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Shifting sands: risk and reform in uncertain times2017 Asia Pacific Tax Complexity Survey
Preface 1
Keyfindingsandinsights 2
Taxenvironmentacrosstheregion 6
Taxstrategyandplanning 21
Theimpactoftaxonbusiness 24
Outlook 29
AppendixI:Respondentprofile 37
AppendixII:TaxratesinAsiaPacificjurisdictions 40
IncometaxandCapitalgainstaxrates 41
Withholdingtaxrates 42
Othertaxes 43
Practiceandprocedures 50
AppendixIII:Contacts 53
Contents
Shifting sands: risk and reform in uncertain times | PrefaceShifting sands: risk and reform in uncertain times | Preface
1
WelcometothethirdDeloitteAsiaPacificTaxComplexitySurvey.1
Wefindourselvesinaremarkabletime,withrecentpoliticaldevelopmentsintheUnitedStatesandEuropehavingthepotentialtodramaticallyalterthelandscapeoftheglobaleconomy.AsiaPacificstandstobothgainandlosefromthesechanges.Theuniquecharacteristicsofeachcountryintheregionmeansgovernmentsandcompanieshavevastlydifferentoutlooksontheirowneconomyandlocaltaxenvironment.Almosteveryoneagreesthatchangeiscoming,buttheunknownfactoriswhatexactlywillchangeandhow?
Globaltradepoliciesareseeingfundamentalshifts.Moreandmorecountriesareadoptingpoliciesthatfocusonlocalizationofwork,reducedrelianceonforeigntradepartnersandtougherimmigrationstandards.Thiscouldleadtoareductionincurrentorfutureinvestmentintheregion.However,thereisalsoaschoolofthoughtthatthisisunlikelysincesomecompaniesmaybelesscompetitiveifmoreoftheiractivitiesaremovedbackonshore.Ontheotherhand,withtheUnitedStates'withdrawalfromtheTrans-PacificPartnership,Chinawilllikelystepintodrivetheconversation
aroundinternationaltradeandcouldnegotiatedealsonevenmorefavourableterms.IncreasedregionaltradeiscertainlyapriorityforAsiaPacificandthiswillimpacttheeconomiesofmanycountriesintheregion.
Inthisgeneralclimateofuncertaintygovernmentsaretryingtobalancethetensionbetweencreatinganenvironmentthatattractsinvestmentwhilstatthesametimeprotectingtheirtaxbasesandraisingneededtaxrevenues.Thishascreatedcompetitionfortaxrevenueamongstmanycountriesworldwide,reignitingageneraltrendtolowercorporateincometaxrates.AsiaPacificcountriesaredoingtheirparttomaintainorenhancetheirtaxcompetitivenessontheglobalstage.AsiaPacificgrowthhasmoderatedinmanycountriessotaxpoliciesarebecomingincreasinglyimportanttoattractbusinesses.However,pressureontaxadministrationstogeneratehighertaxrevenueandtheincreasingsharingofinformationbytaxauthoritieswilllikelyresultinmorefrequentandmoreaggressivetaxaudits.
TheOrganizationforEconomicCooperationandDevelopment's(OECD)15-stepactionplanundertheBaseErosionandProfitShifting(BEPS)project,
1. Thefirstsurveywaspublishedin2011andthesecondin2014.
Prefacethataimstocurbtaxavoidance/evasionworldwide,haspromptedsweepingchangestotheglobaltaxlandscape.SincethereleaseofthefinalBEPSreportsinOctober2015,governmentsinmanycountrieshavebeenactivelyupdatingexistingrulesanddevelopingnewrules.CompanieshavebeenwitnessingtheresponsesoftheirgovernmentstotheBEPSprojectandtheywillneedtoassesstheresultingimpactbasedontheirglobalfootprint,operatingmodelsandstrategicprioritiesandpossiblyreconsiderhowtostructuretheirglobaloperations.
The2017surveywasconductedagainstthebackdropofthisshiftingenvironmenttogaugetheviewsandidentifythetrendsinthetaxlandscapeinAsiaPacific.
Inthisyear'sAsiaPacificTaxComplexitySurvey,wesurveyed331executivesacrosstheregion.AbreakdownoftheprofileoftheserespondentsiscontainedinAppendixI.
Wewouldliketothankallrespondentswhotookthetimetoparticipateinthe2017AsiaPacificTaxComplexitySurvey.Asalways,ourtaxpractitionersin20jurisdictionsacrosstheDeloitteAsiaPacificnetworkwelcomeyourthoughtsandfeedback.
Shifting sands: risk and reform in uncertain times | Key findings and insightsShifting sands: risk and reform in uncertain times | Key findings and insights
2
Keyfindingsandinsights
Shifting sands: risk and reform in uncertain times | Key findings and insightsShifting sands: risk and reform in uncertain times | Key findings and insights
3
Responsestothe2017surveyreflecttheescalatingcomplexityinthetaxenvironmentinAsiaPacificjurisdictionsinthethree-yearperiodsincethelastsurvey.Intheshiftingsandsoftaxpolicies,respondentsareincreasinglycautiousabouttheircompanies'taxstrategywithBEPSreformsbeingtranslatedintodomesticlegislationinmanyjurisdictions.ThiscautionisjustifiableinlightoflingeringquestionsaboutthepredictabilityandconsistencyofkeytaxregimesinAsiaPacificandthesomewhatlowconfidenceinthefairnessofthesystems.
Governments under pressure to secure their tax baseFacedwithanuncertainglobaleconomicenvironment,countriesinAsiaPacificareaggressivelyattemptingtocapturetheirshareoftaxrevenuefromcross-borderactivities.AsHongKong'snextleaderCarrieLamindicatedatherfirstpublicspeechafterwinningoffice,thecityneededtaxreformtobecomemorecompetitive."Mynewtaxphilosophyisnotexactly'themore,themerrier'.Sometimescollectinglessishighlydesirable,"shesaid.Oneoftheprimarymechanismsusedforcountriestoattractforeigninvestmentis
Figure 1: Regional tax landscape – At a glance
tolowertheircorporateincometaxrates.Perhapsinfluencingdecisionstoenterintoandexitfromcertainjurisdictions,surveyrespondentsidentifiedcorporateincometaxasthemostimportanttaxationareafortheirbusiness.Governmentsarealsolookingtomaximizetaxrevenuefromcompaniesoperatingintheirjurisdictions.Inthelargerjurisdictions,suchasAustralia,China,IndiaandJapan,mostrespondentsagreethattaxauthorities'auditsarerigorous;andmanyarewitnessingahigherfrequencyofsuchaudits.Taxdisputesarelikelytoescalatefurtherinthefuture,andauditsarelikelytointensify.Disputeresolutionprocesses,however,canbelengthyinmanyjurisdictions.
Predictability and consistency in tax regimes, while desired, remains elusiveRespondents'viewsofthemostimportantfactorinbusinessdecision-makinghaveevolvedsincetheinauguralsurveyconductedsevenyearsago.In2010,lowcomplexityandhighpredictabilitywerethemostimportant;threeyearslater,anoverwhelmingmajorityofrespondentsagreedthathighconsistencyinthetaxenvironmentwasthemostcritical.In
Highlights
• Governmentsareunderpressuretosecuretheirtaxbase,taxreforms,andincreasedfrequencyoftaxauditswillremaininthespotlight.
• Predictabilityandconsistencyintaxregimes,whiledesiredbycompanies,remainelusive.Yet,inuncertaintimes,taxpayersseekstability.
• BEPSistopofmindforbothgovernmentsandcompanies.ChangestotaxlawsareexpectedinseveralcountriesinAsiaPacificasaresultofBEPS.
• Taxstrategyofcompaniesareincreasinglyconservativeinthisuncertaineconomicenvironment.
• OperatingacrossmultipleAsiaPacificjurisdictionscanbeabalancingactformultinationalsastaxenvironmentscanbevastlydifferent.
External Environment
Country-specificDevelopments
InternationalDevelopments
Companies
Changeisaconstant
Marketcompetitiveness/EconomicprioritiesBEPSimplementation
TaxlawTaxadministrations
OECD's15-pointactionplan(BEPS)
InvestmentdecisionTaxstrategiesCompliance
• TheOECD'srecommendationsare contingentuponcountriesenactinglegislativechangestotheirtaxlawsandrevisingtheirtreatieswithotherjurisdictions,however,therearetwo key areasthatarelikelytobesignificantlyimpactedandbusinessesshouldstartevaluatingnowtomitigaterisk–compliance andbusiness model
• Uncertainglobalenvironment
• Shiftingtradepolicies
• Slowingglobaleconomicgrowth
• Governments'needtosecure tax base throughattractingforeigninvestmentandmaximizingtaxrevenuefromdomestictaxpayers – Loweringcorporateincome tax rates – Increasingfrequencyandaggressivenessoftaxaudits
• ReformsarisingfromBEPS
• Improvingtax administration
• Cautiouswithforeigninvestment
• Seekingpredictableandconsistent taxenvironments
• Increased burdenaroundreportingandcompliance
• Less aggressivetaxstrategies
Shifting sands: risk and reform in uncertain times | Key findings and insightsShifting sands: risk and reform in uncertain times | Key findings and insights
4
"OurexperiencewiththeAustralianTaxationOffice(ATO)duringourauditiscertainlyamongstthemostaggressivewehaveexperienced,buttheATOisnotalone,eitherinAsiaPacificorglobally."
–Australiarespondent
2017,predictability,followedcloselybyconsistency,areperceivedascrucial.Lowcomplexityhasbecometheleastimportantofthethreefactors,possiblybecausemanyhaveacceptedthattaxenvironmentsinAsiaPacificwillbecomplex.Astheexternalenvironmentbecomesmoreunpredictable,companiesmaybeactingmorecautiouslyandseekingpredictabilitywheretheycan.Companiescanseethatthelargestdevelopingeconomies—China,IndiaandIndonesia—stillhavemuchprogresstomakebeforetheycanmeetinvestors'expectationsinthisregard.
Whenaskedwhatreformsareneededforeachjurisdiction,respondentsprioritizedreformsthatwillimprovethepredictabilityandconsistencyoftaxregimes.Thesereformsincludeimprovingthetimelinessandqualityoftaxofficeaudits,improvingthetrainingoftaxofficialsandincreasingpublicconsultationontaxpolicy.Inanefforttoimprovetheconsistencyintheapplicationofthetaxlaw,severalgovernmentsintheregionare,infact,introducingreformstostrengthentaxadministration.
Giventhecomplex,unpredictableandinconsistenttaxenvironmentsthatmanyrespondents'companiesareoperatingin,relationshipswithtaxauthoritiesarekeytomanagingtheirtaxaffairsandmitigatingrisks.Themajorityofrespondentsinthisyear'ssurveyplantostrengthenrelationshipswiththeauthoritiesinthecomingyears.
BEPS is top priority for governments and companiesRespondentsgenerallyagreethatthealignmentofcountrypoliciestotheBEPSactionrecommendationsistoppriorityfortaxreformacrossAsiaPacific.
Governmentsconcur,astaxreformsareexpectedinseveraljurisdictionstoaligndomesticruleswiththeBEPSrecommendations.SurveyrespondentsalsoexpressedmuchmoreconcernwithBEPSthanthreeyearsago.ItiswidelyacceptedthatBEPSwilldrivesignificantchangeintheglobaltaxlandscapeasgovernmentsintroducenewpoliciesinlinewithglobalstandards.Multinationalsarefindingthemselvespreparingforthisimpendingchange—whetherbychangingtheirbusinessmodelsoradaptingtheirresourcessotheyareabletocomplywithenhancedreportingrequirements.Thiscanbetakenasapostivesignfortaxdevelopmentintheregion.IthaslongbeenrecognizedthatmanycountriesinAsiaPacificneedtoupdateandmodernizetheirtaxregimesanditismuchbetterthatcountriesdothisconsistentlybyfollowingtheBEPSapproachratherthantakingunilateralaction.
Tax strategy is increasingly conservativeInlightoftheobservationsdescribedabove,itisforeseeablethatrespondentsarelesslikelytopursueaggressivetaxstrategiesthaninthepast.Thiscautionwasexpressedbythree-quartersofthe2017respondents,whoindicatedtheywouldnotenterintoataxplanningstrategyifperceivedbysometobeaggressive.Only40percentofrespondentsin2014expressedthesamesentiment.Inthethreeyearssinceourlastsurvey,thesocialresponsibilityofcompaniesastaxpayershascomeunderclosepublicscrutiny.Thetaxpracticesofmultinationalenterpriseshavebeenembroiledincontroversyinseverallargerjurisdictions,whichhasattractedintensemediacoveragearoundtaxplanningandraisedtheawarenessofthepublicinthisarea.Theenormouspotentialfordetrimentalreputationalriskhaspromptedcompanyexecutivesandboardsofdirectorstoacknowledgetheneedtoconsidersuchriskwhendeterminingthecompany'staxstrategy.
Shifting sands: risk and reform in uncertain times | Key findings and insightsShifting sands: risk and reform in uncertain times | Key findings and insights
5
Operating across multiple Asia Pacific jurisdictions can be a balancing act AsiaPacificcountriesareamixtureofstabilityandvariability.Somejurisdictions,suchasHongKongandJapan,offeralevelofstabilitythatinvestorsseek.Ontheotherhand,countriessuchasChinaandIndiapromisesignificantpotential,againstthebackdropofamorechallengingsocial,economicandtaxenvironment.Inthisyear'ssurvey,theresultspaintavastlydifferentpicturebetweenthesecontrastingeconomiesinAsiaPacific.Thereisageneralsatisfactionwiththetaxenvironmentsinthemoredevelopedjurisdictions,whilesignificantopportunitiesexistforemergingeconomiestoimprovethepredictabilityandconsistencyoftheirtaxenvironments.
Asaresult,respondentswillspendmoretimeandresourcesonmanagingtaxinChinaandIndiainthecomingyears.
Thefollowingpagesoutlinethesurveyresultsandexploretheseobservationsinfurtherdetail.ReadontolearnhowthetaxenvironmentisperceivedacrossAsiaPacific.
"BEPSwouldbringtransparencyinglobaloperations,howeveritwouldhavethepotentialofmisinterpretationandcreatingcomplexityasdifferentcountriesmayhavedifferenttaxlaws."
–Indiarespondent
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
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Taxenvironmentacrosstheregion
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
7
Thetaxregimesinlargercountrieshaveincreasedincomplexity
How has the complexity of the tax regime changed in the last three years?Figure 2. Change in complexity of tax regimes
ComplexityFor the purposes of this survey, "complexity" means the perceived level of difficulty in interpreting and understanding the tax law and rules in the relevant jurisdictions.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Asia Pacific
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
% of respondents
Became less complicated Not much change from three years ago Became more complicated
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
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AcrossAsiaPacific,35percentofrespondentsindicatedtaxregimeshavebecomemorecomplexinthepastthreeyears.Largercountries,specifically,ChinaandIndiawereidentifiedasbecomingmorecomplex.Inthesetwojurisdictions,welloverhalfoftherespondentsbelievecomplexityinthetaxregimeshasincreased.Basedontherespondents'comments,thereisageneralexpectationthatthereportingobligationswillincreaseduetotheimplementationoftheBEPSrecommendations.ThisisalsothecaseinsomesmallerjurisdictionssuchasNewZealand,wherecomplexityinthetaxenvironmentisexpectedtoincreaseduetochangesincorporateincometaxandtransferpricingrules.
GiventhatAustraliahasbeenrelativelymoreadvancedinadoptingtheBEPSrecommendationsthanitsAsiancounterparts,manyrespondentscontinuetoviewthecountrytobeincreasingincomplexity.Thisisconsistentwiththeresultsfrom2014.
ThecomplexityofIndonesia'staxregimeappearstohavestabilized,ascomparedwiththeresultsfrom2014whenoverhalfoftherespondentsbelievedthetaxenvironmenthasbecomemorecomplicated.wide-rangingtaxreformisonthehorizoninIndonesiahoweverasnewtaxlawsarescheduledtobeintroducedin2018thatwillcovergeneraltaxationandadministration,personalandcorporateincometax,andVAT.ImplementationofthereformislikelytobeaccompaniedbyanincreaseinthecomplexityofIndonesia'staxenvironment.
InKorea,complexityhascomemainlyfromfrequentchangestothetaxlawsandpracticaldifficultyininterpretingandapplyingtheregulations.FollowingtheintroductionofBEPSintolocalregulations,thetaxauthority'sattentionwillbemorefocusedontaxationofcross-bordertransactions,leadingtogreatertaxcomplexityforthetimebeing.
JurisdictionssuchasHongKongandMacaohavemoresimpleandstabletaxregimesandarethereforerankedthelowestintermsofchangingcomplexity.
"Insteadofsimplifyingthetaxlawsandinterpretationbytaxauthorities,thetaxenvironmentinIndiaisbecomingmorecomplicated.Thegovernmentneedstomovequicklytolowertaxratesandminimizeexemptionstomakethelawssimpleandlesspronetomultipleinterpretations."
–Indiarespondent
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
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Morethan80percentofrespondentsacrosstheregionviewtaxcomplianceandreportingobligationsinthecountriesinwhichtheyoperateascomplicated.Thisisaninterestingresultashavingasimplifiedtaxsystemisstilloftenhailedasakeyattractionforforeigninvestment.InDeloitte'sEuropeanTaxSurveyconductedinautumn2015,43percentofrespondentsindicatedthat
Please rate the complexity of the tax compliance and reporting obligations in the below chart.Figure 3. Tax compliance and reporting requirements
taxsimplificationwaskeytomakingajurisdictioncompetitive;thisissomethingtoconsiderifAsiaPacificjurisdictionsareseekingtoattractinvestmentfromEurope.Asanexample,Japaniscitedashavingataxenvironmentthatmaynotbeveryattractivetoinvestorsduetoitshightaxratesandtheadministrativeburdenandcomplexrequirementsforlegalregistration.
MostagreethatChinaandIndiahavethemostcomplicatedrequirementsofalljurisdictionsinAsiaPacific,followedbyJapan,Australia,IndonesiaandSouthKorea.
Incontrast,HongKongandSingaporehavethesimplestrequirements,whichisnotsurprisinggiventheirrelativelystraightforwardtaxregimes.
IndiaandChinahavethemostcomplexreportingrequirements
ComplexityFor the purposes of this survey, "complexity" means the perceived level of difficulty in interpreting and understanding the tax law and rules in the jurisdiction.
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
No. of respondents
Simple Somewhat complicated Complicated Very complicated
Simple Complicated
27
9
9
4
77
7
14
29
28
22
17
8
9
31
11
77
12
21
15
17
64
19
58
17
67
29
60
72
20
82
16
17
23
48
49
77
73
70
84
63
50
1
99
3
23
63
54
663
38
3
8
14
21
29
36
51
35
35
32
23
62
77
22
17
1
6
2
3
13
3
13
6
13
9
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
10
How has the consistency of the tax regime changed in the last three years?Figure 4. Change in consistency of tax regimes
Sometaxjurisidictionshavebecomelessconsistentbutgenerallythereisnotmuchchangefrom2014
Consistency"Consistency" refers to the perceived uniformity and transparency of enforcement of prevailing tax laws.
0% 20% 40% 60% 80% 100%
Asia Pacific
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
% of respondents
Became more consistent Not much change from three years ago Became less consistent
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
11
ForChinaandAustralia,respondentsappeartobedividedastothechangeinconsistencyofthesetaxregimes,similartotheresultsinthe2014survey.
Interestingly,ChinaandAustraliaalsosawthelargestproportionofrespondentsnotingthattaxregimeshadbecomemoreconsistent.InChina,recenteffortstoenhancetrainingfortaxofficersmayhavecontributedtotheimprovementinconsistencyintheapplicationandenforcementoftaxlaws.
Conversely,IndiaandIndonesiawereviewedashavingbecomelessconsistentinthepastthreeyears.FarmoreregardthatIndia'staxregimehasbecomelessconsistentcomparedwiththosewhoviewittohavebecomemoreconsistent.ThisspeakstothereformthatmanyfeelisneededinIndiaaroundtaxadministration;forexample,trainingfortaxofficerstoimprovetheirunderstandingoftaxpayersandhowthelawshouldbeappliedwould
bringaboutgreaterconsistencyandqualityinthecountry'staxenvironment.Ononehand,theIndiagovernment'sintroductionoftheGoodsandServicesTax(GST)inJuly2017willreducecomplexityinthetaxenvironmentbyeliminatingmultipletaxes,therebyimprovingtheeaseoftradeandcommerce.Ontheotherhand,thissignificanttaxreformwouldrequirebusinessestoconductimpactassessmentsandmodifytheirsystemstocomplywiththenewGSTforboththeirvendorsandcustomers.InadditiontotheGST,India'sintroductionofGeneralAntiAvoidanceRules(GAAR)fromApril2017andtheadoptionoftheBEPSactionswillincreasecomplexityinthenexttwotothreeyearsintheareasofinternationaltax,mergersandacquisitionsandindirecttax.
Manyjurisdictions,suchasHongKong,JapanandSingapore,havenotseenmuchchangefromthreeyearsagointermsofconsistency.
"OnechallengeinChinaisthattaxadministrationisnotcoordinatedcentrally;treatmentandinterpretationsaredifferent,sometimeswithcompetingagendas."
–Chinarespondent
Regionally,almost70percentofrespondentsagreethattheconsistencyoftaxregimeshavenotchangedmuchfromthreeyearsago.Theremainingrespondentsaresplitastowhetherthejurisdictionshavebecomemoreconsistentorless.Thisislikelydrivenbythepolardemandsofimplementingnewtaxlawsbalancedbymoreexperiencewiththeexistingtaxlaws.
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
12
ThemostconsistenttaxregimesareSingapore,Japan,HongKongandAustralia.Inthesejurisdictions,farmorerespondentsviewedthetaxregimestobeconsistentthanthosewhoratedthemasinconsistent.
Taiwan,NewZealand,andSouthKoreaarealsocitedashavingconsistenttaxregimes.
Please rate the consistency of these regimes.Figure 5. Consistency of tax regimes
Developedmarketshavethemostconsistenttaxregimes
RespondentsareagainsplitovertheirviewsofChina;thisechoestheiropiniononthenotableimprovementinconsistencyoftaxregimesinthepastthreeyears,asdiscussedpreviously.TaxlawsinChinaarenotalwaysconsistentlyappliedthroughoutthecountry,hence,respondentsmayhavevariedexperiencesinthistaxjurisdiction.
ThemajorityofrespondentsconcludedthatthemostinconsistentregimesintheregionareinChina,IndiaandIndonesia.
Theselargeeconomieswerealsoidentifiedashavingthemostcomplextaxsystemsintheregion.
Inseveraljurisdictions,respondentsseeanopportunitytoimprovetheconsistencyinhowthetaxlawsareappliedthroughincreasedtrainingfortaxofficers.
Consistency"Consistency" refers to the perceived uniformity and transparency of enforcement of prevailing tax laws.
Macao
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
No. of respondents
InconsistentVery inconsistent Consistent Very consistent
Inconsistent Consistent
16
2
70
2
8
49
41
18
3
30
5
6
12
5
34
9
25
13
28
33
7
1
21
1
1
33
23
3
1
7
1
1
2
1
4
2
2
2
4
7
80
18
66
14
87
32
36
84
32
63
20
16
19
59
34
93
63
74
64
35
17
2
23
1
1
16
3
3
12
6
30
4
3
2
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
13
How has the predictability of the tax regime changed in the last three years?Figure 6. Change in predictability of tax regimes
TaxregimesinIndia,ChinaandIndonesiahavebecomelesspredictable
Predictability"Predictability" refers to the availability of information and resources that allow taxpayers to foresee the direction and potential changes in tax law.
0% 20% 40% 60% 80% 100%
Asia Pacific
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
% of respondents
Became more predictable Not much change from three years ago Became less predictable
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
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Alargerportionofrespondentsviewthattaxregimesintheregionhavebecomelesspredictable(23percent)inthepastthreeyearsthanthosewhoviewthemasmorepredictable(10percent).Thesameopinionswerealsoreportedthreeyearsago,whenthisresultwasdrivenbyrespondents'viewsonIndiaandChinabecominglesspredictabletaxjurisdictions.ThisistobeexpectedinlightoftheBEPSinitiatives.Infact,giventhefast-trackingmanyoftheAsiaPacificcountriesareundertakingwiththeirBEPSprogramsto"catch-up",anargumentcanbemadethattheregionhaslargelyconformedwithglobalexpectations.
Meanwhile,mostrespondentsnotedthatthepredictabilityofthetaxregimesinHongKong,Singapore,Japan,ThailandandSouthKoreahavenotchangedmuchfromthreeyearsago.ThislackofperceivedchangeisalsointerestingasthesejurisdictionshavealsonotbeenasactivearoundenactingunilateralBEPSresponses.
ThejurisdictionswherethemostrespondentsperceivethetaxregimesaslesspredictableareIndia,ChinaandseveralSoutheastAsiancountries(Indonesia,Malaysia,PhilippinesandVietnam).Thesearealljurisdictionsthatcontinuetogothroughsignificanteconomicandpoliticalreforms,whilerespondingtoBEPSpolicies.
Asinresponsestoearlierquestions,viewsaresplitoverthechangeinpredictabilityinChina'staxenvironment.CompaniesarehavingdifferentexperiencesinChina,whichmayspeaktoitsoverallconsistency.
ManyalsoviewSingapore'staxregimeasbeingmorepredictable.ThegovernmentrecentlyreleasedareportbytheCommitteeontheFutureEconomy,identifyinghowtopositionSingaporeforthefuture.Inlinewiththisreport,Singapore's2017budgetcontainstargetedmeasurestosupportbusinessesinvestingintechnologyandinnovation,andexpandingintointernationalmarkets.
Giventhefast-trackingmanyoftheAsiaPacificcountriesareundertakingwiththeirBEPSprogramsto"catch-up",anargumentcanbemadethattheregionhaslargelyconformedwithglobalexpectations.
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
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Please rate the predictability of the tax environment.Figure 7. Predictability of tax regimes
Themostpredictabletaxenvironmentsintheregionareinthemostdevelopedcountries
Predictability"Predictability" refers to the availability of information and resources that allow taxpayers to foresee the direction and potential changes in tax law.
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
No. of respondentsUnpredictable Predictable
A low level of predictabilityNo predictability An intermediate level of predictability A very high level of predictability
16
5
69
4
12
49
43
12
6
28
5
7
11
9
30
12
20
16
32
32
3
1
12
2
3
25
11
1
2
4
1
1
3
1
8
3
2
6
8
66
15
56
11
56
26
32
69
21
58
12
15
15
48
26
63
64
58
51
28
28
1
5
1
35
4
4
29
6
5
5
2
18
3
40
8
5
1
1
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
16
DevelopedeconomiesinAsiaPacific,includingSingapore,Japan,AustraliaandHongKong,areconsideredtohaveverypredictabletaxenvironments.Mostrespondentsindicatedthatthesejurisdictionshaveaveryhighlevelofpredictability.Incontrast,thejurisdictionswiththelowestlevelofpredictabilityareChina,IndiaandIndonesia.
ThemostunpredictabletaxenvironmentintheregionisinIndia.TheviewsonIndiaareconsistentwiththosefromour2014survey,whenalargeproportionofrespondentsalsonotedthatIndia'staxregimehaslittlepredictability.ItappearsthattheIndiangovernmentstillhasmuchtodointermsofsignallingthedirectionitwilltakeinchangingthetaxlaws.
Incontrast,Chinaappearstohaveimproveditspredictabilityoverthelastthreeyears,withmorerespondentsreportingbetterpredictabilityinChinathanthosewhothoughtthesameforbothIndiaandIndonesia.Thereishowevera
"ThetaxenvironmentinChinaisgettingmorecomplex,butitstaxrulesarequitepredictableastheStateAdministrationofTaxationconductsformalandinformalconsultations,sotaxpayerscananticipateanychangesbeforetheyareimplemented."
–Singaporerespondent
contrastinrespondents'viewsonChina;manyrespondentsviewthecountry'staxenvironmenttobepredictable,whileothersviewittobeunpredictable.
WhilethereisspeculationthatIndonesia'snewtaxlaws,anticipatedtobeintroducedin2018,willincorporateShariafinancelaw,thereisuncertaintyastootherchanges.Thislevelofuncertaintymaybemotivatingrespondents'viewsonthelackofpredictabilityinIndonesia.
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
17
1. Ratingsarebasedonthepercentageofrespondentsindicatingtheircompanieswereauditedinthosejurisdictions
2. Ratingsarebasedonaweightedaveragescorefromresponses
Figure 8. Frequency of tax audits1, fairness in tax audits2, confidence in appeal system2, and relationships with authorities2
Australia,NewZealandandSingaporeareperceivedtohavethefairestsystemsandtaxpayersenjoygoodrelationshipswiththeauthorities,whileIndonesiaisthemostchallenging
Frequency of Tax Audits
Fairness in Tax Audits
Confidence in Appeal System
Relationship with Authorities
Australia Neutral High High Good
Brunei Low Neutral Neutral Neutral
Mainland China High Low Low Neutral
Guam Low Neutral Neutral Good
Hong Kong Neutral High High Neutral
India High Low Neutral Poor
Indonesia High Low Low Poor
Japan High High Neutral Good
Macao Low High Neutral Neutral
Malaysia Neutral Neutral Neutral Neutral
Mauritius Low Neutral Neutral Neutral
Mongolia Neutral Neutral Neutral Neutral
Myanmar Low Neutral Low Neutral
New Zealand Neutral High High Good
Philippines Neutral Low Low Poor
Singapore Neutral High High Good
South Korea High Neutral Neutral Neutral
Taiwan Low Neutral Neutral Neutral
Thailand Neutral Neutral Low Neutral
Vietnam Neutral Low Low Neutral
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
18
Regionally,respondentsviewAustralia,NewZealandandSingaporetohavethefairesttaxregimes;respondentsalsohavethehighestconfidenceinthesejurisdictions'appealsystems,whileenjoyinggoodrelationshipswiththeauthorities.
"Allfinaltaxrulingsareexpectedtotakeaverylongtimetosettleastheprocessitselfislong-drawn-out."
–Indiarespondent
"TheAustralianTaxationOfficeiscertainlymessagingfairnesstostakeholderslocallyandinternationally,butanoticeablechangehasyettofilterdowntotaxpayers."
–Australiarespondent
areaggressiveandnotalwaysalignedwiththepolicymakers'positions.Respondents'relationshipswiththeIndiantaxauthoritiesaretenuous.AsinthecaseofChinaandIndonesia,thereappearstobeanopportunityforthegovernmenttoimprovetheconsistencyinwhichtaxlawsareapplied,aswellasthegeneraladministrationofthetaxlaw.
SoutheastAsiancountries,withtheexceptionofSingapore,generallyseemanytaxaudits,thoughalargenumberofrespondentshavelowerconfidenceintheappealsystemandviewtaxauditsasunfair.Relationshipswiththeauthoritiesarealsoanareaforimprovement,especiallyinthecaseofIndonesiaandthePhilippines.
JapanisalsosubjecttofrequenttaxauditshowevertherespondentsfeelthattheauditsarefairlikelyduetogoodrelationshipswiththeNationalTaxAgencyofficials.
Indonesiaappearstohavethemostchallengingtaxenvironmentwhenitcomestotaxauditsanddisputes.Manycompaniesarebeingauditedandthefairnessofthetaxauditsarequestioned.RespondentslackconfidenceinIndonesia'sappealssystemandtheirrelationshipswiththeauthoritiesarepoor.TheseviewsareconsistentwiththoseexpressedaroundthecomplexityandconsistencyoftheIndonesiantaxregime.Auditsaretypicallyconductedforlongerthanayear,andthelengthyappealsprocesscanexceedthreeyears,hence,companiesoftenexperienceaconsiderableperiodofuncertainty.
Chinaisnotedashavingahighleveloftaxauditactivity,andthefairnessoftheseauditsandrespondents'confidenceintheappealsystemisratherlow.Again,theseviewsmaybeduetocompaniesseeingdifferentinterpretationsandapplicationofthecountry'staxlaws.
Indiaalsohasahighfrequencyoftaxaudits,althoughtheirfairnessisinquestion.Thereisaperceptionthatthefieldofficers'approachontaxaudits
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
19
Generally,taxauditsacrossAsiaPacificareviewedasrigorous.
Consistentwithresponsesfromthreeyearsago,manyviewtaxauditsinHongKong,MacaoandTaiwanasnotoverlyrigorous,butalmostallrespondentsviewtaxauditsinSouthKorea,Vietnam,andGuamtoberigorous.
"TaxauditscontinuetobeaheavyburdenforJapanesetaxpayers,particularlybecauseon-siteauditsareconductedovermanydays."
–Japanrespondent
Mostviewtaxauditsintheregiontoberigorous
Please rate your perception of tax officials' rigorousness as they conduct tax audits. Figure 9. Rigorousness of tax audits
ItisworthnotingthatIndia,SouthKoreaandChinaarethejurisdictionswherethehighestproportionofrespondentsviewtaxauditstobefairlyorveryrigorous.
Acrosstheregion,itisexpectedthatthefrequencyoftaxauditsandtheirlevelofrigorwillincreaseinthemorecompetitiveclimateasjurisdictionsaggressivelystrivetomaintaintheirshareofglobaltax.
0% 20% 40% 60% 80% 100%
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
% of respondents
Very rigorous Fairly rigorous Somewhat rigorous Not rigorous
Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region
20
"TaxauditsinSouthKoreaareveryrigorous.Officialscarryouttaxauditsbasedonastrictmandatetocollectadditionaltaxrevenue."
–SouthKorearespondent
InKorea,largecorporationsaresubjecttoregularauditsgivenstatutesoflimitation.Smallormedium-sizedenterprisesareselectedasatargetbasedonthedegreeoffaithfulnessoftaxreportingevaluatedbythetaxauthorities.Itappearsthattargetselectionisconductedinanon-aggressivefashion,aspertherelevantregulations.ThewinningrateoftaxpayerstendstograduallydecreaseforTribunalcasesrelatingtodomestictaxes,whichmeansthatthefairnessoftaxauditsisimproving.
Shifting sands: risk and reform in uncertain times | Tax strategy and planningShifting sands: risk and reform in uncertain times | Tax strategy and planning
21
Taxstrategyandplanning
Shifting sands: risk and reform in uncertain times | Tax strategy and planningShifting sands: risk and reform in uncertain times | Tax strategy and planning
22
Over90percentofrespondentsindicatedthatreputationalriskconcernsaregivenatleastsomeconsiderationintheircompany'staxstrategy.Withtheongoingpublicpressureandnegativemediacoverageofsomecompanies'aggressivetaxstrategies,itisexpectedthatreputationalriskwillremainanagendaitemascompanies,especiallylargecompanies,becomemoreconscioustoavoidsuchrisk.
ThedramaticshifttoamoreconservativeapproachmaybeduetotheresultsoftheBEPSactionplanswherecompaniesarebeingaskedforincreaseddisclosureontheiractivitiesinalljurisdictionsinwhichtheyoperate.
Companiesarebecomingincreasinglyconservativeintaxplanningandremainconcernedaboutreputationalrisk
How much weight does your company give to reputational risk concerns when considering a tax strategy?Figure 10. Reputational risk concerns
Would your company enter into a legal tax planning strategy that might be perceived by some to be aggressive? Figure 11: Aggressiveness of strategy
Atthesametime,75percentofrespondentswouldnotenterintoalegaltaxplanningstrategyifitisperceivedbysometobeaggressive,evenifthestrategyislegalorthetaxlawdidnotspecificallyconsideritillegal.Thisisasharpincreasefromthreeyearsago,whenonly40percentrespondedthesame.Evidently,companieshavebecomemuchmorecautiousabouttaxplanningstrategies.
ThisdramaticshifttoamoreconservativeapproachmaybeduetotheresultsoftheBEPSactionplanswherecompaniesarebeingaskedforincreaseddisclosureontheiractivitiesinalljurisdictionsinwhichtheyoperate.Companiesmayalsohavetorestructuretheiroperationstotransitionactivitiestodifferentcountriesdependingonthechangesinvariouscountries'taxenvironmentinresponsetoBEPS.
% of respondents
45%A lot49%
Some
6% Very little% of respondents
25%Yes
75%No
Shifting sands: risk and reform in uncertain times | Tax strategy and planningShifting sands: risk and reform in uncertain times | Tax strategy and planning
23
Giventherisingexpectationoftaxsocialresponsibilityandpublicattentiononthetaxaffairsofcompanies,itisnotsurprisingthatthemajorityofrespondentsindicatedtheirC-suiteorboardofdirectorsaremoreengagedintaxaffairsnowthaninthepast.However,weseeaslightdropinengagementfrom65percentin2014to59percentin2017.ThismaybeduetoexecutivestemporarilymovedontootherkeybusinessissueswhileBEPSactionplansandcountrylawsarebeingimplementedinthepastthreeyears.Nevertheless,weexpecttaxsocialresponsibilitytobecomeanincreasingtopicofconversationintheboardroomasnewlawsareintroduced.ThisisofparticularinterestasthereseemstobefarmoreinterestfromtheC-suiteinAsiaPacificthaninEurope.InDeloitte's2015EuropeanTaxSurvey,themajorityofrespondentswerenotaskedbyinternalstakeholderstojustifytheirtaxstrategy.
Manyexecutivesandboardsofdirectorsaremoreengagedintaxaffairsnowthaninthepast
Is your C-suite or board of directors more engaged in tax affairs now than in the past?Figure 12. Engagement of C-suite or board of directors
% of respondents
41%No 59%
Yes
Shifting sands: risk and reform in uncertain times | The impact of tax on businessShifting sands: risk and reform in uncertain times | The impact of tax on business
24
Theimpactoftaxonbusiness
Shifting sands: risk and reform in uncertain times | The impact of tax on businessShifting sands: risk and reform in uncertain times | The impact of tax on business
25
Taxconsiderationsarelessimportantincountrieswiththemostpredictableandconsistenttaxregimes
How has the complexity, consistency or predictability of the following jurisdictions' tax regimes influenced your company's decision to enter into or exit from these jurisdictions?Figure 13. Tax regimes affecting investment decisions
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
No. of respondentsNo influence Some or strong influcence
No influence Some influence Strong influence
8
5
45
35
42
27
26
46
13
30
7
7
10
35
25
48
37
32
29
24
47
15
66
15
42
45
44
49
20
51
18
19
22
35
38
45
43
40
47
35
18
3
32
1
16
33
18
7
7
13
4
3
4
5
8
20
10
7
9
13
Shifting sands: risk and reform in uncertain times | The impact of tax on businessShifting sands: risk and reform in uncertain times | The impact of tax on business
26
Acrosstheregion,65percentofrespondentsindicatedthatcomplexity,consistencyorpredictabilityintaxregimeshadastrong,oratleastsome,influenceintheircompanies'decisionstoenterintoorexitfromthesejurisdictions.
Taxregimesindevelopingandemergingeconomies(India,China,Indonesia,andMalaysia)havethestrongestinfluenceinthesedecisions.
Unchangedfrom2014,thetaxregimesinChinaandIndiahavethestrongestinfluenceoncompanies'investmentdecisions.InIndia,thecurrentsystemfordisputeresolutionsystemistime-consumingandofferslittlecertainty.Someviewthatthetaxenvironmentwouldbemoreattractivetoinvestorsifanefficientadvancerulingschemewasinplaceforcorporatetax,similartotheadvancepricingagreementinplacewherethereisanagreementbetweenthetaxpayerandthetaxauthorityonthepricingoffutureintercompanytransactions.
Taxpolicyisgenerallyanimportantconsiderationininvestmentdecisions,with84percentofrespondentsconsideringitahighpriorityoroneofthetopthreecriteriaininvestmentdecisions.Inmanyjurisdictions,thereareothernon-taxconsiderationsthatarealsoimportantindrivingthesedecisions.Forinstance,thechallengeofmovingmoneyoutofChinaandthelanguagebarriersinChina,JapanandKoreaaresomeinevitableconsiderationsforforeigninvestors.
Withthepublicpayingincreasingattentiontocompanies'taxresponsibilityinthejurisdictionsinwhichtheyoperate,taxmatterscouldrequiresignificantmanagementtimeandresources.ItisparticularlyimportantforjurisdictionslikeHongKongandSingaporesincethey
84percentofrespondentsconsidertaxpolicytobeahighpriorityoroneofthetopthreeconsiderationsininvestmentdecisions.
TaxpolicyisofparticularimportanceforjurisdictionslikeHongKongandSingaporesincetheydon'thaveanaturalconsumerbaseorotherfactorstoattractinvestment.
don'thaveanaturalconsumerbaseorotherfactorstoattractinvestment.WithinJapan'sadministration,therearealsoasignificantnumberofofficialsthatunderstandthat,apositivechangetothelocaltaxregimeisneededtoaffectinvestmentdecisionswithintheregion.
Shifting sands: risk and reform in uncertain times | The impact of tax on businessShifting sands: risk and reform in uncertain times | The impact of tax on business
27
"Intermsoftheorderofimportancetobusinessdecision-making,mypriorityisfirstpredictability,thenconsistencyandcomplexity.
–Chinarespondent
Predictabilityhasbeenrankedasthemostimportantfactorinbusinessdecision-making,followedbyconsistency.Complexityappearstobetheleastimportantfactor.
Sincetheinauguralsurveyin2010,respondents'viewsofthemostimportantfactorinbusinessdecision-makinghaveevolved.In2010,themajorityagreedlowcomplexityandhighpredictabilitywerethemostimportant;in2014,highconsistencyinthetaxenvironmentwasoverwhelminglyidentifiedasthemostcriticalfactor.Now,predictabilityinthetaxenvironmentisthemostimportant,albeitwithconsistencystillacrucialconsideration.Lowcomplexityhasbecometheleastimportantofthethreefactors.
Predictabilityisasignificantconsideration,perhapsduetoincreasedforeigninvestmentflowingintotheregion'sdevelopingcountriesascomparedtointhepast.Assuch,companieswillbeseekingameasureofstabilityinthesecountries'taxenvironmentsasinvestmentsinthesejurisdictionsareevaluated.
EvolutionfromconsistencyandpredictabilityislikelyduetoBEPS.Taxpayersareconcernedabouttheupcomingchangesandwanttoknowwhattoexpect.
Predictabilityisnowthekeyfactor
Rank the following in the order of importance to your business decision-making.Figure 14. Factors important in business decision-making
Since the inaugural survey in 2010, respondents' views of the factors important in business decision-making have evolved.Figure 15: Comparison of change in factors important in business decision making (2010, 2014, 2017)
31%25%
44%
37%36%
27%
32% 39%29%
% of respondents
Least important Important Most important
CONSISTENCY in interpretation and enforcement of tax law
PREDICTIBILITY about future development of tax law
COMPLEXITY of tax laws
% of respondents
38%
25%29%
26%
57%
32%36%
18%
39%
Year 2010 Year 2014 Year 2017
Low Complexity High Consistency High Predictability
Shifting sands: risk and reform in uncertain times | The impact of tax on businessShifting sands: risk and reform in uncertain times | The impact of tax on business
28
"Weareexpectingmoretaxchallengesinlocaltaxaudits,transferpricingissues,andcrossborderpayments."
–Singaporerespondent
Corporateincometax,indirecttaxandtransferpricingarethemostimportanttobusinesses,whichisnotsurprisinggiventhatcorporateincometaxandindirecttaxaccountforthemosttaxrevenuecollectedinmanyjurisdictions,andtheserepresentthelargesttaxexpendituresforcompaniesinmanytaxjurisdictions.Transferpricinghasincreasedinimportancebecauseofthenewonerouscountrybycountryreportingrequirementsandtheimpactthatwillhaveontaxdepartmentsandbusinesses.
Manyrespondents,however,viewcustomsdutyaslessimportant,possibly
Corporateincometaxandindirecttaxaremostimportant
How important are the following taxation areas to your company's business? Figure 16: Important tax areas
becausecustomsdutyisanelementofthecostofgoodsratherthanpartofacompany'staxliability.Assuch,companiesmaynot"feel"theimpactofcustomsdutytothesameasextentasthatofcorporatetaxliabilities.Additionally,customsdutyaffectsoperations,butthistaxdoesnottypicallydrivestructuringdecisionsinthewaythatcorporatetaxeswould.
Theseopinionsareconsistentwiththeresultsfromthreeyearsago.
% of respondentsNot important Important
Corporate income tax
Indirect tax
Transfer pricing
Cross border international tax
Payroll taxes
Customs duty
Not important Moderately important Quite important Extremely important
1%
1%
5%
6%
7%
19%
8%
15%
10%
21%
37%
24%
29%
41%
37%
37%
41%
34%
63%
44%
48%
36%
15%
23%
Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook
29
Outlook
Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook
30
Itisnosurprisethatthejurisdictionsinwhichmanycompanieswillspendthemosttimeandresourcesontaxmanagementwillbethelargesteconomiesintheregion:China,India,Australia,Japan,andSingapore.
In which jurisdictions do you envision your company will spend more time and resources on tax management in the next three years?Figure 17. Jurisdictions requiring more time and resources
CompanieswilldevoteconsiderablymoretaxmanagementresourcestoChinaandIndia
Figure 18. Jurisdictions requiring the most time and resources on tax management
2010 2014 2017
1 China China China
2 India India India
3 Japan Indonesia Australia
4 Singapore Australia Japan
5 SouthKorea Guam Singapore
Aswasthecasethreeyearsago,ChinaandIndiatopthelist.However,IndonesiahasdroppedbelowAustralia,JapananditsSoutheastAsianneighbors,SingaporeandMalaysia.In2014,perhapsitwasatimewhenopportunitieswereemerging
% of respondents
33%20%
16%14%
11%10%
10%9%
7%5%
5%5%5%
3%1%
1%
Mainland ChinaIndia
AustraliaJapan
SingaporeMalaysia
IndonesiaSouth Korea
VietnamHong Kong
TaiwanNew Zealand
ThailandPhilippines
MyanmarMauritius
Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook
31
"Regionally,wewillspendmoretimeandresourcesontaxmanagementinChinaandIndia."
–Indonesiarespondent
insmaller,frontierterritories;Guam,MongoliaandMyanmarwerehigherprioritiesthanSingaporeorJapan.
Thisyear,asintheinauguralsurveyin2010,JapanandSingaporereappearedinthetopfivejurisdictionsinwhichrespondentsexpecttodedicatemoretimeandresources.ThereappearstobearenewedemphasisonthelargereconomiesinAsiaPacificvis-à-visthesmallerjurisdictionsthatwereahigherpriorityin2014.Singapore'shigherrankingin2017maybebecauseitisajurisdictionwithmanyheadquartersgeneratingsignificantinter-companyflowsand,hence,Singaporewouldrequiregreateroversightbymultinationals.
Australiaremainsinthetopfivejurisdictionswhererespondentsexpecttospendmoretaxmanagementtimeandresources.SignificantchangesareexpectedinAustralia'staxenvironmentinthecomingyears.First,thedivertedprofitstax(DPT)thatwillbecomeeffectiveinmid-2017willbeanissuerequiringconsiderationformanymultinationals,sincetheDPTwilllikelyresultinfurtheruncertaintyastoappropriateincometaxandtransferpricingoutcomes.Second,theAustraliangovernmentintendstosign
theMultilateralInstrumenttoeffectBEPS-relatedtaxtreatychanges.Giventhesignificantlevelofnewlawsandtheareasoffocus,taxcontroversyrelatingtointernationaltaxandtransferpricingwilllikelyincreaseinthenextfewyears.
Surprisingly,Japanhasmovedupinprioritycomparedwiththreeyearsago,jumpingfromthetenthspotin2014tothefourthspotin2017.After10yearsofeconomicstagnation,Japan'seconomyisshowingsignsofrecovery,sotheremaybearenewedinterestininvestmentinthecountry.Increasedinboundinvestmentisalsoexpectedintheyearsleadingupto2020whentheOlympicswillbeheldinTokyo.ChangesinthetaxationofexpatriatepersonnelsecondedtoJapancontinuestoevolverapidly,andcompanieswillcontinuetohavetopayattentiontothetaxsituationoftheirmanagementpersonnel.
ThereappearstobearenewedemphasisonthelargereconomiesinAsiaPacificvis-à-visthesmallerjurisdictionsthatwereahigherpriorityin2014.
Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook
32
Mostrespondentsplantomanagetheirtaxaffairsandassociatedrisksintheforeseeablefuturebystrengtheningrelationshipswithgovernmentauthorities.
Themostunlikelywayforrespondentstomanagetaxaffairsandtaxriskswillbetoformacoalitionwithindustrypeersortoimplementataxenterpriseresourceplanning(ERP)onanalyticssystems.Interestingly,threeyearsago,alargeproportionofrespondentsplannedtomanagetaxaffairsbyimplementingatax-riskmanagementsystem.Thisyear'sresultissomewhatsurprisingasthereisatrendincompaniessearchingfortechnologytosupporttaxprocesses.Manycompaniesareinvestigatinghowtechnologycanenhanceexistingprocesses,specifically,howtax-specificdatacanbeefficientlyextractedfromERPsystems.Systemscangenerateanalytics,however,thereisstilluncertaintyastowhichdatashouldbeincludedandwhattypesofanalyticreportsareneeded.
Themostpopularapproachtomanagingtaxaffairsandriskswillbetostrengthenrelationshipswiththeauthorities
As a company, how do you plan to manage your tax affairs and tax risks?Figure 19. Approaches to managing tax
Weexpecttechnologytoplayamoreprominentroleinthecomingyearsinsupportingtaxprocessesasthekindsofinsightsthatcanbegainedfromtaxdatabecomeclearer.
DuetotheunpredictabletaxenvironmentsinmanykeyjurisdictionsinAsiaPacific,itisnotsurprisingthatmostrespondentsplantostrengthentheirrelationshipswiththeauthoritiesinanefforttobettermanagetaxaffairsandmitigaterisk.
Threeyearsagooutsourcingtaxconsultingandcompliancewasthemostpopularwaytomanagetaxifabudgetwasavailable.Outsourcingisnowinsecondplace,indicatingthatitstillisonthewishlistfortaxpractitionersintheregion,providedbudgetisavailable.
Top responses
In current plans Strengthenrelationshipswithgovernmentauthorities
Would like to do if budget is available
Increaseoutsourcingbudgetfortaxconsulting&compliance
Unlikely FormcoalitionwithindustrypeerstolobbyorformtaxworkinggroupsImplementtaxERPonanalyticssystems
Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook
33
Whileweknowvariousreformsareunderway,theoverwhelmingmajorityofrespondents(morethan90percent)indicatethatreformsareneededinChina,IndiaandIndonesia.Over80percentofrespondentsagreethatmanySoutheast
Regionally,theadoptionofBEPSrecommendationsisviewedasthemostcriticalreform
In which of the following Asia Pacific tax jurisdictions would you like to see reform?Figure 20. Jurisdictions which require tax reforms
Asiacountries(Malaysia,thePhilippines,ThailandandVietnam)areinneedofreform.Developingeconomiesarenotaloneinthisarea;alargeproportionofrespondentsalsoidentifiedAustraliaasajurisdictionrequiringtaxreform.
0% 20% 40% 60% 80% 100%
Australia
Brunei
Mainland China
Guam
Hong Kong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
% of respondents
Reforms are required No reforms required
Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook
34
In which of the following Asia Pacific tax jurisdictions would you like to see reform in the specified areas?Figure 21. Areas of tax reforms
Acrosstheregion,theadoptionofBEPSrecommendationsisthemostcommonlycitedreformneeded.Thisrepresentsachangefromthe2014surveyresultswhentaxofficertrainingwasthetoppriority.Thisislikelyduetothecurrentfocusongettingtherulesrightandthensubsequentlytrainingthetaxofficersonthenewrules.Timeliness,thequality
oftaxauditsandtransparencyintaxstatisticsarealsoconsideredimportantbytherespondentsinmanyjurisdictions.ItislikelythataftertheimplementationofBEPSmeasures,taxofficertrainingwillagainresurfaceasthetoppriority,especiallyinlightofanynewrules.
Reforms
TaxOfficerTraining
Timeliness&QualityofTaxAudits
PublicConsultationinTaxPolicyMaking
AdoptionofBEPSRecommendations
Transparencyin TaxStatistics
ImplementationofBindingTaxRulings
Australia √ √
Brunei* √ √ √ √
MainlandChina √ √
Guam √ √
HongKong √ √
India √ √
Indonesia √ √
Japan √ √
Macao √ √
Malaysia √ √
Mauritius* √ √ √
Mongolia* √ √ √ √
Myanmar √ √
NewZealand √ √
Philippines √ √
Singapore √ √
SouthKorea √ √
Taiwan √ √
Thailand √ √
Vietnam √ √
Atthejurisdictionlevel,therearesomedifferencesintherespondents'views.TimelinessandqualityoftaxauditsisanimportantreformforChina,IndiaandIndonesia.However,inChina,transparencyintaxstatisticsisatoppriority,whereasinIndia,manyfelttheadoptionofBEPSrecommendationsiscritical.AcrossSoutheastAsia(exceptinSingapore),taxofficertrainingisviewedaspriority.
InJapan,thecompaniesarewellontheirwayincompletingthefirstyeardraftsofBEPSAction13work,andtaxauthoritiesarealsosetondocumentation.AftertheplannednewAnti-TaxHaven(CFC) Rulesthisyear,thenextlargefocusareafortheauthoritieswillbeBEPSActions8-10,i.e.,theproperattributionofincometoriskandintangiblesrelatedactivities.
Ingeneral,taxauthoritieswouldneedtostartplanningfortrainingandenforcementinlightofnewinternationaldevelopmentsuchasBEPSanddomesticlawsandregulationsinordertoadministerandimplementthemeffectively.
√ Identifiedastoptwopriorityareasfortaxreform*Duetothelownumberofrespondentsforthesmallerjurisdictions,threeorfourreformsareidentifiedastoppriorities
Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook
35
Whenaskedwhethertaxsocialresponsibilityconsiderationshaveledthemtomodifyhowtaxismanaged,99percentofrespondentsagreedtheyhad.Thisisastarkincreasefromthreeyearsagowhenonly32percentindicatedtheseconsiderationsimpactedtaxmanagement.Thisyear'sresponseisnotsurprisinggiventheincreasedpublicattentionandfrontpageheadlineshighlightingperceived
Thedebateoftaxsocialresponsibilityisexpectedtocontinue,especiallyinthelargejurisdictionsintheregion.
Which jurisdiction(s) do you think would likely engage in the tax social responsibility debate in the near future (over the next one to three years)?Figure 22. Tax social responsibility
Taxsocialresponsibilityconsiderationswillhaveanincreasingimpactonhowtaxismanaged,particularlyinAustraliaandChina
instancesofwhencompaniesfailedtopaytheirfairshareoftax.Thisdebateisexpectedtocontinue,especiallyinthelargerjurisdictionsintheregion.
Australia,China,JapanandIndiaareconsideredthemostlikelytaxregimestoengageinthetaxsocialresponsibilitydebateinthenearfuture.
No. of respondents
AustraliaMainland China
JapanIndia
SingaporeNew ZealandSouth Korea
Hong KongIndonesia
MalaysiaThailand
TaiwanVietnam
PhilippinesMacao
MyanmarMongolia
Note: Excludes jurisdictions for which there were no responses
6655
4135
3219
1817
1615
866
422
1
Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook
36
SincethefinalreportsontheBEPSactionswerereleasedinOctober2015,companieshavebeenwatchingtheresponsesofthegovernmentsinAsiaPacificcountriestotheOCEDrecommendations;companiesareassessingtheimpactofpotentialchangestotaxlaws,andtakingstepstoensurecompliancewherenewruleshavebeenimplemented.
AsthefullextentoftheBEPSrecommendationsarenowmorefullyunderstood,almost80percentofrespondentsexpressedconcernabouttheimplementationofBEPS-relatedmeasures.Thisisasignificantincreasefromthreeyearsago,whenonly60percentofrespondentsindicatedtheywereconcernedaboutthisinitiative;atthattime,thedraftreportsundertheBEPSprojectwerestillbeingreleasedsotherewasnotasmuchclarityabouttheimplicationsoftheprojectthatnowexists.
Somerespondents'concernsmayarisefromanexpectationofincreasedcomplianceanddocumentationburdens,particularlywithrespecttotransferpricingdisclosureandcountry-by-country(CbC)reporting.
"WewelcomethestandardizationofadministrativepracticesunderBEPS,eventhoughprocesseswillbecomemorecomplicated."
–Japanrespondent
ThereissignificantconcernabouttheBEPSinitiativeandtheresultingimpactonhowmultinationalsaretaxed
Figure 23. How concerned are you about the OECD BEPS initiative?
Figure 24: Do you think that the BEPS initiative will result in a significant change in how multinationals are taxed around the world?
Asexpected,themajorityofrespondentsbelieveBEPSwillsignificantlyalterhowmultinationalswillbetaxedaroundtheworld.
InAsiaPacific,nearlyallmajorcountrieshavetheireyeonBEPSandwillbeadaptingtheirtaxrulestoensuretheirjurisdictionsareincompliancewiththenewstandards.MostAsiaPacificcountriesexpecttoreleasenewguidelinesarisingfromBEPSin2017or2018.
WeexpectHongKongandSingaporetobeproactiveindesigningBEPScompliantregimestoattractforeigninvestmentandupholdtheirreputationsasinvestmenthubsinAsia.
"WeareexpectingtheInlandRevenueAuthorityofSingapore(IRAS)tocloselymonitorandfollowmanyoftheBEPSmeasures.Itwillcertainlyincreaseourtaxcomplianceburden."
–Singaporerespondent
% of respondents
79%Concerned
21% Not concerned
% of respondents
85%Yes
15%No
Shifting sands: risk and reform in uncertain times | Appendix I: Respondent profileShifting sands: risk and reform in uncertain times | Appendix I: Respondent profile
37
AppendixI:RespondentprofileInthe2017TaxComplexitysurvey,therewere331respondentsacrosstheAsiaPacificregion.Surveysweredistributedelectronicallyandcouldbecompletedonananonymousbasis.ThesurveywasconductedduringtheperiodDecember2016toJanuary2017.
Shifting sands: risk and reform in uncertain times | Appendix I: Respondent profileShifting sands: risk and reform in uncertain times | Appendix I: Respondent profile
38
In which industry is your company primarily engaged?Figure 25. Respondents' industry
Industries
45%
15%
12%
11%
4%
4%
4%
3%
2%
Consumer Business & Transportation
% of respondents
Technology, Media & Telecommunications
Financial Services
Energy & Resources
Manufacturing
Engineering & Construction
Life Sciences & Health Care
Services
Real Estate
Please indicate the Asia Pacific jurisdictions in which your company has business operations.Figure 26. Jurisdictions of business operations
Jurisdictions
Mainland ChinaJapan
SingaporeAustralia
Hong KongIndia
MalaysiaSouth Korea
IndonesiaThailand
TaiwanVietnam
PhilippinesNew Zealand
MacaoMyanmar
BruneiMauritiusMongolia
Guam
No. of respondents
208168168
151151
147130
127125125
120102
8887
3636
1515
136
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What is the size of your company in terms of gross revenue in Asia Pacific? Figure 27. Gross revenue
What is the size of your company's tax department in Asia Pacific?Figure 28: Tax department
Companyandtaxdepartmentsize
% of respondents
43%
7%
24%
11%
8%
8%
Less than US$0.5 billion
US$0.5bn to US$1bn
>US$1bn but < US$5bn
>US$5bn but < US$10bn
>US$10bn
>US$20bn
% of respondents
28%
43%
12%
6%
10%
We do not have a dedicated tax function
1 - 5 persons
6-10 persons
11-20 persons
Over 20 persons
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40
AppendixII:TaxratesinAsiaPacificjurisdictions
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IncometaxandCapitalgainstaxrates**Highest statutory rateUpdatedMarch2017
Jurisdiction For Corporation For Individual
Incometax Capitalgainstax Incometax Capitalgainstax
Australia 30% 30%Note1 45% 45%Note2
Brunei 18.5%Note3 No 0% No
MainlandChina 25% Note4 45% Note5
Guam 35% 35% 39.6% 20%
HongKong 16.5% No 15% No
India 30%Note6 40%Note7 30%Note6 30%Note7
Indonesia 25% 25%Note8 30% 30%Note9
Japan 23.4%Note10 23.4%Note10 45%Note11 45%Note11&12
Macao 12% Note13 12% No
Malaysia 24% Note14 28% Note14
Mauritius 15% No 15% No
Mongolia 25% 25% 10% 10%
Myanmar 25% 10% 25% 10%
NewZealand 28% Note15 33% Note15
Philippines 30% 30% 32% 32%
Singapore 17% Note16 22% Note16
SouthKorea 24.2% 24.2%Note17 44% VariedNote18
Taiwan 17% 17%Note19 45% 45%Note19
Thailand 20% 20% 35% 35%
Vietnam 20%Note20 20% 35% 20%
Note:1. Assessableincomeincludesanycapitalgainsafteroffsettingcapitallosses.Netcapitalgainsderivedbycompaniesaretaxedatthe30%corporaterate.2. Netcapitalgainsderivedfromthedisposalofassetsacquiredafter19September1985areincludedinassessableincome.Capitalgainstaxdiscountapplies.3. Rateforoilandgascompaniesis55%.4. Gainsandlossesfromthetransferofassetsgenerallyarecombinedwithotheroperatingincomeandtaxedattheapplicableenterpriseincometaxrate.5. Netgainsfromthesaleofpropertyaresubjecttotaxatarateof20%.Exemptionapplies.6. Surchargeandcessapplicable.30%fordomesticcompaniesand40%forforeigncompaniesandbranchofforeigncompanies.7. Taxratesdependsuponthenatureofgains(short-termorlong-term)andunderlyingassets(shares,listedorunlistedsecurities,movableorimmovable
assets).Surchargeandcessapplicable.8. Certaintransactionsaretaxedunderaspecialregime(e.g.incomefromdisposalsoflandand/orbuildings).9. Certaintransactionsaretaxedunderaspecialregime(e.g.incomefromdisposalsoflandand/orbuildings,gainsonshareslisted,etc.)10. Localinhabitanttaxandlocalenterprisetaxapplicable.11. 0.945%ofrestorationsurtaxapplicable.12. Ratesvaryforcapitalgainsfromrealestateandsecurities,dependingonthenatureofgainsandholdingperiod.13. Capitalgainistreatedasincomeofcompanyandissubjecttocomplementarytax(euqiv.profittax).14. CapitalgainsarenottaxedinMalaysia,exceptforgainsderivedfromdisposalofrealpropertyoronthesaleofsharesinarealpropertycompany.The
rateisupto30%,dependingonholdingperiod.15. NewZealanddoesnothaveageneralcapitalgainstax.Certaincapitalgainsaretaxedunderspecifictaxrules.16. Singaporedoesnottaxgainsofacapitalnature;whetheragainisregardedascapitalorrevenueinnaturerequiresaconsideration,intotality,ofall
factsapplicabletothetransactiongivingrisetothegain.17. Capitalgainsorlossesareusuallyreflectedinnormaltaxableincometax.Capitalgainsderivedbynonresidentfromtransferofsharesaretaxedatthe
lesserof11%ofthesalesproceedsreceivedor22%ofthegainsrealized.18. Capitalgainsaretaxedseparately,withtheratedependingonthetypeofasset,holdingperiod,etc.19. Certaintransactionsaretaxedunderaspecialregime(e.g.incomefromdisposalsoflandand/orbuildings,gainsontheshareslistedetc.).20. Rateapplicabletoenterprisesoperatinginoilandgasandnaturalgasresourcesectoris32%-55%,dependingonproject.
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Withholdingtaxrates**Rates applied to payment to nonresidents and may be reduced under provision of applicable tax treaties.UpdatedMarch2017
Jurisdiction Dividends Interest Royalties Notes
Australia 0%/30% 10% 30%
Brunei 0% 15% 10%
MainlandChina 10% 10% 10%
Guam 30% 30% 30%
HongKong 0% 0% 4.95%/16.5%
India 0% 5%/20%/30%/40% 10% Ratesareexclusiveofapplicablesurchargeandcess.Dividendpaidbyadomesticcompanyaresubjecttodividenddistributiontax(DDT)at20.36%.
Indonesia 20% 20% 20%
Japan 20% 15%/20% 20% Surtaxof2.1%alsoapplies.
Macao 0% 0% 0%
Malaysia 0% 0%/15% 10%
Mauritius 0% 0%/15% 0%/15%
Mongolia 20% 20% 20%
Myanmar 0% 15% 20%
NewZealand 0%/15%/30% 15% 15%
Philippines 15%/30% 20% 30%
Singapore 0% 0%/15% 0%/10%
SouthKorea 20% 14%/20% 20% 10%localsurchargealsoapplies,resultinginaneffectiverateof22%(and15.4%forcertaininterest).
Taiwan 20% 15%/20% 20%
Thailand 10% 0%/10%/15% 15%
Vietnam 0% 5% 10% Awithholdingtaxof5%(corporatetax)and5%(VAT)generallyappliestotechnicalservicefeespaidtoanonresident.Acorporatetaxexemptionmayapplyunderataxtreaty.
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Othertaxes(GST/VAT,Payrolltax,Socialsecurity,Realpropertytax)
Jurisdiction GST / VAT Payroll tax Social security Real property tax
Australia GST-10% Leviedonemployersbythestatesandterritories,withtheamountbasedonsalaries,wagesandbenefitspaidtoemployees.
Employersarerequiredtocontributetoacomplyingsuperannuationfundorretirementsavingsaccountonbehalfoftheiremployees,atarateof9.5%oftheemployee's"ordinarytimeearnings",uptoamaximumearningsbase.
A2%medicarelevyonthetaxableincomeofAustralianresidentsispayablebyindividual.
Stampdutyunderlandtransfers.Moststates/territoriesalsolevylandtaxatratesupto3.75%.Landtaxsurchargemayalsoapply.
Brunei No No Bothemployerandlocalemployeesarerequiredtocontribute5%ofthewages(oflocalemployeesonly)totheEmployeeTrustFundand3.5%totheSupplementaryContributionPension.
Notaxesareleviedonproperty,buta12%buildingtaxisleviedonbuildingslocatedinBandarSeriBegawan.
MainlandChina
VAT-17%,13%,11%and6%forgeneraltaxpayersdependingonthetypeoftransactions;3%levyrateforsmall-scaletaxpayerswhilenoVATinputisallowedtobecredited.
No BothemployerandemployeesarerequiredtomakecontributionstothePRCSocialSecuritySchemes,whichincludesbasicpensioninsurance,basicmedicalinsurance,work-relatedinjuryinsurance,unemploymentinsuranceandmaternityinsuranceschemes.
1.2%oftheoriginalpropertyvaluewith10%to30%reduction;or12%onpropertyrentalincome(onlyleviedincities,countytowns,statedesignatedtownshipsandindustrialandminingareas).
Guam VAT-4% No Employerscontribute7.65%ofemployeewagestoSocialSecurityandMedicare.
0.25%ofassessedvalueforlandand1%oftheassessedvalueofbuildings.Assessedvalueis35%ofappraisedvalue.
HongKong No No Anemployerisrequiredtodeduct5%ofanemployee'smonthlyincome(cappedatHKD1,500)ashis/hercontributiontotheMandatoryProvidentFund(MPF)scheme,andpayanadditional5%astheemployer'scontribution.
5%oftheratablevaluewhichistheestimatedannualrentalvalueofaproperty.
India Ratesvarybetweenstates.
Theemployerisresponsibleforwithholdingtaxonsalaryincome.
Allemployeescontribute12%ofeligiblewagespermonthtotheprovidentfund,withamatching12%contributionbytheemployer.
Eachstateleviespropertytax,withratesvaryingfromstatetostate.
UpdatedMarch2017
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Jurisdiction GST / VAT Payroll tax Social security Real property tax
Indonesia VAT-10% Anemployerisrequiredtowithhold,remitandreportincometaxontheemploymentincomeofitsemployees.
Boththeemployerandemployeearerequiredtomakesocialsecuritycontributions,upto11.74%byemployerand4%byemployedresidentindividual.
Landandbuildingtaxispayableannuallyonland,buildingsandpermanentstructures.Theratetypicallyisnomorethan3%oftheestimatedsalesvalueoftheproperty.
Japan VAT-8% Theemployermustwithholdincometaxandsocialsecuritycontributionsatsource.
Socialsecuritytaxcomprisesseveralcomponents.Thehighestcombinedportionforemployerandemployeeisapproximately16.248%and15.446%,respectively.
Themunicipalfixedassetslevyisassessedatanannualrateof1.4%.RealestateacquisitionstaxandRealestateregistrationtaxalsoapply.
Macao No No Theemployerandresidentemployeemustpayintothesocialsecuritycontributionfund(FSS).TheemployercontributesMOP60permonthforeachMacaoresidentemployee,andtheemployeepaysMOP30permonth.
10%onactualrentalincomeforleasedproperty.
6%onofficialratablevalueforself-usedproperty.
Malaysia GST-6% TaxonemploymentincomeiswithheldbytheemployerunderaPAYE(pay-as-you-earn)schemeandremittedtothetaxauthorities.
BoththeemployerandemployeearerequiredtomakecontributionstotheSocialSecurityOrganisation(SOCSO),andcontributetotheEmployeesProvidentFund(EPF)atarateof12%/13%and11%oftheemployee'sremuneration,respectively.
IndividualstatesinMalaysialevy"quit"rentandassessmentsatvaryingrates.
Mauritius VAT-15% No Theemployerisrequiredtomakesocialsecuritycontributionsatacombinedrateof10%ofanemployee'smonthlybasicsalary.Employee'scontributionsisatacombinedrateof4%ofhis/hermonthlybasicsalary.
No
Mongolia VAT-10% Anemployermustwithholdincometaxfromemployeewagesandremitthetaxtothegovernment.
Employerisrequiredtocontributetoarangeofinsurancesatacombinedratesof11%to13%ofanemployee'sgrossincome.Socialsecurityiscorporatetaxdeductible.Employee'scontributionis10%,withamonthlycapofMNT192,000.
0.6%to1%ofthevalueoftheproperty.
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Jurisdiction GST / VAT Payroll tax Social security Real property tax
Myanmar GST-Goods5%to100%;Services:5%
Theemployermustwithholdtaxesonemploymentincome.
Theemployermustcontribute3%ofanemployee'sbasicsalaryandwages(cappedatMKK9,000)tosocialsecurity.Anemployeemustcontribute2%ofhis/herbasicsalaryandwages(cappedatMKK6,000)tosocialsecurity.
No
NewZealand GST-15% No Anemployermayberequiredtocontributeapercentageofanemployee'sgrosssalaryorwagestotheKiwiSaversuperannuationscheme,foremployeesthathaveoptedintothescheme.
Localauthoritieschargeratesonlandbasedontheofficialvaluationoftheland.Theratesvaryconsiderablyfromonelocalitytoanother.
Philippines VAT-12% Acorporateemployerisrequiredtowithholdtaxontheremunerationpaidtoitsemployees.
Monthlycontributiontothesocialsecuritysystembyemployerandemployeebasedonemployee'ssalarybracket.Monthlycapapplies.
WithinMetroManila–2%.Provinces-1%.
Singapore GST-7% No Employer'sstatutorycontributionratetotheCentralProvidentFund(CPF)isupto17%,employee'sstatutorycontributerateisupto20%.
Propertytaxesareprogressiveupto20%.20%representsthehighestmarginalrateandappliestonon-owneroccupiedresidentialproperties.Lowerratesareapplicabletoowneroccupiedresidentialproperties.
SouthKorea VAT-10% Employermustwithholdtaxesonsalarypaidtoitsemployees.
Employermustmakesocialsecuritycontributionstotherelevantsocialsecurityauthorities.Ratesvarydependinguponnumberofemployeesandindustry.
Individualsarerequiredtopaynationalpension,medicalinsuranceandunemploymentinsurancepremiums.
0.24%to0.6%dependingonthetypeofproperty.Realestate,suchaslandorresidentialbuildingsissubjecttothecomprehensiverealestatetaxinadditiontothelocalpropertytax.
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Jurisdiction GST / VAT Payroll tax Social security Real property tax
Taiwan VAT-5% No Nosocialsecuritytax,butfactories,minesandallcompanieswithover50employeesmustestablishfundsforemployeewelfares.TherearetwosocialsecurityprogramsinTaiwan:LaborInsuranceandNationalHealthInsurance.Premiumsforbothprogramsaredeterminedbythegovernmentandbornebytheemployer,theemployeeandthegovernment.
LandValueTaxandLandValueIncrementalTax-1%to5.5%,orspecialratesforLandvaluetax(LVT).20%to40%,orspecialprivilegedratesforLandvalueincrementaltax(LVIT).
RealPropertyTax-Underthetaxregimethatappliestothesaleofrealestate(includinglandandhouses)acquiredafter1January2016,residentcompaniesaresubjecttocorporateincometax(17%)oncapitalgainsfromthesaleofrealestate.
Nonresidents(includingcompaniesandindividuals)willbesubjecttoa45%incometaxoncapitalgainsfromthesaleofrealestatethathasbeenheldforlessthanoneyear,or35%ifthepropertyhasbeenheldformorethanoneyear.
TheincrementalnetvalueoftherealestatesoldstillwillbesubjecttoLVIT,buttheincrementalnetvalueofthelandcanbedeductedfromthetaxablecapitalgainswhencalculatingthetax.
Thailand VAT-7% Taxonemploymentincomeiswithheldbytheemployerandremittedtothetaxauthorities,generallyonamonthlybasis.
Theemployerandtheemployeearerequiredtocontribute5%ofanemployee'smonthlycompensation,uptoaspecifiedmonthlycap.
12.5%withcertainexemptions.
Vietnam VAT-10% No Employercontribution:Socialinsurance(SI)18%,healthinsurance(HI),3%,andunemploymentinsurance(UI)1%oftheemployee'ssalary.
Employeecontribution:Socialinsurance(SI)8%,healthinsurance(HI),1.5%,andunemploymentinsurance(UI)1%oftheemployee'ssalary.
Themunicipalauthoritieslevytax(e.g.landrentaltax,landusefees,etc.)ontheuseofrealproperty.
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Othertaxes(Unemploymenttax,inheritancetax&Gifttax,Stampduty,Alternativeminimumtax)
Jurisdiction Unemployment tax
Inheritance tax & Gift tax
Stamp duty Alternative minimum tax Other significant taxes
Australia No No Upto5.75%,ratesvarydependingonthestate/territoryandclassofbusinesspropertytransferred.Extrastampdutyisimposedinsomestates.
No No
Brunei No No Fixedoradvaloremratesonvariousbusinessdocuments.
No No
MainlandChina
No No 0.005%to0.1%,dependingonthetypeofdutiablecontractsordocuments.
No No
Guam No No No 20to28% UseTax–4%assesseduponimportationoftangiblepropertynotforresale.
HongKong No No 0.2%to20%,dependingonthetypeofdocumentsandtransactions.
No No
India No No StampdutiesareleviedundertheIndianStampActandthestampactsofthevariousstates(withratesvaryingsignificantlybetweenstates).
18.5%plusanyapplicablesurchargeandcessontheadjustedbookprofitsofcorporationswhosetaxliabilityislessthan18.5%oftheirbookprofits.Exemptionsapply.
Servicetax–15%.
Indonesia No No CertaindocumentsaresubjecttostampdutyatanominalamountofIDR3,000orIDR6,000.
No No
Japan 1.1% 10%to55% JPY200toJPY600,000ontheexecutionoftaxabledocuments.
No No
UpdatedMarch2017
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Jurisdiction Unemployment tax
Inheritance tax & Gift tax
Stamp duty Alternative minimum tax Other significant taxes
Macao No No 0.2%to5%,dependingonthetypeoftransaction.
No GamingTax-AspecialtaxforlicensedgamingoperatorthatrunscasinoinMacao.
TourismTax-Appliestoacompanyrunningtourismbusinessesandischargedtocustomers,suchashotels,restaurants,barorfitnessclubs,etc.
Malaysia No No 1%to3%ofthevalueofpropertytransfers.0.3%onsharetransactiondocuments.
ALabuancompanycarryingonaLabuanbusinessactivitymayelecttopayafixedamountofMYR20,000,ortobetaxedat3%oftheauditedaccountingprofit.
No
Mauritius No No No No No
Mongolia No No Stampdutyreferstogovernmentservicefeeandisimposedatvariousrates.
No Customsdutyandexcisetax.
Myanmar No No,butregistrationfeesarepayableforinheritancesunderanarrangementofsettlementandforgifts,dependingonthevalueoftheproperty.
Ratesvarydependingonthetypeofdocumentsandinstruments.
No Specialgoodstax(5%-60%).
NewZealand No No No No No
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Jurisdiction Unemployment tax
Inheritance tax & Gift tax
Stamp duty Alternative minimum tax Other significant taxes
Philippines No 5%to20%onthenetestateofbothresidentsandnonresidents.
Ratesvarydependingonthetypeoftransaction/document.
Aminimumcorporateincometax(MCIT)equalto2%ofgrossincomeisimposedonbothdomesticandresidentforeigncorporationsbeginninginthefourthtaxableyearofoperations.
No
Singapore No No 0.2%onshares,3%onproperties.
No Vehiculartaxes.
SouthKorea Seesocialsecurity
10%to50% Stamptaxisleviedonagreementsrelatingtothecreation,transferoralterationofrights,butthetaxisnotsignificant.
7.7%to18.7% No
Taiwan No EstateandgifttaxisleviedontheworldwideassetsofTaiwanese-domiciledindividuals.
Ratesvarydependingonthetypeoftransaction/document.
Aprofit-seekingenterprisewithafixedplaceofbusinessorbusinessagentinTaiwanissubjecttoaseparatealternativeminimumtax(AMT)calculationifitearnscertainincomethatistaxexemptorenjoyscertaintaxincentivesundertheIncomeTaxActorotherlaws,andtheenterprise'sbasicincomeexceedsNTD0.5million.TheAMTrateis12%.
AresidentindividualwithAMTtaxableincomeexceedingNTD6.7millionmaybesubjecttoa20%AMT.
No
Thailand No Inheritancetaxattherateof5%or10%appliesontheexcessofBaht100millionafterdeductingthetestator'sdebts.
Ratesvarydependingonthetypeofinstrument.
No No
Vietnam Seesocialsecurity
InheritancesandgiftsaboveVND10millionaresubjecttoincometaxat10%.
Astampdutyof0.5%to2%isleviedoncertaintypesofassets,includingrealproperty.
No SpecialSalesTax(SST)from10%to70%.
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Practice&procedures
Jurisdiction Advance tax ruling Availability of a tax court
Statute of limitation Competent authority process
May the taxpayer enter into an advance tax ruling or agreement with the tax authority?
May the taxpayer appeal to the tax court in case of disagreement with the tax authority's decision?
Is there a competent authority process to resolve disputes between countries?
Australia Y Y-ThelawspecificallygivestaxpayertherighttogototheAdministrativeAppealsTribunal(AAT)ortheFederalCourtofAustraliaforareviewofsomeofATO'sactionsordecisions.
Fouryears Y
Brunei N Y Sixyears Y
MainlandChina N-Thereisgenerallynoadvancerulingprocedure,butthetaxauthoritiescanissuerulingsinspecialcases.Taxpayersnormallyconsulttheirlocalin-chargetaxofficialswhenissuesarise.Advancepricingagreementsmaybeconcluded.
N-Onlyinageneralcourt.
ThreeyearsandcanbeextendedtofiveyearsiftheamountoftaxunderpaidisoverCNY100,000.Statuteoflimitationfortransferpricingistenyears.Nostatuteoflimitationfortaxevasion,refusaltopaytax,ordefraudingoftaxpayment.
Y
Guam N Y Threeyearsingeneral,maybeextendedtosixyearswhenthetaxpayeromitsgrossincomeinanamountexceeding25%ofthegrossincomeactuallyreportedontheincometaxreturn.
N
HongKong Y Y Sixyearsingeneral,maybeextendedtotenyearsinthecaseoffraudwilfulevasion.
Y
India Y Y Varied Y
Indonesia Y–However,itisdifficulttoobtainone.TheIndonesiantaxofficedoesnothavetorespondtothetaxpayer'srulingrequest.
Y–TaxpayercanalsofileanotherappealtoIndonesiansupremecourtifthecasewaslostintaxcourt.
Withinfiveyearsaftertheincurrenceofataxliability.
Y
UpdatedMarch2017
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Jurisdiction Advance tax ruling Availability of a tax court
Statute of limitation Competent authority process
May the taxpayer enter into an advance tax ruling or agreement with the tax authority?
May the taxpayer appeal to the tax court in case of disagreement with the tax authority's decision?
Is there a competent authority process to resolve disputes between countries?
Japan Y Y Fiveyearsingeneral,sixyearsfortransferpricing.
Y
Macao N Y Fiveyears Y
Malaysia Y Y Withinfiveyearsfromtheendoftheyearofassessmentwithinwhichtheassessmentismade.
Y
Mauritius Y Y Fouryears Y
Mongolia N N-Onlyinageneralcourt.
Fiveyears Y
Myanmar N N Threeyears Y
NewZealand Y Y Fouryearsandcanbeextendedifthetaxpayerhasbeenfraudulent/misleadingoromittingincome.LikewisetaxpayerscanagreetowaivethetimebarforadditionaltimetoallowInlandRevenuetoresolvedisputes.
Y
Philippines Y Y Threeyearsfromthelastdayprescribedbylawforthefilingofthetaxreturningeneral.Incaseofafalseorafraudulentreturnwithintenttoevadetaxorincaseoffailuretofileareturn,thetaxmaybeassessedoraproceedingincourtforthecollectionofsuchtaxmaybefiledwithoutassessmentatanytimewithintenyearsafterthediscoveryofthefalsity,fraudoromission.
Y
Singapore Y Y Fouryears Y
SouthKorea Y Y Fiveyearsingeneral,canbeextendedinthecasesofevasion,falseorfraudulentreturn.
Y
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Jurisdiction Advance tax ruling Availability of a tax court
Statute of limitation Competent authority process
May the taxpayer enter into an advance tax ruling or agreement with the tax authority?
May the taxpayer appeal to the tax court in case of disagreement with the tax authority's decision?
Is there a competent authority process to resolve disputes between countries?
Taiwan Y Y Fiveyearsandcanbeextendedtosevenyearswhenataxpayerfailstofileataxreturnwithinthestatutorydeadlineorevadestaxbyfraud.
Y
Thailand Y-Ataxpayermayrequestanonbindingprivateletterruling,andAdvancepricingagreements- AdvancePricingAgreements(APAs)areavailableunderthetransferpricingregime.
Y Tenyears N–Noformal/officialprocedureisavailable,buttaxpayerscanrequestforanadvancepricingagreementandmutualagreementprocedureundertheapplicabletaxtreaty.
Vietnam N-Technically,ataxpayercouldaskforfurtherguidancefromthetaxauthorityforuncleartaxissuesthroughsubmittingaprivateruling.However,itisnotentirelyguaranteedthatataxinspectionteaminasubsequenttaxauditwouldnotlikelychallengethetaxfilingwhichismadebythetaxpayerbasedontheguidancefromthetaxauthorityinarespondingprivateruling.
Y Tenyearsingeneral.Fiveyearsforpenaltyforwrongfuldeclaration.
Y-Technically,GeneralDepartmentofTaxationwhichisauthorizedbyMinistryofFinancewouldtakeresponsibilityofresolvingdisputesbetweenVietnamandotherforeigncountriesthroughMAPsunderthetaxtreaties.
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AppendixIII:Contacts
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54
OurtaxexpertscanhelpyoutonavigatethecomplexityinAsiaPacific
Vietnam
Australia
Brunei
China
Guam
HongKong
India
Indonesia
Japan
Macao
Malaysia
Mauritius
Mongolia
Myanmar
Bangladesh
NewZealand
Philippines
Singapore
SouthKorea
Taiwan
Thailand
Cambodia
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Formoreinformationaboutthissurveyortoenquireaboutourtaxservices,pleasecontactourDeloitteprofessionalsintheregion
Asia PacificAlan [email protected]
Chris [email protected]
AustraliaBrett [email protected]
BangladeshPatel Himanshu [email protected]
BruneiPengiran Haji [email protected]
CambodiaKimsroy [email protected]
China Vivian [email protected]
GuamJennie [email protected]
IndiaVipul [email protected]
IndonesiaMelisa [email protected]
JapanShinya [email protected]
Hong KongSarah [email protected]
MacaoRaymond [email protected]
MalaysiaWing Peng [email protected]
MauritiusTwaleb [email protected]
MongoliaOnchinsuren [email protected]
MyanmarAye [email protected]
New ZealandPeter [email protected]
PhilippinesFredieric [email protected]
SingaporeHwee Chua [email protected]
South KoreaJung Hee [email protected]
TaiwanAustin [email protected]
ThailandAnthony [email protected]
VietnamThomas [email protected]
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Asia Pacific International Core of Excellence (AP ICE)Lili [email protected]
Leonard [email protected]
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