2017 asia pacific tax complexity survey – deloitte · pdf fileand business model •...

Shifting sands: risk and reform in uncertain times2017 Asia Pacific Tax Complexity Survey

Preface 1

Keyfindingsandinsights 2

Taxenvironmentacrosstheregion 6

Taxstrategyandplanning 21

Theimpactoftaxonbusiness 24

Outlook 29

AppendixI:Respondentprofile 37

AppendixII:TaxratesinAsiaPacificjurisdictions 40

IncometaxandCapitalgainstaxrates 41

Withholdingtaxrates 42

Othertaxes 43

Practiceandprocedures 50

AppendixIII:Contacts 53

Contents

Shifting sands: risk and reform in uncertain times | PrefaceShifting sands: risk and reform in uncertain times | Preface

1

WelcometothethirdDeloitteAsiaPacificTaxComplexitySurvey.1

Wefindourselvesinaremarkabletime,withrecentpoliticaldevelopmentsintheUnitedStatesandEuropehavingthepotentialtodramaticallyalterthelandscapeoftheglobaleconomy.AsiaPacificstandstobothgainandlosefromthesechanges.Theuniquecharacteristicsofeachcountryintheregionmeansgovernmentsandcompanieshavevastlydifferentoutlooksontheirowneconomyandlocaltaxenvironment.Almosteveryoneagreesthatchangeiscoming,buttheunknownfactoriswhatexactlywillchangeandhow?

Globaltradepoliciesareseeingfundamentalshifts.Moreandmorecountriesareadoptingpoliciesthatfocusonlocalizationofwork,reducedrelianceonforeigntradepartnersandtougherimmigrationstandards.Thiscouldleadtoareductionincurrentorfutureinvestmentintheregion.However,thereisalsoaschoolofthoughtthatthisisunlikelysincesomecompaniesmaybelesscompetitiveifmoreoftheiractivitiesaremovedbackonshore.Ontheotherhand,withtheUnitedStates'withdrawalfromtheTrans-PacificPartnership,Chinawilllikelystepintodrivetheconversation

aroundinternationaltradeandcouldnegotiatedealsonevenmorefavourableterms.IncreasedregionaltradeiscertainlyapriorityforAsiaPacificandthiswillimpacttheeconomiesofmanycountriesintheregion.

Inthisgeneralclimateofuncertaintygovernmentsaretryingtobalancethetensionbetweencreatinganenvironmentthatattractsinvestmentwhilstatthesametimeprotectingtheirtaxbasesandraisingneededtaxrevenues.Thishascreatedcompetitionfortaxrevenueamongstmanycountriesworldwide,reignitingageneraltrendtolowercorporateincometaxrates.AsiaPacificcountriesaredoingtheirparttomaintainorenhancetheirtaxcompetitivenessontheglobalstage.AsiaPacificgrowthhasmoderatedinmanycountriessotaxpoliciesarebecomingincreasinglyimportanttoattractbusinesses.However,pressureontaxadministrationstogeneratehighertaxrevenueandtheincreasingsharingofinformationbytaxauthoritieswilllikelyresultinmorefrequentandmoreaggressivetaxaudits.

TheOrganizationforEconomicCooperationandDevelopment's(OECD)15-stepactionplanundertheBaseErosionandProfitShifting(BEPS)project,

1. Thefirstsurveywaspublishedin2011andthesecondin2014.

Prefacethataimstocurbtaxavoidance/evasionworldwide,haspromptedsweepingchangestotheglobaltaxlandscape.SincethereleaseofthefinalBEPSreportsinOctober2015,governmentsinmanycountrieshavebeenactivelyupdatingexistingrulesanddevelopingnewrules.CompanieshavebeenwitnessingtheresponsesoftheirgovernmentstotheBEPSprojectandtheywillneedtoassesstheresultingimpactbasedontheirglobalfootprint,operatingmodelsandstrategicprioritiesandpossiblyreconsiderhowtostructuretheirglobaloperations.

The2017surveywasconductedagainstthebackdropofthisshiftingenvironmenttogaugetheviewsandidentifythetrendsinthetaxlandscapeinAsiaPacific.

Inthisyear'sAsiaPacificTaxComplexitySurvey,wesurveyed331executivesacrosstheregion.AbreakdownoftheprofileoftheserespondentsiscontainedinAppendixI.

Wewouldliketothankallrespondentswhotookthetimetoparticipateinthe2017AsiaPacificTaxComplexitySurvey.Asalways,ourtaxpractitionersin20jurisdictionsacrosstheDeloitteAsiaPacificnetworkwelcomeyourthoughtsandfeedback.

Shifting sands: risk and reform in uncertain times | Key findings and insightsShifting sands: risk and reform in uncertain times | Key findings and insights

2

Keyfindingsandinsights


3

Responsestothe2017surveyreflecttheescalatingcomplexityinthetaxenvironmentinAsiaPacificjurisdictionsinthethree-yearperiodsincethelastsurvey.Intheshiftingsandsoftaxpolicies,respondentsareincreasinglycautiousabouttheircompanies'taxstrategywithBEPSreformsbeingtranslatedintodomesticlegislationinmanyjurisdictions.ThiscautionisjustifiableinlightoflingeringquestionsaboutthepredictabilityandconsistencyofkeytaxregimesinAsiaPacificandthesomewhatlowconfidenceinthefairnessofthesystems.

Governments under pressure to secure their tax baseFacedwithanuncertainglobaleconomicenvironment,countriesinAsiaPacificareaggressivelyattemptingtocapturetheirshareoftaxrevenuefromcross-borderactivities.AsHongKong'snextleaderCarrieLamindicatedatherfirstpublicspeechafterwinningoffice,thecityneededtaxreformtobecomemorecompetitive."Mynewtaxphilosophyisnotexactly'themore,themerrier'.Sometimescollectinglessishighlydesirable,"shesaid.Oneoftheprimarymechanismsusedforcountriestoattractforeigninvestmentis

Figure 1: Regional tax landscape – At a glance

tolowertheircorporateincometaxrates.Perhapsinfluencingdecisionstoenterintoandexitfromcertainjurisdictions,surveyrespondentsidentifiedcorporateincometaxasthemostimportanttaxationareafortheirbusiness.Governmentsarealsolookingtomaximizetaxrevenuefromcompaniesoperatingintheirjurisdictions.Inthelargerjurisdictions,suchasAustralia,China,IndiaandJapan,mostrespondentsagreethattaxauthorities'auditsarerigorous;andmanyarewitnessingahigherfrequencyofsuchaudits.Taxdisputesarelikelytoescalatefurtherinthefuture,andauditsarelikelytointensify.Disputeresolutionprocesses,however,canbelengthyinmanyjurisdictions.

Predictability and consistency in tax regimes, while desired, remains elusiveRespondents'viewsofthemostimportantfactorinbusinessdecision-makinghaveevolvedsincetheinauguralsurveyconductedsevenyearsago.In2010,lowcomplexityandhighpredictabilitywerethemostimportant;threeyearslater,anoverwhelmingmajorityofrespondentsagreedthathighconsistencyinthetaxenvironmentwasthemostcritical.In

Highlights

• Governmentsareunderpressuretosecuretheirtaxbase,taxreforms,andincreasedfrequencyoftaxauditswillremaininthespotlight.

• Predictabilityandconsistencyintaxregimes,whiledesiredbycompanies,remainelusive.Yet,inuncertaintimes,taxpayersseekstability.

• BEPSistopofmindforbothgovernmentsandcompanies.ChangestotaxlawsareexpectedinseveralcountriesinAsiaPacificasaresultofBEPS.

• Taxstrategyofcompaniesareincreasinglyconservativeinthisuncertaineconomicenvironment.

• OperatingacrossmultipleAsiaPacificjurisdictionscanbeabalancingactformultinationalsastaxenvironmentscanbevastlydifferent.

External Environment

Country-specificDevelopments

InternationalDevelopments

Companies

Changeisaconstant

Marketcompetitiveness/EconomicprioritiesBEPSimplementation

TaxlawTaxadministrations

OECD's15-pointactionplan(BEPS)

InvestmentdecisionTaxstrategiesCompliance

• TheOECD'srecommendationsare contingentuponcountriesenactinglegislativechangestotheirtaxlawsandrevisingtheirtreatieswithotherjurisdictions,however,therearetwo key areasthatarelikelytobesignificantlyimpactedandbusinessesshouldstartevaluatingnowtomitigaterisk–compliance andbusiness model

• Uncertainglobalenvironment

• Shiftingtradepolicies

• Slowingglobaleconomicgrowth

• Governments'needtosecure tax base throughattractingforeigninvestmentandmaximizingtaxrevenuefromdomestictaxpayers – Loweringcorporateincome tax rates – Increasingfrequencyandaggressivenessoftaxaudits

• ReformsarisingfromBEPS

• Improvingtax administration

• Cautiouswithforeigninvestment

• Seekingpredictableandconsistent taxenvironments

• Increased burdenaroundreportingandcompliance

• Less aggressivetaxstrategies


4

"OurexperiencewiththeAustralianTaxationOffice(ATO)duringourauditiscertainlyamongstthemostaggressivewehaveexperienced,buttheATOisnotalone,eitherinAsiaPacificorglobally."

–Australiarespondent

2017,predictability,followedcloselybyconsistency,areperceivedascrucial.Lowcomplexityhasbecometheleastimportantofthethreefactors,possiblybecausemanyhaveacceptedthattaxenvironmentsinAsiaPacificwillbecomplex.Astheexternalenvironmentbecomesmoreunpredictable,companiesmaybeactingmorecautiouslyandseekingpredictabilitywheretheycan.Companiescanseethatthelargestdevelopingeconomies—China,IndiaandIndonesia—stillhavemuchprogresstomakebeforetheycanmeetinvestors'expectationsinthisregard.

Whenaskedwhatreformsareneededforeachjurisdiction,respondentsprioritizedreformsthatwillimprovethepredictabilityandconsistencyoftaxregimes.Thesereformsincludeimprovingthetimelinessandqualityoftaxofficeaudits,improvingthetrainingoftaxofficialsandincreasingpublicconsultationontaxpolicy.Inanefforttoimprovetheconsistencyintheapplicationofthetaxlaw,severalgovernmentsintheregionare,infact,introducingreformstostrengthentaxadministration.

Giventhecomplex,unpredictableandinconsistenttaxenvironmentsthatmanyrespondents'companiesareoperatingin,relationshipswithtaxauthoritiesarekeytomanagingtheirtaxaffairsandmitigatingrisks.Themajorityofrespondentsinthisyear'ssurveyplantostrengthenrelationshipswiththeauthoritiesinthecomingyears.

BEPS is top priority for governments and companiesRespondentsgenerallyagreethatthealignmentofcountrypoliciestotheBEPSactionrecommendationsistoppriorityfortaxreformacrossAsiaPacific.

Governmentsconcur,astaxreformsareexpectedinseveraljurisdictionstoaligndomesticruleswiththeBEPSrecommendations.SurveyrespondentsalsoexpressedmuchmoreconcernwithBEPSthanthreeyearsago.ItiswidelyacceptedthatBEPSwilldrivesignificantchangeintheglobaltaxlandscapeasgovernmentsintroducenewpoliciesinlinewithglobalstandards.Multinationalsarefindingthemselvespreparingforthisimpendingchange—whetherbychangingtheirbusinessmodelsoradaptingtheirresourcessotheyareabletocomplywithenhancedreportingrequirements.Thiscanbetakenasapostivesignfortaxdevelopmentintheregion.IthaslongbeenrecognizedthatmanycountriesinAsiaPacificneedtoupdateandmodernizetheirtaxregimesanditismuchbetterthatcountriesdothisconsistentlybyfollowingtheBEPSapproachratherthantakingunilateralaction.

Tax strategy is increasingly conservativeInlightoftheobservationsdescribedabove,itisforeseeablethatrespondentsarelesslikelytopursueaggressivetaxstrategiesthaninthepast.Thiscautionwasexpressedbythree-quartersofthe2017respondents,whoindicatedtheywouldnotenterintoataxplanningstrategyifperceivedbysometobeaggressive.Only40percentofrespondentsin2014expressedthesamesentiment.Inthethreeyearssinceourlastsurvey,thesocialresponsibilityofcompaniesastaxpayershascomeunderclosepublicscrutiny.Thetaxpracticesofmultinationalenterpriseshavebeenembroiledincontroversyinseverallargerjurisdictions,whichhasattractedintensemediacoveragearoundtaxplanningandraisedtheawarenessofthepublicinthisarea.Theenormouspotentialfordetrimentalreputationalriskhaspromptedcompanyexecutivesandboardsofdirectorstoacknowledgetheneedtoconsidersuchriskwhendeterminingthecompany'staxstrategy.


5

Operating across multiple Asia Pacific jurisdictions can be a balancing act AsiaPacificcountriesareamixtureofstabilityandvariability.Somejurisdictions,suchasHongKongandJapan,offeralevelofstabilitythatinvestorsseek.Ontheotherhand,countriessuchasChinaandIndiapromisesignificantpotential,againstthebackdropofamorechallengingsocial,economicandtaxenvironment.Inthisyear'ssurvey,theresultspaintavastlydifferentpicturebetweenthesecontrastingeconomiesinAsiaPacific.Thereisageneralsatisfactionwiththetaxenvironmentsinthemoredevelopedjurisdictions,whilesignificantopportunitiesexistforemergingeconomiestoimprovethepredictabilityandconsistencyoftheirtaxenvironments.

Asaresult,respondentswillspendmoretimeandresourcesonmanagingtaxinChinaandIndiainthecomingyears.

Thefollowingpagesoutlinethesurveyresultsandexploretheseobservationsinfurtherdetail.ReadontolearnhowthetaxenvironmentisperceivedacrossAsiaPacific.

"BEPSwouldbringtransparencyinglobaloperations,howeveritwouldhavethepotentialofmisinterpretationandcreatingcomplexityasdifferentcountriesmayhavedifferenttaxlaws."

–Indiarespondent

Shifting sands: risk and reform in uncertain times | Tax environment across the regionShifting sands: risk and reform in uncertain times | Tax environment across the region

6

Taxenvironmentacrosstheregion


7

Thetaxregimesinlargercountrieshaveincreasedincomplexity

How has the complexity of the tax regime changed in the last three years?Figure 2. Change in complexity of tax regimes

ComplexityFor the purposes of this survey, "complexity" means the perceived level of difficulty in interpreting and understanding the tax law and rules in the relevant jurisdictions.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Asia Pacific

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

% of respondents

Became less complicated Not much change from three years ago Became more complicated


8

AcrossAsiaPacific,35percentofrespondentsindicatedtaxregimeshavebecomemorecomplexinthepastthreeyears.Largercountries,specifically,ChinaandIndiawereidentifiedasbecomingmorecomplex.Inthesetwojurisdictions,welloverhalfoftherespondentsbelievecomplexityinthetaxregimeshasincreased.Basedontherespondents'comments,thereisageneralexpectationthatthereportingobligationswillincreaseduetotheimplementationoftheBEPSrecommendations.ThisisalsothecaseinsomesmallerjurisdictionssuchasNewZealand,wherecomplexityinthetaxenvironmentisexpectedtoincreaseduetochangesincorporateincometaxandtransferpricingrules.

GiventhatAustraliahasbeenrelativelymoreadvancedinadoptingtheBEPSrecommendationsthanitsAsiancounterparts,manyrespondentscontinuetoviewthecountrytobeincreasingincomplexity.Thisisconsistentwiththeresultsfrom2014.

ThecomplexityofIndonesia'staxregimeappearstohavestabilized,ascomparedwiththeresultsfrom2014whenoverhalfoftherespondentsbelievedthetaxenvironmenthasbecomemorecomplicated.wide-rangingtaxreformisonthehorizoninIndonesiahoweverasnewtaxlawsarescheduledtobeintroducedin2018thatwillcovergeneraltaxationandadministration,personalandcorporateincometax,andVAT.ImplementationofthereformislikelytobeaccompaniedbyanincreaseinthecomplexityofIndonesia'staxenvironment.

InKorea,complexityhascomemainlyfromfrequentchangestothetaxlawsandpracticaldifficultyininterpretingandapplyingtheregulations.FollowingtheintroductionofBEPSintolocalregulations,thetaxauthority'sattentionwillbemorefocusedontaxationofcross-bordertransactions,leadingtogreatertaxcomplexityforthetimebeing.

JurisdictionssuchasHongKongandMacaohavemoresimpleandstabletaxregimesandarethereforerankedthelowestintermsofchangingcomplexity.

"Insteadofsimplifyingthetaxlawsandinterpretationbytaxauthorities,thetaxenvironmentinIndiaisbecomingmorecomplicated.Thegovernmentneedstomovequicklytolowertaxratesandminimizeexemptionstomakethelawssimpleandlesspronetomultipleinterpretations."

–Indiarespondent


9

Morethan80percentofrespondentsacrosstheregionviewtaxcomplianceandreportingobligationsinthecountriesinwhichtheyoperateascomplicated.Thisisaninterestingresultashavingasimplifiedtaxsystemisstilloftenhailedasakeyattractionforforeigninvestment.InDeloitte'sEuropeanTaxSurveyconductedinautumn2015,43percentofrespondentsindicatedthat

Please rate the complexity of the tax compliance and reporting obligations in the below chart.Figure 3. Tax compliance and reporting requirements

taxsimplificationwaskeytomakingajurisdictioncompetitive;thisissomethingtoconsiderifAsiaPacificjurisdictionsareseekingtoattractinvestmentfromEurope.Asanexample,Japaniscitedashavingataxenvironmentthatmaynotbeveryattractivetoinvestorsduetoitshightaxratesandtheadministrativeburdenandcomplexrequirementsforlegalregistration.

MostagreethatChinaandIndiahavethemostcomplicatedrequirementsofalljurisdictionsinAsiaPacific,followedbyJapan,Australia,IndonesiaandSouthKorea.

Incontrast,HongKongandSingaporehavethesimplestrequirements,whichisnotsurprisinggiventheirrelativelystraightforwardtaxregimes.

IndiaandChinahavethemostcomplexreportingrequirements

ComplexityFor the purposes of this survey, "complexity" means the perceived level of difficulty in interpreting and understanding the tax law and rules in the jurisdiction.

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

No. of respondents

Simple Somewhat complicated Complicated Very complicated

Simple Complicated

27

9

9

4

77

7

14

29

28

22

17

8

9

31

11

77

12

21

15

17

64

19

58

17

67

29

60

72

20

82

16

17

23

48

49

77

73

70

84

63

50

1

99

3

23

63

54

663

38

3

8

14

21

29

36

51

35

35

32

23

62

77

22

17

1

6

2

3

13

3

13

6

13

9


10

How has the consistency of the tax regime changed in the last three years?Figure 4. Change in consistency of tax regimes

Sometaxjurisidictionshavebecomelessconsistentbutgenerallythereisnotmuchchangefrom2014

Consistency"Consistency" refers to the perceived uniformity and transparency of enforcement of prevailing tax laws.

0% 20% 40% 60% 80% 100%

Asia Pacific

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

% of respondents

Became more consistent Not much change from three years ago Became less consistent


11

ForChinaandAustralia,respondentsappeartobedividedastothechangeinconsistencyofthesetaxregimes,similartotheresultsinthe2014survey.

Interestingly,ChinaandAustraliaalsosawthelargestproportionofrespondentsnotingthattaxregimeshadbecomemoreconsistent.InChina,recenteffortstoenhancetrainingfortaxofficersmayhavecontributedtotheimprovementinconsistencyintheapplicationandenforcementoftaxlaws.

Conversely,IndiaandIndonesiawereviewedashavingbecomelessconsistentinthepastthreeyears.FarmoreregardthatIndia'staxregimehasbecomelessconsistentcomparedwiththosewhoviewittohavebecomemoreconsistent.ThisspeakstothereformthatmanyfeelisneededinIndiaaroundtaxadministration;forexample,trainingfortaxofficerstoimprovetheirunderstandingoftaxpayersandhowthelawshouldbeappliedwould

bringaboutgreaterconsistencyandqualityinthecountry'staxenvironment.Ononehand,theIndiagovernment'sintroductionoftheGoodsandServicesTax(GST)inJuly2017willreducecomplexityinthetaxenvironmentbyeliminatingmultipletaxes,therebyimprovingtheeaseoftradeandcommerce.Ontheotherhand,thissignificanttaxreformwouldrequirebusinessestoconductimpactassessmentsandmodifytheirsystemstocomplywiththenewGSTforboththeirvendorsandcustomers.InadditiontotheGST,India'sintroductionofGeneralAntiAvoidanceRules(GAAR)fromApril2017andtheadoptionoftheBEPSactionswillincreasecomplexityinthenexttwotothreeyearsintheareasofinternationaltax,mergersandacquisitionsandindirecttax.

Manyjurisdictions,suchasHongKong,JapanandSingapore,havenotseenmuchchangefromthreeyearsagointermsofconsistency.

"OnechallengeinChinaisthattaxadministrationisnotcoordinatedcentrally;treatmentandinterpretationsaredifferent,sometimeswithcompetingagendas."

–Chinarespondent

Regionally,almost70percentofrespondentsagreethattheconsistencyoftaxregimeshavenotchangedmuchfromthreeyearsago.Theremainingrespondentsaresplitastowhetherthejurisdictionshavebecomemoreconsistentorless.Thisislikelydrivenbythepolardemandsofimplementingnewtaxlawsbalancedbymoreexperiencewiththeexistingtaxlaws.


12

ThemostconsistenttaxregimesareSingapore,Japan,HongKongandAustralia.Inthesejurisdictions,farmorerespondentsviewedthetaxregimestobeconsistentthanthosewhoratedthemasinconsistent.

Taiwan,NewZealand,andSouthKoreaarealsocitedashavingconsistenttaxregimes.

Please rate the consistency of these regimes.Figure 5. Consistency of tax regimes

Developedmarketshavethemostconsistenttaxregimes

RespondentsareagainsplitovertheirviewsofChina;thisechoestheiropiniononthenotableimprovementinconsistencyoftaxregimesinthepastthreeyears,asdiscussedpreviously.TaxlawsinChinaarenotalwaysconsistentlyappliedthroughoutthecountry,hence,respondentsmayhavevariedexperiencesinthistaxjurisdiction.

ThemajorityofrespondentsconcludedthatthemostinconsistentregimesintheregionareinChina,IndiaandIndonesia.

Theselargeeconomieswerealsoidentifiedashavingthemostcomplextaxsystemsintheregion.

Inseveraljurisdictions,respondentsseeanopportunitytoimprovetheconsistencyinhowthetaxlawsareappliedthroughincreasedtrainingfortaxofficers.

Consistency"Consistency" refers to the perceived uniformity and transparency of enforcement of prevailing tax laws.

Macao

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

No. of respondents

InconsistentVery inconsistent Consistent Very consistent

Inconsistent Consistent

16

2

70

2

8

49

41

18

3

30

5

6

12

5

34

9

25

13

28

33

7

1

21

1

1

33

23

3

1

7

1

1

2

1

4

2

2

2

4

7

80

18

66

14

87

32

36

84

32

63

20

16

19

59

34

93

63

74

64

35

17

2

23

1

1

16

3

3

12

6

30

4

3

2


13

How has the predictability of the tax regime changed in the last three years?Figure 6. Change in predictability of tax regimes

TaxregimesinIndia,ChinaandIndonesiahavebecomelesspredictable

Predictability"Predictability" refers to the availability of information and resources that allow taxpayers to foresee the direction and potential changes in tax law.

0% 20% 40% 60% 80% 100%

Asia Pacific

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

% of respondents

Became more predictable Not much change from three years ago Became less predictable


14

Alargerportionofrespondentsviewthattaxregimesintheregionhavebecomelesspredictable(23percent)inthepastthreeyearsthanthosewhoviewthemasmorepredictable(10percent).Thesameopinionswerealsoreportedthreeyearsago,whenthisresultwasdrivenbyrespondents'viewsonIndiaandChinabecominglesspredictabletaxjurisdictions.ThisistobeexpectedinlightoftheBEPSinitiatives.Infact,giventhefast-trackingmanyoftheAsiaPacificcountriesareundertakingwiththeirBEPSprogramsto"catch-up",anargumentcanbemadethattheregionhaslargelyconformedwithglobalexpectations.

Meanwhile,mostrespondentsnotedthatthepredictabilityofthetaxregimesinHongKong,Singapore,Japan,ThailandandSouthKoreahavenotchangedmuchfromthreeyearsago.ThislackofperceivedchangeisalsointerestingasthesejurisdictionshavealsonotbeenasactivearoundenactingunilateralBEPSresponses.

ThejurisdictionswherethemostrespondentsperceivethetaxregimesaslesspredictableareIndia,ChinaandseveralSoutheastAsiancountries(Indonesia,Malaysia,PhilippinesandVietnam).Thesearealljurisdictionsthatcontinuetogothroughsignificanteconomicandpoliticalreforms,whilerespondingtoBEPSpolicies.

Asinresponsestoearlierquestions,viewsaresplitoverthechangeinpredictabilityinChina'staxenvironment.CompaniesarehavingdifferentexperiencesinChina,whichmayspeaktoitsoverallconsistency.

ManyalsoviewSingapore'staxregimeasbeingmorepredictable.ThegovernmentrecentlyreleasedareportbytheCommitteeontheFutureEconomy,identifyinghowtopositionSingaporeforthefuture.Inlinewiththisreport,Singapore's2017budgetcontainstargetedmeasurestosupportbusinessesinvestingintechnologyandinnovation,andexpandingintointernationalmarkets.

Giventhefast-trackingmanyoftheAsiaPacificcountriesareundertakingwiththeirBEPSprogramsto"catch-up",anargumentcanbemadethattheregionhaslargelyconformedwithglobalexpectations.


15

Please rate the predictability of the tax environment.Figure 7. Predictability of tax regimes

Themostpredictabletaxenvironmentsintheregionareinthemostdevelopedcountries

Predictability"Predictability" refers to the availability of information and resources that allow taxpayers to foresee the direction and potential changes in tax law.

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

No. of respondentsUnpredictable Predictable

A low level of predictabilityNo predictability An intermediate level of predictability A very high level of predictability

16

5

69

4

12

49

43

12

6

28

5

7

11

9

30

12

20

16

32

32

3

1

12

2

3

25

11

1

2

4

1

1

3

1

8

3

2

6

8

66

15

56

11

56

26

32

69

21

58

12

15

15

48

26

63

64

58

51

28

28

1

5

1

35

4

4

29

6

5

5

2

18

3

40

8

5

1

1


16

DevelopedeconomiesinAsiaPacific,includingSingapore,Japan,AustraliaandHongKong,areconsideredtohaveverypredictabletaxenvironments.Mostrespondentsindicatedthatthesejurisdictionshaveaveryhighlevelofpredictability.Incontrast,thejurisdictionswiththelowestlevelofpredictabilityareChina,IndiaandIndonesia.

ThemostunpredictabletaxenvironmentintheregionisinIndia.TheviewsonIndiaareconsistentwiththosefromour2014survey,whenalargeproportionofrespondentsalsonotedthatIndia'staxregimehaslittlepredictability.ItappearsthattheIndiangovernmentstillhasmuchtodointermsofsignallingthedirectionitwilltakeinchangingthetaxlaws.

Incontrast,Chinaappearstohaveimproveditspredictabilityoverthelastthreeyears,withmorerespondentsreportingbetterpredictabilityinChinathanthosewhothoughtthesameforbothIndiaandIndonesia.Thereishowevera

"ThetaxenvironmentinChinaisgettingmorecomplex,butitstaxrulesarequitepredictableastheStateAdministrationofTaxationconductsformalandinformalconsultations,sotaxpayerscananticipateanychangesbeforetheyareimplemented."

–Singaporerespondent

contrastinrespondents'viewsonChina;manyrespondentsviewthecountry'staxenvironmenttobepredictable,whileothersviewittobeunpredictable.

WhilethereisspeculationthatIndonesia'snewtaxlaws,anticipatedtobeintroducedin2018,willincorporateShariafinancelaw,thereisuncertaintyastootherchanges.Thislevelofuncertaintymaybemotivatingrespondents'viewsonthelackofpredictabilityinIndonesia.


17

1. Ratingsarebasedonthepercentageofrespondentsindicatingtheircompanieswereauditedinthosejurisdictions

2. Ratingsarebasedonaweightedaveragescorefromresponses

Figure 8. Frequency of tax audits1, fairness in tax audits2, confidence in appeal system2, and relationships with authorities2

Australia,NewZealandandSingaporeareperceivedtohavethefairestsystemsandtaxpayersenjoygoodrelationshipswiththeauthorities,whileIndonesiaisthemostchallenging

Frequency of Tax Audits

Fairness in Tax Audits

Confidence in Appeal System

Relationship with Authorities

Australia Neutral High High Good

Brunei Low Neutral Neutral Neutral

Mainland China High Low Low Neutral

Guam Low Neutral Neutral Good

Hong Kong Neutral High High Neutral

India High Low Neutral Poor

Indonesia High Low Low Poor

Japan High High Neutral Good

Macao Low High Neutral Neutral

Malaysia Neutral Neutral Neutral Neutral

Mauritius Low Neutral Neutral Neutral

Mongolia Neutral Neutral Neutral Neutral

Myanmar Low Neutral Low Neutral

New Zealand Neutral High High Good

Philippines Neutral Low Low Poor

Singapore Neutral High High Good

South Korea High Neutral Neutral Neutral

Taiwan Low Neutral Neutral Neutral

Thailand Neutral Neutral Low Neutral

Vietnam Neutral Low Low Neutral


18

Regionally,respondentsviewAustralia,NewZealandandSingaporetohavethefairesttaxregimes;respondentsalsohavethehighestconfidenceinthesejurisdictions'appealsystems,whileenjoyinggoodrelationshipswiththeauthorities.

"Allfinaltaxrulingsareexpectedtotakeaverylongtimetosettleastheprocessitselfislong-drawn-out."

–Indiarespondent

"TheAustralianTaxationOfficeiscertainlymessagingfairnesstostakeholderslocallyandinternationally,butanoticeablechangehasyettofilterdowntotaxpayers."

–Australiarespondent

areaggressiveandnotalwaysalignedwiththepolicymakers'positions.Respondents'relationshipswiththeIndiantaxauthoritiesaretenuous.AsinthecaseofChinaandIndonesia,thereappearstobeanopportunityforthegovernmenttoimprovetheconsistencyinwhichtaxlawsareapplied,aswellasthegeneraladministrationofthetaxlaw.

SoutheastAsiancountries,withtheexceptionofSingapore,generallyseemanytaxaudits,thoughalargenumberofrespondentshavelowerconfidenceintheappealsystemandviewtaxauditsasunfair.Relationshipswiththeauthoritiesarealsoanareaforimprovement,especiallyinthecaseofIndonesiaandthePhilippines.

JapanisalsosubjecttofrequenttaxauditshowevertherespondentsfeelthattheauditsarefairlikelyduetogoodrelationshipswiththeNationalTaxAgencyofficials.

Indonesiaappearstohavethemostchallengingtaxenvironmentwhenitcomestotaxauditsanddisputes.Manycompaniesarebeingauditedandthefairnessofthetaxauditsarequestioned.RespondentslackconfidenceinIndonesia'sappealssystemandtheirrelationshipswiththeauthoritiesarepoor.TheseviewsareconsistentwiththoseexpressedaroundthecomplexityandconsistencyoftheIndonesiantaxregime.Auditsaretypicallyconductedforlongerthanayear,andthelengthyappealsprocesscanexceedthreeyears,hence,companiesoftenexperienceaconsiderableperiodofuncertainty.

Chinaisnotedashavingahighleveloftaxauditactivity,andthefairnessoftheseauditsandrespondents'confidenceintheappealsystemisratherlow.Again,theseviewsmaybeduetocompaniesseeingdifferentinterpretationsandapplicationofthecountry'staxlaws.

Indiaalsohasahighfrequencyoftaxaudits,althoughtheirfairnessisinquestion.Thereisaperceptionthatthefieldofficers'approachontaxaudits


19

Generally,taxauditsacrossAsiaPacificareviewedasrigorous.

Consistentwithresponsesfromthreeyearsago,manyviewtaxauditsinHongKong,MacaoandTaiwanasnotoverlyrigorous,butalmostallrespondentsviewtaxauditsinSouthKorea,Vietnam,andGuamtoberigorous.

"TaxauditscontinuetobeaheavyburdenforJapanesetaxpayers,particularlybecauseon-siteauditsareconductedovermanydays."

–Japanrespondent

Mostviewtaxauditsintheregiontoberigorous

Please rate your perception of tax officials' rigorousness as they conduct tax audits. Figure 9. Rigorousness of tax audits

ItisworthnotingthatIndia,SouthKoreaandChinaarethejurisdictionswherethehighestproportionofrespondentsviewtaxauditstobefairlyorveryrigorous.

Acrosstheregion,itisexpectedthatthefrequencyoftaxauditsandtheirlevelofrigorwillincreaseinthemorecompetitiveclimateasjurisdictionsaggressivelystrivetomaintaintheirshareofglobaltax.

0% 20% 40% 60% 80% 100%

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

% of respondents

Very rigorous Fairly rigorous Somewhat rigorous Not rigorous


20

"TaxauditsinSouthKoreaareveryrigorous.Officialscarryouttaxauditsbasedonastrictmandatetocollectadditionaltaxrevenue."

–SouthKorearespondent

InKorea,largecorporationsaresubjecttoregularauditsgivenstatutesoflimitation.Smallormedium-sizedenterprisesareselectedasatargetbasedonthedegreeoffaithfulnessoftaxreportingevaluatedbythetaxauthorities.Itappearsthattargetselectionisconductedinanon-aggressivefashion,aspertherelevantregulations.ThewinningrateoftaxpayerstendstograduallydecreaseforTribunalcasesrelatingtodomestictaxes,whichmeansthatthefairnessoftaxauditsisimproving.

Shifting sands: risk and reform in uncertain times | Tax strategy and planningShifting sands: risk and reform in uncertain times | Tax strategy and planning

21

Taxstrategyandplanning


22

Over90percentofrespondentsindicatedthatreputationalriskconcernsaregivenatleastsomeconsiderationintheircompany'staxstrategy.Withtheongoingpublicpressureandnegativemediacoverageofsomecompanies'aggressivetaxstrategies,itisexpectedthatreputationalriskwillremainanagendaitemascompanies,especiallylargecompanies,becomemoreconscioustoavoidsuchrisk.

ThedramaticshifttoamoreconservativeapproachmaybeduetotheresultsoftheBEPSactionplanswherecompaniesarebeingaskedforincreaseddisclosureontheiractivitiesinalljurisdictionsinwhichtheyoperate.

Companiesarebecomingincreasinglyconservativeintaxplanningandremainconcernedaboutreputationalrisk

How much weight does your company give to reputational risk concerns when considering a tax strategy?Figure 10. Reputational risk concerns

Would your company enter into a legal tax planning strategy that might be perceived by some to be aggressive? Figure 11: Aggressiveness of strategy

Atthesametime,75percentofrespondentswouldnotenterintoalegaltaxplanningstrategyifitisperceivedbysometobeaggressive,evenifthestrategyislegalorthetaxlawdidnotspecificallyconsideritillegal.Thisisasharpincreasefromthreeyearsago,whenonly40percentrespondedthesame.Evidently,companieshavebecomemuchmorecautiousabouttaxplanningstrategies.

ThisdramaticshifttoamoreconservativeapproachmaybeduetotheresultsoftheBEPSactionplanswherecompaniesarebeingaskedforincreaseddisclosureontheiractivitiesinalljurisdictionsinwhichtheyoperate.Companiesmayalsohavetorestructuretheiroperationstotransitionactivitiestodifferentcountriesdependingonthechangesinvariouscountries'taxenvironmentinresponsetoBEPS.

% of respondents

45%A lot49%

Some

6% Very little% of respondents

25%Yes

75%No


23

Giventherisingexpectationoftaxsocialresponsibilityandpublicattentiononthetaxaffairsofcompanies,itisnotsurprisingthatthemajorityofrespondentsindicatedtheirC-suiteorboardofdirectorsaremoreengagedintaxaffairsnowthaninthepast.However,weseeaslightdropinengagementfrom65percentin2014to59percentin2017.ThismaybeduetoexecutivestemporarilymovedontootherkeybusinessissueswhileBEPSactionplansandcountrylawsarebeingimplementedinthepastthreeyears.Nevertheless,weexpecttaxsocialresponsibilitytobecomeanincreasingtopicofconversationintheboardroomasnewlawsareintroduced.ThisisofparticularinterestasthereseemstobefarmoreinterestfromtheC-suiteinAsiaPacificthaninEurope.InDeloitte's2015EuropeanTaxSurvey,themajorityofrespondentswerenotaskedbyinternalstakeholderstojustifytheirtaxstrategy.

Manyexecutivesandboardsofdirectorsaremoreengagedintaxaffairsnowthaninthepast

Is your C-suite or board of directors more engaged in tax affairs now than in the past?Figure 12. Engagement of C-suite or board of directors

% of respondents

41%No 59%

Yes

Shifting sands: risk and reform in uncertain times | The impact of tax on businessShifting sands: risk and reform in uncertain times | The impact of tax on business

24

Theimpactoftaxonbusiness


25

Taxconsiderationsarelessimportantincountrieswiththemostpredictableandconsistenttaxregimes

How has the complexity, consistency or predictability of the following jurisdictions' tax regimes influenced your company's decision to enter into or exit from these jurisdictions?Figure 13. Tax regimes affecting investment decisions

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

No. of respondentsNo influence Some or strong influcence

No influence Some influence Strong influence

8

5

45

35

42

27

26

46

13

30

7

7

10

35

25

48

37

32

29

24

47

15

66

15

42

45

44

49

20

51

18

19

22

35

38

45

43

40

47

35

18

3

32

1

16

33

18

7

7

13

4

3

4

5

8

20

10

7

9

13


26

Acrosstheregion,65percentofrespondentsindicatedthatcomplexity,consistencyorpredictabilityintaxregimeshadastrong,oratleastsome,influenceintheircompanies'decisionstoenterintoorexitfromthesejurisdictions.

Taxregimesindevelopingandemergingeconomies(India,China,Indonesia,andMalaysia)havethestrongestinfluenceinthesedecisions.

Unchangedfrom2014,thetaxregimesinChinaandIndiahavethestrongestinfluenceoncompanies'investmentdecisions.InIndia,thecurrentsystemfordisputeresolutionsystemistime-consumingandofferslittlecertainty.Someviewthatthetaxenvironmentwouldbemoreattractivetoinvestorsifanefficientadvancerulingschemewasinplaceforcorporatetax,similartotheadvancepricingagreementinplacewherethereisanagreementbetweenthetaxpayerandthetaxauthorityonthepricingoffutureintercompanytransactions.

Taxpolicyisgenerallyanimportantconsiderationininvestmentdecisions,with84percentofrespondentsconsideringitahighpriorityoroneofthetopthreecriteriaininvestmentdecisions.Inmanyjurisdictions,thereareothernon-taxconsiderationsthatarealsoimportantindrivingthesedecisions.Forinstance,thechallengeofmovingmoneyoutofChinaandthelanguagebarriersinChina,JapanandKoreaaresomeinevitableconsiderationsforforeigninvestors.

Withthepublicpayingincreasingattentiontocompanies'taxresponsibilityinthejurisdictionsinwhichtheyoperate,taxmatterscouldrequiresignificantmanagementtimeandresources.ItisparticularlyimportantforjurisdictionslikeHongKongandSingaporesincethey

84percentofrespondentsconsidertaxpolicytobeahighpriorityoroneofthetopthreeconsiderationsininvestmentdecisions.

TaxpolicyisofparticularimportanceforjurisdictionslikeHongKongandSingaporesincetheydon'thaveanaturalconsumerbaseorotherfactorstoattractinvestment.

don'thaveanaturalconsumerbaseorotherfactorstoattractinvestment.WithinJapan'sadministration,therearealsoasignificantnumberofofficialsthatunderstandthat,apositivechangetothelocaltaxregimeisneededtoaffectinvestmentdecisionswithintheregion.


27

"Intermsoftheorderofimportancetobusinessdecision-making,mypriorityisfirstpredictability,thenconsistencyandcomplexity.

–Chinarespondent

Predictabilityhasbeenrankedasthemostimportantfactorinbusinessdecision-making,followedbyconsistency.Complexityappearstobetheleastimportantfactor.

Sincetheinauguralsurveyin2010,respondents'viewsofthemostimportantfactorinbusinessdecision-makinghaveevolved.In2010,themajorityagreedlowcomplexityandhighpredictabilitywerethemostimportant;in2014,highconsistencyinthetaxenvironmentwasoverwhelminglyidentifiedasthemostcriticalfactor.Now,predictabilityinthetaxenvironmentisthemostimportant,albeitwithconsistencystillacrucialconsideration.Lowcomplexityhasbecometheleastimportantofthethreefactors.

Predictabilityisasignificantconsideration,perhapsduetoincreasedforeigninvestmentflowingintotheregion'sdevelopingcountriesascomparedtointhepast.Assuch,companieswillbeseekingameasureofstabilityinthesecountries'taxenvironmentsasinvestmentsinthesejurisdictionsareevaluated.

EvolutionfromconsistencyandpredictabilityislikelyduetoBEPS.Taxpayersareconcernedabouttheupcomingchangesandwanttoknowwhattoexpect.

Predictabilityisnowthekeyfactor

Rank the following in the order of importance to your business decision-making.Figure 14. Factors important in business decision-making

Since the inaugural survey in 2010, respondents' views of the factors important in business decision-making have evolved.Figure 15: Comparison of change in factors important in business decision making (2010, 2014, 2017)

31%25%

44%

37%36%

27%

32% 39%29%

% of respondents

Least important Important Most important

CONSISTENCY in interpretation and enforcement of tax law

PREDICTIBILITY about future development of tax law

COMPLEXITY of tax laws

% of respondents

38%

25%29%

26%

57%

32%36%

18%

39%

Year 2010 Year 2014 Year 2017

Low Complexity High Consistency High Predictability


28

"Weareexpectingmoretaxchallengesinlocaltaxaudits,transferpricingissues,andcrossborderpayments."


Corporateincometax,indirecttaxandtransferpricingarethemostimportanttobusinesses,whichisnotsurprisinggiventhatcorporateincometaxandindirecttaxaccountforthemosttaxrevenuecollectedinmanyjurisdictions,andtheserepresentthelargesttaxexpendituresforcompaniesinmanytaxjurisdictions.Transferpricinghasincreasedinimportancebecauseofthenewonerouscountrybycountryreportingrequirementsandtheimpactthatwillhaveontaxdepartmentsandbusinesses.

Manyrespondents,however,viewcustomsdutyaslessimportant,possibly

Corporateincometaxandindirecttaxaremostimportant

How important are the following taxation areas to your company's business? Figure 16: Important tax areas

becausecustomsdutyisanelementofthecostofgoodsratherthanpartofacompany'staxliability.Assuch,companiesmaynot"feel"theimpactofcustomsdutytothesameasextentasthatofcorporatetaxliabilities.Additionally,customsdutyaffectsoperations,butthistaxdoesnottypicallydrivestructuringdecisionsinthewaythatcorporatetaxeswould.

Theseopinionsareconsistentwiththeresultsfromthreeyearsago.

% of respondentsNot important Important

Corporate income tax

Indirect tax

Transfer pricing

Cross border international tax

Payroll taxes

Customs duty

Not important Moderately important Quite important Extremely important

1%

1%

5%

6%

7%

19%

8%

15%

10%

21%

37%

24%

29%

41%

37%

37%

41%

34%

63%

44%

48%

36%

15%

23%

Shifting sands: risk and reform in uncertain times | Outlook Shifting sands: risk and reform in uncertain times | Outlook

29

Outlook


30

Itisnosurprisethatthejurisdictionsinwhichmanycompanieswillspendthemosttimeandresourcesontaxmanagementwillbethelargesteconomiesintheregion:China,India,Australia,Japan,andSingapore.

In which jurisdictions do you envision your company will spend more time and resources on tax management in the next three years?Figure 17. Jurisdictions requiring more time and resources

CompanieswilldevoteconsiderablymoretaxmanagementresourcestoChinaandIndia

Figure 18. Jurisdictions requiring the most time and resources on tax management

2010 2014 2017

1 China China China

2 India India India

3 Japan Indonesia Australia

4 Singapore Australia Japan

5 SouthKorea Guam Singapore

Aswasthecasethreeyearsago,ChinaandIndiatopthelist.However,IndonesiahasdroppedbelowAustralia,JapananditsSoutheastAsianneighbors,SingaporeandMalaysia.In2014,perhapsitwasatimewhenopportunitieswereemerging

% of respondents

33%20%

16%14%

11%10%

10%9%

7%5%

5%5%5%

3%1%

1%

Mainland ChinaIndia

AustraliaJapan

SingaporeMalaysia

IndonesiaSouth Korea

VietnamHong Kong

TaiwanNew Zealand

ThailandPhilippines

MyanmarMauritius


31

"Regionally,wewillspendmoretimeandresourcesontaxmanagementinChinaandIndia."

–Indonesiarespondent

insmaller,frontierterritories;Guam,MongoliaandMyanmarwerehigherprioritiesthanSingaporeorJapan.

Thisyear,asintheinauguralsurveyin2010,JapanandSingaporereappearedinthetopfivejurisdictionsinwhichrespondentsexpecttodedicatemoretimeandresources.ThereappearstobearenewedemphasisonthelargereconomiesinAsiaPacificvis-à-visthesmallerjurisdictionsthatwereahigherpriorityin2014.Singapore'shigherrankingin2017maybebecauseitisajurisdictionwithmanyheadquartersgeneratingsignificantinter-companyflowsand,hence,Singaporewouldrequiregreateroversightbymultinationals.

Australiaremainsinthetopfivejurisdictionswhererespondentsexpecttospendmoretaxmanagementtimeandresources.SignificantchangesareexpectedinAustralia'staxenvironmentinthecomingyears.First,thedivertedprofitstax(DPT)thatwillbecomeeffectiveinmid-2017willbeanissuerequiringconsiderationformanymultinationals,sincetheDPTwilllikelyresultinfurtheruncertaintyastoappropriateincometaxandtransferpricingoutcomes.Second,theAustraliangovernmentintendstosign

theMultilateralInstrumenttoeffectBEPS-relatedtaxtreatychanges.Giventhesignificantlevelofnewlawsandtheareasoffocus,taxcontroversyrelatingtointernationaltaxandtransferpricingwilllikelyincreaseinthenextfewyears.

Surprisingly,Japanhasmovedupinprioritycomparedwiththreeyearsago,jumpingfromthetenthspotin2014tothefourthspotin2017.After10yearsofeconomicstagnation,Japan'seconomyisshowingsignsofrecovery,sotheremaybearenewedinterestininvestmentinthecountry.Increasedinboundinvestmentisalsoexpectedintheyearsleadingupto2020whentheOlympicswillbeheldinTokyo.ChangesinthetaxationofexpatriatepersonnelsecondedtoJapancontinuestoevolverapidly,andcompanieswillcontinuetohavetopayattentiontothetaxsituationoftheirmanagementpersonnel.

ThereappearstobearenewedemphasisonthelargereconomiesinAsiaPacificvis-à-visthesmallerjurisdictionsthatwereahigherpriorityin2014.


32

Mostrespondentsplantomanagetheirtaxaffairsandassociatedrisksintheforeseeablefuturebystrengtheningrelationshipswithgovernmentauthorities.

Themostunlikelywayforrespondentstomanagetaxaffairsandtaxriskswillbetoformacoalitionwithindustrypeersortoimplementataxenterpriseresourceplanning(ERP)onanalyticssystems.Interestingly,threeyearsago,alargeproportionofrespondentsplannedtomanagetaxaffairsbyimplementingatax-riskmanagementsystem.Thisyear'sresultissomewhatsurprisingasthereisatrendincompaniessearchingfortechnologytosupporttaxprocesses.Manycompaniesareinvestigatinghowtechnologycanenhanceexistingprocesses,specifically,howtax-specificdatacanbeefficientlyextractedfromERPsystems.Systemscangenerateanalytics,however,thereisstilluncertaintyastowhichdatashouldbeincludedandwhattypesofanalyticreportsareneeded.

Themostpopularapproachtomanagingtaxaffairsandriskswillbetostrengthenrelationshipswiththeauthorities

As a company, how do you plan to manage your tax affairs and tax risks?Figure 19. Approaches to managing tax

Weexpecttechnologytoplayamoreprominentroleinthecomingyearsinsupportingtaxprocessesasthekindsofinsightsthatcanbegainedfromtaxdatabecomeclearer.

DuetotheunpredictabletaxenvironmentsinmanykeyjurisdictionsinAsiaPacific,itisnotsurprisingthatmostrespondentsplantostrengthentheirrelationshipswiththeauthoritiesinanefforttobettermanagetaxaffairsandmitigaterisk.

Threeyearsagooutsourcingtaxconsultingandcompliancewasthemostpopularwaytomanagetaxifabudgetwasavailable.Outsourcingisnowinsecondplace,indicatingthatitstillisonthewishlistfortaxpractitionersintheregion,providedbudgetisavailable.

Top responses

In current plans Strengthenrelationshipswithgovernmentauthorities

Would like to do if budget is available

Increaseoutsourcingbudgetfortaxconsulting&compliance

Unlikely FormcoalitionwithindustrypeerstolobbyorformtaxworkinggroupsImplementtaxERPonanalyticssystems


33

Whileweknowvariousreformsareunderway,theoverwhelmingmajorityofrespondents(morethan90percent)indicatethatreformsareneededinChina,IndiaandIndonesia.Over80percentofrespondentsagreethatmanySoutheast

Regionally,theadoptionofBEPSrecommendationsisviewedasthemostcriticalreform

In which of the following Asia Pacific tax jurisdictions would you like to see reform?Figure 20. Jurisdictions which require tax reforms

Asiacountries(Malaysia,thePhilippines,ThailandandVietnam)areinneedofreform.Developingeconomiesarenotaloneinthisarea;alargeproportionofrespondentsalsoidentifiedAustraliaasajurisdictionrequiringtaxreform.

0% 20% 40% 60% 80% 100%

Australia

Brunei

Mainland China

Guam

Hong Kong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

New Zealand

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

% of respondents

Reforms are required No reforms required


34

In which of the following Asia Pacific tax jurisdictions would you like to see reform in the specified areas?Figure 21. Areas of tax reforms

Acrosstheregion,theadoptionofBEPSrecommendationsisthemostcommonlycitedreformneeded.Thisrepresentsachangefromthe2014surveyresultswhentaxofficertrainingwasthetoppriority.Thisislikelyduetothecurrentfocusongettingtherulesrightandthensubsequentlytrainingthetaxofficersonthenewrules.Timeliness,thequality

oftaxauditsandtransparencyintaxstatisticsarealsoconsideredimportantbytherespondentsinmanyjurisdictions.ItislikelythataftertheimplementationofBEPSmeasures,taxofficertrainingwillagainresurfaceasthetoppriority,especiallyinlightofanynewrules.

Reforms

TaxOfficerTraining

Timeliness&QualityofTaxAudits

PublicConsultationinTaxPolicyMaking

AdoptionofBEPSRecommendations

Transparencyin TaxStatistics

ImplementationofBindingTaxRulings

Australia √ √

Brunei* √ √ √ √

MainlandChina √ √

Guam √ √

HongKong √ √

India √ √

Indonesia √ √

Japan √ √

Macao √ √

Malaysia √ √

Mauritius* √ √ √

Mongolia* √ √ √ √

Myanmar √ √

NewZealand √ √

Philippines √ √

Singapore √ √

SouthKorea √ √

Taiwan √ √

Thailand √ √

Vietnam √ √

Atthejurisdictionlevel,therearesomedifferencesintherespondents'views.TimelinessandqualityoftaxauditsisanimportantreformforChina,IndiaandIndonesia.However,inChina,transparencyintaxstatisticsisatoppriority,whereasinIndia,manyfelttheadoptionofBEPSrecommendationsiscritical.AcrossSoutheastAsia(exceptinSingapore),taxofficertrainingisviewedaspriority.

InJapan,thecompaniesarewellontheirwayincompletingthefirstyeardraftsofBEPSAction13work,andtaxauthoritiesarealsosetondocumentation.AftertheplannednewAnti-TaxHaven(CFC) Rulesthisyear,thenextlargefocusareafortheauthoritieswillbeBEPSActions8-10,i.e.,theproperattributionofincometoriskandintangiblesrelatedactivities.

Ingeneral,taxauthoritieswouldneedtostartplanningfortrainingandenforcementinlightofnewinternationaldevelopmentsuchasBEPSanddomesticlawsandregulationsinordertoadministerandimplementthemeffectively.

√ Identifiedastoptwopriorityareasfortaxreform*Duetothelownumberofrespondentsforthesmallerjurisdictions,threeorfourreformsareidentifiedastoppriorities


35

Whenaskedwhethertaxsocialresponsibilityconsiderationshaveledthemtomodifyhowtaxismanaged,99percentofrespondentsagreedtheyhad.Thisisastarkincreasefromthreeyearsagowhenonly32percentindicatedtheseconsiderationsimpactedtaxmanagement.Thisyear'sresponseisnotsurprisinggiventheincreasedpublicattentionandfrontpageheadlineshighlightingperceived

Thedebateoftaxsocialresponsibilityisexpectedtocontinue,especiallyinthelargejurisdictionsintheregion.

Which jurisdiction(s) do you think would likely engage in the tax social responsibility debate in the near future (over the next one to three years)?Figure 22. Tax social responsibility

Taxsocialresponsibilityconsiderationswillhaveanincreasingimpactonhowtaxismanaged,particularlyinAustraliaandChina

instancesofwhencompaniesfailedtopaytheirfairshareoftax.Thisdebateisexpectedtocontinue,especiallyinthelargerjurisdictionsintheregion.

Australia,China,JapanandIndiaareconsideredthemostlikelytaxregimestoengageinthetaxsocialresponsibilitydebateinthenearfuture.

No. of respondents

AustraliaMainland China

JapanIndia

SingaporeNew ZealandSouth Korea

Hong KongIndonesia

MalaysiaThailand

TaiwanVietnam

PhilippinesMacao

MyanmarMongolia

Note: Excludes jurisdictions for which there were no responses

6655

4135

3219

1817

1615

866

422

1


36

SincethefinalreportsontheBEPSactionswerereleasedinOctober2015,companieshavebeenwatchingtheresponsesofthegovernmentsinAsiaPacificcountriestotheOCEDrecommendations;companiesareassessingtheimpactofpotentialchangestotaxlaws,andtakingstepstoensurecompliancewherenewruleshavebeenimplemented.

AsthefullextentoftheBEPSrecommendationsarenowmorefullyunderstood,almost80percentofrespondentsexpressedconcernabouttheimplementationofBEPS-relatedmeasures.Thisisasignificantincreasefromthreeyearsago,whenonly60percentofrespondentsindicatedtheywereconcernedaboutthisinitiative;atthattime,thedraftreportsundertheBEPSprojectwerestillbeingreleasedsotherewasnotasmuchclarityabouttheimplicationsoftheprojectthatnowexists.

Somerespondents'concernsmayarisefromanexpectationofincreasedcomplianceanddocumentationburdens,particularlywithrespecttotransferpricingdisclosureandcountry-by-country(CbC)reporting.

"WewelcomethestandardizationofadministrativepracticesunderBEPS,eventhoughprocesseswillbecomemorecomplicated."

–Japanrespondent

ThereissignificantconcernabouttheBEPSinitiativeandtheresultingimpactonhowmultinationalsaretaxed

Figure 23. How concerned are you about the OECD BEPS initiative?

Figure 24: Do you think that the BEPS initiative will result in a significant change in how multinationals are taxed around the world?

Asexpected,themajorityofrespondentsbelieveBEPSwillsignificantlyalterhowmultinationalswillbetaxedaroundtheworld.

InAsiaPacific,nearlyallmajorcountrieshavetheireyeonBEPSandwillbeadaptingtheirtaxrulestoensuretheirjurisdictionsareincompliancewiththenewstandards.MostAsiaPacificcountriesexpecttoreleasenewguidelinesarisingfromBEPSin2017or2018.

WeexpectHongKongandSingaporetobeproactiveindesigningBEPScompliantregimestoattractforeigninvestmentandupholdtheirreputationsasinvestmenthubsinAsia.

"WeareexpectingtheInlandRevenueAuthorityofSingapore(IRAS)tocloselymonitorandfollowmanyoftheBEPSmeasures.Itwillcertainlyincreaseourtaxcomplianceburden."


% of respondents

79%Concerned

21% Not concerned

% of respondents

85%Yes

15%No

Shifting sands: risk and reform in uncertain times | Appendix I: Respondent profileShifting sands: risk and reform in uncertain times | Appendix I: Respondent profile

37

AppendixI:RespondentprofileInthe2017TaxComplexitysurvey,therewere331respondentsacrosstheAsiaPacificregion.Surveysweredistributedelectronicallyandcouldbecompletedonananonymousbasis.ThesurveywasconductedduringtheperiodDecember2016toJanuary2017.


38

In which industry is your company primarily engaged?Figure 25. Respondents' industry

Industries

45%

15%

12%

11%

4%

4%

4%

3%

2%

Consumer Business & Transportation

% of respondents

Technology, Media & Telecommunications

Financial Services

Energy & Resources

Manufacturing

Engineering & Construction

Life Sciences & Health Care

Services

Real Estate

Please indicate the Asia Pacific jurisdictions in which your company has business operations.Figure 26. Jurisdictions of business operations

Jurisdictions

Mainland ChinaJapan

SingaporeAustralia

Hong KongIndia

MalaysiaSouth Korea

IndonesiaThailand

TaiwanVietnam

PhilippinesNew Zealand

MacaoMyanmar

BruneiMauritiusMongolia

Guam

No. of respondents

208168168

151151

147130

127125125

120102

8887

3636

1515

136


39

What is the size of your company in terms of gross revenue in Asia Pacific? Figure 27. Gross revenue

What is the size of your company's tax department in Asia Pacific?Figure 28: Tax department

Companyandtaxdepartmentsize

% of respondents

43%

7%

24%

11%

8%

8%

Less than US$0.5 billion

US$0.5bn to US$1bn

>US$1bn but < US$5bn

>US$5bn but < US$10bn

>US$10bn

>US$20bn

% of respondents

28%

43%

12%

6%

10%

We do not have a dedicated tax function

1 - 5 persons

6-10 persons

11-20 persons

Over 20 persons

Shifting sands: risk and reform in uncertain times | Appendix II: Tax rates in Asia Pacific jurisdictionsShifting sands: risk and reform in uncertain times | Appendix II: Tax rates in Asia Pacific jurisdictions

40

AppendixII:TaxratesinAsiaPacificjurisdictions


41

IncometaxandCapitalgainstaxrates**Highest statutory rateUpdatedMarch2017

Jurisdiction For Corporation For Individual

Incometax Capitalgainstax Incometax Capitalgainstax

Australia 30% 30%Note1 45% 45%Note2

Brunei 18.5%Note3 No 0% No

MainlandChina 25% Note4 45% Note5

Guam 35% 35% 39.6% 20%

HongKong 16.5% No 15% No

India 30%Note6 40%Note7 30%Note6 30%Note7

Indonesia 25% 25%Note8 30% 30%Note9

Japan 23.4%Note10 23.4%Note10 45%Note11 45%Note11&12

Macao 12% Note13 12% No

Malaysia 24% Note14 28% Note14

Mauritius 15% No 15% No

Mongolia 25% 25% 10% 10%

Myanmar 25% 10% 25% 10%

NewZealand 28% Note15 33% Note15

Philippines 30% 30% 32% 32%

Singapore 17% Note16 22% Note16

SouthKorea 24.2% 24.2%Note17 44% VariedNote18

Taiwan 17% 17%Note19 45% 45%Note19

Thailand 20% 20% 35% 35%

Vietnam 20%Note20 20% 35% 20%

Note:1. Assessableincomeincludesanycapitalgainsafteroffsettingcapitallosses.Netcapitalgainsderivedbycompaniesaretaxedatthe30%corporaterate.2. Netcapitalgainsderivedfromthedisposalofassetsacquiredafter19September1985areincludedinassessableincome.Capitalgainstaxdiscountapplies.3. Rateforoilandgascompaniesis55%.4. Gainsandlossesfromthetransferofassetsgenerallyarecombinedwithotheroperatingincomeandtaxedattheapplicableenterpriseincometaxrate.5. Netgainsfromthesaleofpropertyaresubjecttotaxatarateof20%.Exemptionapplies.6. Surchargeandcessapplicable.30%fordomesticcompaniesand40%forforeigncompaniesandbranchofforeigncompanies.7. Taxratesdependsuponthenatureofgains(short-termorlong-term)andunderlyingassets(shares,listedorunlistedsecurities,movableorimmovable

assets).Surchargeandcessapplicable.8. Certaintransactionsaretaxedunderaspecialregime(e.g.incomefromdisposalsoflandand/orbuildings).9. Certaintransactionsaretaxedunderaspecialregime(e.g.incomefromdisposalsoflandand/orbuildings,gainsonshareslisted,etc.)10. Localinhabitanttaxandlocalenterprisetaxapplicable.11. 0.945%ofrestorationsurtaxapplicable.12. Ratesvaryforcapitalgainsfromrealestateandsecurities,dependingonthenatureofgainsandholdingperiod.13. Capitalgainistreatedasincomeofcompanyandissubjecttocomplementarytax(euqiv.profittax).14. CapitalgainsarenottaxedinMalaysia,exceptforgainsderivedfromdisposalofrealpropertyoronthesaleofsharesinarealpropertycompany.The

rateisupto30%,dependingonholdingperiod.15. NewZealanddoesnothaveageneralcapitalgainstax.Certaincapitalgainsaretaxedunderspecifictaxrules.16. Singaporedoesnottaxgainsofacapitalnature;whetheragainisregardedascapitalorrevenueinnaturerequiresaconsideration,intotality,ofall

factsapplicabletothetransactiongivingrisetothegain.17. Capitalgainsorlossesareusuallyreflectedinnormaltaxableincometax.Capitalgainsderivedbynonresidentfromtransferofsharesaretaxedatthe

lesserof11%ofthesalesproceedsreceivedor22%ofthegainsrealized.18. Capitalgainsaretaxedseparately,withtheratedependingonthetypeofasset,holdingperiod,etc.19. Certaintransactionsaretaxedunderaspecialregime(e.g.incomefromdisposalsoflandand/orbuildings,gainsontheshareslistedetc.).20. Rateapplicabletoenterprisesoperatinginoilandgasandnaturalgasresourcesectoris32%-55%,dependingonproject.


42

Withholdingtaxrates**Rates applied to payment to nonresidents and may be reduced under provision of applicable tax treaties.UpdatedMarch2017

Jurisdiction Dividends Interest Royalties Notes

Australia 0%/30% 10% 30%

Brunei 0% 15% 10%

MainlandChina 10% 10% 10%

Guam 30% 30% 30%

HongKong 0% 0% 4.95%/16.5%

India 0% 5%/20%/30%/40% 10% Ratesareexclusiveofapplicablesurchargeandcess.Dividendpaidbyadomesticcompanyaresubjecttodividenddistributiontax(DDT)at20.36%.

Indonesia 20% 20% 20%

Japan 20% 15%/20% 20% Surtaxof2.1%alsoapplies.

Macao 0% 0% 0%

Malaysia 0% 0%/15% 10%

Mauritius 0% 0%/15% 0%/15%

Mongolia 20% 20% 20%

Myanmar 0% 15% 20%

NewZealand 0%/15%/30% 15% 15%

Philippines 15%/30% 20% 30%

Singapore 0% 0%/15% 0%/10%

SouthKorea 20% 14%/20% 20% 10%localsurchargealsoapplies,resultinginaneffectiverateof22%(and15.4%forcertaininterest).

Taiwan 20% 15%/20% 20%

Thailand 10% 0%/10%/15% 15%

Vietnam 0% 5% 10% Awithholdingtaxof5%(corporatetax)and5%(VAT)generallyappliestotechnicalservicefeespaidtoanonresident.Acorporatetaxexemptionmayapplyunderataxtreaty.


43

Othertaxes(GST/VAT,Payrolltax,Socialsecurity,Realpropertytax)

Jurisdiction GST / VAT Payroll tax Social security Real property tax

Australia GST-10% Leviedonemployersbythestatesandterritories,withtheamountbasedonsalaries,wagesandbenefitspaidtoemployees.

Employersarerequiredtocontributetoacomplyingsuperannuationfundorretirementsavingsaccountonbehalfoftheiremployees,atarateof9.5%oftheemployee's"ordinarytimeearnings",uptoamaximumearningsbase.

A2%medicarelevyonthetaxableincomeofAustralianresidentsispayablebyindividual.

Stampdutyunderlandtransfers.Moststates/territoriesalsolevylandtaxatratesupto3.75%.Landtaxsurchargemayalsoapply.

Brunei No No Bothemployerandlocalemployeesarerequiredtocontribute5%ofthewages(oflocalemployeesonly)totheEmployeeTrustFundand3.5%totheSupplementaryContributionPension.

Notaxesareleviedonproperty,buta12%buildingtaxisleviedonbuildingslocatedinBandarSeriBegawan.

MainlandChina

VAT-17%,13%,11%and6%forgeneraltaxpayersdependingonthetypeoftransactions;3%levyrateforsmall-scaletaxpayerswhilenoVATinputisallowedtobecredited.

No BothemployerandemployeesarerequiredtomakecontributionstothePRCSocialSecuritySchemes,whichincludesbasicpensioninsurance,basicmedicalinsurance,work-relatedinjuryinsurance,unemploymentinsuranceandmaternityinsuranceschemes.

1.2%oftheoriginalpropertyvaluewith10%to30%reduction;or12%onpropertyrentalincome(onlyleviedincities,countytowns,statedesignatedtownshipsandindustrialandminingareas).

Guam VAT-4% No Employerscontribute7.65%ofemployeewagestoSocialSecurityandMedicare.

0.25%ofassessedvalueforlandand1%oftheassessedvalueofbuildings.Assessedvalueis35%ofappraisedvalue.

HongKong No No Anemployerisrequiredtodeduct5%ofanemployee'smonthlyincome(cappedatHKD1,500)ashis/hercontributiontotheMandatoryProvidentFund(MPF)scheme,andpayanadditional5%astheemployer'scontribution.

5%oftheratablevaluewhichistheestimatedannualrentalvalueofaproperty.

India Ratesvarybetweenstates.

Theemployerisresponsibleforwithholdingtaxonsalaryincome.

Allemployeescontribute12%ofeligiblewagespermonthtotheprovidentfund,withamatching12%contributionbytheemployer.

Eachstateleviespropertytax,withratesvaryingfromstatetostate.

UpdatedMarch2017


44


Indonesia VAT-10% Anemployerisrequiredtowithhold,remitandreportincometaxontheemploymentincomeofitsemployees.

Boththeemployerandemployeearerequiredtomakesocialsecuritycontributions,upto11.74%byemployerand4%byemployedresidentindividual.

Landandbuildingtaxispayableannuallyonland,buildingsandpermanentstructures.Theratetypicallyisnomorethan3%oftheestimatedsalesvalueoftheproperty.

Japan VAT-8% Theemployermustwithholdincometaxandsocialsecuritycontributionsatsource.

Socialsecuritytaxcomprisesseveralcomponents.Thehighestcombinedportionforemployerandemployeeisapproximately16.248%and15.446%,respectively.

Themunicipalfixedassetslevyisassessedatanannualrateof1.4%.RealestateacquisitionstaxandRealestateregistrationtaxalsoapply.

Macao No No Theemployerandresidentemployeemustpayintothesocialsecuritycontributionfund(FSS).TheemployercontributesMOP60permonthforeachMacaoresidentemployee,andtheemployeepaysMOP30permonth.

10%onactualrentalincomeforleasedproperty.

6%onofficialratablevalueforself-usedproperty.

Malaysia GST-6% TaxonemploymentincomeiswithheldbytheemployerunderaPAYE(pay-as-you-earn)schemeandremittedtothetaxauthorities.

BoththeemployerandemployeearerequiredtomakecontributionstotheSocialSecurityOrganisation(SOCSO),andcontributetotheEmployeesProvidentFund(EPF)atarateof12%/13%and11%oftheemployee'sremuneration,respectively.

IndividualstatesinMalaysialevy"quit"rentandassessmentsatvaryingrates.

Mauritius VAT-15% No Theemployerisrequiredtomakesocialsecuritycontributionsatacombinedrateof10%ofanemployee'smonthlybasicsalary.Employee'scontributionsisatacombinedrateof4%ofhis/hermonthlybasicsalary.

No

Mongolia VAT-10% Anemployermustwithholdincometaxfromemployeewagesandremitthetaxtothegovernment.

Employerisrequiredtocontributetoarangeofinsurancesatacombinedratesof11%to13%ofanemployee'sgrossincome.Socialsecurityiscorporatetaxdeductible.Employee'scontributionis10%,withamonthlycapofMNT192,000.

0.6%to1%ofthevalueoftheproperty.


45


Myanmar GST-Goods5%to100%;Services:5%

Theemployermustwithholdtaxesonemploymentincome.

Theemployermustcontribute3%ofanemployee'sbasicsalaryandwages(cappedatMKK9,000)tosocialsecurity.Anemployeemustcontribute2%ofhis/herbasicsalaryandwages(cappedatMKK6,000)tosocialsecurity.

No

NewZealand GST-15% No Anemployermayberequiredtocontributeapercentageofanemployee'sgrosssalaryorwagestotheKiwiSaversuperannuationscheme,foremployeesthathaveoptedintothescheme.

Localauthoritieschargeratesonlandbasedontheofficialvaluationoftheland.Theratesvaryconsiderablyfromonelocalitytoanother.

Philippines VAT-12% Acorporateemployerisrequiredtowithholdtaxontheremunerationpaidtoitsemployees.

Monthlycontributiontothesocialsecuritysystembyemployerandemployeebasedonemployee'ssalarybracket.Monthlycapapplies.

WithinMetroManila–2%.Provinces-1%.

Singapore GST-7% No Employer'sstatutorycontributionratetotheCentralProvidentFund(CPF)isupto17%,employee'sstatutorycontributerateisupto20%.

Propertytaxesareprogressiveupto20%.20%representsthehighestmarginalrateandappliestonon-owneroccupiedresidentialproperties.Lowerratesareapplicabletoowneroccupiedresidentialproperties.

SouthKorea VAT-10% Employermustwithholdtaxesonsalarypaidtoitsemployees.

Employermustmakesocialsecuritycontributionstotherelevantsocialsecurityauthorities.Ratesvarydependinguponnumberofemployeesandindustry.

Individualsarerequiredtopaynationalpension,medicalinsuranceandunemploymentinsurancepremiums.

0.24%to0.6%dependingonthetypeofproperty.Realestate,suchaslandorresidentialbuildingsissubjecttothecomprehensiverealestatetaxinadditiontothelocalpropertytax.


46


Taiwan VAT-5% No Nosocialsecuritytax,butfactories,minesandallcompanieswithover50employeesmustestablishfundsforemployeewelfares.TherearetwosocialsecurityprogramsinTaiwan:LaborInsuranceandNationalHealthInsurance.Premiumsforbothprogramsaredeterminedbythegovernmentandbornebytheemployer,theemployeeandthegovernment.

LandValueTaxandLandValueIncrementalTax-1%to5.5%,orspecialratesforLandvaluetax(LVT).20%to40%,orspecialprivilegedratesforLandvalueincrementaltax(LVIT).

RealPropertyTax-Underthetaxregimethatappliestothesaleofrealestate(includinglandandhouses)acquiredafter1January2016,residentcompaniesaresubjecttocorporateincometax(17%)oncapitalgainsfromthesaleofrealestate.

Nonresidents(includingcompaniesandindividuals)willbesubjecttoa45%incometaxoncapitalgainsfromthesaleofrealestatethathasbeenheldforlessthanoneyear,or35%ifthepropertyhasbeenheldformorethanoneyear.

TheincrementalnetvalueoftherealestatesoldstillwillbesubjecttoLVIT,buttheincrementalnetvalueofthelandcanbedeductedfromthetaxablecapitalgainswhencalculatingthetax.

Thailand VAT-7% Taxonemploymentincomeiswithheldbytheemployerandremittedtothetaxauthorities,generallyonamonthlybasis.

Theemployerandtheemployeearerequiredtocontribute5%ofanemployee'smonthlycompensation,uptoaspecifiedmonthlycap.

12.5%withcertainexemptions.

Vietnam VAT-10% No Employercontribution:Socialinsurance(SI)18%,healthinsurance(HI),3%,andunemploymentinsurance(UI)1%oftheemployee'ssalary.

Employeecontribution:Socialinsurance(SI)8%,healthinsurance(HI),1.5%,andunemploymentinsurance(UI)1%oftheemployee'ssalary.

Themunicipalauthoritieslevytax(e.g.landrentaltax,landusefees,etc.)ontheuseofrealproperty.


47

Othertaxes(Unemploymenttax,inheritancetax&Gifttax,Stampduty,Alternativeminimumtax)

Jurisdiction Unemployment tax

Inheritance tax & Gift tax

Stamp duty Alternative minimum tax Other significant taxes

Australia No No Upto5.75%,ratesvarydependingonthestate/territoryandclassofbusinesspropertytransferred.Extrastampdutyisimposedinsomestates.

No No

Brunei No No Fixedoradvaloremratesonvariousbusinessdocuments.

No No

MainlandChina

No No 0.005%to0.1%,dependingonthetypeofdutiablecontractsordocuments.

No No

Guam No No No 20to28% UseTax–4%assesseduponimportationoftangiblepropertynotforresale.

HongKong No No 0.2%to20%,dependingonthetypeofdocumentsandtransactions.

No No

India No No StampdutiesareleviedundertheIndianStampActandthestampactsofthevariousstates(withratesvaryingsignificantlybetweenstates).

18.5%plusanyapplicablesurchargeandcessontheadjustedbookprofitsofcorporationswhosetaxliabilityislessthan18.5%oftheirbookprofits.Exemptionsapply.

Servicetax–15%.

Indonesia No No CertaindocumentsaresubjecttostampdutyatanominalamountofIDR3,000orIDR6,000.

No No

Japan 1.1% 10%to55% JPY200toJPY600,000ontheexecutionoftaxabledocuments.

No No

UpdatedMarch2017


48




Macao No No 0.2%to5%,dependingonthetypeoftransaction.

No GamingTax-AspecialtaxforlicensedgamingoperatorthatrunscasinoinMacao.

TourismTax-Appliestoacompanyrunningtourismbusinessesandischargedtocustomers,suchashotels,restaurants,barorfitnessclubs,etc.

Malaysia No No 1%to3%ofthevalueofpropertytransfers.0.3%onsharetransactiondocuments.

ALabuancompanycarryingonaLabuanbusinessactivitymayelecttopayafixedamountofMYR20,000,ortobetaxedat3%oftheauditedaccountingprofit.

No

Mauritius No No No No No

Mongolia No No Stampdutyreferstogovernmentservicefeeandisimposedatvariousrates.

No Customsdutyandexcisetax.

Myanmar No No,butregistrationfeesarepayableforinheritancesunderanarrangementofsettlementandforgifts,dependingonthevalueoftheproperty.

Ratesvarydependingonthetypeofdocumentsandinstruments.

No Specialgoodstax(5%-60%).

NewZealand No No No No No


49




Philippines No 5%to20%onthenetestateofbothresidentsandnonresidents.

Ratesvarydependingonthetypeoftransaction/document.

Aminimumcorporateincometax(MCIT)equalto2%ofgrossincomeisimposedonbothdomesticandresidentforeigncorporationsbeginninginthefourthtaxableyearofoperations.

No

Singapore No No 0.2%onshares,3%onproperties.

No Vehiculartaxes.

SouthKorea Seesocialsecurity

10%to50% Stamptaxisleviedonagreementsrelatingtothecreation,transferoralterationofrights,butthetaxisnotsignificant.

7.7%to18.7% No

Taiwan No EstateandgifttaxisleviedontheworldwideassetsofTaiwanese-domiciledindividuals.

Ratesvarydependingonthetypeoftransaction/document.

Aprofit-seekingenterprisewithafixedplaceofbusinessorbusinessagentinTaiwanissubjecttoaseparatealternativeminimumtax(AMT)calculationifitearnscertainincomethatistaxexemptorenjoyscertaintaxincentivesundertheIncomeTaxActorotherlaws,andtheenterprise'sbasicincomeexceedsNTD0.5million.TheAMTrateis12%.

AresidentindividualwithAMTtaxableincomeexceedingNTD6.7millionmaybesubjecttoa20%AMT.

No

Thailand No Inheritancetaxattherateof5%or10%appliesontheexcessofBaht100millionafterdeductingthetestator'sdebts.

Ratesvarydependingonthetypeofinstrument.

No No

Vietnam Seesocialsecurity

InheritancesandgiftsaboveVND10millionaresubjecttoincometaxat10%.

Astampdutyof0.5%to2%isleviedoncertaintypesofassets,includingrealproperty.

No SpecialSalesTax(SST)from10%to70%.


50

Practice&procedures

Jurisdiction Advance tax ruling Availability of a tax court

Statute of limitation Competent authority process

May the taxpayer enter into an advance tax ruling or agreement with the tax authority?

May the taxpayer appeal to the tax court in case of disagreement with the tax authority's decision?

Is there a competent authority process to resolve disputes between countries?

Australia Y Y-ThelawspecificallygivestaxpayertherighttogototheAdministrativeAppealsTribunal(AAT)ortheFederalCourtofAustraliaforareviewofsomeofATO'sactionsordecisions.

Fouryears Y

Brunei N Y Sixyears Y

MainlandChina N-Thereisgenerallynoadvancerulingprocedure,butthetaxauthoritiescanissuerulingsinspecialcases.Taxpayersnormallyconsulttheirlocalin-chargetaxofficialswhenissuesarise.Advancepricingagreementsmaybeconcluded.

N-Onlyinageneralcourt.

ThreeyearsandcanbeextendedtofiveyearsiftheamountoftaxunderpaidisoverCNY100,000.Statuteoflimitationfortransferpricingistenyears.Nostatuteoflimitationfortaxevasion,refusaltopaytax,ordefraudingoftaxpayment.

Y

Guam N Y Threeyearsingeneral,maybeextendedtosixyearswhenthetaxpayeromitsgrossincomeinanamountexceeding25%ofthegrossincomeactuallyreportedontheincometaxreturn.

N

HongKong Y Y Sixyearsingeneral,maybeextendedtotenyearsinthecaseoffraudwilfulevasion.

Y

India Y Y Varied Y

Indonesia Y–However,itisdifficulttoobtainone.TheIndonesiantaxofficedoesnothavetorespondtothetaxpayer'srulingrequest.

Y–TaxpayercanalsofileanotherappealtoIndonesiansupremecourtifthecasewaslostintaxcourt.

Withinfiveyearsaftertheincurrenceofataxliability.

Y

UpdatedMarch2017


51






Japan Y Y Fiveyearsingeneral,sixyearsfortransferpricing.

Y

Macao N Y Fiveyears Y

Malaysia Y Y Withinfiveyearsfromtheendoftheyearofassessmentwithinwhichtheassessmentismade.

Y

Mauritius Y Y Fouryears Y

Mongolia N N-Onlyinageneralcourt.

Fiveyears Y

Myanmar N N Threeyears Y

NewZealand Y Y Fouryearsandcanbeextendedifthetaxpayerhasbeenfraudulent/misleadingoromittingincome.LikewisetaxpayerscanagreetowaivethetimebarforadditionaltimetoallowInlandRevenuetoresolvedisputes.

Y

Philippines Y Y Threeyearsfromthelastdayprescribedbylawforthefilingofthetaxreturningeneral.Incaseofafalseorafraudulentreturnwithintenttoevadetaxorincaseoffailuretofileareturn,thetaxmaybeassessedoraproceedingincourtforthecollectionofsuchtaxmaybefiledwithoutassessmentatanytimewithintenyearsafterthediscoveryofthefalsity,fraudoromission.

Y

Singapore Y Y Fouryears Y

SouthKorea Y Y Fiveyearsingeneral,canbeextendedinthecasesofevasion,falseorfraudulentreturn.

Y


52






Taiwan Y Y Fiveyearsandcanbeextendedtosevenyearswhenataxpayerfailstofileataxreturnwithinthestatutorydeadlineorevadestaxbyfraud.

Y

Thailand Y-Ataxpayermayrequestanonbindingprivateletterruling,andAdvancepricingagreements- AdvancePricingAgreements(APAs)areavailableunderthetransferpricingregime.

Y Tenyears N–Noformal/officialprocedureisavailable,buttaxpayerscanrequestforanadvancepricingagreementandmutualagreementprocedureundertheapplicabletaxtreaty.

Vietnam N-Technically,ataxpayercouldaskforfurtherguidancefromthetaxauthorityforuncleartaxissuesthroughsubmittingaprivateruling.However,itisnotentirelyguaranteedthatataxinspectionteaminasubsequenttaxauditwouldnotlikelychallengethetaxfilingwhichismadebythetaxpayerbasedontheguidancefromthetaxauthorityinarespondingprivateruling.

Y Tenyearsingeneral.Fiveyearsforpenaltyforwrongfuldeclaration.

Y-Technically,GeneralDepartmentofTaxationwhichisauthorizedbyMinistryofFinancewouldtakeresponsibilityofresolvingdisputesbetweenVietnamandotherforeigncountriesthroughMAPsunderthetaxtreaties.

Shifting sands: risk and reform in uncertain times | Appendix III: ContactsShifting sands: risk and reform in uncertain times | Appendix III: Contacts

53

AppendixIII:Contacts


54

OurtaxexpertscanhelpyoutonavigatethecomplexityinAsiaPacific

Vietnam

Australia

Brunei

China

Guam

HongKong

India

Indonesia

Japan

Macao

Malaysia

Mauritius

Mongolia

Myanmar

Bangladesh

NewZealand

Philippines

Singapore

SouthKorea

Taiwan

Thailand

Cambodia


55

Formoreinformationaboutthissurveyortoenquireaboutourtaxservices,pleasecontactourDeloitteprofessionalsintheregion

Asia PacificAlan [email protected]

Chris [email protected]

AustraliaBrett [email protected]

BangladeshPatel Himanshu [email protected]

BruneiPengiran Haji [email protected]

CambodiaKimsroy [email protected]

China Vivian [email protected]

GuamJennie [email protected]

IndiaVipul [email protected]

IndonesiaMelisa [email protected]

JapanShinya [email protected]

Hong KongSarah [email protected]

MacaoRaymond [email protected]

MalaysiaWing Peng [email protected]

MauritiusTwaleb [email protected]

MongoliaOnchinsuren [email protected]

MyanmarAye [email protected]

New ZealandPeter [email protected]

PhilippinesFredieric [email protected]

SingaporeHwee Chua [email protected]

South KoreaJung Hee [email protected]

TaiwanAustin [email protected]

ThailandAnthony [email protected]

VietnamThomas [email protected]


56

Asia Pacific International Core of Excellence (AP ICE)Lili [email protected]

Leonard [email protected]

Business TaxNeeru Ahuja [email protected]

Business Process SolutionsMichael [email protected]

Deloitte LegalAlan [email protected]

Global Employer ServicesJoseph [email protected]

Indirect TaxSarah [email protected]

International TaxSteve [email protected]

Mergers & Acquisitions (M&A) Danny [email protected]

Transfer PricingFiona [email protected]

Tax Management ConsultingPiyus [email protected]

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