Bdo Asean Investment Tax News_issue2_2014

ISSUE 2/2014
WWW.BDO.MY/ASEAN
FEATURE ARTICLE
READ MORE Page 2-3
NEWS
READ MORE Page 3-8
ASEAN INVESTMENT
& TAX NEWS
CONTENTS
P1 FOREWORD
P2 FEATUREARTICLE
u Indonesia Economic Policy —
Tax Incentives & Investment
P3 NEWS
u Encouraging Progress OfThe
CSX

u Tax Reduction In Brunei
u ImprovementTo Efficiency Of
Public Services In Philippines
u Indonesia’s GDP & Currency
Movement

u TakingThe Cue From
Singapore’s Budget 2014

u Thailand ReducesTax In
Preparation ForAEC 2015
u Surge In Foreign District
Investment (FDI) In Myanmar
u Favourable FDI Numbers For
Vietnam
u Japanese Investments Pour In
To Lao PDR
u Malaysia IRB Updates Public
Ruling OnWithholdingTax
Earlier this month, I was invited to address a group of businesspeople and professionals at
a forum organised by ZicoLAW themed AEC — Implications for the Private Sector in Yangon. I
shared my views on the topic Challenges and Opportunities for the Private Sector with the AEC.
Those in attendance, while recognising the road bumps in the journey towards forming the
ASEAN Economic Community (AEC), also agreed that closer co-operation in the region
presents tremendous opportunities economically and socially.
ASEAN has been designated as a priority region by BDO International. The Managing
Partners and Senior Partners of ASEAN member firms have been meeting regularly to discuss
strategies and ways of working closer to serve our clients in light of the formation of the AEC
targeted by 2015. One such meeting is the ASEAN Strategy Workshop in early April, which
will be attended by Martin van Roekel, CEO of BDO International. We also work closely with
BDO’s CEO Asia Pacific, Stephen Darley, as well as members of the Asia Pacific Board with
representation from countries such as Australia, China, India, Hong Kong and Japan.
All these underline our commitment to bolster our capabilities to continue providing
exceptional client service to you. We recognise that ASEAN is an important market for
business, and that having presence in all 10 ASEAN countries is vital. We are in the process of
setting up an office in Lao PDR, and we continually train our human capital through inter-
office staff secondment and participation as Approved Employer under the ICAEW Regional
Centre of Excellence.
Till the next issue of BDO’s ASEAN Investment & Tax News, happy reading and as always,
you are welcome to contact us if you would like in-depth advice on the topics covered herein.
DATO’ GAN AH TEE
Regional Senior Partner
Welcome to the second issue of BDO’s ASEAN
Investment & Tax News, a quarterly newsletter
introduced in January this year to bring you
updates on topics of interest and tax
developments within the ASEAN region.
In this issue, Wawat Sutanto, Managing Partner of
BDO Indonesia comments on the tax incentives
under the four packages of economic policy
announced by the Indonesian Government at the
end of 2013. We also arranged for a compilation
of recent tax and business news from around
the region, including the first listing of a private
company on the Cambodia Stock Exchange, for
which BDO acted as the Reporting Accountants.
I am proud to note that BDO was one of the first
three of the world’s Big 5 professional services
firms to be approved by the Securities and
Exchange Commission of Cambodia (SECC) as
independent auditors back in 2011.
FOREWORD

2 ASEAN INVESTMENT & TAX NEWS
FEATURE
INDONESIAECONOMIC POLICY—TAXINCENTIVESANDINVESTMENT
by Wawat Sutanto
Managing Partner, BDO Indonesia
At the end of 2013, the Indonesian
Government announced four packages of
economic policy to strengthen Indonesia’s
economic growth and reduce the sharp
depreciation of the rupiah by providing
various attractive tax incentives (tax
holiday and tax allowance) to foreign
investors. These economic policies
involved Bank Indonesia and the Financial
Services Authorities outlined the
importance of boosting Indonesia’s current
business environment and investment
potential.
The four packages cover the current
account deficit, rupiah performance,
economic growth, purchasing power,
inflation and investment. The discussion
below is focused on the tax incentives and
investment point of view.
I. Cross-border transactions
• Tax deduction and tax payment
facilities for certain industries
The Minister of Finance (MoF)
announced the tax deduction and tax
payment facilities through its Regulation
No.124/PMK.011/2013 applicable for five
industries: textile, garment, footwear,
furniture and toys. Taxpayers in these
industries are entitled for 25% (non-
export oriented) to 50% (export
oriented) deduction of corporate income
tax (CIT) instalment for tax periods
commencing September through
December 2013. Further, the CIT
payable is deferred for an additional
three months beyond the normal CIT
due date with no late penalties
imposed.
• Reducing import of oil & gas by
increasing the mandatory use of
biodiesel
The Minister of Energy and
Mineral Resources has recently
issued Regulation No. 25/2013 as an
implementation of the mandatory
policy of 10% biofuels applicable for
the transport, generator and industrial
sectors. The use of biofuels has been
increased in recent years from 5% to
7.5% in early 2012.
• Increasing import duty on luxury goods
such as completely built-up cars and
branded products
The new import tariffs will be 125% to
150% (previously 75%).
• Stimulating export of minerals by
relaxing export quotas
This includes relaxation of procedures
and export permits for processed
minerals and mineral concentrates.
II. Sustaining economic growth
• Tax deduction for labour intensive
industries
In light of the implementation of the
new provincial minimum wage,
taxpayers in labour intensive industries
that cannot afford the new minimum
wage are entitled for the tax deduction
and tax payment facilities under MoF
Regulation No. 124/PMK.011/2013,
provided no employment termination
occurs during the periods.
• Relaxation of tax facilities in bonded
zones
Under MoF Regulation No. 120/
PMK.04/2013, the threshold of sales to
the local market by companies in
bonded zones has been increased from
25% to 50%, calculated from the
preceding actual cumulative sales of
export and sales to other bonded
zones/free trade zones/economic areas.
Companies in bonded zones will be
served as well as monitored by the
authorities based on their risk profiles,
which are divided into green, yellow and
red categories.
Companies under green and yellow
categories can perform chains of
subcontracting works within bonded
zones, which provide much greater
flexibility in a company’s operating
activities (previously, no such
subcontract chain was provided).
Further, the green category enables
the use of a corporate guarantee
(instead of money guarantee) for the
flows of inventories and capital goods
between a bonded zone and the
customs area (previously, corporate
guarantee was not recognised).
In addition, subcontractors can provide
materials that form part of
subcontracting work. (Previously,
subcontract work was limited only to
parts of operating activities that do not
form the company’s main activities or
additional materials.)
• Value added tax (VAT) exemption on
certain books
Under the new MoF Regulation No.
122/PMK.011/2013, a tax exemption
letter is no longer required for import or
delivery of general education and
religious books (not including excluded
books that are later approved as
general education books). This implies
simplification of the procedures.
• Luxury sales tax (LST) relief for certain
goods that formerly were included as
luxury products
This includes certain electronic devices
and appliances, footwear and leather
(genuine and imitation) goods with
particular size or capacity threshold.
Accordingly, the aforesaid products will
have a lower market price, which in turn
will increase consumers’ purchasing
power.
• Determine the agreed limits of
provincial minimum wage increase,
taking into account productivity,
economic growth, and labour- or
capital-intensive industries
This step provides liaison and
co-operation between governments and
business associations in view of mutual
benefits.

3ASEAN INVESTMENT & TAX NEWS
NEWS
FEATURE
INDONESIAECONOMIC POLICY—TAXINCENTIVESANDINVESTMENT
(continued)
• Tax deduction for research and
development (R&D) activities
This is conducted through double
deduction of R&D-related expenses
in a taxpayer’s annual corporate income
tax. Moreover, scholarship and
internship expenses will be included
under the definition.
• Optimisation of tax allowance for
investment in certain industries
The Indonesian Government is
revisiting the current requirements of
tax holiday and tax allowance to
enhance investment conditions in
Indonesia. Special considerations are
focused on the size of investment,
serving periods, workforce and
bureaucracy. Under the amendment,
the tax holiday is expected to be
provided to investments below IDR1
trillion, considering, inter alia, a
significant utilisation of local workforce.
III. Maintaining purchasing power and
controlling inflation
The Government will amend the trading
system of beef and horticultural products
from a quota system to a price mechanism
system to reduce inflation and price
volatility.
IV. Investment
This package is aimed at boosting
investment conditions in Indonesia. The
Government’s actions are focused on the
following:
• simplifying permits to speed up
realisation of investment — for
example, potential simplification of

investment permits for the upstream oil
& gas industry to 8 permits (previously
69 permits);
• revising the current negative
investment list to a more investor-
friendly list — the recent revision
contains only 14 fields closed to foreign
investment (previously, 20 fields). The
upcoming list will potentially reduce
foreign ownership restrictions on certain
industries such as pharmaceuticals,
advertising agencies and power plants;
• accelerating the investment
programmes on agro-based business
including crude palm oil, cocoa, rattan,
minerals, metal, bauxite, nickel and
copper through fiscal incentives as well
as accelerating renegotiations of
Contracts of Work and Coal Contracts of
Work.
CAMBODIA
ENCOURAGINGPROGRESS
OFTHECSX
According to the World Bank, Cambodia’s
economy grew rapidly, at more than 8%
per year, between 2004 and 2012. The
economy had sustained its growth in
2013, estimated at around 7%, driven by
strong exports, private investment and
agriculture, and underpinned by a solid
macroeconomic position.
Against the backdrop of positive economic
indicators,the Cambodia Stock Exchange
(CSX) is set to see more companies getting
listed after the first listing in April 2012
of the state-owned Phnom Penh Water
Supply Authority.
Grand Twins International (GTI), an audit
client of BDO Cambodia, has recently
announced that it is planning to go public
in May 2014 and start trading on the CSX.
This marks the first private Cambodian
company to be listed on the CSX, of
which BDO Cambodia were also the IPO
reporting accountants.
GTI, one of the top three garment
manufacturers in Cambodia based on
number of employees (Source: Phnom Penh
Securities), was set up in 1997. It has since
come a long way and currently produces
for world-renowned brands like Adidas
and Reebok. It has about 5,600 employees
working within its factories, spread among
65 different product lines.
The garment industry in Cambodia is
the largest non-agricultural industry
and the largest employer in the country.
It also accounts for more than 80% of
its exports, with Europe and the United
States of America being the main buyers of
Cambodian-made garments.
With the eventual listing of GTI, the CSX
expects more Cambodian companies to
follow suit and this is expected to provide
a healthy boost to the local capital market.
The CSX was launched in July 2011 with
the following mission:
• To facilitate the raising of capital by
companies in Cambodia;
• To establish investor-friendly
environment for securities trading for
investors in and outside of Cambodia;
• To offer a variety of state-of-the-art
products and services to all market
participants; and
• To operate a self-sustaining public
enterprise under the guidance of the
Royal Government of Cambodia.
BDO Cambodia was one of the first
three among the Big 5 accounting firms
to be approved by the Securities and
Exchange Commission of Cambodia
(SECC) as independent auditors providing
professional services in the securities
sector in Cambodia (or more commonly
known as reporting accountants). BDO
is also the auditor of Nagacorp, which is
listed on the Hong Kong Stock Exchange
and is the largest gaming operator
in Cambodia. At the time of writing,
Nagacorp has a market capitalisation of
approximately HKD19 billion (USD2.5
billion).

NEWS
BRUNEI
TAXREDUCTION
The Minister of Finance II announced that
the corporate tax rate for companies not
engaged in petroleum operations will be
reduced to 18.5% from the current tax rate
of 20% in 2015. In addition, companies
with profits not exceeding BND250,000
will enjoy lower taxes, tax credits for
investments in new technologies to
improve operational efficiency, and for
employment and training of locals.
GOVERNMENTTENDERS
To encourage local firms to be competitive
in bidding for government tenders, the
Government has revised the conditions
relating to banker’s guarantee and
performance bond. Under the revision,
construction or service contracts of less
than BND1 million will not be required to
have banker’s guarantee or performance
bonds. For construction or service
contracts valued between BND1 million
and BND5 million, the rate charged for the
banker’s guarantee or performance bond
will not exceed 3%. Lastly, for contracts
for construction or services exceeding
BND5 million, the rate charged will not
exceed 5%.
PHILIPPINES
IMPROVEMENTTO
EFFICIENCYOF PUBLIC
SERVICES
The President of the Philippines, Benigno
S. Aquino III, on 18 December 2013 signed
Executive Order (EO) No.155 amending
Executive Order No.160 as part of his
administration’s continuous effort to
eradicate corruption and improve the
quality and efficiency of public service.
In this new EO, the “Department of
Finance (DoF) will be responsible for the
sound and efficient management of
financial resources of the Government,
its subdivisions, agencies and
instrumentalities.”
The new EO will implement reform
measures within the Bureau of Customs
(BoC) under the purview of the
Department of Finance. In the new EO, the
functions of post-entry audit will no longer
be part of BoC and are now assumed by
the newly established Fiscal Intelligence
Unit (FIU) to ensure independence and
impartiality of the audit functions.
The FIU is a new unit under the DoF
answerable to the Finance Secretary Cesar
Purisima to identify potential revenue
sources and leakages by analysing data
from the Bureau of Internal Revenue (BIR),
BoC, Bureau of Local Government Finance
and other revenue-generating agencies
attached to the DoF and comparing these
with third party information (Source: The
Philippine Star, 1 January 2014).
This change has resulted in higher
revenues for the BoC and has contributed
to President Aquino’s anti-corruption
programme as well as stamping out tax
evasion and smuggling. It is hoped that
with the continuous efforts of the
President, more investors will be
motivated to come to the Philippines.
INDONESIA
GDPANDCURRENCY
MOVEMENTS
The World Bank states in its most recent
quarterly review of the Indonesian
economy that growth is likely to slow in
2014 to 5.3% down from 5.6% in 2013.
The Indonesian Rupiah (IDR) fell to a five-
year low of IDR12,189 against the USD on
31 December 2013. On 25 February 2014
it had strengthened to IDR11,620.
The recent appreciating trend of the IDR is
caused by international investors’ renewed
confidence in Indonesia’s macroeconomic
fundamentals. Indonesia’s current account
deficit eased much faster than expected.
On 13 February 2014, Bank Indonesia
issued a press release in which it stated
that the deficit was equivalent to 1.98%
of Indonesia’s GDP in the fourth quarter
of 2013. Previously, the central bank had
estimated that the deficit would ease to
around 3% of GDP by end of the year.
INFRASTRUCTURE
According to the World Bank, Indonesia’s
infrastructure needs are the third greatest
in Asia after China and India with USD450
billion in capital expenditure needed
between 2010 and 2020. These figures
broadly correlate with the Government’s
2011-2025 development plan, which
identifies IDR4.012 trillion (USD440
billion) of investment, of which IDR1.786
trillion is assigned for basic infrastructure.
Under the nation’s shorter term 2011-
2014 economic plan, the infrastructure
investment target is up to USD191 billion
for the economy to grow at its full
potential.

NEWS
One third of this will come from the
Government, in partnership with the
private sector.
Foreign investors will be able to take larger
stakes in Indonesia’s power, advertising
and pharmaceutical sectors as part of
efforts to boost the country’s slowing
economy. However, the changes require
formal presidential endorsement before
they can come into effect.
There are modifications in the “Negative
Investment List” which specifies
investment areas that are closed or
restricted to foreign participation as well
as the limit of investment.
The changes consist of the following.
• Pharmaceuticals sector
The limit on foreign investment in
pharmaceutical companies will rise
from 75% to 85%.
• Power plant projects
Foreign investors are now eligible
for full ownership of power plant
projects constructed as public-private
partnerships, where participation was
previously capped at 95%.
• Advertising agencies
Investment in advertising agencies by
groups from ASEAN member countries
will increase from 49% to 51%.
for 10 years until YA2025. Businesses
can continue to claim tax deductions/
allowances on R&D expenditure incurred
for R&D in areas unrelated to their existing
trade or business, as long as the R&D
is conducted in Singapore. The further
deduction of up to 300% on qualifying
expenditure will also be available to
businesses until YA2018, in line with
the extension of the PIC Scheme, as
mentioned above. Further tax deductions
for expenditure incurred on R&D projects
approved by the Economic Development
Board will also be extended for five years
until 31 March 2020.
Extending and refining the writing down
allowance (WDA) scheme
To build Singapore as an intellectual
property hub, the WDA on the acquisition
of qualifying Intellectual Property Rights
(IPR) will be extended for five years
until YA2020. The accelerated WDA for
Media and Digital Entertainment (MDE)
companies will be extended for three years
until YA2018.
The two categories of information:
(i) customer-based intangibles, and
(ii) documentation of work processes
will be excluded as qualifying IPRs through
a negative list. The negative list will be
published on the IRAS website by the end
of April 2014.
Extending the tax deduction scheme for
registration costs of IP
The 100% tax deduction scheme for
registration costs of IP will be extended
for five years until YA2020. The further
deduction of up to 300% on qualifying
costs will also be available to businesses
until YA2018, in line with the extension of
the PIC Scheme.
It is heartening to see tax measures in
place to assist businesses, especially
SMEs to manage cost, raise productivity
and invest in innovation. There are also
non-tax measures to help businesses to
upgrade through R&D, business process
automation, adoption of new technology
and productivity solutions. There is no
better time for business transformation
and upgrading than in this fast-moving
economy.
SINGAPORE
BUSINESSRESTRUCTURING
—TAKINGTHECUEFROM
BUDGET2014
Singapore Deputy Prime Minister
and Finance Minister Mr Tharman
Shanmugaratnam delivered the 2014
Budget Speech on 21 February 2014. The
emphasis continues to be restructuring
the economy to create quality growth
with enhancement of productivity and
innovation capabilities.
Productivity and innovation credit (PIC)
scheme
The PIC Scheme, to encourage businesses
to invest in productivity and innovation
activities, provides for enhanced tax
deductions or cash payouts. The Scheme,
which started in Year of Assessment (YA)
2011 and is due to end in YA2015, will be
extended for three years until YA2018.
Businesses will be able to claim PIC
benefits for training expenses incurred on
individuals hired under centralised hiring
arrangements with effect from YA2014.
To reinforce the condition that cash
payouts are made to businesses with
active operations, businesses will have to
meet the ‘three local employees’ condition
for a consecutive period of at least three
months prior to claiming the cash payout.
This will be effective for PIC cash payout
applications from YA2016.
New PIC+ scheme
A PIC+ Scheme will be introduced for
qualifying SMEs. This will increase the
expenditure cap from SGD400,000 to
SGD600,000 per year in each of the
six qualifying activities from YA2015 to
YA2018.
An entity will be a qualifying SME if its
annual turnover is not more than SGD100
million or its employment size is not
more than 200 workers. The combined
expenditure cap under the PIC+ Scheme
will be up to SGD1.4 million for YA2015,
and up to SGD1.8 million for YA2016 to
YA2018. The expenditure cap for PIC cash
payouts will remain at SGD100,000 of
qualifying expenditure per YA.
Extending research and development
(R&D) tax measures
To continue encouraging R&D activities,
the additional 50% tax deduction on
qualifying expenditure will be extended

NEWS
THAILAND
TAX REDUCTIONIN
PREPARATIONFORAEC
2015
With the coming of ASEAN Economic
Community (AEC) in 2015, the number
of businesses in ASEAN engaged in cross
border trade and investment is expected
to increase significantly.
Whilst one of the core elements
underpinning the AEC is the free flow of
investment and the lifting of restrictions
on ASEAN businesses trading in the region,
the AEC blueprint does not contain action
points to harmonise national tax policies.
Member nations are free to use tax policies
to compete for investment and trade
within ASEAN.
In the case of Thailand, it reduced its
corporate tax rate to 20% and lowered
personal tax rates, as part of its efforts to
improve the kingdom’s competitiveness.
The 20% corporate tax rate applies for
accounting periods commencing on or
after 1 January 2013 and by 31 December
2014 and is expected to be extended to
later years.
For small and medium enterprises (SMEs),
the first Thai Baht (THB) 300,000 of net
profit is exempt from income tax and the
next THB700,000 subject to 15% tax. Net
profits exceeding THB1 million are subject
to 20% tax.
To be eligible for the SME rates, the
following conditions must be met:
MYANMAR
SURGEINFOREIGNDIRECT
INVESTMENTS(FDI)
Myanmar is expected to achieve a total
FDI of not less than USD3.5 billion in the
fiscal year ending 31 March 2014, more
than doubling its FDI numbers for the
preceding year. The manufacturing and
telecommunications sectors attracted
about 50% and 20% of the investments
respectively. The FDI trend is set to
continue, with a projection of USD4 billion
in the next fiscal year.
Based on a survey undertaken by the
United Overseas Bank of Singapore and
disclosed at an investors’ conference held
in Yangon in February 2014, half of large
Asian enterprises view Myanmar as an
opportunity to expand their business.
According to Myanmar’s Directorate of
Investment and Company Administration,
FDI in January 2014 was about USD1
billion with Singapore being the largest
foreign investor, followed by Hong Kong,
South Korea and Japan. Myanmar expects
to establish its stock exchange in 2015.
Meanwhile, the Myanmar Ministry of
Finance and the EU Commission have
commenced negotiations to conclude a
new international arbitration agreement
that would give greater confidence to
European investors in the Myanmar
markets.
1 - 150,000
150,001 - 300,000
300,001 - 500,000
500,001 - 750,000
750,001 - 1,000,000
1,000,001 - 2,000,000
2,000,001 - 4,000,000
4,000,001 and above
Net Income (THB)
Exempt
5%
10%
15%
20%
25%
30%
35%
Marginal Tax Rate
• the company’s paid-up share capital
must not exceed THB5 million on the
last day of the accounting period; and
• the income derived from the sale of
goods or provision of services during the
accounting period must not exceed
THB30 million.
The reduced tax rate signals Thailand’s
move from a nation with one of the
highest corporate tax rates in ASEAN
to one of the lowest (Singapore has the
lowest at 17%).
Thailand also recently amended its
personal tax rates, which take effect
retrospectively from 1 January 2013.
The new personal tax rate scales are as
follows.
The top personal tax rate is reduced from
37% to 35% and the tax bands have been
increased. As an example, net income
from THB1 million to THB4 million was
previously taxed at 30%, whereas the new
scales tax net income from THB 1 million
to THB2 million at only 25% and then tax
net income from THB2 million to THB4
million at 30%.

NEWS
VIETNAM
GOODSTARTTOTHEYEAR
OFTHEHORSE
Favourable investment numbers have
been released recently by the Foreign
Investment Agency (FIA) of Vietnam.
According to the FIA, total foreign direct
investments (FDI) commitment to
Vietnam in 2013 amounted to USD22.3
billion, a 36% increase compared with
the previous year and the highest figure
since 2008. During the first two months
of 2014, 122 new projects with a total
registered capital of USD831 million were
granted investment certificates and 41
projects increased their investment capital
by a total of USD709 million.
The northern province of Thai Nguyen was
the most attractive investment location
for foreign investors, followed by the
central province of Thanh Hoa and the
port city of Hai Phong in the north. Recent
FDI trends show that the sectors preferred
by foreign investors include manufacturing
and processing, power and water supply,
real estate, transport and warehousing. A
total of 29 countries have invested into
Vietnam thus far in 2014, led by South
Korea (30%), Singapore (17%) and Japan
(17%).
In 2013, Vietnam’s exports and imports
were estimated to be USD132.2 billion
and USD131.3 billion respectively, giving
rise to a trade surplus of almost USD900
million. FDI enterprises have contributed
significantly to Vietnam’s exports in
2013 as they attained a total turnover of
USD88.4 billion, a 22.4% increase over the
previous year.
LAO PDR
JAPANESEINVESTMENTS
POUR IN
Japanese investments in Lao PDR in
2013 reached a record high of USD405.7
million, a 15% jump over 2012. Currently
Japan is ranked 6th in terms of investment
value in Lao PDR but is expected to
become the 4th largest investor in 2
years, after China, Vietnam and Thailand,
according to an official of the Ministry of
Planning and Investment.
Among the reasons cited for heightened
interest among Japanese businesses in
Lao PDR are the rising labour costs in
the larger cities in China and the political
turmoil in Thailand. Foreign investors
have tended to focus more on golf
courses and real estate, but Japanese
investors are likely to have keener interest
in manufacturing, services and agro-
forestry, observed the official. In view of
the significant increase in the number of
Japanese investors coming to Lao PDR, the
Japan External Trade Organisation (JETRO)
intends to open an office in Vientiane in
2014.
MALAYSIA
IRBUPDATESPUBLIC
RULINGONWITHHOLDING
TAX
The Inland Revenue Board of Malaysia
(IRB) in January 2014 updated its Public
Ruling (PR) on “Withholding Tax on Special
Classes of Income”. The PR (titled PR No.
1/2014) sets out the interpretation of the
IRB in respect of the tax law, policy and
procedure applicable to the subject under
consideration.
The PR explains that the income of a non-
resident derived from Malaysia from the
following special classes of income is liable
to Malaysian withholding tax:
• amounts paid in consideration of
services rendered in Malaysia by the
non-resident or his employee in
connection with the use of property/
rights belonging to him or the
installation or operation of any plant,
machinery or other apparatus purchased
from him;
• amounts paid in consideration of
technical advice, assistance or services
rendered in Malaysia in connection with
technical management or administration
of any scientific, industrial or commercial
undertaking, venture, scheme; or
• rent or other payments for the use of any
moveable property.
Where the services stated above are
performed by the non-resident both
within and outside Malaysia, a reasonable
apportionment of the income is required
as only the income attributable to
services performed in Malaysia is subject
to Malaysian withholding tax. The
apportionment could be based on the value
of services performed in Malaysia.
The withholding tax rate applicable is
generally 10% unless otherwise stipulated
in the double tax treaty between Malaysia
and the country of residence of the non-
resident person. The payer is required to
deduct and remit the withholding tax to
the IRB and pay the non-resident the net
amount. The withholding tax must be
remitted within one month upon paying
or crediting the non-resident. The payer
will be subject to penalties for failure to
remit the withholding tax; additionally,
the payment to the non-resident will be
treated as a disallowable expense for the
payer’s tax purposes.

NEWS
BRUNEI
Tel: +673 333 6589
Fax: +673 334 0010
E-mail: info@bdo-bn.com
www.bdo.com.bn
PHILIPPINES
Tel: +632 844 2016
Fax: +632 844 2045
E-mail: cpas@bdo.net.ph
www.bdo.net.ph
CAMBODIA
Tel: +855 23 218 128
Fax: +855 23 993 225
E-mail: info@bdo.com.kh
www.bdo.com.kh
SINGAPORE
Tel: +65 6828 9118
Fax: +65 6828 9111
E-mail: info@bdo.com.sg
www.bdo.com.sg
INDONESIA
Tel: +62 21 5795 7300
Fax: +62 21 5795 7301
E-mail: bdoidn@bdo.co.id
www.bdo.co.id
THAILAND
Tel: 0-2261-1251-4
Fax: 0-2261-1255
E-mail: bdo@bdo.co.th
www.bdo.co.th
MALAYSIA
Tel: +603 2616 2888
Fax: +603 2616 2970
E-mail: bdo@bdo.my
www.bdo.my
VIETNAM
Tel: +84 (0)8 3911 0033
Fax: +84 (0)8 3911 7439
E-mail: bdo@bdo.vn
www.bdo.vn
MYANMAR
Tel: +95(0)1-229023
Fax: +95(0)1-377822
E-mail: myanmar@bdo.my
www.bdo.my/myanmar
.....................................................................................................................................................................................................
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied
upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice.
Please contact BDO Tax Services to discuss these matters in the context of your particular circumstances. BDO Tax Services, its partners, employees and agents do not
accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for
any decision based on it.
BDO International Limited is a UK company limited by guarantee. It is the governing entity of the international BDO network of independent member firms (‘the BDO
network’). Service provision within the BDO network is coordinated by Brussels Worldwide Services BVBA, a limited liability company incorporated in Belgium with
its statutory seat in Brussels. Each of BDO International Limited, Brussels Worldwide Services BVBA and the member firms of the BDO network is a separate legal
entity and has no liability for another such entity’s acts or omissions. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency
relationship or a partnership between BDO International Limited, Brussels Worldwide Services BVBA and/or the member firms of the BDO network. BDO is the brand
name for the BDO network and for each of the BDO member firms.
CONTACTS
Where the withholding tax on a payment
to a non-resident is paid and borne by the
payer, the PR clarifies that the payment
received by the non-resident is considered
to be “net of tax” and has to be regrossed
to determine the amount of income on
which withholding tax should be applied.
The PR further clarifies that certain
payments to non-residents are not liable
to withholding tax stated above. These
include:
• commission paid to a non-resident
general commission agent for deals
transacted overseas on behalf of the
Malaysian payer;
• guarantee fees connected with any loan/
indebtedness;
• commission for letters of credit;
• deposit paid on the signing of an
agreement for technical services if it is
refundable upon completion of the
service;
• fee for testing services for the provision
of test results on finished products to
meet required standards which do not
involve technical advice or consultation;
and
• income for providing technical advice
or technical services to an approved
Multimedia Super Corridor (MSC) status
company.

Bdo Asean Investment Tax News_issue2_2014

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Bdo Asean Investment Tax News_issue2_2014