Taxand Provides its Top Ten Key Pointers for Multinationals Operating in Asia
Representatives from Taxand, the world's largest organisation of independent tax advisors to multinational businesses, travelled from India, Indonesia, Malaysia, Philippines, Singapore and Thailand to attend, chair or sit on panels at the International Tax Review's (ITR) recent Asia Tax Executives' Forum.
From these panel sessions we've put together Taxand's top ten key pointers for multinational companies operating in Asia, covering legislative changes; tax incentives to promote investment and changes to reporting procedures.
Top ten key pointers for multinationals operating in Asia:
1) Thin capitalisation rules in Indonesia allow the Tax Office authority to re-determine debt as capital. Multinationals should review the financing structures adopted by their Indonesian entities to ensure they maximise tax efficiencies, whilst also taking into account the requirements of their global operation.
2) Tax audits in Indonesia are focusing on selected industries: mining, palm oil, mass media, chemical, automotive, construction, wholesaler, banking and insurance, real estate, consultancy and the processing industry. Multinationals operating in these sectors could be subjected to retrospective tax audits over the last five years. However, documentation must be kept for ten years.
3) A number of tax holidays for new capital investments have been implemented in Indonesia in industrial sectors including renewable energy, telecommunication equipment and oil refinery. Multinationals could take advantage of a corporate income tax holiday of between five and ten years; a further 50% income tax reduction for two years after the tax holiday and a minimum dividend tax rate of 10%.
4) Tax Treaties across Asia are growing rapidly. Multinationals should be well prepared to verify their tax documentation to make sure they are compliant in the face of heightened scrutiny. Companies should keep a watchful eye on the implications of these treaties as further announcements across Asia are made.
5) The Philippines have implemented incentives to encourage investment including, an income tax holiday; exemption from duties and taxes on importation of capital equipment and raw materials; exemption from local taxes and net operating loss carry-over. Multinationals should evaluate whether they qualify to take full advantage of these Philippines incentives.
6) Anti-avoidance tools currently being considered in Thailand include, thin capitalisation; General Anti Avoidance Rules (GAAR) and Controlled Foreign Company reforms (CFC). Keep up to date with these developments and assess your level of uncertainty and exposure to prepare for potential implementation,
7) The Thai government reduced the corporate income tax rate from 30% to 23% in 2012 and agreed to further reduce the rate to 20% in 2013 and 2014. Despite the reduction, the government is stepping up its efforts to increase tax collections through closer scrutiny. Companies need to minimise compliance risk and maximise benefits arising from the reduction in the tax rate.
8) Tax dispute litigation is on the rise. Multinationals operating in Asia should continue to focus on building good relationships with tax authorities; ensure robust housekeeping practices are in place and keep senior management informed to reduce dispute risk.
9) Impact of Foreign Account Tax Compliance Act (FATCA) introduced by the USA is another one to watch. Although seen as a significant move in collaboration and transparency, the legislation faces a number of barriers and is continually evolving. Multinationals should keep up to date with new announcements and ensure they're prepared ahead of implementation
10) Tax reporting technology is changing, with more authorities moving to online systems. These advancements provide time savings, greater accuracy and more reliable accounting. Multinationals need to keep abreast of technological change to drive efficiencies.
Mukesh Butani, Head of Taxand Asia, commented: "Asia is going through a period of unprecedented change as it implements regulation, procedures and policies to bring it into line with developed markets. Whilst this undoubtedly presents risks for multinationals operating in the region, it also presents a number of opportunities. It's essential that multinationals take the initiative to plan for change by seeking advice from in-country specialists to assess relevant opportunities. Responsiveness to change is critical during this period in time."
For further information please contact:
Abigail Tarren, COO
T. +44 (0)207715 5243