ASEAN Today – Regional Legal and Business News – December 2019

ASEAN Today – Regional Legal and Business News for December 2019 including an Immigration update on the new required work permit filing locations for Greater Bangkok and the new definition of vacant/non-utilized properties under the new Land and Building Tax Act.

 

ASEAN Economic Community News

ASEAN Banking Assessment
The world’s leading conservation organization released a report that says ASEAN financial regulators and banking associations are strengthening regulatory safeguards and increasing their expectations for ASEAN banks to assess and mitigate climate and environmental risks. The report looks at recent progress made in Indonesia, Malaysia, Singapore, Thailand and Vietnam, countries that make up 85% of the region’s GDP, using a new assessment framework on what makes up a robust foundation of regulatory practices. Overall, seven ASEAN countries will have issued new or revised sustainable banking regulations or guidelines by the end of 2019. 27 out of the 29 banks assessed refer to sustainability in their strategy and 20 reference sustainability in their leadership statements. The report also recommended that financial regulators and banking associations enhance the resilience of ASEAN’s financial sector and create the necessary conditions to fully mobilize private capital. Also recommended was to require banks to develop policies based on internationally recognized sustainability standards and certification schemes and proactively support clients in transitioning to low-carbon and sustainable business models.

Trade War Incentive Schemes
A number of ASEAN countries issued trade war incentive schemes in 2019 to attract potential investors affected by the US-China trade war. These include tax breaks and incentives to improve the ease of doing business and accelerated business reforms like free trade agreements and double taxation treaties. Thailand rolled out the Thailand Plus stimulus package which includes new tax incentives and deductions. Investments of at least THB1 billion submitted to Thailand’s Board of Investment (BOI) by the end of 2020 will be entitled to a 50% reduction in corporate income tax (CIT) for 5 years if at least THB1 billion of the actual investment is in place by the end of 2021. Tax deductions of up to 200% are also available for investments into developing advanced technology, using automation systems, and employing highly-skilled workers in science, technology, engineering, and mathematics (STEM).

In the Philippines, the new Corporate Income Tax and Incentives Rationalization Act (CITIRA) will reduce CIT from 30% to 20% over 10 years and also introduced other specific tax incentives. Malaysia’s incentives target Fortune 500 companies in high-end technology and manufacturing. Qualifying companies need to invest at least MYR5 billion and will receive MYR1 billion in incentives over 5 years. Indonesia issued incentives for businesses investing in labor-intensive industries, training programs, and R&D. A tax facility of 300% in gross income reduction of total costs incurred is possible for R&D investments. Indonesia also plans to reduce its CIT from 25% to 20% in 2021.

Vietnam News
Solar Subsidies
Vietnam’s government is officially urging its regional governments and the county’s state-owned utility company, Electricity of Vietnam (EVN), to suspend approving any new large-scale solar projects under the country’s feed-in-tariffs (FIT) scheme. The government had approved 9 GW of utility-scale solar capacity and 4.5 GW came on line by the time the first phase of the FIT scheme expired in June 2019. However, Vietnam has decided to not renew the FIT scheme and plans to shift to solar auctions instead of subsidizing solar development through an FIT. Vietnam’s electricity demand is growing at around 10% a year and the country needs to add 4 GW of new generating capacity to keep up with demand.

Singapore Bulletin
Digital Banks
Singapore plans to liberalize their banking sector by issuing up to five new licenses to operate digital banks. According to the Monetary Authority of Singapore (MAS); however, applicants will need to show profitability and comply with stronger capital requirements. Companies that show a consistent or increasing trend in net losses won’t meet the MAS’s requirement of demonstrating a path to profitability. There are also stringent capital requirements. The MAS plans to award 2 full bank licenses and 3 wholesales licenses. The capital requirement for a full bank is S$1.5 billion and S$100 million for a wholesale bank.

Myanmar Watch
Draft Trade Law Worries
Experts believe that the latest draft trade law revised by Myanmar’s Ministry of Commerce will make the country’s already difficult business environment even more difficult. Under the new draft law, companies would need to submit to more government approvals and allow ministries to further regulate broader areas of the economy. Under the current draft law, the government can apply price control measures to products under the pretext of ensuring national interest. Experts also say the legislation will also empower the government to issue a list of trade-related restricted items, prohibited items, and dual-use items, and possibly a list of restricted retail and wholesale businesses in which foreign companies are not allowed to invest in. Companies will also be required to apply for a trade registration certificate before carrying out any trading activities.

Malaysia Update
Madrid Protocol
On December 27, 2019, Malaysia became a contracting party to the Protocol relating to the Madrid System for the International Registration of Marks. Under the protocol, a trademark can be registered in the 122 member countries of the Madrid Protocol using a single application. Applications for the international registration of trademarks can now be filed with the Intellectual Property Corporation of Malaysia.
Indonesia News
E-Commerce Import Tax Increase
Indonesia announced that it plans to lower the import tax threshold for items sold via e-commerce from US$75 to US$3 to control the purchases of cheap foreign products and protect small domestic firms. Overseas shipments from e-commerce purchases, predominately from China, climbed to 50 million packages in 2019 compared to 20 million in 2018 and 6 million in 2017. Starting at the end of January 2020, foreign produced textiles, clothes, bags, and shoes valued over US$3 will be taxed at rates ranging from 32.5% to 50% with other products being taxed at 17.5%.

Brunei Update
Competition Order Enforced
Brunei’s Competition Commission announced that the Competition Order will come into force on January 1, 2020. The order prohibits activities in three key areas. The first is anti-competitive agreements which are defined as agreements made between two or more businesses involving price-fixing, market-sharing, supply control, or bid-rigging. The second is the abuse of dominant positions where a business uses its leading position in an exclusionary or exploitative manner to earn favorable outcomes that would not have been possible in open competition. The third is anti-competitive mergers where a merger leads to anti-competitive actions like direct increases in prices, lower quality, and restricted number of options for consumers.

Cambodia Bulletin
Special Economic Zones
The Cambodian government is drafting new laws to regulate special economic zones (SEZs) and attract investment into the country, enhance transparency, and promote fair competition. Currently, there are 23 active SEZs with 490 factories that employ 130,000 people. However, while there is continued interest from foreign investors to set up factories in the SEZs, Cambodia needs to improve its business environment in order to stay competitive in the region. This includes expanding the production base, developing infrastructure, improving logistics, facilitating trade, and reducing the cost of electricity and other expenses.

THAILAND LEGAL REVIEW

Corporate Law News
Definition of Vacant/Non-Utilized Properties under the new Land and Building Tax Act
On December 20, 2019, for the purpose of clarification, the Minister of Interior issued the Ministerial Regulation to define the characteristics of vacant/non-utilized properties. A property having the following characteristics is liable for a tax payment under the Land and Building Tax Act B.E. 2562 (2019):
 Characteristics of vacant properties include:
1) Land which can be utilized, but with no utilization over past years, except for a natural disaster and force majeure; and
2) Buildings which can be utilized, but are abandoned with no utilization over past years.
 Characteristics of properties non-utilized in the proper manner include:
1) Land which can be utilized for agriculture, but with no utilization in accordance with the criteria prescribed by the Minister of Finance together with Minister of Interior (e.g., farming, gardening, or animal husbandry) over past years; and
2) Buildings being built/renovated, and by nature can be utilized for agriculture, residence, or other purposes apart from agriculture or residence, but with no utilization over past years

However, said characteristics will be excluded under the following circumstances:
 Land being under arrangement for any benefit or buildings under construction
 Land or buildings being barred from any benefit by law, court order, or judgment
 Land or buildings under legal proceedings regarding ownership or possessory right

Update on the Submission of Financial Statements for 2020
According to DBD e-Filing, starting from January 1, 2020 onward, the filing of financial statements can only be made in the form of DBD XBRL in Excel (V.2.0); however, the format for other supporting documents remains unchanged. For filing by hand, this method can still be effective as an alternative for financial statement filing. Still, companies will also be required to submit the financial statement via DBD e-Filing again, apart from the hard copies, within 7 days from the due date prescribed by law

Immigration News
New Work Permit Filing Locations
Under a new rule from the Employment Department, companies in Greater Bangkok who use the regular work permit process at the Employment Department, Ministry of Labour, when filing all types of work permit applications – new work permits, renewals, cancellations, urgent work permits (UWPs) – can no longer file at the Employment Department. Instead, these companies must use the Employment Office located in the District where the company is located. There are now 10 Employment Offices in Bangkok responsible for the applicable related Districts:
1. Bangkok Employment Office Area 1
Responsible District Area: Bangrak, Pathumwan, Yannawa, Sathorn, Bang Kho Laem
2. Bangkok Employment Office Area 2
Responsible District Area: Chom Thong, Thung Khru, Bang Khun Thian, Bang Bon, Rat Burana
3. Bangkok Employment Office Area 3
Responsible District Area: Khlong Toei, Bang Na, Prawet, Pra Khanong, Wattana, Suan Luang
4. Bangkok Employment Office Area 4
Responsible District Area: Khan Na Yao, Bang Kapi, Lad Phrao, Wang Thonglang, Bueng Kum
5. Bangkok Employment Office Area 5
Responsible District Area: Khlong Sam Wa, Min Buri, Lat Krabang, Saphan Sung, Nong Chok, Sai Mai
6. Bangkok Employment Office Area 6
Responsible District Area: Khlong San, Thon Buri, Bangkok Noi, Bangkok Yai, Bang Phlat
7. Bangkok Employment Office Area 7
Responsible District Are: Taling Chan, Nong Khaem, Phasi Charoen, Tawi Watthana, Bang Khae
8. Bangkok Employment Office Area 8
Responsible District Area: Dusit, Pom Prap Sattru Phai, Phra Nakhon, Samphanthawong
9. Bangkok Employment Office Area 9
Responsible District Area: Chatuchak, Don Mueang, Bang Sue, Bang Khen, Lak Si
10. Bangkok Employment Office Area 10
Responsible District Area: Din Daeng, Phaya Thai, Ratchathewi, Huai Khwang

This new rule will not impact companies that are eligible to use the One Stop Service Center for all types of work permit applications. The new rule becomes effective on January 16, 2020.

Note: We expect to see minor delays in the processing timeline due to the establishment of the new Employment Offices and the new rotation of the officers in charge.

Disclaimer
The material contained herein is only provided for information purposes. No part thereof may be deemed to constitute legal advice or the opinions of this law firm or any of its attorneys. Whilst every effort has been made to verify the contents of the material contained herein, we do not represent, warrant, undertake, or guarantee that the information contained in this newsletter is correct, accurate, or complete. Legal advice must be sought before acting on any information contained herein.

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