Asia Tax Bulletin Summer 2021 - Mayer Brown
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Asia Tax Bulletin Summer 2021
In This Edition
EUROPE
BRUSSELS
LONDON
Spring 2021
We are pleased to present the Summer 2021edition
of DÜSSELDORF
PARIS FRANKFURT
our firm’s
edition of Asia Tax Bulletin.
our firm’s Asia Tax Bulletin.
ORK BEIJING
Dear Reader,
While GTON DC
the world is watching the progress on how
whichto allows
compute theeligible IP (royalty)
tax authority income
to appoint a
the OECD’s
As the world global tax proposals
CHARLOTTE
struggles to recover for from
taxingthe for the reduced income tax rate;
local administrator as a representative and Thailand’s TOKYO
digital businesses and introducing a global introduction
of non-resident of VAT on overseas
taxpayers digitalcollect
and hence services
pandemic, business continues regardless and
minimum income taxappear rate, which werelittle consumed in Thailand with effect
the latter’s tax from said administrator, from SHANGHAI
the tax authorities to have
embraced and committed to
trouble keeping up, at least judging fromby most Asian 1the
September
Philippines 2021.
reduced corporate income
DUBAI HONG KONG
countries,
developments there over
have the
been a number
past of other
three months. tax rates
This and
edition its contains
also simplicationsome ofinteresting
tax treaty HANOI
tax developments over the past three months applications, Taiwan’s new
case law in various Asian countries. rules which
We make
This edition of the Asia Tax Bulletin
which you will read about in this bulletin. covers the it easier
hope youto conclude
enjoy reading a bilateral
it. or multilateral
highlights,
The changes inter
arealia including
diverse and we theencourage
tax proposals pricing agreement with the Taiwanese tax HO CHI MINH CITY
in the
you to 2021
read thebudgets
countryin Hong
sectionsKong, India and
in this Stay safe and
authority anddon’t
its newgive in to
rules tothe
enable write-offs
Singapore; China’s draft stamp duty law and
bulletin. current
of bad challenges.
debt for tax purposes and finally,
simplified APA procedure; the long-awaited Vietnam’s new e-commerce income tax
SINGAPORE
carried interest concession
A special note perhaps in respect of theproposed by the and VAT circular.
Hong Kong tax authority; India’s
following changes which are particularly launch of the With kind regards,
Faceless Penalty
newsworthy: Scheme
China’s and an e-portal
tax treatment of cross- to We wish
* de you happy reading.
report tax evasion; the BRASÍLIA
Indonesian
border hybrid payments and the tax tax
Pieter Ridder
authorities’of
exemption
exemption
clarification
deed tax inonqualifying
treatment of
the offshore
expats living
tax
internal
in
VITÓRIA*
Pieter de Ridder
reorganisations, Hong Kong’s zero tax rate for
RIO DE JANEIRO *
Indonesia carried
qualifying – as wellinterest
as the which
dividend haswithholding
now taken
tax exemption SÃO PAULO *
effect, the new criteria
specified forthresholds
Indonesianin India as
companies;
to Korea’satax
what constitutes law changes
‘significant for 2021;
economic
Malaysia’s Covid relief package and
presence’ in the country and hence constitutes its *TAUIL & CHEQUER OFFICE
aratification
permanent ofestablishment,
the MultilateralJapan’s
(BEPS) new Treaty;
law Pieter
Pieterde deRidder
Ridder
the first corporate tax rate reduction by the Partner,
Partner, MayerBrown
Mayer BrownLLP
LLP
Philippines in 20 years; the IRAS (Inland +65 6327 0250
+65 6327 0250
Revenue Authority of Singapore) circular on pieter.deridder@mayerbrown.com
pieter.deridder@mayerbrown.com
22 || Asia
Asia Tax
Tax Bulletin
Bulletin MAYER BROWN
MAYER BROWN || 33
Contents
China India Philippines Thailand
6 Easing of filing requirements for 12 Taxable presence in India 19 New income tax rates 28 Write off bad debt
foreign currency payments
12 Parliament passes amendments 20 VAT amendments
31 Enhanced tax incentives for R&D and
Imports of necessary equipment to Finance Bill 2021 human resource development
7 and materials for innovations
Reimbursement paid for payments 21 VAT on previously
zero-rated transactions 32 Advance pricing agreement guidelines
Super-deduction of R&D 14 made to employees not subject
7 to withholding tax
expenditure increase
22 Guidelines for claiming tax
treaty benefits
Convertible loans and Favourable dividend withholding
7 hybrid instruments 14 tax rate under the Netherlands
Tax Treaty
Integration of tax returns for Singapore
8 various taxes 14 International tax developments
Characterisation of certain
Exemption of deed tax for business 23
8 restructurings Indonesia hybrid instruments
Advance ruling on characterisation of
Extension of land
15 Cryptocurrencies 25 disposal of certain investments
9 appreciation tax exemption
for business restructurings
15 Tax reform proposal to parliament 26 International tax developments
9 Stamp duty on IP
15 International tax developments
9 Tax incentives
Taiwan
Japan 27 More flexibility for BAPA and MAPA
Hong Kong 16 Tax reform
10 Carried interest zero tax rate
Appointment of tax administrator
16 for non-resident taxpayers
Qualifying amalgamations and
10 transfers or successions
17 International tax developments
11 International tax developments
Malaysia
18 International tax developments
4 | Asia Tax Bulletin MAYER BROWN | 5
Easing of filing Imports of necessary Super-deduction of R&D
requirements for foreign equipment and materials expenditure increase
currency payments for innovations Effective 1 January 2021, a manufacturing
enterprise engaged in research and development
On 26 April 2021, China’s State From 1 January 2021 to 31 December 2025, China (R&D) activities may, in addition to the actual
Administration of Foreign Exchange (SAFE) exempts the import of necessary equipment and expenses, claim a special (super) deduction of
and State Taxation Administration (SAT) materials by scientific research institutions, 100% of the actual R&D expenses (increased from
JURISDICTION: jointly issued a draft supplemental public technology development centres, universities and 75%) in the current tax period if the R&D activities
notice to ease filing requirements for persons libraries from import duties, value-added tax (VAT) have not yet created an intangible asset. Where the
China (PRC)
making outbound payments such as at the import stage and consumption tax, provided R&D activities have resulted in an intangible asset,
dividends, interest, royalties, technical fees, that such necessary items cannot be made in China. the amortisation base of that intangible will be
etc. in foreign currency. The relaxation is
In addition, China also exempts the import of 200% of the cost incurred (increased from 175%).
given in the draft supplemental public notice
books and teaching materials by institutions in This increase is provided in Circular [2021] No. 13,
on Issues Concerning Tax Filings for
charge of imported publications from VAT at the jointly issued by the Ministry of Finance and the
Outbound Payments for Trading and
import stage. The exemptions were announced by State Taxation Administration on 31 March 2021.
Services Projects (the Draft Notice).
the Circular of the Ministry of Finance, Customs For the purpose of the Circular, a manufacturing
According to Public Notice [2013] No. 42, Services and the State Taxation Administration enterprise is an enterprise with manufacturing
institutions and individuals within China that [2021] No. 23. activity as the main business and more than 50% of
remit funds abroad in excess of USD 50,000
The government has also announced import duty the enterprise’s total revenue being derived from
(per transaction) are required to file records
exemption on raw materials, certain equipment that main business. In respect of the requirements
with the local tax bureau in-charge. The
imported by enterprises engaged in manufacturing and details relating to the super-deduction,
Draft Notice eases the tax filing procedure of
integrated circuits and storage machines from taxpayers should refer to the rules contained in
Public Notice [2013] No. 42 and provides that
27 July 2020 to 31 December 2030 (Circular of the Circular [2015] No. 119 and Circular [2018] No. 64.
the filing is only required for the initial
Ministry of Finance, Custom Services and the State
payment where several payments or
payments in instalments are made for the
Taxation Administration [2021] No.4).
Convertible loans and
same contract. The filing obligation is In addition, the government also exempts the
exempt in the case of direct re-investment in materials used in development and manufacturing hybrid instruments
China using funds derived from China and if of new models of monitors/screens from import
the funds are transferred abroad for non- duties and VAT from 1 January 2021 to The State Taxation Administration (SAT) has
trade and non-business purposes by 31 December 2030 (Circular of the MoF, clarified the tax treatment of interest from
government institutions, semi-government Custom Services and SAT [2021] No.19) (in Chinese). convertible bonds and foreign hybrid investments,
units and social organisations. The above exemptions aim to support scientific assets after a change in tax assessment method
and technological innovations in line with and the timing of recognition of government
The abovementioned draft was implemented
China’s 14th Five Year Plan. payments. These clarifications are laid down in SAT
via the Supplemental Public Notice on Issues
Public Notice [2021] No. 17 and will apply from the
Concerning Tax Filings for Outbound
tax year 2021 onwards.
Payments for Trading and Service Projects
(SAT and SAFE Notice [2021] No. 19). TAX TREATMENT OF CONVERSION OF DEBT
The notice applies as from the issuance TO EQUITY
date of 29 June 2021.
Interest derived from convertible bonds is taxable
The filing can be done either by way of income of the holder (purchaser) of such bonds and
online filing, completing a downloaded form must be included in the enterprise income tax
and sending it, or by completing a paper return. When the purchaser converts the bonds
form at the local tax bureau in-charge. plus any unreceived interest into equity, the interest
is taxable regardless of whether or not it is
recorded as income. All the taxed interest and
associated expenses will be treated as the purchase
cost in the calculation of the acquisition price of the
shares after the conversion.
CHINA (PRC) MAYER BROWN | 7
TAX TREATMENT OF CROSS-BORDER Integration of tax returns for The exemptions are laid down in Circular [2021] • reduction of tax rates for IP transactions (i.e.
HYBRID INVESTMENTS No.17 jointly issued by the Ministry of Finance and transfer of the exclusive right to use trade
Foreign investors who make hybrid investments in
various taxes State Taxation Administration on 26 April 2021. marks, copyrights, patents or the use of
This circular replaces Circular [2018] No.17 proprietary technology) from 0.05% to 0.03%.
China and have satisfied the requirements in SAT
In order to reduce the compliance burden of which granted almost the same exemptions
Public Notice [2013] No. 41 may be treated
and expired on 31 December 2020.
according to the provisions of the notice. This
taxpayers, the State Taxation Administration has
integrated separate tax returns for ten types of
Tax incentives
means that the interest paid by the invested
enterprise must be recognised on the due date of
taxes into a single return. Effective 1 June 2021,
taxpayers may use a single tax return for filing one
Extension of land China has extended various tax incentives that have
the interest (including guaranteed minimum
interest, fixed profit or fixed dividends) and
or more of the following taxes: appreciation tax exemption expired such as a one-off deduction for fixed assets
of less than CNY 5 million, tax incentives for
included in the taxable income of the investing
enterprise. The same interest is deductible by the
• urban land use tax; for business restructurings enterprises providing heating services and others.
• house property tax; The extended tax incentives are mainly related to
paying enterprise. However, this rule does not
The government has extended the land providing support for the development of micro
apply if: • vehicle and vessel tax;
appreciation tax exemption for the transfer of enterprises, innovation in technology and relevant
• the foreign investor and the invested enterprise • stamp duty; land-use rights, buildings and other properties social developments.
in China are related; and attached to the buildings under a change in legal
• farmland use tax; The extension was jointly issued by the Ministry of
• the residence state of the foreign investor form or business restructuring until 31 December Finance and the State Taxation Administration in the
• resource tax; 2023. The exemption also applies to capital Circular [2021] No.6 dated 15 March 2021 and the
treats the income as equity income and does
not tax such income. contributions in kind made by an entity or an main extensions are set out below:
• land appreciation tax;
individual that brings in these assets for similar
TAX TREATMENT OF ASSETS AFTER A CHANGE • deed tax; purposes. • 16 incentives, such as the one-off deduction for
IN TAX ASSESSMENT METHOD fixed assets with a value of less than CNY 5
• environmental tax; and Change in legal form includes, among others, million (Circular [2018] No. 54) and tax incentives
Assets may, after a change in the tax assessment conversion of an unincorporated business as a
• tobacco tax. for enterprises providing heating (Circular [2019]
method from a deemed profit basis to an actual whole into a limited liability company, whereas No.38) have respectively been extended to 31
basis, be depreciated according to the amount Furthermore, effective 1 May 2021, taxpayers business restructuring includes, for example, December 2023 and the year 2023.
stated in the invoice or, in the absence of an may file a single return for value-added tax, mergers and divisions.
invoice, on the basis of the amount mentioned in consumption tax, urban maintenance and • The individual income tax incentives in Ping Tan
the purchase contract, evidence of payment or The exemption was announced jointly by the in Fujian Province (Circular [2014] No. 24) and
construction tax, education surcharge and local
other records. Furthermore, the assets must be Ministry of Finance and the State Taxation tax incentives relating to domestic relocation in
additional education charges in Hainan province,
depreciated according to the depreciation period Administration in Circular [2021] No. 21 and applies the framework of poverty reduction (Circular
Shanxi province, Dalian and Xiamen as a
and method prescribed by the laws and from 1 January 2021. Open land appreciation tax [2018] No. 135) have been extended to 31
pilot project.
regulations, after deduction of the years that the issues may be settled according to this circular. December 2025.
The simplified filing was announced in SAT Public
assets have been put in use.
Notice [2021] No. 9 together with the templates of • Six other incentives (Circular [2016] No.114) will
TIMING OF RECOGNITION OF PAYMENTS FROM the new returns. Consequently, several circulars or Stamp duty on IP be continued without an expiry date.
GOVERNMENT public notices concerning the previously separate The taxes that have been collected before the
filing of returns of the different taxes have On 10 June 2021, the 29th Meeting of the Standing publication of Circular [2021] No.6 can be deducted
Payments (wholly or partly) received from the
been abolished. Committee of the 13th National People’s Congress against the tax payable of the taxpayer in the
government for goods and services supplied by an
passed the Stamp Duty Law of the People’s following months or refunded accordingly.
enterprise according to the supplied quantity and
Republic of China (the “Stamp Tax Law”), effective
the market price must be recognised on an accrual Exemption of deed tax for from 1 July 2022. Changes made to the Stamp Tax
basis. However, other payments such as subsidies,
allowances, compensation or tax refunds must be business restructurings Law in respect of intellectual property rights
compared with the Interim Regulations on Stamp
recognised at the time that the payments are
Duty are:
received (on a cash basis). From 1 January 2021 to 31 December 2023,
transfers of land and housing properties in business • abolishing the stamp duty of RMB 5 for each
restructurings of enterprises and semi-government documentation of rights or licenses. This means
organisations, mergers and divisions, bankruptcies, that trade mark and patent registration
asset reallocations, debt restructurings and transfer certificates and licenses will not be subject to
of shares are exempt from deed tax, subject to stamp duty in the future; and
certain conditions.
8 | Asia Tax Bulletin CHINA (PRC) CHINA (PRC) MAYER BROWN | 9
Carried interest certain circumstances; changes refining the
statutory framework for the furnishing of tax
zero tax rate returns; and changes enhancing the foreign
tax deduction regime.
On 7 May 2021, the Inland Revenue The Ordinance will be gazetted and come into
(Amendment) (Tax Concessions for Carried operation on 11 June 2021. Amendments in relation
Interest) Ordinance was gazetted and came to foreign tax deductions will take effect from the
into effect. The Carried Interest Ordinance year of assessment 2021/22.
amends the Inland Revenue Ordinance
JURISDICTION: (Cap. 112) to introduce a concessionary 0%
tax rate for ‘carried interest’ paid by eligible International tax
Hong Kong private equity (PE) funds operating in
Hong Kong to their managers. The
concessionary tax treatment applies
developments
GEORGIA
retroactively to eligible carried interest
received by or accrued to qualifying PE On 1 July 2021, the Georgia - Hong Kong Income
fund managers on or after 1 April 2020. and Capital Tax Agreement entered into force. The
Reference is made to the previous editions agreement generally applies from 1 January 2022 in
of this bulletin. No amendments were made respect of Georgia and from 1 April 2022 in respect
to the draft legislation during its passage of Hong Kong.
through the Legislative Council.
Qualifying carried interest recipients have
to fulfil substantial activities requirements
(including the number of qualified full-time
employees and operating expenditure
incurred in Hong Kong) for the tax
concessions to apply. The Bill also expands
the classes of assets that may be held and
administered by a special purpose entity on
behalf of a fund for the purpose of profits
tax exemption regime for funds, with a view
to facilitating the operation of funds in
Hong Kong.
Qualifying
amalgamations and
transfers or successions
On 2 June 2021, the Legislative Council
passed the Inland Revenue (Amendment)
(Miscellaneous Provisions) Bill 2021. The Bill
deals with profits tax and stamp duty and
implements four areas of amendments to
the Inland Revenue Ordinance, namely the
tax treatment of amalgamations of
companies under court-free procedures as
provided for under the Companies
Ordinance; the tax treatment of transfers or
successions of specified assets under
HONG KONG MAYER BROWN | 11
Taxable presence in India in India, if the sale of such goods or the provision of specified entity shall be deemed to be the capital
such services is effectively connected with the PE. gains of the specified entity.
Through Notification No. 41/2021 of 3 May DEFINITION OF “LIABLE TO TAX” REPHRASED MINIMUM ALTERNATE TAX (MAT) RELIEF FOR
2021, the Central Board of Direct Taxes SECONDARY ADJUSTMENT OR ADVANCE
The definition of “liable to tax” is rephrased to
(CBDT) has specified the thresholds in PRICING AGREEMENT (APA)
mean that, in relation to a person and with
determining significant economic presence
reference to a country, there is an income tax As proposed earlier, a corporate taxpayer can make
(SEP) of a non-resident in India under section
liability on such person under the law of that an application before an assessing officer to
9(1)(i) of the Income Tax Act (ITA) for the
country for the time being in force and shall include recompute the book profit of past years on account
purpose of attributing income in India. Under
JURISDICTION: a person that has subsequently been exempted of a secondary adjustment or an APA. The
the ITA, the SEP of a non-resident constitutes
from such liability under the law of that country. provisions will apply to the AY beginning on or
a business connection in India, which in turn
India
before 1 April 2020 only if the taxpayer does not
determines the non-resident’s taxable CLARIFICATION OF RREATMENT OF EXISTING
utilise the MAT credit in any subsequent AY. No
income in India. GOODWILL IN A BLOCK OF ASSETS
interest shall be payable on a refund arising out of
The thresholds, which will apply beginning Existing blocks of assets will be reduced by an this provision.
1 April 2022, are set as follows: amount equal to the actual cost of goodwill within
TAX ON INTEREST EARNED ON PROVIDENT
the block of assets as reduced by:
• payment threshold: transactions FUND (PF) CONTRIBUTION
involving goods, services or property • the amount of depreciation actually allowed to
In cases where contributions to the PF are made
carried out by a non-resident with any the taxpayer for such goodwill prior to
only by the employee, interest accruing on such
person in India, including data or assessment year (AY) 1988-89; and
contributions in excess of INR 500,000 will be
software downloads in India, equivalent
• the amount of depreciation that would have taxable.
to INR 20 million or more of the prior
been allowed to the taxpayer for such goodwill
year’s total payments; or NO TAX ON INCOME OF DEVELOPMENT
after AY 1988-89, as if the goodwill was the only
FINANCIAL INSTITUTIONS
• user threshold: systematic and asset within such a block.
continuous soliciting of business Income of institutions established for financing
This amendment will take effect from AY 2021-22
activities or engaging in interaction infrastructure and development may be tax exempt
where tax depreciation was claimed on goodwill in
with 300,000 or more users in India. for 10 consecutive assessment years and income of
AY 2020-21. Further, the reduction shall not exceed
developmental financing institutions licensed by the
the written down value of the block of assets.
Parliament passes FAIR MARKET VALUE (FMV) OF CAPITAL ASSETS
Reserve Bank of India may be tax exempt for the
first five consecutive assessment years. Qualified
amendments to Finance TRANSFERRED UNDER SLUMP SALE transfer of capital assets for the abovementioned
institutions may also be exempt from capital
Bill 2021 The FMV of the transferred undertaking shall be
gains tax.
deemed to be the full value of consideration in a
slump sale. Further, the value of goodwill that has CAPITAL GAINS TAX ON UNIT LINKED
On 1 February 2021, the Finance Minister
not been purchased by the taxpayer shall be INVESTMENT PLANS (ULIPS)
presented the Finance Bill, 2021 in the
considered as nil for the purpose of computing net
lower house (Lok Sabha) of Parliament. The proposed minimum equity component of 65%
worth of the undertaking.
On 23 March, the lower house of Parliament or 90%, as the case may be, must be satisfied
passed the Bill with amendments. We refer TAX ON TRANSFER OF MONEY OR PROPERTY throughout the term of a ULIP in order to be
to the previous edition of this Bulletin for BY A FIRM, ASSOCIATION OF PERSONS (AOP) OR eligible for the concessional long-term capital gains
details. The most significant changes are BODY OF INDIVIDUALS (BOI) TO ITS PARTNERS tax rate of 10%.
set out below. OR MEMBERS
RELOCATION OF OFFSHORE FUNDS TO
EQUALISATION LEVY The amended bill proposed to simplify the earlier INTERNATIONAL FINANCIAL SERVICES
proposed version of section 45(4) of the Income Tax CENTRES (IFSCS)
The scope of the equalisation levy is further
Act (ITA), which provided for the taxability of capital
clarified so that “consideration received or The proposed capital gains tax exemption on the
assets received by specified persons upon the
receivable from e-commerce supply or transfer of shares of an Indian company acquired or
dissolution of a firm, AOP or BOI representing their
services” does not include any consideration relocated from an offshore fund will also apply to a
share in their capital account, and provide that any
for the sale of goods or provision of services specified fund.
profits from money or capital asset received by a
which are owned or provided by a resident in
specified person on account of reconstitution of a
India or by a permanent establishment (PE)
INDIA MAYER BROWN | 13
GLOBAL DEPOSITORY RECEIPTS (GDRS) provided that the jurisdiction of the foreign Cryptocurrencies
CREATED IN AN IFSC shareholder has a favourable tax treaty with India.
One such jurisdiction is the Netherlands, whose tax
The scope of section 115ACA of the ITA, which It has been reported that the Directorate
treaty with India provides for a 10% dividend
deals with the taxation of income from GDRs in the General of Taxation is currently reviewing
withholding tax rate, but which also contains a Most
hands of specified resident individuals, will include the features of cryptocurrency transactions
Favoured Nation clause (MFN) which stipulates that
GDRs created in an IFSC. in order to determine the appropriate type
a more beneficial withholding tax rate applies if
of tax to be imposed on cryptocurrency
INCOME FROM AIRCRAFT LEASING India subsequently enters into a tax treaty with an
transactions. Currently, cryptocurrencies
OECD member state, which has a lower than 10%
The proposed tax exemption on royalty received may be traded as commodities, but not
dividend withholding tax provision. JURISDICTION:
by a non-resident from an IFSC unit for the lease used as a mode of payment, in Indonesia.
of an aircraft will also apply to interest income. Courtesy Khaitan & Co in Mumbai it was reported
The scope of the proposed 100% deduction
allowed to an IFSC unit in respect of income
arising from the transfer of a leased aircraft will
that the Delhi High Court in its recent judgment in
the case of Concentrix Services Netherlands BV WP
(C) 9051/2020 and Optum Global Solutions
Indonesia Tax reform proposal
to parliament
International BV WP (C) 882/2021 (Taxpayer), ruled
apply to any person (previously, to domestic
that instead of the 10% tax rate on dividends under The government has submitted a
companies only).
the India-Netherlands tax treaty (Tax Treaty), comprehensive tax reform proposal to the
because of the Most Favourable Nation clause in parliament that includes measures such as a
Reimbursement paid the dividend article of the Tax Treaty, the 5% rate VAT rate increase, new income tax brackets
applies (by reference to India’s tax treaty with
for payments made to Slovenia), notwithstanding the fact that Slovenia
for individuals, a tax amnesty programme to
allow taxpayers to declare undisclosed assets,
employees not subject was not an OECD member state at the time that an alternative minimum tax for operating
India’s treaty with Slovenia was executed. The Delhi loss-making businesses and a carbon tax.
to withholding tax1 High Court ruled that a reasonable application of There is also a proposal to introduce VAT on
the MFN clause in the Tax Treaty requires Slovenia financial services which are currently exempt
The Mumbai bench of the Authority for Advance to be an OECD member state at the time of from VAT.
Rulings held that a reimbursement made by an application of the MFN clause. As Slovenia had
Indian company, to a foreign company for certain become an OECD member state when the Tax
obligatory payments made to expatriate personnel Treaty application was made by the taxpayer, the International tax
on behalf of the Indian company, would not be 5% dividend withholding tax rate should apply developments
taxable as fees for technical services. The under the Tax Treaty.
reimbursement was held not to be fees for technical
SINGAPORE
services as there was an employer-employee
relationship between the Indian company and the
International tax On 11 May 2021, Indonesia ratified the new
expatriate personnel. Payments made to reimburse developments Indonesia-Singapore Income Tax Treaty, by
obligated expenses such as social security way of Presidential Decree No. 35 of 2021, as
contributions, insurance and relocation expenses published in Official Gazette No. 114 of 2021.
IRAN
were held to be a reimbursement since they do not Once in force and effective, the new treaty will
accrue to the offshore company. According to an update of 1 April 2021, published replace the current tax treaty between the
by the Indian Ministry of Finance, the income tax two countries. The new tax treaty will be
treaty with Iran entered into force on 29 September favourable for investments into Indonesia
Favourable dividend 2020. The treaty generally applies from 21 March from Singapore, especially for private equity
withholding tax rate under 2021 in respect of Iran and from 1 April 2021 in investors and investment funds. At this point
respect of India. the waiting is still for Singapore to ratify the
the Netherlands Tax Treaty tax treaty.
MAURITIUS
As a result of the cancellation of the previous On 1 April 2021, the Comprehensive Economic
dividend distribution tax in 2020, foreign investors Cooperation Partnership Agreement (CECPA)
in India can now achieve tax savings and reduce between India and Mauritius, signed on
Indian tax by applying for tax treaty benefits 17 February 2021, entered into force.
1
Courtesy of Nishith Desai Associates.
14 | Asia Tax Bulletin INDIA
Tax reform International tax RCEP
On 26 March 2021, the government
developments On 25 June 2021, Japan deposited its instrument of
acceptance with the depositary, the Secretary-
enacted the 2021 tax reform legislation General of ASEAN, for the Regional Comprehensive
GEORGIA
that introduced tax incentives for Economic Partnership Agreement (RCEP) between
investments in carbon reduction efforts On 23 July 2021, the Georgia - Japan Income Tax the Association of Southeast Asian Nations
and digital transformation and provides Treaty will enter into force. The treaty generally (ASEAN) and ASEAN’s free trade agreement
inheritance tax exemption to foreign applies from 1 January 2022. The provisions of partners (Australia, PRC, Japan, Korea and New
citizens, among other measures, Articles 25 (exchange of information) and 26 Zealand), signed on 15 November 2020. The
JURISDICTION:
effective 1 April 2021. (assistance in the collection of taxes) will have effect agreement will enter into force 60 days after the
date on which at least six signatory states which
Japan
from 23 July 2021, without regard to the date on
We refer to the previous edition of this
which the taxes are levied or the taxable year to are member states of ASEAN and three signatory
Bulletin for details of the tax reform.
which the taxes relate. From these dates, the new states other than member states of ASEAN
treaty will replace the former USSR-Japan Income have deposited their instrument of ratification,
Appointment of Tax Treaty, in relations between Georgia and Japan. acceptance or approval with the depositary for
On the same day, the investment protection those signatory states. Singapore was the first RCEP
tax administrator for agreement (IPA) between Japan and Georgia, Participating Country (RPC) to complete the official
non-resident taxpayers signed on 29 January 2021, will enter into force. ratification process by depositing its instrument of
ratification on 9 April 2021. PRC followed as second
The agreement will be effective for a period of
10 years and shall continue to be in force unless country on 15 April 2021.
On 26 March 2021, the Japanese parliament
terminated by either contracting party.
passed into law a new measure that allows
the Japanese tax authorities to assign a tax URUGUAY
administrator to a non-resident taxpayer
On 23 July 2021, the Japan-Uruguay Income Tax
that the authorities believe has a Japanese
Treaty will enter into force. The treaty generally
tax payment obligation. Under this new
applies from 1 January 2022. The provisions of
measure, the tax authorities will have the
article 25 (Exchange of information) and article
ability to designate certain domestic
26 (Assistance in the collection of taxes) will have
parties, either related or unrelated to
effect from 23 July 2021, without regard to the date
the non-resident taxpayer, as a tax
on which the taxes are levied or the taxable year to
administrator. They can do so if the
which the taxes relate.
non-resident taxpayer has not itself
appointed a Japan-based party as its tax
administrator or have not done so within
60 days after receiving a notice to do so
from the Japanese tax authority.
Tax administrators are typically responsible
for dealing with the tax administration
on behalf of the non-resident taxpayer,
including filing tax returns, receiving
tax notices and making tax payments.
Under the previous law there were
no such measures in place for the
tax authority.
JAPAN MAYER BROWN | 17
International tax New income tax rates
developments The Bureau of Internal Revenue (BIR) has
issued the implementing regulation for,
JAPAN among other things, the new income tax
rates applying to regular income of
On 1 June 2021, the amending protocol,
corporations and to certain passive income
signed in Tokyo on 27 February 2019 and in
pursuant to the tax reforms introduced
Siem Reap on 2 March 2019, to the 2008
under the Corporate Recovery and Tax
JURISDICTION: Comprehensive Economic Partnership JURISDICTION:
Incentives for Enterprises (CREATE) Act.
Agreement (CEPA) with the Association of
Malaysia Philippines
Southeast Asian Nations (ASEAN), will enter
CORPORATE INCOME TAX RATES
into force in respect of Malaysia. The
protocol has already entered into force in Domestic corporations:
respect of Japan, Brunei, Cambodia, Laos,
Myanmar, Singapore, Thailand and Vietnam Type of corporation Rate Effective date
and will enter into force for the Philippines
on 1 May 2021. Domestic corporations 25% 1 July 2020
Corporations with net 20% 1 July 2020
taxable income not
exceeding PHP 5 million
and total assets not
exceeding PHP 100
million, excluding the
land on which the
relevant business entity’s
office, plant and
equipment are situated
Proprietary educational 1% 1 July 2020 until
institutions and hospitals 30 June 2023
Foreign corporations on taxable
income derived from all sources within
the Philippines:
Type of corporation Rate Effective date
Resident foreign 25% 1 July 2020
corporations
Offshore Banking Units 25% Effective
date of the
CREATE Act
Regional operating 25% 1 January 2022
headquarters
Non-resident foreign 25% 1 January 2021
corporationsMINIMUM CORPORATE INCOME TAX • the dividends are used exclusively to fund dwellings with a selling price of not more that VAT on previously
The minimum corporate income tax rate is 1% for working capital requirements, capital PHP 2 million;
the period 1 July 2020 until 30 June 2023. expenditures, dividend payments, investment in
• sale, importation, printing or publication of
zero-rated transactions
domestic subsidiaries and infrastructure
books, any newspaper, magazine, journal,
OFFSHORE BANKING UNITS (OBUs) projects; and Following the satisfaction of conditions set forth
review bulletin or any such educational reading
under the Tax Reform for Acceleration and Inclusion
OBUs are subject to regular corporate income tax • a domestic corporation directly holds at least material covered by the UNESCO Agreement
(TRAIN) Act, the Bureau of Internal Revenue (BIR)
from the date the CREATE Act becomes effective. 20% in value of the outstanding shares of the on the importation of educational, scientific and
has issued the implementing regulations that
foreign corporation and has held the shares cultural materials, including the digital or
impose 12% value-added tax (VAT) on previously
INCOME TAX RATE ON CERTAIN uninterruptedly for a minimum of two years at electronic format;
zero-rated export sales of goods and provision
PASSIVE INCOME the time of the dividend distribution.
• sale or importation of prescription drugs and of services.
The income tax rate applicable to certain passive Domestic corporations must also comply with the medicines for:
income of corporations are: The following transactions are now subject to
administrative requirements provided in Revenue
>> diabetes, high cholesterol and hypertension 12% VAT:
Regulation 5-2021.
from 1 January 2020; and
Taxable Nature of income Rate Effective • transactions considered as export sales under
person date No credit or deduction will be allowed for
>> cancer, mental illness, tuberculosis and section 106(A)(2) of the National Internal
any foreign taxes paid in relation to the
Resident Interest income 15% Effective kidney diseases from 1 January 2021; Revenue Code (NIRC):
abovementioned dividends, and such
foreign from a depositary date of the
corporations bank under the CREATE Act foreign taxes will be disregarded in • sale or importation by manufacturers, >> sale of raw materials or packaging materials
expanded foreign computing the limitation for tax credits. distributors, wholesalers and retailers of drugs to a non-resident buyer for delivery to a
currency deposit and medicine included in the list of approved resident local export-oriented enterprise to
system
IMPROPERLY ACCUMULATED drugs and medicines issued by the Department be used in manufacturing, processing,
Capital gains from 15% Effective EARNINGS TAX (IAET) of Health of the following from 1 January 2021 packing or repacking in the Philippines of
sale of shares of date of the The IAET will not be imposed on until 31 December 2023, subject to conditions: the said buyer’s goods and paid for in
stock not traded CREATE Act
corporations for all full fiscal years acceptable foreign currency, and accounted
on the stock • capital equipment, its spare parts and raw
exchange commencing after the effective date of for in accordance with the rules and
materials, necessary for the production of
the CREATE Act. regulations of the Bangko Sentral ng
Gross income
personal protective equipment components for
Non-resident 25% 1 January Pilipinas (BSP);
foreign received from all 2021 COVID-19 prevention;
corporations sources within the
Philippines, such VAT amendments >> all drugs, vaccines and medical devices
>> sale of raw materials or packaging materials
to export-oriented enterprise whose export
as interest, specifically prescribed and directly used for
dividends, rents, sales exceed 70% of total annual
The Bureau of Internal Revenue (BIR) has the treatment of COVID-19; and
etc. production; and
issued the regulation to implement the tax
>> approved drugs for the treatment of COVID-
Dividends 25% (15%, 1 January reforms introduced in the Corporate • those considered as export sales under
received from a subject to 2021 19 for use in clinical trials, including raw
Recovery and Tax Incentives for Executive Order No. 226, otherwise known as
domestic conditions) materials directly necessary for the
corporation Enterprises (CREATE) Act that include the Omnibus Investments Code of 1987, and
production of such drugs;
amendments to the value-added tax (VAT) other special law;
Capital gains from 15% Effective and percentage tax provisions of the • sale or lease of goods or properties or the
sale of shares of date of the • provision of services performed in the
Tax Code. The Revenue Regulations performance of services other than the
stock not traded CREATE Act Philippines by VAT-registered persons under
on the stock concerned is No. 4-2021 (RR 4-2021). abovementioned transactions, where the gross
exchange section 108(B) of the NIRC:
The following transactions are exempt annual sales and/or receipts do not exceed
from VAT: PHP 3 million. >> processing, manufacturing or repacking of
goods for other persons doing business
TAX-EXEMPT FOREIGN-SOURCE DIVIDENDS • sale of residential lot valued at PHP 1.5 million Effective 1 July 2020 until 30 June 2023, the
outside the Philippines which are
and below, or house and lot and other percentage tax is reduced from 3% to 1%.
Foreign-source dividends received by domestic subsequently exported, where the services
residential dwellings valued at PHP 2.5 million
corporations are tax exempt once the CREATE Act are paid for in acceptable foreign currency
and below. Beginning 1 January 2021, the VAT
comes into effect, subject to the following and accounted for in accordance with the
exemption will only apply to the sale of real
conditions: rules and regulations of the BSP; and
properties not primarily held for sale to
• the dividends are reinvested in the domestic customers or held for lease in the ordinary
corporations’ business operations in the taxable course of trade or business, the sale of real
year following that in which the dividends were property utilised for socialised housing, the sale
received or remitted; of a house and lot, and other residential
20 | Asia Tax Bulletin PHILIPPINES PHILIPPINES MAYER BROWN | 21>> services performed by subcontractors and/ If regular WHT rates have been imposed on a Characterisation of
or contractors in processing, converting or non-resident taxpayer’s income, the non-resident
manufacturing goods for an enterprise taxpayer may file a tax treaty relief application certain hybrid
whose export sales exceed 70% of the total
annual production.
(TTRA) with the ITAD at any time after the receipt of
such income supported by documentary
instruments
requirements set out in RMO 14-2021.
The BIR has reportedly satisfied the following On 3 May 2021, the Inland Revenue
conditions set forth under the TRAIN Act: The taxpayer may file a claim for refund of the Authority of Singapore (IRAS) published the
difference between the actual WHT rate and the summaries of two advance rulings relating
• successful establishment and implementation
treaty WHT rate after obtaining a certificate to the characterisation and income tax
of an enhanced VAT refund system i.e. 90-day JURISDICTION:
confirming entitlement to treaty benefits. The claim treatment of certain hybrid instruments. In
refund system; and
for refund may be filed independently of, or
Singapore
both cases, the IRAS ruled that: (i) the
payment of all pending VAT refund claims as of simultaneously with, the TTRA. However, it must be instruments are considered debt securities
31 December 2017 by 31 December 2019. filed within the two-year prescriptive period for purposes of the Qualifying Debt
provided under Section 229 of the Tax Code. Securities (QDS) scheme; (ii) the
Full details are available in Revenue Regulations
No. 9-2021 of 9 June 2021, which comes into effect Generally, one request for confirmation or TTRA distributions payable on the instruments
15 days after its publication on 12 June 2021. must be filed for each transaction, except for constitute interest payable on indebtedness
long-term contracts or those which are effective for that is deductible under section 14(1)(a) of
more than one year, where an annual update must the Income Tax Act (ITA) if incurred on
Guidelines for claiming tax be made until the end of the contract. capital employed in acquiring the income of
treaty benefits Beneficial owners of any income paid to foreign
the issuer; and (iii) the distributions are
eligible for tax concessions and exemptions
fiscally transparent entities may avail of treaty under the QDS scheme, provided that the
On 31 March 2021, the Bureau of Internal Revenue benefits, subject to conditions. relevant qualifying conditions are satisfied.
(BIR) updated the guidelines to rationalise and
For affirmative rulings, the BIR will issue a duly In the first case, the issuer issued a tranche
simplify the procedures in claiming tax treaty
signed certification in lieu of the usual BIR Ruling of subordinated perpetual securities on the
benefits for all types of income derived by non-
and Compliance Check Report. In cases of denial or Bond Market of the Singapore Exchange
resident taxpayers from Philippine sources as part
rulings of first impression, the BIR will issue a BIR Securities Trading Limited. The proceeds
of Revenue Memorandum Order No. 14-2021 (RMO
Ruling containing the factual and legal reasons for from the issuance are intended to finance
14-2021), which took effect immediately.
such denial. Taxpayers may appeal adverse rulings the issuer’s general corporate funding
The withholding agent or income payor may rely on to the Department of Finance within 30 days from requirements or its corporate group’s
the submitted Application Form for Treaty Purposes the receipt of the ruling. investments.
(BIR Form No. 0901), Tax Residency Certificate duly
Taxpayers with pending TTRAs for income earned In the second case, the issuer issued a
issued by the foreign tax authority, or the relevant
in 2020 and prior years are given three months from tranche of senior perpetual capital
provision of the applicable tax treaty on whether to
the date of receipt of a Final Notice to Submit securities that were guaranteed by a foreign
apply a reduced rate of, or exemption from,
Additional Documents or from the effectivity of the company. The issuer plans to use the
withholding at source on income derived by a
guidelines, whichever comes later, to complete their proceeds from the issuance to refinance the
non-resident taxpayer from all sources within the
submission of documents. issuer’s existing borrowings and also for
Philippines. Therefore, it is imperative for non-
resident taxpayers intending to avail of treaty The submission of a Certificate of Residence for general corporate purposes. The main
benefits to always submit the said documents to Treaty Relief (CORTT) Form for dividends, interests features of the instruments are as follows:
each withholding agent or income payor prior to and royalties is discontinued. Nevertheless, CORTT
the payment of income for the first time. Forms submitted before the effectivity of the
guidelines will be forwarded to the relevant tax Table on next page
Withholding agents must file with the International
office for compliance check.
Tax Affairs Division (ITAD) of the BIR a request for
confirmation on the propriety of the withholding tax
(WHT) rate applied to the income of non-resident
taxpayers at any time after the payment of the WHT
but not later than the last day of the fourth month
following the close of the taxable year.
22 | Asia Tax Bulletin PHILIPPINEScoincide with the scheduled distribution payment ABC Trust was established with the principal
Subordinated perpetual securities Senior perpetual capital securities
dates in the instruments. investment strategy of directly or indirectly
Nature of Holders of the instruments are not entitled to any shareholding or residual interest in investing in the business of owning a portfolio of
On the third issue, the holders of the instruments
interest acquired the issuer stabilised, income-generating assets. ABC Trust
are eligible for tax concessions and exemptions
held the investment in its initial offering portfolio of
Payout Semi-annual, fixed-rate distributions (distribution rate), with a step-up feature provided that the relevant qualifying conditions are
assets in certain jurisdiction through a business
also satisfied. In this regard, the distributions
arrangement, where it entered into an agreement to
Distributions are not dependent on Distributions are not dependent on the issuer’s payable on the instruments are either:
the issuer’s profitability or the foreign guarantor’s profitability invest in XY, the operator that managed and
• subject to tax at a concessionary rate of 10%; or operated the income-generating assets under the
The issuer may, in its sole and absolute The issuer or the foreign guarantor may, arrangement. Proceeds from the listing were used
• exempt from tax in the event that
discretion, defer the payment of the in its sole and absolute discretion, defer to purchase the interest in XY. ABC Trust derived
distributions. The deferred distributions the payment of the distributions. The the instruments are issued by a
profit distribution and return of capital from the XY
(arrears) will bear interest at the distributions will accrue on arrears as non-resident person:
interest. After holding the XY interest for more than
prevailing distribution rate long as they remain outstanding.
(additional amount). >> without a permanent establishment (PE) five years, ABC Trust disposed of the XY interest.
in Singapore; or The trustee-manager of ABC Trust, who did not
Obligation to Both instruments have no fixed redemption date. However, the issuer may redeem the
actively solicit the divestment of the XY interest,
>> carrying on Singapore operations through
repay principal instruments under certain circumstances. had received a non-binding unsolicited proposal to
a PE in Singapore where the funds used to
amount divest the said interest.
acquire the instruments were not obtained
from the Singapore operations. The issue was whether the sale of XY interest by
The issuer must satisfy all arrears on The issuer must satisfy all arrears on the
the earlier of the date of redemption earlier of the date of redemption and the ABC Trust was a capital or revenue transaction, and
Both rulings are consistent with the administrative
and the occurrence of certain events occurrence of certain events (such as the accordingly, whether the costs or losses associated
(such as the winding up of the issuer). position set out by IRAS in the e-Tax Guide entitled
winding up of the foreign guarantor). with or gains arising from the sale should be
Income Tax Treatment of Hybrid Instruments
deductible or taxable, respectively.
(Second Edition). The fact that there are no fixed
Prohibitions The issuer is generally prohibited from The issuer and the foreign guarantor are
declaring dividends or making redemption dates for both instruments did not in The IRAS considered the sale of XY interest by ABC
generally prohibited from declaring dividends
payments to its junior obligations. or making payments to the issuer’s or the and of itself suffice for the classification of the Trust to be a capital transaction, having specifically
foreign guarantor’s junior obligations. instruments as equity, particularly since there is a taken into account the following factors:
step-up feature embedded in the instruments. The
• Motive: XY was the business operator that
Ranking for (1) Junior to the issuer’s senior creditors; Pari passu with the issuer’s other unsecured rulings are binding only in respect of the applicants
managed and operated the income-generating
repayment and unsubordinated obligations and the instruments as set out above. The rulings
(2) Pari passu with the issuer’s other assets under the business arrangement through
subordinated obligations; and were published via Advance Ruling Summary No.
which ABC Trust, which was established with a
(3) In priority to the issuer’s ordinary 4/2021 and No. 5/2021.
principal investment strategy of holding
shareholders
stabilised, income-generating assets, held the
Advance ruling on investment in its initial offering portfolio of
assets in certain jurisdiction. This suggests a
The issues were as follows: The IRAS ruled in the affirmative on all issues. On characterisation of disposal lack of intention by ABC Trust to trade at the
the first issue, the IRAS ruled that both instruments
• whether the instruments are regarded as debt
securities under section 43N(4) of the ITA and
are debt securities for the purposes of section of certain investments time of such acquisition.
43N(4) of the ITA and regulation 2 of the QDS • Length of ownership: The five-year holding
regulation 2 of the Income Tax (Qualifying Debt
Regulations since the main features of the On 1 June 2021, the Inland Revenue Authority of period suggests that the XY interest was less
Securities) Regulations (QDS Regulations);
instruments support the debt characterisation. Singapore (IRAS) published a summary of an likely to be held for trading purposes.
• whether the distributions (including any arrears advance ruling relating to the revenue or capital
On the second issue, the distributions payable on • Mode of financing: The absence of short-term
and additional amounts) payable on the characterisation of a sale of interest in a certain
the instruments constitute interest payable on financing (i.e. the purchase of the XY interest
instruments are regarded as interest payable investment by a listed business trust (ABC Trust),
indebtedness. Accordingly, the distributions are was financed by proceeds from ABC Trust's
on indebtedness for the purposes of making a and accordingly the deductibility of any cost or loss
deductible under section 14(1)(a) of the ITA if the listing) suggests that the XY interest was less
deduction under section 14(1)(a) of the ITA; and associated with or taxability of gains derived from
distributions (including any arrears and additional likely to be held for trading purposes.
• whether the holders of the instruments are amounts) are incurred on capital raised through the such sale for Singapore income tax purposes. The
IRAS ruled that the sale is a capital transaction • Frequency of transactions: The lack of prior sale
eligible for tax concessions and exemptions issuance of the instruments and employed in
taking into consideration the various badges of of any part of the XY interest by ABC Trust
under the QDS scheme provided that the acquiring the issuer's income. Additionally, the
trade. Consequently, associated costs or losses are suggests that the XY interest was more likely to
relevant qualifying conditions are satisfied. distributions (including any arrears and additional
not deductible, and gains are not taxable, under the be held for capital purposes.
amounts) are deductible when they become legally
due and payable, which may not necessarily Income Tax Act.
24 | Asia Tax Bulletin SINGAPORE SINGAPORE MAYER BROWN | 25• Circumstances of realisation: The fact that ABC
Trust had no intention to divest the XY interest
Vietnam, Cambodia, Indonesia, Malaysia, Brunei,
Laos, Myanmar and the Philippines) and key
More flexibility for
until it received the unsolicited offer, and that partners China, South Korea, Japan, Australia and BAPA and MAPA
the divestment was partially driven by New Zealand at the 4th RCEP leaders’ summit in
difficulties in improving distribution per unit November 2020. These 15 countries account for To improve the flexibility and efficiency in
and trade price since ABC Trust's listing, are almost 29% of global GDP. The RCEP Agreement concluding bilateral/multilateral advance
less likely to indicate trading. will come into force 60 days after six ASEAN pricing agreements (BAPAs/MAPAs) with
member states and three of the non-ASEAN tax treaty partners under the mutual
• Other factors: ABC Trust's intention to wind up
signatories deposit their ratification instrument, agreement procedure (MAP) article of the
upon completion of the sale of the XY interest
acceptance or approval with the Secretary-General JURISDICTION: relevant tax agreement, the Ministry of
suggests that the XY interest was more likely to
of ASEAN. The target date to bring the agreement Finance issued Decree No. 11024508100
form ABC Trust's capital apparatus rather than
Taiwan
into force is January 1, 2022. on 24 June 2021 that allows the competent
trading stock.
authority to determine the transfer pricing
From the above factors which were explicitly INDONESIA method of examining whether controlled
acknowledged as having been taken into On 11 May 2021, Indonesia ratified the new transactions fall within the arm’s length
consideration in informing the IRAS's decision, the Indonesia-Singapore Income Tax Treaty, by way of range.
IRAS stated that ABC Trust passively held the XY Presidential Decree No. 35 of 2021, as published in
interest and did not actively participate in or According to the Decree, the results of the
Official Gazette No. 114 of 2021. Once in force and
directly control the XY business, and that ABC Trust controlled transactions can be adopted on
effective, the new treaty will replace the current tax
did not perform any supplementary work on or in a year-by-year basis or the average results
treaty between the two countries. The new tax
connection with the enhancement of the value of of the controlled transactions of the
treaty will be favourable for investments into
the underlying asset. The IRAS generally considers covered years as a whole. If the results of
Indonesia from Singapore, especially for private
a lack of supplementary work done as indicative of the controlled transactions are not within
equity investors and investment funds. The new
the absence of a trade, even though it was not the arm’s length range, either an upward or
treaty still awaits the ratification by Singapore.
listed as one of the factors taken into consideration a downward adjustment should be made to
in the present case. the incomes of the related parties at an
agreed point within the arm’s length range.
The ruling, which was delivered via Advance Ruling The adjustment can be either calculated
Summary No. 6/2021, is binding only in respect of and made separately to the incomes of
the applicant and the transaction as set out above. related parties on a year-by-year basis or be
aggregated as a sum and made once in the
International tax last year covered in the BAPA/MAPA.
developments In the past, the competent authority could
only accept the median of the arm’s length
range as the result of the controlled
ASEAN – PRC, JAPAN, KOREA, transactions, and the adjustments had to be
NEW ZEALAND, AUSTRALIA made on a year-by-year basis which made it
difficult and time-consuming to conclude
Singapore’s Ministry of Trade and
BAPAs/MAPAs with the competent
Industry announced that on 9 April 2021, Singapore
authorities of treaty partners. Under the
deposited its instrument of ratification with the
new rules introduced in the Decree, it will
Secretary-General of ASEAN and became the first
be easier to harmonise the transfer pricing
country to complete the official process for
regulations with other countries by
ratification of the Regional Comprehensive
considering global operating risks borne by
Economic Partnership (RCEP) Agreement.
multinational enterprises and reflecting
It is understood that China, Japan
economic realities, as well as to improve tax
and Thailand completed their domestic
certainty, prevent disputes, and avoid
procedures to approve RCEP, but apparently
double taxation for taxpayers.
have not deposited their instruments of
ratification with ASEAN. RCEP is the world’s
largest free trade agreement and was signed
by all 10 ASEAN members (Singapore, Thailand,
26 | Asia Tax Bulletin SINGAPOREYou can also read
