ASEAN Market Watch: Malaysia CIT Reduction, Indonesia Ease of Doing Business, and Cambodia Rice Exports

Malaysia: Corporate Income Tax to be Reduced for Profit-making Companies

In the forthcoming Assessment Year (AY) 2017, beginning January 1, 2017, as well as AY 2018, companies registering an increase in revenue, compared to the previous AY, will be eligible to pay a reduced rate of corporate income tax (CIT) on the increased amount.

As per the new measure, companies increasing their annual revenue by at least five percent over the previous year will get a one percent reduction in the 24 percent CIT rate on the incremental portion of taxable income. The tax cut will rise on a sliding scale to four percent in line with revenue increases of 20 percent or more. For example, if a company increases its chargeable income from RM 10 million in AY 2016 to RM 12 million in AY 2017, the income tax rate for the first RM 10 million will be 24 percent, and the income tax rate for the additional RM 2 million will be 20 percent.

In addition, a tax incentive has been introduced for small and medium enterprises (SMEs) whereby the income tax rate on the first RM 500,000 (US$120,222) will be reduced from the current 19 percent to 18 percent with effect from AY 2017. The changes are part of the Budget 2017, which will also include incentives for other sectors like hotels and insurance. Despite these incentives, analysts have stated that the tax reduction is still not attractive as compared to other ASEAN countries.

RELATED: International Tax Planning Services from Dezan Shira & Associates

Indonesia Climbs Ease of Doing Business Index by 15 Spots

Indonesia moved up 15 places in this year’s Ease of Doing Business 2017 index of the World Bank. Indonesia moved to 91 from 106 among 190 world economies. The improvement has been attributed to the removal of several unnecessary regulations by the government. Improvements were particularly felt in Jakarta and Surabaya, which are two of the biggest industrial cities in the country. Indonesia improved on several factors, including access to electricity, registration of property, payment of taxes, use of online systems, and the scrapping of paid-in minimum capital requirement for SMEs among others.

Nevertheless, government officials have stated that a special team needs to be assigned to monitor ease of doing business in order to attract more private investment. The government has released fiscal stimulus and economic reforms through 13 packages since September 2015 aimed at boosting investment; the 14^th package focusing on e-commerce is scheduled to be released this week. Ahead of Indonesia was Malaysia at 23^rd, Thailand at 46^th and Vietnam at 82^nd.

RELATED: The Guide to Corporate Establishment in Indonesia

Cambodia to Sign Agreement to Export Rice to Indonesia

Cambodian authorities have prepared a memorandum of understanding (MoU) with Indonesia which will allow it to export one million tons of rice as per a new quota system. The MoU is expected to be signed soon. Government estimates forecast that three million tons of rice are expected to be produced this year, depending on how the grain is harvested and stored.

Nevertheless, officials have stated that even when the MoU is signed, Cambodia will have to compete with other rice exporters such as Thailand and Vietnam. Difficulties that prevent the country to increase rice exports include capital shortages, inefficient logistical capacity, inadequate storage capacity, and the high cost of electricity.

Annual Audit and Compliance in ASEAN
For the first issue of our ASEAN Briefing Magazine, we look at the different audit and compliance regulations of five of the main economies in ASEAN. We firstly focus on the accounting standards, filing processes, and requirements for Indonesia, Malaysia, Thailand and the Philippines. We then provide similar information on Singapore, and offer a closer examination of the city-state’s generous audit exemptions for small-and-medium sized enterprises.

The Trans-Pacific Partnership and its Impact on Asian Markets
The United States backed Trans-Pacific Partnership Agreement (TPP) includes six Asian economies – Australia, Brunei, Japan, Malaysia, Singapore and Vietnam, while Indonesia has expressed a keen willingness to join. However, the agreement’s potential impact will affect many others, not least of all China. In this issue of Asia Briefing magazine, we examine where the TPP agreement stands right now, look at the potential impact of the participating nations, as well as examine how it will affect Asian economies that have not been included.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.

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