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Tax management planning for Southeast Asia
Wednesday, 10 September 2014 00:00

The 2013 Taiwan CEO Survey results showed that 39% of Taiwan companies regard Southeast Asia as a key area for labor-intensive manufacturing and business growth opportunities. Among the various Southeast Asian countries, Vietnam was regarded as the leading investment destination for its manufacturing base and consumer market.

The ASEAN bloc as a whole had the third largest population in the world after China and India. Ten ASEAN countries jointly have six hundred million people and rich natural resources. All member states have aggressively pursued free trade agreements with other countries in recent years and set the goal of establishing an ASEAN Economic Community by 2015. In addition, the ASEAN Plus Three forum was set up to coordinate cooperation between ASEAN and the three East Asia nations of China, Japan, and South Korea. All of this will certainly have an impact on future business models of Taiwanese companies, which have so far primarily relied on China as their manufacturing base.

The bilateral trade volume between China and ASEAN had doubled to US$400 billion in 2012 from US$200 billion in 2009. The expected formation of a single ASEAN market in 2015 will allow not only the free movement of goods and services, but also capital and labor, and will unleash unlimited potential for economic development and growth.

Notwithstanding the potential investment and market opportunities in Southeast Asia, the companies should be aware of the tax risks arising from different and complex tax laws and regulations in different ASEAN countries regarding cross-border trade and investment. When positioning their operations overseas, transnational corporations have to carefully deliberate on how to develop a tax-efficient organizational structure and how to avoid any tax-related risks.

Given the growing attraction of Vietnam, Malaysia, Cambodia and Thailand as alternative investment destinations, the companies take the initiative to implement a corporate tax risk management framework and stay one step ahead of tax policy and compliance trends in these and other countries when considering their overall global positioning strategy.

Income types

Taiwan

Vietnam

Malaysia

Thailand

Cambodia

Corporate income

tax rate (%)

17

25

25

20

20

VAT tax rate (%)

5

10

5~10

7

10

Dividend withholding rate (%)

20

0

0

10

14

Signed comprehensive double tax agreements with Taiwan

NA

Yes

Yes

Yes

No

 


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