24 Aug ASEAN Today – Regional Legal and Business News – July 2021
ASEAN Today – Regional Legal and Business News for July 2021 including an Immigration Update on the Phuket Sandbox and Corporate Law News including a Reminder to File Semi-Annual Corporate Income Tax Returns
ASEAN Economic Community News
ASEAN Green Recovery Measures
Experts warn that ASEAN governments are prioritizing the disbursement of stimulus measures for short-term economic relief and to boost socioeconomic resilience and are not leveraging the pandemic crisis to fight climate change and have not tied green components to their stimulus packages or addressed the environmentally harmful measures embedded in the current stimulus packages. At present, ASEAN countries had authorized a total of US$730 billion, equivalent to 7.8 per cent of ASEAN’s’ total GDP in stimulus money. However, the addition of green recovery policies and strategies would equally help ASEAN countries on the path to economic recovery while bringing environmental and sustainability benefits. Economists and development experts have introduced the concept of green recovery measures to encourage governments to decarbonize the economy and enhance resilience in facing future health and climate shocks such as investing in infrastructure that supports energy efficiency and decarbonization. Some of the sustainable economic policies to combat the pandemic crisis include fiscal measures with long-term vision, fossil fuel subsidy reform, environmental taxation, natural capital investment, and increasing research and innovation to advance decarbonization. ASEAN’s collective efforts for green recovery come under the ASEAN Comprehensive Recovery Framework adopted at the 37th ASEAN Summit held in 2020. Under the framework, green recovery including green growth, green jobs, green infrastructure, and decarbonization pathways is one of the suggested measures at the country level.
New Double Taxation Agreements
The updated Indonesia-Singapore double taxation agreement (DTA) entered into force on July 23, 2021, and will strengthen efforts to prevent tax evasion, increase the tax base, and increase investments between the two countries. The DTA will further enhance Singapore’s status as a hub for international investments into Indonesia. The three major changes to the previous DTA are the introduction of an article that provides capital gains tax protection, the reduction of withholding tax (WHT) on royalties, and the reduction in branch profits tax (BPT).
On July 16, 2021, Brunei and the Philippines signed an agreement to eliminate double taxation and prevent tax evasion on income from cross-border transactions between the two countries. The Philippines and Brunei began negotiations on a DTA in 2001 and the first draft was approved in 2017. The agreement is expected to further strengthen economic cooperation and enhance investment flows and economic activity between Brunei and the Philippines and reduce tax liability from both jurisdictions and facilitate the exchange of tax information in accordance with internationally agreed tax information exchange standards.
A report by a global integrated risk assessment firm warns that the Asia-Pacific region (APAC) including ASEAN faces deep economic scars from the global pandemic. While APAC economic growth is expected to start rebounding in 2021, the report says that the overall resiliency of the Asia-Pacific economy masks a range of output losses across individual markets. Analysts anticipate output declines of 2% to 8% by 2023 in the lower- to upper-middle-income economies that have moderate exposure to tourism or are grappling with virus outbreaks such as Malaysia, Indonesia and Thailand. However, Taiwan, China, Japan, South Korea, and Singapore are still expected to post strong growth and return to pre-pandemic economic levels by 2023.
Creative Economy Growth
The Philippines plans to become the top creative economy in ASEAN by 2030. Rankings by the United Nations Conference on Trade and Development place the Philippines first amongst the world’s countries in generating creative services exports. Additionally, the Global Innovation Index of 2020 ranks the Philippines 10th out of 130 countries for creative goods exports. The government says that the creative services industry is a fast-growing, high-value contributor to the Philippine economy, with potential to become an important driver of more inclusive and resilient growth and is actively legislating to improve their competitiveness. One such piece of legislation is the Philippine Creative Industries Development Bill which will define the scope of creative industries to include audio and audiovisual media, visual arts, books publishing and printed media, digital interactive media, creative services, and performing arts. Another is the Freelance Workers Protection Bill which will require written contracts for creative freelancers that must contain the services to be provided, details of compensation and benefits, period of employment, grounds for breach of contract, and the freelancer’s tax identification number.
New VAT Rate on Exporters
The Philippines issued Revenue Regulation (RR) No. 9-2021, which introduced a 12% value-added tax (VAT) rate on certain sales transactions that were previously taxed at zero percent. The new regulation came into effect on June 27, 2021. The examples of transactions subject to 12% VAT are the sale of raw materials or packaging materials to a non-resident buyer, for delivery to a local export-oriented enterprise, to be used in the processing, manufacturing, packaging or repackaging in the Philippines, or to an export-oriented enterprise whose export sales exceed 70% of total annual production. However, on July 31, 2021, the government decided to defer the Regulation until an amendatory revenue regulation is issued, due to the continuing COVID-19 pandemic and its impact on the export industry.
New Advance Pricing Agreement
Vietnam’s new rules on Advance Pricing Agreements (APA), Circular 45/2021/TT-BTC (Circular 45), comes into force on August 3, 2021. An APA is a procedural agreement between the taxpayer and tax authorities that determines in advance the basis for tax calculation for specific cross-border controlled transactions. A major change in Circular 45 is the definition of eligible transactions under an APA. Now, an eligible party transaction must meet all conditions simultaneously: 1) Must occur during course of business and continue through proposed timeline, 2) Must have a basis to determine nature of transaction and be benchmarked according to tax law, 3) Transactions cannot be subject to tax disputes or under investigation, and 4) Transactions must be transparent and not for the purpose of tax avoidance.
Space Technology Hub
A Malaysian technological-social inclusion company and a Hong Kong multimedia infotainment provider signed a Memorandum of Understanding (MoU) to establish a joint-venture strategic partnership to develop the world’s first Geostationary (GEO) – Low-Earth-Orbit (LEO) integrated satellite network and service platform for ASEAN communities. The partnership also plans to transform Penang into a regional space technology ecosystem hub to foster local innovation, technology transfer, and into a supply chain and distribution hub for global satellite technologies for the ASEAN markets.
Due to its position on the Pacific Ring of Fire, Indonesia is one of the most geologically active countries on the globe and holds 40% of the world’s geothermal resources and is the second largest producer of geothermal energy behind the USA. The Indonesian government has identified more than 300 sites with an estimated 24 gigawatts (GW) in geothermal energy reserves and plans to install 8 GW of geothermal capacity by 2030, up from 2.1 GW currently. This will help the country meet its goal of sourcing 23% of its energy from renewables by 2025, cut carbon emissions to net-zero by 2060, and reduce its fossil fuel subsidies which average US$4.9 billion a year.
Tax Laws Amendments
To counter the country’s financial difficulties stemming from the global pandemic, Laos plans to amend its laws on tax, income tax, excise tax, and value added tax (VAT). The Lao government says that the amendments, especially VAT, will enable entrepreneurs to contribute to the VAT system and raise the purchasing power of consumers. It will also clarify the strategic implementation of the VAT law with a focus on the energy and mines sector rather than other fields. The changes are also aimed at promoting micro, small, and medium-sized enterprises (MSMEs) to increase the number of small businesses participating in the VAT system.
THAILAND LEGAL REVIEW
Thailand’s COVID-19 Situation
Due to the worsening of the COVID-19 situation in Thailand, the government released measures to restrict the outbreak in 29 provinces (the Maximum and Strict Controlled Areas or Dark-Red Zone provinces). In the Dark-Red Zone provinces, some businesses and venues have been ordered to close such as sports fields, public parks and botanical gardens, exhibition centers, meeting centers, learning centers, libraries, museums, beauty salons, hairdressers, and swimming pools. Restaurants and eateries are allowed to offer take-away services only up until 20.00. Department stores, shopping malls, and community malls are closed, except for supermarkets, pharmacies, and vaccination centers. Government agencies have been asked to have their employees work from home 100% of the time, except for special services. Private companies are also encouraged to have their employees work from home 100% of the time. These measures have had serious impact on the economy, especially for food and beverages businesses. Legal service providers also face difficulties in liaising with government agencies and with court hearings that have been postponed.
Phuket Sandbox Update
Starting from August 16, 2021, the Phuket Sandbox 7+7 Extension program allows eligible international travelers to reduce their mandatory stay in Phuket from 14 to 7 days, after which another 7 nights can be spent in Krabi (Ko Phi Phi, Ko Ngai, or Railay), Phang-Nga (Khao Lak or Ko Yao), or Surat Thani (Samui Plus – Ko Samui, Ko Pha-ngan, or Ko Tao).
The existing entry measures in place for the Phuket Sandbox program remain unchanged for the 7+7 extension. But, travelers planning to spend another 7 nights outside of Phuket must obtain a Transfer Form issued by their hotel in Phuket indicating that they have stayed in Phuket for 7 nights which they will need to show together with the negative results of their two COVID-19 tests (conducted on Day 0 and Day 6-7 in Phuket).
Travelling from Phuket to the selected areas in Krabi, Phang-Nga, or Surat Thai will be available only via approved routes and modes of transport.
Surat Thani (Samui Plus – Ko Samui, Ko Pha-ngan, or Ko Tao) can be reached via Bangkok Airways’ direct domestic flight on the Phuket-Ko Samui route.
Krabi (Ko Phi Phi, Ko Ngai, or Railay) can be reached by SHA Plus-certified boat and ferry services from approved piers.
Phang-Nga (Khao Lak) can be reached by SHA Plus-certified car transfer services from Phuket direct to the SHA Plus-certified hotels.
Phang-Nga (Ko Yao Noi or Ko Yao Yai) can be reached via SHA Plus-certified boat and ferry services from approved piers.
Once travelers have completed the 7-night extension in Krabi, Phang-Nga and Surat Thani (Samui Plus), and have tested negative on their third COVID-19 test (conducted on Day 12-13), they will receive a Release Form from their hotel and will be able to continue their journey to other destinations in Thailand.
If the stay in Krabi, Phang-Nga or Surat Thani (Samui+) is less than 7 nights, travelers must proceed directly to Phuket International Airport on the day of departure. At the port of entry back into Phuket, they will need to show a plane ticket or other proof of their international travel from Phuket.
While in Thailand, the Tourism Authority of Thailand would like to remind all travelers to continue with D-M-H-T-T-A precautions to prevent the spread of COVID-19: D – Distancing, M – Mask wearing, H – Handwashing, T – Temperature check, T – Testing for COVID-19, and A – alert application.
Corporate Law News
Reminder for Filing of Semi-Annual Corporate Income Tax Return (P.N.D. 51)
The filing of the semi-annual corporate income tax return (P.N.D. 51) for a juristic person shall be made within 2 months from the last day of the first six months of the accounting period. For a juristic person having a fiscal year starting from January 1 and ending December 31, such juristic person shall submit its semi-annual corporate income tax return (P.N.D. 51), within the following period:
• Manual filing: within August 31, 2021
• E-Tax filing: within September 8, 2021
For failure to comply with the aforementioned deadlines whether it is manual filing or e-Tax filing, the juristic person shall be subject to a fine not exceeding 2,000 Baht together with a surcharge of 20% of the tax payable.
Prohibition on Importing Used Motorcycles
The Notification of the Ministry of Commerce prescribing used motorcycles as goods prohibited on being imported into the Kingdom of Thailand, B.E. 2564 will become effective on February 7, 2022. The Notification includes:
• Definition of motorcycles
– Electric motorcycle
– Motorized bicycle (Electric bicycle)
– Antique motorcycle more than 100 years old, excluding the sidecar which is not installed on the vehicle
• Motorcycles considered as being used, excluding:
– Motorcycles that have been used specifically for the purpose of qualification testing or for delivery to source of sale with a certificate of brand owner
– Motorcycles that have been registered for the first time in a foreign country before loading into a vehicle from the city of origin not exceeding 60 days, by having made tax payment to the Custom Department, Ministry of Finance, as prescribed for new motorcycles
• Exemption for used motorcycles, which shall not fall under the scope of this Notification, for instance:
– Used motorcycles as the Ministry of Foreign Affairs deems appropriate, with a written notification to the Customs Department, permitting importation by a Consulate-General, International Organ-ization, Foreign Trade and Economic Office, or foreign organizations that have been granted privileges or persons who have been granted privileges
– Used motorcycles as the Ministry of Foreign Affairs deems appropriate, with a written notification to the Customs Department permitting importation by government agencies, state enterprises, or charitable organizations of Thailand receiving donations from foreign countries, under the National Disaster Prevention and Mitigation Plan.
The Customs Department is empowered to destroy any imported used motorcycles which violate the said Notification.
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.