Asia Tax Bulletin - Spring 2026

Residential Property Sold After Two Years is Exempt from VAT

According to the International Bureau of Fiscal Documentation (IBFD), the Ministry of Finance and the State Taxation Administration have announced that, effective 1 January 2026, individuals selling residential property purchased less than two years ago are subject to value added tax (VAT) at the 3% tax collection rate for small-scale taxpayers, unless they are sole traders classified as general taxpayers. The sale of properties purchased more than two years ago is exempt from VAT.

The new policy under Announcement [2025] No. 17 replaces paragraph 1 of article 5 of the Annex of Circular [2016] No. 36.

Exports VAT and Consumption Tax Policies

Following the implementation of the Value Added Tax Law and the issuance of the implementation regulations, the Ministry of Finance (MoF) and State Taxation Administration (STA) have jointly issued their detailed policy on the VAT and consumption tax refund (exemption) treatment for exports of goods, services and intangible assets.

Announcement of MOF and STA [2026] No. 11 took effect on 1 January 2026. Circular [2012] No. 39, Circular [2014] No. 98 and Article 4 of Announcement of the MoF and STA [2020] No. 21 were abolished on that same date.

Goods Eligible for VAT Refund (Exemption)

The VAT refund (exemption) method applies to exports of goods (either self-exported or exports on consignment), provided that all the following conditions are fulfilled:

• The goods have been sold to overseas entities or individuals;
• The goods have been declared to the customs service and have left the country;
• The exports have been recorded as sales under accounting rules; and
• Payment has been received as required according to the relevant rules.

Services and Intangible Assets Eligible for VAT Refund (Exemption)

The VAT refund (exemption) method applies to services and intangible assets that are sold to overseas entities and individuals, and are wholly consumed outside China.

Taxpayers eligible for a VAT refund (exemption) can apply one of these methods:

• The exemption-credit-refund method: the VAT at the export stage is exempted, input tax is offset against the corresponding output VAT, and the remainder of the VAT (not offset) will be refunded. This method applies to (i) exports of self-produced and deemed self-produced goods of manufacturing enterprises; (ii) exports of goods (not self-produced) by listed manufacturers; (iii) cross-border sales of services and intangible assets by manufacturing enterprises; and (iv) exports of services and self-developed intangible assets directly by foreign trade enterprises.
• Exemption-and-refund method: the VAT at the export stage is exempted, and the corresponding input tax is refunded. This method applies to exports of goods and sales of cross-border services purchased from third parties or intangible assets by foreign trade enterprises or other entities.

The Announcement also sets out the rules on documentation (e.g., invoices and customs declaration forms) and provides formulas for the calculation of refund (exemption) amounts.

VAT Export Refund Rates

The VAT export refund rate is the rate applicable to the exports (goods, services and intangible assets), unless provided otherwise by the MoF and STA based on the decisions of the State Council. The VAT export refund rates will be made public by STA via the refund rate database.

Export Businesses Eligible for VAT Exemption (No Refund)

For exports of certain goods and services, VAT at the export stage is exempted, but no VAT refund will be granted for, for instance, goods exported by small-scale taxpayers, software products, gold and diamond products and used equipment, construction services carried out abroad and storage services outside China.

Exemption from Consumption Tax

Goods exported by taxpayers applying a VAT export refund (exemption) are exempt from consumption tax. Previously collected consumption tax will be refunded in respect of the goods purchased for export or goods purchased on consignment or contract processing and reexported. Where the goods are subject to VAT exemption at the export stage (without refund), the previously collected consumption tax will not be refunded, and cannot be offset against consumption tax imposed on goods sold domestically.

Preferential Tax Treatment of Chinese Depositary Receipts of Innovative Enterprises

China has extended the preferential tax treatment of Chinese depositary receipts (CDRs) of innovative enterprises, which include income tax and value added tax exemptions. The extension was announced in Announcement of Ministry of Finance, State Taxation Administration and China Securities Regulatory Commission [2026] No. 8.

Individual Income Tax

From 1 January 2026 to 31 December 2027, gains on the disposal of the CDRs by individual investors are exempt from individual income tax. In respect of dividends and bonuses derived by individual investors from the CDRs, the differentiated individual income tax rates will be applied (dividends are taxed differently or exempt depending on the holding period). A tax credit may be available for foreign income tax paid on the corresponding dividends and bonuses.

Enterprise Income Tax

Gains on the disposal of the CDRs by institutional investors and dividends received from the CDRs are exempt from enterprise income tax. The same exemption temporarily applies to public securities investment funds (closed-end and open-end funds) and to qualified foreign institutional investors (QFIIs) and RMB qualified foreign institutional investors (RQFIIs).

Value Added Tax

For both individual and institutional investors, the difference between the sale proceeds and purchase price in respect of disposals of the CDRs are exempt from value added tax (VAT). From 1 January 2026 to 31 December 2027, the same VAT exemption applies to gains derived by the administrators/managers of public securities investment funds, QFIIs and RQFIIs.

CDRs of innovative enterprises are defined to mean the securities mentioned in Notice of State Office [2018] No. 21 and are issued in the Chinese capital market drawing on foreign shares as underlying equity assets.

Tax Exemption for Foreign Bond Investors Extended

China has extended the tax exemption on interest derived by foreign institutions investing in the Chinese bond market. From 1 January 2026 to 31 December 2027, interest derived by foreign institutions from the Chinese bond market continues to be exempt from corporate income tax and value added tax. The extension was announced in Announcement of the Ministry of Finance and State Taxation Administration [2026] No. 5 on 13 January 2026.

However, the exemption from corporate income tax does not apply to interest derived by foreign institutions that have an establishment or a site in China, where such interest is connected with that establishment or site in China.

Furthermore, based on the Announcement of the Ministry of Finance and State Taxation Administration [2026] No. 6 on 14 January 2026, from 8 August 2025 to 31 December 2026, interest derived by foreign institutions on state bonds and local government bonds that are issued outside China remains exempt from value added tax.

Preferential Tax Treatment of Chinese Depositary Receipts of Innovative Enterprises

China has extended the preferential tax treatment of Chinese depositary receipts (CDRs) of innovative enterprises, which include income tax and value added tax exemptions. The extension was announced in Announcement of Ministry of Finance, State Taxation Administration and China Securities Regulatory Commission [2026] No. 8.

Individual Income Tax

From 1 January 2026 to 31 December 2027, gains on the disposal of the CDRs by individual investors are exempt from individual income tax. In respect of dividends and bonuses derived by individual investors from the CDRs, the differentiated individual income tax rates will be applied (dividends are taxed differently or exempt depending on the holding period). A tax credit may be available for foreign income tax paid on the corresponding dividends and bonuses.

Enterprise Income Tax

Gains on the disposal of the CDRs by institutional investors and dividends received from the CDRs are exempt from enterprise income tax. The same exemption temporarily applies to public securities investment funds (closed-end and open-end funds), and to qualified foreign institutional investors (QFIIs) and RMB qualified foreign institutional investors (RQFIIs).

Value Added Tax

For both individual and institutional investors, the difference between the sale proceeds and purchase price in respect of disposals of the CDRs are exempt from value added tax (VAT). From 1 January 2026 to 31 December 2027, the same VAT exemption applies to gains derived by the administrators/managers of public securities investment funds, QFIIs and RQFIIs.

CDRs of innovative enterprises are defined to mean the securities mentioned in Notice of State Office [2018] No. 21 and are issued in the Chinese capital market drawing on foreign shares as underlying equity assets.

Global Minimum Tax (Pillar 2)

On 8 January 2026, the Inland Revenue Department (IRD) updated the guidance on its global minimum tax regime as follows:

• Qualified rule status: Hong Kong has obtained transitional qualified status for its IIR, HKMTT and QDMTT Safe Harbour from 1 January 2025, and has been included in the OECD's central record of legislation with transitional qualified status. The transitional qualification mechanism was developed by the OECD to recognize the qualified status of jurisdictions' domestic rules on a temporary basis, pending a full legislative review. The OECD's website maintains a central record for jurisdictions whose minimum tax legislation has secured transitional qualified status under this mechanism.
• Pillar Two Portal: a Pillar Two Portal is being developed to facilitate the submission of the relevant top-up tax notifications and returns, and will be launched in phases from January 2026 onwards.
• Registration of in-scope MNE groups via application for group codes: a unique group code will be assigned to each in-scope MNE group, Hong Kong stand-alone joint venture (JV) or JV group.

The IRD launched the first phase of the Pillar Two Portal, enabling Part 4AA entities of in-scope MNE groups to file their top-up tax notifications electronically. Part 4AA entities (Hong Kong constituent entities, Hong Kong standalone joint ventures (JVs), Hong Kong members of a JV group, and stateless constituent entities of an in-scope MNE group) are required to submit notifications regarding their obligations of filing top-up tax returns for a fiscal year beginning on or after 1 January 2025.

The first phase was launched on 19 January 2026. The IRD confirmed that the second phase will be launched in the fourth quarter of 2026, which allows Part 4AA entities to file top-up tax returns, and view and download notices of top-up tax assessments.

The top-up tax notifications must be filed within six months after the end of a fiscal year. When completing and filing a notification, a Part 4AA entity must provide the MNE group code assigned to the in-scope MNE group. The IRD encourages relevant groups to apply early for these codes by submitting a written application through Form IR1485.

Government Budget Proposed Tax Changes 2026

On February 24, 2026, the Financial Secretary presented the Budget for 2026/27 to the Legislative Council. The Budget proposes measures to maintain Hong Kong's attractiveness as an international trade and investment centre and support businesses and individuals through tax incentives and increased personal reliefs.

One-Off Tax Reductions and Rates Concessions

• A one-off reduction of 100% of profits tax, salaries tax and tax under personal assessment for the year of assessment 2025/26, subject to a maximum of HKD 3,000 per case.
• Rates concessions for domestic and non-domestic properties for the first two quarters of 2026/27, subject to a ceiling of HKD 500 per rateable property.

Personal Allowances and Deductions

Starting from the year of assessment 2026/27, the following allowances and deduction ceilings are proposed to be increased as follows:

• Basic allowance: From HKD 132,000 to HKD 145,000.
• Single-parent allowance: From HKD 132,000 to HKD 145,000.
• Married person's allowance: From HKD 264,000 to HKD 290,000.
• Child allowance: From HKD 130,000 to HKD 140,000 (basic and additional).
• Ddependent parent/grandparent allowance (aged 60 or above): From HKD 50,000 to HKD 55,000 (basic and additional).
• Dependent parent/grandparent allowance (aged 55-59): From HKD 25,000 to HKD 27,500 (basic and additional).
• Elderly residential care expenses deduction ceiling: From HKD 100,000 to HKD 110,000.

Business and Industry-Specific Tax Incentives

• Enterprise attraction package: A preferential tax rate of either half-rate or 5% will be offered to attract enterprises to set up in Hong Kong, based on factors such as industry, technology level, and potential economic contributions.
• High value-added maritime services: A half-rate tax concession is proposed for eligible commodity traders.
• Corporate Treasury Centres (CTCs): Additional tax incentives and flexibility will be provided to CTCs and their associated companies, including a pre-approval mechanism.
• Intellectual property (IP) trading: Tax deduction arrangements for capital expenditure incurred on purchasing IP or the rights to use IP are being planned, with an amendment bill to be introduced in the course of 2026.
• Family offices and funds: The tax regime will be enhanced by expanding the scope of "fund" to include specific funds-of-one structures and classifying digital assets, precious metals and specified commodities as eligible investments.
• Research and development (R&D) expenditure: The government will review and enhance tax arrangements for R&D expenditures.
• Gold trading: Tax incentives for eligible institutions conducting gold trading and settlement in Hong Kong are proposed.

Stamp Duty Measures

• Increase for high-value residential properties: The ad valorem stamp duty on residential property transactions valued above HKD 100 million is proposed to be raised from 4.25% to 6.5%.
• Waiver for real estate investment trusts (REITs): A stamp duty waiver will be provided for the transfer of non-residential properties into REITs seeking to list.
• Relaxation for intra-group transfers: The criteria for stamp duty relief on intra-group transfers of assets is proposed to be relaxed, expanding the scope of eligible associated body corporates.

Other Tax Measures

• Crypto-asset reporting: The Inland Revenue Ordinance will be amended to implement the OECD's Crypto-Asset Reporting Framework and amended Common Reporting Standard.
• Advisory Committee on Tax Policy: A new Advisory Committee on Tax Policy will be established and chaired by the Financial Secretary to gather views on reinforcing economic development.

Hong Kong has proposed legislative enhancements to its preferential tax regimes for privately offered funds, family-owned investment holding vehicles (FIHVs) and carried interest, aiming to reinforce its position as an international asset and wealth management centre.

Hong Kong currently has three sets of preferential tax regimes that facilitate the development of the asset and wealth management industry in the country: profits tax exemption for privately offered onshore and offshore funds, regardless of their structure, size and location of central management and control (the unified tax regime for funds, UFR); profits tax and salaries tax concession for eligible carried interest; and profits tax concession for eligible FIHVs managed by eligible single family offices in Hong Kong.

The proposed changes to these regimes as presented in a discussion paper on 2 March 2026 include the following:

Proposed Enhancements to the UFR

• The definition of "fund" will be expanded to include pension funds, endowment funds, funds wholly owned by a government entity, central bank or international organization, and high-value single-investor arrangements.
• The scope of qualifying investments will be widened to cover overseas real estate, carbon credits, insurance-linked securities, equity interests in non-corporate private entities, loans, digital assets, precious metals and specified commodities.
• All profits derived by funds and special-purpose entities (SPEs) from qualifying investments will be eligible for profits tax exemption, removing the 5% limit for incidental transactions, with an exclusion list for tax exemption to be introduced.
• The scope of an SPE's activities will be expanded to cover the acquisition, holding, administering and disposal of investee private companies and/or another SPE and incidental activities. Full tax exemption will be provided to a fund's SPE, regardless of the extent of the fund's ownership, subject to the same anti-round tripping provisions applicable to funds.
• The anti-round tripping provisions will be relaxed to facilitate resident investors' investments in UFR funds by adopting the exclusions under the tax-concession regime for FIHVs, while specific anti-round tripping provisions against financial institutions, insurance companies or persons carrying on a money lending business or an intragroup financing business in respect of profits derived by the fund from loans will be introduced.
• In view of the expanded scope of qualifying investments, the scope of the four tests applicable to transactions in private companies will be adjusted to apply to equity investment/interest in private companies and non-corporate private entities (instead of the current applicability to both equity and debt investments).
• To align with international tax transparency standards, the proposals also introduce tax reporting obligations and economic substance requirements for funds benefiting from the UFR, including minimum local employment (at least two local employees) and an annual operating expenditure threshold of HKD 2 million.

Proposed Enhancements to Tax Regime for FIHVs

Similar enhancements will apply to the FIHV regime in respect of the following:

• Qualifying investments;
• Profits eligible for profits tax concession;
• Treatment of family-owned SPEs (FSPEs);
• Tests applicable to an FIHV/FSPE's transactions in private companies; and
• Specific anti-round tripping provisions against financial institutions, insurance companies, etc.

Proposed Enhancements to Tax Regime for Carried Interest

The carried interest tax concession regime will be refined by removing fund certification requirements, broadening the definition of qualifying payers, qualifying transactions and qualifying persons eligible for the concession, and eliminating the hurdle rate requirement in defining eligible carried interest.

Automatic Exchange of Financial Information (CRS)

The Inland Revenue (Amendment) (Automatic Exchange of Information) Bill 2026, which aims to enhance the administrative framework for the automatic exchange of information in tax matters (AEOI) in Hong Kong, will be published on March 27.

As an international financial and trade centre, Hong Kong has been supporting international efforts in enhancing tax transparency and combating cross-border tax evasion. Since 2018, Hong Kong has been conducting automatic exchange of financial account information with partner jurisdictions on an annual basis, in accordance with the Common Reporting Standard (CRS) developed by the Organisation for Economic Co-operation and Development (OECD) and on the premise of data confidentiality and security. This enables the relevant tax authorities to conduct assessment on their tax residents, as well as detect and combat tax evasion.
  
Since 2024, the OECD has been conducting the second round of peer review on Hong Kong's implementation of the AEOI regime. Having taken into consideration the OECD's views, Hong Kong proposes amending the Inland Revenue Ordinance (Cap. 112) to enhance the relevant administrative framework, including requiring reporting financial institutions to register with the Inland Revenue Department (IRD) for strengthening identification, enhancing the requirements on keeping due diligence records, and raising the penalties to increase deterrence. The relevant amendments will take effect from January 1, 2027. Addressing the OECD's comments in a timely manner will help Hong Kong maintain a favourable rating in the peer review, and safeguard Hong Kong's reputation as an international financial centre.

The Government conducted a public consultation between December last year and February this year. The government was pleased that stakeholders, including professional bodies and the financial sector, generally support the above legislative proposals. The government has duly taken into account their views on the implementation details when drafting the Bill.

To assist the industry in adapting to the new requirements and enhance tax certainty, the IRD will issue relevant guidance in due course and provide technical support to the industry and answer enquiries. The Bill will be introduced into the Legislative Council for first reading on April 1.

Supreme Court Decision on Tax Treaty Protection Creates Confusion

In a controversial landmark judgement in January 2026, the Supreme Court of India overturned the decision of the Delhi High Court in the case of Tiger Global and denied capital gains tax exemption claimed under the India-Mauritius tax treaty on the sale by Tiger Global, a Mauritian tax resident company, of shares of Flipkart Pte Ltd, a Singaporean tax resident company, which owned the shares of a number of Indian companies acquired between 2011 and 2015. The case therefore concerns an indirect sale of Indian companies by a Mauritian company.

The Mauritian company concerned is a company which held a Category 1 Global Business Licence issued by the Mauritian government (presently referred to as a “GBL company”), which is a tax resident company under Mauritian law and liable to income tax under the Mauritian income tax law as evidenced by tax residence certificates issued to the Mauritian company by the local tax authority. As the Singapore company derived substantial value from India, capital gains on the sale of such shares is in principle liable to tax in India under the Indian domestic tax law unless this is overruled by a favourable double tax treaty such as the tax treaty between Mauritius and India. This tax treaty contains a capital gains tax exemption for investments made prior to 1 April 2017.

The Supreme Court applied the General Anti Avoidance Rules to treat the transaction as an 'impermissible avoidance arrangement' and prima facie designed for avoidance of taxes. Applying the substance over form principle, the Supreme Court has ruled that Tiger Global is not eligible to claim the India-Mauritius Tax Treaty benefit. The Supreme Court overturned the decision of the High Court in Delhi and affirmed the conclusions of the Authority of Advance Rulings (AAR) that the Mauritian company did not exercise independence in its decision-making and control and management—it was found that control and management of Tiger Global was not in Mauritius but in the United States, with a US resident and sole director of ultimate parent entity in US as the signatory to Tiger Global’s bank account and was also disclosed as the beneficial owner in the GBL application form filed with Mauritius Financial Services Authority. The Supreme Court ruled that the arrangement was prima facie an impermissible tax avoidance structure, making it ineligible to claim the India-Mauritius Tax Treaty benefit. The Supreme Court denied the grandfathering protection under India's domestic “General Anti-Avoidance Rules” (GAAR) for investments undertaken prior to 1 April 2017 on the basis that the transaction is an impermissible avoidance arrangement.

The Supreme Court also ruled that—prior Supreme Court decisions notwithstanding—a tax residence certificate is not sufficient to claim protection under a tax treaty taxation, and that a gain must be taxed in the residence state of the seller as a pre-requisite for capital gains tax protection under a tax treaty.

The Supreme Court judgment deviates from the well-established legal and judicial position in the context of granting tax treaty benefits based on tax-residence certificates (TRC) issued by the resident country.

In brief, the Supreme Court has emphasized that eligibility to claim tax treaty benefit will necessarily have to be evaluated by applying the “substance-over-form” approach. As a result, it is critical for foreign investors making investments in India to carefully address aspects around “control and management”, “decision-making” individuals, and “commercial substance” in the relevant jurisdiction.

Mayer Brown Note: The Supreme Court has hitherto been known for its level-headed and clear view in its interpretation of anti avoidance in international tax matters. The decision in the Tiger Global case is therefore surprising, as it appears to be flawed on a number of fundamental points: its denial of tax treaty application in indirect transfers, its denial of the grandfathering provision for applying GAAR, its consideration that the seller must be effectively taxed on a sale in order to be eligible for capital gains tax protection under the tax treaty and its view on the relevance of the tax residence certificate for the tax treaty application. Consequently, the Supreme Court ruling has created significant confusion about the Indian tax effects of legitimate inbound investments into India. It is to be hoped that the Indian government will take appropriate measures to reassure foreign investors about the consequences of their investments in the country.

Confusion on GAAR rectified by the Indian tax authority

Courtesy of Khaitan & Co, the Indian Central Board of Direct Taxes (CBDT) issued a notification on 31 March 2026 (the “Notification”), providing a significant clarification on the non-applicability of General Anti-Avoidance Rules (GAAR) with respect to income arising from the transfer of an investment that was made prior to 1 April 2017. This development seeks to resolve the ambiguity that arose pursuant to the judgment of the Supreme Court in the case of Tiger Global International II Holdings, discussed above.

The GAAR regime, introduced effective 1 April 2017, empowers tax authorities to treat an arrangement as an “impermissible avoidance arrangement” where the main purpose of the arrangement is to obtain a tax benefit and which satisfies other specified conditions.

As per the existing tax rules, GAAR does not apply to an income which arises from the transfer of an investment made prior to 1 April 2017.

However, the tax rules also state that, without prejudice to the aforesaid exemption, GAAR would apply to any arrangement in respect of tax benefits obtained on or after 1 April 2017 (irrespective of the date of execution of such an arrangement).

In the Notification, the CBDT has amended the tax rules and clarified the following:

GAAR shall not apply to any income arising from transfer of an investment which was made prior to 1 April 2017. GAAR shall apply to an arrangement in respect of which a tax benefit has been obtained or after 1 April 2017, irrespective of the timing of such an arrangement. However, this provision shall not apply to income arising on the transfer of an investment which was made prior to 1 April 2017.

Thie Notification provides substantial relief to foreign investors with respect to grandfathered investments and mitigates the risk of litigation from a GAAR perspective. Taking effect from 1 April 2026, GAAR may not be invoked on income arising from transfer of investments that were made prior to 1 April 2017 and hence, the relaxation extends to all such transactions that are subject to audit proceedings on or after 1 April 2026. In circumstances where GAAR has been invoked prior to 1 April 2026, the taxpayers will need to independently assess the applicability of GAAR grandfathering based on the original tax rules.

Budget 2026

With the President’s assent to the Finance Bill 2026, which was recently passed by the Lower House of Parliament (Lok Sabha) and the Upper House of Parliament (Rajya Sabha), the Finance Act 2025 has been enacted.

The Finance Bill 2026 (the Indian government’s tax proposals for 2026) contain the following key topics.

Buy-back tax:

• The consideration received on buy-back of shares is chargeable to income tax under the heading of ‘capital gains’, instead of being treated as dividend income.
• However, additional income tax on capital gains shall be payable by ‘promoter’ shareholders, which shall result in an effective tax at 22% (for domestic corporate shareholders) and 30% (for others).

Tax rate for units in International Financial Services Centre (IFSC) on income earned after the tax holiday period: eligible business income of units in IFSC will now be taxed at 15% instead of the 22% or 30% rate applicable to income earned after the tax holiday period. This is applicable from tax year 2026-27.

Changes proposed in respect of the Minimum Alternate Tax (MAT):

• MAT changes from tax year 2026-27 onwards. MAT proposed to be reduced from the existing 15% to 14%.
• MAT proposed to be inapplicable to all non-residents (NRs) opting for presumptive taxation, including NRs engaged in (a) operating cruise ships, or (b) providing services or technology in India to resident companies engaged in electronic manufacturing under a notified scheme.
• For domestic companies, it is proposed that MAT would be a final tax; no new MAT credit to be allowed and no set-off of MAT credit if continuing in the old regime.

Exempt incomes

In order to attract investments in data center and promote artificial intelligence data center framework in India, an exemption will now be provided to foreign companies earning any income by way of procuring data center services from specified data centers in India up to tax year 2046-2047, subject to certain conditions.

In order to provide tax certainty to foreign company supplying capital equipment to contract manufacturers of electronic goods, any income arising in India to a foreign company providing capital goods, equipment or tools to the resident contract manufacturers located in custom bonded area will now be exempt from tax in India. The exemption will be subject to certain conditions and will be available up to tax year 2030-31.

Extension of ITR due date for non-audit cases: the due date for filing the return of income by non-audit business cases, partners of non-audit firms and trusts not requiring audit is extended to 31 August following the tax year from the existing time limit of 31 July. This amendment is applicable from tax year 2025-26 onwards.

Tax break announced on high-growth sectors for non-residents

For cloud-based businesses/data center sector: a proposal has been made to provide tax exemption to foreign companies on income arising from procuring data center services from a specified data center. To qualify for the exemption, all sales by such foreign company to users located in India must be made through a reseller that is an Indian company. A specified data center must be set up under an approved scheme notified by the Ministry of Electronics and Information Technology (MeitY) and must be owned and operated by an Indian company. This amendment will be effective from 1 April 2026 (tax year 2026-27 onwards), and will continue up to 31 March 2047.

Electronics manufacturing: A proposal has been made to provide tax exemption to foreign companies on income arising from providing capital goods, equipment, or tooling to an Indian contract manufacturer. The exemption applies when the contract manufacturer is an Indian resident company producing electronic goods for the foreign company located in a customs-bonded area. This amendment will be effective from 1 April 2026 (tax year 2026-27 onwards). The exemption will be available up to the tax year 2030-31.

Safe Harbour Rules

• Consolidate various IT services, including software development services, IT-enabled services, knowledge process outsourcing and contract R&D services into a "unified category", and introduce a common safe harbour (SH) margin of 15.5% for this category, applicable for a period of five tax years. Currently, these services are subject to separate SH margins. Further, the eligibility threshold under the unified category is significantly raised from INR three billion to INR 20 billion.
• Introduce an SH margin of 15% for Indian captive data centre service providers.
• Introduce an SH margin of 2% to non-residents for component warehousing in a bonded warehouse.

Related proposals include:

• Fast-tracking the process of executing unilateral APAs for IT services.
• In the cases where an APA is executed, allowing the impacted associated enterprise to file a modified tax return, in line with the APA, within three months of the agreement (currently, only the taxpayer that executes the APA can file a modified return).
• Rationalizing timelines for the completion of transfer pricing assessments to address tax litigation on this aspect.
• Introducing graded fees (INR 50,000 and INR 100,000) for failure to furnish transfer pricing reports (currently, a fixed penalty of INR 100,000 applies).

Securities Transaction Tax

The Bill proposes to increase the Securities Transaction Tax (STT) rates for derivative transactions as follows:

• On the sale of options from 0.1% to 0.15% of the option premium.
• On the sale of an option where the option is exercised from 0.125% to 0.15% of the intrinsic price.
• On the sale of a futures from 0.02% to 0.05% of the traded price.

Other Proposals:

• Removal of the interest deduction where borrowed funds are utilized for earning dividend income or income from units of mutual funds (currently, the deduction is capped at 20% of such income).
• Reduction of the tax rate for income from unexplained credits, assets, investments, etc. to 30% (currently, 60%).
• An increase in investment limits for a person resident outside India (PROI), i.e. the extent to which PROIs can invest in equity instruments of listed Indian companies through the portfolio investment scheme (PIS), from 5% to 10%.
• Extension of the due date for filing (i) the original tax return to 31 August (from 31 July) in specific cases not subject to tax audit, and (ii) the revised tax return to 12 months (from nine months) from the end of the relevant tax year.
• Facilitating taxpayers to apply electronically for a certificate for lower or nil deduction of tax.
• Elimination of the requirement to procure a tax deduction and collection account number (TAN) where a resident individual purchases immovable property from a non-resident.

New Process for Tax Treaty Benefits Claims

With effect from 31 December 2025, the Ministry of Finance issued Regulation No. 112 of 2025 (PMK-112/2025) on the Procedures for Implementing Double Taxation Agreements (DTAs), providing a comprehensive framework for claiming treaty benefits and preventing treaty abuse by both resident and non-resident taxpayers.

PMK-112/2025 is the implementing regulation of article 50(2) of Government Regulation 55/2022 on the Amendments to the Income Tax Regulations. It updates procedures for resident taxpayers claiming treaty relief abroad and non-resident taxpayers claiming Indonesian treaty relief. PMK-112/2025 also incorporates anti-abuse provisions aligned with the OECD/G20 BEPS minimum standards and clarifies permanent establishment (PE) concepts in a treaty context.

Resident Taxpayers

Resident taxpayers may now obtain a Certificate of Tax Domicile (COD) electronically through the core tax system. Applications must be submitted via the taxpayer portal or contact centre, where each application is limited to one treaty partner country, one tax year (or part thereof), and one non-resident counterparty.

A COD will be issued automatically if the taxpayer meets the eligibility requirements: being an Indonesian tax resident for the relevant period; holding a valid tax identification number; and having filed the relevant annual income tax return. If any requirement is not met, the application is not processed. The COD remains valid until 31 December of the year of issuance.

Resident taxpayers may also request endorsement of the special form issued by the treaty partner's tax authority requesting confirmation of Indonesia tax resident status. These requests require a separate submission and validation by the local tax office.

Non-Resident Taxpayers

Non‑resident taxpayers claiming Indonesian treaty benefits must submit the new Form DGT, certified by the competent authority of the treaty partner, to the Indonesian withholding or paying agent. The Form now includes detailed confirmations on:

• Non‑residency in Indonesia.
• Tax residence in the treaty partner jurisdiction.
• Absence of treaty abuse, including questions on:
  • economic substance (assets, employees, active business);
  • alignment between legal form and economic substance;
  • beneficial ownership, which now applies to all types of income and is no longer limited to dividends, interest and royalty payments;
  • whether transactions have a main purpose of obtaining treaty benefits; and
  • whether more than 50% of the income is used to satisfy written or unwritten obligations to third parties (an example is given that dividends paid by the foreign recipient shortly after the foreign recipient received its interest income from Indonesia would fail the test) – it appears important therefore that the recipient retains the Indonesian income for a while.

In limited cases, a foreign certificate of residence in English, containing the minimum information (i.e., name, issue date, and signature of the competent authority) may substitute for the Form DGT.

Withholding agents receiving the Form DGT must verify it against supporting documentation, upload it to the taxpayer portal, obtain an electronic receipt, and apply withholding tax in accordance with the relevant treaty.

PMK112/2025 consolidates Indonesia's anti-abuse approach with examples covering beneficial ownership tests, shareholding thresholds and holding period rules (including the 365-day requirement under the MLI), indirect transfers of immovable-property-rich entities, PE anti-fragmentation and contract-splitting rules, preparatory/auxiliary activities, closely related persons, and the general principal purpose test.

Where treaty abuse is established, the tax authorities may deny treaty benefits, recharacterize income, apply domestic taxation, and, in PE avoidance cases, issue a tax identification number ex officio for the deemed PE.

Taxpayers and withholding agents must retain CODs, Form DGTs and supporting documents for audit and compliance purposes.

Tax Reform 2026

Japan has enacted and brought into force its 2026 tax reform package, including the side-by-side safe harbour and several other safe harbours endorsed in the OECD/G20 Inclusive Framework's Side-by-Side Package the tax reform proposals for fiscal year (FY) 2026.

The tax reform includes the following measures:

• Introducing a tax incentive for large-scale and high value-added capital investment, including immediate depreciation and 7% tax credit (4% for buildings, etc.), covering all industries;
• Allowing the carry-forward of tax credits for up to three years for companies with government-approved plans for managing volatile business environments; and
• Reviewing existing special tax measures and improving policy effectiveness by:
  • creating a "strategic technology" category (e.g. AI and quantum) with 40% tax credit; reform incentives with strict requirements to further encourage enterprise's R&D and gradually restrict outsourcing of research overseas (excluding overseas clinical trials); and
  • abolishing tax credits for promoting wage increases for large enterprises, while extending such tax credits for medium-sized enterprises with stricter requirements (to be repealed in the FY 2027 tax reform), and maintaining such tax credits for small and medium-sized enterprises (SMEs) (to be reviewed in the FY 2027 tax reform).

On individual income taxation, the following measures were proposed:

• Reviewing the burden on extremely high-income earners: raising the applicable tax rate (from 22.5% to 30%) and lowering the deduction amount (from JPY 330 million to JPY 165 million), expanding the target from approximately 200 taxpayers (income around JPY 3 billion) to around 2,000 taxpayers (income around JPY 600 million);
• Maintaining the current exemption for dependents of high school ages in 2026; and
• Increasing the deduction amount for single parents (national tax: from JPY 350,000 to JPY 380,000; local tax: from JPY 300,000 to JPY 330,000).

For indirect tax and other measures, the following measures were proposed:

• Unlocking the basic investment plan of the Nippon Individual Savings Account (NISA) for ages 0–17 years (annual limit: JPY 600,000 and total limit: JPY 6 million) to support savings and investments for children;
• Reviewing the de minimis rule of consumption tax on low-value shipments and introducing platform taxation on e-commerce;
• Reviewing vehicle taxes (motor vehicle tonnage tax): raising fuel efficiency standards of the Eco-Car Tax Break to promote investment in improving fuel efficiency and introducing an additional charge in the tonnage tax on electric vehicles for private use, which are currently not subject to fuel taxes (to be legislated in FY 2027 tax reform);
• Implementing transitional measures for an invoice system on consumption tax: allowing self-employed individuals to pay 30% of their output tax for 2027 and 2028, regardless of the amount of input tax, even after the end of the current special accommodation of 20%; extending the final deadline of special input tax credit on purchases from tax-exempt suppliers for two years and easing the speed and magnitude of gradually reducing the creditable rate; and lowering the annual cap of purchases eligible for this treatment (from JPY 1 billion to JPY 100 million per tax-exempt business supplier) to prevent tax avoidance;
• Raising the international tourist tax from JPY 1,000 to JPY 3,000 (to fund measures against overtourism); and
• Strengthening defence capacity: imposing a new 1% income tax from January 2027 and reducing the rate of special income tax for reconstruction from 2.1% to 1.1% to avoid an immediate burden increase for households, while extending the applicable period for 10 years.

Tax Neutral Partial Spin-Offs

The scope of tax-neutral partial spin-offs—where the parent company retains less than 20% ownership of the spun-off entity after the spin-off—will be revised. In addition, the measure will become permanent, eliminating the previous sunset provision.

New Documentation Requirements for Intragroup Transactions

A statutory obligation to maintain documentation for certain intragroup transactions will be introduced. Domestic corporations engaging in specified transactions with related parties (defined in a manner similar to transfer pricing rules), such as the licensing arrangements or certain intra-group services, must prepare and retain records that include the nature of assets or services provided, the calculation of consideration payable, and any other information necessary to determine the price. Failure to comply may result in penalties, including revocation of blue return status, which provides preferential tax treatment for compliant taxpayers.

Global Minimum Tax

Japan's Cabinet has approved a formal decision outlining measures to implement the international agreement on the global minimum tax. According to the decision, the government intends to incorporate amendments to Japan's global minimum tax legislation reflecting the Side-by-Side Package. These amendments are expected to be included in the 2026 tax reform bill to be submitted to the Diet.

The Cabinet statement confirms that several elements of the Side-by-Side Package will be implemented through the 2026 tax reform legislation, including the Side-by-Side Safe Harbour (explicitly intended to apply for fiscal years beginning on or after 1 January 2026); a one-year extension of the Transitional CbCR Safe Harbour; the Substance-Based Tax Incentive Safe Harbour; and the UPE Safe Harbour. In contrast, the Cabinet decision does not refer to the Simplified ETR Safe Harbour.

Although the Cabinet announced the policy direction, the government has not yet submitted the actual bill. This is due to the dissolution of the lower house on 23 January 2026 and the adjournment of the upper house on the same day.

Strengthened Consumption Tax Rules for Cross-Border E-Commerce Effective 1 April 2028

The special rule deeming the value of imported personal use goods at 60% of retail price will be abolished. Accordingly, the de minimis exemption threshold will be unified at JPY 10,000 regardless of whether goods are for personal use. Transfers of low-value goods of JPY 10,000 or less shipped from overseas to Japan via e-commerce will no longer qualify for exemption and will be subject to consumption tax. Foreign suppliers must register and appoint a tax agent if they do not have a Japanese office. Consumption tax will be paid by the supplier, and importers will be exempt from import consumption tax if the supplier's registration number is declared at customs. In addition, digital platforms facilitating cross-border e-commerce transactions, including direct shipments from abroad and shipments from domestic warehouses under fulfilment services, will be deemed suppliers and will bear sole liability for consumption tax, provided annual sales exceed JPY 5 billion and the platform is designated by the National Tax Agency.

Taxation of Crypto Assets

Following anticipated financial regulatory reforms (such as amendments to the Financial Instruments and Exchange Act), gains from the transfer of crypto assets registered with licensed crypto asset service providers will be taxed as separate financial income at a flat rate of 20%, comprising 15% national personal income tax and 5% local inhabitant tax, instead of under progressive rates. Losses from such transfers may be carried forward for three years but cannot be offset against income subject to progressive taxation.

Pillar 2 — Side-by-Side Safe Harbour

The bill incorporates into domestic law two of the key safe harbours endorsed in the OECD/G20 Inclusive Framework's Side-by-Side Package.

Under Japan's implementation of the Side-by-Side Safe Harbour, a multinational enterprise group whose ultimate parent entity is located in a jurisdiction publicly designated by the Japanese Finance Minister as meeting the conditions set out in the legislation or forthcoming subordinate ministerial rules will be deemed to have a zero top-up tax liability for purposes of both the Income Inclusion Rule (IIR) and the Under Taxed Profits Rule (UTPR). This amendment is explicitly stated to apply to fiscal years beginning on or after 1 January 2026.

The bill also provides for a one-year extension of the Transitional Country-by-Country-Reporting (CbCR) Safe Harbour and includes provisions for the Ultimate Parent Entity (UPE) Safe Harbour. In contrast, the proposal does not include the Simplified Effective Tax Rate (ETR) Safe Harbour.

Recent Tax Court Rulings

Courtesy of Kim & Chang, the following is a summary version of the update on key precedents and court rulings in taxation in Korea over the past six months.

• A court decision holding that a receivable confirmed to be uncollectable—even if there had previously been a possibility of collection—constitutes a “receivable uncollectable due to the debtor’s bankruptcy”, which qualifies as a ground for a bad-debt tax deduction.
• A court decision holding that sales allowances should be recognized based on the “total transactions during the settlement period” rather than on “individual transactions”, in a case where an online accommodation booking platform earned agency fees at a fixed percentage of gross sales, but received only the net amount after deducting discount coupons used by guests.
• A court decision finding a tax assessment unlawful for treating discounts offered to a contractor’s employees at an employee-discount store as entertainment expenses.
• A court decision holding that profits earned from operating an acquired business should be excluded when calculating the value of property donated as a result of a business transfer.
• A court decision revoking the tax authority’s rejection of in-kind payment, holding that the scope of “non-listed stocks, etc.” includes unlisted stocks issued by foreign corporations for the purpose of calculating the limit on in-kind inheritance tax payments.
• A court decision holding that no withholding tax may be imposed in Korea on consideration paid by a Korean subsidiary to its US parent company for distributing the parent’s software. The court reasoned that such consideration is paid for the purchase of products by the Korean subsidiary and therefore constitutes business income of the US parent company.
• A court decision holding that, even if related investment shares are succeeded in addition to those shares held as a controlling shareholder, the requirements for a qualified spin-off of a holding company under Article 82-2(3)2 of the former Presidential Decree of the Corporate Income Tax Law are satisfied.
• A court decision invalidating a tax assessment because the transactions of the comparable companies selected by the tax authority to determine the arm’s-length price were not sufficiently similar to the transaction at issue.
• A court decision holding that Korea had no right to tax under the Korea-Germany Tax Treaty, by characterizing the substance of the transfer of shares in a Korean corporation from a German parent to its German subsidiary during an internal restructuring as a “donation”, rather than a “sale”.
• A tax tribunal decision ruling that temporary or non-recurring dividends distributed for restructuring purposes should be excluded when calculating the net profit/loss value of unlisted shares under the supplementary valuation method of the Inheritance Tax and Gift Tax Law.
• A tax tribunal decision holding that, with respect to tax credits for the acquisition of shares in a technological innovation-oriented SME under the Special Tax Treatment Control Law, the credit should be granted for the entire equity interest. The tribunal reasoned that although the share purchase agreement and the share exchange agreement were executed on different dates, the shares were, in substance, acquired through a single transaction.

Global Minimum Tax – QDMTT

The Inland Revenue Board (IRB) has recently issued guidelines and updated frequently ask questions (FAQs) on the implementation of the domestic top-up tax (DTT) in Malaysia under the global minimum tax (GMT) framework. The documents provide extensive directions for multinational enterprise (MNE) groups within the scope of the GloBE model rules, clarifying DTT computation, accounting requirements, filing obligations and safe harbour conditions.

The DTT applies to constituent entities (CEs) located in Malaysia that belong to an MNE group meeting the EUR 750 million consolidated revenue threshold in the required testing period. The DTT liability is determined by including the income and covered taxes of all CEs of the MNE group that are in Malaysia, excluding government entities, international organizations, pension funds and certain investment-related entities.

The tax payable is based on the whole amount of the jurisdictional top-up tax, regardless of the ownership interests held in the CEs by any parent entity of the MNE group. The same treatment applies to minority-owned constituent entities (MOCEs), joint ventures (JVs) and JV subsidiaries in Malaysia.

The DTT must be computed based on the financial statements of the CE prepared in accordance with the Malaysian Financial Reporting Standards (MFRS) and/or the Malaysian Private Entities Reporting Standards (MPERS), and computed in Malaysian Ringgit, provided that:

• All CEs of the MNE group in Malaysia must have the same financial year as their ultimate parent entity (UPE).
• Each CE prepares its own financial statements that are required under any written law of Malaysia, or are audited by an approved company auditor.

If the above conditions are not met, the DTT must instead rely on the accounts and the financial accounting standards used for the consolidated financial statements (CFS) of the UPE, and computed in the presentation currency used in the UPE's CFS.

• The financial statements prepared under either MFRS or MPERS may be used to determine the financial accounting net income or loss for DTT computation purposes.
• Unaudited financial statements may also be used, provided that those accounts are also used for Companies Commission of Malaysia submissions or corporate income tax filings.
• In cases of mergers, acquisitions or liquidations, where the financial year-end for the relevant CE differs from the rest of the entities in the MNE group, the CE in Malaysia may still use local financial statements for DTT computation, subject to conditions.

The IRB confirms that to qualify for the transitional country-by-country reporting (CbCR) safe harbour (TCSH):

• The group must ensure that its CbC report is based on the group's qualified financial statements.
• An MNE group that fails to submit its CbC report will not be eligible for TCSH.

Each Malaysian CE of an MNE group must submit its DTT top-up tax return no later than 15 months after the end of the financial year or within 18 months for the transition year.

Tax Incentives under the New Incentive Framework

On 29 January 2026, the Ministry of Investment, Trade and Industry (MITI) announced the implementation of the New Incentive Framework (NIF), a tiered and outcome-based tax incentive approach, effective from 1 March 2026 onwards. The NIF was introduced by the Prime Minister during the Budget for 2026.

The NIF implementation will commence from 1 March 2026 for the manufacturing sector, and the services sector will follow in the second quarter of 2026.

The NIF implementation is guided by two key national strategies, namely the New Investment Policy based on National Investment Aspirations (NIA) and the New Industrial Master Plan 2030.

Types of tax incentives

Two primary tax incentives are offered under the NIF, which are mutually exclusive, whereby applicants are required to select one incentive for each qualifying project:

1. Special tax rate: A reduced corporate income tax rate for a specified period. Accumulated losses incurred during the STR period can be carried forward for seven consecutive years and be deducted from the company's post-incentive income.
2. Investment tax allowance: A capital expenditure-based incentive that allows a company to offset a percentage of qualifying capital expenditure (QCE) against its statutory income. This allowance is granted on QCE incurred within a specified period. Any unutilized allowance can be carried forward to subsequent years until fully utilised.

The selection of the incentive is final once the application is accepted by MIDA.

Categories of incentive

Companies are eligible to apply incentives based on the following categories, subject to fulfilling the requirement specified for the incentives:

The incentive will be granted based on the company's commitment and assessment using the NIA scorecard.

In tandem with the implementation of the NIF, new incentive applications for the manufacturing sector under the Promotion of Investments Act 1986 (PIA) will no longer be accepted, with the last application to be filed by 28 February 2026. However, existing approvals will not be affected and will remain valid according to their terms and conditions.

MIDA has also issued the FAQ and the NIF Implementation Guidelines for the manufacturing sector, which outline the eligibility criteria, NIA Scorecard assessment parameters, category of incentive and the application and evaluation processes.

Service Tax Reduction on Rental and Leasing Services

It was reported by the IBFD that the Ministry of Finance (MoF) has formally published the reduction of the service tax rate on rental or leasing services from 8% to 6%. This implements the policy decision previously announced by the Prime Minister and is reflected in the Royal Malaysian Customs Department's amended Service Tax Policy.

The Service Tax (Rate of Tax) (Amendment) Order 2026 (PU(A) 125/2026), gazetted on 13 March 2026, amends the First Schedule of the Service Tax (Rate of Tax) Order 2018 (PU(A) 213/2018) to prescribe a 6% service tax rate on the provision of rental or leasing services.

Although the amendment order was issued recently, it is effective retroactively from 1 January 2026.

Non-taxable Employee Benefits Thresholds Increased

As of 6 January 2026, the Bureau of Internal Revenue has increased the thresholds of certain de minimis benefits which are exempt from income tax on compensation and fringe benefits tax. The updated thresholds for non-taxable benefits, which can be found in Revenue Regulations (RR) 29-2025, are as follows:

• Monetized unused vacation leave credits of private employees not exceeding 12 days during the year (previously, 10 days).
• Monetized value of vacation and sick leave credits paid to government officials and employees (no change).
• Medical cash allowance to dependents of employees not exceeding PHP 2,000 per semester or PHP 333 per month (previously, PHP 1,500 per semester or PHP 250 per month).
• Rice subsidy of PHP 2,500 or one sack of 50 kg of rice per month not exceeding PHP 2,500 (previously, PHP 2,000).
• Uniform and clothing allowance not exceeding PHP 8,000 per year (previously, PHP 7,000).;
• Actual medical assistance not exceeding PHP 12,000 per year (previously, PHP 10,000).
• Laundry allowance not exceeding PHP 400 per month (previously, PHP 300).
• Employee achievement awards, in any form, with an annual monetary value not exceeding PHP 12,000 received by the employee under an established written plan which does not discriminate in favour of highly paid employees (previously, PHP 10,000).
• Gifts given during Christmas and major anniversary celebrations not exceeding PHP 6,000 per employee per year (previously, PHP 5,000).
• Daily meal allowance for overtime work and night/overnight shift not exceeding 30% of the basic minimum wage on a per-region basis (previously, 25%).
• Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incentive scheme provided that the total annual monetary value received from both CBA and productivity incentive schemes combined does not exceed PHP 12,000 per employee per taxable year (previously, PHP 10,000).

Tax Audits and the Introduction of the Single-Instance Audit Framework

On 27 January 2026, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) 8-2026 to immediately lift the suspension of tax audits and related field operations. In line with the resumption, the BIR issued Revenue Memorandum Order (RMO) 1-2026 prescribing its revised policies, controls and procedural guidelines for the conduct of tax audits.

Notably, RMO 1-2026 introduces the Single-Instance Audit Framework, whereby a taxpayer, as a general rule, will be subject to only one electronic Letter of Authority (eLA) for a given taxable year, covering all applicable internal revenue tax types, including VAT. The audit reform is part of the BIR's five-point priority reform and legacy agenda.

The framework is intended to prevent overlapping or fragmented audits, provide clear and consistent audit authority and promote fairness, transparency and accountability. In fraud cases, as an exception, an eLA may cover several years to facilitate the audit of transactions or schemes that span more than one year.

The RMO also notes that, in light of ongoing organizational structuring, functional realignment and reassignment of revenue officers and audit teams, as well as to support the implementation of the framework, starting from 4 March 2026, all pending eLAs with ongoing investigations covering the same taxpayer and taxable year will be automatically consolidated into one eLA, except where a request for non-consolidation is allowed and filed by the affected taxpayer. Where such a request is received from a taxpayer with multiple pending eLAs covering the same taxable year, the affected eLAs will be allowed to continue until 30 April 2026. Nevertheless, all pending eLAs will be automatically consolidated beginning 4 May 2026.

In this regard, the VAT Audit Sections (VATAS) and Large Taxpayers VAT Audit Units (LTVAU) will be abolished and will immediately begin winding up operations until 15 May 2026. They must transfer all documents, records, working papers and audit dockets relating to cases subject to consolidation or transfer to the designated handling office and review, organise and prepare ongoing audits and assessments for transfer to the appropriate offices of the BIR on or before 30 April 2026.

To ensure objectivity and integrity in the initiation of audits, the issuance of new eLAs will be governed by system-assisted taxpayer selection, defined criteria for audit selection (as provided for in Annex A of the RMO), and centralized approval. Meanwhile, all revenue officers authorized to conduct audits will be required to use a standard checklist of documents (Annex B of the RMO). Additional documents may be required only if they are (i) relevant to the specific issues identified in the audit, or (ii) reasonably necessary and within the authorized scope of the audit. The documentation of audit events and interaction with taxpayers will also be required.

Suspension or Reduction of Excise Tax on Petroleum Products

The President has signed into law a bill authorizing him to suspend the imposition of, or reduce the rates of, excise tax on petroleum products.

Under Republic Act 12316, the President may order a full suspension or partial reduction of excise taxes on specific petroleum products upon the recommendation of the Development Budget Coordination Committee, and in coordination with the Secretary of Energy, when the average Dubai crude oil price reaches or exceeds USD 80 per barrel for one month immediately preceding the issuance of the suspension or reduction order.

Any suspension or reduction will be effective for a period not exceeding three months, subject to an aggregate period not exceeding one year. The excise tax will automatically revert to the rates provided under section 148 of the National Internal Revenue Code 1 week after the one-month average price of Dubai crude oil falls below USD 80 per barrel, or when the three-month limit has ended, whichever occurs first.

Global Minimum Tax (Pillar Two)

In 2026, Singapore has taken yet another step towards implementing the Global Anti-Base Erosion (GloBE) rules. The Multinational Enterprise (Minimum Tax) (Administrative Matters) Regulations 2025 (Administrative Regulations) came into effect on the last day of 2025 and on the same day, the Inland Revenue Authority of Singapore (IRAS) launched a new registration webpage.

The new Administrative Regulations provide much-needed details on the operation of certain aspects of Singapore's Multinational Enterprise (Minimum Tax, MTT) Act 2024 (MTT Act) and domestic top-up tax (DTT) regimes, namely:

1. The qualifying conditions for a constituent entity (CE) of an in-scope MNE group that is located in Singapore to be designated as the MNE group's designated local GloBE information return filing entity (GFE) and designated local DTT filing entity (DFE) (sections 33 and 34 of the MMT Act);
2. The prescribed events which must be reported to the IRAS (section 35 of the MMT Act);
3. Record-keeping periods (section 37 of the MMT Act); and
4. Electronic service by the IRAS.

Interest payable by the IRAS pursuant to a refund (Section 60 of the MMT Act); and Sections 33 and 34 of the MMT Act are the provisions governing the designation of an in-scope MNE group's GFE and DFE, respectively. In particular, sections 33(1) and 34(1) of the MMT Act make reference to conditions that must be satisfied for a Singapore CE to be designated as a GFE or DFE, respectively, under the Act. With the enactment of the Administrative Regulations, the applicable GFE and DFE qualifying conditions are now set out in regulations 3 and 4 of the Administrative Regulations, respectively.

Section 35 of the MMT Act requires the ultimate parent entity (UPE) of in-scope MNE groups to inform the IRAS of the occurrence of certain prescribed events relating to such MNE groups within a prescribed time. Regulation 6 of the Administrative Regulations provides clarity on the types of events that fall under section 35 of the MMT Act, and clarifies that a report must normally be made within six months from the end of the FY of occurrence.

Section 37(1) of the MMT Act requires prescribed entities of in-scope MNE groups to keep and retain in safe custody the records that satisfy the requirement set out in section 37(2) of the MMT Act for a prescribed period. Regulation 7 of the Administrative Regulations set outs the applicable record-keeping periods for MTT and DTT purposes.

When a taxpayer is entitled to a refund of MTT or DTT from the IRAS regarding an Income Tax Board of Review decision, and the IRAS then proceeds to appeal against such a decision, the IRAS may withhold the refund amount pending the appeal decision, and in such a case, interest is payable by the IRAS at a prescribed rate in respect of the refund amount should the IRAS be unsuccessful in its appeal (sections 60(5) and (6) of the MMT Act). Regulation 8 of the Administrative Regulations states that the prescribed interest rate is set at 1.5% above the three-month compounded Singapore overnight rate average.

Finally, regulation 9 of the Administrative Regulations covers the mechanism underpinning the service of documents by the IRAS through electronic service.

The IRAS' newly-launched registration webpage is intended to aid in-scope MNE groups with meeting their registration obligations by clarifying the following:

Who must register?

• MNE groups that meet the terms of section 31(1) of the MMT Act:
  • Are in-scope of the MMT Act (i.e., those with consolidated group revenue that meet or exceed the revenue threshold of EUR 750 million for at least two out of four financial years (FYs) immediately prior to the relevant FY); and
  • Have at least one CE located in Singapore (including a joint venture (JV) or JV subsidiary located in Singapore and connected to such MNE groups), or a reverse hybrid entity established, formed, incorporated or registered in Singapore.
• A 10% surcharge on the MTT and/or DTT payable may be imposed on the UPE if an in-scope MNE group fails to comply with its registration obligations under section 31 of the MMT Act (sections 36(1) and (2) of the MMT Act).

When to register?

• The UPE of these MNE groups must normally register with the IRAS within six months from the end of the relevant FY (section 31(2) of the MMT Act).
• To illustrate, an in-scope MNE group with a FY from 1 January to 31 December 2025 must register with the IRAS by 30 June 2026, whereas an in-scope MNE group with a FY from 1 July 2025 to 30 June 2026 would only need to do so by 31 December 2026. Thus, the registration deadline of in-scope MNE groups would differ according to their FY.

How to register?

• Registration is submitted electronically by way of an online registration form, starting from May 2026 – a sample of the online registration form is available online.
• For further details on the information required for registration, the IRAS has helpfully prepared Explanatory Notes to the Registration Form to guide in-scope MNE groups through the registration process.
• Note that while the UPE of an in-scope MNE group is the entity that is statutorily responsible for registering with the IRAS, as a practical matter, it may appoint a CE of the MNE group that is located in Singapore or a local tax agent to register on its behalf. In such instances, the Singapore CE or the local tax agent (as the case may be) must submit the online registration form to the IRAS along with a copy of the Letter of Authorisation issued by the UPE.

What happens after registering?

• Where a complete set of information is submitted, the IRAS is expected to process the registration within one month from the date of receipt.
• Once the registration is approved, the IRAS would send copies of the letter of notification to:
  • For MTT: All responsible members located in Singapore; and
  • For DTT: All CEs, JVs, JV subsidiaries and excluded entities located in Singapore, and reverse hybrid entities established, formed, incorporated or registered in Singapore.

2025 has proven to be an eventful year for Singapore in the implementation of its GloBE rules and qualified domestic minimum top-up tax (QDMTT). The MMT Act and the Multinational Enterprise (Minimum Tax) Regulations 2024 came into operation on 1 January 2025 just as the IRAS issued the accompanying e-Tax Guide on the new multinational enterprise top-up tax (MTT)—Singapore's income inclusion rule or IIR—and DTT —Singapore's QDMTT.

E-Tax Guides

Participation exemption: The e-Tax Guide about the discretionary income tax exemption on dividends from foreign subsidiaries and infrastructure and REITs interest has been updated by the IRAS on 7 January 2026, by inserting a new section to clarify that the top-up tax under Pillar 2 (the global minimum tax QDMTT or any substantially similar tax) should be taken into account when determining the tax paid in a foreign tax jurisdiction and in Singapore respectively, whereas income under the income inclusion rule (IIR) and qualified UTPR (or substantially similar taxes) should not be taken into account. The new section also sets out that, for the purpose of determining the headline tax rate of the foreign tax jurisdiction, any QDMTT, qualified IIR, and qualified UTPR (or substantially similar taxes) should not be taken into consideration. The global minimum tax provisions have taken effect in many jurisdictions as from 1 January 2025 and in 2026 will be showing the first effects of it in the tax returns to be filed where a company is within scope of the global minimum tax provisions. This update ensures that the additional top-up tax paid abroad by a foreign subsidiary (or any of its lower-tier subsidiaries) will be taken into account as qualifying income for purposes of enjoying the tax exemption.

Automatic Exchange of Financial Information

On 2 February 2026, the Inland Revenue Authority of Singapore (IRAS) published the updated lists of participating and reportable jurisdictions for the purpose of the automatic exchange of financial account information under the CRS MCAA and Singapore's bilateral automatic exchange agreements.

In the updated list of reportable jurisdictions for the 2025 reporting period, Rwanda, Senegal and Uganda were added. Reporting Singapore Financial Institutions (SGFIs) should submit information for the 2025 reporting period by 31 May 2026.

Self-Employed Persons CPF Deduction

From Year of Assessment (YA) 2026 (i.e., calendar year/financial year 2025), self-employed persons (SEPs) will be allowed tax relief on the full amount of compulsory MediSave contributions made in the preceding year, without any capping restriction. In other words, SEPs will enjoy tax relief on the full amount of compulsory MediSave contributions made in the preceding year, even if they have no assessable net trade income for the YA.

The tax relief for the SEPs' voluntary CPF contributions will be calculated as follows:

Where the amount of compulsory MediSave contributions is more than 37% of net trade income, no amount is allowed on voluntary CPF contributions.

Where the amount of compulsory MediSave contributions is less than 37% of net trade income, the tax relief for voluntary CPF contributions for a YA would be capped at the lowest of:

• 37% of your net trade income assessed;*
• CPF annual limit of SGD 37,740;* and
• The actual amount of voluntary CPF contribution made by the SEP.

* Amount less tax relief allowed on compulsory contributions (excluding compulsory contributions as a platform worker who is mandated or opted in to increased CPF contributions).

GST - e-Invoicing

InvoiceNow is Singapore’s nationwide e-invoicing network. Introduced by the Infocomm Media Development Authority (IMDA) in 2019, InvoiceNow enables businesses to easily send and receive invoices in a structured digital format. This seamless process reduces errors and enables invoices to be processed more efficiently, thereby improving businesses’ productivity and cash flow.

As announced at the Ministry of Finance Committee of Supply (COS) Debate 2026, all GST-registered businesses will be required to onboard InvoiceNow and submit invoice data directly to Inland Revenue Authority of Singapore (IRAS) via the InvoiceNow network. This will be rolled out progressively from Apr 2028 to Apr 2031.

Currently, new voluntary GST registrants are already required to onboard InvoiceNow and submit their invoice data to IRAS in phases starting from Nov 2025.

For GST-registered businesses transitioning to InvoiceNow, the Government, through IMDA and IRAS, will provide additional support to keep onboarding costs low and manageable. 

For small and medium-sized enterprises (SMEs):

Free-of-charge InvoiceNow-Ready Solutions are available until Mar 2031.

A new grant of up to SGD 1,000 will be introduced for SMEs to defray any operational costs of adopting InvoiceNow-Ready Solutions.

SMEs can also tap on the existing Productivity Solutions Grant to defray up to 50% of the eligible software subscription costs.

For larger businesses:

• The progressive implementation approach provides businesses more time to sync the necessary updates with their software refresh cycles. 
• A new grant of up to SGD 5,000 will be provided for early adopters.

More details on the support provided will be released by IMDA and IRAS in due course.

International Tax Developments

Taiwan: On 13 February 2026, Singapore's tax treaty with Taiwan, signed on 31 December 2025, has entered into force. The agreement generally applies from 1 January 2027 for withholding and other taxes. The provisions of Article 26 (Exchange of Information) shall have effect from 13 February 2026 for information that relates to taxable periods beginning on or after 1 January 1982; or, when there is no taxable period, for all charges to tax arising on or after 1 January 1982.

Cambodia: A protocol to the tax treaty between Singapore and Cambodia went into force on 6 March 2026 and applies from 1 January 2027 for withholding and other taxes. The protocol amends the preamble of the treaty (which now stipulates that it should avoid double taxation and double non-taxation) and introduces a new article for Entitlement to Benefits, to incorporate the Base Erosion and Profit Shifting (BEPS) standards for combating treaty abuse.

Global Minimum Tax

Courtesy of IBFD, it was reported that on 30 December 2025, the Thai Cabinet approved in principle four draft secondary legislations that set out detailed rules for determining the scope of multinational enterprises (MNE) groups subject to the top-up tax, as well as for the adjustment of income, expenses, and covered taxes for the purpose of calculating the top-up tax, pursuant to the implementation of the Emergency Decree on Top-up Tax, with effect from 1 January 2026.

The approved draft secondary legislation consists of:

• A royal decree setting out criteria for determining whether a MNE group that has undergone corporate restructuring falls within the scope of the top-up tax;
• A royal decree prescribing entities that are not members of a corporate group;
• A ministerial regulation prescribing the criteria for allocating top-up tax received by Thailand in cases where no group entity located in Thailand has Global Anti-Base Erosion (GloBE) income; and
• A ministerial regulation establishing the rules for adjusting income, expenses, and covered taxes for top-up tax calculations, as well as the methodology for calculating the domestic top-up tax in Thailand.

The draft secondary legislation has been developed with reference to the GloBE Model Rules, related Commentary, and the Administrative Guidance issued by the OECD. This approach ensures consistency with practices adopted by other members of the OECD/G20 Inclusive Framework on BEPS.

VAT

Courtesy of The Legal Company in Thailand, it was reported that the Thai standard Value Added Tax (VAT) rate is subject to changes. Thailand’s current VAT framework originated as an economic relief measure. In B.E. 2542 (1999), the government issued the Royal Decree Issued under the Revenue Code on the Reduction of the Value Added Tax Rate (No. 353) B.E. 2542 (1999), reducing the VAT rate from the statutory rate of 10% to 7% (comprising 6.3% VAT and 0.7% local tax). This measure was introduced during the Asian financial crisis.

Although originally intended as a temporary measure, the reduced VAT rate of 7% has been continuously extended through successive Royal Decrees for more than two decades and has remained a core feature of Thailand’s VAT system.

In recent years, the Ministry of Finance has expressed concern that the continued application of the reduced VAT rate may prove inadequate to meet Thailand’s future fiscal obligations, including expenditures related to infrastructure development, social welfare programs, and public debt servicing. Additionally, Thailand’s VAT rate remains comparatively low relative to those of many other jurisdictions.

Based on current policy discussions, the Ministry of Finance is considering a phased adjustment of the VAT rate rather than an immediate increase. The indicative timeline under consideration includes:

• An increase in the VAT rate from 7% to 8.5% by 2028; and
• A further increase to 10% by 2030.

Tax Incentives

On 15 January 2026, the Government released Decree 20 providing guidance on certain provisions in Resolution 198/2025/QH15. Decree 20 took effect on 15 January 2026, except for certain clauses which are applicable for 2025 tax year or which took effect from the effective date of Resolution 198; i.e., 17 May 2025. The incentives target innovation and investments in innovative businesses.

Crypto Assets Taxation

Vietnam is developing a legal framework to implement a tax mechanism for the transfer of crypto assets and services related to crypto assets. The Ministry of Finance (MoF) released a draft circular proposing a tax framework for activities involving digital assets and tokenized assets. This policy initiative stems from Government Resolution No. 05/2025/NQ-CP, issued on 9 September 2025, which mandates that—until a dedicated tax regime for digital asset markets is enacted—tax policies for such assets should be applied in line with existing tax regulations governing securities. The draft circular is currently undergoing a public consultation process on the MoF's online portal.

The draft circular details three main tax policies—on corporate income tax, personal income tax and value added tax—which are summarized below.

Investors that are organizations established and operating under Vietnamese law and deriving income from the transfer of tokenized assets must declare and pay corporate income tax (CIT) at a rate of 20%, except in cases qualified for lower CIT rates of 17% and 15% as specified in Article 10(2) and (3) of the CIT Law 2025.

Taxable income from tokenized asset transfers is calculated as the selling price minus the acquisition price and legitimate transfer‑related expenses.

Enterprises providing tokenized asset services are likewise subject to a 20% CIT rate, except in cases qualified for lower CIT rates of 17% and 15% as specified in article 10(2) and (3) of the CIT Law 2025.

Foreign organizations conducting tokenized asset transfers through a licensed service provider in Vietnam must pay CIT at 0.1% of gross proceeds for each transfer.

Individual investors—both resident and non-resident—who transfer crypto assets via a licensed service provider must pay personal income tax (PIT) at 0.1% of the gross transfer proceeds per transaction. This follows the same tax mechanism currently applied to securities transactions.

The transfer and trading of digital assets fall under the category of non-VAT taxable activities. Services not explicitly covered under this exemption will remain subject to VAT following the general VAT regulations.

The proposed tax framework provides a structured, interim mechanism for managing the taxation of tokenized asset transactions. By applying securities-based tax principles, the MoF aims to create legal certainty, support compliance, and facilitate the healthy development of Vietnam's emerging digital asset market.

Clarification on Foreign Contractor's Tax

On 12 March 2026 the Ministry of Finance (MOF) issued Circular 20/2026/TT-BTC (“Circular 20”) elaborating several articles of the Law on Corporate Income Tax (CIT) and Decree 320/2025/ND-CP.

Circular 20 provides detailed guidance on the following matters:

• Prescribed acceptable documentation of deductible expenses as provided in article 9(1)(b) and (c) of the Law on CIT;
• Prescribed dossiers for tax incentives in certain cases stipulated under articles 4, 13, 14 and 15 of the Law on CIT;
• Timing of determining taxable revenue for CIT in certain cases as provided in article 8(2)(c) and article 12(3) of Decree 320/2025/ND-CP;
• Prescribed dossiers of tax declaration and payment for enterprises deriving income from overseas investment projects;
• Determination of taxable income of foreign enterprises conducting business in Vietnam subject to the foreign contractor's tax (FCT); i.e., FCT-CIT.;
• Notification requirement for expansion investment projects of enterprises eligible for a tax holiday; and
• Tax liability when fixed assets formed from an enterprise's Science and Technology Development Fund for scientific and technological research activities that are not fully depreciated are used for another purpose.

Corporate Income Tax of Foreign Contractors and Foreign Subcontractors in Vietnam

Foreign contractors and foreign subcontractors including foreign enterprises with or without a permanent establishment in Vietnam, as well as enterprises engaged in e-commerce or digital platform-based businesses in Vietnam (hereinafter collectively referred to as foreign contractors) are taxable in Vietnam if they fall under the cases prescribed in Circular 20. Notably, income tax will be assessed on the total revenue received by a foreign contractor, before deducting any taxes payable and including any expenses paid by the Vietnamese party on behalf of the foreign contractor. This approach differs from that under the old guidance under Circular 103/2014 on the same topic, which excludes VAT. This change may lead to the enforcement of the requirement that taxable revenue for FCT-CIT will equal the taxable revenue for FCT-VAT, resulting in an increase in FCT-CIT payable compared with the previous calculation method.

The relevant FCTCIT provisions on the hybrid method set out in Circular 103/2014 are abolished, except for contracts entered into prior to the effective date of this Circular (i.e., 12 March 2026). In such cases, the determination of the FCTCIT obligation will continue to be carried out in accordance with the legal provisions in effect at the time the contract was signed.

Notification Requirement for Expansion Investment Projects

Enterprises enjoying tax incentives that undertake expansion investment projects must submit a written notification to the relevant tax authority regarding the registered investment capital of the expansion project. The deadline for submitting this notification is the same as the deadline for filing the corporate income tax finalization return for the year in which the expansion investment project is implemented. During the course of implementing the expansion investment project, further notification is also required if the enterprise makes any changes to the registered investment capital.

Application of Capital Gains Tax Exemption to Intra-Group Restructuring Transactions

Foreign enterprises that implement intragroup restructuring transactions (such as company division, separation, merger, consolidation, share swaps, capital contribution by shares, profit or dividend distribution in shares or other ownership transfers involving enterprises in Vietnam) through capital transfer are exempt from Capital Gains Tax (CGT) provided they do not generate taxable income and there is no change in the ultimate parent company holding direct or indirect ownership in the Vietnamese enterprise.

Such capital transfers are deemed non-income-generating only if all of the following conditions are met:

• The ultimate beneficial owner remains unchanged;
• The transfer value does not exceed the original book value or the original contributed capital;
• The transaction does not create a valuation difference;
• The value recorded in the approved restructuring documents must not exceed the value at the time of transfer; and
• The transferee takes over the full capital value, obligations and rights related to the investment from the transferor.