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Asia Tax Bulletin Autumn 2019 in This Edition

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Asia Tax Bulletin Autumn 2019 in This Edition Asia Tax Bulletin Autumn 2019 In This Edition We are pleased to present the Autumn 2019 edition of our firm’s Asia Tax Bulletin. Dear reader, I’m happy to present this edition of our We hope you will enjoy reading about these quarterly Asia Tax Bulletin, reporting on and other developments and as always significant tax related developments in appreciate any suggestions for improvement. Southeast Asia, Greater China, Japan, Korea Please do not hesitate to contact us if you have CHICAGO SAN FRANCISCOand India. Included in this edition is the interN EWany YORK questions about taxation in Asia. BEIJING alia the trade war between the PRC and theW ASHINGTON DC PALO ALTO With kind regards, USA, transfer pricing circulars issued by theCHARLOTTE TOKYO LOS ANIRDGE inL ESHong Kong, India’s tax changesHOUS TON Pieter de Ridder SHANGHAI proposed in the recent government Budget for DUBAI 2019/2020 as well as the proposed tax reform, HANOI HONG KONG CFCMEXICO changes and CITY tax incentives in Indonesia, Korea’s Budget proposals, service tax BANGKOK developments in Malaysia and tax reform HO CHI MINH CITY Pieter de Ridder measuresAM Ein theR IPhilippines.CAS Partner, Mayer Brown LLP +65 6327 0250 SINGAPORE Singapore is one step closer to implementing [email protected] the long awaited Variable Capital Company legislation, which will effectively put it on a par with the company law of the British Virgin BRASÍLIA* Islands. Thailand introduced a VAT on foreign * ecommerce operators and is encouraging RIO DE JANEIRO foreign talent to relocate to Thailand by SÃO PAULO* offering attractive tax benefits. *TAUIL & CHEQUER OFFICE 2 | Asia Tax Bulletin MAYER BROWN | 3 Contents China India (cont’d.) Korea Singapore (cont’d.) 06 Retaliation Increase of Tariffs 16 Management Services are not Subject to 27 Budget - Proposed Tax Changes 41 International Tax Developments Withholding Tax 06 Tax Incentive in Hengqin New Area 29 International Tax Developments Taiwan Extended to Tourism Industry 17 Finance Ministry’s Economic Stimulus Malaysia 42 Futures Transaction Tax in Case of Merger 07 US Trade War Subsidy 17 Consolidated Circular for Assessment of Start-ups 30 Restriction on Deductability of interest 42 Abolishment of Stamp Duty Act 07 Farmland Use Tax Implementation Rules Issued 18 Farm-in Expenditure Incurred by Oil 32 Wholly and Partly Irrecoverable Debts and 43 Law on Repatriation of Offshore Funds Exploration and Production Companies Debt Recoverie 07 Resource Tax Law published Thailand 19 New Direct Tax Law 33 Service Tax 09 Tax incentives for Lingang New Area in 44 VAT on Foreign E-commerce Operators Shanghai Free Trade Zone 20 Taxation Laws (Amendment) Ordinance 33 Service Tax Amendments Gazetted 2019 44 VAT Rate 09 International Tax Developments 34 Withholding Tax Exemption Withdrawn 20 Capital Gains Tax Liability on for Income from MSC 44 Tax Exemption on Interest Income Hong Kong Conversion into an LLP 34 International Tax Developments 45 New Relocation Package Incentive 10 Foreign Taxes Deduction for Profits Tax 21 Notification on Arm’s Length Tolerance Purposes Range for 2019-20 Assessment Year Philippines Vietnam 10 Tax Penalties 21 International Tax Developments 35 Proposed Passive Income and Financial 46 Taxation of Foreign Workers Intermediary Tax Act 46 Business Trip Allowances Paid to Experts 11 Transfer Pricing Guidelines Indonesia 36 Tax Reform 12 Package of Measures to Support 47 Transfer of Shares 22 VAT Exemption on Transportation Enterprises and Resident International Tax Developments Equipment 36 47 Tax Treatment of Liquidation of Assets 12 Charitable Institutions by Foreign Representative Office 22 Changes to the CFC Rules Singapore 13 International Tax Developments 47 Guidance on Provisions 23 Tax Incentives 37 FATCA 48 Tax Incentives for Investments in India 24 Reduction of Tax on Bond Interest 37 Variable Capital Company (VCC) Payments Expansion of Projects 15 Budget 2019/2020 Presented 38 Public Consultation on GST on Digital 48 Clarification on VAT Treatment for 24 Tax Incentives for Upstream Oil and Gas Payment Tokens 15 Sabka Vishwas (Legacy Dispute Sector Certain Services Provided for Foreign Resolution) Scheme 39 Responses to Public Consultation on Enterprises International Tax Developments 24 Draft Income Tax (Amendment) Bill 2019 15 Tax Deduction at Source on Cash 49 Social and Health Insurance Withdrawals Japan 39 MOF Invites Feedback on Proposed Contributions Increased Changes to GST Act 26 International Tax Developments 49 Withholding Policy Applicable to Online 40 Proposed Tax Framework for VCCs Advertising Services 49 International Tax DevelopmentsMAYER BROWN | 5 Retaliation increase • enterprise income tax incentives for other 13th round of negotiations in Washington, DC, in industries that are regarded as encouraged and September 2019. The CRS is an agency within the of tarriffs taxed at a reduced rate of 15% in Hengqin New US Library of Congress and serves the US Congress Area will continue to be implemented in throughout the legislative process by providing As a response to the US government’s accordance with Circular [2014] No. 26 which legislative research and analysis for an informed announcements to impose additional 10% stipulates the preferential tax policies in national legislature. tariffs on USD 300 billion worth of Chinese Shenzhen Qianhai, Shenzhen-Hong Kong goods, the Customs Tariff Commission of Modern Service Cooperation Zone, Fujian Farmland use tax the State Council has issued a public notice Pingtan Comprehensive Experimental Area and JURISDICTION: (Shui Wei Hui Public Notice [2019] No. 4) Hengqin New Area. implementation rules issued imposing import tariffs on US products. • From 1 September 2019, 916 goods and US Trade war subsidy On 30 August 2019, the Ministry of Finance, China (PRC) products will be subject to 10% together with other ministries, published the additional tariffs, and 801 goods and It was announced in September 2019 that the Farmland Use Tax Implementation Rules (the rules). products will be subject to 5% Guangdong-province government authorities The rules contain 33 articles and will be effective additional tariffs. issued a policy granting allowances to companies in from 1 September 2019. The rules define and that province to mitigate the negative impact on specify certain concepts and terms used in • From 15 December 2019, another 912 those companies as a result of the “trade war” farmland use tax, such as users of farmland. They goods and products will be subject to between China and the U.S. As a key requirement, also define in more detail the institutions and 10% additional tariffs, and 2,449 goods a company’s quarterly gross revenue, quarterly constructions that are exempt from such tax. and products will be subject to 5% exported amount, or quarterly imported amount Moreover, the rules provide that the farmland use additional tariffs. must have decreased by more than 15% in two tax return must be filed by the taxpayer, and the • All goods and products subject to consecutive quarters as compared with the same tax collected by the tax bureau, in the place where additional tariffs are listed in four period of last year for purposes of qualifying for the farmland is located. The information concerning attachments to the Public Notice with the government subsidy. The subsidy to be granted size, type of farmland, etc., provided by the (local) specifications of the appropriate tariffs to a qualified company located in e.g. Zhuhai government department in charge of natural and dates of implementation. In total, would be CNY 9,288 (about $1300) multiplied by resources will be used for the tax assessment. 5,078 US products with a total value of the number of the average employees of the USD 75 billion will be affected. company who paid mandatory social security Resource Tax Law published expenses last year. Tax incentive in Hengqin The Congressional Research Service (CRS) of the US On 26 August 2019, the Resource Tax Law (the law) Library of Congress has released a report entitled was adopted at the 12th meeting of the 13th New Area extended to “US-China Relations”. The CRS report indicates an Standing Committee of the National People’s tourism industry updated date of 29 August 2019 and is designated Congress. The law will be implemented from 1 R45898. The United States has so far imposed September 2020; on that same date, the Resource Section 301 tariffs of 25% on three tranches of Tax Interim Regulations of 1993 will be repealed. The Ministry of Finance and State Taxation imports from China, valued at an estimated USD Entities and individuals exploiting taxable products Administration jointly issued Circular [2019] 250 billion, to pressure China to address its policy in China and in the waters under its jurisdiction are 63 (the circular) which extends the tax issues related to technology transfer, intellectual subject to resource tax. Depending on the incentives granted in Hengqin New Area to property, and innovation. The CRS report states resource, tax is imposed on the basis of ad valorem the tourism industry. The circular applies that President Trump tweeted on 23 August 2019 or per unit. The applicable rates will be determined from 1 January 2019 to 31 December 2020. that he would increase the tariff rate for USD 250 by local governments within the ranges provided Its contents are as follows: billion worth of imports from China from 25% to by the law. The rates for the major resources are • the tourism industry is added to the 30%, effective from 1 October 2019, and that he as follows: Catalogue of Industries for Enterprise would increase the proposed tariff rate for the Income Tax Incentives in Hengqin New remaining imports from China from 10% to 15%, to Taxable product Rate (% of Area 2019, benefiting from the reduced go into effect for some products on 1 September value/price) enterprise income tax rate of 15% (the 2019, and for other products on 15 December 2019.
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