EUROCHAM VIETNAMREGIONAL TAX DEVELOPMENTSIN CAMBODIA, LAOS, MYANMAR AND THAILAND

Jack SheehanTax Partner, DFDLHo Chi Minh City, Vietnam | 19 February 2019

KEY TAX THEMES IN 2019

New transfer pricing laws in Cambodia and Thailand. Laos and Myanmar still have no indication of when they will adopt formal TP rules.

Corporate tax rates are lowering in the region – average corporate tax rate is 20%. Singapore is the lowest at 17%

Tax Departments are becoming more aware of aggressive tax planning and avoidance by international companies

The OECD BEPS project is seeing a slow implementation in the region, Thailand and Vietnam have agreed to the inclusive framework. Laos, Cambodia and Myanmar have not indicated if or when they will take part

KEY TAX THEMES IN 2019

The indirect sale or transfer of shares has become a hot issue and has resulted in large tax liabilities for international companies, including for internal restructuring and reorganizations. Myanmar, Laos and Vietnam have implemented such rules.

Singapore and Hong Kong are common holding jurisdictions in the region. Thailand offers an alternative by way of its IBC incentives.

All countries have a VAT or something that equates to a VAT where tax paid on purchases can be deducted from tax on sales.

Laos has proposed three new tax laws for 2019 including a reduction of the corporate tax from 24% to 20%

Myanmar and Vietnam has no tax on dividends paid from their countries, Thailand and Laos are 10% and Cambodia is 14%.

CAMBODIA01

CAMBODIATAX HIGHLIGHTS

2019 Law on Financial Management – effective from 1 January 2019, Cambodia source income includes capital gains, dividends, interest, royalty and other financial income

Currently, no tax returns for individuals

Subsequent regulations are expected that may pave the way for a Cambodia resident to file tax returns and be taxed on world wide income

Cambodian resident entities required to make Transfer Pricing declarations with the annual tax return on or before 31 March 2019

Currently, no safe harbor thresholds or APAs

Cambodia continues to sign new Double Tax Agreements (DTAs)

CAMBODIA – SUMMARY OF TAXES

Taxes Cambodia

Income Tax/Minimum Tax 20%/1%

Value Added Tax (‘VAT’) 10%

Withholding Tax – Dividends (non-residents) 14%

Withholding Tax – Interest (non-residents) 14%

Withholding tax – Royalties (non-residents) 14%

Withholding tax – Services (non-residents) 14%

Personal Income tax (Employment) 0-20%/20%

Non-resident Capital Gains Tax on Sale of Shares 0%

Tax Treaty Network Limited

Transfer pricing rules Yes

DOUBLE TAXATION

AGREEMENTS

RECENT DEVELOPMENTS

CAMBODIA – TAX TREATY NETWORK

THAILAND02

THAILANDTAX HIGHLIGHTS

Thai Government policy is to attract more high end technology and manufacturing – Thailand 4.0 and the Eastern Economic Corridor (“EEC”)

Due to a BEPS review of harmful tax competition - the existing International Headquarters scheme is no longer available

The IHQ has been replaced with an International Business Center (“IBC”) scheme – is the IBC as attractive for tax planning as the IHQ?

A new Transfer Pricing law has been passed and is effective from 1 January 2019

Thailand has a new draft Trust law that is expected to be passed in 2019

Thailand is moving towards compliance with Common Reporting Standards (“CRS”) and the Foreign Account Tax Compliance Act (“FATCA”)

THAILAND BUSINESS CENTERS (“IBC”)

To provide management services;

To provide technical services;

To provide supporting services;

To provide treasury services; and

including an approved international trading center under this Royal Decree.

International Business Centers (IBC) - Royal

Decree no. 674

A company incorporated under Thai law to

provide the following activities to its

associated enterprises, regardless of their

location in Thailand or in a foreign country;

IBC: TAX AND NON-TAX INCENTIVES

CIT Reduction from 20% to 8%, 5%, 3% for services income for IBC expenditure of at least THB 60, 300, 600 million, respectively.

Personal Income Tax (PIT) for expatriates (15%)

Special Business Tax (SBT) - Exemption

Withholding Tax (WHT) - Exemption

TAX INCENTIVES

TRD

100% foreign ownership

Work Permit/ Visa

Right to own land

Import duty exemption on equipment used for research and training

NON-TAX INCENTIVES

BOI

IBC: TAX RATE ARBITRAGE

MYNCo

ThaiIBC

VNCo

25% 25%

Services Services

Qualifying Expense @

20%

ForeignAffiliate Income

3%, 5%, 8%

Qualifying Expense @

25%

MYANMAR03

SNAPSHOT OF MYANMAR TAXES

Taxes Myanmar

Corporate Income Tax (CIT) 25%

Commercial Tax (similar to VAT) 5%

Withholding Tax – Dividends (non-residents) 0%

Withholding Tax – Interest (non-residents) 15%

Withholding tax – Royalties (non-residents) 15%

Withholding tax – Services (non-residents) 2.5%

Personal Income tax (Employment) 0-25%

Non-resident Capital Gains Tax on Sale of Shares 10%40-50% (if under oil and gas exploration)

Special Goods Tax Various

Tax Treaty Network 8

Transfer pricing rules No

TAX STRUCTURING:

THAILAND OR SINGAPORE AS HOLDING COMPANIES FOR CAMBODIA, LAOS, MYANMAR AND VIETNAM?

THAI INTERMEDIARY HOLDING CO.

MYA

EUR

THAI

LAO VN

Dividends 10%

Participation exemption –Dividends received at 0%

Participation exemption under Thai Revenue Code

CAM

THAI INTERNATIONAL BUSINESS CENTER (IBC)

MYA

EUR

THAI

LAO VN

Dividends 0%

Dividends 0%Qualifying services at 3%, 5%, 8%

BOI exemptions

DTA relief

CAM

SINGAPORE HOLDING COMPANY

EUR

SIN

MYALAO VN

Dividends & capital gains are not subject to tax

No tax on dividends

EUR

CAM

Jack SheehanTax Partner

jack.sheehan@dfdl.com

THANK YOU

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