Category: APJT Archive

Undertaking investment activities in the Chinese market through mergers and acquisitions (M&A) or corporate restructuring may raise issues of tax anti avoidance, which could be sceptically and stringently viewed by the Chinese tax authorities, who have recently formulated new regulations to tackle such attempts to avoid taxes. Investors intending to acquire shares of Chinese enterprises or to enter into joint ventures with them need to not only concern themselves with operational strategies but also to design their investment portfolios and structure their corporate frameworks to achieve tax-planning efficacy. This article uses two recent cases to illustrate a few major Chinese tax issues from an anti-avoidance perspective. It aims to remind foreign investors of the potential tax risks when they enter the Chinese market through the different approaches of M&A or corporate restructuring....

The terms “subject to tax”, “tax paid”, and “tax payable” are found in the domestic tax and treaty provisions of Singapore that grant relief from double taxation. This paper focuses on companies and makes three submissions. First, income would be “subject to tax” in a treaty scenario as long as it was included in computing the tax liability of the company concerned; actual tax assessed is not a requirement. Second, “tax paid” and “tax payable” differ in meaning, although practice in effect interprets either term more widely as “tax has been paid or will be paid”. Third, the term “liable to tax”, discussed in the context of treaty provisions based on OECD Article 4(1), must be read liberally to give effect to the terms of those treaties....

The informal economy is a major hurdle in the economic growth of developing countries, causing a loss of revenue, inequities, and misallocation of resources. An income tax is generally recommended as a major revenue instrument in informal economies because other taxes are considered regressive and consequently become a catalyst for the informal economy (Alm et al., 2003, p. 6). But studies show that the income tax has failed to secure most of its objectives in developing countries (Tanzi, 1991, p. 205) because most businesses in such countries are small in size and so cannot afford the compliance costs. In many instances, such businesses do not comply with their income tax obligations by operating in the informal sector (Schneider and Hemetner, 2007, p. 5). Instead they hide all or certain parts of their business transactions from the income tax authorities, with a low risk of being caught owing to weak and corrupt tax administrations (International Finance Commission [IFC], 2007, pp. vi,...

New UK Chancellor George Osborne delivered his first emergency Conservative- Liberal Democrat Government Budget on 22 June 2010, just six weeks after an historic election brought a coalition Government to the UK....

If anyone is looking for signs of dynamism or innovativeness in the island state of Singapore, Budget 2010 may well offer some useful hints. On 22 February 2010, the Singapore Government unveiled Budget 2010, charting out a course to build up the needed capabilities to transform Singapore into an advanced economy over the next decade. Those who follow the development of Singapore closely, particularly its budget announcements, will recall that just over a year ago, the Singapore Government introduced the Resilience Package in Budget 2009 at a time of enormous economic uncertainties. The world then, as considered by many economists, was suffering its worst and most widespread financial crisis since the Great Depression of the 1930s....

International trade theory suggests that exports are the quickest and most successful route to economic growth. As Malaysia struggles to maintain its economic growth and export levels, it is important that the country do all that is necessary to provide the right environment in order to encourage export oriented industries. Because competition to attract investment in industries is intense, tax incentives can be seen as an effective and deciding factor in achieving that aim. This article appraises the incentives offered in Malaysia to encourage export promotion. Separate sections are devoted to reviewing past and present incentives offered by the Government, and recommendations are offered to further improve incentive design....

Offshore special purpose vehicles (offshore SPVs) are commonly used by investors, including multinational corporations and investment funds, as intermediate holding companies for their cross-border investments for income tax, legal, operational, or other reasons. From an income tax perspective, an offshore SPV could enjoy applicable tax treaty benefits such as reduced withholding tax rates on dividends, interest, and royalty payments, or capital gains tax exemptions on the transfer of shares. Another reason for setting up an offshore SPV would be to facilitate a future exit strategy through a transfer of shares in the SPV without triggering any taxes in the country in which the investment is located. In most cases, the transfer of shares in the offshore SPV will not trigger any taxes in the offshore country....

Over recent years, controversial debates have occurred over the interpretation and application of section 39E of the Inland Revenue Ordinance (IRO), since the Inland Revenue Department (IRD) does not allow Hong Kong taxpayers to claim depreciation allowances on their plant or machinery used outside Hong Kong under import-processing arrangements. Given that the plant or machinery forms an integral element, or even the core component, of the taxpayers’ business operations, this has given rise to a demand to come up with possible solutions to iron out their concerns. Entrepreneurs in the manufacturing industry are even pushing the legislative authorities to put their concerns over this issue at the top of the agenda....

Plant and machinery play an important role in manufacturing operations. For tax purposes, capital expenditure on plant or machinery is usually allowed in the form of depreciation allowances. The current practice of the Inland Revenue Department (IRD) in denying the depreciation allowance claim on manufacturing plant and machinery by Hong Kong companies in their import-processing arrangements in mainland China, in accordance with section 39E of the Inland Revenue Ordinance (IRO), is considered unfair; this is because an additional tax burden is being imposed on some taxpayers who comply fully with the tax requirements. In this article, we discuss the following: 1. The history of cross-border processing businesses; 2. S e c t i o n 3 9 E , i t s i n t e n t , a n d r e c e n t developments; 3.Our observations regarding the impact on import processing businesses; and 4. Interpretation of section 39E....

The recent surge in Hong Kong property prices has increased concerns about the affordability of property among low-to-middle class income residents, as well as a potential risk that a property bubble will be created as a result of speculative property-dealing activities. Since the onset of the global financial tsunami, the monetary policies of certain economies have helped to increase global liquidity and have resulted in a large inflow of “hot money” into the Hong Kong financial system, particularly from the Chinese Mainland. It has been reported that more than 600 billion Hong Kong dollars in hot money flowed into Hong Kong after the global financial meltdown in late 2008, a significant amount of which was injected into the stock and real estate markets. A substantial portion of hot money also flowed into Hong Kong following the 4 trillion renminbi Chinese stimulus package in November 2008, which led to a massive influx of buyers from the Chinese Mainland....