On 12 June, the National Assembly passed the Law on the support of small and medium-sized enterprises (SMEs). The measure will help to improve the quality of growth and change the nation’s economic growth model.
Under the new law, SMEs include micro-enterprises and small- and medium-sized enterprises whose average number of employees with social insurance is less than 200 in the year. These companies must also meet one of the following two criteria:
- Total investment capital of a maximum of US $ 10 billion (US $ 4.4 million) and a total annual turnover of US $ 100 billion; or
- Companies must be operating in the fields of agriculture, forestry, fisheries, industry, construction, trade and services.
SMEs that meet these requirements can be eligible for various incentives, such as assistance with credit access, support for tax and accounting or support for the acquisition of production areas, among others. In addition, the new measures provide for specific support measures for innovative start-up companies and SMEs involved in industrial interconnection clusters and value chains in the area of production and processing.
The law will take effect from January 1, 2018.
The Malaysian government is going ahead with its tourism tax to be imposed from July 1, 2017. Under the new tax, hotel guests will be charged between RM2.50 and RM20 for every night’s stay, depending on the classification of the hotel.
According to Malaysian Tourism and Culture Minister Mohamed Nazri Abdul Aziz the money collected would be used to promote Malaysia overseas and refurbish tourism facilities. The Tourism Tax Bill 2017 was passed in the last Parliament sitting with a majority vote.
On 7 June 2017, the Commissioner of China’s State Administration of Taxation (SAT) signed, on behalf of Hong Kong, the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, which aims to close loopholes in the current bilateral tax treaties and lessen the opportunity for tax avoidance.
In implementing the Multilateral Instrument, Hong Kong has taken a pragmatic approach, opting into the provisions of the Convention that represent the minimum standards including the principal purpose test for preventing treaty abuse and the requirement for allowing a minimum three-year period for a person to present its case for Mutual Agreement Procedure (MAP). Hong Kong has opted out of other provisions that are not mandatory such as provisions addressing hybrid mismatches and changes to combat artificial avoidance of a permanent establishment.
On 15 June 2017, the Hong Kong Inland Revenue Department (IRD) issued a notice on the property tax obligations of property owners. Property tax is charged on property owners by reference to the actual rent receivable (including lease premium) in the relevant year of assessment. Owners in receipt of rental income must inform the tax department in writing if they are liable to tax and supply the particulars of the property not later than 4 months after the end of the basis period for the year of assessment (e.g. on or before 31 July 2017 for the year of assessment 2016/17), unless they have already received the appropriate tax returns.
A return issued by the IRD should be completed and furnished to the IRD within the stipulated time limit for official record updating purposes even if no rental was received in respect of the property concerned. Owners chargeable to property tax must keep sufficient rent records, such as lease agreements and duplicates of rental receipts for at least 7 years. They must inform the Department of any change of address in writing within one month.
Where a corporation has been exempted from property tax and there is a change in the ownership or use of the property, or in any other circumstances which may affect such exemption, the corporation must notify the Department in writing of the change within 30 days after the event. Heavy penalties may be incurred for failure to comply with the requirements of the Inland Revenue Ordinance.
Inland Revenue (Amendment) (No. 2) Ordinance 2017 (Amendment Ordinance) was gazetted June 16 and will come into effect on July 1, 2017. The Amendment Ordinance enables Hong Kong to implement automatic exchange of financial account information in tax matters (AEOI) more effectively.
As an international financial centre Hong Kong has been committed to enhancing tax transparency and combatting cross-border tax evasion. Hong Kong has been making preparations for the implementation of the common reporting standard for AEOI as set out by the Organisation for Economic Cooperation and Development (OECD). At the same time, both the OECD and the European Union (EU) have been closely monitoring jurisdictions’ progress in the implementation of AEOI.
The Amendment Ordinance can ensure that Hong Kong preserves the financial account information from the second half of 2017 for exchanging with other jurisdictions. This enables the effective implementation of AEOI without introducing an undue compliance burden to financial institutions.
To implement AEOI, from July 1, 2017, the list of “reportable jurisdictions” under the Inland Revenue Ordinance will be expanded to cover 75 jurisdictions, comprising 13 confirmed AEOI partners and 62 prospective AEOI partners. The 62 prospective AEOI partners include the following three categories:
(a) jurisdictions which have expressed an interest in conducting AEOI with Hong Kong or jurisdictions suggested by the OECD;
(b) Hong Kong’s tax treaty partners which have committed to AEOI; and
(c) all member states of the EU.
The Amendment Ordinance does not alter the privacy and data protection requirements on AEOI under the Inland Revenue Ordinance. Hong Kong would only conduct AEOI with jurisdictions which have signed dedicated exchange agreements with Hong Kong and have fulfilled the OECD’s standard and relevant safeguards for protecting data privacy and confidentiality of the information exchanged.
Hong Kong has signed an agreement with Indonesia for conducting automatic exchange of financial account information in tax matters (AEOI), a Government spokesman said on June 16, 2017.
The spokesman added that they have been seeking to expand Hong Kong’s AEOI network with their tax treaty partners. Including the agreement with Indonesia, Hong Kong now has 13 AEOI partners. The others are Belgium, Canada, Guernsey, Ireland, Italy, Japan, Korea, Mexico, the Netherlands, Portugal, South Africa and the United Kingdom.
The spokesman also added that the Government plans to extend the application of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters to Hong Kong. An amendment bill will be introduced into the Legislative Council in late 2017.
India: CBDT publishes a draft notice on special transitional provisions for a foreign company based in India
The Finance Ministry on 15 June 2017, issued a draft notification of transitional provisions for foreign companies in the first year of becoming resident based on their place of effective management.
The notification has clarified that the tax on foreign companies qualifying as resident firms due to their place of effective management (POEM) will be the same as that for any foreign company and will be imposed at a rate of 40%.
The draft notification by the Central Board of Direct Taxes (CBDT) provides exceptions, modifications and adaptations for computation of total income, treatment of unabsorbed depreciation, set off or carry forward of losses, collection, recovery and special provisions for tax avoidance.
The notification, once finalised, will come into effect from April 1, 2017.