Asia Tax Bulletin Spring 2019 - Mayer Brown
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Asia Tax Bulletin Spring 2019
In This Edition
We are pleased to present the Spring 2019 edition of
our firm’s Asia Tax Bulletin.
The past few months have witnessed some having a liaison office in the country, showing
important tax changes, which are included in that India takes the permanent establishment
this edition of the Bulletin. I merely wish to risk very seriously.
highlight the following developments as
Indonesia updated its transfer pricing and
being of particular interest to many of our
information requirements for annual corporate
clients. Hong Kong, India and Singapore
income tax returns by requiring additional
issued their proposed tax changes for the
CHICAGO
SAN FRANCISCO
current year in their respective governments’
NEWinformation
YORK to be disclosed in the returns. BEIJING
PALO ALTO WASHINGTON DC
In Japan, the multilateral instrument entered
budget proposals.
CHARLOTTE
into force, which introduces additional TOKYO
LOS ANGELES
China introduced an individualHOUSTON
income tax anti-avoidance issues that must be addressed SHANGHAI
reform which took effect on 1 January 2019. in order to enjoy tax treaty benefits. South
DUBAI HONG KONG
In the first quarter of 2019, the Chinese Korea’s Supreme Court issued a ruling on the HANOI
MEXICO CITY
authorities issued various implementing rules application of gear on beneficial ownership,
to clarify certain aspects of the tax reform. and Thailand replaced its headquarters, BANGKOK
It is good to note that foreign individuals treasury and trading tax incentives with a HO CHI MINH CITY
AMERICAS
living in China will continue to enjoy the
offshore source exemptions which they had
new tax incentive regime called International
Business Centre (IBC). SINGAPORE
prior to 2019 if they meet the foreign travel
We hope you will enjoy reading this Bulletin
requirement at least once every six years
and that you will find it useful. Please let
(which used to be five years). China also carried
us know *if you need assistance with Asian
BRASÍLIA
through a second instalment of reducing its
tax matters.
two highest VAT rates. We expect a third RIO DE JANEIRO*
reduction to happen towards the last quarter With kind regards,
SÃO PAULO*
of the year.
Pieter de Ridder
Hong Kong enacted legislation which will see *TAUIL & CHEQUER OFFICE
qualifying tax-exempt funds managed in Hong
Kong coming on par with their Singapore
equivalents, showing that Hong Kong is busy
catching up with Singapore on vital business
Pieter de Ridder
sectors for its economy. India’s Supreme Court Partner, Mayer Brown LLP
issued an important ruling on permanent +65 6327 0250
establishment risks caused by foreign investors pieter.deridder@mayerbrown.com
2 | Asia Tax Bulletin MAYER BROWN | 3
Contents
China India Japan Singapore
6 Individual Income Tax Reform 16 Interim Budget 2019 23 Multilateral Convention Enters into Force 31 Budget 2019
8 Tax Treatment of Individual Partners of 17 Indian Stamp Act, 1899 23 Pre-Brexit Merger between UK 32 Certificate Of Residence (COR)
Venture Capital Enterprise Subsidiary and Dutch Subsidiary
17 GST on Residential Property Considered Tax-Qualified Merger 32 Public-Private Partnership
9 Fees for Tax Withholding and
18
Arrangements
Collection Agents Stamp Duty 24 International Tax Developments
33 Foreign Exchange Gains or Losses for
9 Significant Amendments 18 Extension Granted for Filing GST Annual Businesses
Return for Year 2017/18
10
to VAT
Farmland Use Tax 11 Local Company and Liaison Office of
Korea 33 International Tax Developments
25
Taiwan
Overseas Group Constitute PE in India
11 New Foreign Investment Law
Supreme Court Rules on Application
12 International Tax Developments
19 International Tax Developments
of GAAR on Beneficial Ownership
26 International Tax Developments 34 Fixed Assets Written Off before End of
Service Lives to be Reported
Hong Kong Indonesia
20 Malaysia Thailand
13 Tax-Exempt Funds Managed in Hong
Foreign Tax Credit
Kong
21 Transfer Pricing Information in the
27 Withholding Tax on Special Classes
35 International Business Centre
of Income
13 Budget 2019 Tax Return
35
21 28 Professional Indemnity Insurance
Land and Building
14 Automatic Exchange of Information
Tax Free Asset Transfers
36
21 28 Director’s Liability
Tax Amnesty Programme for SMEs
14 Tax Deductions for Annuity Premiums
Tax Deductions of Benefits In Kind Paid to
28
and MPF Voluntary Contributions
22
Employees Digital Business Taxation for
Overseas Vendors Vietnam
14 Peer Review of Hong Kong’s Tax
Tax Holiday
37
Transparency 22 International Tax Developments
International Tax Developments
15 Stamp Duty Exemption Philippines
15 International Tax Developments 30 International Tax Developments
4 | Asia Tax Bulletin MAYER BROWN | 5
Individual Income • Tax treatment of stock incentive scheme
granted by listed companies.
amount of the payment does not exceed three
times the local average salary in the preceding
Tax Reform Before 31 December 2021, the total amount of
year. The excess may be taxed separately.
annual income from stock incentives, such as Lump-sum payments due to early retirement
Individual income tax was substantially stock options, stock appreciation, restricted may be divided by the number of years
reformed in 2018. On 27 December 2018, shares and stock awards, may be calculated between the early retirement and mandatory
the Ministry of Finance (MoF) and the State and taxed as a separate monthly salary to retirement age and taxed separately. Lump-
Administration of Taxation (SAT) jointly which the rate table for comprehensive sum payments due to internal semi-retirement
issued a circular (Circular [2018] No. 164) income applies. The tax payable is may be divided by the number of months
JURISDICTION: clarifying the measures on individual calculated as follows: between the internal semi-retirement and
income tax during the transitional period mandatory retirement age and added to the
China (PRC)
until 1 January 2022. The measures >> Tax payable = (income from stock incentive
monthly salary received as prescribed in SAT
apply from 1 January 2019 and are scheme x applicable tax rate) – quick
Notice [1999] No. 58 and taxed accordingly.
summarised below. calculation deduction
• Tax treatment of employee benefit on acquiring
• Tax treatment of year-end bonus and • Tax treatment of commissions received by
a residential property at low price.
other performance-related annual insurance agent or broker.
remuneration. The benefit (the difference between market
Income received by an insurance agent or a
price and the actual price paid) from acquiring
Subject to certain conditions (which are stock broker is regarded as personal services
a residential property at a low price may be
laid down in Circular [2005] No. 9), income and may be taxed as part of
divided by 12 and taxed separately.
year-end bonuses derived by a resident comprehensive income. The taxable income is
individual may be calculated and taxed calculated as follows: • Tax treatment of benefits in kind for
as a separate monthly salary before 31 foreign workers.
>> Taxable income = income received
December 2021. (excluding VAT) - deemed expenses (20% of From 1 January 2019 to 31 December 2021,
The tax payable is calculated as follows: the income received) - deemed cost - foreign individuals resident in China may
additional taxes and fees. choose to apply special additional deductions
>> Tax payable = [(the total lump-sum or benefits in kind under the benefit scheme
year-end bonus/ 12) x the applicable >> 25% of income received (excluding VAT)
prior to 1 January 2019. Once the choice is
tax rate (see the rate table below)] less deemed expenses is considered to be
made, it may not be altered within one year.
– quick calculation deduction. deemed cost.
From 1 January 2022, the benefit scheme prior
>> An appointed withholding agent is to 1 January 2019 for foreign individuals will be
Taxable Monthly Income
Rate on Excess (%)
required to withhold the tax when abolished and foreign individuals working in
(CNY) – (year-end bonus/12)
paying commissions to an insurance China may enjoy special additional deductions,
agent or broker. the same as Chinese individuals.
0 – 3,000 3
3,001 – 12,000 10 • Tax treatment of annuities.
12,001 – 25,000 20 When an employee reaches the pension age
25,001 – 35,000 25 and receives an annuity from his former
35,001 – 55,000 30 employer or an occupational annuity, the
55,001 – 80,000 35 payment received may be taxed separately on
a monthly or annual basis, depending on
over 80,000 40
whether it is paid in monthly, quarterly or
annual instalments.
However, a resident individual
taxpayer may elect to include • Tax treatment of lump-sum payment due to
year-end bonuses in comprehensive dismissal, early retirement or internal
income and to be taxed accordingly. semi-retirement.
From 1 January 2022, it will be Lump-sum payments (including financial
compulsory to include year-end compensation, subsistence payment and other
bonuses and other performance- allowances) due to dismissal from employment
related remuneration in are exempt from individual income tax if the
comprehensive income.
6 | Asia Tax Bulletin CHINA (PRC) MAYER BROWN | 7
Tax Treatment of Individual Taxable income and IIT payable are determined
as follows:
Except for the above deductible costs and
expenses, other expenses incurred by the single
agents that have been assigned to collect taxes.
Unless specifically prescribed by law or
Partners of Venture Capital • Gains on the transfer of shares:
investment fund, including management fees and administrative regulations, fees paid to agents
performance remuneration of investment fund are limited and/or capped at a maximum amount.
Enterprise >> A single investment fund, including a managers, are not deductible in calculating
venture capital enterprise, may invest in taxable income. Tax Limitation Cap
On 10 January 2019, the Ministry of Finance, the many projects. The gains or losses of a Income tax 2% of the rax CNY
Annual enterprise income method: the income
State Taxation Administration (previously the State project from a transfer of shares refer to the withheld 700,000
derived by individual partners from venture capital The following limitations apply: a year
Administration of Taxation), the National net proceeds (sale proceeds of the shares
enterprises is subject to IIT as business income at Vehicle and vessel tax 3% of the tax None
Development and Reform Commission (NDRC) and minus the original value) plus the taxes and
progressive rates ranging from 5% to 35%. Taxable payable
the China Securities Regulatory Commission (CSRC) fees associated with the transfer. The annual
income and IIT payable are determined as follows:
jointly issued Circular [2019] No. 8, clarifying the tax gain or loss of the single investment fund is Consumption tax 2% of the tax None
treatment of individual partners of venture capital calculated as the sum of the gains and • The income of the individual partner is the consigned processing payable
(no fee payment is
enterprises. The Circular applies from 1 January losses of all projects in which the fund has proportion of the venture capital enterprise’s allowed where the
2019 to 31 December 2023. invested. An annual gain is subject to IIT, income attributable to the individual partner. principal and the agent
while an annual loss is deemed as zero The venture capital enterprise’s income is are related)
A venture capital enterprise may choose one of two
and may not be carried forward to the calculated as the gross revenue of the tax year Vehicle purchase tax None CNY 15 per
methods to determine the individual income tax
following years. less allowable costs, expenses and losses vehicle
(IIT) on income derived by individual partners from
related to the business. Stamp duty collected 0.03% of the CNY 10
the venture capital enterprise, i.e. the single >> The IIT payable by an individual partner is
by security company duty payable million a
investment fund method or the annual enterprise calculated based on the gain derived by the • If the requirements for venture capital year
income method. For the purpose of the Circular, individual partner from the annual gains of enterprises and individual angel investors, as
Sale of stamps for 5% of the None
the term “venture capital enterprise” means any the single investment fund and is withheld laid down in Circular [2018] No. 55, are met, an stamp duty purposes amount of the
partnership or fund that is registered and operates by the venture capital enterprise before 31 individual partner will be granted a tax stamps
in compliance with the provisions stipulated in the March of the following year. If the deduction of 70% of the investment amount of Taxes collected by 3% of the tax None
Administrative Measures on Venture Capital requirements for venture capital enterprises the project transferred. If the allowable postal services collected
Enterprises (Order No. 39 of the NDRC) or the and individual angel investors, as laid down deduction cannot be fully utilised in a tax year, Tax collected by 5% of the tax None
Provisional Regulations on the Supervision and in Circular [2018] No. 55, are met, the the balance amount may be carried forward to markets or individuals collected
Management of Private Equity Funds (Order No. individual partner will be granted a tax the following tax years.
105 of the CSRC). deduction of 70% of the investment amount The circular provides that one tax authority is not
• In calculating taxable income, an individual
of the transferred project. If the allowable allowed to pay fees to another tax authority for the
A venture capital enterprise may not change the partner who does not receive comprehensive
deduction cannot be fully utilised in a tax collection of taxes. The payment of the fees must
method of calculating the IIT payable within three income (i.e. wages/salaries, income from
year, the balance amount may not be be settled on an annual basis. In order to obtain the
years from the time that the method is chosen. independent personal services, royalties and
carried forward to the following tax years. fees, the withholding or collection agent must
If a venture capital enterprise chooses the single author’s remuneration) can deduct from
submit the required information to the tax authority
investment fund method, it is required to file the • Dividends and profit distributions: business income the standard deduction,
before 30 March of the following tax year.
method with the competent tax authority; special deduction, additional deduction and
>> The income of the single investment fund is
otherwise the annual enterprise income method other deductions determined by the State The circular takes effect as from the date of
calculated as the sum of dividends, profit
will apply. If a venture capital enterprise intends to Council. All business income received by the promulgation. On that same date, the Circular on
distributions and income from fixed-
change the method, it must re-file it with the individual partner from different businesses Further Strengthening of the Commission
income securities of all projects in which the
competent tax authority before 31 January of the should be aggregated for IIT purposes. Management of Withholding Tax (Circular Cai Han
fund has invested.
year following three years from the time of [2005] No. 365) and the Circular on the Withholding
choosing the method being used. >> The IIT payable by an individual partner is Tax Commission of Insurance Company (Circular
calculated based on the income derived Fees for Tax Withholding Cai Han [2007] No. 695) will be abolished.
Single investment fund method: the single
investment fund method is used only for the
by the individual partner from the income and Collection Agents
of the single investment fund and is
purpose of calculating the IIT payable of the
withheld by the venture capital enterprise Significant Amendments
individual partners of venture capital enterprises. On 2 February 2019, the Ministry of Finance, the
Gains on the transfer of shares, dividends and
upon payment.
State Taxation Administration (formerly known as to VAT
profit distributions derived by individual partners the State Administration of Taxation) and the
from the funds they invested in are taxed at a flat People’s Bank of China jointly issued a circular Following the decision of the State Council and in
rate of 20%. (Circular Cai Han [2019] No. 11) (the circular) conformity with the overall policy on tax cuts, the
clarifying the rules on fees that have to be paid by Ministry of Finance, the State Taxation
the tax authority to tax withholding and collection Administration and General Custom Administration
8 | Asia Tax Bulletin CHINA (PRC) CHINA (PRC) MAYER BROWN | 9
jointly issued a circular on 20 March 2019 (Circular
[2019] No. 39) announcing the amendments to VAT
Farmland Use Tax The FUT may be increased by up to 50% of the
applicable FUT in relevant provinces, autonomous
that make direct or indirect investments in
China, including establishing a foreign
which will apply from 1 April 2019. regions or municipality where the farmland is less investment enterprise (alone or together with
The Law on Farmland Use Tax of the People’s than 0.5 mu per capita and in the case of the use other partners), acquiring an interest such as
The 16% VAT rate currently applicable to general Republic of China (FUT) was passed by the of farmland that is protected from use other than shares or participation in a Chinese enterprise
VAT taxpayers will be reduced to 13%, whilst the Standing Committee of the People’s Congress and as farmland. or making investments in a new investment
13% VAT will be reduced to 9%. Correspondingly, promulgated on 29 December 2018. The Law will project. A foreign investment enterprise is
the VAT export refund rates will be respectively take effect from 1 September 2019 and on the FUT is exempt if the farmland is used:
referred to as an enterprise that is wholly or
reduced from 16% to 13% and from 13% to 9%. same date, the Interim Regulations on the Farmland • for the purposes of military facilities, schools, partly invested in by foreign investors and
Input tax credit for VAT taxpayers purchasing Use Tax of the People’s Republic of China, which kindergartens, social welfare institutions, and established and registered in China in
agricultural products will be adjusted from 10% to was issued by the State Council on 1 December medical institutions; accordance with Chinese laws and regulations.
9%, and for those purchasing agricultural products 2007, will be abolished. As regards the legal forms of business
• by rural residents who meet certain conditions
for production or contract processing will be 10%. Entities or individuals that use farmland to organisation used to carry out the investment,
to build their own homes;
Input VAT on purchases made by real estate construct buildings or structures, or engage in the Company Law and the Law of Partnership
companies, including any remaining input VAT from non-agricultural constructions, are subject to the • for farmland irrigation construction; and will apply.
the previous period, may be offset against output Farmland Use Tax (FUT). The tax base of the FUT is • for agricultural production. • Foreign investment is not allowed in projects or
VAT in the current period, as opposed to the the farmland actually occupied by the taxpayer and sectors listed in the “negative list” which is
current rule that input VAT deduction must be the tax is levied on a one-off basis. FUT is reduced in the following cases:
issued by the State Council. Foreign investment
spread over two years. Input tax on domestic
Depending on the population density of the • CNY 2 per m2 applies to the use of farmland for in sectors such as banking, insurance, and
passenger transport services purchased by VAT
farmland location, the FUT varies from place to railways, highways, airport runways or aprons, security is subject to relevant laws and
taxpayers may be offset against output VAT. The
place. The local government has the discretion to ports, water channels, hydraulic engineering regulations. Further, foreign investment is
circular specifies that ordinary invoices or tickets
determine the tax amount per square metre within projects; and subject to the scrutiny of antitrust law and the
may be used if no special VAT invoice is available.
the ranges below: Regulations on National Security.
• in certain other cases, FUT may be reduced
From 1 April 2019 to 31 December 2021, the
Local Population Density
FUT (CNY per with the approval of the local government, but • Foreign investors will be granted national
allowable input VAT in the current period may be
(x mu* per capita) m farmland)
2 the reduction is limited to 50% of the treatment but are also entitled to treatment
increased by 10% for VAT taxpayers engaged in
applicable FUT. under an international treaty or agreement that
manufacturing or lifestyle services. Any “increased” Less than 1 mu 10-50
is more favourable than the national treatment.
input VAT that cannot be offset due to insufficient More than 1 but less than 2 mu 8-40 The tax authority is responsible for the collection of
The Law expressly states that foreign investors
output VAT can be carried over to the following More than 2 but less than 3 mu 6-30
FUT. The tax liability arises on the date on which
must be equally treated in government
periods. Once the taxpayer elects to apply VAT More than 3 mu
the taxpayer receives a notice from the local natural
5-25 procurement activities and participation in
super deduction, the choice may not be changed resource government department to start the
* One mu approximately equals 0.0777 hectare. standardisation. Foreign investors may not be
within one year. Whether the VAT super deduction application for the use of farmland. The taxpayer
dispossessed of their investment in China.
can be applied in the subsequent years depends However, a minimum tax (average tax amount) must file the return and pay the FUT within 30 days
Where expropriation is necessary in special
on the turnover of the preceding year. The VAT applies to the province, autonomous region or of the notice. The local relevant government
circumstances, foreign investors must be fairly
super deduction does not apply to export of goods municipality as mentioned below: departments in charge of natural resources are
compensated. Foreign investors are permitted
or services and cross-border taxable events. required to provide the tax authorities with
Province, Autonomous Average Tax Amount to transfer funds abroad or bring funds in for
information on the use of farmland.
The VAT refund for foreign passengers leaving Region or Municipality (CNY per m2) purposes of profit repatriation, returns of
China will be reduced from 13% to 11%. Where the investment, capital gains, capital contribution,
Shanghai 45.0
current refund rate is 9%, the refund rate will be
Beijing 40.0
New Foreign Investment Law payments of royalties and lawful compensations
reduced to 8%. From 1 April 2019, the tax authority in foreign or Chinese currency. Also, foreign
will introduce refunds of non-offset input VAT that Tianjin 35.0 investors are permitted to issue shares, bonds
On 15 March 2019, China published its Foreign
has been increased after March 2019 (currently, Jiangsu, Zhejiang, Fujian, or raise capital in other forms. The Law firmly
Guangdong 30.0 Investment Law (the Law) which will take effect on 1
input VAT can in principle only be offset against states that intellectual properties and
January 2020 and replace the current Law on
output VAT). Non-offset input VAT can only be Liaoning, Hubei, Hunan 25.0 commercial secrets will be protected and
Wholly Foreign-Owned Enterprises, the Law on
refunded at the request of VAT taxpayers if certain Hebei, Anhui, Jiangxi, foreign investment enterprises and foreign
Shandong, Henan,
Chinese-Foreign Equity Joint Ventures and the Law
conditions are satisfied. The conditions include, 22.5 investors will not be forced by government
Chongqing, Sichuan on Chinese-Foreign Cooperative Joint Ventures.
among others, that the increased non-offset VAT officials to transfer technology when making
Guangxi, Hainan, Guizhou, The Law contains six chapters and 42 articles; its
within six months exceeds CNY 500,000 and the 20.0 investments in China. Local governments are
Yunnan, Shanxi main provisions are summarised below.
VAT taxpayer applying for the refund is rated as urged to fulfil the terms and conditions of the
Shanxi, Jilin, Heilongjiang 17.5
an A or B taxpayer (under a credit system for • The Law applies to foreign investors contracts concluded with foreign investors and
Inter Mongolia, Tibet, Gansu, (enterprises, individuals or other organisations)
taxpayer behaviour). 12.5 honour any promises made. Foreign investors
Qinghai, Ningxia, Xinjiang
10 | Asia Tax Bulletin CHINA (PRC) CHINA (PRC) MAYER BROWN | 11
will be consulted in advance in respect of the
introduction or amendment of (new) laws and
Tax-Exempt Funds
regulations relevant to foreign investment Managed in Hong Kong
enterprises. A complaints and appeal
mechanism will be established for foreign On 20 February 2019, the Inland Revenue
investment enterprises in cases where their (Profits Tax Exemption for Funds)
rights are infringed and their problems are not (Amendment) Bill 2018 was passed by the
dealt with. Legislative Council to provide profits tax
• In addition to observing the rules on business exemption on qualifying income for eligible
JURISDICTION: onshore and offshore funds managed
registration and licences, labour protection,
social security insurances, accounting and through fund management companies in
Hong Kong
taxation, etc., foreign investment enterprises Hong Kong. The Bill also seeks to address
are required to set up a workers’ union and the concerns of the Council of the European
provide information on their investment to the Union over the ring-fencing features of
government agency in charge. Failure to Hong Kong’s tax regimes for privately
provide such information will result in a fine of offered offshore funds and enhance
between CNY 100,000 and CNY 500,000. competitiveness of Hong Kong’s tax
regimes by creating a level playing field
• If Chinese outbound investment is for all funds operating in Hong Kong.
discriminated in a foreign country or region, The new tax regime will come into
foreign investment from that country or region operation on 1 April 2019. We refer to
can be similarly treated on a reciprocal basis. the previous edition of this tax bulletin for
Depending on development needs, China may more details. In essence, the new law
establish “special economic zones” or provides profits tax exemption on gains
designate specific regions where foreign derived from the sale of shares by offshore
investment is encouraged and special policies or onshore funds managed by a qualifying
or incentives are trialled. Foreign investment fund management company in Hong Kong.
enterprises operating as wholly foreign-owned It applies to both closely held and open-
enterprises, a Chinese-foreign equity joint ended private equity funds and brings
venture or a Chinese-foreign cooperative joint Hong Kong closer to (and in many respect
venture may continue to conduct business in on par with) Singapore as the jurisdiction
these forms for up to five years after 1 January of choice for investment funds.
2020. The State Council will announce detailed
rules for this transitional period.
Budget 2019
International Tax The Budget for 2019/20 was presented to
Developments the Legislative Council by the Financial
Secretary on 27 February 2019. The tax-
LUXEMBOURG related proposals require legislative
On 1 May 2019, China’s Social Security Agreement amendments before implementation. Once
with Luxembourg has entered into force. The enacted, the amendments will apply from 1
agreement generally applies from 1 May 2019. April 2019. The main proposals include:
• a one-off tax reduction of 75% on
ITALY
profits tax, salaries tax and tax under
On 23 March 2019, China and Italy signed an personal assessment for the year of
income tax treaty in Rome. Once in force and assessment 2018/19, subject to a
effective, the new treaty will replace the current maximum of HKD 20,000 per case; and
China-Italy Income Tax Treaty.
• a waiver of business registration fees for
2019/20.
12 | Asia Tax Bulletin CHINA (PRC) MAYER BROWN | 13
Automatic Exchange of salaries tax and personal assessment for their
premiums paid to qualifying deferred annuities and
Hong Kong falls short when it comes to scope of
application and the definition of beneficial owners,
MALTA
A competent authority arrangement on the
Information contributions made to tax deductible Mandatory the report says. exchange of country-by-country (CbC) reports
Provident Fund (MPF) voluntary contribution between Hong Kong and Malta has been
accounts. The maximum tax-deductible limit for a
The Inland Revenue (Amendment) (No. 2)
taxpayer is HKD 60,000 per year.
Stamp Duty Exemption signed. Further developments will be reported
as they occur.
Ordinance 2019 (Amendment Ordinance) was
gazetted by the government on 1 March 2019. Under the new arrangement, a taxpayer can claim a
The Securities and Futures (Amendment) Ordinance
The legislative framework of automatic exchange tax deduction for deferred annuity premiums GUERNSEY
2016 took effect from 30 July 2018 to provide
of financial account information in tax matters covering the taxpayer’s spouse as joint annuitant, On 9 January 2019, the Guernsey-Hong Kong
stamp duty exemption for the sale and purchase of
(AEOI) under the Inland Revenue Ordinance (Cap. or either the taxpayer or the taxpayer’s spouse as a Competent Authority Agreement on the Exchange
Hong Kong stocks in consideration of the allotment
112) (IRO) will be refined with effect from 1 January sole annuitant. A taxpaying couple is allowed to of Country-By-Country (CbC) Reports was signed in
or redemption of shares or units of an authorised
2020 for better aligning the relevant provisions allocate tax deduction for deferred annuity Paris. In accordance with Section 8 (Term of
open-ended collective investment scheme.
with the requirements promulgated by the OECD. premiums between themselves in order to claim Agreement), paragraph 1, the agreement became
total annual deductions of HKD 120,000, provided According to the Securities and Futures Ordinance, effective on the date of signature.
The Amendment Ordinance requires Mandatory
that the deduction claimed by each taxpayer does an open-ended collective investment scheme
Provident Fund Schemes, Occupational Retirement
not exceed the individual limit. Tax-deductible MPF means a collective investment scheme whose GEORGIA
Schemes registered under the Occupational
voluntary contributions are subject to “preservation shares or units may be repurchased or redeemed
Retirement Schemes Ordinance (Cap. 426), pooling The free trade agreement between Georgia and
requirements”, meaning that the accrued benefits at the request of any of its shareholders or
agreements, approved pooled investment funds Hong Kong, signed on 28 June 2018, entered into
can be withdrawn only upon reaching the age of 65 unit holders:
and credit unions to comply with the due diligence force on 13 February 2019.
and reporting obligations relating to AEOI starting or based on statutory grounds.
• at a price calculated wholly or mainly by
from year 2020. If members of the institutions reference to the net asset value of the KOREA, JAPAN, NETHERLANDS AND
concerned are tax residents of the reportable Peer Review of Hong Kong’s scheme; and NEW ZEALAND
jurisdictions, such institutions are required to report According to an update of 18 January 2019,
for the first time to the Inland Revenue Department Tax Transparency • in accordance with the frequency for
repurchase or redemption, requirements and
published by the Hong Kong Inland Revenue
(IRD) the financial account information of the Department, Hong Kong signed a competent
procedures set out in the offering document
relevant members (covering the year 2020) for The Global Forum on Transparency and Exchange authority arrangement on the exchange of country-
or constitutive documents of the scheme.
transmission to the relevant tax authorities in the of Information for Tax Purposes on March 18 by-country (CbC) reports with Korea, Japan, the
year 2021. released peer reviews for Hong Kong, Netherlands and New Zealand, respectively.
In addition, Hong Kong’s network for tax Liechtenstein, Luxembourg, the Netherlands, International Tax
North Macedonia, Spain and the Turks and AUSTRALIA
information exchange has been expanded since the
Caicos Islands. The reports assess compliance with Developments On 26 March 2019, Australia and Hong Kong signed
Convention on Mutual Administrative Assistance in
Tax Matters came into force in Hong Kong on 1 the international standard governing transparency an investment protection agreement (IPA) in
September 2018. The Amendment Ordinance and exchange of information on request (EOIR). Sydney. Once in force and effective, the new
SOUTH AFRICA
increases the number of reportable jurisdictions The process builds on the Global Forum’s two- agreement will replace the 1993 agreement, in
On 30 November 2018, the Hong Kong-South
under the IRO from the current 75 to 126. phase peer review mechanism that evaluates force as of 15 October 1993. A Free Trade
Africa Memorandum of Understanding (MoU) on
compliance with the international standard on EOIR Agreement was also signed on the same day.
the Exchange of Country-by-Country Reports
using revised terms of reference to assess beneficial
Tax Deductions for Annuity ownership information availability, in line with the
(CbC), in respect of the fiscal years 2017 and 2018,
was signed in Hong Kong and in Pretoria.
Financial Action Task Force’s international standard.
Premiums and MPF Under the enhanced peer review process,
JERSEY
Voluntary Contributions jurisdictions are rated as compliant, largely
The Hong Kong-Jersey Memorandum of
compliant, partially compliant, or noncompliant.
Understanding (MoU) on the Exchange of Country-
The Inland Revenue and MPF Schemes Legislation Hong Kong has addressed most recommendations
by-Country Reports (CbC) in respect of the fiscal
(Tax Deductions for Annuity Premiums and MPF from its 2013 review, according to the 2019 report.
years 2017 and 2018, was signed. In accordance
Voluntary Contributions) (Amendment) Bill 2018 However there were ongoing deficiencies related to
with Section V (Term), paragraph 1, the MoU
was approved by the Legislative Council on 20 “monitoring the compliance with ownership and
entered into force on 31 December 2018 and
March 2019. The new Ordinance gives effect to the accounting record-keeping requirements in respect
generally applies from that date.
tax deductions that were proposed in the 2018-19 of trusts managed by non-professional trustees”,
Budget. From the year of assessment 2019/20, And while it has the legal framework to facilitate
taxpayers are entitled to tax deductions under accessibility of beneficial ownership information,
14 | Asia Tax Bulletin HONG KONG HONG KONG MAYER BROWN | 15
Interim Budget 2019 PERSONAL TAX The period for which the attachment or retention of
property involved in money laundering or records
• The eligible rebate from income tax payable is
increased to INR 12,500 for resident individuals seized or frozen will continue during an
The Finance Minister presented the Interim investigation is extended from 90 days to 365 days.
whose total income does not exceed INR
Union Budget 2019/20 in Parliament on 1
500,000. Hence, resident individuals having a The final Budget is expected to be presented later
February 2019.
total income up to INR 500,000 will have no during the year, after the general elections (around
tax payable. June-July 2019).
CORPORATE TAX
• The end date for obtaining approval • The standard deduction for salaried individuals
JURISDICTION: from the competent authority to claim in a financial year is increased from INR 40,000
to INR 50,000 per annum.
GST on Residential Property
the profit-linked deductions by
India
taxpayers engaged in the business of • The second self-occupied property will not be In its 33rd meeting, held on 24 February 2019, the
developing and building affordable subject to tax on a notional rent basis. The limit Goods and Services Tax (GST) Council
housing projects is extended from 31 to claim house property loss in respect of recommended that the GST rates for under-
March 2019 to 31 March 2020. This will interest on loans taken for both the properties construction residential properties be reduced as
allow developers more time to in aggregate will continue to be INR 200,000. follows with effect from 1 April 2019 in order to
complete ongoing projects which are Hence, the maximum loss that can be claimed invigorate this segment of the real estate sector:
otherwise qualified. in respect of such properties in one financial
• an effective GST rate of 5%, without input tax
• The threshold in a financial year for year is INR 200,000.
credit (ITC), for residential properties outside
deducting tax at source for payment of • Income tax exemption on long-term capital the affordable segment (currently, an effective
rent is increased from INR 180,000 to gains from the sale of a residential house will rate of 12%, with ITC); and
INR 240,000. be extended from re-investment in one
• an effective GST rate of 1%, without ITC, on
• The threshold in a financial year for residential house to two residential houses in
affordable housing properties (currently, an
deducting tax at source on interest India on a once-in-a-lifetime basis provided
effective rate of 8%, with ITC).
income from deposits with a banking such long-term capital gains do not exceed
company or co-operative society INR 20 million. The definition of “affordable housing” is expanded
engaged in banking business or post to include a residential house/flat of carpet area of
office business is increased from INR
10,000 to INR 40,000. This would
Indian Stamp Act, 1899 up to 90 m2 in non-metropolitan cities/towns and
60 m2 in metropolitan cities, and valued at up to
benefit small depositors who do not INR 4.5 million (for both metropolitan and
• The levy and administration of stamp duty on
have taxable income but were non-metropolitan cities). Metropolitan cities
the issue and transfer of financial instruments
subjected to withholding tax on such are Bengaluru, Chennai, Delhi NCR (limited to
by the states is to be streamlined through
income and had to file tax returns to Delhi, Noida, Greater Noida, Ghaziabad,
stock exchanges, clearing corporations
claim an income tax refund. Gurgaon, Faridabad), Hyderabad, Kolkata
and depositories.
and Mumbai (whole of MMR). Guidelines for
• The period of exemption from tax on
• The following definitions will be available in this recommendation will be drafted and
notional rent on unsold inventory of
the Stamp Act: “allotment list”, “debenture”, subsequently approved by the GST Council.
land and buildings is extended from
“market value”, and “securities”, and the
one year to two years from the end of
definition of “marketable security” will
the financial year in which the certificate
be amended.
of completion of construction of the
property is obtained from the • The levy of stamp duty will be on the market
competent authority. This is intended to value of the securities and the rates are 0% for
provide relief to real estate developers. government securities and for other securities
in the range of 0.00001% to 0.015%, and are
to be levied on transfer of securities in
dematerialised form.
• The proposed amendments include the
procedure for payment and collection of such
stamp duty. The proposed levy would also be
subject to detailed rules to be specified in
this regard.
16 | Asia Tax Bulletin INDIA MAYER BROWN | 17
Stamp Duty The taxpayer (GE Energy Parts Inc.) was a US tax
resident engaged in the business of manufacturing
nature of preparatory and auxiliary activities as per
article 5(3)(e) of the treaty. The High Court
The High Court upheld the ITAT’s view on
attributing 10% of the value of supplies made to
highly sophisticated products such as gas turbine observed from the order of the ITAT that GE India clients in India as profit arising from such supplies
On 21 February 2019, the President of India gave parts and sub-assemblies. The modus operandi of was located at the premises leased by an overseas and attributing 26% of such profits to the taxpayer’s
his assent to the amendments to the Stamp Act the overseas GE Group entities was to supply GE entity for its LO activities. These premises were PE in India, considering that GE Group’s activities of
1899 which had been proposed as part of the products to worldwide customers on a principal-to- at its constant disposal. Further, specific chambers/ making sales in India is roughly 25% of the total
Finance Bill 2019 presented during the Interim principal basis whereby the title to goods was rooms and secretarial staff were allotted to GE marketing efforts.
Union Budget 2019/20. The amendments create the passed from the overseas GE Group to Indian staff, which were used for their work, thereby
legal and institutional mechanism to enable the clients directly. A member of the overseas GE ensuring the continuity of available space.
Indian states to streamline the collection of stamp Group had also maintained an LO in India for its It concurred with the ITAT’s findings that the
International Tax
duty on securities market instruments at one place
by one agency (through stock exchanges, clearing
coordination activities and an Indian company (GE core of the sales activities was done from the Developments
India Industrial Pvt. Ltd. or GE India) to provide said premises. It then came to the conclusion
corporations or depositories) on one instrument, limited marketing support services to the GE Group that GE’s activities in India are wholly or partly
and develop the mechanism for sharing the stamp entities. According to GE’s written submission, the carried on through its fixed place of business. BRUNEI
duty with the relevant state governments. LO was merely providing market inputs and
The High Court also rejected the contention of On 28 February 2019, Brunei and India signed an
interface and creating awareness of the business exchange of information and assistance in
the taxpayer that, by merely participating in the
Extension Granted for Filing products. The tax authorities carried out a survey
negotiation of prices, the LO was carrying on collection agreement with respect to taxes (TIEA),
at the premises of the LO and found that certain in New Delhi.
GST Annual Return for Year expatriates and employees of GE India carried on
preparatory and auxiliary activities. The High Court
analysed the job descriptions, email exchanges,
marketing activities together in India and were
2017/18 involved in the negotiation of prices and the
appraisal reports and assignment letters forming USA
part of the survey documents, concluding that the On 27 March 2019, India and the United States
finalisation of contracts.
In a press release issued by the Press Information GE professionals were involved in certain core signed an agreement on exchange of country-by-
Bureau on 7 March 2019, it was stated that the The taxpayer contended that the LO carried on functions such as the negotiation and finalisation country (CbC) reports in New Delhi.
deadline for filing the annual return for goods and preparatory and auxiliary activities and, hence, did of contracts, helping GE Overseas to develop their
services tax (GST) – Form GSTR-9 and Form not constitute a fixed place PE in India. Further, it strategy in India, aligning GE solutions with
GSTR-9A – for the year 2017/18 had been extended contended that, through mere participation in the customer needs, helping shape policy to realise
to 30 June 2019. The forms are now available on negotiation of prices, it did not carry on core opportunities, facilitating business development
the common portal for filing, and taxpayers are business activities of the overseas GE Group and, discussions, and finalising business contracts for
reminded that no facility exists to revise these hence, would not be relevant for the determination offshore sales. The survey documents also alleged
forms after they have been filed. of a fixed place PE in India. Also, GE India did not that a few expatriates were designated as “country
constitute a DAPE in the absence of the authority heads” and were heading the operations of
to conclude contracts. In addition, the mere overseas GE group entities in India. The High Court
Local Company and Liaison participation in a negotiation process for multiple therefore concluded that the LO was a fixed place
overseas GE Group entities should not be seen as of business through which GE Overseas carried on
Office of Overseas Group being “devoted wholly or almost wholly” to one its core business activities and, hence, constituted a
Constitute PE in India enterprise. The tax authorities did not agree with fixed place PE.
the taxpayer’s contention and deemed the LO and
The High Court rejected the taxpayer’s contention
GE India to have constituted a PE of the overseas
On 21 December 2018, the Delhi High Court issued that since GE India works on behalf of 24 overseas
GE Group in India. The taxpayer appealed before
its decision in the case of GE Energy Parts Inc. v. GE entities, it cannot be considered to be devoted
the Income Tax Appellate Tribunal (ITAT), which
CIT (ITA 621/2017), stating that a liaison office (LO) wholly or almost wholly to one foreign enterprise
held in favour of the tax authorities. The taxpayer
of the GE Group, which participates in sales and hence cannot form a DAPE. It held that since
then appealed the decision before the High Court.
negotiations, constitutes a fixed place permanent GE India was devoted to overseas GE entities
establishment (PE) of the overseas GE Group The issue was whether the LO constituted a fixed forming part of the same group, it formed DAPE of
entities; and that GE India, which acts as an agent place PE and whether GE India constituted a DAPE GE Overseas in India. In the absence of specific
of the overseas GE Group and participates in sales for the GE Group entities. annual financial statements in India, the tax
negotiations, constitutes a dependent agent PE authorities relied on Rule 10(iii) of the Income Tax
The High Court upheld the ITAT decision and held
(DAPE) in India under the India-United States Rules, 1962, which prescribes that attribution may
in favour of the tax authorities. It confirmed the
Income Tax Treaty (1989) (the treaty). be determined “in such other manner as the
constitution of a fixed place PE by the LO and
Assessing Officer may deem suitable”.
DAPE by GE India. The High Court rejected the
taxpayer’s contention that the LO activity is in the
18 | Asia Tax Bulletin INDIA INDIA MAYER BROWN | 19Foreign Tax Credit Transfer Pricing Information Two additional types of domestic taxpayers can
now use tax book value for a transfer of assets in an
The Minister of Finance (MoF) issued
in the Tax Return expansion. These taxpayers, and the supplemental
documents to be attached to their application, are:
Regulation 192/PMK.03/2018 (PMK 192)
The Director General of Taxation (DGT) has issued
regarding the implementation of credit for Domestic Taxpayer Additional Document
Distribution II Attachment II to Regulation of the
tax paid on income from abroad. PMK 192 to Submit
Director General of Taxation Number PER-02/
became effective from 31 December 2018
PJ/2019. Through Distribution II, DGT clarifies the A corporate entity that Deed of establishment or
and replaced MoF Decision 164/ resulted from a business amendment of the
details of transfer pricing documents which need
KMK.03/2002 of 19 April. expansion and received Indonesian company
JURISDICTION: to be attached to corporate annual tax return a minimum of IDR 500 resulting from the
PMK 192 provides clarification and detailed form 1771. billion of additional business expansion which
Indonesia
instructions regarding the procedure for capital from a foreign states the amount of the
Initially, the regulation required the “Master file, investor new investment by the
calculating the amount of foreign tax foreign investor
local file and/or country-by-country report.” This
credit that could be recognised and the
was changed into “In the form of summary of A state-owned A letter of
procedures for reporting it, which include
master file and local file; and receipt of the enterprise that received recommendation from the
the following: capital from the Minister of State-Owned
submission of Notification or submission of government to establish Enterprises
• determination of country of source of Country-by-Country Report.” a holding company
foreign income e.g. the calculation of
Thus, the master file, local file, and Other procedures and requirements regarding the
the amount of foreign tax credit that
country-by-country report do not need to use of tax book value on transfer of assets remain
could be credited is done separately
be attached to corporate annual tax return the same as before.
based on the type of income and the
(form 1771). A corporate taxpayer only needs to
source country;
attach the summary of the master file and local file
• determination of the amount of as well as receipt of the submission of notification Tax Deductions of Benefits In
foreign income, e.g. the foreign
income included as taxable income
or country-by-country report to corporate annual
tax return form 1771.
Kind Paid to Employees2
is the net income;
Subsequently, a report on the calculation of debt The general tax rule in Indonesia is that benefits in
• determination of the amount of foreign to equity ratio and/or report on external private kind are tax-exempt in the hands of employees and
income tax that could be credited; debts must be attached to corporate annual tax not deductible for corporate tax purposes for the
return if a corporate taxpayer which is established employee. MoF Regulation No. 167/PMK.03/2018
• rules regarding tax credit of husband
or domiciled in Indonesia, the capital of which is (“MoF-167”) revokes MoF Regulation No. 83/
and wife who carry out their tax
divided into shares, has debts and deducts a PMK.03/2009 (“MoF-83”) and amends the
obligations separately, e.g. tax credits
borrowing fee in the calculation of taxable income deductibility by employers of certain benefits
are determined separately for each
and/or has external private debts. in kind (“BIK”) provided to their employees.
husband or wife;
• administrative requirements, e.g. Change or Additional Requirement
the only documents required to Tax-Free Asset Transfers1 Description
per MoF-167
substantiate foreign tax paid are the
Provided by 1. Clarifies that vouchers for food
proof of tax payment or proof of foreign Minister of Finance (“MoF”) Regulation No. 205/ employers in and beverages which are
tax withholding; and PMK.010/2018, issued 31 December 2018, amends general provided to employees outside
MoF Regulation No. 52/PMK.010/2017 (“MoF-52”) the workplace can be deducted
• rules concerning foreign tax credit for from the employer’s gross
concerning the use of tax book value on a transfer
income from trusts. income, provided the voucher
and acquisition of assets in the context of a merger, value per employee is not more
consolidation, expansion, or business acquisition. than that provided to employees
The amendment is intended to promote foreign at the workplace.
direct investment and support the government’s 2. Clarifies that “necessary for work
program to establish state-owned enterprise performance” relates to worker
security or safety as required by
holding companies. government agencies in charge
of manpower.
1 Courtesy Harsono Strategic Consulting in Jakarta.
2 Courtesy Harsono Strategic Consulting in Jakarta.
20 | Asia Tax Bulletin INDONESIA MAYER BROWN | 21International Tax Multilateral Convention
Continued
Description Change or Additional Requirement Developments Enters into Force
per MoF-167
On 1 January 2019, the Multilateral
Provided by 1. Clarifies that family members are CAMBODIA
employers entitled to healthcare and Convention (2016) (MLI) entered into force
located in worship benefits. Cambodia ratified the Cambodia-Indonesia Income in respect of Japan. Japan signed the
remote areas Tax Treaty signed on 13 October 2017 by convention on 7 June 2017 and deposited
2. Clarifies that transportation only
covers relocation costs at the Cambodia and on 23 October 2017 by Indonesia, its final MLI position on 26 September 2018,
beginning and end of the by way of promulgation of 12 December 2018. JURISDICTION: including the 39 tax treaties that it wishes
assignment.
to be covered by the MLI. For a treaty to
Japan
be covered by the MLI, both signatories
Regarding deductibility of BIK provided by need to have a) joined the convention,
employers in remote areas, MoF-167 states that an b) included each other in their list of
approval that the area qualifies as a remote area is covered tax agreements, and c) deposited
granted for a five-year period, with a possible their instruments of ratification. In the case
five-year extension. However, the period is of Japan, this means that the following
extended to 10 years (+10) for a holder of an treaties will now be affected by the MLI:
IUPK-OP (Production Operation Special Mining
Business Permit) whose contract was initially a • Australia-Japan Income Tax Treaty
contract of work (CoW) or coal mining CoW which (2008);
stated the treatment of BIK. The decision that an • France-Japan Income Tax Treaty (1995)
area qualifies as a remote area applies from the (as amended through 2007);
month the decision was issued. This was previously
from the tax year the decision was issued. • Israel-Japan Income Tax Treaty (1993);
Approvals that a company operates in a remote • Japan-New Zealand Income Tax Treaty
area based on MoF-83 remain applicable up to the (2012);
end of their validity period. Applications to qualify • Japan-Poland Income Tax Treaty (1980);
as a remote area which were pending when MoF-
167 was issued will be decided based on MoF-167. • Japan-Slovak Republic Income Tax
Treaty (1977);
Tax Holiday • Japan-Sweden Income Tax Treaty
(1983); and
As part of the Economic Policy Package XVI, the • Japan-United Kingdom Income Tax
Minister of Finance (MoF) has issued an updated Treaty (2006).
Tax Holiday policy through Regulation No.150/
PMK.010/2018 (PMK-150) dated 27 November 2018.
PMK-150, which revokes the recently-issued MoF
Pre-Brexit Merger
Regulation No.35/PMK.010/2018 (PMK-35). between UK Subsidiary
The new regulation has expanded the number of
activities which are eligible for the tax holiday and
and Dutch Subsidiary
the minimum capital investment for the tax holiday Considered Tax-
has now been reduced to IDR 100 billion. Subject
to how much capital will be injected in the Qualified Merger
Indonesian company, the holiday period could
range from five to 20 years and the tax holiday On 7 March 2019, the National Tax Agency
could consist of a 50% tax rate reduction for a (NTA), Osaka branch, published an advance
five- year holiday to a 100% tax holiday for a ruling in response to a request made on 18
period between five and 20 years. February 2019. The taxpayer (A-co) was a
Japanese corporation holding all the shares
22 | Asia Tax Bulletin INDONESIA MAYER BROWN | 23in a UK corporation (B-co). B-co controlled
corporations located in other EU Member States.
Supreme Court Rules on
Following the United Kingdom’s decision to leave Application of GAAR on
the European Union on 29 March 2019 (commonly
referred to as Brexit), A-co planned to transfer Beneficial Ownership
B-co’s business to a newly established Dutch
corporation (C-co) before 29 March 2019. All of On 27 December 2018, the Korean
C-co’s shares were held by A-co. Supreme Court ruled on a beneficial
ownership case involving patent royalties
The issue was whether the merger between B-co
JURISDICTION: paid to an Irish company. A US patent
and C-co, a merger conducted under foreign law,
management company had been providing
can be considered a tax-qualified merger in Japan.
Korea
intellectual property management services
Generally, under the Corporation Tax Law, in the
for various patents owned by US parent
case of a tax-qualified merger, the corporation
companies (US Parent Cos). The US patent
ceasing to exist is deemed to transfer to the
management company had been in
acquiring corporation all its assets and liabilities at
negotiations since 2004 with a Korean
its tax book value. Accordingly, the transfer is
company regarding the patent license and
non-taxable, and taxation of any unrealised
settlement over patent infringement claims.
appreciation in the assets of the disappearing
In May 2010, US Parent Cos established a
corporation is deferred.
US company (US Co), which in turn
The NTA ruled that the merger between B-co and established the Irish company (Irish Co) in
C-co is a qualified merger based on the facts and June 2010. On 8 November 2010, US
circumstances of the case presented. Parent Cos granted certain licensing rights
Consequently, the transfer is non-taxable: no to US Co, which provided the sub-licensing
deemed dividend is distributed from B-co to A-co, rights to Irish Co on the same day. Irish Co
and taxation of any unrealised appreciation in then entered into a USD 3.7 billion patent
B-co’s assets is deferred. license and settlement agreement with the
Korean company on 11 November 2010. On
30 November 2010, Irish Co received the
International Tax royalties and settlement payment of USD
Developments 3.7 billion. Subsequently, approximately
USD 3.4 billion was passed to US Parent
Cos through US Co within a month. The
ECUADOR Korean company, which was a withholding
On 15 January 2019, the Ecuador-Japan Income Tax agent as well as the taxpayer, did not
Treaty was signed in Quito. withhold any taxes based on the tax treaty
with Ireland, which provides for a 0%
withholding tax rate on royalties paid to an
Irish beneficial owner. When the patent
license and settlement agreement was
made, Irish Co’s initial capital was EUR 20,
had only three employees and a rented
office space in Ireland. It had also entered
into licensing agreements with various
licensees in four other countries.
The Korean tax authority argued that Irish
Co was established solely to take
advantage of the 0% withholding tax rate
and assessed additional taxes on the
income at issue, alleging that US Co was the
beneficial owner of the income and
applying the reduced withholding tax rate
24 | Asia Tax Bulletin JAPAN MAYER BROWN | 25You can also read
