asset and wealth management tax highlights – …...management tax highlights – asia pacific in...
TRANSCRIPT
Asset and Wealth Management Tax Highlights – Asia PacificIn this edition’s asset and wealth management tax highlights for the Asia Pacific region, we highlight industry and tax developments from Australia, China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia and Thailand, which may impact your asset and wealth management business. We hope you find these updates of interest, and will be pleased to discuss these developments and issues with you further.
October to December 2018
Australia
Australia updates list of EOI countries for MIT withholding tax purposesRegulations have been made to update the list of Exchange of Information (EOI) countries now able to access the concessional managed investment trust (MIT) withholding tax rate of 15% in respect of qualifying MIT distributions from 1 January 2019.
Specifically, the following 54 countries were added to the relevant Regulation:
Albania, Andorra, Austria, Azerbaijan, Bahrain, Barbados, Brazil, Brunei, Bulgaria, Cameroon, Chile, Colombia, Costa Rica, Croatia, Cyprus, Dominica, Estonia, Faroe Islands, Georgia, Ghana, Greece, Greenland, Grenada, Guatemala, Iceland, Israel, Kazakhstan, Kenya, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Marshall Islands, Moldova, Montserrat, Nigeria, Niue, Philippines, Portugal, Samoa, Saint Lucia, Saudi Arabia, Senegal, Seychelles, Sint Maarten, Slovenia, Switzerland, Tunisia, Turkey, Uganda, Ukraine, Uruguay and Vanuatu.
pwc2
Further draft law for Corporate Collective Investment Vehicle Treasury has released the third tranche of law in relation to the new Corporate Collective Investment Vehicle (CCIV) regime. This latest tranche includes the independence requirement for the depositary (whose responsibility it is to safeguard the fund’s assets and oversee some of the activities of the fund), arrangements and reconstructions, receiver-ship and winding up, deregistration of subfunds and CCIVs, takeovers, compulsory acquisitions and buy-outs, and disclosure requirements, and other consequential amendments to the Asia Region Funds Passport, the ASIC Act and the Personal Property and Securities Act 2009 (Cth) to accommodate the new CCIV regime.
Accelerated company tax rate reductions for small to medium sized businessesAs the Government is no longer proceeding with a corporate tax rate reduction for all corporate entities, it has moved its focus to small and medium sized businesses. The newly enacted law accelerates the reduction of the corporate tax rate for ‘base rate entities’ (i.e. corporate tax entities that derive no more than 80 per cent of their income in passive forms and have an aggregated turnover of less than $50 million). Specifically, the corporate tax rate for base rate entities has now reduced from 27.5 per cent to 26 per cent for the 2020-21 income year and to 25 per cent for the 2021-22 income year and later income years.
Multilateral Instrument - Tax TreatiesAustralia has passed laws giving force to the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Convention). The Multilateral Convention modifies the provisions of existing tax agreements to implement these rules. It comes into effect on 1 January 2019, with the Government having formally ratified the Multilateral Convention with the OECD on 26 September.
Asset and Wealth Management Tax Highlights – Asia Pacific 3
China
China opens up iron core futures trading to overseas investorsTo further open up the Chinese commodity futures market, the China Securities Regulatory Commission (CSRC) has allowed overseas investors to trade in domestic iron ore futures on the Dalian Commodity Exchange from 4 May 2018. Along with the great interest shown by overseas investors on iron ore futures trading, the China tax position on such trading activities has increasingly drawn attention from overseas investors.
The existing China tax laws and regulations governing iron ore futures trading by overseas investors lack clarity. Pending further clarifications are expected from the Chinese competent tax authorities, overseas investors are suggested to refer to the applicable tax treatments under the existing China domestic tax legislation and closely monitor the development of this subject.
For more details, please refer to the following URL:https://www.pwccn.com/en/industries/financial-ser-vices/publications/fstax-news-nov2018-2.html
A glimpse of the new investment scheme: Shanghai-London Stock ConnectTo deepen the financial cooperation between China and the UK and to expand the opening up of China’s capital market, a new investment scheme, the Shanghai-London Stock Connect, will be launched in both the Shanghai Stock Exchange and the London Stock Exchange. The connectivity mechanism provides eligible companies listed in either of the two countries a platform to issue the depository receipts, and list and trade them on the other’s market. Since October 2018, the Chinese government authorities have released some regulations regarding the listing and trading of depository receipts under the Shanghai-London Stock Connect. We expect the market to have a clearer tax profile upon which the investors can build and grow their businesses with certainty.
For more details, please refer to the following URL:https://www.pwccn.com/en/industries/financial-ser-vices/publications/fstax-news-dec2018-2.html
China issues formal tax regulation for three-year tax exemption on bond inter-est for foreign investorsOn 22 November 2018, China’s Ministry of Finance (MOF) and State Administration of Taxation (SAT) jointly issued circular Caishui [2018] No. 108 (Circular 108), which stipulates that foreign institutional investors are exempt from China Corporate Income Tax (CIT) and Value Added Tax (VAT). The exemptions are in respect of bond interest income received from 7 November
2018 to 6 November 2021 from investments in China’s bond market. This follows the three-year exemption proposal announced by the Standing Committee of the State Council on 30 August 2018.
Circular 108 brings good news to foreign institutional investors – reducing their tax burdens and clarifying their uncertain tax positions and tax compliance concerns. However, Circular 108 still leaves a number of outstanding tax issues for foreign investors to consider and the Chinese tax authority to clarify.
For more details, please refer to the following URL:https://www.pwccn.com/en/industries/financial-ser-vices/publications/fstax-news-nov2018-3.html
China further released new Individual Income Tax policies to benefit individuals investing in National Equity Exchange and Quotations (NEEQ) listed companies as well as Venture Capital FundsOn 30 November 2018, the Ministry of Finance (MOF), State Administration of Taxation (SAT) and China Securities Regulatory Commission (CSRC) jointly released the Circular on the Individual Income Tax Policies for Individual Investors Transferring Equity Shares of Companies Listed on NEEQ (Caishui [2018] No.137, Circular 137), clarifying that individual investors transferring non-anchor shares through NEEQ shall be exempted from IIT. On 12 December 2018, at the State Council Executive Meeting, it was decided that natural person partners of venture capital funds could be subject to IIT at 20% for equity transfer and dividend income, echoing the announcement at the previous meeting that the overall tax burden of venture capital funds will not increase. The release of these two policies demonstrates the central governments’ commitment in promoting the equitability of taxation, boosting the capital market and supporting entrepreneurships and innovations in China.
For details, please refer to:https://www.pwccn.com/en/china-tax-news/2018q4/chinatax-news-dec2018-35.pdf
China’s new Individual Income Tax Law and Regulations come to effective from 1 January 2019The long-awaited Detailed Implementation Rules of China Individual Income Tax Law was finally promulgated on 22 December 2018. Subsequently, the State Administration of Taxation also published other relevant documents to clarify the special additional deduction operation method, personal self-declaration method and transitional treatment of specified incomes such as year-end bonus, incentive plan and expatriate employee welfare, etc. Together with the new Individual Income Tax Law, all these rules and regulations will be implemented with effect from 1 January 2019.
4 pwc
Hong Kong
Hong Kong signed an AEOI agreement with the Mainland ChinaThe HKSAR Government issued a press release on 11 September 2018, announcing that Hong Kong has signed a bilateral competent authority agreement (CAA) on automatic exchange of financial account information (AEOI) with the Mainland China, bringing the total number of CAAs signed to 16. The arrangement came into effect on 6 September 2018. The other 15 CAAs were signed with: Belgium, Canada, Guernsey, Ireland, Indonesia, Italy, Japan, Korea, Mexico, the Netherlands, New Zealand, Portugal, South Africa, Switzerland and the United Kingdom.
As a related matter, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Multilateral Convention) entered into force in HK on 1 September 2018.
Further, the HKSAR Government plans to increase the number of reportable jurisdictions for AEOI purpose from the current 75 to 126 jurisdictions so that Hong Kong can conduct AEOI with most of the AEOI-committed jurisdictions.
Bill to change Hong Kong’s profits tax exemption for funds gazetted On 12 December 2018, the Inland Revenue (Profits Tax Exemption for Funds) (Amendment) Bill 2018 (the Bill) which proposes to amend Hong Kong’s profits tax exemption for privately offered funds was introduced to the Legislative Council for its first and second reading, following its gazettal on 7 December 2018. The Bill is largely consistent with the Financial Services and the Treasury Bureau’s proposals. It clarifies some initial uncertainties, including the impact of the changes to non-fund entities (their tax treatment will remain unchanged and the previously applicable profits tax exemption regime will continue to operate separately), and Hong Kong privately offered open-ended fund companies.
This Bill unifies the profits tax exemptions for privately offered funds (onshore or offshore, regardless of their structure, location of central management and control, their size, or the purpose they serve) into one comprehensive regime. It also widens the application scope of the profits tax exemption significantly, putting Hong Kong in a much more competitive position as a regional and international asset and fund management centre.
For more details, please refer to the following URL:https://www.pwchk.com/en/financial-services/publi-cations/fstax-news-dec2018.pdf
Fair value accounting treatment of financial instruments for tax purposes introducedThe Inland Revenue (Amendment) (No. 7) Bill 2018 was introduced and will apply, upon enactment, for a taxable year beginning on or after 1 January 2018. Taxpayers can make an election to choose the fair value stated in the financial statements for tax purposes, subject to specific rules on impairment loss and other situations. The election is irrevocable, with a few exceptions.
The HK/India CDTA entered into force on 30 November 2018The IRD announced on 30 November 2018 that the HK/India CDTA entered into force on 30 November 2018. The table below set out the effective dates of the CDTA in Hong Kong and India respectively.
Treaty Date of signing
Date of entry into force
Date of effect
HK-India treaty
19 March 2018
30 November 2018
• From year of assessment 2019/20 in HK
• From fiscal year beginning on 1 April 2019 in India
Asset and Wealth Management Tax Highlights – Asia Pacific 5
Treaty Date of signing
Date of entry into force
Date of effect
HK-India treaty
19 March 2018
30 November 2018
• From year of assessment 2019/20 in HK
• From fiscal year beginning on 1 April 2019 in India
India
Modes of acquisition not covered under Section 112A of Income-Tax Act, 1961On 1 October 2018, the Central Board of Direct Taxes (CBDT) issued a final notification in line with the draft notification issued earlier providing a negative list of transactions of acquisition in respect of which the condition of Securities Transaction Taxbeing paid on acquisition and transfer will have to be satisfied.
Amended Form 36 / 36A for filing appeals / cross objections On 23 October 2018, the CBDT notified revised Form 36/36A for filing appeals/cross objections before the Income Tax Appellate Authorities which seeks detailed information about the appellant and respondent (including their PAN, TAN, email id etc.).
87 jurisdictions specified for purpose of ‘passive non-financial entity’ definition under FATCAOn 5 November 2018, the CBDT issued a notification specifying 87 jurisdictions for purpose of ‘passive non-financial entity’ definition under Foreign Account Tax Compliance Act.
Amendment to PAN Application RulesOn 19 November 2018, the CBDT issued a notification amending Permanent Account Number application rules.
Final notification issued for conversion of Indian branch of foreign bank into an Indian subsidiary companyOn 6 December 2018, the CBDT issued two final notifications, notifying the conditions that need to be satisfied to avail benefits under section 115JG of the Income-Tax Act, 1961(the Act) i.e. exemption from tax on capital gains arising upon conversion of the Indian branch of a foreign bank into a Indian subsidiary company which is in accordance with the scheme framed by the RBI.
Relaxation of CbCR deadlineOn 18 December 2018, the CBDT extended the Country-by-Country reporting (CbCR) deadline in case of systemic failure. The period for furnishing of the CbCR report by the constituent entity is twelve months from the end of the reporting accounting year. However in case the parent entity of the constituent entity is resident of a country or territory, where, there has been a systemic failure of the country or territory and the said failure has been intimated to such constituent entity, the period for submission of the CbCR report shall be six months from the end of the month in which said systemic failure has been intimated.
Further on 26 December 2018, the CBDT extended the due date of CbCR report for inbound constituent entities (i.e., a constituent entity, resident in India, of an international group, the parent entity of which is not resident in India) to 31 March 2019 for reporting accounting years ending upto 28 February 2018. The due date in such cases was originally notified to be 12 months from the end of the relevant reporting accounting year.
Procedure for online application for nil or lower TDS/TCSOn 31 December 2018, the CBDT issued a notification specifying the procedure, format and standards for the purpose of electronic filing of Form No.13 and generation of certificate for deduction of Income- tax at any lower rate or no deduction of Income-tax under section 197 of the Act and for collection of the tax at any lower rate under section 206C of the Act.
Indonesia
Updated Certificate of Domicile for foreign tax residentsIndonesia has again updated its provisions on the Certificate of Domicile (CoD) for foreign tax residents through the issue of Director General of Tax (DGT) Regulation No.PER- 25/PJ/2018 (PER-25) on 21 November 2018. PER-25 will apply from 1 January 2019 and revokes DGT Regulation No.PER-10/PJ/2017. CoDs based on this former regulation remain valid up to 31 December 2018.
Please refer to the following URL:https://www.pwc.com/id/en/taxflash/assets/tax-flash-2018-13.pdf
6 pwc
JapanThe 2019 tax reform proposals (Taiko) submitted by the Government’s Ruling Party were released on 14 December 2018. These proposals are submitted to the Japanese parliament (Diet) in early 2019.
Please refer to the URL: https://www.pwc.com/jp/en/taxnews-financial-services/assets/fs-20181217-en.pdf for a brief summary highlighting five significant developments of the proposed reform package specifically of interest to Japan’s financial services industry and real estate market. These include:
1. Expansion of earnings stripping rules
2. Modifications to Japan’s controlled foreign corporation regime
3. Clarification of tax treatments for virtual currency (e.g., Bitcoin)
4. Special taxation measures for J-REITs, etc.
5. Expansion of tax exemption for interest received by designated foreign company entering into Japanese repos (saiken-gensaki)
Korea
The National Assembly Approved the Tax Reform Bill with Several ChangesOn December 8, Korea’s National Assembly approved the government’s tax reform bill to amend 21 tax laws with several changes to the government’s original reform proposal released at the end of last July. The government bill submitted to the National Assembly on August 31 included the expected reduction of KRW 2.7 trillion in tax revenue and an additional revenue reduction in the amount of KRW 3.3 trillion is expected based on the parliamentary discussions. As a result, it is estimated that the tax revenue would be reduced by a total of KRW 6 trillion over the next five years. The expected increase in tax revenue is due to the comprehensive real estate tax rate hike (KRW 0.3 trillion increase). On the other hand, as local consumption tax would have a more allocation from national VAT revenue, this will result in a reduction of national tax revenue by KRW3.3 trillion. The approved bill will be promulgated at the end of 2018 following a review by the Cabinet meeting.
Please refer to the URL: https://www.pwc.com/kr/ko/publications/samil-commentary/samilcommen-tary_dec2018_en.pdf for a summary of major changes to the government’s tax reform bill announced last July as well as new changes contained in the recently approved bill, as well as other Korea tax developments.
Malaysia
Public Ruling 11/2018 - Withholding Tax on Special Classes of IncomeThe Inland Revenue Board has issued Public Ruling 11/2018 - Withholding Tax on Special Classes of Income (“PR 11/2018”) dated 5 December 2018, replacing the earlier Public Ruling 1/2014 - Withhold-ing Tax on Special Classes of Income (“PR 1/2014”). PR 11/2018 essentially incorporates changes to the law since PR 1/2014 was issued as well as sets out changes in Inland Revenue Board’s positions with respect to certain matters, some of which take immediate effect from the date the new public ruling is published.
For more details, please refer to the following URL:
https://www.pwc.com/my/en/publications/taxav-vy/2018-taxavvy-issue10.html
Thailand
Thailand enacts transfer pricing legislationThe Revenue Code Amendment Act to introduce specific transfer pricing provisions into the income tax law (No. 47) was published in the Royal Gazette on 21 November 2018, and has become law. Specific transfer pricing provisions will apply to accounting periods on or after 1 January 2019. Once in effect, Thailand’s income tax law will contain a definition of the arm’s-length principle and introduce penalties for failure to comply with the transfer pricing disclosure requirement, in addition to the penalties for failure to comply with Thailand transfer pricing rules.
For more details, please refer to the following URL:
https://www.pwc.com/gx/en/tax/newsletters/pric-ing-knowledge-network/assets/pwc-thailand-tp-leg.pdf
Country Partner Telephone Email address
Australia Ken Woo +61 2 8266 2948 [email protected]
China Matthew Wong +86 21 2323 3052 [email protected]
Hong Kong Florence Yip +852 2289 1833 [email protected]
India Bhavin Shah +91 22 6689 1122 [email protected]
Indonesia Margie Margaret +62 21 5289 0862 [email protected]
Japan Akemi Kitou Stuart Porter +813 5251 2461 +813 5251 2944
[email protected] [email protected]
Korea In-Hee Yun Hoon Jung +82 02 709 0542 +82 (0) 2709 3383
[email protected] [email protected]
Malaysia Jennifer Chang +60 3 2173 1828 [email protected]
New Zealand Darry Eady +64 9 355 8215 [email protected]
Philippines Malou P. Lim +63 2 845 2728 [email protected]
Singapore Anuj Kagalwala +65 6236 3822 [email protected]
Taiwan Jessie Chen +886 (0) 2 27296666 25360 [email protected]
Thailand Orawan Fongasira +66 (2) 344 1302 [email protected]
Vietnam Nghiem Hoang Lan +84 4 3946 2246 1510 [email protected]
Contact list
This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
© 2019 PricewaterhouseCoopers Limited. All rights reserved. PwC refers to the Hong Kong member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. HK-20190115-3-C1