Asia Tax Bulletin Winter 2019/20 - Mayer Brown
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Asia Tax Bulletin Winter 2019/20
In This Edition
We are pleased to present the Winter 2019/20 edition
of our firm’s Asia Tax Bulletin.
We wish our readers a happy new year. The Philippines Board of Internal Revenue
issued transfer pricing audit guidelines and
This edition of the Asia Tax Bulletin is filled Taiwan proposes a reduction of the retained
with many tax developments, especially in earnings tax provided that substantial
the ASEAN countries and China. China issued investments are made in Taiwan by the
SAN FRANCISCO CHICAGO NEW YORK business. Finally, as regards
a draft of a new VAT law and a Consumption Taiwanese BEIJING
PALO ALTO WASHINGTON DC
tax law and issued clarifications on the recently Vietnamese taxation, the Hanoi tax
CHARLOTTE
department issued clarifications on a host of
TOKYO
LOS ANGELES
amended individual income tax law.
HOUSTON matters which are highlighted in this edition. SHANGHAI
Indonesia came out with draft proposals DUBAI HONG KONG
forMEXICO We hope and trust that you will find the HANOI
CITY
a radical reform of the way individuals
are taxed, which will give exciting contents of this edition of interest. Please let us
opportunities to individuals resident know if you have questions or if you wish to BANGKOK HO CHI MINH CITY
share your feedback on this publication.
AMERICAS
in Indonesia. It also came out with tax
measures to tax foreign digital companies.
SINGAPORE
With kind regards,
Japan introduced an increase of its Pieter de Ridder
consumption tax and Korea launched a task
BRASÍLIA*
force to monitor taxation of digital companies.
Malaysia is also now going to tax foreign
RIO DE JANEIRO*
digital businesses as of 2020. Malaysia
issued its annual government budget in
SÃO PAULO*
October 2019.
Pieter de Ridder
*TAUIL & CHEQUER OFFICE
Partner, Mayer Brown LLP
+65 6327 0250
pieter.deridder@mayerbrown.com
2 | Asia Tax Bulletin MAYER BROWN | 3
Contents
China India Korea Taiwan
6 Draft Value Added Tax Law
14 Liaison Office in India is a 22 Task Force on Digital Tax to be Set Up 35 Procedure for Withholding Taiwan-Sourced
Released for Public Consultation Permanent Establishment Income of Foreign Companies
22 International Tax Developments
7 Draft Consumption Tax Law
14 Reduced Corporate Tax Rate, Carry- 36 Incentive for Reducing Retained
Malaysia
Forward of Losses and MAT Credits Earnings Tax by Substantial Investment
8 Gains on Transfer of Listed Shares
and on Hong Kong Securities
Investment Funds Trading
15 TDS Exemption on Cash Withdrawal 37 Safe Harbour Rules for
by Authorised Dealer & FFMC
24 Budget 2020
Master File and CbC Report
8 Changes to Individual Income Tax 15 TDS Credit under Section 194N
25 Principal Hub Incentive
9 Annual Individual Income Tax 16 CBDT Extends Tax Filing Deadline 26 Digital Services Tax Thailand
Settlement of Comprehensive for Certain Cases
Income Clarified
28 Development Cost for Customised 38 Repeal of Existing Tax Incentive
16 Taxation Laws (Amendment) Bill, Computer Software Tax Benefits
9 Social Insurance for Residents 2019 – Introduced in Lower House
39 Tax Implications of Investment Income
from Hong Kong, Macau and of Parliament 28 Taxation of Foreign Fund
Taiwan Announced
16 International Tax Developments
Management Company
39 Withholding Tax Implication on Interest
10 Draft Urban Maintenance
29 Tax Treatment of Perquisites
Payment Made to Mutual Fund
Indonesia
and Construction Tax Law from Employment
10 Export of Retail Products Through
Cross-Border E-Commerce Pilot Zone 17 Tax Reform
29 Tax Treatment of Expenditure for
Repairs and Renewals of Assets
Vietnam
18 40 Loan Interest Earned by
10 China Postpones Imposition Super Deduction for Certain Expenses
30 Labuan Offshore Companies Representative Office
of Tariffs on US Products
18
40
Taxation of Foreign Digital Companies
Tax Implications
10 Adjustments to Tentative
Import Tariffs for 2020 Published
19 Updates on Tax Incentives for Companies
Philippines 43 International Tax Developments
11 19
31
International Tax Developments
International Tax Developments Transfer Pricing Audit Guidelines Issued
32
Hong Kong Japan
International Tax Developments
12 Tax Concessions 20 Consumption Tax Rate Increase Singapore
12 Profits Tax Concessions for 21 Highlights of 2020 Tax
33 FATCA Reporting
Insurance-Related Businesses Reform Proposals
13 International Tax Developments 21 International Tax Developments 33 International Tax Developments
4 | Asia Tax Bulletin MAYER BROWN | 5
Draft Value Added Tax >> 6% for distribution services, intangible assets
and financial goods; and
TAXPAYERS
• Entities and individuals engaged in the
Law Released for Public >> 3% collection rate for small-scale VAT taxpayer production, commissioned processing or
Consultation rate (i.e. VAT at a low rate and no input tax importing of taxable consumption goods in(to)
China are subject to consumption tax. The
credit granted).
consumption tax is levied on the production,
The Ministry of Finance (MoF) and the State wholesale or retail sale of taxable goods, or on
TAXABLE AMOUNT
Taxation Administration (SAT) released the the goods that are not sold but are for the
draft Value Added Tax (VAT) Law (the draft • The draft VAT Law clarifies that the taxable
JURISDICTION: taxpayer’s own use.
VAT Law), which is now open to public amount is the consideration for taxable
transactions, including all monetary or non-
China (PRC)
consultation. Any comments should be TAX RATES
submitted to the MoF before 26 December monetary economic benefits. In the case of
“mixed sales”, the applicable tax rate for main • The State Council can adjust the tax rates and
2019. The draft VAT Law contains nine
business should apply. report the adjustments to the Standing
chapters and 47 articles. The main content
Committee of the National People’s Congress.
is set out below.
VAT EXEMPTIONS A taxpayer supplying different taxable goods
subject to different tax rates has to calculate
TAXPAYERS AND • Supplies such as contraceptive pills or classic
the sales proceeds and sales amount
WITHHOLDING AGENTS books and entities such as hospitals, museums
separately. If no such separate calculation is
• Taxpayers are entities or individuals that or welfare institutions are exempt from VAT.
made, or if different taxable goods subject to
are engaged in taxable transactions The State Council may formulate special
different tax rates are sold in one package, the
that do not exceed the tax threshold of preferential VAT policies and report them to the
highest rate will apply.
CNY 300,000 per quarter. Recipients of Standing Committee of the National People’s
imported goods are VAT taxpayers. Congress in accordance with the needs of
DEDUCTIONS AND EXEMPTIONS
national economic and social development, or
• Entities and individuals engaged in due to emergencies or any other reasons that • Consumption tax imposed on taxable goods
taxable transactions that do not exceed have a significant impact on taxpayers’ business used for the production of taxable consumption
the above tax threshold are not activities. goods can be deducted from the consumption
considered VAT taxpayers; however, tax payable on goods produced or sold, e.g.
they may opt to register as VAT FILING PERIODS consumption tax paid on tobacco products
taxpayers to pay VAT. used for the production of cigarettes or cigars,
• Depending on the circumstances, filing periods
or on petroleum for the production of petrol or
• In the case of taxable transactions could be 10 or 15 days, a month, a quarter or
diesel oil.
carried out within the territory of China half year.
by foreign entities or individuals, the • Export of taxable goods is exempt from
purchaser will be withholding agent. TAX ADMINISTRATION consumption tax, unless it is provided
• VAT is collected by the tax authorities. otherwise by the State Council.
VAT TAX RATES AND VAT However, VAT on imported goods will be • The State Council is authorised to stipulate
COLLECTION RATE collected by the customs services. To facilitate exemptions or reductions of consumption tax
• The draft VAT Law provides the a smooth transition, the current tax treatment and report them to the Standing Committee of
following rates: may continue to apply up to five years after the the National People’s Congress.
implementation of the new law where it is
>> 13% for the supply of goods,
necessary to do so. TAX ADMINISTRATION
processing, repairs and repairs services,
leasing services of tangible movable • Consumption tax will be collected by the tax
property and imported goods; Draft Consumption Tax Law authorities or, with respect to imported taxable
consumer goods, by the customs service on
>> 9% for the supply of transportation
behalf of the tax authorities. The State Council
services, postal services, basic The Ministry of Finance (MoF) and the State
will issue the implementation rules in
telecommunications, construction, Taxation Administration (SAT) have released the
accordance with the draft law.
leasing services of real estate, granting draft Consumption Tax Law (the draft law) for public
land use rights, sales or import of consultation. Any comments should be submitted
agricultural products and other goods; to the MoF or SAT before 2 January 2020. The draft
law contains 23 articles.
CHINA (PRC) MAYER BROWN | 7
Gains on Transfer of Listed >> the invested amount is at least USD 5 million
where the R&D centre is a separate entity with
Annual Individual Social Insurance for
Shares and on Hong Kong legal personality or a department of a company Income Tax Settlement Residents from Hong Kong,
or branch and the R&D expenses exceed CNY
Securities Investment 10 million on an annual basis; of Comprehensive Macau and Taiwan
Funds Trading >> staff engaged in R&D exceeds 90; and Income Clarified Announced
>> the cumulative value of the equipment
On 4 December 2019, the Ministry of Finance, State purchased is more than CNY 10 million; and On 7 December 2019, the Ministry of Finance and On 29 November 2019, the Ministry of Human
Taxation Administration and Securities Regulatory the State Taxation Administration jointly issued a Resources and the National Medical Security jointly
Committee jointly issued Circular [2019] No. 93 (the • for foreign-invested R&D centres established circular (Circular [2019] No. 94) clarifying several published a circular (Ling [2019] No.41) concerning
Circular) continuing the exemption from individual on or after 1 October 2009: issues regarding the annual individual income tax social insurance for residents from Hong Kong,
income tax for gains derived by Chinese individual >> the invested amount is at least USD 8 million settlement of comprehensive income. From 1 Macau and Taiwan who are employed, live or study
investors from the transfer of shares listed on the where the R&D centre is a separate entity with January 2019 to 31 December 2020, a resident in mainland China. The circular will come into effect
Hong Kong Stock Exchange and from trading of legal personality or a department of a company individual is exempt from the annual tax settlement on 1 January 2020.
Hong Kong securities investment funds through the or branch and the R&D expenses exceed CNY if his annual comprehensive income does not
• Residents from Hong Kong, Macau and Taiwan
recognised investment fund mechanism between 10 million on an annual basis; exceed CNY 120,000 or if the amount of tax
hired and recruited by employers such as
Hong Kong and Shanghai and the same mechanism payable upon tax settlement is less than CNY 400.
>> staff engaged in R&D exceeds 150; and enterprises, public institutions, social
between Hong Kong and Shenzhen. The exemption does not apply if the withholding
organisations and individual economic
>> the cumulative value of the equipment agent has not withheld tax on the comprehensive
The previous exemptions were laid down in Circular organisations in mainland China must
purchased is more than CNY 20 million. income where such an obligation exists.
[2017] No. 78 and Circular No. 154, respectively, participate in basic pension insurance, basic
which provided for an applicable period ending on A foreign-invested R&D centre must be recognised Furthermore, the following applies from tax medical insurance, employment injury
4 December 2019. Under the Circular, the exemp- as such by the competent department of com- year 2019: insurance, unemployment insurance and
tions have been extended until 31 December 2022. merce. A guideline for approval of foreign-invested maternity insurance.
• where a discrepancy exists between the tax
R&D centres and a list of eligible equipment are calculation and the deduction rules of the • Non-employed residents of Hong Kong, Macau
INPUT VAT REFUND ON PURCHASE OF attached to the circular. The previous circular on withholding agent and those of the tax and Taiwan who live in mainland China and
EQUIPMENT USED BY R&D INSTITUTIONS the same subject, Circular [2016] No. 121, was authority in charge of the annual tax settlement hold “residence permits for Hong Kong, Macau
On 25 November 2019, the Ministry of Finance abolished on 11 November 2019. with regard to tax matters of the disabled, and Taiwan residents” must participate in basic
(MoF), the Ministry of Commerce and the State widowed and childless elderly or martyrs’ pension insurance and basic medical insurance
Changes to Individual
Taxation Administration (SAT) released a circular families, the most favourable outcome for the in their place of residence.
(Circular [2019] No. 91) concerning the refund of taxpayer will prevail; and
input VAT on the purchase of equipment used by Income Tax • where information provided by a resident
• University students from Hong Kong, Macau
and Taiwan who are studying in mainland China
domestic research and development (R&D) institu-
tions or foreign-invested R&D centres. The circular individual in respect of special additional are required to buy the same medical insurance
At a meeting of the State Council on 20 November deductions is incorrect and, despite a policy as mainland students in the place where
applies from 1 January 2019 to 31 December 2020.
2019, it was decided that individual taxpayers notification by the tax authority, is not rectified their education institutions are located.
The domestic R&D institutions that are eligible for whose annual comprehensive income is less than without a legitimate reason, the tax authority
the full refund of input VAT include the R&D or CNY 120,000 or whose tax payable after an annual • Residents from Hong Kong, Macau and Taiwan
may suspend the application of the special
technology institutions designated and approved tax settlement is mino, will be exempt from the who meet the conditions for participating in
additional deductions. After a resident
by the MoF, Customs Service, the Ministry of annual tax settlement in the following two years. social insurance in mainland China have to
individual has corrected the relevant
Science and Technology and the SAT, universities register for social insurance at their place of
Moreover, from 1 January 2019 to 31 December information or explained the situation in
and designated platforms of small and residence by presenting their residence permits
2023, only 50% of the employment income derived accordance with the regulations, the resident
medium-sized enterprises. and following the same procedures as for
by crew working on a cross-ocean ship will be individual may apply the special additional
mainland Chinese residents.
Foreign-invested R&D centres are also eligible included in the tax base for individual income tax deductions with confirmation by the tax
for the refund if all the following conditions purposes if they sail on a ship for more than 183 authority and recoup the deductions for • If residents from Hong Kong, Macau and
are satisfied: days in a tax year. previous months. Taiwan leave mainland China before the
conditions for receiving pension payments are
• for foreign-invested R&D centres established The Ministry of Finance and the State Taxation met, their social insurance personal accounts
on or before 30 September 2009: Administration are expected to publish a circular to will be retained. However, an application for
implement the decisions in the short term. termination of social insurance can be made,
in which case the deposit amount in the social
insurance personal account will be refunded.
8 | Asia Tax Bulletin CHINA (PRC) CHINA (PRC) MAYER BROWN | 9
Where the insured person subsequently returns The deemed taxable profit rate is set at 4% • On 1 July 2020, the fifth-step tariff reduction HONG KONG
to mainland China, the insurance can be of revenue. for the information technology products listed On 6 December 2019, the amending protocol to
resumed and the insured period will be in the Schedule of the Amendment to the Tariff the China-Hong Kong Income Tax Agreement,
An enterprise eligible for tax incentives granted to
added up to the previous insured terms. Concession Schedule of the People’s Republic as amended by the 2008, 2010 and 2015 protocols,
small and medium-sized enterprises may continue
of China to Join the World Trade Organization entered into force. The protocol generally applies
• Residents from Hong Kong, Macau and to enjoy those incentives. Similarly, those that are
will be implemented. The tariff quotas continue from 1 January 2020 for China and from
Taiwan who have participated in social eligible for tax exemption as prescribed under
to apply to eight commodities, including wheat, 1 April 2020 for Hong Kong.
insurance in their home jurisdictions are article 26 of the Enterprise Income Tax Law
and the quota tariff rate for fertilisers, urea,
exempt from the obligations of basic pension (interest from treasury bonds, dividends, income
compound fertiliser, ammonium hydrogen NEW ZEALAND
insurance and unemployment insurance in of non-profit organisation) will be exempt from
phosphate will remain unchanged at 1%.
mainland China by presenting certificates tax on such income. On 27 December 2019, the China-New Zealand
issued by the relevant authorities. • From 1 January 2020, new reduced rates will be Income Tax Treaty entered into force. The treaty
China Postpones Imposition
implemented under trade agreements or generally applies from 1 January 2020. From this
Draft Urban Maintenance
preferential rate arrangements concluded with date, the new treaty generally replaces the tax
of Tariffs on US Products New Zealand, Peru, Costa Rica, Switzerland treaty of 1986, as amended by the 1997 protocol.
and Construction Tax Law (from 1 July 2020), Iceland, Singapore,
Australia, South Korea, Chile, Georgia and
On 15 December 2019, China’s Customs Tariff
Pakistan, among other countries.
On 20 November 2019, the State Council approved Commission issued a Public Notice (CTC Public
the draft of the Urban Maintenance and Notice [2019] No. 7) stating that the government • Moreover, from 1 January 2020, 107 products
Construction Tax Law of the People’s Republic of had postponed the imposition of tariffs of 5% and or commodities, including ferrochrome, will
China. The charge of the draft tax remains the same 10% (as prescribed by CTC Public Notice [2019] No. continue to be subject to export duties;
as the Urban Maintenance and Construction Fee 4) on imports of US products with a total value of the scope and rates of the taxable items
currently imposed by the interim regulation. USD 75 billion. The government also postpones the remain unchanged.
imposition of tariffs of 5% and 25% (as prescribed
Export of Retail Products International Tax
by CIC Public Notice [2018] Nos. 5, 7 and 8) on
US-manufactured vehicles and auto parts. Both
Through Cross-Border impositions were scheduled to take effect on 15 Developments
December 2019. This is considered to be a
E-Commerce Pilot Zone mitigation measure in response to the trade ARMENIA, BELARUS, K AZAKHSTAN,
agreement that the United States and China KYRGYZSTAN, RUSSIA
The State Taxation Administration has published a recently concluded. Earlier, the United States On 25 October 2019, the free trade agreement
notice concerning the enterprise income tax had cancelled an additional 10% tariff on (FTA) between China and the Eurasian Economic
treatment of enterprises engaged in export of retail Chinese goods that was scheduled to take Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan,
products (SAT Public Notice [2019] No. 36). effect on 15 December 2019. Russia), signed on 17 May 2018, entered into force.
According to the notice, from 1 January 2020,
e-commerce enterprises engaged in cross-border
business located within the Cross-Border
Adjustments to MAURITIUS
Tentative Import Tariffs
On 17 October 2019, China and Mauritius
E-Commerce Pilot Zone will be taxed on a deemed
signed a free trade agreement (FTA) in Beijing.
for 2020 Published
profit basis provided that the enterprises fulfil the
following requirements:
SINGAPORE
• the enterprise is registered in the Pilot Zone On 16 October 2019, the amending protocol,
On 23 December 2019, the Customs Tariff
and with the Cross-Border E-Commerce Online signed on 12 November 2018, to the 2008 free
Commission of the State Council published a public
Service Platform in respect of the date of trade agreement (FTA) between China and
notice (CTC Public Notice [2019] No. 50) (the notice)
export, name, quantity unit, quantity, unit price Singapore entered into force.
adjusting the tentative import tariffs for 2020.
and amount of export;
The content of the notice is summarised below.
MACAU
• exported goods are declared through the
• From 1 January 2020, the import tariffs for
local Customs Service; and On 27 November 2019, China and Macau signed an
859 commodities will be reduced (the
amending protocol to the China-Macau Income Tax
• exported goods are exempt from application of tentative import tariffs); and
Arrangement (2003), as amended by the 2009, 2011
value-added tax and consumption tax from 1 July 2020, the tentative import tariffs
and 2016 protocols, in Macau.
even if the enterprises have not yet for seven information technology products
received the official receipt of purchases. will be repealed.
10 | Asia Tax Bulletin CHINA (PRC) CHINA (PRC) MAYER BROWN | 11
Tax Concessions International Tax
On 6 November 2019, the Legislative
Developments
Council passed the Inland Revenue ESTONIA AND CAMBODIA
(Amendment) (Tax Concessions) Bill 2019.
Hong Kong’s double tax treaties (CDTAs) with
The new Ordinance gives effect to the
Cambodia and Estonia signed in June and
concessionary tax measures proposed in
September this year respectively came into force
the 2019-2020 Budget. These measures
JURISDICTION: on 27 and 18 December 2019, respectively, after
include a one-off tax reduction of 75% on
the completion of the relevant ratification
profits tax, salaries tax and tax under
Hong Kong
procedures. The CDTAs will have effect in respect
personal assessment for the year of
of Hong Kong tax for any taxable periods
assessment 2018/19, subject to a maximum
beginning on or after April 1, 2020, a Government
of HKD 20,000 per case; and a waiver of
spokesman said today (December 27). Cambodia
business registration fees for 2019/20.
and Estonia were the 38th and 75th largest trading
partners of Hong Kong in 2018 respectively. The
Profits Tax Concessions CDTAs will bring a greater degree of certainty on
tax liabilities for those who engage in cross-border
for Insurance-Related business activities, and help promote bilateral trade
Businesses and investment activities.
PRC
On 6 December 2019, the government
The Hong Kong Chief Executive in Council issued
published the Inland Revenue (Amendment)
an Order to implement the amending protocol,
(Profits Tax Concessions for insurance-
signed on 19 July 2019, to the China-Hong Kong
related Businesses) Bill 2019 in the Official
Income Tax Agreement, as amended by the 2008,
Gazette. The Bill seeks to amend the Inland
2010 and 2015 protocols. The Order was published
Revenue Ordinance (Cap. 112) to reduce the
by way of Legal Notice No. 118 in Gazette No. 40,
profits tax rate by 50% (i.e. 8.25%) for all
Vol. 23, Legal Supplement No. 2, of 4 October 2019
general reinsurance business of direct
and will be scheduled at the Legislative Council on
insurers, selected general insurance
6 December 2019 for negative vetting.
business of direct insurers and selected
insurance brokerage business of direct
MACAU
insurers. Administrative provisions,
including provisions on anti-avoidance and According to a press release of 25 November 2019,
ascertainment of assessable profits, are also published by the government of Macau, the Hong
included in the Bill to address enforcement Kong-Macau Income Tax Agreement was signed by
issues arising from the provision of the Hong Kong on 22 November 2019 and by Macau
proposed tax relief. on 25 November 2019.
Currently, there are only tax incentives for
captive insurance business and reinsurance
business of professional reinsurers in Hong
Kong at the profits tax rate of 8.25%. It is
necessary for Hong Kong to introduce new
measures to keep the business environment
conducive to insurance business and to
help the insurance industry seize new
opportunities, including those arising from
the Belt and Road Initiative. The Bill was
introduced into the Legislative Council for
the first reading on 18 December 2019.
HONG KONG MAYER BROWN | 13
Liaison Office in • no timeline exists within which the option under
section 115BAA must be exercised. Hence, a
To qualify for exemption, the following
requirements must be met:
India is a Permanent domestic company, having carried forward
• The withdrawal will be made only for the
losses on account of additional depreciation,
Establishment 1 may exercise the option after setting off the
purposes of:
losses thereby accumulated. >> purchase of foreign currency from foreign
The Delhi bench of the Income Tax tourists or non-residents visiting India or from
The Circular also clarifies the situation regarding
Appellate Tribunal (“Tribunal”) in a set of resident Indians on their return to India, in cash
the carried-forward Minimum Alternate Tax (MAT)
batch appeals in Hitachi High Technologies as per the directions or guidelines issued by the
JURISDICTION: credit under section 115JB of the Act as follows:
v. DCIT1, held that a Liaison Office (“LO”) of Reserve Bank of India; or
• the provisions of section 115JB shall not be
India
Hitachi High Technologies Singapore Pte.
>> payment of inward remittances to the recipient
Ltd. (“Appellant”) in India constituted a applicable to the domestic company that
beneficiaries in India in cash under the Money
Permanent Establishment (“PE”) of the exercises the option under section 115BAA.
Transfer Service Scheme (MTSS) of the Reserve
Appellant on account of the activities Hence, the MAT credit of the domestic
Bank of India.
undertaken by it, which were not simply company that exercised the option under
preparatory or auxiliary in nature. The section 115BAA shall not be available • A certificate must be furnished by the qualified
Tribunal compared the PE exclusion clause subsequent to the exercise of such option; and person to the bank mentioning that the
for preparatory and auxiliary activities in withdrawal is only for the purposes specified
• no timeline exists within which the option under
Article 5(7)(e) of the India-Singapore tax above and the directions or guidelines
section 115BAA must be exercised. Hence,
treaty, against the language in India’s issued by the Reserve Bank of India have
a domestic company with MAT credits may
treaties with the USA and Canada; and been followed.
exercise the option after utilising the said
concluded that the India-Singapore treaty
credit against the regular tax payable under The Notification shall be deemed to
envisaged a narrower exclusion which the
the taxation regime existing prior to have come into force with effect from
Appellant did not qualify.
promulgation of the Ordinance. 1 September 2019 onwards.
Reduced Corporate Tax TDS Exemption on Cash TDS Credit under
Rate, Carry-Forward of Withdrawal by Authorised Section 194N
Losses and MAT Credits Dealer & FFMC On 27 September 2019, the Central Board of Direct
On 2 October 2019, the Central Board of Taxes issued the Income-tax (10th Amendment)
On 15 October 2019, the Central Board of Direct
Direct Taxes (CBDT) issued Circular No. Rules, 2019 (the amendment) vide Notification
Taxes (CBDT) issued Notification No. 80/2019
29/2019 (the Circular) which clarifies the 74/2019, which provides a new sub-rule (3A) in rule
(the Notification) which exempts cash withdrawal
option available under section 115BAA of 37BA of the Income-tax Rules, 1962 (the rules).
from Tax Deducted at Source (TDS) under
the Income-tax Act, 1961 (the Act) and the Under the new sub-rule (3A), it is provided that for
section 194N of the Income-tax Act, 1961
secondary legislation, The Taxation Laws the purposes of section 194N (payment of certain
(the Act) for a withdrawal made by the
(Amendment) Ordinance, 2019 (the amounts in cash), the credit for tax deducted at
following “qualified person”:
Ordinance). The Circular clarifies that: source (TDS) shall be given to the person from
• authorised dealer (i.e. a person that is an
• a domestic company opting for the whose account tax is deducted and paid to the
authorised dealer under the Foreign Exchange
benefit of a lower tax rate under section Central Government account for the assessment
Management Act, 1999) and its franchise agent
115BAA of the Act is not allowed to year relevant to the previous year in which such
and sub-agent; and
claim any losses carried forward on tax deduction is made.
account of additional depreciation. This • full-fledged money changer (FFMC) licensed The amendment shall be deemed to have come
applies for the Assessment Year during by the Reserve Bank of India and its into force with effect from 1 September 2019.
which the option was exercised and for franchise agent.
any subsequent Assessment Years; and
14 | Asia Tax Bulletin 1
Courtesy Nishith Desai Associates in Mumbai. INDIA MAYER BROWN | 15
CBDT Extends Tax Filing • Certain additional grounds will be added to
section 115BAA(2) of the Act to be complied
Tax Reform
Deadline for Certain Cases with by the domestic company in order to apply
Indonesia’s Minister of Finance announced
the reduced corporate tax rate of 22%.
Following the Central Board of Direct Taxes on 3 September 2019 the Government’s
(CBDT)’s decision to extend the deadline for • A new section 115BAB(4) of the Act will be plan to introduce legislation on a number of
the filing of income tax returns (ITRs) from added to provide that if any difficulty arises tax changes (the New Tax Law). The New
30 September 2019 to 31 October 2019 for persons regarding fulfilment of conditions, the Central Tax Law will impact the Income Tax, Value
whose accounts are required to be audited, the Board of Direct Taxes may issue guidelines for Added Tax (VAT), and General Tax Provision
CBDT issued an order under Section 119 of the the purpose of removing the difficulty and JURISDICTION:
laws. The legislative process is at a very
Income-tax Act, 1961 (the Act) on 27 September promoting manufacturing or production of an early stage and many key aspects of the
Indonesia
2019. The order provides that this extension is article using a new plant and/or machinery. proposals may be subject to change.
applicable to assessees covered under clause (a) of • A new section 115JAA(8) of the Act will be The corporate income tax (CIT) rate will be
Explanation 2 to section 139(1) of the Act, which added to provide that the provisions of section reduced in phases, from 25% to 22% for tax
includes companies, partnership firms, 115JAA of the Act relating to the tax credit in years 2021 and 2022, with a further
proprietorships and working partners of a firm. respect of tax paid on deemed income of reduction to 20% for tax years 2023 and
However, it is clarified that there shall be no certain companies shall not apply to a person thereafter. Newly listed Indonesian
extension of the due date for the purpose of who has exercised the option under section companies will receive an additional three
Explanation 1 to section 234A of the Act (interest 115BAA of the Act. percentage point reduction (CIT rate of 19%
for defaults in furnishing return) and the assessee for tax years 2021 and 2022 and 17% for tax
shall remain liable for the payment of interest as
provided under section 234A of the Act.
International Tax years 2023 and thereafter for a period of
five years. After the five years, the rate
Developments becomes 20%).
Taxation Laws (Amendment) MOROCCO Tax exemptions will be provided for
Bill, 2019 – Introduced in
Indonesian resident companies and
On 15 July 2019, the amending protocol, signed on
individuals on dividends received from
Lower House of Parliament
8 August 2013, to the India-Morocco Income Tax
both domestic and foreign companies, if
Treaty (1998) entered into force. The protocol
the dividend is reinvested in Indonesia.
generally applies from 15 July 2019.
Currently, an Indonesian company pays 25%
On 25 November 2019, the Finance Minister
profits tax on all foreign source dividends,
introduced the Taxation Laws (Amendment) Bill,
and on domestic dividends when the
2019 (the bill) in the Lok Sabha (the lower house of
company’s shareholding is less than 25%.
Parliament). The bill will replace the Taxation Laws
(Amendment) Ordinance 2019 (the ordinance) Tax penalties will be reduced to encourage
which was brought in to make certain amendments voluntary compliance. The penalty for
in the Income-tax Act, 1961 (the Act) and the failure to issue, or for the late issuance
Finance (No. 2) Act 2019 (the Finance Act). The of a VAT invoice would be reduced from
amendments provided in the bill are generally in 2% to 1% of the VAT transaction value.
line with the amendments provided in the The interest for the underpayment of tax
ordinance, with some further amendments made to (due to tax return amendments and tax
the Act, as set out below. assessment letters) would be reduced
from 2% per month to a benchmark interest
• A provison to section 115BAA(1) of the Act will
rate plus 5%, prorated on a monthly basis.
be added to provide that the option for a
A new penalty of 1% of the VAT transaction
domestic company to compute its income tax
value will be introduced if a person fails to
payable at 22% for any previous year relevant
register for VAT purposes.
to the assessment year beginning on or after 1
April 2020 will be withdrawn if the domestic The ability to claim input VAT will
company fails to satisfy the conditions be broadened to potentially cover
contained in section 115BAA(2) of the Act. pre-production periods and certain
other situations.
16 | Asia Tax Bulletin INDIA MAYER BROWN | 17
The legal and regulatory frameworks for Indonesia’s The deduction applies to the following costs: According to the regulation, foreign companies An extension of the carry-forward of tax losses of
various incentives will be consolidated into one part trading goods and services online in Indonesia will more than five years but not more than 10 years is
• provision of premises and supporting facilities
of the law. be treated as having a physical presence in available, provided that the following annual
such as electricity, water, fuel, maintenance fee,
Indonesia, and will be required to comply with local qualifications to extend the tax loss carry-forward
A new domestic permanent establishment (PE) and any other related expenses for the purpose
taxation rules as a result. Foreign companies are period are met:
definition (without physical presence) will be of carrying on the activities;
also required to appoint representatives to act on
introduced that may apply the ”significant • the company carries out eligible investment
• provision of instructors or educators; their behalf for tax purposes.
economic presence” concept. It appears that the PE provided under the regulation;
definition in Indonesia’s Income Tax Law will be • provision of goods or materials for the purpose The new regulation will apply to foreign companies
• the company carries out eligible investment in
updated to reflect this change that allows the of the activities; that meet certain criteria (with further details still to
the Industrial Zone or Bonded Zone;
Indonesian Government to tax profits without be provided) such as:
• fees or cash incentives paid to the
physical presence in Indonesia. The announcement • the company carries out investment in new and
participants; and • a certain number of transactions;
did not address the expected impact of treaty renewable energy;
definitions of PE, but the Director General of • certificates granted to the participants. • a certain transaction value;
• the company carries out development in
Taxation has been subsequently quoted as stating
The deduction is not available for any incurred • a certain number of shipping packages; and economic or social infrastructure in the
that such treaty articles will still apply.
expenses that are attributable to participants with operational area of at least IDR 10 billion;
• a certain amount of traffic.
Indonesia may adopt a territorial tax principle of special relationships with the taxpayer. The 100%
• the company uses raw materials and/or
taxation instead of the current worldwide income additional deduction element will be capped if the Furthermore, the regulation provides that foreign
components which are at least 70% made
taxation principle for individuals. additional deduction results in a loss. The digital companies that were operating in Indonesia
in Indonesia;
deduction is not available if certain other incentives before the regulation came into effect will have a
Super Deduction for Certain
have already been granted to the taxpayer. The grace period of two years from the date of • the company employs a certain number of
taxpayer is required to submit a notification, the implementation. The regulation came into Indonesian workers;
Expenses cooperation agreement and a fiscal statement effect on 25 November 2019.
• the company carries out research and
before commencing a training programme. An
development in Indonesia for product
Updates on Tax Incentives
annual report must be submitted by the taxpayer
On 9 September 2019, the Ministry of Finance development or production efficiency of
together with its corporate income tax return for
for Companies
(MOF) issued Regulation No. 128/PMK.010/2019 at least 5% of the investment made within
the purpose of claiming the deduction.
(the Regulation) on the 200% super deduction (the five years; or
deduction) for apprenticeship, internship and The Director General of Tax may deny the
• exports make up at least 30% of the total sales
teaching activities conducted by a taxpayer’s deduction if: On 12 November 2019, the government issued
of the company for the investment conducted
employees. The Regulation came into effect on 9 Regulation No. 78 Year 2019 (the regulation), which
• no cooperation agreement was entered into by outside of a Bonded Zone.
September 2019. provides amendments to the regulations on the tax
the taxpayer;
incentives provided for companies investing in The Online Single Submission (OSS)
In order to qualify for the deduction, the taxpayer
• the activities performed are not in line with the certain business sectors. The regulation will come system is introduced to process the tax
must satisfy the following requirements:
cooperation agreement; into effect on 13 December 2019, and the previous incentives applications.
• the taxpayer’s employees have conducted Government Regulation (i.e. GR No. 18 Year 2015
• the notification is not submitted Taxpayers who have enjoyed tax incentive under
apprenticeship, internship and teaching (as amended by GR No. 9 Year 2016)) is revoked.
accordingly; and the regulation are not allowed to enjoy the
activities in certain competency sectors as
In order to enjoy the reduction in the net taxable following tax incentives provided:
provided under the Regulation; • the annual report is not submitted in a timely
income of up to 30% from the amount invested in
fashion, or inadequate information is provided. • the tax incentive in the Integrated Economic
• the taxpayer has entered into a Perjanjian fixed asset, the fixed asset invested is required to
Development Zones;
Kerja Sama (cooperation agreement) with comply with the following conditions:
the relevant institution; Taxation of Foreign Digital • the asset should be new, unless it
• the tax holiday provided under GR No. 94 Year
Companies
2010 (as amended by GR No. 45 Year 2019); and
• the taxpayer has not incurred a tax loss in the originates from a complete relocation
tax year in which the said deduction arises; and from another country; • the super deduction incentives on the
labour-intensive industries provided under
• the taxpayer has submitted Surat Keterangan On 4 December 2019, it was reported that the • the asset should be listed in the new business
GR No. 94 Year 2010 (as amended by
Fiskal (Fiscal Statements) accordingly for the government had issued a new regulation providing licence as the basis for obtaining the tax
GR No. 45 Year 2019).
purpose of the deduction. that foreign companies with a significant presence incentives; and
in the emerging Internet economy in Indonesia are The implementing regulations based on the old
• the asset should be owned directly by
subject to local taxes in Indonesia. regulations remain effective, provided that they are
the taxpayer and utilised for the main
consistent with the provisions of the regulation.
business activity.
18 | Asia Tax Bulletin INDONESIA INDONESIA MAYER BROWN | 19Consumption Tax This “point back” system will be effective until the
end of June 2020. By introducing this system, the
International Tax
Rate Increase government is also aiming to promote a cashless Developments
society in Japan.
The consumption tax rate increase from 8% The introduction of an invoice system like that of
ECUADOR
to 10% (7.8% for national consumption tax the EU is delayed till October 2023, as further
and 2.2% for local consumption tax) is preparations are required. On 28 December 2019, the Ecuador-Japan Income
effective as from 1 October 2019. This is the Tax Treaty entered into force. The treaty generally
JURISDICTION: applies from 28 December 2019 for the provisions
Highlights of 2020 Tax
first time the consumption tax rate has been
increased since the increase from 5% to 8% of article 25 (Exchange of Information) and from 1
Reform Proposals
Japan
on 1 March 2014. January 2020 for other taxes. With respect to article
26 (Assistance in the Collection of Taxes), the treaty
However, the increase is not across the will apply on a date to be agreed between the
board as the government has introduced a On 12 December 2019, the government outlined its governments of the two countries through an
reduced rate of 8% (6.24% for national 2020 tax reform plan (the Plan). The Plan is currently exchange of diplomatic notes.
consumption tax and 1.76% for local at the proposal stage and is still subject to change.
consumption tax) for everyday essentials, Highlights of the key reform measures are PERU
food and non-alcoholic beverages as follows:
According to a press release of 19 November 2019,
purchased for consumption offsite and
• To encourage the spread of 5G networks, a 15% published by the Japanese Ministry of Foreign
subscriptions for printed newspapers
tax credit is proposed to be given to eligible Affairs, Japan and Peru signed the Japan-Peru
published at least twice a week.
businesses that invest in 5G infrastructure. Income Tax Treaty on 18 November 2019 in Lima.
There are criticisms that confusion will arise
• Eligible companies that invest in innovative
as consumers are not accustomed to the JAMAICA
start-ups will be able to deduct 25% of their
dual rate system. For example, when On 12 December 2019, the Jamaica-Japan Income
investment from taxable income.
people eat at a restaurant, 10% is applied Tax Treaty was signed in Tokyo.
but the 8% rate is used for to-go purchases, • Single parents who have never been married
in some cases from the same outlet. and with an annual income of less than JPY 5
million will also be given special tax deductions
In the interim, the consumption tax returns
that are currently only available to parents that
will have three rates which are the previous
are divorced or widowed.
8% (6.3% for national consumption tax and
1.7% for local consumption tax), the new • To encourage individuals to invest more and
10% and the reduced rate of 8%. increase their retirement savings, it is planned
to extend the Nippon Individual Savings
The additional tax revenue from the
Account (NISA) programme by five years
increase in the consumption tax rate is
beyond 2037.
planned to be used for free education for
young children, to help low-income
households and for fiscal reconstruction.
To avoid a business recession like the one
that occurred when consumption tax was
raised from 5% to 8%, the government is
introducing certain economic measures
such as the “point back” system. Under this
system, when a consumer makes a cashless
payment at a registered small and medium-
sized shop, 5% is rebated, and when
cashless payment is made at a registered
convenience store and food service chain,
the rebate is 2%. However, there will be no
rebates at large supermarkets.
JAPAN MAYER BROWN | 21Task Force on Digital CAMBODIA
On 25 November 2019, Cambodia and Korea
Tax to be Set Up signed an income tax treaty on the sidelines of the
2019 Association of Southeast Asian Nations
On 16 December 2019, it was reported that (ASEAN)-Republic of Korea Commemorative
the Finance Ministry is planning to set up a Summit, taking place in Busan from 25 to
task force to study the digital tax on 26 November 2019.
advertising by global internet companies
JURISDICTION: like Facebook and Google. The scope of PHILIPPINES
taxation on electronic services provided by On 25 November 2019, Korea and the Philippines
Korea
foreign providers has been expanded signed a social security agreement in Busan.
previously under the 2019 tax proposals to
cover “cloud computing services”. The VIETNAM
government is now taking steps to further On 27 November 2019, Korea and Vietnam signed
expand the scope to include taxing digital an amending protocol to update the Korea-Vietnam
advertising as the task force will join Income Tax Treaty, in Seoul.
international discussions on the matter to
draft the relevant tax measures.
International Tax
Developments
ARMENIA
On 3 October 2019, the investment
protection agreement (IPA) between
Armenia and Korea, signed on 19 October
2018, entered into force.
NEW ZEALAND
On 29 October 2019, Korea and New
Zealand signed a social security agreement
in Seoul.
CROATIA
On 1 November 2019, the Croatia-Korea
Social Security Agreement will enter into
force. The agreement generally applies
from 1 November 2019.
KOREA MAYER BROWN | 23Budget 2020 • Accelerated capital allowance and automation
equipment capital allowance for manufacturing
INDIRECT TAXATION
• Training and coaching services provided by
sector on the first MYR 2 million and MYR 4 training service providers to disabled persons
On 11 October 2019, the Budget for 2020 million incurred on qualifying capital will be exempt from services tax.
was presented to the parliament by the expenditure. This incentive will be extended up
Minister of Finance. The main tax proposals to YA 2023. • Services tax on digital services by foreign
of the Budget, which unless otherwise service providers will be implemented with
indicated will apply from 1 January 2020, • The existing tax deductions on cost of issuance effect from 1 January 2020.
are summarised below. On 18 December and additional deductions on sukuk issuance
JURISDICTION: 2019, the Senate passed the Labuan costs under the Wakalah principle will be OTHER MEASURES
Business Activity Tax (Amendment) Bill extended up to YA 2025.
• A comprehensive review and revamp of the
Malaysia
2019, the Petroleum (Income Tax) • Various tax incentives targeted to promote existing incentive framework is ongoing
(Amendment) Bill 2019, the Income Tax tourism are introduced, such as: (including the incentives under the Income Tax
(Amendment) Bill 2019 and the Finance Bill Act 1967, the Promotion of Investments Act
2019 (the bills) after the bills were passed in >> income tax exemption for organisers of
1986 and Special Incentive Package), the new
the House of Representatives. approved activities, including arts and culture,
framework being expected to be completed by
international sports recreational competitions
1 January 2021.
CORPORATE TAXATION and conference organisers;
• A Tax Identification Number (TIN) system will
• Special investment incentives packages >> investment tax allowance or 100% income tax
be introduced to all Malaysians above the age
for five years will be awarded to attract exemption for new investments in international
of 18 and corporate entities. This is expected to
Fortune 500 companies and global theme park projects; and
take effect from January 2021.
unicorns companies that are involved in
>> the current tax deduction up to MYR 70,000 for
the high technology, manufacturing, • Real property gains tax (RPGT): With respect to
companies that sponsor arts, cultural and
creative and economic sectors. the acquisition of assets prior to 1 January
heritage activities in Malaysia will be increased
2013, the acquisition price of the assets will be
• The current tax incentives for venture to MYR 1,000,000 per year of assessment.
deemed to be the market value as at 1 January
capital and angel investors will be
• Small and medium-sized enterprises (SMEs) will 2013 for RPGT purposes.
extended up to year of assessment
be taxed at 17% on the first MYR 600,000 of
(YA) 2023. • Stamp duty: the maximum stamp duty payable
chargeable income (instead of the current MYR
for a loan in foreign currency will be increased
• To further enhance sustainable 500,000 threshold).
to MYR 2,000.
development within the country,
the existing Green Investment Tax PERSONAL TAXATION
Allowance and Green Investment Tax • A new band for top income earners was Principal Hub Incentive
Exemptions will be extended to YA introduced, whereby taxpayers with taxable
2023. Companies undertaking solar income above MYR 20 million will be taxed at On 8 October 2019, the Malaysian Investment
leasing activities will be given up to 30% (currently 28%). Development Authority (MIDA) issued updated
70% income tax exemption. guidelines for the principal hub (PH) incentive (PH
• Income tax exemption for women who return to
• Tax incentives, as follows, will be 2.0 guidelines, the guidelines). The guidelines
work after a career break will be extended up
provided to qualifying companies under incorporate changes announced by the govern-
to YA 2023.
the electrical and electronics (E&E) ment in the Budget 2019. The PH 2.0 guidelines,
industry that promotes the transition of • Personal relief on fees paid to child care centres which supersede the previous guidelines, are
5G digital economy and Industry 4.0: and kindergartens will be increased from MYR effective for applications received by MIDA from 1
1,000 to MYR 2,000. January 2019 to 31 December 2020.
>> income tax exemption
up to 10 years; and • The scope of serious diseases relief (with tax The PH incentive is only eligible for manufacturing
relief amount up to MYR 6,000) will be and services companies. Commodity-based com-
>> special investment tax allowances for expanded to include medical costs related panies can no longer apply for the PH incentive.
existing qualifying E&E companies that to fertility treatment.
have exhausted the current The new reduced corporate taxation rates for new
reinvestment allowance incentive. • Tax deduction on donations to approved companies will be 5% and 10% for Tier 1 and Tier 2
institutions which were previously capped at companies, respectively, for a period of five years
7% of the aggregate income will be increased (an extension of another five years is available upon
to 10%. meeting certain requirements).
MALAYSIA MAYER BROWN | 25The reduced corporate taxation of 10% for An approved PH company will be able to enjoy The invoice for the provision of digital services must Under the guideline, the penalty for late filing to be
Tier 3 companies is removed. certain facilities accorded to it, such as no local contain several particulars as provided under the imposed under subsection 112(3) of ITA and sub-
equity/ownership conditions, acquisition of fixed Regulations. Every FSP must file a service tax return section 51(3) of PITA is as set out below.
For existing companies, the incentive will be
assets for business purposes, foreign exchange for every taxable period using Form DST-02.
granted in the form of a concessionary corporate • 15% (if the filing is done up to 12 months from
administration flexibilities, etc. Existing companies Payment of service tax/penalties must be made to
taxation rate of 10% on statutory income derived the filing deadline).
which are granted the PH incentive are required to the Director General via electronic banking or any
from qualifying PH activities for a period of five
conduct structured internship programmes or manner determined by the Director General. The • 30% (if the filing is done after 12 months
years of assessment.
equivalent training schemes introduced by the total amount of service tax payable will be declared but not later than 24 months from the
Companies applying for the PH incentive must government as specified in the Appendices. in Ringgit Malaysia in the return. Any person who is filing deadline).
meet the following criteria: eligible to claim a refund for digital service tax
Royalties and other income derived from intellec- • 45% (if the filing is done after 24 months from
purposes must apply for this to the Director
• being locally incorporated under the tual property rights (IPR) are excluded from the PH the filing deadline).
General in the form and manner determined by the
Companies Act 2016 and Malaysian incentive. Companies must submit the PH-CAF
Director General. An authentication code and an With effect from the year of assessment 2019, any
tax residents; (Principal Hub-Compliance Assessment Form) to
account for the use of electronic services provided company, limited liability partnership, trust body or
the MIDA annually (within six months from the date
• having paid-up share capital of more than under section 87 of the Service Tax Act 2018 may co-operative society that fails to inform the IRB of a
of financial year-end) for evaluation of performance.
MYR 2.5 million; be assigned to any person by the Director General. change to the accounting period pursuant to
An approved PH company must comply with
subsection 21A(3A) of ITA will have the penalty for
• having minimum annual sales of MYR 500 the stipulated conditions throughout the Ordinary hours for the purpose of receiving returns
late filing imposed under subsection 112(3) of ITA
million (additional requirement for companies exemption period. and making payments of service tax or penalties
regardless of whether the filing is done before the
applying for tax exemption on trading income); payable through electronic banking will be from
Where the approved PH Company fails to comply filing deadline of the new accounting period.
7.30am to 11.30pm Malaysian standard time (UTC/
• serving and controlling a minimum number with the stipulated conditions in any year of assess-
GMT + 8 hours) at any day of the week. Returns or The filing of the tax return is considered late if the
of network companies as specified in the ment of the exemption period, the company may
payments received beyond ordinary hours will be tax return is not filed within the grace period
Appendices provided under the not enjoy the exemption on statutory income
deemed to be received on the following day. Any provided by the IRB and the grace period will be
PH 2.0 guidelines; derived from PH qualifying activities for that year of
person committing an offence under the regulation disregarded accordingly for the purpose of deter-
assessment. The full eligibility criteria are provided
• core income-generating activities must include will be liable, upon conviction, to a fine not exceed- mining the late filing penalty rate. The penalty for
in Appendix A (New company), Appendix B
the compulsory services activities, i.e. the ing MYR 30,000 or to imprisonment for a term not late filing to be imposed under subsection 29(3) of
(Existing company approved International
Regional P&L Business Unit Management, exceeding two years, or both. RPGTA is as set out below.
Procurement Centre, Regional Distribution Centre,
and Strategic Business Planning and Corporate
Operational Headquarters with or without Parts II (registration) and V (electronic services), and • 15% (if the filing is done up to 12 months from
Development and a minimum number of
incentive) and Appendix C (existing company), regulations 17 (general penalty) and 18 (forms) of the filing deadline).
other qualifying services as specified in
respectively. the Regulations came into operation on 1 October
the Appendices; • 20% (if the filing is done after 12 months but not
2019. Parts III (invoice), IV (return, payment and
later than 24 months from the filing deadline).
Digital Services Tax
• providing an adequate number of high-value refund) and VI (miscellaneous), with the exception of
jobs as specified in the Appendices; regulations 17 and 18, of the Regulations will come • 25% (if the filing is done after 24 months from
into operation on 1 January 2020. the filing deadline).
• incurring an adequate amount of
On 27 September 2019, the Ministry of Finance
annual operating expenditure as If a taxpayer fails to file his tax return within the
issued the Service Tax (Digital Services) Regulations ITA, PITA AND RGPTA RETURNS:
specified in the Appendices; stipulated deadline in a particular year of assess-
2019 (the Regulations) for the implementation of PENALTY FOR LATE FILING
ment, an estimated assessment may be made and
• the applicant company should be the planning, service tax on the provision of digital services by a
On 16 October 2019, the Inland Revenue Board the following penalties may also be imposed:
control and reporting centre for the qualifying foreign service provider (FSP). All FSPs providing
(IRB) issued Operational Guideline No. 5/2019 (the
services provided; any digital services to consumers with a total value • 45% under ITA.
guideline) to provide clarifications on the penalty
exceeding MYR 500,000 will be liable for service
• Malaysian-owned and incorporated businesses that will be imposed for late filing of the tax return • 45% under PITA.
tax registration. The application for registration
are encouraged to provide headquarters- under subsection 112(3) of the Income Tax Act 1967
can be made using Form DST-01. Notification of • 25% under RPGTA.
related services and expertise to their overseas (ITA), subsection 51(3) of the Petroleum Income Tax
successful registration will be made in writing by
companies; and Act 1967 (PITA) and subsection 29(3) of the Real The guideline came into effect on 1 October 2019
the Director General, and a registration number
Property Gains Tax Act 1976 (RPGTA). and replaces the previous guideline No. 1/2015
• significant use is made of Malaysia’s banking will be assigned accordingly. Any changes in
dated 5 March 2015.
and financial services and other ancillary the particulars of the FSP must be reported in
services and facilities. writing to the senior officer of service tax.
26 | Asia Tax Bulletin MALAYSIA MALAYSIA MAYER BROWN | 27You can also read
