Asia Tax Bulletin Winter 2020/21 - Mayer Brown
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Asia Tax Bulletin Winter 2020/21
In This Edition
EUROPE
We are pleased to present the Winter 2020/21 edition
of our firm’s Asia Tax Bulletin.
BRUSSELS
Dear Reader,
LONDON DÜSSELDORF
Indonesia’s tax reform (the Omnibus Law)
PARIS FRANKFURT
took effect in November and introduced tax
The pandemic has had its effect on business
exemptions for qualifying offshore salary
and this edition of the Bulletin is
income and certain investment income
ORK
predominantly about tax incentives China,
provided it is reinvested in the country. Finally, BEIJING
GTON DC
Indonesia, Japan, Malaysia, the Philippines
Vietnam’s tax department issued a circular
and Vietnam have all introduced to stimulate
CHARLOTTE prescribing interest to be imputed on certain
TOKYO
their economies. We have also seen countries
take measures to ensure related-party
interest-free loans.
SHANGHAI
transactions comply with the arm’s-length
DUBAI HONG KONG
principle, either by regulating documentation
requirements (Hong Kong, Philippines) or by
Happy new year and please stay safe. HANOI
adjusting the range within which a transaction
Pieter de Ridder
is considered to be at arm’s length (Vietnam).
Singapore has announced tougher measures
HO CHI MINH CITY
against GST and income tax avoidance by
introducing a 50% surcharge on transfer-
pricing adjustments.
SINGAPORE
Pieter de Ridder
BRASÍLIA* Partner, Mayer Brown LLP
+65 6327 0250
VITÓRIA* pieter.deridder@mayerbrown.com
RIO DE JANEIRO*
SÃO PAULO*
*TAUIL & CHEQUER OFFICE
2 | Asia Tax Bulletin MAYER BROWN | 3
Contents
China Indonesia Philippines Taiwan
6 Value-added tax treatment on transfer 14 Tax reform
Related party and transfer pricing 38 Valuation of collateral for tax liabilities
of shares for no consideration 28 documentation requirements
6 Hainan free trade haven 15 Tax holiday incentive
for pioneer industries 39 International tax developments
Tax incentives for donations of
29
7 Deed tax 16 Tax incentive for R&D activities computers and similar equipment
Vietnam
Tax exemptions for import of certain
7 COVID-19: exported goods returned
17 Tax incentives for import 30 essential equipment and goods
due to force majeure of COVID-19 vaccine
40 Interest imputation on interest-free loans
8 Tax incentives for software and 17 Stamp duty rate increase Reduction of corporate income
integrated circuits businesses Singapore 41 tax for 2020
Vat collectors for foreign
Deduction of advertisement 18 digital goods and services
9 and promotion expenses 31
Tougher anti-avoidance measures
41 Higher fines for tax
administration violations
in the goods and services tax
18 International tax developments
9 Internal tax developments Tougher anti-avoidance measures 42 Electronic invoices
32 for income tax
Japan 42 Transfer pricing
Hong Kong 32 Income tax treatment of leases
19 2021 tax incentives
43 COVID-19 pandemic: incentive
10 Ramping up transfer pricing 33 COVID-19 permanent establishment for donations by companies
20 International tax developments
Guidelines on GST treatment of transfer
11 Stamp duty on non-residential
property transactions
33 pricing adjustments
Korea 34
11 International tax developments Anti-avoidance case
21 International tax developments 34 Tax treatment of foreign digital taxes
India Deemed remittance on transfer
35 of unremitted foreign-sourced
12
Important victory against
retroactive tax legislation
Malaysia interest income
Participation in international
13 Tolerance range for arm’s 22 Budget 2021 36 compliance assurance programme
length price variance
24 Tax incentives for angel investors
36 Income tax treatment of security tokens
13 Equalisation levy
24 Reinvestment allowances
36 International tax developments
Lower threshold for
13 mandatory electronic invoicing 25 Tax treatment of trusts
25 Tax changes and incentives
26 Changes to the tax appeals process
27 Renovation and refurbishment expenses
MAYER BROWN | 5
Value-added tax The above exemptions are only applicable if the For the deed tax rate, Article 3 of the Law
materials are imported by incorporated entities specifically sets the rate at 3% to 5%, but it should
treatment on transfer (companies with legal personality) that are be noted that the applicable tax rate shall be
of shares for no registered in the Hainan Free Trade Haven for determined by the people’s governments at the
self-use in the so-called “two-ends outside China” provincial, autonomous region and municipal level
consideration production process (the end of import of materials directly under the jurisdiction of the State Council,
and that of export of products are both abroad). while different tax rates can be determined in
China has clarified the value-added tax (VAT) accordance with specific procedures for ownership
In this regard, the tax and customs authorities use a
JURISDICTION: treatment regarding the transfer of shares for transfer for different entities, different regions and
“positive list” of 169 products that are eligible for
no consideration, VAT exemption on interest different types of housing.
the exemption. With the publication of the list, the
China (PRC)
on loans to small enterprises or sole traders duty-free policy will be implemented. It is also Regarding what may be exempted from the deed
and the VAT treatment of compensation paid mentioned that the list will be adjusted from time tax, the Law adds three new types of tax-exempt
for land reclaimed by landowners. to time as needed and depending on ownership transfer of lands and housing units,
The Ministry of Finance and the State administrative conditions. including between husband and wife during
Taxation Administration has issued Circular marriage; the inheritance of lands and housing units
[2020] No. 40 on 29 September 2020. The exemption and the positive list of exempt
by legal heirs; and assuming ownership of lands
products are announced in Circular [2020]
Effective 29 September 2020, where shares and housing units by foreign embassies, consulates
No. 42 that is jointly issued by the Ministry of
are transferred for no consideration, the and representative offices of international
Finance, State Taxation Administration and
transferor of shares must deem the purchase organisations in China, all of whom are tax-exempt
General Customs Service on 11 November 2020.
price as the sale price in computing VAT pursuant to law.
liability. Where the transferee, in its turn, In addition, the Law specifically provided for
transfers the shares, the deemed sale price Deed tax confidentiality of the personal information of deed
of the previous transfer will be deemed as taxpayers, this requires tax authorities and their
the purchase price for the transferee for VAT Courtesy of Lee Tsai & Partners, it was reported staff to keep confidential the personal information
purposes. The transfer is subject to VAT at that on August 11, 2020, the Standing Committee of taxpayers in the process of tax collection and
the rate of 6%, i.e. the rate applicable to of the National People’s Congress promulgated the administration and not disclose or illegally provide
transfers of financial assets. Deed Tax Law of the People’s Republic of China such information to others.
Where a landowner reclaims its land from the (the “Deed Law”). The Deed Law elevates deed tax
regulations from an administrative regulation level
user of the land and pays compensation for
the loss of the land, tangibles and real to national law, while amending and upgrading the COVID-19: exported
property attached to the land, it must be Interim Regulations of the People’s Republic of goods returned due
regarded as the return of the land-use right China on Deed Taxes promulgated by the State
to the owner as provided under item 37 of Council on July 7, 1997, and also, takes into account to force majeure
Art. 1 of Circular [2016] No. 36 and is subject new problems in the deed tax collection process.
to VAT accordingly. The Law will come into force on September 1, 2021, The Ministry of Finance (MoF) will provide an
and the Interim Regulations of the People’s exemption from import duty, value-added tax (VAT)
Republic of China on Deed Taxes will be repealed and consumption tax on import for goods exported
Hainan free trade haven at the same time. between 1 January and 31 December 2020 but
returned (re-imported) to China in their original
With regard to the scope of taxable acts, the Deed
Effective 1 December 2020, China will state due to the force majeure of COVID-19 within
Law makes it clear that ownership transfer of lands
exempt the import of raw materials and 1 year from the date of export. Furthermore,
and housing units for investment (share acquisition),
accessories (for aviation or vessel repair the MoF will refund any export duties paid at
repayment of debts, transfer, reward, etc., shall be
services) used in the processing industry in the time of export.
subject to deed tax. This provision aims to provide
the Hainan Free Trade Haven from import a basis for taxation of new forms of transactions
duties, value-added tax at the import stage observed in recent years.
and consumption tax. The duty-free policy
applies until the island becomes a closed
bonded zone which is expected to occur
in 2025.
CHINA (PRC) MAYER BROWN | 7
Correspondingly, the taxpayer must repay refunds integrated circuits (ICs) business. The following Deduction of advertisement International tax
of VAT and consumption tax on the export of
these goods (or provide a certificate to prove that
incentives came into effect retroactively from
1 January 2020:
and promotion expenses developments
no taxes for the export of these goods have been
*Enterprises encouraged by the state that are From 1 January 2021 to 31 December 2025, ASEAN, JAPAN, KOREA.
refunded) before applying for the exemption for
engaged in manufacturing ICs with a line width of enterprises in the cosmetic, pharmacy and
the re-importation of goods. If the return of these On 15 November 2020, the Association of
not more than 130 nanometres may carry forward (non-alcoholic) beverage industries will be able to
goods has already been subject to VAT, Southeast Asian Nations (ASEAN) member states
losses incurred in the period of five years before claim deductions on advertisement and promotion
consumption tax on the re-importation and import (Brunei, Cambodia, Indonesia, Laos, Malaysia,
they are listed as enterprises eligible for incentives. expenses, limited to 30% of current year sales.
duties in the period between 1 January 2020 and Myanmar, the Philippines, Singapore, Thailand and
The losses can be carried forward for up to Excess expenses may be carried forward to
2 November 2020, the paid taxes must be refunded Vietnam) and ASEAN's free trade agreement
ten years. future tax years for subsequent deduction.
to taxpayers. Taxpayers must submit their refund partners (Australia, China, Japan, New Zealand and
applications to the Customs Service before Where associated enterprises have entered into a Korea (Rep.)) signed a Regional Comprehensive
The incentives are in alignment with Notice of State
30 June 2021. cost-sharing agreement on advertisement and Economic Partnership Agreement (RCEP), during
Council [2020] No.8, announced in Circular [2020]
promotion expenses, one of the parties to the the virtually held 4th RCEP Summit. In November
The above tax regulation is laid down in Public No. 45 jointly issued by the Ministry of Finance, the
agreement may choose to deduct such expenses or 2019, India (an ASEAN's free trade agreement
Notice [2020] No. 41 jointly issued by the MoF, State Taxation Administration, the Development
to allocate part or all of the expenses to another partner as well) indicated it had several issues
the State Taxation Administration and the General and Reform Committee and the Ministry of Industry
party to the agreement for deduction, provided preventing it from joining RCEP and has since
Customs Service on 2 November 2020. and Information. These government departments
that the deductible amount does not exceed the indicated it is not in a position to sign
are also responsible for drawing up a list of
30% limitation. The other party may, in computing the agreement.
Tax incentives for enterprises or projects that are eligible for
the incentives.
its own deduction limitation, exclude the part of
software and integrated the expenses allocated to it.
Advertisement and promotion expenses incurred
circuits businesses by tobacco industries are not deductible for
enterprise income tax purposes.
The State Taxation Administration has updated
The new rule is laid down in Circular [2020]
the enterprise income tax (EIT) incentives for
No. 43 jointly issued by the Ministry of Finance
enterprises and projects engaged in software and
and the State Taxation Administration on
27 November 2020 and will supersede the
Minimum period Circular [2017] No. 41 (which will be abolished
Type of enterprise or project Exemption from EIT Post-exemption
of manufacturing effective 1 January 2021) on the same subject.
reduced tax rate
operations
Enterprises or projects encouraged by
the state that are engaged in manufacturing First 10 years. None (normal rate 15 years.
ICs with a line width of not more than of 25%).
28 nanometres.
Enterprises or projects encouraged
by the state that are engaged in First 5 years. 12.5% for 5 years. 15 years.
manufacturing ICs with a line width
of not more than 65 nanometres.
Enterprises or projects encouraged
by the state that are engaged in First 2 years. 12.5% for 3 years. 10 years.
manufacturing ICs with a line width
of not more than 130 nanometres*.
Enterprises engaged in the design,
assembly, materials, packing and testing First 2 years. 12.5% for 3 years. None.
of ICs, and software enterprises that are
encouraged by the state.
Key encouraged enterprises engaged in
First 5 years. 10%. None.
the design of ICs and software enterprises.
8 | Asia Tax Bulletin CHINA (PRC) CHINA (PRC) MAYER BROWN | 9
Ramping up Stamp duty on International
transfer pricing 1 non-residential tax developments
property transactions
The Inland Revenue Department (IRD) GEORGIA
recently developed Form IR1475 and The Chief Executive of the Hong Kong Special According to press releases of 5 October 2020,
commenced transfer pricing compliance Administrative Region announced in her Policy published by both the Inland Revenue Department
reviews, signalling their intention to ramp Address the abolition of double ad valorem stamp of Hong Kong and the Georgian Ministry of
JURISDICTION: up transfer pricing enforcement in Hong Finance, Georgia and Hong Kong signed the
duty (DSD) on non-residential property
Kong. The form will serve as a tool for the transactions. In this regard, the ad valorem stamp Georgia–Hong Kong Income Tax Agreement
Hong Kong
IRD to identify high-risk taxpayers for duty rates chargeable on non-residential property on 5 October 2020.
further scrutiny based on factors including transactions will revert to the Scale 2 rates effective
the nature and size of the transactions, USA
26 November 2020. The abolition of DSD is
transacting with jurisdictions with lower tax intended to facilitate the selling of non-residential On 20 October 2020, the US Internal Revenue
rates than Hong Kong or claiming ‘offshore’ property by businesses that are encountering Service (IRS) issued announcement 2020-40,
status for income where such claims may financial difficulties or liquidity needs because of communicating that the United States provided
not be consistent with the transfer pricing the economic downturn, and mitigate the impact of a written notification dated 18 August 2020
profile of the Hong Kong taxpayer. the COVID-19 pandemic on Hong Kong’s economy to the government of the Hong Kong Special
Form IR1475 has been sent to several and business activities. Administrative Region on the termination of the
taxpayers who indicated on their tax returns Hong Kong–United States Shipping Tax Agreement.
that they have a requirement to prepare The termination of the agreement took effect on
transfer pricing documentation. The form is 1 January 2021 and has effect for taxable years
a summary of the contents of the local file beginning on or after that date. Under the
and master file, although it also includes Hong Kong–United States Shipping Tax Agreement
elements related to: income was exempt from tax in one contracting
state for income derived from the international
• Details of controlled transactions of a operation of ships by residents of the other
capital nature; contracting state. Shipping companies are presently
• Whether certain controlled considering whether they can invoke the domestic
transactions are ‘offshore’ for tax provisions in both the US and Hong Kong
profits tax purposes; and dealing with tax exemption of qualifying shipping
profits if their respective domestic taxation regimes
• Details of controlled transactions that of shipping profits is sufficiently comparable and
either were not subject to tax or were exempts shipping profits earned by companies
subject to tax at a statutory tax rate resident in the other jurisdiction.
lower than that of Hong Kong.
At this stage, the focus is on taxpayers
with a 31 March year end. However, it is
expected to be rolled out further in
coming months.
1
Courtesy Duff & Phelps (Hong Kong) HONG KONG MAYER BROWN | 11
Important victory Tolerance range for arm’s >> in Form No. 1, an e-commerce operator (i.e.
the payer) is only required to provide
against retroactive length price variance information on the EL remitted to the
tax legislation The tax authorities will continue to deem the price
government for each calendar quarter,
unlike the requirement for specified
at which an international transaction or specified services where the payer is required to
The Indian revenue authorities had initiated provide information for each service
domestic transaction has actually been undertaken
high-profile litigation against Vodafone on provider and transaction;
(“actual price”) to be the arm’s length price for
the basis that Vodafone had failed to
JURISDICTION: assessment year (AY) 2020-2021 if the variance
withhold Indian taxes on payments made to >> in the case of a corporate payer, Form No. 1
between the arm’s length price determined under
the selling Hutch entity. The Supreme Court may be verified by a person authorised to
India
the Income Tax Act (ITA) and the actual price:
of India held in favour of Vodafone that no verify the income tax return under section
Indian tax was required to be withheld on • does not exceed 1% of the actual price 140 of the Income Tax Act or the principal
a transfer of offshore assets between two in respect of wholesale trading; and officer (previously, the managing director or
non-residents. director or principal officer); and
• does not exceed 3% of the actual price
Shortly thereafter, the Finance Act, 2012 in all other cases.
>> in Forms No. 1 and 3, a payer for specified
introduced a number of amendments to
services or e-commerce supply or services
undo the impact of the Supreme Court
ruling. These included a validation clause 1
Equalisation levy may provide the Aadhar number instead of
the Permanent Account Number (PAN)
which could enable the Revenue Authorities
The Central Board of Direct Taxes (CBDT) has (previously, only the PAN is accepted).
to deprive the Supreme Court Ruling of its
finality, substantive amendments to the issued guidelines implementing a 2% equalisation
levy (EL) chargeable on certain non-resident The Finance Act, 2020 extends the application of
definitions of “capital asset” and “transfer”,
e-commerce supply or services under the Finance the equalisation levy to e-commerce supply or
as well as an addition of Explanation 5 to
Act, 2020, with the existing rules and forms on the services, in addition to specified services (i.e. online
section 9(1)(i) of the Income Tax Act, 1961
advertisement equalisation levy being amended to advertisement or any provision of digital
(“ITA”), “clarifying” that an offshore capital
extend their application to e-commerce supply or advertisement space), effective from 1 April 2020.
asset would be considered to have a situs in
services. The obligation to withhold and remit the EL falls in
India if it substantially derived its value
the hands of the payer.
(directly or indirectly) from assets situated in In this regard, the CBDT issued the Equalisation
India. All of these amendments were enacted Levy (Amendment) Rules, 2020 to amend the
to take effect retroactively from 1962. Equalisation Levy Rules, 2016. The amended EL Lower threshold
Amendments were also introduced, with rules remain largely the same, except for:
retroactive effect, to procedural provisions for mandatory
• the substitution of the phrases “specified
relating to withholding tax (Explanation 2
to s.195 of the ITA). services or e-commerce supply or services” electronic invoicing
and “assessee or e-commerce operator” in
Thereafter, Vodafone invoked arbitration provisions that mention “specified services” The Central Board of Indirect Taxes and Customs
under the India–Netherlands BIT. On and “assessee”, respectively; and (CBIC) will lower the aggregate turnover threshold
September 25, 2020, the international that applies to mandatory electronic invoicing from
arbitral tribunal constituted in the case of • the revised Statement of Specified Services or
INR 5 billion to INR 1 billion effective 1 January
Vodafone International Holdings BV v. E-commerce Supply or Services (Form No. 1)
2021. The CBIC previously increased the threshold
The Republic of India (Vodafone case) and Appeal to the Commissioner of Income
requirement in view of the difficulties faced by
held that India had violated the ‘fair and Tax (Form No. 3), namely:
taxpayers due to the COVID-19 pandemic.
equitable treatment’ (Vodafone award)
guaranteed to VIHBV under the 1995
Bilateral Investment Promotion and
Protection Agreement (BIPA) between the
Republic of India and the Kingdom of
Netherlands (India–Netherlands BIT).
INDIA MAYER BROWN | 13
Tax reform • Exclusion of delivery of goods for the purpose are set out below. The eligibility criteria for the tax
of capital injection, as long as the party who holiday remain largely the same as those provided
deliver the goods and the recipient of the under the previous regulation (MoF Regulation
On 5 October 2020, the House of
goods are a taxable entrepreneur. No. 150/PMK.010/2018). However, PMK-130
Representatives passed the Omnibus Bill on
includes the following additional criteria:
Job Creation into law. The Bill also includes • Relaxation in claiming input tax credit, i.e.,:
the proposed tax changes mentioned in the • A company must have a capital investment
previous edition of this bulletin. The list below >> Entrepreneurs that have not started their plan that has not been granted the following:
summarises the tax changes. Some of the commercial operation will be allowed to
JURISDICTION: items below still require an implementing claim their input tax credit (previously they >> a tax holiday incentive, including capital
regulation in order to take effect. On 2 could only claim input tax credit related to investment plans that have been denied the
Indonesia
November 2020, the President enacted the capital goods). However, similar to the tax holiday;
Omnibus Bill on Job Creation into law. current provision, if a taxpayer fails to
commence its commercial operation within >> an income tax incentive for investments
CHANGES IN THE INCOME TAX LAW made in certain business fields and/or
three years after the input VAT is claimed,
• Provision on the tax treatment for the taxpayer must return the amount of VAT certain areas;
individual taxpayers, i.e.: claimed to the government. For certain
>> reduction in net income for new investment
industries, the timeline to start the
>> An Indonesian taxpayer who resides or business expansion in certain labour-
commercial operation may be extended by
outside Indonesia for more than 183 intensive industries;
Minister of Finance regulation.
days will be treated as a non-resident
>> an income tax incentive in special economic
taxpayer with several conditions. • Entrepreneurs will be allowed to claim input tax zones; and
credit before they are registered as taxable
>> Individual non-resident taxpayers with
entrepreneurs (a maximum 80% of the relevant >> a company must implement the investment
certain special skills will be granted an
output VAT). plan not later than one year after obtaining
exemption from the worldwide income
the tax holiday approval.
rule for four years from when they • If input tax credit that has not been reported in
arrive in Indonesia. During that period a tax return is found during a tax audit,
the income that is subject to tax in entrepreneurs will be allowed to claim that • The application for a tax holiday may only be
Indonesia will be limited to the income input tax credit. submitted up to four years after the effective
that originates in Indonesia. date of PMK-130.
• Entrepreneurs will be allowed to claim input tax
credit that is collected through a tax • PMK-130 also provides clarification regarding
>> Tax exemption for dividends received
assessment letter, as long as the amount in the the procedure for obtaining the tax holiday
by resident taxpayer that originate
tax assessment letter has been paid and the incentive for companies that are not listed as
from both domestic and foreign
entrepreneur has not filed an objection or any approved pioneer industries.
sources that are re-invested in
other legal proceeding against the tax • The Directorate General of Taxes will carry out
Indonesia.
assessment letter. tax audits to ensure that taxpayers that have
• Possibility (with the issuance of a • Inclusion of some provisions on the issuance of been granted a tax holiday are compliant with
government regulation) to reduce the tax invoices that were previously stated in an the requirements set out under PMK-130.
withholding tax rate on interest paid to implementing regulation. • Taxpayers are required to submit annual
non-resident taxpayers (currently 20%). investment and production realisation reports
CHANGES IN THE VAT LAW Tax holiday incentive once the tax holiday incentive is granted.
• Exclusion of delivery on consignment from for pioneer industries • Transitional provisions are provided in PMK-130
for taxpayers that were granted the tax holiday
the definition of “deliveries” that are
subject to VAT. under previous regulations.
The Ministry of Finance (MoF) has updated the
• Exclusion of delivery of coal from the eligibility criteria and administrative requirements
definition of delivery of natural resources for the tax holiday incentive for new investments
that is not subject to VAT. made in specific pioneer industries. In this regard,
the MoF issued MoF Regulation No. 130/
PMK.010/2020 (PMK-130) whose salient features
14 | Asia Tax Bulletin INDONESIA MAYER BROWN | 15
• PMK-130 also includes provisions relating to R&D activities that qualify for the additional Tax incentives for import Stamp duty rate increase
investors assigned by the government to deductions are activities that meet certain criteria
accelerate the implementation of national under PMK-153 and are carried on by corporate of COVID-19 vaccine The government will impose a higher stamp duty
strategic projects. PMK-130 replaces MoF taxpayers (excluding taxpayers under production
under the new Stamp Duty Law, which will come
Regulation No. 150/PMK.010/2018. PMK-130 sharing contracts, work contracts or mining Indonesia will exempt the importation and into effect from 1 January 2021. Under Law No. 10
was promulgated on 24 September 2020 contracts whose taxable income is calculated based distribution of COVID-19 vaccines from import duty, of 2020 on Stamp Duty (Law No. 10), stamp duty will
and came into operation 15 days after the on the contract provisions) from 26 June 2019 excise duty, value-added tax (VAT) and income tax. be levied at a fixed rate of IDR 10,000 on
date of promulgation. onwards. The R&D activity must be in accordance The Ministry of Finance (MOF) has issued MOF commercial documents, including those in
with the focus and theme of priority R&D activities Regulation No. 188/ PMK.04/2020 (PMK-188). electronic form. Currently, certain documents are
as listed in the attachment of PMK-153.
Tax incentive for PMK-188 came into effect on 26 November 2020. subject to stamp duty of IDR 3,000 or IDR 6,000.
R&D costs that qualify for the additional The importation of COVID-19 vaccines, including
R&D activities deductions include: raw materials and equipment needed in vaccine
Under Law No. 10, stamp duty will be imposed on
two types of documents:
production and the implementation of vaccines,
• assets other than land and buildings;
The Ministry of Finance (MoF) has provided further through bonded logistic centres will be • documents of a civil nature, such as:
guidance on the tax incentive for qualifying research • goods or materials; exempted from:
and development (R&D) activities in Indonesia under >> letters of agreement, certificates, statement
• payments made to employees, researchers and • import duty and/or excise duty;
Government Regulation No. 45 of 2019 (GR-45). letters or other similar documents and
engineers;
In this regard, the MoF issued Regulation No. 153/ • VAT or sales tax on luxury goods; and copies thereof;
PMK.010/2020 (PMK-153) as one of the • fees to register the IPR; and
• income tax on importation under article >> notarial deeds along with the grosse, copy
implementing regulations for GR-45.
• payments made to R&D institutions or higher 22 of Income Tax Law. and quotation thereof;
PMK-153 came into effect on 9 October 2020.
education institutions in Indonesia to undertake
Customs duty and/or excise duty exemption and tax
Under GR-45, a domestic corporate taxpayer the R&D activities. >> deeds of land conveyancers and copies
exemptions will also be granted for the distribution
carrying on certain R&D activities in Indonesia may thereof;
The breakdown stipulated under the additional of vaccines in the customs area from:
deduct up to 300% of the actual costs incurred for
deduction of 200% deduction is applied to
the R&D activities over a certain period of time. • bonded areas or bonded warehouses; >> securities in any name or form;
qualifying costs incurred within the past five years
PMK-153 provides the breakdown of the 300%
from the earlier of: • free zones or special economic zones; and/or >> documents evidencing the transfer of
deduction as follows:
• registration of the IPR; and securities, including the transfer of futures
• companies with import facilities for
• 100% deduction of the actual R&D costs contracts;
export purposes.
incurred in the relevant year; and • start of the commercialisation stage.
The above incentives are applicable to the import of >> auction documents;
• additional deductions of up to 200% of the The additional deductions can be deducted against
COVID-19 vaccines by the central and regional
actual R&D costs that can be claimed at the a maximum of 40% of the taxable income for the >> documents with a nominal value exceeding
government, and companies appointed by the
following stages: relevant fiscal year. Any unutilised additional IDR 5 million acknowledging the receipt of
Ministry of Health. To obtain the above incentives,
deduction can be carried forward to the subsequent money or the payment or calculation of
the relevant entities are required to submit an
>> 50% when certain intellectual property fiscal years. debt; and
application to the MOF via the Head of Customs
rights (IPR) relating to the R&D activities are
The application procedure for availing of the and Excise office through which the goods are
registered with the Indonesian IPR office; >> other documents defined by Law No. 10;
additional deductions is prescribed in PMK-153. imported or distributed. Designated customs and
and
>> 25% when the locally registered IPR are also Once the application is approved, the taxpayer will excise officials can carry out inspections to ensure
registered overseas; be required to submit, annually, the R&D cost report compliance by qualifying persons.
and a report on the utilisation of the additional • documents used as evidence in court.
In the case where a taxpayer is granted the above
>> 100% upon commercialisation of the R&D deductions for R&D activities. Taxpayers that have
incentives but does not use the vaccine for the
activities; and carried on qualifying R&D activities before PMK-153
intended purpose, the taxpayer will then be obliged
came into effect may still benefit from the incentive,
>> 25% when the qualifying R&D activities to pay the unpaid taxes and penalty ranging from
subject to conditions.
stated above are carried on in cooperation 100% to 500% of the import duty payable, and also
with the government’s R&D institution or a be subject to administrative sanctions.
higher education institution in Indonesia.
16 | Asia Tax Bulletin INDONESIA INDONESIA MAYER BROWN | 17
Stamp duty will not be levied on instruments International tax 2021 tax incentives
relating to the transport of passengers or goods,
certificates of studies or diplomas, receipt of salary, developments The government’s ruling coalition has
pension or any similar payment relating to proposed to introduce tax incentives for
employment, receipt of all taxes and other CAMBODIA investments in carbon reduction efforts and
documents as provided under Law No.10. digital transformation, extend tax incentives
The Cambodia–Indonesia Income Tax Treaty (2017)
for new home and car buyers and provide
The government will allow the use of existing entered into force on 28 July 2020. The treaty
inheritance tax exemption to long-term
stamps in a combination of IDR 3,000 and IDR generally applies 1 January 2021. JURISDICTION: foreign residents, among other measures,
6,000 stamps (for a total of IDR 9,000) to be affixed
in the 2021 tax reform outline announced
onto the aforementioned documents from
Japan
recently. The related tax reform bills are
1 January 2021 to 31 December 2021.
expected to be submitted to the parliament
The President enacted Law No. 10 (in Indonesian
in January 2021.
only) on 26 October 2020. Law No. 10 will come
into force on 1 January 2021 and replace Companies that invest in carbon reduction
Law No. 13 of 1985 on Stamp Duty. efforts will be eligible for income tax
payment deduction of up to 10% of their
investments. Companies that invest in
VAT collectors for foreign digital transformation will be eligible for a
digital goods and services special depreciation rate or a tax credit.
Businesses may also be eligible for the
following incentives:
The Directorate General of Taxation (DGT) has
appointed the following companies as value-added • higher tax credits for qualified research
tax (VAT) collectors for digital products and and development expenditures;
services from abroad that are sold to consumers in
• tax credits for compensation paid to
Indonesia, effective 1 December 2020. For
newly hired employees, subject to
domestic online marketplace operators appointed
conditions; and
as VAT collectors, VAT is collected only on the sale
of digital goods and services by foreign sellers who • higher net operating loss (NOL) carry-
sell through the online marketplace. over limit for eligible NOL.
• Cleverbridge AG Corporation; Unlisted firms, including investment funds,
will be allowed to deduct as business
• Hewlett-Packard Enterprise USA;
expenses directors’ remuneration (generally
• Softlayer Dutch Holdings B.V. (IBM); non-deductible), subject to conditions. New
home buyers that avail of housing loans by
• PT Bukalapak.com;
2022 will be eligible to a 13-year tax
• PT Ecart Webportal Indonesia (Lazada); reduction, instead of the usual ten-year
period. Previously, the extended period was
• PT Fashion Eservices Indonesia (Zalora);
allowed to new home buyers that avail of
• PT Tokopedia; housing loans by 31 December 2020. The
existing tax reduction for owners of electric
• PT Global Digital Niaga (Blibli.com);
vehicles will be extended by 2 years from
• Valve Corporation (Steam); and the incentive’s end date in May 2021, in
order to boost demand and promote
• beIN Sports Asia Pte Limited.
electric vehicles. Assets acquired abroad by
foreign nationals who have been living in
Japan for more than ten years may be
exempt from inheritance tax or gift tax.
18 | Asia Tax Bulletin INDONESIAInternational tax International tax
developments developments
UK UZBEKISTAN
On 23 October 2020, Japan and the United On 18 October 2020, the amending protocol,
Kingdom signed a free trade agreement in Tokyo, signed on 19 July 2019, to the Korea -
agreed already in principle on 11 September 2020. Uzbekistan Income and Capital Tax Treaty
The agreement is known as the UK-Japan JURISDICTION: entered into force. The protocol generally
Comprehensive Economic Partnership Agreement applies from 1 January 2021.
(CEPA). More information can be found on the
website of the UK government.
Korea SWITZERLAND
On 28 October 2020, the amending protocol,
signed on 17 May 2019, to Korea’s tax treaty
with Switzerland, as amended by the 2010
protocol, entered into force. The protocol
generally applies from 1 January 2021 for
withholding and other taxes. The provision
concerning article 24 (Mutual agreement
procedure) of the amended convention will
have effect with respect to cases that are
presented to the competent authority of a
contracting state from 28 October 2020.
20 | Asia Tax Bulletin JAPANBudget 2021 • pharmaceutical companies involved in vaccine • the personal income tax relief for individuals
production with investments made in Malaysia with disabled spouses will be increased to MYR
will be entitled to a reduced tax rate between 5,000 (from MYR 3,500);
The Minister of Finance has proposed
0% and 10% for ten years;
several changes, including reducing • an employee’s contribution to the Employee
individual tax rates, increasing personal tax • income tax exemptions for private healthcare Provident Fund will be reduced to 9% (from
reliefs for individuals and extending the tax service providers on exported services will be 11%) from January 2021 to December 2021;
incentives period for companies, in the extended to 2022;
• the personal tax relief of up to MYR 3,000 for
Budget 2021. On 31 December 2020, the
JURISDICTION: • existing tax incentives for the Iskandar contribution to private retirement scheme will
government gazetted the Finance Act 2020
Development Region, Eastern Corridor be extended to year of assessment 2025 (from
(the Act).
Malaysia
Economic Region and Sabah Development year of assessment 2021);
CORPORATE TAXATION Corridor will be extended to 2022;
• the limitation of income tax exemption for
In order to boost business continuity in the • existing tax incentives for companies producing compensation given on loss of employment will
country, the government announced various components for industrialised building systems be increased to MYR 20,000 (from MYR 10,000)
tax incentives for corporates, as follows: will be extended for another five years, subject for every year of service completed for years of
to conditions; and assessment 2020 and 2021;
• the compliance requirement for
principal hub incentives will be made • additional tax deductions for employers • personal tax relief for lifestyle expenses will be
less stringent until 31 December 2022; employing senior citizens and other selected increased to MYR 3,000 (from MYR 2,500),
individuals (subject to conditions) will be where an additional MYR 500 is specifically
• global trading centres will be granted a
applicable up to year of assessment 2025. allowed for sport-related expenses. The scope
concessionary tax rate of 10% for a
of lifestyle relief is also expanded to include
period of five years (with the option to INDIVIDUAL TAXATION
purchase of electronic newspaper;
extend for another five years);
In terms of individual taxation, the reduced income
• a personal tax relief of MYR 8,000 for resident
• application deadlines for tax incentives tax of 1% for resident individuals with chargeable
individuals on deposits made into the National
for companies relocating their income between MYR 50,000 and MYR 70,000 was
Education Savings Scheme (Skim Simpanan
operations to Malaysia will be extended part of the initiatives announced with the aim of
Pendidikan Nasional) for their children will be
to 31 December 2022 (from 31 easing the burden for Malaysian individuals amid
extended to year of assessment 2022 (from year
December 2021). The scope of the tax the COVID-19 pandemic.
of assessment 2020); and
incentives will be expanded to include
Various increases in personal tax reliefs for resident
companies in certain service industries • a concessionary tax rate of 15% will be
individuals were also announced, as follows, which
where the tax incentives will be in the extended for another five years for foreign
will take effect from year of assessment 2021 (unless
form of a reduced income tax rate citizens who hold important positions in
stated otherwise):
between 0% and 10% for ten years; strategic investment at companies that relocate
• personal tax relief of up to MYR 1,000 will be their operation to Malaysia.
• existing tax incentives which will be
granted for vaccination expenses incurred by
expiring this year, including those for INDIRECT TAXATION
individuals, their spouses and/or children due to
industry in the maintenance, repair and
COVID-19, pneumococcal and influenza • A stamp duty exemption will be granted on
overhaul activities for aerospace,
diseases; sales and purchase agreements (SPAs) and loan
building and repair of ships, BioNexus
agreements for first-time homeowners for the
status and economic corridor • an increased personal tax relief of up to MYR
purchase of property valued at MYR 500,000 or
developments will be extended for 8,000 (from MYR 6,000) for incurring medical
below. The exemption is available for SPAs
another year; expenses due to serious diseases will be
completed between 1 January 2021 and 31
granted to individuals, their spouses and/or
• the tax incentives on research and December 2025.
children. In addition, personal tax relief for full
development activities will be granted
health screening will be increased to MYR 1,000 • The stamp duty exemption will be extended for
with a 100% tax exemption for ten years
(from MYR 500); five years on relevant instruments to property
based on commercialisation of research
developers and purchasers of abandoned
and development activities by private • an increased personal tax relief of up to MYR
projects. The exemption is available for SPAs
tertiary education research institutes, 8,000 (from MYR 5,000) will be granted for
completed between 1 January 2021 and 31
subject to conditions; expenses of an individual’s parent’s medical
December 2025 relating to certified abandoned
treatment, special needs and parental care;
projects.
MALAYSIA MAYER BROWN | 23• A sales tax exemption for the domestic of 10 November 2020. The PRs take into income. However, for manufacturing projects that ascertaining the trust body’s chargeable
purchase of buses by bus operators will be consideration the latest changes in tax legislation achieve the level of productivity prescribed by the income for that year of assessment. Thus,
extended to 31 December 2022 (from with regard to RAs. The main updates are set Minister of Finance, RA may be deducted from income is taxed only once.
31 December 2020). out below. 100% of the statutory income. A company is
TAX TREATMENT OF A BENEFICIARY
entitled to claim RA for 15 consecutive years
• A Human Resources Development Fund levy PR NO. 10/2020 –
of assessment. • The beneficiary is taxed on the income
will be exempt from stamp duty from 1 January RA ON MANUFACTURING ACTIVITIES
distributed from the trust at the individual level.
2021 to 30 June 2021.
Where the beneficiary’s share of the total
• Effective 1 January 2021, excise duties will be
• A new diagram (Diagram 2) is added to
illustrate that where the floor area used as
Tax treatment of trusts income from the trust body has been taxed at
introduced on electronic cigarettes and its storage space exceeds 10% of the total floor the trust body level, a set-off under subsection
relevant ingredients. area of the extension of a building used for a The Inland Revenue Board (IRB) has published 110(8) of the ITA is allowed to the beneficiary.
qualifying project, an RA will not be allowed on consolidated guidance on the taxation of trusts,
• However, where the trust body has deducted
the capital expenditure for the total extended including the ascertainment of a trust beneficiary’s
Tax incentives for floor area. statutory income from the trust. The IRB issued
the income distributed to the beneficiary in
arriving at its chargeable income at the trust
angel investors • A company is not eligible to claim an RA on
Public Ruling (PR) No. 9/2020 of 6 November 2020.
PR No. 9/2020 does not amend the existing tax
body level, the set-off is not allowed to
expenses incurred in replacing tools or the beneficiary.
treatment of trusts. It merely provides an
The Inland Revenue Board (IRB) has issued an machinery parts, unless it is able to show that explanation of and guidance for the determination
updated public ruling (PR) on tax incentives for
angel investors that takes into consideration recent
such capital expenditure results in expanding,
modernising, automating or diversifying the
of the statutory income of a trust beneficiary, such Tax changes and incentives
as in the case of discretionary and mixed trusts.
changes in tax legislation. In this regard, the IRB existing business.
issued PR No. 12/2020 of 17 November 2020. TAX TREATMENT OF A TRUST BODY The Ministry of Finance has proposed additional
• Effective from year of assessment (YA) 2019, tax amendments, including the introduction of
The main updates are set out below: • Under the Income Tax Act (ITA), a trust body,
any unabsorbed RA can only be carried forward approved incentive schemes, re-introduction of
• An angel investor who intends to qualify for the to be absorbed for a maximum period of seven consisting of a trustee or trustees, is the
reinvestment allowances (RAs) and introduction of
tax exemption must make an application with consecutive YAs immediately upon expiry of chargeable person in a trust. The trust body is
tax avoidance measures, in the Finance Bill 2020.
the Ministry of Finance from 1 January 2013 the qualifying period of such RA. After this a tax resident of Malaysia for the basis period
until 31 December 2023 (previously, until period, any unabsorbed balance will be of a year of assessment if any trustee member The Bill, which was recently presented to Parliament
31 December 2017); and disregarded accordingly. Businesses with of the trust body is resident in Malaysia for that for the first reading, amends certain provisions of
unabsorbed RA in YA 2018, even though the basis year. the Income Tax Act 1967, Real Property Gains Tax
• A company must be incorporated under Act 1976, Labuan Business Activity Tax Act 1990,
qualifying period (i.e. 15 years) for such RA has • Where the trust body is a tax resident in
the Companies Act 2016 (previously, Stamp Act 1949 and other relevant legislation.
lapsed, can carry forward the unabsorbed RA Malaysia, the trust body may:
the Companies Act 1965) to qualify as
until YA 2025. CORPORATE TAXATION
an investee company.
• Written approval from the IRB is not required >> deduct the beneficiary’s share of the
PR No. 12/2020 replaces PR No. 11/2015. A • A qualifying person undertaking a qualifying
for claiming RA, but taxpayers must record the total income of the trust body from its
qualifying angel investor is entitled to a tax activity (i.e. any high-technology activity in the
claims in the RA claim form accordingly. total income;
exemption in the second year of assessment manufacturing and services sector or any other
following the year of assessment the investment is PR NO. 11/2020 – RA ON AGRICULTURAL >> deduct any annuity payable to a beneficiary; activity which would benefit the economy of
made, provided that the investment is not disposed AND INTEGRATED ACTIVITIES and Malaysia) approved by the Ministry of Finance
of in part or in full within two years from the will be entitled to a concessionary income tax
The following amendments made in PR No. rate of not more than 20%.
investment date. The tax exemption is capped at >> deem any annuity paid by the trust to
10/2020 are applicable in PR No. 11/2020:
the amount of investment or MYR 500,000, its beneficiaries to be derived from
• Special RAs will be made available for
whichever is lower. • restriction on the carry-forward period for Malaysia regardless of whether the
manufacturing and certain agricultural projects
unabsorbed RA balances; and trust body has any income in the
(where the 15-year RA period has already
relevant year of assessment.
Reinvestment allowances • clarification on the RA claim form. expired) from years of assessment (YAs) 2020 to
2022 to encourage reinvestments.
PR No. 10/2020 replaces PR No. 9/2017,
• Where a share of the total income of the
while PR No. 11/2020 replaces PR No. 10/2017.
The Inland Revenue Board (IRB) has issued two resident trust body for a year of assessment is
updated public rulings (PRs) to clarify the A reinvestment allowance (RA) is an incentive deemed to be the statutory income of a
application of reinvestment allowances (RAs) for granted to resident companies equal to 60% of the beneficiary (i.e. distributed from the trust to the
manufacturing, agricultural and integrated activities qualifying capital expenditures in an assessment beneficiary), the said share may be deducted
undertaken in Malaysia. The IRB issued PR No. year. Generally, an eligible company can claim an from the trust body’s total income in
10/2020 of 6 November 2020 and PR No. 11/2020 RA against a maximum of 70% of the statutory
24 | Asia Tax Bulletin MALAYSIA MALAYSIA MAYER BROWN | 25• The restriction on deductible expenses for REAL PROPERTY GAINS TAX (RPGT) ACT 1976 Effective YA 2020, a taxpayer who was unable to Renovation and
payments made to Labuan entities will be lodge an appeal within the prescribed period may
extended to Labuan entities that do not meet
• Taxpayers may authorise a tax agent, advocate
or solicitor to file their RPGT returns
submit the application for extension (Form N) to refurbishment expenses
the substantial activity requirements under the IRB within seven years from 30 days after the
electronically.
section 2b(1)(a) of the Labuan Business Activity notice of assessment is served to the taxpayer The Ministry of Finance (MOF) has gazetted the
Tax Act 1990. • The RPGT rate for companies will apply (previously, no limit applied). To illustrate, an rules governing the special deduction of up to MYR
to societies registered under the Societies appellant who was served a notice of assessment 300,000 for costs incurred between 1 March 2020
• Effective from the date of operation of the
Act 1966. on 1 August 2020 has until 30 August 2027 to and 31 December 2021 on the renovation and
Finance Act 2020, additional conditions must
submit an application for extension. Where the refurbishment of business premises. The MOF has
be met for claiming special deductions/double LABUAN BUSINESS ACTIVITY TAX ACT 1990
application is rejected by the IRB and subsequently issued the Income Tax (Cost of Renovation and
deductions for research and development
• Effective YA 2020, “chargeable profits” of rejected by the Special Commissioners of Income Refurbishment of Business Premise) Rules 2020
expenditure.
Labuan entities are clarified as “the net profits Tax (SCIT), no further appeal is allowed. (the Rules), which came into effect from year of
• Effective YA 2021, a “plant” for capital reflected in the audited accounts in respect of assessment 2020 onwards.
For best judgment assessments under subsection
allowance purposes will be defined as “an such Labuan business activity of the Labuan
90(3) of the ITA made against a company, limited Qualifying costs, as provided under Schedule 1 of
apparatus used by a person for carrying on his entity for the basis period for that YA”.
liability partnership, trust body or co-operative the Rules, include lighting, gas systems, water
business but does not include a building, an
• Labuan entities carrying on Labuan non-trading society for YA 2019 onwards, the taxpayer must systems and similar expenses. Meanwhile,
intangible asset, or any asset used and that
activities will be required to comply with the submit Form Q with the income tax return form “designer fees, professional fees and the purchase
functions as a place within which a business is
control and management requirement (in (ITRF) for the relevant YA not later than 30 days of antiques” are excluded accordingly. The Rules
carried on”.
addition to the substantial activity requirement) after the notice of assessment has been served to also state that the special deduction will not be
• For transfer pricing purposes, the Director in order to avail preferential tax treatments. the taxpayer. applicable for a person who has claimed the said
General will be given the power to disregard deduction as:
STAMP ACT 1949 For taxpayers other than those referred to above,
any structure adopted by a person in entering
the ITRF must be submitted if so requested by • any allowable expense under section 33(1)
into a transaction if (i) the economic substance • A digital stamp on a duplicate and counterpart
the IRB. of the Income Tax Act 1967 (ITA); or
of that transaction differs from its form; or (ii) of an instrument will be deemed a valid stamp
the form and substance of that transaction are showing that the full and proper duty has been Effective 24 January 2014, the submission of • any capital allowance under Schedule 2 or 3
the same but the arrangement made in relation paid on the original instrument. Form Q to the SCIT may be postponed if the of the ITA.
to the transaction, viewed in totality, differs appellant has applied for a resolution under a MAP
from those which would have been adopted by with a competent authority. If the appellant agrees
independent persons behaving in a Changes to the tax with the decision made under the MAP, the
commercially rational manner. appeals process appellant must apply to cancel the Form Q within
30 days from the date of receipt of the decision.
• A 5% surcharge on the increase in income or
However, if the appellant disagrees with the
reduction of deduction or loss, as the case may The Inland Revenue Board (IRB) has updated the
decision, the appellant must submit a request to
be, will be introduced for transfer pricing procedures for lodging appeals against tax
the IRB to forward the Form Q to the SCIT within
adjustments made by the Inland Revenue assessments and making applications for relief
30 days from the date of the notification letter of
Board. In addition, taxpayers that fail to provide under the Income Tax Act 1967 (ITA). In connection
the decision. PR No. 7/2020 replaces PR No.
contemporaneous transfer pricing with this, the IRB issued Public Ruling (PR) No.
12/2017 of 29 December 2017.
documentation will be fined between MYR 7/2020 of 7 October 2020. The highlights of the
20,000 and MYR 100,000 or imprisoned for up updated procedures include:
to six months, if prosecuted.
• a new seven-year limit on the application for
INDIVIDUAL TAXATION extension of appeals effective from the year of
assessment (YA) 2020;
• Individuals who purchased mobile phones,
tablets or notebooks between 1 June 2020 and • a procedure for lodging an appeal against best
31 December 2020 will be entitled to a special judgment assessments under subsection 90(3)
personal relief of up to MYR 2,500 for YA 2020. of the ITA effective from YA 2019; and
• Individuals may avail of a special personal relief • a procedure for lodging an appeal involving an
of up to MYR 1,000 for domestic travels application for resolution under a mutual
undertaken between 1 March 2020 and 31 agreement procedure (MAP).
December 2021 for YAs 2020 and 2021.
26 | Asia Tax Bulletin MALAYSIA MALAYSIA MAYER BROWN | 27Related party and >> amounts received and/or receivable from Tax incentives for
related parties or paid and/or payable to
transfer pricing related parties but excluding compensation donations of computers
documentation paid to KMP, dividends and branch profit
remittances; and
and similar equipment
requirements The Bureau of Internal Revenue (BIR) has issued the
>> outstanding loans and non-trade amounts
due from/to all related parties; regulation to implement the tax incentives for
The Bureau of Internal Revenue has clarified
donations of computers, laptops, tablets or similar
JURISDICTION: the submission requirements for related
• RPT covered by an Advance Pricing Agreement equipment, for use in public schools from 15
party transactions (RPT) and transfer pricing
September 2020 until 19 December 2020. the
Philippines
documentation (TP documentation) by are included in the threshold computation but
need not be disclosed in the RPT Form; or regulation was introduced under the Bayanihan to
providing safe harbours and materiality
Recover as One Act.
thresholds in Revenue Regulations (RR) • the aggregate value of RPT exceeds the
No. 34-2020. following thresholds within the taxable year: All donors of computers, laptops, tablets or similar
equipment, including mobile phones and printers,
The following taxpayers are required to
>> for sale of tangible goods, PHP 60 million; or for use in teaching and learning in public schools
submit the RPT Form with their annual
are eligible for the following incentives:
income tax return:
>> for service transactions, interest payments,
• exemption from donor’s tax;
• large taxpayers; use of intangible goods or other RPT,
PHP 15 million. • the donations are deductible from the donor’s
• taxpayers enjoying tax incentives i.e.
income, subject to the limitations under section
enterprises registered with the
The TP documentation is required to be prepared 34 (H) of the Tax Code and the following
Board of Investments and those
and submitted if the taxpayer was required to conditions:
in economic zones;
prepare the TP documentation during the
• taxpayers reporting net operating immediately preceding taxable year for exceeding >> the donor must indicate in the Deed
losses for the current taxable year either of the above-mentioned thresholds. of Donation, the details of the item
and the immediately preceding donated, and the quantity and amount
two years; and The TP documentation and supporting documents of the donation;
will no longer be attached to the RPT Form but
• a related party conducting transactions must be submitted within 30 calendar days upon >> the deduction is applicable in the taxable
with the above taxpayers. As such, key receipt of request from the tax authorities pursuant year that the expenses have been paid or
management personnel (KMP) are no to a duly issued Letter of Authority covering all incurred; and
longer required to file the RPT Form. internal revenue taxes. The submission deadline
Moreover, the KMP and the reporting may be extended once by 30 calendar days on >> sufficient documentary evidence is available
entity/parent company of the KMP are meritorious grounds. for the amount of expenses claimed as
not required to report transactions deductions and the acknowledgement of
between them in the RPT Form. Taxpayers with RPT that are not required to submit receipt of the donated items by the
the RPT Form are required to disclose such recipient public school;
The aforementioned taxpayers are also information in the Notes to the Financial
required to prepare and submit the TP Statements. A simplified version of the RPT Form
documentation and supporting documents • in the case of foreign donation, the importation
replaces the old form. RR No. 34-2020 of 18
if any of the following thresholds are met: of the items by certain government agencies is
December 2020 amends RR No. 19-2020 and
exempt from value added tax (VAT); and
• the annual gross sales/revenue for the came into effect immediately upon its publication
taxable period exceeds PHP 150 million on 22 December 2020. • for local donation, items originally intended for
and the total value of the RPT with sale will not be deemed as sales subject to
foreign and domestic related parties VAT and any input tax attributable on the
exceeds PHP 90 million, including: purchase of the donated articles not previously
claimed as input tax may be credited against
any output tax.
PHILIPPINES MAYER BROWN | 29You can also read
