country update: malaysia, singapore, vietnam · · 2015-08-16country update: malaysia, singapore,...

Country update:Malaysia, Singapore,Vietnam

Benedict FrancisExecutive Director, PwC Malaysia

Tan Tay LekPartner, PwC Singapore

David FitzgeraldPartner, PwC Vietnam

www.pwc.com

Malaysia

Benedict FrancisExecutive Director, PwC Malaysia

PwC

Agenda

1. Goods and services tax

2. Tax incentives

3. Other recent tax developments

3Global Tax Symposium – Asia 2015

PwC

Goods and services tax (GST)


PwC

Introduction of GST and the relief measures


PwC

GST headlines

Goods & services tax

Effective date: 1 April 2015

Standard rate: 6%

Registration: Businesses with annual

sales turnover > MYR500,000

Sales & service tax (SST) abolished


PwC

GST/VAT in ASEAN countries

Source: Royal Malaysian Customs Department

Country Year of implementation Initial rate (%) Current rate (%)

Indonesia 1984 10 10

Thailand 1992 7 7

Singapore 1994 3 7

Philippines 1998 10 12

Cambodia 1999 10 10

Vietnam 1999 10 10

Laos 2009 10 10

Note: No GST/VAT regime in Brunei and Myanmar


PwC

Reduce cost of doing business

• Secretarial fee and tax filing fee tax deductible up to MYR5,000 and MYR10,000 respectively YA 2015

• Accelerated capital allowance for ICT equipment and software extended

YAs 2014 to 2016

• Expenses for GST-related training in accounting and ICT given further deduction

YAs 2014 & 2015

Financial assistance

• Training grant of MYR100m for GST training

• MYR150m allocation for purchase of accounting software by SMEs

2014 & 2015

2013 & 2014

• Reduction in corporate tax rate by 1% • Reduction in cooperatives tax rate by 1% to 2%

YA 2016YA 2015

GST implementation relief packageBusinesses

Description Effective


PwC

Description Effective

Increase disposable income

• Restructuring of income tax bands by increasing chargeable income subject to maximum rate from > MYR100,000 to > MYR400,000

• Personal tax rate reduction across tax bands by 1% to 3%

YA 2015

• Highest marginal tax rate reduced from 26% to 25%

• One-off cash assistance of MYR300 to households who are BR1M recipients

Financial assistance

GST implementation relief packageIndividuals

2015


PwC

Tax incentives


PwC

Principal Hub


PwC

Principal HubOverview

Central sourcing and procurement

Sales and marketing Support

Research and development

Supply chain management

Text

Principal Hub

Centralising high value activities

Guidelines issued by MITI on 6 April 2015


PwC

Traditional model

Global HQ provides services to group companies

Principal Hub

• Transactional principal

• Value added services principal

Traditional model vs. Principal Hub

LEGENDFlow of goods

Management servicesTransaction/ trade

Global Headquarter

Raw materials supplier

Manufacturer Distributor Customer

Global headquarter

Raw materials supplier

Manufacturer Distributor Customer

Principal Hub


PwC

Why choose Malaysia?

The ETP (Economic Transformation Programme) is a comprehensive effort that will transform Malaysia into a high income nation by 2020.

Government’ support and certainty

Best Level of English

proficiency in Asia (Education First)

1.5 hrsJourney time

from Kuala Lumpur to

Singapore via high speed rail

by 2020 (SPAD)

11th world’s busiest airport (ACI)

70 double tax agreements offered in Malaysia (IKL)

110,000 graduates annually in Greater KL (IKL)

Excellent ecosystem

Business potential 10 million –Kuala Lumpur’s population by 2020 – up 40% (IKL)

ASEAN’s market

600 million population, US$2.4

trillion GDP (IKL)

US$47billion in Oil & Gas upstream investment over next 5 years (MPRC O&G Journal, 2014)

US$9Trillion of new Infrastructure in Asia by 2020 (Asian Development Bank)

1.7billion middle class market rising in Asia by 2020 (OECD)

*KV: Klang Valley**Greater KL includes KL city centre and the greater metropolitan area, covering 10 municipalitiesSource: Pemandu, ETP


PwC

Why choose Malaysia?

Competitive economy

Transitioning from an efficiency-driven economy to an innovation-driven one

1

Investor protection

Strong investor protection ahead of countries such as Australia, US and UK

2

Talent availability

Highest talent ranking in South East Asia with good scores in the quality of the labour force and talent environment

3

Quality of living

2nd most liveable city in SEA and only one of two SEA cities that made the top 100

4

Affordable & business friendly

KL scored well in terms of cost and ease of doing business – 8th

and 18th

position in the world

5

WEF Global Competitive Report, 2014-15

World Bank Doing Business, 2015

IMD World Talent Report, 2014

EIU Global Liveability Survey, 2014

EIU Global Liveability Survey, 2014

• Attractive business environment with legal, political and economic stability

• ASEAN Economic Community, OIC, APEC

• Access to USD2 trillion ASEAN’s market size

• No. 12th in competitive index globally

• Stable climate i.e. hot and rainy days

• Extensive logistics

Business environment


PwC

Principal Hub incentive frameworkFiscal and non-fiscal benefits

Fiscal benefits

Non-fiscal benefits

1. Bring in raw materials, components or finished products with customs duty exemption into free industrial zones, LMW, free commercial zones and bonded warehouses for production or repackaging, cargo consolidation and integration before distribution to its final consumers for goods-based companies

2. No local equity / ownership condition3. Expatriate posts based on requirements of applicant’s business plan subject to

current policy on expatriates 4. Foreign Exchange Administration flexibilities will be accorded in support of business

efficiency and competitiveness of companies under the Principal Hub

Tier 1 2 3

Blocks (Year) 5 +5 5 +5 5 +5

Tax Rate 0% 5% 10%


PwC

Principal Hub incentive frameworkEligibility criteria

1. Local incorporation under Companies Act 19652. Paid-up capital of more than MYR2.5m3. Minimum annual sales of MYR300m (applicable only to goods-based

applicant company)4. Serve and control network companies1 in at least three countries outside

Malaysia 5. Carry out at least three qualifying services, of which one of the qualifying

services must be from the strategic services cluster.

1 Network companies refer to related companies (any entity within the group including subsidiaries, branches, joint ventures, franchises) or unrelated companies within the applicants’ supply chain and business with contractual agreements.


PwC

Principal Hub incentive framework

1. Regional P&L/ business unit management

2. Strategic business planning & corporate development

3. Corporate finance advisory services

4. Brand management5. IP management6. Senior-level talent

acquisition and management

1. Bid and tender management 2. Treasury and fund

management3. Research, development and

innovation 4. Project management5. Sales and marketing 6. Business development7. Technical support and

consultancy8. Information management

and processing9. Economic/ investment

research Analysis10. Strategic sourcing,

procurement and distribution

11. Logistics services

1. Corporate training and human resource management

2. Finance and accounting (transactions, internal audit)

3. General administration4. IT services

A. Strategic services B. Business services C. Shared services


PwC

Principal Hub incentive framework

Tier 1 2 3Blocks (Year) 5 +5 5 +5 5 +5

Tax rate 0% 5% 10%Functions Regional P&L + 2 Strategic services + 2

High-value job1

Key positions250(5)

30(4)

15(3)

Local business spend MYR10m MYR5m MYR3m

Countries served outside Malaysia 5 4 3

Annual sales MYR300m (applicable only to goods-based applicant company)

Extension Jobs: Base + 20%Business spend: Base + 30%

Notesa. Applicants will be given till end of Year 3 (valid only for first block) to comply to each tier’s criteria. Failing to do so will result in claw back of tax incentives from Year 1.

The flexibility is not applicable for existing companies who have already enjoyed IPC/RDC/OHQ incentives. b. Income tax exemption threshold – 70% outside Malaysia: 30% inside Malaysia

• Income generated from rendering Principal Hub services to network companies in Malaysia, provided such income does not exceed 30% of the total income, will be tax exempted during the incentive period.

c. At least 50% of the high-value jobs must be Malaysians by end of year 3.

1. Jobs with minimum monthly salary requirement of at least MYR5k that require higher and more diverse set of managerial/ technical/ professional skills such as management, analytics, communication, problem-solving, and proficiency in information technology.

2. Positions with minimum monthly salary requirement of at least MYR25k with key strategic/ management positions.


PwCGlobal Tax Symposium – Asia 2015

Comparison with other countriesWhat are other countries doing? Country Tax incentive and R&D support

Singapore Corp tax DEI (IHQ/RHQ), Pioneer, GTP, etc.

R&D PIC, credits (up to 400%), IA

IP Excellent protection, ARI

Hong Kong Corp tax No incentives – offshore claim on profits

R&D No R&D incentives

IP No credits or protection

Thailand Corp tax Reduction granted by BOI

R&D 200% on qualifying R&D, CIT exemption

IP Credits, embedded in above incentives

China Corp tax WFOE/Shanghai FTZ- 15%

R&D HNTE- 15% on qualifying R&D

IP Minimal

The Philippines Corp tax Philippine Economic Zone Authority (PEZA)

R&D No R&D Incentives

IP No credits or protection20

PwC

Other recent tax developments


PwC

Related party transactions


PwC

Related party transactionsWhat’s new?

W.e.f. 31 Dec 2014Prior to 31 Dec 2014

• DGIR is empowered to raise assessment or additional assessment within 5 years after the expiration of a YA for all cases including TP

• DGIR can raise assessment or additional assessment within 7 years after the expiration of a YA for TP cases


PwC

Related party transactionsWhat is the impact?

Increased uncertainty

Prolonged auditCould potentially complicate Mutual Agreement Procedure (MAP)


PwC

Transfer PricingNew ‘check the box’ requirement

With effect from YA 2014, taxpayers are required to confirm whether transfer pricing documentation has been prepared – there is a new check box in Form C.

Before amendment After amendment

√


PwC

Requirements and penalties

Type of

penaltyCondition

Penalty rates (%)

Normal case

Voluntary disclosure after taxpayer has been

informed but before commencement of the

audit visit

Voluntary disclosure

before case is selected for

audit

1 Understatement or omission of income 45 35 15

2 Taxpayer did not prepare transfer pricing documentation 35 30* 15*

3

Taxpayer prepared transfer pricing documentation but did not fully comply with the requirements under the Transfer Pricing Guidelines

25 20 10

4

Taxpayer prepared a comprehensive, good quality, contemporaneous transfer pricing documentation in accordance with existing regulations

0 0 0

* Upon voluntary disclosure, transfer pricing documentation are still required to be prepared


PwC

Landmark tax cases


PwC

Entertainment — tax cases

Case Items challenged Decision

2012 Amount paid for advertising exposure and expenses for business promotion and marketing strategy

Both expenses incurred for promoting of business and are not sponsorship/ entertainment in nature – deductible(Court of Appeal)

2007 Promotional gifts with logo given to customers

Promotional gifts incurred solely for the purposes of business promotion – deductible(Court of Appeal)


PwC

Amendment to definition of ‘entertainment’

Entertainment includes:

a) The provision of food, drink, recreation or hospitality of any kind; or

b) The provision of accommodation or travel in connection with or for the purpose of facilitating entertainment of the kind mentioned in paragraph (a),

by a person or an employee of his with or without any consideration paid whether in cash or in kind, in promoting or in connection with a trade or business carried on by that person

Effective from YA 2014


PwC

Rationale

With or without any consideration paid whether in cash or in kind Company C vs. Company B (High Court)

Company A vs. Company B (Court of Appeal)

Company D vs. Company B (Court of Appeal)

Company E vs. Company B (Court of Appeal)

Company F vs. Company B (Court of Appeal)

In promoting


Singapore

Tan Tay LekPartner, PwC Singapore

31

PwC

Agenda

1. Supporting growth– Mergers and acquisitions– International growth scheme– Double tax deduction for internationalisation

2. Supporting enterprise growth

3. Tackling rising business costs– Transition support package

4. Financial services and maritime sectors

5. Rationalisation and review

6. Changing assessment environment


PwC

Supporting growth


PwC

Supporting growthMergers & acquisitions

34

Global M&A deals to hit USD4.1 trillion in 2015 from

USD3.6 trillion in 2014Source: J.P. Morgan

January 2015

Global Tax Symposium – Asia 2015

PwC


35

1. M&A allowance cap 2. Stamp duty

relief

3. Shareholding requirement

4. Look-back

Changes effective from 1 April 2015 to 31 March 2020Global Tax Symposium – Asia 2015

PwC


3636

SG CoAcquirer

Target Co Max value $100m

Current rules

Max M&A allowance per YA

5% of $100m = $5m

SG CoAcquirer

Target Co

New rules

Max M&A allowance per YA

25% of $20m = $5m

• No change in overall allowance cap ($5m)

• Higher M&A allowance rate and lower shareholding thresholds will benefit smaller sized deals.

Max value $20m


PwC



Lower relief affects local acquisitions

Current rules New rules

Relief cap $200,000(acquisition

value capped at $100m)

Relief cap $40,000

(acquisition value capped at $20m)

Reduced

PwC

New rules

Acquisition that results in ownership of:

• More than 50% [Previous ownership 50% or less]

• At least 75%[Previous ownership more than 50% but less than 75%]


• At least 20%[Previous ownership less than 20%]

• More than 50%[Previous ownership 50% or less]


38

Current rules


PwC

New rules








39

Current rules


IRAS – additional conditions:

The acquiring company must have:

1. at least 1 director represented on the board of directors of the target company; and

2. company is considered an associate of the acquiring company under Singapore FRS rules.

PwC

New rules








40

Current rules


Intro 20% - encourage strategic stakes (with influence) as an alternative to consolidation (control)

PwC

New rules








41

Current rules


No further incentive for acquisitions of higher level of control where >50% ownership is present

PwC



Current rules New rules

12-monthlook-back period

12-monthlook-back period

Stepped/ phased acquisitions requiring the 12-month look back period

PwC

Supporting growthDouble tax deduction for internationalisation (DTD)

43

Current scheme • 200% tax deduction for qualifying expenses for qualifying

market expansion and investment development activities.

• Approval from IE Singapore.

• Automatic deduction up to $100,000 per YA for certain qualifying activities


airfare hotel

meals roadshows

freight consultants

Examples

Budget 20121. Overseas trips/ missions for

• business development• investment study• trade fairs

2. Local trade fairs approved by IE Singapore or STB

PwC

Supporting growthDouble tax deduction for internationalisation (DTD)

44

Enhancement

• Qualifying manpower expenses (1 July 2015 to 31 March 2020) for Singaporeans posted to new overseas entities

• Capped at $1 million per approved entity per year

• Approval from IE Singapore

Clarity by May 2015 ?

• New overseas entities

- representative offices, branches, companies, partnerships, joint ventures ?

• Qualifying manpower expenses

- where costs are borne by the overseas entities?- where costs are recharged by the overseas entities?- where partial costs are absorbed by Singapore entity?


PwC

Supporting growthInternational Growth SchemeKey features

• 10% concessionary tax rate • Larger Singapore companies/ high potential companies• Incremental income from qualifying activities• Not more than 5 years

(approval 1 April 2015 – 31 March 2020)• IE Singapore (further details – May 2015)

45

Overseas expansion milestones? e.g. • New markets

penetrated• Singaporeans

based overseas


PwC

Supporting growthInternational Growth SchemeKey features

• 10% concessionary tax rate • Larger Singapore companies/ high potential companies• Incremental income from qualifying activities• Not more than 5 years

(approval 1 April 2015 – 31 March 2020)• IE Singapore (further details – May 2015)


46

Internationalisationefforts take time – too short ?

Base income concept from DEI

PwC

Supporting enterprise growth


PwC 48

Supporting enterprise growth

2014

Crowdfunding

Co-investment Programme by SPRING (Phase 2)

Micro Loan Programme Enhancements Capability

Development Grant (CDG)

Venture Debt Risk Sharing Programme

SPRING StartupEnterprise Development Scheme (SEEDS) & Business Angel Scheme (BAS)

Angel Investors Tax Deduction Scheme

Venture Capital Funds and Fund

Manager

2015

New


PwC

Tackling rising business costs


PwC

Transition support packageWage Credit Scheme (WCS)

50

Budget 2013

2013–2015

40% 20%

2016–2017

Co-funding of qualifying wage

Budget 2015


PwC


51

Budget 2013

2013–2015

40% 20%

2016–2017

Co-funding of qualifying wage

Budget 2015

33% 17%


PwC


52

Illustration

Gross Monthly Wage Increase $500 $500

$200

$500

$200

$200

2015 2016 2017

Govt co-funds 40% per month $200

$140(20% of [$500+$200])

$180(20% of [$500+$200+$200])

Govt co-funds 20% per month

- -

- $100 $100


PwC

Transition support packageCorporate income tax rebate

53

0

20

40

YA 2013 - 15YA 2016 - 17

Maximum rebate of 30% tax payable or:

$30kper YA $20k

per YA

$’000


PwC

Transition support packageProductivity and innovation credit (PIC) bonus

54

• Dollar-for-dollar matching cash bonus for YAs 2013 to 2015

• Overall combined cap of $15,000 for 3 YAs

PIC bonus

Global Tax Symposium – Asia 2015PwC

EXPIRED

PwC

Transition support packageProductivity and innovation credit (PIC) bonus

55

0%10%20%30%40%50%60%70%80%90%

100%

YA 2011 YA 2014

33%46%

Active companies benefiting from PIC

Press release by the Ministry of Finance issued on 12 February 2015,


PwC

Financial services and maritime sectors

56Global Tax Symposium – Asia 2015PwC

PwC 57

Positioning SG among Asia and global leaders –five growth clusters of the future

Growth clusters

1

5

4

2

3

Advancedmanufacturing

Smart and sustainable urban solutions

Asian and global financial

services

Logistics and

aerospace

Applied health sciences

“Being small, we cannot achieve expertise and advanced capabilities in every area. We have to build on strengths we have already developed. We must also focus on areas in growing demand, and where Singapore have the capacity to excel. We are well positioned to be amongst the leaders in Asia and globally in five growth clusters of the future”

Mr Tharman Shanmugaratnam,Deputy Prime Minister and Minister for Finance


PwC 58

Maritime sector – tax concessions

Owners/ operators

MSI – Shipping Enterprise (SG Flag)

(MSI-SRS)

Tax exemption

MSI – Approved International

Shipping Enterprise

(Foreign-Flag)(MSI-AIS)

Tax exemption

MSI – Maritime Leasing (Ship)

(MSI-ML)Tax Exemption on

leasing income and 10% on managing shipping

investment enterprise

MSI – ML (Container)

5% or 10% on leasing income

and 10% on managing container

investment enterprise

MSI – Shipping Related Support Services

(MIS-MSS)

10% on incremental

qualifyingincome

Automatic WHT

exemption for qualifying financing

arrangements

Financing

ChangeChange

Change

Lessors Service providers


PwC

Asset managementEnhanced tier fund tax incentive

59

Singapore Fund

Investment entity (IE) IE IE

• Waiver of separate tax exemption application by each IE

• Remove conditions at IE level (e.g. fund size and spending)

Proposed

• Separate tax exemption application to be made by each entity.

• Conditions for tax exemption applied at each entity level.

• Each entity is subject to compliance obligations.

Current treatment

New


PwC 60

REITSTax concessions for listed REITS/RBTs

Asset

Investors

Singapore REITs

SPVs

Current treatment

10% withholding tax rate on distribution

N.A.

S13(12) qualifying foreign sourced income and GST remission (REITS and RBT)

Level

Investors

SPV

Trust level

Proposal

Extended for 5 years

GST remission for SPVs used for funding (REITS/RBT)

Extended for 5 years

Others Stamp duty remissions Stamp duty remissions removed

New!


PwC

Rationalisation and review


PwC

Rationalisation and reviewInvestment allowance – energy efficiency schemes (IA-EE)

Current

1. IA-EE Scheme – Singapore Economic Development Board, National Environmental Agency

2. IA-EE for Green Data Centres Scheme – Infocomm Development Authority of Singapore

Both scheduled to lapse after 31 March 2015

62

New

• From 1 March 2015 – The two schemes will be combined into one scheme, IA-EE scheme.

• Extended to 31 March 2021

• Singapore Economic Development Board


PwC

Rationalisation and reviewInternational telecommunications submarine cable system

Current• Section 19D

• Writing down allowances for capital expenditure incurred on the acquisition of an IRU of any international telecommunications submarine cable system

63

New• Review date – 31 December 2020


PwC

Rationalisation and reviewApproved Foreign Loan (AFL) and Approved Royalties Incentive (ARI)

Current• ARI – tax exemption or concessionary rate

Approved royalties, technical assistance fees or contributions to R&D costs made to non-tax residents for providing cutting-edge technology and know-how

• AFL incentive – tax exemption or concessionary rateInterest payments made to non-tax residents for loans to purchase productive equipment. Minimum loan quantum $200,000.

64

New• The minimum loan quantum under the AFL incentive will be $20 million from 24

February 2015. Other loan quantum may be approved by the Minister for Trade and Industry

• Review date – 31 December 2023


PwC

Rationalisation and reviewPhasing out

Offshore leasing – withdrawn from 1 January 2016• 10% concessionary tax rate on income derived by a leasing company in

respect of offshore leasing of machinery and plant

65

Operational headquarters – withdrawn from 1 October 2015• Scheme was introduced to encourage companies to use Singapore as a base to

conduct headquarter management activities by providing tax exemption or a concessionary tax rate of 10% on income from qualifying HQ services

• HQ companies may still qualify for DEI, subject to conditions

Royalties – withdrawn from YA 2017• Section 10 (16) of the ITA provides a tax concession on royalties and other

payments from approved intellectual property or innovation


PwC

Changing assessment environment?


PwC

Changing assessment environment?

GST ACAP

• IRAS’ letters to ‘encourage’ tax payers to voluntarily undertake a GST ACAP review or be subject to IRAS audit

Internal controls for corporate tax

• Taking the lead from ACAP, IRAS appears to be moving to focus on the internal controls relating to corporate income tax reporting and other tax-related areas, e.g. withholding tax

Contemporaneous documentation for transfer pricing

• Need I say more?


67

Vietnam

David FitzgeraldPartner, PwC Vietnam


Economic overview

• Fitch rating: stable, BB-

• Continued moderation in inflation ~5.5%

• Trade balance improving

• Currency generally stable, although continued minor devaluations

• GDP growth: over 6% for 2014

• FDI: USD20bn in 2014

• New Law on Investment and Law on Enterprise this July

69


Corporate income tax

• Corporate tax rate – reduced to 22% for 2014-2015 and to 20% from 2016

• Revamped CIT incentive regime – broader scope and also applied to business expansion

• Advertising and promotion (A&P) cap removed from 2015

• Capital gains tax

− Foreign companies taxed on sale of Vietnamese companies at 22% of gain

− Targeting offshore sales?

70


Foreign contractor tax

• Remains the method used in practice to tax foreign companies

• PE is on the statute book but not invoked

• FCT places filing payment obligations exclusively on the Vietnamese customers

• New FCT Circular 103 applicable to foreign entities which:

− “carry out part or all of the activities of distributing goods….in Vietnam where foreign entity….is still owner of goods ”

− “incur expenses for distribution, advertising and marketing, or are responsible for the quality of services or goods……or set prices for selling goods or providing services”

− “authorise or hire a number of Vietnamese organisations to provide part of the distribution service or other services related to sale of goods in Vietnam”

• What is the objective of these provisions?

71


Foreign contractor tax

8

Overseas goods provider

Overseas goods provider

Vietnamese distributorVietnamese distributor MarketMarket

Sales subject to FCT?

VN Rep officeVN Rep office

Control / Distribution / A&P / Quality / Pricing

Sales

• 1% CIT, VAT exempt applied to gross sales

• CIT may be avoidable if overseas seller is located in a tax treaty partner country, but an application is needed and commercial challenges exist

• Circ 103 is likely to increase focus on activities of representative offices

Control / Distribution / A&P / Quality / Pricing

72


Value added tax

• Exported services: services must be “consumed” outside Vietnam to be eligible for zero rating

• VAT creditability requires payment via bank and registered bank account

• Removal of 6 month limit to claim input VAT

• Waiting time for VAT refunds increased to 1 year; or VND300 million for new projects/export

• Funding is no longer VAT exempt if provided in return for services

73


Transfer pricing – developments

• Ministry of Finance’s “Action Plan on Transfer Pricing Management” – stated goal of 20% of all tax audits to focus on transfer pricing by 2015. Now striving for consistency in transfer pricing audit process:

− Strategic risk assessment / profiling still under development

− Front line auditors lack knowledge / experience

− Aggressive positions (e.g. MOTC of 25% for a contract manufacturer) taken where no documentation exists and / or tax return filings are incomplete or inaccurate

• Focus on ‘transparency and completeness’ of information through detailed disclosure requirements and other measures:

− Revised transfer pricing declaration form effective for 2014 filings onwards –requires companies to declare their compliance with the arm’s length principle at the time of filing

− Enhanced focus on maintenance of TP documentation

− Objective measures (i.e. caps / safe-harbours) are in place or contemplated

• GDT is closely watching other authorities in the region (particularly China) and developments elsewhere

74


Transfer pricing – APAs and MAP

• APA programme established in February 2014, four major taxpayers have lodged official (bilateral) applications. PwC assisting with three of these.

• Key insights from initial cases:

− GDT is still developing competency and leaning on the taxpayer to drive the process

− Significant information hurdle to obtain approval into the programme

− Need to engage multiple stakeholders with the MoF and GDT

− Due to the nature and complexity of the interactions with the Government, generally only suitable for larger taxpayers

• Taxpayers have lodged applications for MAP to resolve Vietnam transfer pricing disputes (one with Japan, one with Korea), along with other tax issues:

− Pilot MAP cases will help shape the process, however, MAP is seen as a realistic option to resolve disputes.

75


Enforcement and implementation

• Active tax audit programme

− Tax incentives is a key focus

− Tougher dispute resolution environment

− Tougher enforcement – individuals stopped at airport, bank accounts frozen, penalties and interest applied

− Tax issues increasingly going to court

• Structural issues with the tax system. What may the Government do?

− Re-introduce a dividend withholding tax?

− Introduce a thin capitalisation rule?

− Increase SST rates already increased – now proposed changes to taxable price

− Increase VAT rate?

− More consistent application of the existing rules?

− Apply FCT to distribution arrangements

− Anti treaty shopping regulations

76


Contact us

Benedict Francis

Executive Director, PwC [email protected]

Tan Tay Lek

Partner, PwC Singapore +65 6236 [email protected]

David Fitzgerald

Partner, PwC [email protected]

7777

Thank you.

The information contained in this presentation is of a general nature only. It is not meant to be comprehensive and does not constitute the rendering of legal, tax or other professional advice or service by PricewaterhouseCoopers Ltd. ("PwC"). PwC has no obligation to update the information as law and practices change. The application and impact of laws can vary widely based on the specific facts involved. Before taking any action, please ensure that you obtain advice specific to your circumstances from your usual PwC client service team or your other advisers.

The materials contained in this presentation were assembled in May 2015 and were based on the law enforceable and information available at that time.

© 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

country update: malaysia, singapore, vietnam · · 2015-08-16country update: malaysia, singapore,...

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