Asia Tax Bulletin Spring 2020 - Mayer Brown
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Asia Tax Bulletin Spring 2020
In This Edition
We are pleased to present the Spring 2020 edition of
our firm’s Asia Tax Bulletin.
While half the world is working from home as EUROPE
favourable jurisdiction for Indonesian private
a result of the global pandemic that has taken equity and investment fund investments, as it
over normal life in a matter of weeks, it is contains an exemption from Indonesian
probably only right that this edition of the Asia capital gains tax of the sale of sharesBRUSSELS
of
Tax Bulletin includes a separate ‘Coronavirus
LONDON
Indonesian companies. In the same vein, DÜSSELDORF
Measures’ section for each of the jurisdictions
PARIS
Singapore promulgated detailed legislation FRANKFURT
covered. Besides that, the first three months surrounding the long awaited Variable Capital
N FRANCISCO of a new CHICAGO
year meant budget timeNEW for a few YORK
of Company (VCC) on 15 January 2020, bringing BEIJING
PALO ALTO the jurisdictions here, specifically Hong Kong, it intoDC
WASHINGTON effect as per that date. Given its
TOKYO
India and Singapore, which even CHARLOTTE
came out attractive legal and tax features, the VCC is
LOS ANGELES with a supplementary HOUSTON
budget announcement expected to give the Cayman Islands a run for SHANGHAI
five weeks after its regular one, as the its money as the preferred jurisdiction for
DUBAI HONG KONG
coronavirus was developing at a much faster Asian investment funds going forward. HANOI
MEXICO CITY
pace than initially expected. It contained
On a final point, Thailand has introduced new MIDDLE ASIA
additional relief measures in an attempt to BANGKOK
stem the depressing economic impact.
tax incentives for investments in Special
EAST HO CHI MINH CITY
AMERICAS
Two points to note about the Indian budget
Economic Zones.
We hope you will find this useful – be safe SINGAPORE
are that (i) It abolished its dividend
and healthy!
distribution tax and replaced it with a
dividend withholding tax, which will be
BRASÍLIA *
welcomed by foreign investors, and (ii) It
With kind regards,
expanded the scope of the Equalisation Levy VITÓRIA
Pieter de Ridder
*
to cover most digital and online transactions. RIO DE JANEIRO*
In further news, Japan’s parliament has passed SÃO PAULO *
tax reform proposals into law, while Indonesia
*TAUIL & CHEQUER OFFICE
is looking to pass a tax reform through
parliament to make it more attractive to
Pieter de Ridder
foreign investors and has also signed a new Partner, Mayer Brown LLP
tax treaty with Singapore, which will, once it is +65 6327 0250
ratified by both countries, make Singapore a pieter.deridder@mayerbrown.com
2 | Asia Tax Bulletin MAYER BROWN | 3
Contents
China India Korea Singapore
6 Individual Income Tax Rule on Foreign
14 Budget 2020 27 Tax Law Amendment Proposals for 2020 37 Variable Capital Company
Source Income
8 Reduction of Social Security 18 Dispute Settlement Scheme 30 Collective Investment Vehicle Eligible for 38 Budget for 2020
Contributions Tax Treaty
19 Coronavirus Measures
39 Coronavirus Measures
8 Accounting Standards for Carbon 30 Coronavirus Tax Stimulus Measures
Emission rights 19 International Tax Developments
39 International Tax Developments
8 Temporary VAT Exemption for 31 International Tax Developments
Commodity Futures
Indonesia Taiwan
9 Import Duty and Value-Added Tax
Exemption for Key Technical Equipment
20
Malaysia
Tax Reform 40 Management Fees Charged to Branch
9 Tax Refund for Exports Increased
21 Coronavirus Tax Measures
32 Labuan Office Accounts
9 Tax Exemptions for Controlling 32 Non-Deductibility Rules on Payments
41 Incentive for Reducing Retained Earnings
Coronavirus Outbreak 21 Tax Incentives in Special Economic Zones Made to Labuan Companies
Tax by Substantial Investment
10 Deduction of Public Welfare Donations 22 International Tax Developments 33 Coronavirus Measures 41 Coronavirus Measures
34 Withholding Tax Exemption for Income
11 International Tax Developments from MSC Malaysia Status Companies
Thailand
Japan
42 Coronavirus Tax Relief Measures
Hong Kong 23 2020 Tax Reform Philippines
43 Tax Incentive for Investment in Machinery
12 Budget 2020 Reducing Profits Tax, 26 Coronavirus Measures 35 Corporate Income Tax Rate Reduction
Salaries Tax and Tax Incentives
43 VAT Bill on Foreign E-Business
26 International Tax Developments
13 Coronavirus Measures 36 REIT
44 Tax Incentives
13 International Tax Developments 36 Coronavirus Measures
44 Exemption on Income from Mutual Fund
Vietnam
45 Coronavirus Measures
4 | Asia Tax Bulletin MAYER BROWN | 5
Individual Income of an equity interest, the capital gain from that Foreign income taxes that are exempt or are
transfer is regarded as income sourced from reduced by a contracting state may be credited
Tax Rule on Foreign China; and in China if the tax treaty with that contracting
Source Income • accidental income paid and borne by foreign
state contains a tax sparing credit provision.
Unused foreign tax credit can be carried forward
enterprises or other foreign organisations.
for five years.
On 17 January 2020, the Ministry of Finance For the computation of tax payable,
and the State Taxation Administration To credit foreign taxes, the taxpayer must provide a
the following rules apply:
jointly issued a circular clarifying the certificate of tax payment for the corresponding
JURISDICTION: • foreign comprehensive income must year issued by the foreign tax authority. In cases
individual income tax treatment of foreign
source income (Circular [2020] No. 3) (the be aggregated with domestic where it is impossible to provide such a certificate,
China (PRC) Circular). The Circular applies to tax year comprehensive income; the taxpayer may alternatively present the foreign
2019 and subsequent tax years. On that tax return (or notice from the foreign tax authority
• foreign business income must be aggregated
same date, it was announced that previous for tax payment) plus the bank statement stating
with domestic business income. However,
regulations on individual income tax the tax payment transaction.
foreign losses calculated in accordance with the
treatment, i.e. Circular [2005] No. 35, SAT Individual Income Tax Law and its The statute of limitation for claiming foreign income
Public Notice [1994] No. 44 and SAT Public Implementation Rules may not be set off tax credits is five years from the year in which the
Notice [1995] No. 173, had been abolished. against domestic taxable income, but may be foreign income is earned.
The following income is regarded as income carried forward to be set off against profits
Employment income or income from personal
sourced outside China: derived from the same country or region; and
services derived by individuals resident in China
• income from services provided outside • foreign dividends, interest, bonuses, who are seconded abroad for work is subject to
China on account of holding office, rental income, capital gains and accidental withholding tax if such income is paid or borne by
employment or performance of a income must be calculated separately from the foreign unit of a Chinese institution (which
contract, etc.; domestic income. includes a Chinese domestic enterprise, other
economic organisation, foreign branch of the
• author remunerations paid and Foreign income taxes paid by an individual may be
government departments, subsidiary, embassy and
borne by foreign enterprises or credited against the Chinese tax payable on his
representative office, etc.) which files the tax return
other foreign organisations; foreign income on the basis of the per-country and
and settles the tax payment in the capacity of a
item-by-item methods. The following foreign taxes
• income from granting any kind of withholding tax agent.
are not creditable in China:
licence to be used outside China; In cases where the Chinese institution has not
• foreign income taxes incorrectly and unlawfully
• income from carrying on a business withheld the tax or the foreign unit does not belong
imposed or paid;
outside China; to a Chinese institution, the organisation seconding
• foreign income taxes the imposition and the personnel must report on the secondment to
• dividends, interest and bonuses derived collection of which contravene the provisions of the tax authority and provide information, including
from foreign enterprises or other tax treaties or tax arrangements (with Hong the name of the seconded personnel, identity
foreign organisations; Kong and Macau) concluded by China; document and the number of the identity card,
• income from leasing properties occupation, destination country or region of the
• interest, fines and penalties due to late
outside China; secondment, the name and address of the foreign
payment or underpayment of foreign
unit, the duration of the secondment, domestic and
• income from the transfer of immovable income taxes;
foreign income, and tax payments.
property located outside China or the • foreign income taxes paid by the taxpayer,
foreign transfer of other properties; Individual residents who derive income from
but which have actually been refunded or
outside China are required to report their foreign
• income from the transfer of equity compensated by foreign tax authorities; and
income between 1 March and 30 June of the year
interests in Chinese enterprises (shares, • foreign income taxes on foreign income that is following the year in which the foreign income is
shareholdings or other equity interests). tax-exempt in accordance with the Individual earned. Where the foreign tax year does not
If more than 50% of the value of the Income Tax Law and its Implementation Rules. coincide with the calendar year, the calendar year
invested enterprise is derived directly in which the last day of the foreign tax year falls
or indirectly from immovable property is considered to correspond with the Chinese
situated in China at any time within a tax year.
period of three years before the transfer
CHINA (PRC) MAYER BROWN | 7
Foreign income or foreign tax payments • The interim provisions also impose Import Duty and Value- A complete list of the products with the new refund
denominated in foreign currency must be corresponding requirements for information rates is attached to the circular, and, accordingly,
converted into CNY at the middle exchange disclosure on carbon emission rights. In its Added Tax Exemption for the “Export Refund Rates Database” is adapted to
rate on the last day of the last month. financial statements, an enterprise must present
the balance of the added “carbon emission and
Key Technical Equipment incorporate the changes. The new version of the
database is named 2020B.
decentralisation assets”. The enterprise must
Reduction of Social disclose the relevant information in detail, On 8 January 2020, five ministries of China (the
Tax Exemptions
Security Contributions including emission reduction measures, Ministry of Finance, the Ministry of Industry and
accounting policies, quota holding and Information Technology, the General Administration
of Customs, the State Administration of Taxation
for Controlling
changes, quota trading, etc. in the notes to the
At a meeting of the State Council, it was announced
that the government had decided to exempt
financial statements and ensure the accuracy and the Energy Administration) jointly issued a Coronavirus Outbreak
and authenticity of the information disclosed. circular (MoF and Customs [2020] No. 2) (the new
enterprises from, or reduce on their behalf, three Circular) on the tax policy for importing major
In order to support the prevention and control of
social security contributions, i.e. contributions to technical equipment. The circular applies from the
old-age pension insurance, unemployment Temporary VAT Exemption date of issuance.
the current novel coronavirus (2019-nCoV)
outbreak, the Ministry of Finance, General
insurance and work-related injury insurance. These
measures are intended to mitigate the adverse for Commodity Futures According to the circular, enterprises and nuclear Administration of Customs and the State Taxation
power project owners continue to be exempt from Administration have issued several circulars to grant
effects of the outbreak of Coronavirus.
tariffs and import value-added tax for importing tax exemptions. These tax exemptions are
Furthermore, enterprises may apply for a delay in To further open up the commodity futures market,
key parts and raw materials that are necessary for summarised below.
paying contributions to the housing fund. the Ministry of Finance and the State Taxation
Administration (SAT) issued a circular on the VAT the production of major technical equipment or
• From 1 January to 31 March 2020, the import
From February 2020 to June 2020, small and products supported by China. The ministries will
treatment of commodity futures, “Announcement of goods and equipment donated for
medium-sized enterprises are exempt from the jointly issue a catalogue listing the equipment and
of VAT policy to support the commodity futures preventing and controlling the 2019-nCoV
above contributions, while the contributions projects that will be eligible for exemption. Only
market” (Circular [2020] No. 12), on epidemic is exempt from import duties, VAT
payable by large enterprises are reduced by imported products listed in the catalogue are
18 February 2020. and consumption tax (Circular [2020] No. 6). In
50% during the same period. entitled to this preferential tax policy.
addition to the items mentioned in the “Interim
According to the circular, the bonded delivery of
Enterprises located in the Hubei Province are fully The previous circular (MoF and Customs [2015] No. Measures on the Tax Exemptions for Charitable
commodity futures is temporarily exempt from VAT
exempt from all social security contributions during 51) ceased to apply on 8 January 2020. In fact, the Donations of Materials” of 2015, the goods and
during the period from 30 November 2018 to 29
the same period. new Circular is an update of the circular of 2015 and equipment eligible for the exemptions have
November 2023. If the commodity futures actually
makes adjustments to the kind of equipment and been extended to reagents, disinfecting items,
delivered are imported or exported, the current
Accounting Standards for import and export tax treatment applies. The projects that are no longer eligible for exemption. protective supplies, ambulances, epidemic
prevention vehicles, disinfection vehicles and
physical delivery of futures of non-bonded
Carbon Emission rights commodities is still subject to rules as prescribed in
Tax Refund for
rescue command vehicles.
the Public Notice “Specific measures for the • Enterprises engaged in the production of key
The Ministry of Finance has issued interim collection of VAT on commodity futures” Exports Increased goods and devices used for outbreak
provisions on accounting standards for carbon (SAT Public Notice [1994] No. 244). prevention that expand their production
emission trading and rights, aiming to improve the On 17 March 2020, the Ministry of Finance and the capacity may include the expenditure on the
accuracy and comparability of carbon accounting State Taxation Administration jointly issued a purchase of new equipment as costs of the
information. Details of the provisions are circular on the increase in refund rates for value- current period. The losses suffered in 2020 by
summarised below. added tax and consumption tax on input for 1,467 enterprises in the transportation, hotel and
export products (Circular [2020] No. 15). restaurant and tourism business that are
• Carbon emission quotas obtained free of
affected by the outbreak may be carried
charge by key emission enterprises from the From 20 March 2020, the tax refund rates for 1,084
forward for eight years instead of five years.
government need not be included in the items, such as ceramic sanitary products, will be
accounts; however, quotas that have been increased to 13% (full refund rate) and the rates for • The proceeds derived from the transportation
purchased must be recorded and recognised another 380 products, such as plant growth of key goods for outbreak prevention is exempt
as assets at cost as at the purchase date. regulators, will be increased to 9%. from VAT. The VAT exemption equally applies
to public transportation services, living services
• Enterprises must include in their accounts
and the provision of courier delivery services
account 1489, “carbon emission and
for essential living supplies. Unused input VAT
decentralisation assets”, which is used
accrued from the end of December 2019 may
to report the paid carbon quota.
be refunded in full (Circular [2020] No. 8).
8 | Asia Tax Bulletin CHINA (PRC) CHINA (PRC) MAYER BROWN | 9
• Donations in cash or in kind for fighting the Deduction of Public An individual taxpayer is free to determine the
2019-nCoV are fully deductible in computing order of items of income from which donation
enterprise income tax. Donations to hospitals Welfare Donations payments are deducted. If one item of income is
of self-produced or contractual processed not sufficient for deduction purposes, the unused
goods or purchased goods through charitable On 31 December 2019, the Ministry of Finance and deduction amount can be transposed and
organisations or the local governments at the the State Administration of Taxation (SAT) issued a deducted from another item of income in the same
county level are exempt from VAT, consumption circular (Circular [2019] No. 99) updating the rules period. However, the deductible amount is limited
tax, urban maintenance and construction tax, on the deduction of public welfare donations for to 30% of the annual taxable comprehensive or
education surcharge and local educational individual income tax purposes. The new rules business income, and to 30% of the monthly
surcharges (Circular [2020] No. 9). retroactively apply from 1 January 2019. taxable income for other types of income. Business
income that is taxed on a deemed profit basis is
• Contingent allowances and bonuses received Payments made by individuals through designated
excluded from the deduction.
by medical personnel and workers involved in non-profit organisations for public welfare purposes
epidemic prevention and control according to such as education and poverty alleviation are Subject to a 30% ceiling, non-resident individuals
the standards set by the government are deductible in determining taxable income for may equally deduct their donations made through
exempt from individual income tax. Non-cash individual income tax purposes. public welfare organisations from their Chinese
grants of medicine, medical products and source income.
The amount of donations must be determined
preventive utensils provided by employers are
as follows: Individuals claiming deductions are required to file
not included in taxable income in computing
a form detailing the donations together with their
individual income tax (Circular [2020] No. 10). • in the case of monetary donations, the amount
tax return (or withholding tax return field by a
of donations will be the actual amount donated;
• Donations in cash or in kind for fighting the withholding tax agent) and keep the receipts
2019-nCoV are fully deductible in computing • in the case of share equity or real estate, the from public welfare organisations for a period
individual income tax. Sole traders donating amount of donations will be the original value of five years.
self-produced or contractually processed of the property; and
goods or purchased goods to hospitals through
charitable organisations or the local
• in the case of non-monetary assets other than International Tax
share equity and real estate, the amount of
governments at the county level are exempt
donations must be based on the market value Developments
from VAT, consumption tax, urban maintenance
of the assets concerned.
and construction tax, education surcharge and HONG KONG
local educational surcharges Public welfare donations made by individuals may According to press release of 4 March 2020,
(Circular [2020] No.9). be deducted from the following types of income: published by the Hong Kong Inland Revenue
• Circular [2020] No.6 applies from 1 January to • rental income; Department, a competent authority arrangement
31 March 2020. Circulars [2020] No. 8, No. 9 on the exchange of country-by-country (CbC)
• income from the transfer of property; reports between China and Hong Kong has been
and No. 10 apply from 1 January 2020 to an
undefined date. • dividend and interest income; signed and entered into force. The agreement
applies to accounting periods beginning on or
• accidental income; after 1 January 2018.
• comprehensive income (wages and salaries,
with the exception of year-end bonuses,
authors’ remuneration, income from personal
services, royalties); and
• business income.
10 | Asia Tax Bulletin CHINA (PRC) CHINA (PRC) MAYER BROWN | 11
Budget 2020 Reducing • Continuing to offer enhanced tax deduction for International Tax
qualifying research & development (R&D)
Profits Tax, Salaries Tax expenditure (a 300% tax deduction for the first Developments
HK$2 million qualifying R&D expenditure and a
200% deduction for the remainder). CHINA
The Financial Secretary presented Hong
Kong’s annual budget on 26 February 2020. According to press release of 4 March 2020,
• Amending the relevant legislation to provide
He proposed a one-off reduction of profits published by the Hong Kong Inland Revenue
tax concessions for the ship leasing business,
tax, salaries tax and tax under personal Department, a competent authority arrangement
including offering a profits tax exemption to
assessment for the year of assessment on the exchange of country-by-country (CbC)
JURISDICTION: qualifying ship lessors and a half-rate profits tax
2019/20 by 100%, subject to a ceiling of reports between China and Hong Kong has been
concession to qualifying ship leasing manager.
signed and entered into force. The agreement
Hong Kong
$20,000 per case. This measure will be
effected by amending the Inland • Amending the relevant legislation to reduce applies to accounting periods beginning on or
Revenue Ordinance. profits tax rate by half for eligible insurance after 1 January 2018.
businesses including marine insurance.
For profits tax, the ceiling of the tax
reduction is applied to each business. For • Exploring other tax measures to attract
salaries tax, the ceiling is applied to each more global shipping business operators
individual taxpayer; but for married couples and commercial principals to set up business
jointly assessed, the ceiling is applied to in Hong Kong.
each married couple (i.e. capped at $20,000
in total). For personal assessment, the
ceiling is applied to each single taxpayer or
Coronavirus Measures
married person who elects for personal
assessment separately from his/her spouse. • Disburse HK$10,000 to each Hong Kong
If a taxpayer elects for personal assessment permanent resident aged 18 or above.
jointly with his/her spouse, the tax • Waive the business registration fees
reduction is capped at $20,000 for the for 2020-21.
married couple.
• Waive registration fees for company annual
The proposed tax reduction is not returns for two years.
applicable to property tax. Individuals
with rental income, if eligible for personal • Concessionary low-interest loan is introduced
assessment, may be able to enjoy such with 100% government guarantee for
reduction under personal assessment. enterprises, which will be open for application
for six months. Maximum loan of HK$2 million
The Financial Secretary also proposed with repayment period up to three years.
the following: Moratorium on principal repayment for
• Waiving business registration fees for first six months.
the year 2020-21. • Issue inflation-linked retail bonds and Silver
• Waiving stamp duty on stock transfers Bonds totalling not less than HK$13 billion.
paid by the Exchange Traded Fund A one-off reduction of 100% of the salaries tax
(ETF) market makers when creating and and tax under personal assessment has been
redeeming ETF units in Hong Kong. proposed for 2019/20, subject to a maximum
• Establishing a limited partnership reduction of HK$20,000. The reduction will be
regime and provide tax concessions for deducted directly from the taxpayer’s 2019/20
carried interest issued by private equity final tax payable.
funds to attract fund managers to
domicile and operate in Hong Kong
(currently, the IRD considers
carried interest as income for
services rendered).
HONG KONG MAYER BROWN | 13
Budget 2020 • From a cash extraction perspective, historically, government securities has been extended
interest gave a better outcome, due to being up to 30 June 2023 and also applies for
generally tax-deductible and subject to tax municipal bonds.
The Indian Finance Minister (FM) presented
treaty reduced withholding (where credit was
the Budget for financial year (FY) 2020-21 • To incentivise listing of bonds at the
available). However, thin cap rules on such
on 1 February 2020. Amidst the continuing International Financial Services Centre (IFSC)
interest deductibility were a damper. With the
economic slowdown, there were huge exchange, the withholding rate has been
abolition of DDT and tax in the hands of the
expectations from this Budget for reviving reduced to 4% on interest payments made
shareholder, preference share-like structures
the spirit of the economy. on bonds listed on this exchange.
JURISDICTION: are worth exploring. To remove the cascading
Some of the key changes introduced in the effect, the dividends received by a holding
TAX BENEFITS FOR START-UPS
India
Budget are as follows: company from its subsidiary will be allowed as
a deduction, subject to certain conditions. • To boost the start-up ecosystem, the tax
ABOLITION OF DIVIDEND burden for employees of such start-ups is
• In case of Business Trusts, dividends declared eased through deferral of tax payments on
DISTRIBUTION TAX (DDT)
by SPV’s were exempt from DDT. Such employee stock option plans (ESOPs) by
• In a bold move to increase foreign dividends were exempt in the hands of the five years, or until employees leave the
investment into the country, India’s business trust and onward distribution was also company or sell their shares, whichever
government announced the withdrawal exempt in the hands of the unit holders/ is earlier.
of its dividend distribution tax (DDT, investors. With the abolition of DDT, the
approx. 21%) when it issued the Indian amendments propose that the business trust is • 100% deduction of profits for three consecutive
Budget for 2020. According to the required to withhold taxes on such dividends years out of 10 years is allowed if the total
Budget proposal, the DDT will with distributed to unit holders/investors. Further, turnover does not exceed INR 1 billion.
effect from 1 April 2020 be replaced by the unit holders/investors would be subject to Other changes include:
a 20% dividend withholding tax (similar tax on such dividends (domestic investors –
in nature to what China, Japan, Korea, at applicable rates, non-resident investors – • To attract investment in the power sector, the
the US and many other countries in the at treaty rates). concessional corporate tax rate of 15% has
world have). In brief, this means that been extended to include companies engaged
foreign investors can, where DIGITAL ECONOMY TAX CHANGES in the generation of power/electricity.
appropriate, significantly reduce the
• It is proposed that a 1% withholding tax will be • To bring parity between co-operative societies
Indian tax cost of their investment by
due on the gross amount of the proceeds paid and companies, co-operatives will have the
making the investment from a
by an e-commerce operator to an e-commerce option to pay income tax at a lower tax rate of
jurisdiction that has a favourable tax
participant (seller) for the sale of goods or 22% plus applicable surcharge and cess,
treaty with India. Potential candidates
services on the operator’s platform. The rate subject to certain conditions.
for that are Singapore, the Netherlands
will be 5% if the seller does not provide a PAN
and Hong Kong, who each have good- • Introduction of mechanism for Advance Pricing
or Aadhaar number.
quality tax treaties with India as well as Agreements (APA) and Safe Harbour Rules
the necessary home tax and other (SHR) in respect of profit attribution to
TAX CONCESSION FOR OTHER FOREIGN
qualities one would be looking for in permanent establishments (PE).
INVESTMENTS
order to make it work in practice. This is
• The concessional withholding tax rate under • Changes to the test for residency under section
a very important development for
section 194LC of the Income Tax Act 1961 6 of the Act in respect of stateless persons.
foreign investors as it changes the way
they will structure their investments. (the Act) for interest payments made to • Amendments pertaining to tax
Foreign investors with existing Indian non-residents in respect of funds borrowed administration/litigation.
investments may want to restructure in and bonds issued has been extended up
to 30 June 2023. • Extension of the sunset period for beneficial
order to reduce their Indian tax cost.
rates of withholding tax on interest payments
However, any changes of existing • The period of concessional withholding under under section 194LC/LD of the Act.
holding structures must be carefully section 194LD of the Act for interest payments
prepared in order to achieve the made to foreign portfolio investors (FPIs) and
desired effect. qualified foreign investors (QFIs) in respect of
bonds issued by Indian companies and
14 | Asia Tax Bulletin INDIA MAYER BROWN | 15
INDIVIDUAL TAX • Keeping in view the needs of the micro, small • An amendment will be made to section 194N of • To ensure that section 10(23) institutions do not
• To provide significant relief to individual and medium-sized enterprises (MSME) sector, the Income-tax Act, 1961 with effect from 1 July avail dual benefit (exemption of income as well
taxpayers and to simplify income tax law, a new customs duty has been raised on items such as 2020 as follows: as application of income), corpus donations by
simplified personal income tax regime has been footwear and furniture. a fund or trust or institutions to another
>> tax on cash withdrawals of over INR 2 million
introduced. The new regime is optional. such fund will not be considered application
• The imposition of nominal health cess by way of will be 2% if the tax return has not been filed
However, taxpayers will have to forego certain of income.
customs duty on imports of medical equipment for three years; and
deductions and exemptions. The proposed tax
has been introduced to generate resources for • The concessional tax regime can be opted by
structure under the new regime is as follows: >> tax on cash withdrawals of over INR 10 million
health services. taxpayers having income from a profession as
will be 5% if the tax return has not been filed
well, similar to the option available to taxpayers
• Custom duty rates are revised on electric for three years.
earning income from business (amendment to
Taxable income (INR) New tax rate vehicles and mobile phone components.
• No tax is levied on income arising from section 115BAC of the Income-tax Act, 1961).
• Customs duty on imports of newsprint and e-commerce supply on which equalisation levy
Up to 250,000 Exempt • No exemption will be available to a unit holder
lightweight coated paper has been reduced is chargeable (amendment to section 10(50) of
of business trust in respect of a dividend
251,000 – 500,000 5% from 10% to 5%. the Income-tax Act, 1961).
received from a special purpose vehicle (SPV) if
500,001 – 750,000 10% • The anti-dumping duty on PTA (input for textile • The tax collected at source (TCS) on such SPV has not exercised the option of
750,001 – 1,000,000 15% fibres and yarns) has been abolished. Liberalized Remittance Scheme (LRS) will section 115BAA of the Income-tax Act, 1961
be relaxed as follows: (amendment to section 115BAA of the
1,000,001 – 1,250,000 20% • As a revenue measure, excise duty by way
Income-tax Act, 1961).
of national calamity contingent duty on >> no tax will be levied in respect of export or
1,250,001 – 1,500,000 25%
cigarettes and other tobacco products has import of goods; • The tax exemption for sovereign wealth funds is
Above 1,500,000 30% been increased. extended to pension funds with regard to
>> tax will be levied at 5% only on the amount in
infrastructure investment (amendment to
• On 23 March 2020, the Lok Sabha (Lower excess of INR 700,000, except where a
section 10(23FE) of the Income-tax Act, 1961).
House of Parliament) passed the Finance Bill remittance has been made for overseas tour
INDIRECT TAX 2020 (the Bill) with amendments. The key program package;
TRANSFER PRICING
The following measures are proposed: amendments are summarised below.
>> a lower rate of 0.5% applies where the amount • ‘Safe harbour’ for the purposes of section
• A simplified return will be implemented from 1 is being remitted out of India as a loan, 92CB of the Income-tax Act, 1961 will cover
INCOME TAX
April 2020 with features like SMS-based filing obtained from a banking company, banking the transfer price or income, deemed to
• The following provisions relate to institution, financial institutions notified under
for nil return, return pre-filling and improved accrue or arise under section 9(1)(i), declared
residence status: section 80E of the Income-tax Act, 1961 for the
input tax credit flow. by the assessee.
>> the concession for the period of stay in India for purposes of education; and
• The refund process has been simplified and
an Indian citizen and a person of Indian origin >> applicability of the amendments made to TCS EQUALISATION LEV Y
automated with no human interface.
will be reduced from 182 days to 120 days; and provisions will be deferred from 1 April 2020 to • The equalisation levy of 2% is chargeable on
• Effective from February 2020, electronic 1 October 2020. non-resident e-commerce supply, except in the
>> an Indian citizen will be deemed to be resident
invoicing will be implemented in a phased following cases:
in India only if his total income, other than • Royalties in respect of the exhibition of
manner, and on an optional basis, to facilitate
income from foreign sources, exceeded INR 1.5 cinematographic films will be subject to TDS at >> for e-commerce operators with a permanent
compliance and return filing.
million in the previous year. a rate of 2% under section 194J of the Income- establishment in India;
• To improve tax compliance, the use of a tax Act, 1961.
• The tax deducted at source (TDS) rate on >> for online advertisement service covered under
dynamic QR code is proposed for consumer
payment of dividend to a foreign company, • No TDS will be levied, under section 194K of section 165 of the Finance Act, 2016; and
invoices in which goods and services tax (GST)
non-resident Indian or other non-resident the Income-tax Act, 1961 from capital gains
parameters will be captured for payments >> if the consideration is less than the threshold
person will be 20% with effect from 1 October arising on the transfer of units of mutual funds.
made through the QR code. limit of INR 20 million (aggregate and not
2020. However, this is subject to the provisions
• Customs duty exemptions will be included in the relevant tax treaties that India • The scope of section 80M of the Income-tax buyer-specific).
comprehensively reviewed by September 2020, has concluded with other countries. Act, 1961 will be expanded to include dividend
• The Finance Bill will be enacted into law when it
and suggestions are invited for aligning them received from a foreign company and business
• Dividend received on or after 1 April 2020 will is passed by the Rajya Sabha (Upper House of
with the needs of changing times and ease of trust. Companies opting for the new tax regime
not be taxable as income of the shareholder if Parliament) and assent is given by
doing business. will be eligible for deduction under the said
tax has already been paid on such dividend the President.
section from assessment year 2021-22.
under section 115-O or section 115BBDA of the
Income-tax Act, 1961, (amendment to section
10(34) of the Income-tax Act, 1961).
16 | Asia Tax Bulletin INDIA INDIA MAYER BROWN | 17
Table 1
Dispute Settlement Scheme Mechanism for carry forward and/or set off of
Where payment is made up to Where payment is made after
losses: In case where the returned loss is reduced Cases
31 March 2020 31 March 2020
as a result of additions (this would apply for
On 1 February 2020, the Finance Minister
reduction in Minimum Alternate Tax (MAT) Search cases involving Payment of 125% of disputed tax Payment of 135% of disputed tax
announced the dispute settlement scheme (“Vivad dispute relating to tax,
credit also.), the taxpayer would have the Waiver of interest and penalty Waiver of interest and penalty
se Vishwas” Scheme) in Parliament. Following the interest, penalty, etc.
following options:
announcement, the Direct Tax Vivad se Vishwas Bill,
2020 (the Bill) was introduced. The Bill was • pay the notional tax on the amount by which Other than search cases Payment of 100% of disputed tax Payment of 110% of disputed tax
where dispute involves tax,
subsequently revised to widen the scope and the loss has been reduced and carry forward interest, penalty, etc. Waiver of interest and penalty Waiver of interest and penalty
reduce the compliance burden for taxpayers, and the claimed loss without reduction; or
was passed by the Lok Sabha (Lower House of Payment of 25% of disputed Payment of 30% of disputed
• accept the reduced carry forward of loss Where dispute relates to
Parliament) on 4 March 2020 and by the Rajya only interest, penalty or levy interest, penalty or fee interest, penalty or fee
without making any payment.
Sabha (Upper House of Parliament) on Waiver of balance 75% Waiver of balance 70%
13 March 2020. The revised Bill received the Settling of disputes regarding transfer pricing
President’s assent on 17 March 2020. Some of adjustment would not have any effect on the Where payment is made up to Where payment is made after
Cases
31 March 2020 31 March 2020
the key provisions of the Act are given below. secondary adjustment.
Search cases involving Payment of 62.5% of disputed tax Payment of 67.5% of disputed tax
The scope of the Act has been expanded to cover Cases outside the ambit of the Scheme: dispute relating to tax,
the following: interest, penalty, etc. Waiver of interest and penalty Waiver of interest and penalty
• search cases where disputed tax is more than
• orders for which the time limit for filing an INR 50 million;
Other than search cases Payment of 50% of disputed tax Payment of 55% of disputed tax
appeal had not expired as at 31 January 2020; where dispute involves tax,
• prosecution cases; interest, penalty, etc. Waiver of interest and penalty Waiver of interest and penalty
• cases pending before the Dispute Resolution
• cases involving undisclosed foreign income
Panel (DRP) as at 31 January 2020, including Payment of 12.5% of disputed Payment of 15% of disputed
and/or assets; Where dispute relates to
cases where the DRP had issued directions on only interest, penalty or levy interest, penalty or fee interest, penalty or fee
or before 31 January 2020, but no order had • proceedings based on information received Waiver of balance 87.5% Waiver of balance 85%
been passed; from other countries;
• a revision petition pending before the • cases covered under certain laws such as
Commissioner of Income-tax (CIT) under Conservation of Foreign Exchange and
section 264 of the Income-tax Act, 1961 on 31 Prevention of Smuggling Activities Act, Coronavirus Measures SAMOA
January 2020; and On 12 March 2020, the India-Samoa Exchange of
1974, Unlawful Activities (Prevention) Act,
Information Agreement was signed in Apia (Samoa).
1967, the Prevention of Corruption Act, On 24 March 2020, the Minister of Finance
• search cases where the disputed demand is
1988, the Prevention of Money Laundering announced the following measures:
less than INR 50 million, computed year-wise. BRUNEI
Act, 2002, the Prohibition of Benami
• Due date for filing belated returns and revised On 30 January 2020, the Brunei-India Exchange of
Payment terms under the Scheme: Property Transactions Act, 1988;
return for tax year 2018-2019 has been Information Agreement entered into force. The
• Appeals filed by the assessee • proceedings under the provisions of the Indian extended from 31 March 2020 to 30 June 2020. agreement generally applies from 1 January 2017
Penal Code; and
• Appeals filed by the Department or where the • The deadline for Aadhar-PAN linking for the automatic exchange of information (article
Department has lost an issue earlier (See Table 1) • cases relating to persons notified under section requirement shall also be extended from 31 5A) and from 30 January 2020 for other taxes.
3 of the Special Courts (Trial of Offences March 2020 to 30 June 2020. Thus, PAN shall
• Provision of refund of excess tax paid by the
Relating to Transactions in Securities) Act, 1992. not be treated as inoperative till 30 June 2020 CHILE
taxpayer before filing declaration over the
even if not linked with Aadhar. According to a press release of 11 March 2020,
amount payable under the Scheme.
published by the Chilean Ministry of Finance, Chile
The revised Scheme will not set any precedence for
any other proceedings and does not allow filing of International Tax and India have signed an income tax treaty.
declaration issue-wise. Developments
Proof of withdrawal of appeal and/or writ would be
intimation of payment before the issuance of final
BRAZIL
certificate for settling dispute and not the
declaration. Appeals by the Department also to be On 25 January 2020, India signed a social security
withdrawn before the issuance of final certificate for agreement with Brazil in New Delhi.
settling dispute.
18 | Asia Tax Bulletin INDIA INDIA MAYER BROWN | 19Tax Reform • Foreigners exercising employment in Indonesia • Businesses that invest in the main business
will only be taxed on the income sourced in activity as set by the national council may enjoy
Indonesia for the first four years. a reduction in corporate income tax on the
On 11 February 2020, the Directorate
income derived from the business activity.
General of Taxation announced that the • Relaxations will be introduced for the ability to
Ministry of Finance had submitted the credit input VAT where they are not creditable • Value-added tax and sales tax on luxury goods
proposed Law on Tax Provisions and currently. There will also be a reform of the will be exempted for the following:
Facilities to Strengthen the Economy, also current administrative sanctions (2% per month)
>> provision of certain taxable tangible and/or
known as the Omnibus Bill on Taxation which are proposed to be replaced by an
JURISDICTION: intangible goods in the SEZ by the
(the Bill) to the House of Representatives interest market rate.
entrepreneurs of other places in the customs
on 31 January 2020. Details of the
Indonesia
areas (TLDDP) (i.e. customs areas other than
proposals are yet to be issued.
Coronavirus Tax Measures free areas and bonded collection areas) or
The Bill seeks to boost the economy by other than TLDDP, to businesses in the SEZ;
proposing several tax measures that include
On 13 March 2020, the Coordinating Ministry for >> importation of certain taxable goods by
changes to the corporate income tax rates
Economic Affairs announced tax measures under its businesses in the SEZ;
and introduce tax incentives.
second economic stimulus package to address the
>> provision of certain taxable goods between
• The corporate income tax rate will be impact of Covid-19.
businesses in the SEZ;
gradually reduced to:
The following measures have been proposed to be
>> provision of taxable services and/or intangible
>> 22% in tax years 2021 and 2022; and made available for six months from April 2020 to
goods including rental services for lands and/or
September 2020:
>> 20% in tax year 2023. buildings for a minimum period of five years in
• manufacturing workers with annual income of the SEZ by businesses to other businesses in
• The corporate income tax rate for
less than IDR 200 million will be exempted from the same SEZ or a different SEZ;
public listed companies will be reduced
income tax;
by a further 3% with effect from tax >> provision of certain taxable services by
year 2021. • corporate taxpayers from 19 specific sectors businesses from TLDDP or other than TLDDP to
will be entitled to: businesses in the SEZ; and
• Dividends received by individuals as
well as companies in Indonesia will be >> an exemption from import taxes; and >> consumption of taxable intangible services
exempt from income tax, provided that and/or taxable goods from outside customs
>> a corporate tax reduction of 30%; and
the dividends are re-invested in area within the SEZ by businesses.
Indonesia for a certain period of time. >> corporate taxpayers from 19 specific sectors
• Importation of capital goods for the
will be entitled to an accelerated VAT refund.
• Amendments will be made to the development of the SEZ by the businesses will
The maximum limit for VAT refunds will be
withholding tax rate on interest paid to be exempted from import duties, subject to
increased from IDR 1 billion to IDR 5 billion for
overseas lenders (the rate will be conditions.
non-exporters. No limit is set for exporters.
reduced to a rate below 20%).
• A reduction of between 50% to 100% on
• Tax incentives, including tax holidays,
super deduction and local tax facilities
Tax Incentives in Special regional taxes or regional levy will be available
to the businesses in the SEZ.
will be introduced and consolidated. Economic Zones
• A tax on ecommerce transactions
conducted by sellers or overseas Government Regulation Number 12 of 2020 (the
marketplaces will be introduced. regulation) regarding the incentives available for
special economic zones (SEZ) was promulgated on
• Rationalisation of local taxes will be
24 February 2020 and came into effect on the same
introduced, including the removal of
date. The regulation aims to boost investment and
local regulations that hamper
accelerate implementation of doing business in
investment in Indonesia.
the SEZ that can support national economic
• Amendments will be made to the types development in certain regions and for
of goods that are subject to excise duty. job creation purposes.
20 | Asia Tax Bulletin INDONESIA MAYER BROWN | 21International Tax 2020 Tax Reform
Developments The ruling parties in Japan published their
2020 tax reform proposals (‘2020 tax
proposals’) on December 12, 2019. On 27
SINGAPORE
March 2020, parliament (the Diet) passed
On 4 February 2020, Indonesia and Singapore and enacted the 2020 tax reform bill, which
signed a new double tax treaty. The treaty still has includes, inter alia, the transition of
to be ratified by both countries. It contains a 10% JURISDICTION: corporate tax filing from a consolidated tax
withholding tax rate on dividends, interest and filing regime to a new group income and
Japan
royalties but interestingly prevents capital gains tax loss-sharing regime. The tax reform bill
if a shareholder of one country sells or transfers includes the following:
shares of a company in the other country.
This would make Singapore a tax-efficient holding ABOLISHMENT OF CONSOLIDATED
jurisdiction for investors (e.g. private equity TAX SYSTEM AND INTRODUCTION OF
investors or investment funds) who attach GROUP TAX RELIEF SYSTEM
importance to avoiding tax on capital gains. An
• The introduction of group tax relief
exception applies if the company is a real property
would allow domestic corporations to
company. Another interesting change is that the
allocate profits and losses between
requirement to remit income to the other country in
companies within a 100% Japan-
order to benefit from the reduced withholding tax
parented group. The new law would be
rate has been withdrawn. In line with the BEPS
effective for fiscal years beginning on or
movement, the treaty contains a special
after April 1, 2023. The proposals would
anti-avoidance clause, which denies the tax treaty
introduce measures to transition from
benefits if one of the main reasons for the structure
the current consolidated tax system.
is to benefit from the tax treaty. This reinforces the
The basic rules for applying group
need to have proper business purpose underlying
tax relief essentially would be the
the structure.
same as under the current consolidated
tax system.
• However, under the new system for
group tax relief, the parent corporation
and each subsidiary would file their own
(blue form) corporate tax return. These
tax returns also would need to be filed
through the e-tax system. Under group
tax relief, proposed measures would be
provided to calculate, among other
items, the allocation of current profit
and loss and losses carried forward to
the group member corporations, and
adjustments to the book value of
subsidiary corporations, as well as the
valuation of assets owned and (dis)
allowance of losses carried forward,
upon entry or exit from the group or
beginning or termination of group tax
relief. In contrast to the current
consolidated tax system, under group
tax relief, certain income or tax credits
would be calculated on a stand-alone
22 | Asia Tax Bulletin INDONESIA MAYER BROWN | 23entity basis to reduce the administrative • The application of special rules permitting • Non-deductible interest under the MODIFICATIONS TO EXPAND THE SCOPE OF
burden on group corporations. On the other deduction of entertainment expenses would be earnings stripping rules would exclude INTEREST PAYMENTS WITHIN THE SCOPE OF
hand, certain tax measures would be extended by two years. However, corporations certain interest paid by a Japanese THE EARNINGS STRIPPING RULES TO
determined on a group basis (e.g., the amount with capital greater than JPY10 billion no longer corporation to a Japanese permanent ACCOUNT FOR THE BRANCH / HEAD OFFICE
of R&D credits). To align with the proposed would qualify for the 50% deduction for establishment of a foreign corporation. TREATMENTS OF THE INCOME RECIPIENT
changes, the current rules of the ‘group entertainment expenses. • Interest expense where the income recipient is
• The reporting system for automatic exchange
taxation regime’ would be reviewed, including subject to Japanese taxation is excluded from
of country-by-country reports of non-residents
the dividend income exclusion, donation TAX PROPOSALS RELATED TO SMALL AND the deductibility restrictions under the earnings
would be reviewed.
expenses, bad debt allowances, and capital MEDIUM ENTERPRISES (SMES), REGIONAL stripping rules. Under the 2020 tax reform
gain deductions arising from the transfer of REVITALISATION, ETC. proposals, where the economic benefits arising
MODIFICATIONS TO LIMIT CLAIMS FOR
assets intragroup. • The proposals would extend for two years the from debt claims held by a foreign corporation’s
FOREIGN TAX CREDITS (FTCS) TO ACCOUNT
application of special rules permitting permanent establishment in Japan are planned
FOR FOREIGN TAX CHANGES AND CHARGES
INVESTMENT IN OPEN INNOVATION deductions for entertainment expenses by to be transferred to its head office, interest
ON SPECIFIED INCOME INCLUDING THAT OF
CORPORATIONS AND OTHER POLICY SMEs. The current rules relating to deductions payments on such debt claims would be
THE US BASE EROSION AND ANTI-
MEASURES for small depreciable assets by SMEs would be included within the scope of interest payments
AVOIDANCE TAX (BEAT)
• Establishment of a tax system to promote extended for two years, although the proposals (and thus restricted) under the earnings
• Foreign taxes imposed on income that is not stripping rules.
investment in open innovation corporations: would narrow the scope of corporations to
recognised as taxable income in Japan is
Where a corporation engaging in specified which the rules apply. The two-year extension
excluded from foreign taxes subject to the FTC SPECIAL RELIEVING TAXATION MEASURES
business activities acquires the shares of a would be subject to (1) review of the
regimes. Under the 2020 tax reform proposals, FOR JAPANESE REAL ESTATE INVESTMENT
venture company (as certified by the Ministry of requirements to apply the special rules
the scope of foreign taxes subject to the FTC TRUSTS (‘J-REITS’)
Economy, Trade and Industry) by contributing and (2) the strength of the regional tax system.
rule would be further restricted by excluding:
equity over a period of time, and accounts for • Japan’s CFC tax regime. When J-REITs are
that investment as a tax special account, the INTERNATIONAL TAXATION >> foreign taxes imposed on a foreign subsidiary’s subject to Japan’s CFC tax regime, foreign
investor corporation (i.e., the corporate • Measures to prevent tax avoidance through the income where deemed for foreign tax purposes taxes imposed on its CFCs’ income would be
shareholder) would be permitted to take an payment of dividends and subsequent transfer as the Japanese corporation’s income in the deemed as paid by the J-REITs and could be
income deduction. Specified business activities of shares in subsidiaries. foreign jurisdiction; and utilised to offset withholding tax on dividends
are those that aim to develop new businesses, paid by J-REITs to their shareholders. This
• If the dividend received from an affiliated >> foreign taxes imposed on deemed income
are expected to be highly productive, or that amendment will be effective for CFC fiscal
subsidiary (i.e., a subsidiary with a specified earned by foreign branch offices of Japanese
make use of management resources other than periods ending on or after April 1, 2020.
control relationship on the date of the dividend corporations where payments from foreign
those of the company itself (i.e., by investment
resolution) exceeds 10% of the book value of offices to a head office, etc., are disregarded. • Extension of concessionary measures regarding
into other corporations).
the shares of that affiliated subsidiary, the book This latter change in particular affects the renewable energy facilities. Where a J-REIT
• Establishment of a tax system to promote the value of the affiliated subsidiary would be Japanese tax treatment of US taxes arising acquires renewable energy facilities on or
introduction of 5G technology: Accredited reduced. That is, any capital gain on the under the BEAT provisions. This amendment before 31 March 2020, a concessionary
corporations would be entitled to elect either a transfer of the shares cannot be reduced would apply on or after 1 January 2022 for treatment is permitted to be included as
30% special depreciation rate or a 15% tax through dividend payment. individual income tax and for fiscal years qualifying assets (for dividend deductibility
credit when they invest in infrastructure to beginning on or after 1 April 2021 for test purposes) for fiscal periods ending on
promote the introduction of 5G technology, • Calculation of a controlled foreign corporation tax. and before 10 years after the date of leasing
and when they put that infrastructure into use, corporation’s (CFC’s) income with partial these facilities. This acquisition period would
within a certain period of time. income aggregation. be extended for an additional three years
• Interest received from suppliers to whom ending 31 March 2023.
• The threshold investment amount for the
application of certain tax incentives designed financing was provided would be excluded
to promote investment, such as R&D tax from a CFC’s aggregated taxable income.
incentives and tax credits related to • The scope of creditable foreign tax
improvements in productivity, would increase payments under the foreign tax credit
for large corporations. regime would be reviewed.
24 | Asia Tax Bulletin JAPAN JAPAN MAYER BROWN | 25MODIFICATIONS TO EXCLUDE FROM
CONCESSIONARY SEPARATE TAXATION
Tax Law Amendment
DERIVATIVES WHERE WRITTEN OVER Proposals for 2020
CRYPTOCURRENCY
• Where individuals trade/settle derivative During the last two weeks of December
transactions, etc., separate taxation at a 2019, the National Assembly approved
20.315% flat rate generally is applied when various bills on tax law amendments (the
filing individual tax returns. Under the 2020 tax amendments) submitted by the Ministry of
reform proposals, derivative transactions JURISDICTION: Economy and Finance (MOEF).
related to crypto currencies would be
Korea
specifically excluded from this separate CORPORATE TAX
taxation. This aligns the treatment of the • Under the current CITL, where rights
derivatives where the crypto currency is its (patent rights, etc.) registered overseas
reference asset with the holding of are used for the manufacture or sale of
cryptocurrencies directly. goods in Korea (Rep.) (Korea), such
rights are deemed to be used in Korea.
Coronavirus Measures Accordingly, consideration paid for the
use of rights registered overseas that
are deemed to be used in Korea are
On 27 February 2020, in light of Covid-19, the
Korean-sourced royalties. However, the
National Tax Agency of Japan announced
Supreme Court has consistently held
individual income tax and gift tax return extensions,
that consideration for the use of patents
and delayed individual consumption tax filing
not registered in Korea (patents
deadlines and payments. The deadline for the
registered overseas) cannot be
submission of individual income tax and gift tax
regarded as “consideration for the use
returns for 2019 is extended for one month to
of, or the right to use, patents” based
16 April 2020 from 16 March 2020. The filing
on the territorial principle that patents
deadlines for individual consumption tax returns
are effective only in the country where
and payments are delayed by a half-month until
they are registered. As a result, the CITL
16 April 2020.
has been amended to allow Korea to
tax the consideration paid for the use of
International Tax rights pertaining to manufacturing
methods, technology, information, etc.
Developments associated with patent rights not
registered in Korea. This will be
accomplished by classifying such rights
MOROCCO
as “other like property or rights” to
On 8 January 2020, Japan and Morocco signed a ensure Korean sourced “royalty”
double tax treaty and an investment protection treatment under Korea’s tax treaties
agreement, in Rabat. (including the Korea-United States
Income Tax Treaty). However, disputes
are expected to arise as to whether the
amendments will allow patent rights not
registered in Korea to be taxed as
Korean-sourced royalties without the
applicable tax treaty having to be
amended first. The amendments will be
effective for the use of rights paid after
1 January 2020.
26 | Asia Tax Bulletin JAPAN MAYER BROWN | 27You can also read
