark for own use are eligible for the 100% Green Asset Investment Tax Allowance.
• Companies undertaking new food production projects are eligible for a 100% income tax exemption on statutory income for 10 years. Existing companies expanding their projects are eligible for a 100% income tax exemption for five years. The application period for the tax incentives will be extended until 31 December 2030.
• Automation tax incentives in the agricultural sector will be expanded to cover selected animal farming under closed-system housing.
• Double tax deduction for companies sponsoring training for persons with disabilities will be extended to cover sponsorship of qualifying care worker training programmes.
• The private sector will be granted a double tax deduction on scholarship expenses for eligible students, covering undergraduate scholarships and professional qualifications in selected fields.
• Contributions made by donors to teaching hospitals of public universities that established endowment funds will qualify for income tax deductions. All contributions and the income generated from the fund will be fully exempt from tax.
• The expenses for renovation and conversion of commercial buildings into residential units will be granted a special tax deduction of 10% on qualifying expenditure, capped at MYR 10 million.
• The pilot phase of the Outcome-Based Incentive Framework aligned with the New Industrial Master Plan (NIMP) will continue until the end of 2025. It is anticipated that the full implementation of the tax incentives will be rolled out for the manufacturing sector in the first quarter of 2026 and the services sector in the second quarter.
• The e-Invoicing initiative will be fully implemented, effective from the year 2026.
• The process of refund for overpaid taxes will be expedited.
• Cash contributions made to the approved anti-corruption programme will be regarded as approved cash contributions, with tax deductions to be allowed. Cash contributions made by individuals and corporate entities to the Trust Account of the Department of Museums Malaysia will also be eligible for tax deductions equivalent to the amount of the contribution.

ITA

• From the year of assessment (YA) 2026, a 2% tax will be imposed on profits received by individual partners of a limited liability partnership (LLP) when profits derived from Malaysia that are paid, credited or distributed, whether in cash or in kind from LLPs, are in excess of MYR 100,000.
• Effective YA 2028, the instalment payment of the estimated tax payable for a YA must be paid from the first month in the basis period for the YA.
• The definition of "disposal" under section 65C of the ITA for capital gains tax purposes is expanded to include an extinguishment of any rights to a capital asset due to the dissolution or winding up of a company, conversion of shares, redemption of shares or where ownership of a capital asset ends.
• For capital gains tax purposes, the date of completion for the disposal of a capital asset is the date the ownership of the capital asset by the disposer ends, the rights are extinguished due to the dissolution or winding up of a company, or the whole amount or value of the consideration for the disposal is received, whichever is earlier. In this regard, the transfer of a capital asset, the ending of ownership by the disposer or the extinguishment of rights due to dissolution or winding up is deemed to take place on the date when all requirements under any written law are complied with.
• In relation to a capital asset held by a nominee of a company, LLP, trust body or co-operative society, income tax will apply as if the capital asset were held by the company, LLP, trust body or co-operative society, and any act of the nominee will be deemed the act of the company, LLP, trust body or co-operative society.

RPGT Act

• Any allowable losses relating to a disposal in a YA are allowed as a deduction for a period of 10 consecutive YAs only.
• A taxpayer may be allowed to make payment of tax by instalments for tax deemed assessed.
• The acquirer will be given the option to determine the amount to be retained and remitted to the IRB for RPGT purposes, which is the lesser of:
  • The whole amount of consideration;
  • A sum not exceeding 3% of the total value of the consideration; or
  • The amount of tax on the chargeable gains deemed assessed under the RPGT Act. 

Stamp duty

The rate of stamp duty on an instrument of transfer for the sale of residential property to a foreign company or a person who is not a citizen or permanent resident of Malaysia will be increased to 8% of the purchase consideration or the market value of the property, whichever is the higher.

Presently, an agreement for services or personal employment where the wages do not exceed RM300 per month is exempted from stamp duty of RM10 under Exemption (b) to item 4 of the First Schedule. Exemption (b) will be amended to increase the exemption threshold from RM300 to RM3,000. This means that an agreement for services or personal employment where the wages do not exceed RM3,000 per month will be exempted from stamp duty.

Section 21(1) of the Stamp Act provides that an agreement for the sale of equitable interest or interest in certain property (e.g., goodwill and book debts) shall be charged with the same ad valorem duty as if it were an actual conveyance on sale.

Section 21(7) of the Stamp Act provides for a refund by the Collector of Stamp Duties ("Collector") of the ad valorem duty paid on such agreement if the agreement is thereafter rescinded or annulled, or for any other reason be not substantially performed or carried into effect, so as to operate as or be followed by a conveyance or transfer.

The Bill will amend section 27(2) by imposing a requirement that the refund subject to "an application made within twenty-four months after the date of instrument by the person whom it was first or alone executed."

Presently, item 7 of the Third Schedule provides that the stamp duty payable on any instrument whereby an exchange of property is effected is to be borne by the parties in equal share. The Bill will amend this item so that the stamp duty for such an instrument is to borne by "the grantee or transferee."

All the above amendments are to come into operation on 1 January 2026.

LBATA

The Director General is empowered to authorize any officer or other official to exercise the powers under the LBATA.

Public Ruling on construction contracts

Courtesy of IBFD, it was reported that the Inland Revenue Board (IRB) has recently updated the Public Ruling (PR) that explains the basis for determining the gross income for the purpose of ascertaining adjusted income derived from the business of construction contracts. PR 5/2025 replaces PR 2/2009.

• The estimated loss or aggregate estimated losses from one or more contracts for a basis period will not be allowed to be set off against the actual gross profit of other contracts for the purpose of ascertaining the chargeable income of the construction contractor for that basis period.
• The original estimates of a construction contractor must be revised when the estimated gross profit increases.
• With effect from year of assessment 2023, when a construction contract is deemed completed but the final accounts can only be finalized after the date of completion of the construction contract, the construction contractor may ascertain and recognize the actual gross profit or loss in a basis period that falls on the earliest of the following:
  • 12 months after the date of completion of the construction contract; or
  • The date when the final accounts of the construction contract are agreed upon between the contractor and the employer.
• When there is an adjusted loss of a construction contract business for a basis period, the adjusted loss will be deducted from the aggregate income from all sources of income in that basis period. If there is no or insufficient aggregate income from all sources of income to absorb the adjusted loss, the loss will be carried forward and deducted from the total statutory income from all sources of business income in the following basis period until it is fully absorbed.
• Information required for audit has been expanded to include the appropriate list of all the contracts carried out, including letter of award, progress billing certificate, final account, certificate of practical completion, bills and receipts of purchases, expenses and payments including wages and salaries of contract workers.

International tax developments

UAE. On 1 October 2025, the comprehensive economic partnership agreement (CEPA) between Malaysia and the United Arab Emirates, signed on 14 January 2025, entered into force. When fully implemented, the CEPA will lift and reduce tariffs, liberalizing trade. The agreement is expected to encourage private sector cooperation, promote investment and increase trade between the two countries.

Russia. On 3 September 2025, the new double tax treaty between entered into force. The treaty generally applies from 1 January 2026 for withholding and other taxes. The provisions of article 27 (Exchange of Information) shall have effect from 3 September 2025, without regard to the taxable period to which the matter relates.

Tax authorities temporarily suspend tax audits

Courtesy of IBFD, it was reported that the Bureau of Internal Revenue (BIR) has ordered the temporary suspension of all audit and field operations.

The order applies to all operating offices of the BIR that conduct field audits and related operations, including the Large Taxpayers Service (LTS), Revenue Regions, Revenue District Offices, VAT Audit Unit (LTS) and VAT Audit Sections.

During the suspension period, the issuance of written orders to audit or investigate taxpayers' liabilities is suspended, except in urgent or legally mandated cases such as the following:

• Investigation of cases prescribing within six months from the date of the order (i.e., 24 November 2025);
• Processing and verification of estate tax returns, donor's tax returns, capital gains tax returns and withholding tax returns on the sale of real properties or shares of stocks, together with the related documentary stamp tax returns;
• Examination or verification of internal revenue tax liabilities of taxpayers retiring from business;
• Issuance of Letter of Authority (LOA)/mission order (MO) necessary for active criminal probes conducted by duly authorized enforcement units through verified intelligence reports, inter-agency referrals, third-party data validation or risk-scoring anomalies that require immediate audit action where delay would prejudice the government's case;
• Claims for refund where the issuance of an LOA is statutorily required; and
• Other matters and concerns where deadlines have been imposed or under the orders of the Commissioner of the BIR.

The issuance of assessment notices, warrants and seizure notices will continue for the exceptions outlined above.

The suspension is attributed to numerous complaints regarding irregularities and inconsistencies received from taxpayers, stakeholders and internal units and to protect the integrity of the BIR's audit operations. It was announced jointly by the Finance Secretary and BIR Commissioner.

New transfer pricing guidelines

On 19 November 2025, the IRAS issued the 8^th edition of its Transfer Pricing Guidelines. This edition contains a number of changes, including with respect to the IRAS position on domestic loans between Singapore-based companies, where it seems that IRAS may not apply the transfer pricing rules so long as the Singapore lender is not claiming any tax deduction in Singapore. The IRAS position is not clear on this subject and we look forward to IRAS clarifying what its position will be on domestic loans entered into on or after 1 January 2025. The 8^th edition contains an expanded discussion on the 5% surcharge in case transfer pricing adjustments are made by the IRAS (regardless of whether these result in tax payable). Interestingly, the 8^th edition explicitly confirms that IRAS will not seek to impute arm's-length interest if a foreign lender provides an interest-free or low interest loan to a Singapore borrower and no withholding tax shall be imputed, either. This is consistent with the generally held belief amongst tax practitioners that withholding tax can not be imposed on imputed expenses which have not been incurred.

The Transfer Pricing Guidelines introduce a new OECD-endorsed simplified and streamlined approach (SSA) in paragraph 19—referred to as "Amount B" in OECD nomenclature—which is designed to simplify and streamline the application of the arm's-length principle for qualifying baseline marketing and distribution transactions entered into between related parties (qualifying transactions). This relates to the OECD's Pillar One. Amount A of Pillar One provides for a coordinated reallocation of taxing rights over a portion of the profits of the largest and most profitable MNEs to market jurisdictions (the location of the customers or users), including in situations where the MNE has no physical presence in that market.

Singapore taxpayers that meet the prescribed qualifying conditions may elect to apply the SSA, which approximates an arm's-length price for qualifying transactions for any financial year between 1 January 2026 and 31 December 2028. Taxpayers that do not elect to apply the SSA are expected to continue determining arm's-length prices using accepted TP principles.

Singapore taxpayers may elect to apply the SSA if the following three conditions are met:

• the SSA must be applied to a qualifying transaction. Related-party transactions that are regarded as "qualifying transactions," and therefore within scope of the SSA, are:
  • buy-side marketing and distribution transactions where the distributor purchases goods from related parties for wholesale distribution to unrelated parties; and
  • sales agency and commissionaire transactions where the sales agent or commissionaire contributes to related parties wholesale distribution of goods to unrelated parties.
• It is worth noting that the words "wholesale distribution" cover the distribution of goods to customers who are not end-consumers.
• Where a transaction involves the distribution of non-tangible goods or services, or the marketing, trading or distribution of commodities, or if the distributor, sales agent or commissionaire (tested party) carries out both qualifying transactions and non-distribution activities that are incidental to the qualifying transactions, then such a transaction would generally not be eligible for the SSA.
• the qualifying transaction must be capable of being reliably priced using a one-sided TP method with the tested party, and, the one-sided TP methods approved in the TP Guidelines are the traditional transaction and the transitional net margin methods.
• the tested party in the qualifying transaction must incur annual operating expenses of between 3% and 30% of its annual net revenues (OES ratio).
• As the term implies, the OES ratio is calculated yearly on a three-year weighted average basis (see paragraph 19.6 for details).

Singapore taxpayers that satisfy these qualifying conditions may (not must) apply the SSA to determine the TP for the qualifying transaction of the tested party. Paragraphs 19.7 to 19.17 of the TP Guidelines set out the two-step approach for determining the return of sales for the tested party under the SSA, and also provide worked examples to guide users through the various calculations. In addition, the documentation requirements relevant to taxpayers that have elected to apply the SSA can be found in paragraphs 19.18 of the TP Guidelines.

Not all Inclusive Framework members have implemented the SSA, and its application may vary across jurisdictions. Tax authorities of the jurisdiction where the Singapore taxpayer's counterparty is located are not obligated to accept the application of the SSA to a qualifying transaction, and adjustments made by a foreign jurisdiction to the transaction could potentially result in the double taxation of the underlying profits.

Where a tax treaty is effective between Singapore and that foreign jurisdiction, the taxpayer may submit an application for the IRAS to resolve the double taxation suffered through the mutual agreement procedure provided under the relevant treaty (see sections 10 and 11 of the TP Guidelines for details on Singapore's MAP process).

New tax guides issued by IRAS

Over the past three months, besides the 8^th edition of the transfer pricing guidelines, the IRAS issued new e-Tax guides on the following subjects:

• Submission of income information by commission paying organisations (17 October 2025)
• GST Assisted Self Help Kit (ASK) Annual Review Guide (22 October 2025)
• IRAS Common Reporting Standard (CRS) compliance guidelines (31 October 2025)
• GST guide on attribution of input tax (31 October 2025)
• GST fringe benefits (31 October 2025)
• GST Advance Ruling System (18 November 2025)
• Income Tax treatment of a trust registered under the Business Trust Act (19 November 2025)
• Income Tax treatment of Real Estate Investment Trust – Exchange Traded Funds (4 December 2025)
• Income Tax treatment of Real Estate Investment Trusts and approved sub-trusts (4 December 2025).

Tax classification of foreign entities

The IRAS on 30 October 2025, published its views on the classification of foreign entities for Singapore tax purposes: whether they are a company or a partnership/transparent for Singapore tax purposes. The IRAS says the following about it.

There are tax implications connected to the classification of a foreign entity for income tax purposes. For instance, depending on whether a foreign entity is a company or a partnership for Singapore income tax purposes, tax may either be imposed on the entity or on the entity's owners.

IRAS generally applies a resemblance approach to determine the classification of a foreign entity for Singapore income tax purposes. Under the resemblance approach, the similarities and differences between a foreign entity and its corresponding Singapore entity are examined before deciding on the tax classification. This maintains parity in the treatment of Singapore and foreign entities with similar features. For example, for a foreign entity to be treated as a "company," the entity is expected to be in substance similar to a company incorporated under the Companies Act 1967.

Resemblance approach: Factors for determining whether a foreign entity is a company or a partnership.

To determine if a foreign entity is to be treated as a company or a partnership, a set of factors will be applied. The foreign entity must meet all factors indicated to be considered as a company or a partnership for Singapore income tax purposes.

Factors for a foreign entity to be considered a company:

1. The entity is incorporated or registered under any law in force in its home jurisdiction.
2. The entity has a legal personality separate from its members and directors/managers. Having a separate legal personality implies that the members of an entity are not personally liable for the debts and losses of the entity.
3. The entity maintains a share capital (or accepts undertakings from its members to contribute to the assets of the entity in the event of it being wound up, i.e., members' guarantees). An entity's share capital refers to the amount raised through the issuance of shares.
4. The entity has at least one member and is managed by a board of directors/ managers, which may or may not comprise its members.
5. The entity has perpetual succession until wound up or struck off.
6. Except for an entity limited by guarantee, members are entitled to share in the entity's profits, if so decided and declared by the entity. Members do not have an unconditional right to receive dividends. Typically, the board of directors of the entity would decide on when and the amount of dividends to be paid.

Factors for a foreign entity to be considered a partnership:

1. The entity is formed or registered under any law in force in its home jurisdiction.
2. The entity has at least two members.
3. Members are entitled to share in the entity's profits as the profits arise. Unlike a company, no resolution is required for the distribution of partnership profits. The profits are attributed to members.
4. The entity does not have share capital. The concept of shares does not apply to partnerships.
5. Except for limited liability partnership, the entity does not have a legal personality separate from its members.

Where a foreign entity does not meet all the factors as a company or a partnership, IRAS will consider all relevant factors such as how the entity is classified for tax purposes in its home jurisdiction and the considerations behind the classification, in determining the classification of the entity for Singapore income tax purposes.

Once an assessment has been made for a certain foreign entity structure, IRAS will generally apply the same treatment for that particular foreign entity structure as long as the structure remains substantially the same.

The IRAS also published the following list of certain foreign entity structures and their classifications as to whether according to IRAS the foreign entities shown are a company or a partnership for Singapore income tax purposes (in the case of the LLC in the USA, the LLC is a company unless the LLC can substantiate, based on its agreement, that it should be classified as a partnership).

Tax Deductions for Energy-Efficient Investments

Thailand's Cabinet has recently approved new tax incentives aimed at promoting energy efficiency and renewable energy adoption. Businesses will be eligible for a tax deduction for up to 50% of the cost of investment in high-efficiency machinery, equipment or materials for energy conservation, while individuals will be allowed a deduction of up to THB 200,000 for the cost of equipment and installation of solar rooftop power generation systems for residential homes. The tax incentive will be effective from the day following that on which the Royal Decree is published in the Royal Gazette and will be in force until 31 December 2028.

To qualify for the tax deduction, the high-efficiency machinery, equipment or energy conservation materials that contribute to energy savings must be certified with a five-star energy efficiency label from the Department of Alternative Energy Development and Energy Conservation. Only individuals with taxable income under sections 40 (5), (6), (7) and (8) of the Revenue Code, such as entrepreneurs in the industrial, commercial and service sectors, are eligible for the personal income tax deduction. The purchases must be made from VAT-registered businesses and supported by full tax invoices in electronic format (e-tax invoices).

A personal income tax deduction will be granted for the purchase of equipment and installation of solar power generation systems installed on rooftops, decks or any part of residential buildings connected to the Metropolitan Electricity Authority or Provincial Electricity Authority power grid, up to the actual amount paid, but not exceeding THB 200,000.

Only one solar rooftop power generation system is eligible for the deduction in the tax year in which the connection to the power grid is completed. Payments for the purchase of equipment and installation costs must be made to VAT-registered businesses and supported by e-tax invoices.

Tourism tax measures

Thailand's Cabinet has recently approved stimulus packages under the "Quick Big Win" economic strategy, aimed at revitalizing domestic tourism and supporting economic growth in the fourth quarter of 2025.

Personal Income Tax Deductions to Support Domestic Tourism

Individuals will be allowed to claim a deduction of up to THB 20,000 for accommodation costs (hotels, homestays, or registered non-hotel accommodation) and restaurant service costs paid to VAT-registered businesses from 29 October 2025 to 15 December 2025.

A deduction not exceeding THB 10,000 can be claimed for expenses supported by paper or electronic tax invoices (e-tax invoices) and an additional THB 10,000 can be claimed for e-tax invoices only.

Spending in secondary cities (55 provinces and selected districts in 15 others) will qualify for a 1.5 times deduction, up to THB 30,000 in total.

Corporate Income Tax Incentives for Domestic Training Seminars

Companies and juristic partnerships that hold staff training seminars within Thailand from 29 October 2025 to 15 December 2025 will be allowed to claim additional tax deductions for seminar expenses such as venue rental, accommodation, transportation and licensed tour guide fees.

For training seminars held in secondary provinces, a deduction for twice the actual expenses paid will be allowed. For seminars held in other locations, a deduction of 1.5 times the actual expenses paid will be allowed.

The expenses must be paid to VAT-registered businesses and supported by a full tax invoice in electronic format (e-Tax Invoice), except for transportation costs paid to non-VAT-registered operators, in which case an electronic receipt (e-Receipt) is required.

Tax Incentives for Hotel Renovations

Companies and juristic partnerships operating hotels will be allowed to claim a tax deduction for twice the actual costs paid for renovations, changes, expansions or improvements to assets related to the business (except for repairs to maintain the original condition) from 29 October 2025 to 31 March 2026.

Assets related to the business include:

• Permanent buildings used for hotel operations; and
• Decorations or furniture that are permanently attached to the building.

The first deduction covers normal depreciation of the assets. The second deduction must be claimed in equal amounts over 20 accounting periods, starting from the accounting period in which depreciation commences.

Extension of Reduced Excise Tax Rate for Entertainment Venues

The reduced excise tax rate from 10% to 5% for entertainment venues such as nightclubs, pubs, bars, discos and cocktail lounges will be extended for another year from 1 January to 31 December 2026.

Import duty exemption for Low-Value Goods will end after 31 December 2025

On 16 December 2025, Ms Lalida Periswiwatana, Deputy Spokesperson for the Prime Minister's Office confirmed that import duty will be collected on all goods imported into Thailand with a value of THB 1 or more, starting from 1 January 2026. This follows the Customs Department announcement in November that the import duty exemption for goods imported with a value of THB 1,500 or less would be removed.

The deputy spokesperson explained that the key rationale behind the removal of the customs duty exemption is to reduce under-declaration of prices, prevent tax evasion and deter the import of unusually cheap goods that negatively impact the domestic market.

The deputy spokesperson reiterated that the public and businesses should prepare in advance for the change in imposition of custom duties, especially importers of goods for sale. She affirmed that the government is proceeding with this measure cautiously, transparently and with due consideration to the impact on the public.

Non-resident capital gains tax on direct and indirect transfers

Courtesy of DFDL, it was reported that the Tax Decree (i.e., CIT Guiding Decree No. 320/2025/ND-CP dated 15 December 2025) was signed and took effect on 15 December 2025. The new Tax Decree confirms the introduction of a deemed corporate income tax rate of 2% on the gross transfer value of capital contributions in limited liability companies and shares in non-public joint stock companies, replacing the previous corporate income tax regime under which a 20% rate applied to net capital gains. 

Importantly, the new rules apply to both direct transfers of shares in Vietnamese companies and indirect transfers involving offshore entities that hold Vietnamese subsidiaries. 

The decree further clarifies that certain internal restructuring transactions will fall outside the scope of capital gains taxation, particularly transactions involving an internal group restructuring, provided that such restructuring does not result in a change of the ultimate parent company of the parties that directly or indirectly hold ownership interests in a Vietnamese enterprise following the restructuring, and does not generate any income. 

However, the new Tax Decree does not yet include the updated tax declaration form for applying the new 2% deemed rate. Taxpayers may need to await further guidance, likely to be provided in the upcoming circular to be issued by the Ministry of Finance, on the specific tax filing template.

Global Minimum Tax/Pillar Two

Courtesy of IBFD, it was reported that the Ministry of Finance (MoF) has issued Decision 3563/QD-BTC on newly promulgated administrative procedures in the field of tax administration under its jurisdiction, along with corresponding regulatory forms relevant to the global minimum tax rules pursuant to Decree 236/2025/NĐ-CP on top-up corporate income tax in Vietnam.

Accordingly, the following tax procedures will be under the management of the Tax Management Department of Large Enterprises – MoF:

Enterprise accounting regime

On 27 October 2025, the Ministry of Finance (MOF) issued Circular No. 99/2025/TT-BTC providing guidelines for business accounting regime ("Circular 99"), officially replacing the long-standing Circular No. 200/2014/TT-BTC ("Circular 200") and other related circulars. Circular 99 takes effect from 1 January 2026 and applies to fiscal years beginning on or after such a date. Circular 99 focuses on financial management, risk control, and international integration to align with the Vietnam Accounting Standards (VAS), oriented towards the International Financial Reporting Standards (IFRS) with the key points as follows:

Instead of requiring enterprises to follow the detailed Chart of Accounts (CoA) as regulated by the MOF as in Circular 200, Circular 99 provides the increased flexibility for enterprises by allowing enterprises to customize the CoA to suit their needs. Further, regarding the accounts, Circular 99 abolishes some of the accounts set out in Circular 200 and adds new accounts to be in line with the standard of IFRS, i.e., Acc. 215 – Biological Assets, Acc. 2295 – Provision for Impairment of Biological Assets, and Acc. 1383 – Special Consumption Tax (SCT) of imported goods.

Accounting Currency, and Financial Statements. Under Circular 99, enterprises are given the right to self-design accounting vouchers, provided that they are truthful, verifiable and transparent, and are issued via internal accounting regulations. Circular 99 also provides more flexible rules on accounting currency, but any change must be made at the beginning of a fiscal year using the average transfer exchange rate of the bank regularly used. Financial statements must still be submitted in VND. To align with the IFRS, the "Balance Sheet" is officially renamed the "Statement of Financial Position." Explanatory notes are substantially expanded, requiring clear disclosure based on determining the accounting currency and the impact of exchange rate.

Circular 99 adds credit institutions to its scope of application for their non-specific banking operations (e.g., fixed assets, inventory), although specific banking operations remain under State Bank of Vietnam guidance.

Circular 99 allows flexible decentralization between the parent company and dependent units. Parent companies may choose to recognize capital allocated to dependent units as liabilities or equity, and also decide whether or not to record revenue and cost of goods sold for internal transfers. At the same time, dependent units may choose whether or not to prepare separate financial statements, provided the enterprise ensures full data consolidation.

Circular 99 will replace Circular 200/2014/TT-BTC.

Proposed VAT amendments to facilitate VAT refund procedure and support agricultural and related sectors

On October 27, the Ministry of Finance released a draft law amending certain provisions of the Law on Value Added Tax No. 48/2024/QH15. These changes are expected to be effective from January 1, 2026.

The proposed changes in the draft aim to reduce certain obstacles related to VAT refund procedures and address challenges faced by businesses in the agricultural, seafood and animal feed manufacturing sectors.

Proposed changes include (1) a removal of the requirement that sellers must have declared and paid VAT on invoices issued to buyers in order for the buyers to be eligible for VAT refunds and (2) purchasers of products ranging from cultivation, forests, animal husbandry, aquaculture or fishing, that have not been processed into other products or have only undergone preliminary processing which then sell these products, are not required to declare and pay VAT but are nevertheless able to claim creditable input VAT.

Products from cultivation, forests, animal husbandry, aquaculture or fishing that are unprocessed or have only undergone preliminary processing, and are used as animal feed or medicinal materials will be changed to be exempt from VAT or not required to declare and pay VAT, instead of being subject to a 5% VAT rate.

New Personal income tax law

Courtesy of IBFD, it was reported that on 10 December 2025, the National Assembly enacted a new Law on Personal Income Tax ("PIT"). The new law introduces substantial amendments and supplements concerning, among others, new taxable income sources, the taxable income threshold for certain types of income, and the new taxation regime for household business individuals. It aims to make policies on personal income taxation transparent and straightforward, while reducing administrative procedures, thereby facilitating compliance by taxpayers, as well as enhancing the efficiency of tax administration. The law will come into effect from 1 July 2026.

New Sources of Taxable Income

The following income sources, among others, are classified as other taxable income:

• income from the transfer of Vietnamese national Internet domain names ".vn";
• income from the transfer of greenhouse gas emission reduction results and carbon credits;
• income from the transfer of digital assets; and
• income from the transfer of gold bars (0.1% on the transfer price).

In addition, income from agency, brokerage and business cooperation activities with organizations; and income from e-commerce and digital platform-based businesses are classified as taxable business income. This clarifies the taxation for such types of income as business income of individuals, not income from salaries or wages, which was unclear until now.

New Types of Income Exempt from PIT

The following income sources, among others, are classified as exempt income:

• Income from the transfer of emission reduction certificates, initial transfer of carbon credits; income from interest on green bonds; income from the initial transfer of green bonds after issuance;
• Income as salaries and wages derived from the performance of tasks in science, technology, and innovation;
• Income from copyright related to tasks in science, technology and innovation, where the results of such tasks are commercialized.
• Income of individual investors and experts from innovative start-up projects; and
• The salary and wages of individuals working as high-quality personnel in the digital technology industry will be eligible for a five-year PIT exemption in the following cases:
  
  • Income from digital technology industrial projects in concentrated digital technology zones;
  • Income from R&D projects and production of key digital technology products, semiconductor chips and artificial intelligence systems;

  • Income from training activities for human resources; and

  • Income of individuals engaged in R&D of high technologies or strategic technologies included in the List of High Technologies prioritized for investment and development, or the List of Strategic Technologies and Strategic Technology Products as prescribed by the Law on High Technology.

Adjustments to taxable income threshold

The taxable income from lottery winnings, inheritance and gifts will be the portion of the value of the winnings, inheritance or gift exceeding VND 20 million per transaction. Currently, the threshold is at VND 10 million.

The new threshold for PIT of business individuals will be VND 500 million (currently VND 200 million).

PIT of Business Individuals

Individuals with annual revenue of over 500 million VND to 3 billion VND can be alternatively taxed at 15%, subject to conditions. The rates per activity based on revenue will be as follows:

• 0.5% for distribution and supply of goods;
• 2% for services and construction without material procurement;
• 5% for property leasing, insurance agency, lottery agency and multi-level marketing agency activities;
• 1.5% for production, transportation, services related to goods and construction with material procurement;
• 5% for activities providing digital information content products and services related to entertainment, video games, digital films, digital photos, digital music and digital advertising; and
• 1% for other business activities.

Individuals with annual revenue exceeding VND 3 billion up to VND 50 billion will be subject to 17%.

Individuals with annual revenue exceeding VND 50 billion will be subject to 20%.

Changes to Policies on Income from Wages and Salaries of Resident Individuals

A new progressive tax table for salaries and wages of resident individuals will be applicable as follows:

Consistency in Taxation of Capital Transfers for Residents and Non-Residents

PIT on income from capital transfers of both residents and non-residents will be taxed at 20% for each transfer provided that the purchase price and reasonable expenses related to the generation of income from capital transfer can be determined. Otherwise, the tax is 2% on the selling price.

Income from transfers of securities will be taxed at 0.1%.