ASEAN Regulatory Brief: FATCA, GST, and a New DTA Protocol

In this ASEAN Regulatory Brief, we look at some of the important regulatory changes taking place in Singapore, Malaysia, and Indonesia during the second half of August.

Singapore

• Singapore Updates FATCA Information

The Inland Revenue Authority of Singapore (IRAS) has recently updated a range of information on its website related to the United States Foreign Account Tax Compliance Act (FATCA).

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In particular, the IRAS has issued a reminder that the FATCA Return submission deadline for Reporting Year 2014 ended on July 31, 2015. In addition, reporting Singapore-based financial institutions (SGFIs) that have requested an extension must submit their returns by the extended due date. To avoid follow-up action from the IRAS, any SGFIs that have not already submitted their FATCA returns must immediately do so, and contact the IRAS in order to explain the reason why they failed to submit the returns on time. The IRAS can be contacted via email with this address: FATCA@iras.gov.sg

On December 9, 2014, Singapore became the first country in Southeast Asia to sign an Intergovernmental Agreement (IGA) on tax information sharing with the United States. FATCA requires all financial institutions outside of the US to periodically transmit information on financial accounts held by US persons to the US Internal Revenue Service (IRS), or face a 30 percent withholding tax on payments made from the US.

Original FATCA regulations created a reporting regime under which all foreign financial institutions would have to sign individual agreements to disclose their US clients to the IRS. This regime was modified by introducing IGAs, which were intended to increase compliance and impose a heavier legal burden on financial institutions by integrating FATCA into local law.

Malaysia

• Malaysia GST deadline extended

Malaysia has extended its deadline for the submission of Goods and Services Tax (GST) returns for the April 1 to June 30 taxable period to August 14. The extension is intended to give small and medium-sized enterprises (with turnover of less than RM5 million per year) more time to submit their returns. SMEs have so far struggled to meet the July 31 deadline, with a reported 60-70 percent of business owners failing to meet the cutoff date.

RELATED: Singapore Releases Updated e-Tax Guide on GST and Attribution of Input Tax

Additionally, the Malaysian Customs Department will open four kiosks in four separate locations in the state of Kelantan in order to facilitate the submission of GST-03 statements and payments.

If a business fails to submit their GST payments within the filing period, they will be found in violation of section 41(6) of the Goods and Services Tax Act 2014.

Indonesia

• Indonesia-Netherlands amend their DTA with new protocol
  

Indonesia and the Netherlands have signed a new protocol amending their 2002 double tax agreement (DTA). Important takeaways from the new agreement include the following:

• Dividends:
  • Replaces Paragraph 2 of Article 10 (Dividends).
  • A five percent withholding tax on dividends if the beneficial owner is a company directly holding at least twenty-five percent of the paying company’s capital; ten percent if the beneficial owner is a recognized pension fund; otherwise fifteen percent.
• Interest:
  • Replaces Paragraph 4 of Article 11 (Interest).
  • A five percent withholding tax on interest if paid on a loan made for a period of more than two years, or paid in respect of a sale on credit of any industrial, commercial, or scientific equipment.
• Exchange of Information:
  • Replaces Article 28, bringing it in line with the Organization for Economic Cooperation and Development (OECD) standard for information exchange.
• Assistance in the Collection of Taxes:
  • Added Article 28A (Assistance in the Collection of Taxes).

To view Indonesia’s DTA with the Netherlands, as well as the country’s other agreements, please see here.

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