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DOING BUSINESS IN ASIA PACIFIC

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DOING BUSINESS IN ASIA PACIFIC Powered By Docstoc
					DOING BUSINESS IN ASIA PACIFIC
         By Globalaw Limited
          www.globalaw.net
TA B L E O F C O N T E N T S                                                                                             Doing Business in Asia Pacific




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               Table of Contents................................................................................... 2
               Introduction & Contact.......................................................................... 3
               Country Guides. ..................................................................................... 4–79
                             .
                 1. Australia............................................................................................. 4
                 2. China. ................................................................................................ 11
                         .
                 3. Guam................................................................................................. 14
                 4. Hong.Kong........................................................................................ 17
                             .
                 5. India................................................................................................... 20
                 6. Indonesia........................................................................................... 34
                 7. Japan................................................................................................. 37
                 8. Malaysia............................................................................................. 40
                 9. New.Zealand...................................................................................... 43
               10. Philippines......................................................................................... 46
                              .
               11. Republic.of.Korea.............................................................................. 52
               12. Singapore. ......................................................................................... 55
                            .
               13. Sri.Lanka. ........................................................................................... 60
                            .
               14. Taiwan................................................................................................ 64
               15. Thailand............................................................................................. 68
               16. Vietnam.............................................................................................. 77


                                                                       2
INTRODUCTION                                                                                    Doing Business in Asia Pacific




Globalaw Limited                     Globalaw.is.a.thriving.international.network.of.over.100.law.firms.located.in.over.80.
c/o Congrex Belgium                  different.countries.worldwide..Member.firms.are.full-service.medium.sized.firms.in.
287 Avenue Louise, 4th Floor         their.jurisdiction.able.to.service.their.client’s.legal.demands.
BE-1050 Brussels, Belgium

Tel: +32 2 645 2676                  Created.in.1994,.Globalaw.firms.are.vetted.and.once.admitted.work.hard.to.get.to.
Fax: +32 2 645 2671                  know.each.other.and.then.better.to.service.their.clients.internationally.
secretariat@globalaw.net
www.globalaw.net
                                     Global.business.is.here.to.stay..The.Asia.Pacific.region.has.experienced.a.period.of.
                                     unprecedented.growth..It.is.rich.in.diverse.cultures.and.languages..It.is.also.an.area.
Please.direct.all.queries.to.the.
                                     where.most.of.the.rest.of.the.world.needs.to.do.business..At.the.same.time.it.is.not.
primary.contact.at.the.Globalaw.
                                     always.a.region.that.is.easy.to.access.for.those.outside.it.
member.firm.in.your.local.
jurisdiction..Contact.details.for.
each.firm.and.primary.contact.are.   This.Doing.Business.in.Asia.Guide.has.been.prepared.by.the.Asia.Pacific.Region.
located.at.www.globalaw.net.         Globalaw.firms..It.is.intended.to.give.you.an.overview.of.how.to.do.business.in.all.
                                     those.countries.in.the.region.represented.by.a.Globalaw.member.firm..Presently.
                                     these.number.18..You.will.understand.therefore.that.Globalaw.has.extensive.coverage.
                                     in.the.region.


                                     Globalaw.member.firms.offer.global.and.regional.reach.from.a.platform.of.well-
                                     connected.local.firms.for.whom.personal.and.partner.led.service.are.key.features.


                                     We.hope.that.you.enjoy.this.guide.and.find.it.helpful..




                                     Michael.Hatchwell




                                     Vice-President




                                                         3
AUSTRALIA

• Geographic location: Oceania, continent between the Indian Ocean and the South Pacific
  Ocean
• Commonwealth of Australia – democratic, federal-state system recognizing the British
  monarch as sovereign
• Language: English
• Currency: Australian Dollar (AUD)
• Race/religion: Multicultural and Multidenominational
• Current business environment:
 o Strong and growing economy
 o Sophisticated capital markets
 o Australian Stock Exchange
 o Attractive environment for private equity
 o Investment growth areas: property, resources and mining, technology, venture capital

BUSINESS PRESENCE                                                         sensitive.sectors’,.or.where.the.proposing.entity.is.controlled.by.
                                                                          the.US.government..In.the.latter.case,.the.relevant.threshold.is.
•. Main.types.of.business.for.profit.structure.in.Australia:.Sole.        A$231.million.
Trader,.Limited.Liability.Company.(private.or.public),.Partnership        •. FATA.does.not.apply.to.investments.by.US.investors.in.
•. Other.possible.options.for.doing.business.in.Australia:.agency.        financial.sector.companies.subject.to.the.operation.of.the.
arrangement,.distribution.arrangement,.franchise.arrangement              Financial.Sector.(Shareholdings).Act.1998.(Cth).
•. Quick.and.simple.procedure.for.incorporating.companies                 •. Investments.in.the.media.sector.of.5.per.cent.or.more.
                                                                          regardless.of.the.value.of.the.investment.
                                                                          •. Direct.investments.by.foreign.governments.and.their.related.
FOREIGN INVESTMENT RESTRICTIONS AND                                       entities,.regardless.of.the.value.of.the.investment.
CONDITIONS                                                                •. Acquisitions.of.‘interests’.in.Australian.urban.land.(including.
                                                                          buying.real.estate,.obtaining.or.agreeing.to.enter.a.lease,.
Restrictions in Shareholding                                              financing.and.profit.sharing.arrangements).that.involve:
•. Australian.foreign.investment.policy.is.subject.to.the.Foreign.         o.Developed.non-residential.commercial.real.estate.with.certain.
Acquisitions.and.Takeovers.Act.1975.(Cth).(FATA)..The.Foreign.            value.thresholds;
Investment.Review.Board.(FIRB).operates.as.the.primary.organ.              o.Accommodation.facilities,.regardless.of.value;
of.review..The.outcome.of.the.FIRB’s.review.takes.the.form.of.             o.Residential.real.estate,.regardless.of.value;
a.recommendation.to.the.Federal.Treasurer,.who.retains.the.               .o.Vacant.real.estate,.regardless.of.value;.and
ultimate.discretion.to.determine.whether.or.not.approval.will.be.         .o.Buying.shares.or.units.in.Australian.urban.land.corporations.or.
granted..Under.this.mechanism,.a.proposal.which.is.deemed.to.             trust.estates,.regardless.of.value.
be.contrary.to.the.‘national.interest’.can.be.blocked.                    •. Proposals.where.any.doubt.exists.as.to.whether.they.are.
•. Under.FATA.and.the.accompanying.regulations,.the.                      notifiable.(funding.arrangements.that.include.debt.instruments.
government.is.required.to.be.notified.of.certain.proposals..              having.quasi-equity.characteristics.will.be.treated.as.direct.
Monetary.thresholds.are.stipulated.for.such.notification,.with.           foreign.investment).
provision.made.for.penalties.in.the.event.of.non-compliance..             •. The.Treasurer.has.a.30-day.period.to.respond.to.any.notice..
Proposals.which.are.required.to.be.notified.to.the.government.            However,.an.interim.order.prohibiting.implementation.can.
are.as.follows:                                                           be.made.within.30.days.of.receiving.the.notice,.prohibiting.
•. Acquisition.by.foreign.persons.of.an.interest.of.15.per.cent.or.       implementation.for.a.period.of.up.to.90.days..On.advice.of.the.
more.in.an.existing.Australian.business.or.corporation.where.the.         FIRB,.the.Treasurer.may:
value.exceeds.A$231.million,.or.where.the.proposal.values.the.             o.Make.an.order.prohibiting.a.proposed.transaction;.or
business.at.over.A$231.million..Foreign.persons.also.need.to.              o.Approve.it.with.or.without.conditions;.or
notify.if.they.wish.to.acquire.an.interest.in.an.offshore.company.         o.Indicate.that.the.government.has.no.objection.
whose.Australian.subsidiaries.or.gross.assets.are.valued.above.
A$231.million.                                                            Real Estate – General
•. For.US.investors,.the.notification.threshold.is.A$1005.million,.       •. Foreign.persons.seeking.to.buy.Australian.urban.land.must.
except.in.the.case.of.proposed.investments.in.‘prescribed.                seek.prior.approval.through.the.FIRB,.unless.specifically.


                                                                      4
AUSTRALIA                                                                                                          Doing Business in Asia Pacific

exempted.by.regulation..                                                      CENTRAL BANK EXCHANGE CONTROL
•. Foreign.persons.intending.to.buy.real.estate.in.Australia.
should.make.purchase.contracts.conditional.on.foreign.                        Currency Restrictions/Anti-Money Laundering
investment.approval,.unless.approval.has.already.been.granted.                •. Domestic.and.international.cash.transactions,.whether.in.
or.the.foreign.person.is.exempt.from.the.FATA..                               Australian.or.foreign.currency,.may.be.subject.to.the.regulations.
                                                                              under.the.Anti-Money.Laundering.and.Counter.Terrorism.
Real Estate – Residential                                                     Financing.Act.2006.(Cth).(AML/CTF.Act).and.Criminal.Code.
•. Non-resident.foreign.persons.cannot.buy.established.                       1995.(Cth)..
dwellings.as.investment.properties.or.as.homes.except.as.below:               •. ‘Designated.services’.which.are.subject.to.the.regulations.are.
•. Companies.that.consist.of.foreign.persons.need.to.apply.to.                itemised.under.the.AML/CTF.Act,.and.comprise.services.which.
buy.established.dwellings.to.house.their.Australian-based.staff..             could.provide.opportunities.for.money.laundering.and.terrorism.
Such.proposals.are.normally.approved.subject.to.the.company.                  financing,.such.as.a.broad.range.of.financial.services.and.
undertaking.to.sell.or.rent.the.property.if.it.is.expected.to.remain.         banking.services,.gambling.and.bullion.services..The.AML/CTF.
vacant.for.six.months.or.more.                                                Act.will.be.expanded.to.also.cover.dealings.in.real.estate.and.
•. Non-resident.foreign.persons.need.to.apply.to.buy.established.             jewellery,.and.professional.and.business.services,.but.this.has.not.
dwellings.for.redevelopment.(that.is,.to.demolish.the.existing.               yet.occurred..
dwelling.and.build.new.dwellings)..Proposals.for.redevelopment.               •. Providers.of.a.‘designated.service’.(known.as.reporting.
are.normally.approved.as.long.as.the.redevelopment.increases.                 entities).are.under.an.obligation.to.undertake.their.own.
Australia’s.housing.stock.(at.least.two.dwellings.built.for.the.              risk.assessment.of.their.activities.and.implement.AML/CTF.
one.demolished).or.where.it.can.be.shown.that.the.existing.                   procedures.to.identify,.mitigate.and.manage.AML/CTF.risk.
dwelling.is.derelict.or.uninhabitable..Approvals.are.usually.                 on.the.basis.of.this.assessment..These.procedures.must.meet.
subject.to.conditions.                                                        statutory.minimum.requirements..
•. Non-resident.foreign.persons.need.to.apply.to.buy.vacant.
land.for.residential.development..These.are.normally.approved.                Reporting and other requirements
subject.to.conditions.(such.as,.that.construction.begins.within.24.           •. Reports.to.Austrac.(Australia’s.financial.intelligence.unit).must.
months)..                                                                     be.made:
•. Non-resident.foreign.persons.need.to.apply.to.buy.new.                      o.if.a.reporting.entity.forms.a.suspicion.on.reasonable.grounds.
dwellings.in.Australia..Such.proposals.are.normally.approved.                 that:.a.service.being.provided.relates.to.money.laundering.or.
without.conditions.                                                           terrorism.financing,.or.the.customer.is.not.who.they.claim.to.be
                                                                               o.a.customer.transaction.involves.physical.currency.of.
Real Estate – Commercial                                                      A$10,000.00.or.more;.and.
•. Foreign.persons.need.to.apply.to.buy.or.take.an.interest.in.                o.where.certain.services.relate.to.International.Funds.Transfer.
vacant.land.for.commercial.development,.regardless.of.the.value.              Instructions..
of.the.land..Such.proposals.are.normally.approved.subject.to.                 •. Reporting.entities.are.also.under.an.obligation.to.identify.
development.conditions.                                                       and.verify.the.identity.of.their.customers,.and.re-verify.a.
•. Foreign.persons.need.to.apply.to.buy.or.take.an.interest.in.               customer’s.identity.in.some.circumstances..Identification.and.
developed.commercial.real.estate.valued.at.A$50.million.or.                   verification.requires.the.collection.of.reliable.and.independent.
more.–.unless.the.real.estate.is.heritage.listed,.then.a.$5.million.          documentation.and.data..Some.minimum.information.is.
threshold.applies..US.investors.only.need.to.apply.for.developed.             necessary,.depending.on.the.type.of.customer..
commercial.real.estate.valued.at.A$1,005.million.or.more..                    •. Ongoing.customer.due.diligence.is.required,.such.as.the.
•. Developed.commercial.property.includes.hotels,.motels,.                    monitoring.of.transactions,.to.detect.complex.and.unusual.
hostels.and.guesthouses,.as.well.as.individual.dwellings.that.are.            transactions..
a.part.of.these.properties..Buying.a.unit.in.a.hotel.that.is.owner-           •. Records.must.be.kept.for.a.period.of.seven.years,.being:
occupied.or.rented.out.privately.(that.is,.it.is.not.part.of.the.hotel.        o.any.records.it.has.created.relating.to.the.provision.of.
business).is.considered.to.be.residential.property..                          designated.services;
                                                                               o.documents.provided.by.its.customers.relating.to.the.provision.
Real Estate – Rural                                                           of.designated.services;.and.
•. Rural.Land.is.land.used.wholly.and.exclusively.for.carrying.on.             o.documents.associated.with.the.customer.identification.
a.business.of.primary.production..To.be.a.business.of.primary.                process.
production,.the.business.must.be.substantial.and.have.a.
commercial.purpose.or.character.
•. A.foreign.person.needs.approval.to.buy.an.interest.in.a.                   TAXATION
primary.production.business.where.the.total.assets.of.the.
business.exceed.A$231.million.(or.A$1005.million.for.US.                      General
investors)..                                                                  •. The.Australian.Taxation.Office.administers.most.taxes.in.
                                                                              Australia..A.number.of.taxes,.however,.are.levied.by.the.states.
                                                                              and.territories,.e.g..transfer.duty,.land.tax.and.payroll.tax.




                                                                          5
AUSTRALIA                                                                                                     Doing Business in Asia Pacific

Corporate Tax
•. Australian.resident.companies.are.taxed.at.the.corporate.tax.          Individual Income Tax
rate.of.30%.on.their.worldwide.trading.profits,.capital.gains.and.        •. Residents.are.subject.to.Australian.tax.on.their.worldwide.
other.assessable.income.                                                  income,.less.allowable.deductions.
•. Foreign.resident.companies.are.also.liable.to.tax,.at.the.             •. Foreign.source.income.derived.by.residents.is.taxed.on.a.
corporate.rate.of.30%,.but.only.on.their.Australian.sourced.              gross.basis.with.foreign.tax.credits.being.available.for.tax.
income.and.other.limited.categories.of.statutory.income.                  paid.at.source.
specified.in.the.taxing.legislation.                                      •. Tax.liability.arises.when.income.is.“derived”..Individuals.are.
•. Foreign.resident.companies.that.operate.in.Australia.through.          generally.treated.as.deriving.income.when.it.is.paid.or.credited.
a.permanent.establishment.are.taxed.at.the.corporate.rate.                to.them.rather.than.when.entitlement.to.the.income.accrues.
of.30%.to.the.extent.that.its.income.is.attributable.to.the.              •. Marginal.income.tax.rate.scales.apply..The.top.marginal.rate.
permanent.establishment.                                                  is.45%,.which.applies.to.income.in.excess.of.AUD$180,000.
•. Various.anti-avoidance.provisions.apply.depending.on.the.              (2010/11).
residency.status.of.the.companies.involved..For.example,.                 •. Resident.taxpayers.are.exempt.from.tax.on.their.first.
Australia.operates.a.controlled.foreign.companies.(CFC).regime,.          AUD$6,000.of.income.(the.“tax.free.threshold”).
thin.capitalisation.rules.and.also.has.extensive.transfer.pricing.        •. Non-residents.are.subject.to.Australian.income.tax.only.on.
provisions..The.government.is.continually.reviewing.international.        their.Australian.source.income.
tax.arrangements..The.CFC.rules.are.currently.being.modernised.           •. Non-resident.taxpayers.are.unable.to.access.the.tax-free.
as.part.of.wider.reforms.to.Australia’s.foreign.source.income.anti-       threshold.
tax-deferral.(attribution).rules.announced.in.the.2009/10.Budget..        •. Foreign.source.income.of.non-residents.is.expressly.exempt.
Those.reforms.are.expected.to.improve.the.competitiveness.of.             from.Australian.income.tax.
Australian.businesses.which.have.offshore.operations.by.better.           •. Individuals.who.qualify.as.temporary.residents.are.generally.
targeting.the.rules.to.those.areas.at.risk.of.inappropriate.tax.          able.to.access.certain.tax.concessions.which.effectively.allow.
deferral.while.reducing.red.tape.and.compliance.costs.for.                them.to.be.taxed.as.non-residents.(except.for.employment.and.
those.businesses.                                                         personal.services.income.from.either.Australia.or.overseas,.and.
•. The.taxable.income.of.a.company.can.be.reduced.by.capital.             income.from.employee.shares.or.rights).
allowances,.trading.losses.and.other.allowable.deductions.                •. Most.taxpayers.pay.Medicare.levy.of.1.5%.of.their.taxable.
•. Generally,.no.deduction.is.allowed.on.dividends.paid.by.a.             income..This.levy.is.designed.to.help.fund.the.Medicare.scheme,.
company.to.its.shareholders..                                             which.gives.Australian.residents.access.to.health.care..Taxpayers.
•. Dividends.paid.to.shareholders.are.included.in.the.assessable.         may.be.exempt.from.paying.the.Medicare.levy.if.they.are.a.
income.of.those.shareholders,.but.an.imputation.system.applies.           foreign.resident,.or.only.liable.at.a.reduced.rate.if.their.income.
which.may.give.shareholders.a.credit.for.the.tax.paid.by.the.             is.below.a.certain.threshold..Taxpayers.may.also.have.to.pay.
company.(e.g..where.‘franked.dividends’.are.paid).                        the.Medicare.levy.surcharge.(generally.levied.at.1%.of.taxable.
•. The.imputation.system.only.applies.to.dividends.paid.by.               income).if.their.income.is.above.a.certain.threshold.and.they,.or.
Australian.resident.companies.                                            any.of.their.dependants,.do.not.have.appropriate.private.patient.
•. A.deduction.is.allowed.in.limited.circumstances.for.on-                hospital.cover.
payments.of.unfranked.non-portfolio.dividends.(including.non-             •. Other.specific.purpose.taxes.are.occasionally.levied.
share.dividends).by.an.Australian.resident.company.to.its.foreign.        against.individuals’.taxable.income..In.early.2011,.the.Federal.
resident.parent.                                                          Government.proposed.a.flood.levy.to.assist.the.rebuilding.of.
•. There.are.also.anti-avoidance.provisions.which.tax.certain.non-        flood-.affected.Queensland.and.Victoria..The.levy.has.been.
dividend.payments,.loans,.asset.transfers.and.private.asset.uses.         proposed.at.a.rate.of.0.5%.of.taxable.income.from.$50,000.up.
from.private.companies.as.unfranked.dividends.                            to.$100,000.and.at.1%.of.taxable.incomes.from.$100,000.and.
•. To.ensure.that.the.community.receives.an.appropriate.share.            above..At.the.date.of.this.guide,.the.proposed.levy.is.being.
of.the.large.returns.that.can.follow.the.development.of.rich.             debated.and.has.not.yet.been.passed.into.law.
petroleum.deposits,.Australia.also.has.a.resource.rent.tax.
regime,.which.currently.applies.to.petroleum.projects.in.certain.         Capital Gains Tax
offshore.areas..                                                          •. Capital.gains.tax.(CGT).provisions.apply.where.a.CGT.event.
•. In.2010.the.Federal.Government.proposed.extending.that.                happens.to.a.CGT.asset..
regime.to.all.onshore.oil.and.gas.projects,.including.coal.seam.          •. There.are.a.wide.range.of.CGT.events,.not.limited.to.the.
gas..It.has.also.been.proposed.to.introduce.a.separate.minerals.          disposal.of.assets..For.example,.becoming,.or.ceasing.to.be,.an.
resource.rent.tax.(MRRT).to.apply.to.iron.ore.and.coal.projects.          Australian.resident.are.CGT.events.
whose.resource.profits.exceed.$50.million.per.annum..The.MRRT.            •. Capital.gains.and.losses.made.on.CGT.assets.acquired.on.or.
is.not.yet.law.but.will.be.debated.at.a.tax.summit.due.to.be.held.        before.19.September.1985.are.generally.excluded.
before.30.June.2011..The.MRRT.is.proposed.to.be.levied.(in.               •. Capital.gains.are.taxed.as.income.under.Australia’s.tax.regime,.
addition.to.income.tax.and.State.royalties).at.a.rate.of.30%.of.          but.special.rules.apply.in.calculating.the.taxable.amount.and.
resource.profits.exceeding.a.certain.threshold.(e.g..the.long.            applicable.tax.rate..
term.bond.rate.plus.7%),.thus.earning.the.description.of.a.               •. While.net.capital.gains.are.treated.as.part.of.a.taxpayer’s.
‘super.profits.tax’..                                                     assessable.income,.where.capital.losses.are.incurred.they.


                                                                      6
AUSTRALIA                                                                                                          Doing Business in Asia Pacific

can.only.be.offset.against.capital.gains.and.not.against.other.               o..Land.transfers
income,.but.can.generally.be.carried.forward.to.the.next.year.if.             o .Business.transfers
there.are.insufficient.capital.gains.to.offset.those.losses.                  o..Transfers.of.equity.interests.in.an.entity.that.is.a.landowner
•. A.50%.CGT.discount.applies.to.individuals.and.most.trustee.               •. Certain.exemptions.are.available.in.all.Australian.states.for.
taxpayers.where.the.asset.has.been.held.for.12.months.or.more.               some.corporate.reconstructions.
prior.to.sale..No.CGT.discount.is.available.to.companies.                    •. Excise.taxes.are.levied.by.state.and.commonwealth.
•. Non-residents.are.subject.to.Australian.CGT.only.in.respect.of.           governments.on.selected.articles,.including:
taxable.Australian.property.acquired.after.19.September.1985..                o..Cigarettes
There.are.five.categories.of.taxable.Australian.property,.                    o..Alcoholic.beverages
including:                                                                    o .Petroleum.products.manufactured.in.Australia
o. .taxable.Australian.real.property                                         •. The.rates.of.tax.vary.by.type.of.product.
o. .indirect.Australian.real.property.interests                              •. Some.products.are.free.of.excise.
o. .business.assets.used.in.a.permanent.establishment.of.a.
foreign.resident                                                             Double Taxation Treaties
o. .options.and.rights.over.any.of.the.preceding.assets;.and                 •. Where.assessable.income.is.liable.to.be.taxed.in.both.
o. .assets.where.a.CGT.gain.or.loss.is.deferred.when.an.entity.              Australia.and.another.country,.relief.may.be.available,.e.g..under:
ceases.to.be.an.Australian.resident..                                         o..the.specific.terms.of.a.double.tax.agreement.between.
o. .Capital.gains.made.by.a.non-resident.on.the.disposal.of.other.           Australia.and.that.other.country;.or
assets.are.not.taxable.under.the.CGT.provisions.                              o .the.foreign.tax.offset.provisions.contained.in.the.Australian.
                                                                             tax.legislation.
Withholding Tax
•. Australian.withholding.tax.is.levied.on.the.payer.of.dividends,.          TAX AND INVESTMENT INCENTIVES
interest,.royalties.and.other.limited.categories.of.income.paid.to.          Pioneer Status
non-residents..As.withholding.tax.is.a.final.tax,.there.is.no.further.       •. There.are.a.number.of.incentives.to.encourage.multinationals.
tax.payable.by.the.non-resident.on.such.income.in.Australia.                 to.set.up.a.regional.headquarters.company.in.Australia,.
•. The.following.rates.of.withholding.tax.generally.apply,.but.              including:
these.may.be.reduced.by.any.applicable.double.tax.agreement.                  o..deductions.for.set.up.costs.incurred.12.months.either.side.
between.Australia.and.the.country.of.residence.of.the.non-                   of.the.date.on.which.the.regional.headquarters.company.first.
resident.payee:                                                              derives.assessable.income.in.Australia.from.the.provision.of.
 o..Unfranked.dividends.–.30%.                                               regional.headquarters.support;
 o .Interest.–.10%                                                            o..deduction.for.certain.relocation.costs;
 o..Royalties.–.30%                                                           o..limited.payroll.tax.relief.in.some.states;.and
 o..Other.common.types.of.payments.subject.to.withholding.tax:                o .streamlined.immigration.procedures.
 o..Managed.investment.trust.income
 o..Film.royalties                                                           Capital Allowances
 o..Rentals                                                                  •. Under.the.uniform.capital.allowance.rules,.a.deduction.for.
 o..Technical.assistance.fees.                                               depreciation.is.generally.allowed.in.respect.of.plant,.machinery.
                                                                             and.equipment.and.other.assets.at.various.rates.over.the.useful.
Indirect Tax                                                                 life.of.an.asset.
•. Australia.has.a.goods.and.services.tax.(GST).                             •. Depreciation.is.calculated.on.a.diminishing.value.basis.unless.
•. GST.applies.to.the.supply.of.most.things..                                the.taxpayer.elects.to.use.prime.cost.
•. Notable.exceptions.include.GST-free.supplies.of.food,.medical.            •. To.calculate.the.applicable.rate.of.depreciation.for.a.particular.
and.health.services,.education,.childcare,.the.export.of.goods,.             asset,.reference.must.be.made.to.the.formulas.prescribed.by.
and.religious.services..Input.taxed.supplies.such.as.financial.              Australian.tax.law..
supplies,.residential.rent.and.residential.accommodation,.are.               •. The.Australian.Taxation.Office.publishes.an.annual.taxation.
also.not.subject.to.GST.                                                     ruling.to.provide.guidance.on.the.effective.life.of.a.wide.range.of.
•. The.current.GST.rate.is.10%.                                              depreciable.assets.
•. Stamp.duty.(now.transfer.duty).is.a.state.and.territory-based.            •. Companies.that.incur.expenditure.on.research.and.
tax.levied.at.various.rates.on.certain.dutiable.transactions..               development.(R&D).may.be.eligible.to.claim.a.number.of.tax.
•. All.Australian.states.and.territories.impose.their.own.duty.              concessions,.including:
regime,.requiring.the.instruments.that.effect.a.dutiable.                     o..an.accelerated.rate.of.deduction.(generally.125%).is.allowed.
transaction.to.be.stamped.by.the.respective.government.                      for.wages,.salaries,.other.labour.costs.and.expenditures.incurred.
authority.to.denote.the.payment.of.applicable.duty.                          directly.on.R&D.activities.and.for.certain.payments.to.approved.
•. Duty.is.charged.at.various.rates.based.on.the.nature.of.the.              outside.bodies,.subject.to.an.A$20,000.threshold;
transaction.and.the.dutiable.value.of.the.transaction.                        o .expenditure.on.R&D.plant.incurred.after.29.January.2001.is.
•. Generally.duty.is.payable.by.the.transferee.(e.g..purchaser).in.          eligible.for.effective.life.depreciation.at.125%;
the.transaction.                                                              o..a.100%.deduction.can.be.claimed.for.expenditure.incurred.in.
•. The.following.are.general.examples.of.dutiable.transactions:              acquiring.rights.to.pre-existing.‘core’.technology;



                                                                         7
AUSTRALIA                                                                                                      Doing Business in Asia Pacific

 o .a.100%.deduction.over.40.years.is.allowed.for.expenditure.on.         or.carers.of.a.child.under.school.age,.or.of.a.child.under.18.with.
R&D.buildings;                                                            a.disability,.to.request.a.change.in.working.arrangements.to.
 o..an.incremental.concession.(175%.deduction).applies.where.             assist.with.the.child’s.care.
companies.increase.their.level.of.R&D.expenditure;.and                     o .Parental.leave.and.related.entitlements.–.up.to.12.months’.
  o.a.refundable.tax.offset,.equal.to.the.value.of.the.R&D.               unpaid.leave.for.every.employee,.plus.a.right.to.request.
deduction,.is.available.for.small.companies.                              an.additional.12.months’.unpaid.leave,.plus.other.forms.of.
Investment.Tax/Reinvestment.Allowances                                    maternity,.paternity.and.adoption-related.leave.
•. Tax.incentives.apply.to.encourage.foreign.investment.into.the.          o..Annual.leave.–.four.weeks.paid.leave.per.year,.plus.an.
Australian.venture.capital.market.and.to.encourage.international.         additional.week.for.certain.shift.workers.
venture.capital.managers.to.locate.in.Australia.by.allowing.‘flow-         o..Personal/carer’s.leave.and.compassionate.leave.–.10.days’.
through’.taxation.of.certain.venture.capital.entities.                    paid.personal/carer’s.leave,.two.days’.unpaid.carer’s.leave.as.
                                                                          required,.and.two.days’.compassionate.leave.(unpaid.for.casuals).
Tax Exemptions                                                            as.required.
•. Capital.gains.tax.exemption.applies.to.certain.gains.made.by.           o..Community.service.leave.–.unpaid.leave.for.voluntary.
foreign.residents.on.venture.capital.investments..                        emergency.activities.and.leave.for.jury.service,.with.an.
•. Conditions.for.the.exemption.include.registration,.holding.            entitlement.to.be.paid.for.up.to.10.days.for.jury.service.
the.investment.at.least.12.months,.the.investment.must.be.in.              o .Long.service.leave.–.a.transitional.entitlement.for.certain.
an.eligible.venture.capital.investment,.and.the.partners.must.be.         employees.who.had.certain.LSL.entitlements.before.1.January.
from.Canada,.France,.Germany,.Japan,.the.UK.or.the.US.                    2010.pending.the.development.of.a.uniform.national.long.
•. Individuals.who.hold.a.temporary.visa.and.qualify.as.a.                service.leave.standard.
‘temporary.resident’.are.exempt.from.Australian.tax.on.certain.            o..Public.holidays.–.a.paid.day.off.on.a.public.holiday,.except.
foreign.source.income.or.capital.gains..They.are.treated.similarly.       where.reasonably.requested.to.work.
to.non-residents,.even.though.in.many.cases.they.would.have.               o..Notice.of.termination.and.redundancy.pay.–.up.to.four.weeks’.
been.classed.as.residents.under.the.normal.tax.rules..They.are.           notice.of.termination.(five.weeks.if.the.employee.is.over.45.and.
also.exempt.from.interest.withholding.tax..Special.rules.apply.to.        has.at.least.two.years’.of.continuous.service).and.up.to.16.weeks’.
employee.shares.and.rights..These.concessions.generally.apply.            redundancy.pay,.both.based.on.length.of.service.
to.income.years.on.or.after.1.July.2006,.but.the.withholding.tax.          o..Provision.of.a.Fair.Work.Information.Statement.–.employers.
concessions.apply.to.payments.made.on.or.after.6.April.2006.              must.provide.this.statement.to.all.new.employees..It.contains.
                                                                          information.about.the.NES,.modern.awards,.agreement-making,.
                                                                          the.right.to.freedom.of.association,.termination.of.employment,.
EMPLOYMENT LAW                                                            individual.flexibility.arrangements,.rights.of.entry,.transfer.of.
                                                                          business,.and.the.respective.roles.of.Fair.Work.Australia.and.the.
General Legal Framework                                                   Fair.Work.Ombudsman.
•. The.Commonwealth.Fair.Work.Act.2009.(FW.Act).is.the.
primary.piece.of.industrial.relations.legislation..Parts.of.the.FW.       Awards and enterprise agreements
Act.took.effect.on.1.July.2009.while.other.parts.took.effect.on.1.        •. The.FW.Act.provides.for.awards.to.set.minimum.terms.and.
January.2010..There.are.also.various.equal.opportunity.and.anti-          conditions.of.employment.for.many.employees..Terms.and.
discrimination.laws,.and.occupational.health.and.safety.laws.             conditions.of.employment.can.also.be.controlled.through.
•. The.FW.Act.applies.to.trading.or.financial.corporations,.              enterprise.agreements.made.under.the.FW.Act.
foreign.corporations,.all.Commonwealth.government.agencies,.              •. Awards.and.enterprise.agreements.often.deal.with.
and.aircrew.and.waterside.workers.engaged.in.interstate.trade.            entitlements.such.as.overtime.and.penalty.rates.for.work.outside.
and.commerce..All.States,.except.for.Western.Australia,.have.             normal.business.hours,.on.weekends.or.shift.work..They.operate.
also.now.referred.power.to.the.Commonwealth.to.enable.the.                in.conjunction.with.the.NES..It.is.not.possible.to.contract.out.
FW.Act.to.apply.to.other.private.sector.employers,.such.as.               of.an.award.or.an.enterprise.agreement.but.there.can.be.some.
partnerships.and.unincorporated.associations.                             limited.flexibility.over.certain.requirements,.e.g..when.work.is.
•. State.industrial.relations.laws.principally.cover.State.public.        done,.and.allowances.
servants..However,.State.laws.continue.to.apply.to.private.sector.
employers.in.relation.to.matters.such.as.long.service.leave.              Awards
(but.not.other.forms.of.leave),.occupational.health.and.safety,.          •. Awards.are.binding.on.employers.and.employees.in.a.
workers’.compensation,.and.anti-discrimination.                           specified.class.(for.example.by.reference.to.a.particular.industry.
                                                                          or.task).in.respect.of.employees.in.specified.role.classifications..
The National Employment Standards                                         Awards.will.not.apply.to.an.employee.who.would.otherwise.be.
•. The.National.Employment.Standards.(NES).under.the.FW.                  covered.where.the.employee’s.salary.(and.other.agreed.benefits).
Act.stipulates.10.minimum.standards.for.employment..It.is.not.            is.more.than.the.High.Income.Threshold.(currently.$113,800),.
possible.to.contract.out.of.the.NES..These.are:                           provided.that.the.employee.has.been.given.a.guarantee.of.
 o..Maximum.weekly.hours.of.work.–.38.hours.per.week,.plus.               annual.earnings.in.accordance.with.the.FW.Act.
reasonable.additional.hours;                                              •. Awards.regulate.minimum.wages..Awards.may.also.include.
 o .Requests.for.flexible.working.arrangements.–.allows.parents.          provisions.relating.to.types.of.employment,.arrangements.for.


                                                                      8
AUSTRALIA                                                                                                      Doing Business in Asia Pacific

when.work.is.performed,.overtime.and.penalty.rates.(including.            contributions.on.behalf.of.employees,.currently.at.a.rate.of.9.per.
for.shift.workers),.annualised.wage.or.salary.arrangements,.              cent.of.an.employee’s.“ordinary.time.earnings”.
allowances,.leave.and.leave.loadings,.superannuation,.                    •. Contributions.can.be.made.to.a.complying.superannuation.
procedures.for.consultation,.representation.and.dispute.                  fund,.and.employees.can.generally.choose.a.fund..
settlement.and.pay.and.conditions.for.outworkers.                         •. Australian.workers.are.unable.to.access.their.superannuation.
•. The.Clerks.–.Private.Sector.Award.2010.is.an.award.which.will.         benefits.until.they.reach.a.minimum.age.(generally.age.60).or.
apply.to.most.employees.performing.clerical.or.administrative.            meet.other.conditions.for.payment..After.permanently.leaving.
functions..There.are.also.various.other.industry.awards..However,.        Australia.and.expiry.of.a.temporary.resident.visa,.an.expatriate.
senior.managers.will.often.not.be.covered.by.any.award.                   employee.may.apply.for.a.refund.of.their.superannuation,.
(regardless.of.their.rate.of.pay)..For.instance,.there.is.no.award.       subject.to.withholding.tax.and.certain.other.conditions.
that.has.general.application.to.more.senior.lawyers.in.the.legal.
industry.(although.legal.graduates.may.be.an.exception).                  DISPUTE RESOLUTION

Enterprise Agreements                                                     General Legal Framework
•. Enterprise.agreements.can.be.negotiated.directly.with.                 •. As.Australia.is.a.Federation.of.States,.the.legal.framework.
employees.on.a.collective.basis.(most.commonly.via.employee.              is.characterised.by.a.blend.of.State.and.Federal.jurisdictions..
union.bargaining.representatives).in.accordance.with.the.FW.              Each.State.and.Territory.has.a.Supreme.Court.which.has.full.
Act..Agreements.are.employer.specific.and.contain.enhanced.               power.over.matters.arising.under.the.law.of.that.State.or.
conditions.to.suit.the.business..They.override.an.award,.but.must.        Territory..Legislation.enacted.by.the.Federal.Parliament.is.
provide.conditions.of.employment.that.are.“better.off.overall”.           presided.over.by.the.courts.within.the.Federal.jurisdiction..At.
for.employees.when.compared.to.the.applicable.award.                      the.apex.of.both.the.State.and.Territory.jurisdictions.and.the.
                                                                          Federal.jurisdiction.is.the.High.Court.of.Australia,.the.ultimate.
Minimum Wage Requirements                                                 appellate.court.in.the.land.
•. The.Minimum.Wage.Panel.in.Fair.Work.Australia.is.responsible.
for.setting.minimum.wages.for.employees.in.the.national.                  Court System
workplace.relations.system..Minimum.wages.for.employees.                  •. Within.the.various.jurisdictions.there.are.both.general.courts,.
covered.by.an.award.are.specified.in.the.award..Minimum.wages.            with.jurisdiction.over.legal.disputes.generally,.and.specialist.
for.employees.who.are.not.covered.by.an.award.or.agreement.               courts,.which.have.jurisdiction.over.particular.areas.of.the.law..
are.specified.in.the.national.minimum.wage.order.which.is.                •. The.Australian.court.system.is.modelled.on.the.British.
reviewed.annually..The.Minimum.Wage.Panel.also.reviews.award.             common.law,.operating.in.the.adversarial.style,.in.which.each.
minimum.wages.annually..                                                  party.to.a.proceeding.is.entitled.to.be.represented.by.Counsel..
•. The.national.minimum.wage.order.sets.the.minimum.wage.                 The.proceedings.are.overseen.by.a.judge.or.judicial.officer,.
and.casual.loadings..It.also.sets.special.national.minimum.wages.         who.acts.as.the.ultimate.arbiter.in.questions.of.law..In.the.civil.
for.all.award/agreement.free.employees.in.the.following.classes:          jurisdiction,.this.judicial.officer.also.operates.as.the.ultimate.
 o..Junior.employees;                                                     finder.of.fact.
 o..Employees.to.whom.training.arrangements.apply;.and
 o .Employees.with.a.disability.                                          Alternative Dispute Resolution
•. Award.minimum.wages.include.the.rates.of.minimum.                      •. Alternative.Dispute.Resolution.(ADR).has.gained.increasing.
wages.and:                                                                acceptance.among.both.the.general.public.and.legal.profession..
 o..Wage.rates.for.junior.employees,.employees.to.whom.special.           •. Mediation.has.become.an.increasingly.common.alternative.to.
training.arrangements.apply.and.employees.with.a.disability;.             formal.litigation..Parties.to.a.dispute.are.assisted.by.an.impartial.
 o.Casual.loadings;.and                                                   person.or.persons.who.work.together.to.isolate.the.issues.in.
 o.Piece.rates.                                                           dispute.in.order.to.develop.a.consensual.settlement.acceptable.
                                                                          to.both.parties..It.is.common.for.civil.disputes.to.be.referred.
Statutory Contributions                                                   to.mediation.before.they.are.heard.by.the.court.in.a.formal.
•. Taxation.is.compulsorily.exacted.by.both.the.Federal.                  litigious.setting..
Government.and.the.Governments.of.the.States..These.include:              •. Arbitration.has.also.become.a.common.method.by.which.
 o..Payroll.tax;                                                          disputes.are.resolved..The.issue.is.referred.to.an.arbitral.body,.
 o..PAYG.deductions.from.employees’.remuneration;                         generally.by.agreement,.which.considers.the.elements.in.a.
 o..Compulsory.1.5.per.cent.Medicare.levy;                                judicial.manner,.and.makes.a.legally.binding.‘award’.which.alters.
 o..Fringe.benefits.tax;                                                  the.rights.of.the.parties..Each.State.has.adopted.legislation.
.o..Termination.payments.                                                 to.govern.the.conduct.of.domestic-based.arbitrations..These.
.o..Employers.are.also.required.to.make.compulsory.                       legislative.measures.roughly.follow.an.agreed.uniform.approach..
superannuation.contributions.on.behalf.of.employees,.currently.           International.arbitration.may.be.governed.by.Federal.legislation.
at.a.rate.of.9.per.cent.of.employees’.‘ordinary.time.earnings’.           which.adopts.the.United.Nations.Commission.on.International.
                                                                          Trade.Law.(UNCITRAL).model.on.an.opt-out.basis.
Superannuation
•. Employers.are.required.to.make.compulsory.superannuation.


                                                                      9
AUSTRALIA                                                                   Doing Business in Asia Pacific



IMMIGRATION PROCEDURES

Temporary Residency
•. For.short-term.business.visits,.the.following.options.
are.available:
.o..Business.Electronic.Travel.Authority.short.and.long.validity;
.o..APEC.business.travel.card;
 o..Business.(Short.Stay).visa.(subclass.456);
 o.Sponsored.Business.Visitor.(Short.Stay).visa.(subclass.459).
•. For.each.of.the.above.visas,.the.purpose.of.entry.must.
be.conducting.business.on.behalf.of.an.overseas.business.
as.opposed.to.undertaking.work.for.an.Australian.business..
Activities.included.in.the.meaning.of.conducting.business.on.
behalf.of.an.overseas.business.are:
.o..Attending.a.conference.or.training.session;
.o..Negotiating.business.deals.or.contracts;
.o..Exploring.business.options;
.o..Business.meetings;
 o..Working.on.a.short-term.project.(strictly.no.more.than.six.
weeks).requiring.a.high.level.of.skill.
•. These.visas.allow.for.potentially.multiple.entries.with.stays.of.
up.to.three.months.on.each.visit.

Long-Term Business Visit
•. For.foreign.employees.of.companies.in.Australia.or.offshore.
who.are.required.to.work.temporarily.in.Australia,.the.relevant.
visa.is.a.Temporary.Business.(Long.Stay).visa.(subclass.457)..This.
visa.is.for:
.o..Personnel.(executives,.managers,.specialists.and.trades.
persons).for.companies.operating.in.Australia.who.would.like.to.
employ.overseas.workers.to.fill.skilled.positions.in.Australia;
.o..Personnel.from.offshore.companies.seeking.to.establish.a.
branch.in.Australia,.or.fulfil.obligations.for.a.contract.or.other.
business.activities.in.Australia;.and
.o..Personnel.coming.under.a.labour.agreement.
•. The.457.visa.allows.a.stay.for.a.period.of.between.one.day.
and.four.years.

Permanent Residency
•. The.Employer.Nomination.Scheme.(ENS).allows.Australian.
employers.to.sponsor.highly.skilled.workers.for.a.permanent.visa.
to.work.in.Australia..The.employees.can.be.either:
 o..Highly.skilled.workers.from.overseas;.or
.o.Highly.skilled.temporary.residents.currently.working.in.
Australia.
•. This.visa.allows.the.employee.and.any.dependant.family.
members.included.in.their.visa.application.to.live.as.permanent.
residents.in.Australia.
•. Streamlined.arrangements.are.in.place.where.an.Australian.
employer.is.using.the.ENS.to.nominate.a.person.on.a.temporary.
residence.visa.who.has.already.been.working.for.the.employer.
in.Australia..Nominees.in.this.category.will.generally.not.be.
required.to.undergo.a.formal.skills.assessment.before.they.
qualify.for.a.permanent.residence.visa.under.the.ENS..�




                                                                       10
CHINA

• Stretched across the East Asia landmass with an area of 9.6 million km2.
• Practices single party rule run by the Chinese Communist Party.
• Population is over 1.3 billion people from 56 nationalities. Han people make up over 90%
of the population. The 55 nationalities except Han are usually referred to as the minority
nationalities because of their relatively smaller population size compared with Han people.
• The main religions are Buddhism, Taoism, Islam and Christianity.
• Mandarin is the national language; English is widely written and spoken especially in
urban areas and for business.
• Currency: Renminbi (RMB).
• Since the founding of new China in 1949, China’s economy has witnessed great
achievements. Each year, China’s gross domestic product has grown at an average
rate of 9%.
• Investment growth areas include biotechnology industry (encompassing agriculture,
food, industrial and medical biotechnology), tourism, research and development, medical
device industry, shipping and transportation industry, manufacturing-related services and
agriculture.

BUSINESS PRESENCE                                                            be.allowed.as.a.Chinese.party.to.joint.ventures..
                                                                             •. Subject.to.conditions,.local.Chinese.natural.persons.are.
•.Main.types.of.business.models.in.China:.locally.incorporated.              now.allowed.to.set.up.EJVs.or.CJVs.with.foreign.companies.or.
companies.(may.be.limited.by.shares.or.by.guarantee),.sole.                  individuals..However,.so.far.this.reform.has.only.been.launched.
proprietorships,.partnerships.and.registered.branches.of.foreign.            in.the.Pudong.district.of.Shanghai,.and.the.fields.of.these.
companies.                                                                   FIEs.with.local.Chinese.natural.persons.must.be.limited.to.
•. Main.vehicles.available.to.foreign.direct.investors:.                     encouraged/permitted.industries.
representative.office,.equity.joint.venture.(‘EJV’),.cooperative.            •. There.are.mandatory.requirements.on.the.qualification.of.
joint.venture.(‘CJV’),.and.wholly.foreign-owned.enterprise.                  Chinese.counterparts.in.the.joint.venture.of.certain.industries.
(‘WFOE’)..                                                                   (such.as.establishing.a.Sino-foreign.cooperative.education.
•. PRC.laws.allow.and.encourage.foreign.investors.to.set.up.                 institution).
foreign.investment.holding.company.(‘FIHC’).and.multinational.
corporations’.regional.headquarters.(‘MCRH’).in.China..                      Partnership enterprises
                                                                             •. Foreign.companies,.enterprises.or.natural.persons.can.also.set.
                                                                             up.a.partnership..
FOREIGN INVESTMENT RESTRICTIONS AND                                          •. Foreign.invested.partnerships.should.comply.with.the.
CONDITIONS                                                                   regulations.of.the.Partnership.Enterprise.Law.of.PRC.and.the.
                                                                             rules.for.the.accessibility.foreign.investment.
Investment categories
PRC.law.classifies.various.industries.into.these.general.categories.         Representative office
in.terms.of.accessibility.of.foreign.investment:.(i).encouraged.             •. Representative.offices.are.entitled.to.carry.out.market.
industries;.(ii).permitted.industries;.(iii).restricted.industries;.(iv).    research,.product.publicity,.etc,.but.they.are.not.allowed.to.
prohibited.industries..Under.PRC.laws,.the.approval.of.related.              engage.in.any.profit-making.activities.
authorities.is.necessary.for.the.set-up.and.many.other.activities.           •. Foreign.investors.should.make.registration.to.the.authorities.
of.foreign.invested.enterprises.(‘FIEs’).                                    for.the.set-up.of.its.representative.office.

Eligible Chinese party
•. Generally,.Chinese.investors.do.not.have.to.meet.special.                 FOREIGN EXCHANGE CONTROL AND PROFIT
conditions.in.order.to.become.a.party.to.a.Sino-foreign.joint.               REPATRIATION
venture.
•. Under.normal.circumstances,.only.companies,.enterprises.or.               •. RMB,.the.national.currency.of.China,.is.not.yet.a.freely.
other.economic.organisations.with.the.status.of.legal.person.may.            convertible.currency.and.China.is.still.a.foreign.exchange.



                                                                        11
CHINA                                                                                                             Doing Business in Asia Pacific

control.country.                                                              social.insurance.premiums.in.full.and.on.time.in.accordance.with.
•. Only.foreign.exchange.under.capital.account.items.are.under.               local.standards..The.new.Social.Insurance.Law.of.PRC,.which.
PRC.laws.and.regulations,.and.the.legal.entities,.including.                  has.established.a.standard.social.insurance.system.–.including.
FIEs,.are.free.to.deal.with.their.foreign.exchange.under.current.             basic.retirement.plan,.basic.medical,.work-related.injury,.
account.items.                                                                unemployment.and.child-bearing.insurance.–.will.come.into.
•. In.fact,.foreign.investors.seldom.have.the.problem.in.                     force.on.1.July.2011.
converting.its.post.tax.profit.into.foreign.currencies.and.                   •. In.addition,.FIEs.shall.reserve.housing.accumulation.funds.
repatriating.out.of.China,.provided.that.the.required.documents.              on.behalf.of.their.Chinese.employees,.and.shall.use.such.funds.
are.furnished.and.in.order.                                                   according.to.local.regulations.


TAX COMPLIANCE                                                                INTELLECTUAL PROPERTY

Basic tax system                                                              •.China.has.acceded.to.most.of.the.more.important.international.
•. Central.tax:.customs.duty,.consumption.tax,.value.added.tax.               intellectual.property.protection.and.the.legal.framework.within.
(‘VAT’).levied.by.customs,.etc.                                               China.now.provides.for.comprehensive.protection.of.intellectual.
•. Local.tax:.business.tax.(‘BT’),.individual.income.tax.(‘IIT’),.tax.        property.rights.
for.use.of.state-owned.urban.land,.land.value.added.tax,.real.
estate.tax,.etc.
•. Sharing.tax:.VAT,.enterprises’.income.tax.(‘EIT’),.income.tax.for.         DISPUTE RESOLUTION
foreign.invested.enterprises.and.foreign.enterprises,.resource.
tax.                                                                          Consultation/mediation
                                                                              Most.business.contracts.in.China.contain.a.clause.stipulating.
Main taxes applicable to FIEs                                                 that.negotiation.should.be.employed.before.any.other.dispute.
•. EIT:                                                                       settlement.mechanisms.are.pursued.
.o.15%:.applicable.to.‘encouraged.hi-tech.enterprises’
.o.20%:.applicable.to.small-scale.enterprises.earning.a.‘small.               Arbitration
profit’                                                                       •. If.parties.to.the.contract.wish.to.choose.arbitration.as.a.mode.
.o.25%:.applicable.to.all.enterprises.other.than.those.mentioned.             of.dispute.resolution,.they.must.indicate.in.their.contracts.that.
above                                                                         disputes.will.be.resolved.through.arbitration.
•. BT:                                                                        •. Agreements.to.arbitrate.usually.specify.a.choice.of.arbitration.
.o.BT.rate.generally.ranging.from.3%.to.5%                                    body,.which.may.be.located.in.China.or.abroad,.and.a.choice.of.
.o.BT.rate.for.entertainment.industry.could.be.as.high.as.20%                 law.to.govern.the.dispute..For.foreign-related.disputes,.parties.
.o.VAT:.VAT.ranging.from.13%.to.17%                                           to.the.contract.may.specify.the.nationality.of.members.of.the.
                                                                              arbitration.panel.in.the.contact..
Preferential tax treatment for FIEs                                           •. There.are.two.Chinese.government-sponsored.arbitration.
•. The.tax.treatment.for.both.FIEs.and.domestic.enterprises.                  bodies.for.handling.cases.involving.at.least.one.foreign.party:.
has.become.consistent,.and.most.nationwide.preferential.tax.                  the.China.International.Economic.and.Trade.Arbitration.
treatments.will.not.be.available.or.continued.anymore..Even.the.              Commission.(‘CIETAC’).and,.for.maritime.disputes,.the.China.
Urban.Maintenance.and.Construction.Tax,.and.Education.Surtax.                 Maritime.Arbitration.Commission.(‘CMAC’)..
have.applied.to.FIEs.and.foreign.individuals.since.1.December.                •. Contracts.involving.foreign.companies.doing.business.in.China.
2010.                                                                         often.provide.for.CIETAC.arbitration.
•. Local.governments.in.certain.districts.may.still.provide.FIEs.             •. China.acceded.to.the.United.Nations.Convention.on.the.
with.local.tax.preferential.treatment.                                        Recognition.and.Enforcement.of.Foreign.Arbitral.Awards.
                                                                              (the.‘New.York.Convention’).in.1987..Under.the.New.York.
                                                                              Convention,.arbitral.awards.rendered.in.other.signatory.countries.
LABOUR LAW                                                                    are.recognised.and.enforceable.in.China..Arbitral.awards.by.
                                                                              Chinese.arbitration.bodies.are.enforceable.in.other.countries.
•. Generally.FIEs.are.entitled.to.recruit.their.employees.freely,.            signatory.to.the.New.York.Convention..
except.representative.offices.which.must.recruit.the.local.
Chinese.staff.through.government-approved.labour.agencies.                    Litigation
•. The.enterprise.may.not.lay.off.an.employee.at.will.or.without.             •. Foreign.individuals.and.companies.can.bring.action.in.court.in.
due.cause..If.the.enterprise.(employer).decides.to.terminate.                 the.same.manner.as.Chinese.citizens.and.companies.
the.employment.contract.with.an.employee,.it.shall.give.the.                  •. China.has.four.levels.of.courts:.basic.courts,.intermediate.
employee.severance.pay..                                                      courts,.high.courts,.and.the.national.Supreme.People’s.Court.
•. FIEs.are.required.to.participate.in.unemployment,.medical.                 •. Only.Chinese.nationals.working.for.Chinese.law.firms.may.
and.work-related.injury.programmes.and.social.insurance.                      appear.in.court.
schemes.pursuant.to.relevant.national.regulations.and.to.pay.


                                                                         12
CHINA                                                                         Doing Business in Asia Pacific


IMMIGRATION PROCEDURES

Passport and visa requirements
•. All.persons.entering.China.must.possess.valid.national.
passports.or.other.internationally.recognised.travel.documents.
valid.for.travel.to.China..These.passports.or.travel.documents.
must.have.at.least.six.months’.validity.left.before.expiration.and.
at.least.one.blank.page.remaining..

Business passes and work permits
•. Business.Passes:.A.business.visa.is.issued.to.a.person.who.is.
invited.to.come.to.China.for.a.visit,.for.investigations,.for.giving.
lectures,.for.doing.business,.for.carrying.out.scientific,.technical.
and.cultural.exchanges,.for.pursuing.short-term.advanced.
studies.or.for.doing.short-term.fieldwork..These.activities.shall.
not.exceed.six.months.
•. Employment.Passes:.According.to.the.Rules.for.the.
Administration.of.Foreign.Employment.(Rules).a.domestic.
employer.must.apply.to.the.local.labour.bureau.of.the.Ministry.
of.Labor.for.an.employment.license.for.the.prospective.foreign.
employee..And.in.practice,.the.threshold.for.approval.is.
relatively.low.
•. It.is.the.sole.responsibility.of.an.employer.to.apply.to.the.local.
labour.bureau.of.the.Ministry.of.Labor.for.an.employment.license.
for.the.prospective.employee

The Chinese Green Card System
Foreign.nationals.who.wish.to.apply.must.fall.under.at.least.one.
of.the.eligible.categories.below:
•. Individuals.who.make.a.large.direct.investment.in.China.for.
three.consecutive.years.
•. Individuals.who.make.outstanding.contributions.to.China’s.
development,.or.are.considered.by.the.Chinese.government.to.
be.critical.to.the.needs.of.the.country.
•. Individuals.who.have.held.a.high-level.position.and.have.
resided.in.China.for.three.of.the.past.four.years,.in.a.business.
which.promotes.the.country’s.economic,.scientific.and.
technological.development.or.social.progress..
•. If.the.individual.is.successful.in.their.application,.they.will.be.
granted.a.five.or.10-year.renewable.permanent.residency.card,.
which.allows.them.to.enter.or.exit.China.freely.without.having.to.
apply.for.a.visa..There.is.no.requirement.to.continuously.renew.
the.work.permit,.as.tied.to.their.current.local.employer..�




                                                                         13
GUAM

• Guam is a territory of the US and is subject to US law and local law enacted by Guam’s
legislature.
• Guam is strategically located in the Western Pacific within a three to five-hour flight from
most commercial centres in East Asia, including Tokyo, Manila, Hong Kong and Singapore.
Guam has an area of 541.3km2.
• Guam has three branches of government: the executive, which is headed by the
governor, a unicameral legislature, and the judiciary, which is comprised of the Superior
Court and the Supreme Court.
• Population: 178,000, comprised of Chamorro (39%), Filipino (26.3%), Pacific Islander
(11.3%), White (6.9%), Other Asian (6.3%), Other (2.3%) and Mixed (9.8%)
• Religious composition: Roman Catholic (85%).
• English and Chamorro are the two official languages. English is universally spoken.
• Currency: US Dollar
• Investment growth areas include: tourism, shipping and transportation industry,
government contracting and consulting, and retail.

BUSINESS PRESENCE                                                      the.Department.of.Revenue.and.Taxation.or,.in.the.case.of.
                                                                       professional.service.firms,.from.the.appropriate.self-governing.
•. Main.types.of.business.models.in.Guam:.corporations,.limited.       body..For.example,.in.the.case.of.lawyers,.the.Guam.Bar.
liability.companies.(including.single.member.LLCs),.partnerships,.     Association.and,.in.the.case.of.architects,.the.Guam.Board.
limited.liability.partnerships,.professional.corporations,.            of.Registration.for.Professional.Engineers,.Architects.and.
registered.foreign.corporations.and.registered.foreign.limited.        Land.Surveyors.
liability.companies.                                                   •. Application.process.and.prescribed.fee.payable.vary.
•. Corporations.and.limited.liability.companies.are.the.most.          depending.on.the.certificate.or.license.sought.
prevalent..
•. Branch.offices.of.foreign.corporations.may.be.opened.in.
Guam..These.require.registration.with.the.Department.of.               EXCHANGE CONTROL
Revenue.and.Taxation.(‘DRT’)..Once.properly.licensed.according.
to.their.particular.trade.or.business,.these.corporations.are.         •. None
generally.permitted.to.engage.in.any.business.except.full.service.     ...
banking.                                                               TAXATION

                                                                       •. Gross.Receipts.Tax.(aka.Business.Privilege.Tax)
FOREIGN INVESTMENT RESTRICTIONS AND                                    o. Businesses.–.4%.on.monthly.gross.income.due.by.the.20th.
CONDITIONS                                                             day.of.the.following.month.income.received.or.accrued
                                                                       o. Commercial.banks.and.lending.institutions.–.4%.on.annual.
Restrictions in Equity Participation                                   net.income.due.by.the.90th.day.following.tax.year
•. None.                                                               •. Use.Tax.–.4%.assessed.on.personal.property.imported.
                                                                       into.Guam..
Restrictions in Real Property Acquisition                              o. not.applicable.to.items.imported.for.resale,.to.used.
•. Laws.limiting.the.ownership.rights.of.foreigners.still.exist,.      goods,.to.property.with.a.value.of.$1,000.or.less.to.aircraft.
however,.these.laws.are.widely.regarded.as.unconstitutional.and.       parts.and.materials
unenforceable..Nevertheless,.some.foreign.businesses.choose.to.        •. Hotel.Occupancy.Tax.–.11%.of.daily.room.rate
form.local.entities.with.which.to.acquire.real.property.on.Guam.       •. Alcoholic.Beverage.Tax.–.tax.on.all.imported.alcoholic.
in.order.to.further.reduce.any.risk.of.divestiture.                    beverages.(locally.manufactured.alcoholic.beverages.
                                                                       are.exempted)
Approvals and Licensing                                                .o..$10.per.wine.gallon.on.distilled.beverages
•. Appropriate.approvals.and.licences.are.required.for.the.            .o..$2.75.per.wine.gallon.on.vinous.beverages
operation.of.any.business.activity..These.may.be.obtained.from.        .o..$0.04.per.each.12.fl.ounce.on.malted.beverage



                                                                  14
GUAM                                                                                                             Doing Business in Asia Pacific

•. Tobacco.Tax.–.tax.on.all.imported.tobacco.products                       on.property.utilised.by.the.QC.beneficiary.to.operate.
.o..$0.35.per.each.100.cigarettes                                           its.business.
.o..10%.of.landed.cost.of.cigars                                            o. Up.to.100%.abatement.of.gross.receipt.tax.on.income.derived.
.o..$0.35.per.pound.for.all.others                                          from.the.sale.of.alcoholic.beverages.and.petroleum.products.
•. Real.Property.Tax                                                        manufactured.in.Guam.for.up.to.10.years.
.o.Upon.the.sale.of.land.and/or.buildings.–.35%.of.the.full.
cash.value
.o..On.the.assessed.value.–..005%.for.land.and..01%.for.building            EMPLOYMENT LAW
•. Amusement.Tax.-.$50.to.$250.on.various.types.of.coin-
operated.machines                                                           •. Guam.is.subject.to.the.US.Fair.Labor.Standards.Act.(‘FLSA’),.
•. Recreational.Facilities.Tax.-.$5.to.$100.on.various.types.of.            which.covers.most.hourly.wage.earners.and.their.employers..The.
facilities.such.as.bowling.alleys,.golf.courses,.billiard.halls,.           FLSA’s.principal.function.is.that.it.establishes.minimum.wage.and.
shooting.galley,.etc.                                                       overtime.pay.
•. Liquid.Fuel.Tax.–.levied.on.a.distributor.of.liquid.fuel                 o. Minimum.wage:.the.federal.minimum.wage.is.$7.25.per.hour.
.o..$0.10/gallon.on.diesel                                                  effective.24.July.2009.
.o.$0.04/gallon.on.aviation.fuel                                            o. Overtime:.covered.nonexempt.employees.must.receive.
.o..$0.11/gallon.on.all.other.fuel                                          overtime.pay.for.hours.worked.over.40.per.work.week.(any.fixed.
•. Personal.Income.Tax.                                                     and.regularly.recurring.period.of.168.hours.—.seven.consecutive.
.o..Guam.individual.tax.rates.are.the.same.as.those.imposed.                24-hour.periods).at.a.rate.not.less.than.one.and.one-half.times.
under.the.US.Internal.Revenue.Code.                                         the.regular.rate.of.pay..There.is.no.limit.on.the.number.of.hours.
.o..Personal.income.taxes.are.imposed.progressively.based.upon.             employees.16.years.or.older.may.work.in.any.workweek..The.
income.with.a.marginal.tax.rate.ranging.from.10%.to.35%                     FLSA.does.not.require.overtime.pay.for.work.on.weekends,.
.o.Income.brackets.and.associated.marginal.tax.rates.can.be.                holidays,.or.regular.days.of.rest,.unless.overtime.is.worked.on.
found.in.Section.1.of.the.Guam.Territorial.Income.Tax.Law.                  such.days.
•. Corporate.Tax                                                            o. Hours.worked:.hours.worked.ordinarily.include.all.the.time.
.o..Guam.domestic.corporations.are.subject.to.income.tax.                   during.which.an.employee.is.required.to.be.on.the.employer’s.
on.their.income.from.all.sources.at.the.same.rate.schedule.                 premises,.on.duty,.or.at.a.prescribed.workplace.
published.by.the.U..S..Internal.Revenue.Service.for.the.                    •. Guam.has.also.adopted.a.local.version.of.the.FLSA.which.
applicable.tax.year..                                                       largely.mirrors.the.federal.law.
.o..Other.corporations.doing.business.on.Guam.incur.income.tax.             •. Guam.recognises.‘at.will’.employment.relationships,.which.
liabilities.to.Guam.on.all.Guam.source.income..                             allow.parties.to.an.employment.relationship.to.terminate.the.
.o..Corporations.are.required.to.file.an.income.tax.return.for.the.         relationship.for.any.reason.except.one.which.violates.public.
calendar.year.on.or.before.March.15.of.the.following.year.                  policy.or.any.local.or.federal.statue.
.o..Corporations.on.a.fiscal.year.basis.must.file.income.tax.return.        •. Local.and.federal.laws,.including.Title.VII.of.the.Civil.Rights.
on.the.15th.day.of.the.third.month.following.the.close.of.the.              Act,.COBRA.Act.and.WARN.Act,.apply.to.employers.on.Guam.
fiscal.year.

                                                                            INTELLECTUAL PROPERTY
TAX AND INVESTMENT INCENTIVES
                                                                            •. Intellectual.property.is.protected.by.a.bevy.of.federal.laws.
Qualifying Certificate Program                                              •. Creators.of.intellectual.property.can.seek.protection.over.their.
•. Guam’s.principal.program.for.incentivising.investment.in.Guam.           intellectual.property.rights.by.applying.federally,.as.appropriate,.
is.its.Qualifying.Certificate.(‘QC’).Program.                               for.a.trademark,.copyright.or.patent.
•. The.program.is.administered.by.the.Guam.Economic.                        •. In.certain.cases,.limited.trademark.and.copyright.protection.
Development.Authority.(‘Authority’)..The.Program.has.proven.to.             can.arise.without.application.
be.highly.successful,.particularly.in.the.development.of.Guam’s.            •. In.addition.to.federal.laws,.Guam.statutes.(including.a.local.
primary.industry.–.tourism.                                                 trademark.law).and.common.law.protect.parties’.rights.to.
•. Any.trust,.partnership,.sole.proprietorship,.Limited.Liability.          intellectual.property.
Partnership,.Limited.Liability.Company,.or.corporation,.formed.
under.the.laws.of.Guam.and.licensed.to.do.business.in.Guam.
and.engaged.in.a.wide.range.of.business.activities.(as.set.forth.in.        DISPUTE RESOLUTION
12.GCA.§.58104).may.apply.for.participation.in.the.program.
•. Businesses.selected.by.the.authority.for.participation.in.the.           •. Guam.has.both.a.local.and.federal.court.system..Disputes.
program.receive.tax.rebates.and/or.tax.abatement.as.follow:                 arising.out.of.local.law.are.tried.at.the.Superior.Court.and.all.
o. Up.to.75%.Rebate.of.corporate.income.tax.for.up.to.20.years.             decisions.are.subject.to.appeal.to.the.Supreme.Court..
o. Up.to.75%.Rebate.of.corporate.dividends.tax.for.up.to.                   •. The.local.courts.of.Guam.have.been.in.operation.for.almost.60.
five.years.                                                                 years,.and.have.therefore.developed.a.deep.and.broad.body.of.
o. Up.to.100%.abatement.of.real.property.tax.for.up.to.10.years.            common.law..In.cases.of.first.impression,.Guam.courts.typically.


                                                                       15
GUAM                                                                       Doing Business in Asia Pacific

look.for.guidance.to.common.law.trends.in.the.States.
•. The.US.District.Court.of.Guam.provides.the.forum.for.disputes.
arising.out.of.federal.law..Appeals.from.the.US.District.Court.of.
Guam.are.made.to.the.US.Circuit.Court.of.Appeals.for.the.
Ninth.Circuit..
•. In.2004,.Guam.enacted.a.law.that.established.rules.for.
international.arbitration.on.Guam..Based.upon.the.UNCITRAL.
rules.of.arbitration,.arbitral.awards.granted.under.the.law.and.
certified.by.US.District.Court.of.Guam.are.enforceable.in.every.
nation.that.is.a.signatory.to.the.UNCITRAL.Convention..Although.
in.its.nascent.stage.of.development,.the.Guam.International.
Mediation.and.Arbitration.Center.is.expected.to.eventually.serve.
as.the.principal.forum.for.international.arbitration.on.Guam.



IMMIGRATION PROCEDURES

Passport and Visa Requirements
•. All.persons.entering.Guam.must.possess.valid.national.
passports.or.other.internationally.recognised.travel.documents.
valid.for.travel.to.Guam..
•. Applications.for.visas.(where.necessary).may.be.made.at.the.
nearest.United.States.embassy,.consulate.or.mission.abroad..

Visa Types
There.are.several.types.of.work.visas.available.from.the.US.State.
Department:.

•. The.‘E’.visas.are.for.individuals.or.employees.of.corporations.
that.have.made.a.substantial.investment.in.a.US.business.or.
property..

•. The.‘L’.visas.are.commonly.known.as.transfer.visas.used.to.
bring.an.employee.into.the.US.to.work.for.his.same.employer.
abroad..

•. The.‘H’.visas.are.typically.for.contract.workers.who.enter.the.
US.for.a.specific.project.or.a.one-time.assignment.

•. H-The.‘J-1’.visa.is.for.participants.who.seek.volunteer.or.
minimally.paid.practical.training.in.the.US.in.a.specific.field.of.
interest.

H-1B.and.H-2B.Worker.Program

•. To.help.with.the.lack.of.sufficient.workforce.personnel.for.
the.various.construction.projects.that.must.be.completed.in.
conjunction.with.the.recent.US.military.build-up.on.Guam,.the.
United.States.Citizenship.and.Immigration.Service.has.exempted.
Guam.from.the.quota.normally.imposed.on.the.issuance.of.H-1B.
and.H-2B.worker.visas.for.the.period.of.28.November.2009.to.31.
December.2014..This.exemption.will.allow.contractors.to.bring.
in.the.skilled.labour.that.will.be.required.to.satisfy.the.demand.
from.federal.and.local.projects.generated.as.a.result.of.the.
build-up..�




                                                                      16
HONG KONG

• A population of 7.1 million, with three languages commonly spoken: English, Cantonese
and Mandarin
• Legal system based on the English common law system and on the rules of equity, with
a strict adherence to the principles of the Rule of Law and to the independence of the
judiciary.
• The Basic Law, the constitution of Hong Kong, provides that for a period of 50 years
from 1 July 1997, Hong Kong will enjoy a high degree of autonomy and will be allowed
to retain its current political, social, commercial and legal system including the capitalist
economic and trade systems that have made it the successful international financial and
business centre that it is.
• The Hong Kong Dollar (HK$) has been pegged at HK$7.80 to US$1 since 1983.
• Hong Kong has full autonomy in the conduct of its external commercial relations, and can
conclude and implement bilateral or multilateral trade agreements with states, regions and
international organisations.
• A founding member of the World Trade Organisation (WTO), Asia-Pacific Economic Co-
operation (APEC), and has a number of double tax treaties, these being with mainland
China, Luxembourg, Belgium, Thailand and Vietnam.

BUSINESS PRESENCE                                                           EXCHANGE CONTROL

•. Operates.a.free.enterprise,.free.trade,.‘laissez-faire‘.economic.        •. No.exchange.control,.and.no.restriction.on.repatriation.of.
system.with.minimal.government.interference.in.all.sections.of.             capital,.profits,.dividends,.interest.and.rental.income.by.foreign.
the.economy..Companies.and.individuals.may.import.or.export.                investors..
capital.at.their.own.discretion.and.profits.and.dividends.derived.
from.a.business.in.Hong.Kong.can.be.freely.converted.and.
remitted..                                                                  TAXATION
•. No.taxation.on.dividends,.no.exchange.controls.or.foreign.
currency.regulations.(except.those.that.relate.to.suspected.                Profits Tax
terrorist.financing.and.money.laundering).and.no.statutory.anti-            •. Liability.to.tax,.as.a.general.rule,.will.arise.when.certain.types.
trust.laws.                                                                 of.income.have.a.source.within.Hong.Kong..In.general,.income.
•. Various.sectors.of.the.financial.and.securities.community.               which.arises.or.is.derived.from.outside.Hong.Kong.will.not.be.
are.regulated.by.the.Hong.Kong.Stock.Exchange.(HKSE),.the.                  assessed.to.tax.by.the.Hong.Kong.Inland.Revenue.Department..
Securities.and.Futures.Commission.(SFC).and.the.Hong.Kong.                  Current.tax.rate.around.16.5%.
Monetary.Authority.(HKMA).                                                  •. Interest.earned.by.companies.(other.than.financial.institutions).
•. A.foreign.company.wishing.to.carry.on.business.in.Hong.Kong.             on.deposits.with.an.authorised.institution.are.exempt.from.
can.do.this.through.a.company.incorporated.in.Hong.Kong,.                   profits.tax.
a.branch.office.of.that.foreign.company,.or.by.establishing.a.              •. Losses.can.be.carried.forward.without.limit.
representative.office.in.Hong.Kong.
•. Companies.incorporated.in.Hong.Kong.can.be.public.                       Property Tax
or.private.and.can.be.limited.by.shares.or.by.guarantee..                   •. Charged.on.every.person.who.owns.any.building.or.land.in.
Companies.limited.by.guarantee.are.generally.set.up.by.non-                 Hong.Kong.and.based.on.the.rent.payable.in.respect.of.such.
profit.organisations.                                                       land.or.buildings.for.each.year.of.assessment..
                                                                            •. Exemption.from.property.tax.for.corporations.for.any.income.
                                                                            earned.in.respect.of.any.property.brought.into.charge.for.profits.
FOREIGN INVESTMENT RESTRICTIONS AND                                         tax.purposes.or.the.corporation.occupies.the.property.for.the.
CONDITIONS                                                                  purpose.of.producing.profits.assessable.to.profits.tax..
                                                                            •. The.rate.of.property.tax.is.15.per.cent.(2008/09.onwards)..
•. No.restrictions.imposed.on.foreigners.owning.equity.in.Hong.             Property.is.also.subject.to.rates.based.on.an.assessed.rateable.
Kong.companies.or.the.acquisition.by.foreigners.of.real.property.           value.for.each.property.
in.Hong.Kong.

                                                                       17
HONG KONG                                                                                                     Doing Business in Asia Pacific

Salaries Tax                                                              •. No.statutory.provisions.prescribe.maximum.working.hours,.but.
•. Charged.on.every.person.in.respect.of.his.income.arising.in.or.        it.is.currently.under.review.
derived.from.Hong.Kong.from.any.office.or.employment.of.profit.           •. Employees.are.entitled.to.a.minimum.of.between.7.and.14.
and.any.pension..                                                         days.annual.leave.per.year.
•. Income.deemed.to.include.all.wages,.salary,.leave.pay,.                •. In.general.every.employer.in.Hong.Kong.contributes.an.
perquisites,.bonus.and.allowances,.and.includes.the.rental.value.         amount.equal.to.at.least.5.per.cent.of.an.employee’s.salary.(up.
of.a.residence.provided.by.an.employer.to.an.employee.                    to.a.maximum.monthly.salary.of.HK$20,000).to.a.retirement.
•. The.employee.can.elect.to.have.this.rental.value.to.be.                scheme.that.is.registered.as.an.MPF.scheme..Every.employee.is.
deemed.to.be.equal.to.10.per.cent.of.the.total.income.paid.               also.required.to.contribute.at.least.5.per.cent.of.their.salary.(up.
by.the.employer.to.the.employee.(therefore.reducing.the.tax.              to.a.maximum.salary.of.HK$20,000.pm).to.the.scheme..
liability.if.his.rent.allowance.exceeds.10.per.cent.of.his.total.         •. Employers.are.required.to.maintain.insurance.coverage.
income)..                                                                 in.respect.of.work-related.injuries.but,.otherwise,.there.is.no.
•. Charged.on.a.sliding.scale,.the.top.rate.being.17.per.cent.            statutory.requirement.to.provide.medical.benefits.
(2008/09.onwards)..                                                       •. Hong.Kong.has.a.non-contributory.social.security.system.to.
•. In.determining.whether.or.not.all.services.are.rendered.               provide.a.basic.social.safety.net..No.deductions.are.made.from.
outside.Hong.Kong,.no.account.is.taken.in.respect.of.services.            salaries.in.respect.of.social.security.contributions.
rendered.in.Hong.Kong.during.visits.not.exceeding.a.total.of.60.          •. Subject.to.the.qualifying.requirements,.female.employees.
days.per.year.                                                            are.entitled.to.paid.maternity.leave.of.10.weeks.or.as.provided.
                                                                          by.the.terms.of.the.employer,.whichever.is.more.favourable..
Other Taxes                                                               Maternity.leave.pay.is.paid.at.the.rate.of.four-fifths.of.a.
•. Stamp.Duty.on.documents.effecting.the.transfer.of.shares.and.          month’s.pay
securities.which.are.required.to.be.registered.in.Hong.Kong.or.           •. Employees.are.entitled.to.pay.sick.leave.at.the.rate.of.four-
transfer.or.lease.of.land.and.buildings.situated.in.Hong.Kong:.at.        fifths.of.a.month’s.pay,.with.conditions.applying.
various.rate,.with.0.2%.on.shares.or.securities,.and.max.4.25%.on.        •. Severance.pay.is.applicable.for.employees.of.more.than.
transfer.of.real.properties.                                              24.months.if.he/she.is.dismissed.by.reason.of.redundancy,.or.
•. Capital.tax.on.the.creation.of.authorised.capital.of.a.company:.       laid.off,.with.a.maximum.payment.of.HK$390,000..Contractual.
HK$1.per.HK$1,000.00.                                                     gratuity.and.retirement.scheme.benefit.due.to.the.employer’s.
•. No.withholding.taxes.(with.exception),.no.taxes.on.dividends,.         contributions.may.be.set-off.against.an.employee’s.entitlement.
no.taxes.on.any.other.types.of.income.except.those.mentioned.             to.the.severance.pay.
above,.no.capital.gains.tax,.no.gifts.tax.and.no.wealth.tax..             •. Long.service.pay.applies.to.employees.working.for.more.than.
                                                                          five.years,.calculated.on.the.period.of.service.and.salaries,.and.
                                                                          subject.to.a.maximum.payment.of.HK$390,000..
TAX AND INVESTMENT INCENTIVES                                             •. Hong.Kong.employees.are.subject.to.salaries.tax.taxable.on.
                                                                          ‘assessable.income’..As.such,.suitably.tailored.remuneration.
•. There.are.few.treaties.for.the.avoidance.of.double.taxation.           packages.can.have.tax.advantages.for.the.employee.without.
between.Hong.Kong.and.other.countries,.one.of.which.is.the.               any.detrimental.effects.on.the.employer’s.Hong.Kong.Profits.
PRC..                                                                     Tax.liability,.since.all.costs.of.rewarding.employees.should.be.
•. An.arrangement.was.entered.into.between.the.PRC.and.                   allowable.expenses.incurred.in.the.production.of.chargeable.
Hong.Kong.for.the.avoidance.of.double.taxation.on.income,.                profits..
the.effect.of.which.is.to.tax.profits.attributable.to.a.permanent.
establishment.and.provide.for.credits.if.profits.are.taxed.in.
both.jurisdictions..The.arrangement.is.based.largely.on.the.              INTELLECTUAL PROPERTY
Organisation.for.Economic.Co-operation.and.Development.
(OECD).model.double.taxation.treaties.                                    •. Intellectual.Property.protection.in.Hong.Kong.comprises.
                                                                          patents,.trademarks,.industrial.design,.copyright,.geographical.
                                                                          indications.and.layout.designs.of.integrated.circuits.
EMPLOYMENT LAW                                                            •. Registered.patents,.trademarks/service.marks,.industrial.
                                                                          design.and.geographical.marks.enjoy.monopoly.rights/
•. Employment.in.Hong.Kong.is.less.regulated.than.it.is.in.many.          protection.for.specific.periods.of.time.
other.jurisdictions.such.as.the.European.Union.and.the.United.            •. Unregistered.trademarks.protected.by.the.Hong.Kong.courts.
States..                                                                  under.the.tort.of.passing.off.
•. There.are.a.number.of.labour.organisations/trade.unions.in.            •. Copyright.protection.for.literary,.musical.or.artistic.works,.
Hong.Kong.but.no.closed.shops..                                           sound.recordings,.broadcasts.and.films.
•. No.statutory.requirement.that.a.percentage.of.employees.               •. Know-how.may.be.protected.as.confidential.information.under.
must.be.local.nationals.or.that.a.percentage.of.payroll.be.paid.to.       contract,.rules.of.common.law.and.equity,.and.can.be.assigned.
local.national.employees.                                                 or.licensed..
•. A.minimum.wage.of.HK$28.00.per.hour.will.be.implemented.               •. Remedies.for.infringement.of.all.intellectual.property.rights.
on.1.May.2011.                                                            include.an.injunction,.disclosure.upon.oath,.delivery.up.for.


                                                                     18
HONG KONG                                                                                                      Doing Business in Asia Pacific

destruction.or.forfeiture,.damages.and/or.an.account.of.profits.           •. Commercial,.shipping.and.building.arbitrations,.some.very.
and.legal.costs..In.the.case.of.serious.counterfeiting,.the.courts.        substantial,.frequently.take.place.in.Hong.Kong.
may.grant.orders.to.search.premises.and.seize.infringing.goods.
and.evidence.without.prior.notice.to.the.infringer..The.Customs.           Mediation.
and.Excise.Department.also.have.wide.powers.of.search,.seizure.            •. As.an.alternative.to.litigation.or.arbitration,.mediation.is.
and.arrest.under.the.criminal.provisions.to.enforce.trademark.             becoming.an.increasingly.popular.procedure..
and.copyright.                                                             •. The.recent.reform.of.litigation.rules.in.Hong.Kong.provides.
                                                                           that.any.party.who.unreasonably.refuses.to.attempt.mediation.to.
                                                                           resolve.the.dispute.may.be.subject.to.a.sanction.on.costs.
DISPUTE RESOLUTION                                                         •. The.HKIAC.is.active.in.promoting.mediation.and.training.
                                                                           mediators,.and.maintains.lists.of.accredited.mediators.
Litigation
•. Similar.to.that.in.England.and.various.Commonwealth.                    Other Tribunals
countries,.Hong.Kong.courts.adopt.an.adversarial.common.law.               •. As.is.the.case.in.many.comparable.jurisdictions,.there.is.a.
system.with.the.legal.representatives.of.the.parties.appearing.            wide.range.of.specialist.tribunals.and.courts.dealing.with.land,.
before.the.District.Court.or.(for.cases.over.HK$1,000,000).the.            tenancy,.labour,.licensing,.professional.disciplinary.and.other.
Court.of.First.Instance,.with.machinery.for.appeals.to.the.Court.          matters.
of.Appeal,.and.thereafter.to.the.Court.of.Final.Appeal..
•. The.judiciary.is.generally.recognised.as.independent.and.free.
from.Government.interference.                                              IMMIGRATION PROCEDURES
•. Provisions.exist.for.obtaining.default.judgment.without.a.
trial.where.the.defendant.does.not.file.an.acknowledgement.                •. Hong.Kong.has.visa-free.entry.for.residents.from.over.170.
of.service.or.a.defence.within.the.prescribed.time,.and.for.               countries.and.territories.for.trips.ranging.from.seven.to.180.days..
obtaining.summary.judgement.without.a.trial.where.there.is.no.             Short-term.visitors.may.conduct.business.negotiations.and.sign.
bona.fide.defence.to.a.claim.                                              contracts.while.entering.Hong.Kong.on.a.visitor.visa.or.entry.
•. The.High.Court.has.specialist.judges.hearing.admiralty,.                permit.
arbitration,.commercial,.company.and.construction-related.                 •. To.employ.people.from.overseas.it.must.be.demonstrated.
matters.                                                                   that.the.proposed.employee.has.special.skills,.knowledge.or.
•. Many.types.of.foreign.monetary.judgement.obtained.                      experience.not.readily.available.in.Hong.Kong..
in.the.superior.courts.of.some.jurisdictions.(largely.certain.             •. An.investment.visa.requires.the.applicant.to.be.a.shareholder.
Commonwealth.and.Western.European.countries.but.excluding.                 of.a.Hong.Kong-registered.company,.either.by.registering.and.
the.United.States).may.be.registered.in.the.High.Court.and.                setting.up.a.company.in.which.the.applicant.is.the.major.investor.
enforced.in.Hong.Kong..                                                    or.investing.in.a.Hong.Kong-based.company..Details.on.the.
                                                                           viability.of.proposed.business.must.be.provided.
Arbitration                                                                •. Capital.Investment.Entrant.Scheme.(CIES).requires.a.capital.
•. Hong.Kong.law.provides.for.international.arbitrations.(as.              investment.of.HK$10.million.into.a.legitimate.asset.class.in.Hong.
defined.in.the.UNCITRAL.Model.Law).to.be.governed.by.                      Kong,.(real.properties.investment.excluded)..Applicants.must.
a.slightly.amended.UNCITRAL.Model.Law,.and.domestic.                       also.demonstrate.that.they.can.support.themselves.and.their.
arbitrations.by.provisions.of.the.Arbitration.Ordinance.(Cap.              dependants.without.public.assistance..Approved.CIES.applicants.
341.of.the.Laws.of.Hong.Kong).which.are.similar,.although.not.             are.allowed.to.take.up.employment.or.establish.a.business.
identical,.to.the.English.Arbitration.Acts.1950.and.1979..                 •. Dependant.visa:.persons.who.are.successful.in.receiving.one.
•. The.New.York.Convention.governing.enforcement.of.arbitral.              of.the.above.visas.may.also.bring.their.spouse.and.dependant.
awards.applies.to.Hong.Kong..                                              children.under.the.age.of.18.to.Hong.Kong.provided.there.are.
•. There.are.also.arrangements.for.mutual.enforcement.of.arbitral.         sufficient.funds.and.suitable.accommodation.for.them..The.limit.
awards.between.Mainland.China.and.Hong.Kong.similar.to.the.                on.their.stay.is.the.same.as.that.of.the.applicant.sponsor..
New.York.Convention..                                                      •. Every.adult.(and.child.aged.11.years.or.above).who.enters.and.
•. All.awards.(including.non-convention.awards).may.be.enforced.           is.permitted.to.stay.in.Hong.Kong.for.more.than.180.days.must.
in.Hong.Kong.in.the.same.way.as.a.judgement.of.the.Court.of.               apply.for.a.Hong.Kong.Identity.Card.within.30.days.of.arrival..
First.Instance,.with.the.leave.of.the.court.                               Applying.for.the.card.from.the.Immigration.Department.is.simple.
•. Arbitration.as.a.means.of.dispute.resolution.has.been.actively.         and.free..�
pursued.in.Hong.Kong.for.many.years,.in.particular.by.the.Hong.
Kong.Government,.which.inserts.arbitration.clauses.in.all.its.
major.building.and.civil.engineering.contracts..
•. Hong.Kong.International.Arbitration.Centre.(HKIAC).operates.
panels.of.international.and.local.arbitrators.of.experience.and.
distinction..The.Chartered.Institute.of.Arbitrators.East.Asia.
Branch.is.heavily.involved.in.the.training.of.arbitrators..A.local.
institute,.the.Hong.Kong.Institute.of.Arbitrators,.has.also.been.
set.up..
                                                                      19
INDIA

• Strategically located in Southern Asia, India is the seventh largest country in the world
with a total land area of 3,287,263 km2.
• India has a parliamentary system of government and the preamble of the constitution of
India states that the type of government adopted by India is sovereign, socialist, secular,
democratic, republic.
• Legal system is based on English common law and statutory law.
• The judiciary consists of the Supreme Court of India, High Courts at the state level and
District and Session Courts at the district level.
• Religious composition of the country consists of Hinduism, Islam, Christianity, Sikhism,
Buddhism, and Jainism.
• Hindi is the principal official language of the Republic of India while English is the
secondary official language. English is widely written and spoken especially in urban areas
and for business.
• Currency: Indian Rupees (INR).
• Investment growth areas include infrastructure, automobiles, ports, chemicals,
food processing, oil and natural gas, civil aviation, petrochemicals, power, services,
biotechnology, IT and IT enabled services, telecommunications manufacturing-related
services, and agriculture.

BUSINESS PRESENCE
                                                                             •. Under.the.government.route,.prior.approval.of.Government.of.
•. Main.types.of.business.models.in.India:.locally.incorporated.             India,.Ministry.of.Finance,.Foreign.Investment.Promotion.Board.
companies.(may.be.limited.by.shares.or.by.guarantee),.sole.                  (FIPB).is.required.
proprietorships,.partnerships.and.limited.liability.partnerships.
•. Foreign.companies.may.incorporate.a.company.under.the.                    •. Foreign.Direct.Investment.(‘FDI’).is.prohibited.in.India.in.the.
Companies.Act.either.as.a.joint.venture.company.or.as.a.wholly.              following.sectors:
owned.subsidiary.subject.to.foreign.investment.restrictions..                .. o.Retail.trading.(except.single.brand.retailing)
Foreign.companies.may.also.open.branch.offices,.project.offices.             .. o.Atomic.energy
or.liaison.offices.in.India.in.accordance.with.the.provisions.of.the.        .. o.Lottery.business.including.government/private.lottery,.
Foreign.Exchange.Management.Act.of.1999.                                     ......online.lotteries.etc
                                                                             .. o.Gambling.and.betting,.including.casinos.etc
                                                                             .. o.Business.of.chit.fund
FOREIGN INVESTMENT RESTRICTIONS AND                                          .. o.Nidhi.company
CONDITIONS                                                                   .. o.Trading.in.Transferable.Development.Rights.(TDRs).
                                                                             .. o.Real.estate.business.or.construction.of.farm.houses
Restrictions in Equity Participation                                         .. o.Activity/sector.not.opened.to.private.sector.investment
•. Foreign..collaboration..and..equity..participation..in..India..
is..regulated..by..the..Foreign..Direct.Investment.(FDI).policy.             •. Besides.foreign.investment.in.any.form,.foreign.technology.
announced.by.the.Government.of..India.and.the.Foreign.                       collaboration.in.any.form.–.including.licensing.for.franchise,.
Exchange.Management.Act.of.1999.                                             trademark,.brand.name,.or.management.contract.–.is.also.
                                                                             completely.prohibited.for.lottery.business.and.gambling.and.
•. FDI.can.be.made.by.non.residents.in.the.shares,.convertible.              betting.activities.
debentures,.or.preference.shares.of.an.Indian.company.through.
two.routes.–.the.automatic.route.and.the.government.route.                   •. In.the.following.sectors/activities,.FDI.is.allowed.up.to.the.
                                                                             limits.indicated.below.subject.to.other.conditions.as.indicated
•. Under.the.automatic.route,.the.foreign.investor.or.the.Indian.            (see following chart):
company.does.not.require.any.approval.from.the.Reserve.Bank.
of.India.or.Government.of.India.for.the.investment.



                                                                        20
INDIA                                                                                   Doing Business in Asia Pacific


Sector   Sector/activity                            FDI Cap/    Entry route   Other conditions
number                                              equity

I.       Agriculture
1.       Floriculture,.horticulture,.develop-       100%        Automatic
         ment.of.seeds,.animal.husbandry,.
         pisciculture,.aqua-.culture.and.cultiva-
         tion.of.vegetables.&.mushrooms.
         under.controlled. conditions.and.
         services.related.to.agro.and.allied.
         sectors.
         Note:.Besides.the.above,..FDI.is..not.
         allowed.in.any.other.agricultural.
         sector/activity
2.       Tea.Sector,.including.tea.plantation       100%        FIPB.         Subject.to.divestment.of
         Note:..Besides.the.above,..FDI.is.not.                               26%.equity.in.favour.of.Indian.
         allowed.in.any.other.plantation.sec-                                 partner/Indian.public.within.
         tor/activity                                                         five.years.and.prior.approval.
                                                                              of.state.government.con-
                                                                              cerned.in.case.of.any.change.
                                                                              in.future.land.use.
II.      INDUSTRY
IIA.     MINING
3.       Mining.covering                            100%        Automatic     Subject. to.Mines..&.Minerals.
         Mining.and.exploration.of.metal.and.                                 (Development.&.Regulation).
         non-metal.ores.including.diamonds                                    Act,.1957.
         and.precious.stones,.gold,.silver.and.                               www.mines.nic.in
         minerals.but.excluding.titanium-bear-
         ing.minerals.and.its.ores.
4.       Coal.and.Lignite.mining.for.captive.     100%          Automatic     Subject.to.provisions..of.Coal.
         consumption.by.power.projects,.and.                                  Mines.(Nationalisation).Act,.
         iron.and.steel,.cement.production                                    1973.
         and.other.eligible.activities.permitted.                             www.coal.nic.in
         under.the.Coal.Mines
         (Nationalisation).Act,.1973
4A.      Setting.up.coal.processing.plants.         100%        Automatic     Subject.to.the.company.not.
         such.as.washeries                                                    doing.coal.mining.and.not.
                                                                              selling.washed.coal.or.sized.
                                                                              coal.from.its.coal.processing.
                                                                              plants.in.the.open.market.
                                                                              and.shall.supply.washed.or.
                                                                              sized.coal.to.parties.who.are.
                                                                              supplying.raw.coal.to.coal.
                                                                              processing.plants.for.washing.
                                                                              or.sizing.




                                                           21
INDIA                                                                              Doing Business in Asia Pacific


5.      Mining.and.mineral.separation.of.        100%        FIPB        Subject.to.sectoral.regulations.
        titanium.bearing.minerals.and.ores,.its.                         and.the.Mines.and.Minerals.
        value.addition.and.integrated.                                   (Development&.Regulation).
        activities...Note:.FDI.will.not.be.                              Act,.1957.and.the.following.
        allowed.in.mining.of.‘prescribed.                                conditions:
        substances’.listed.in.Government.of.                             i..value.addition.facilities.are.
        India.notification.No..S.O..61(E).dt.                            set.up.within.India.along.with.
        18.1.2006.issued.by.the.Department.                              transfer.of.technology;
        of..Atomic.Energy.under.the.Atomic.                              ii..disposal.of.tailing.during.
        Energy.Act,1962.                                                 the.mineral.separation.shall.
                                                                         be.carried.out.in.accordance.
                                                                         with.regulations..framed.by.
                                                                         the.Atomic.Energy.Regulatory.
                                                                         Board.such.Atomic.Energy.
                                                                         (Radiation.Protection).Rules.
                                                                         2004.and.the.Atomic.Energy.
                                                                         (Safe.Disposal.of.Radioactive.
                                                                         Wastes).Rules.1987.
IIB     MANUFACTURING
6.      Alcohol-.Distillation.and.Brewing      100%          Automatic   Subject.to.license.by.appro-
                                                                         priate.authority.
7.      Cigars.and.Cigarettes-.Manufacture     100%          FIPB        Subject.to.industrial
                                                                         license.under.the
                                                                         Industries.(Development
                                                                         &.Regulation).Act,.1951.
8.      Coffee.and.Rubber.processing.          100%          Automatic
9.      Defence.production                     26%           FIPB        Subject.to.licensing.under
                                                                         Industries..(Development.&..
                                                                         Regulation).Act,.1951
                                                                         and.guidelines.on.FDI.in.pro-
                                                                         duction.of.arms.and.
                                                                         ammunition
10.     Hazardous.chemicals,.viz,.hydrocyanic. 100%          Automatic   Subject.to.industrial
        acid.and.its.derivatives;.phosgene.                              license.under.the
        and.its.derivatives;.and.isocyanates.                            Industries.(Development
        and.diisocyantes.of.hydrocarbon.                                 &.Regulation).Act,.1951.and.
                                                                         other.sectoral.regulations.
11.     Industrial.explosives.–.manufacture    100%          Automatic   Subject.to.industrial
                                                                         license.under.Industries.
                                                                         (Development.&.Regulation).
                                                                         Act,1951.and.regulations.
                                                                         under.Explosives.Act,.1898.
12.     Drugs.and.Pharmaceuticals.including.   100%          Automatic   Subject.to.industrial
        those.involving.use.of.recombinant.                              license.under
        DNA.technology                                                   Industries..(Development
                                                                         &..Regulation).Act,.1951.and.
                                                                         the.conditions.for.issuance.
                                                                         of.Industrial.license.for.such.
                                                                         manufacture.
13.     Industrial.undertaking.which.is.not.   100%          FIPB        Subject. to.industrial.license.
        a.micro.or.small.enterprise,.but.                    beyond      under.Industries.(Develoment
        manufactures.items.reserved.for.MSE.                 24%         &.Regulation).Act,.1951.and.
        sector                                                           the.conditions.for.issuance.
                                                                         of.Industrial.license.for.such.
                                                                         manufacture.


                                                        22
INDIA                                                                                                 Doing Business in Asia Pacific


IIC     POWER
14.     Generation.and.transmission.of.elec-    100%                 Automatic   Subject.to.provisions.of.the.Electricity.Act,.
        tric.energy.produced.in.hydroelectric,.                                  2003.
        coal/lignite-based.thermal.and.gas-                                      www.powermin.nic.in
        based.power.plants.(except.Atomic
        Power.plant/atomic.energy);.Non.
        -conventional.Energy.Generation.and.
        Distribution.(except.Atomic.Power.
        plant/atomic.energy),.Distribution.of.
        electric.energy.to.households,.indus-
        trial,.commercial.and.other.users.and
        Power.Trading.
III     SERVICES
15.     Advertising.and.Film.Industry.in-        100%                Automatic
        cluding..film.financing,.production,.
        distribution,.exhibition.and.associated.
        activities.related.to.film.industry


15A. Civil.Aviation.Sector
(i)     Airports
a.      Greenfield.projects                     100%                 Automatic   Subject.to.sectoral
                                                                                 regulations.notified.by.Ministry.of.Civil.Aviation.
                                                                                 www.civilaviation.nic..in


b.      Existing.projects                       100%                 FIPB        Subject.to.sectoral
                                                                     beyond      regulations.notified.by.Ministry.of.Civil.Aviation.
                                                                     74%         www.civilaviation.nic.in


(ii)    .Air.Transport.Services.including.
        Domestic.Scheduled.Passenger.
        Airlines;.Non-.Schedules.Airlines;.
        Chartered.Airlines;.Cargo. Airlines;.
        Helicopter.and.Seaplane.Services
c.      Scheduled.Air.Transport.Services/.      49%.–.FDI;           Automatic   Subject.to.no.direct.or
        Domestic.Scheduled.Passenger.           100%.–.for.                      indirect.participation.by.foreign.airlines.
        Airline                                 NRI.invesment                    and.sectoral.regulations.
d.      Non-Scheduled.Air.Transport.Service/. 74%.–.FDI              Automatic   Subject.to.no.direct.or.indirect.participation.by.
        Non-Scheduled.airlines,.Chartered.    100%.–. for.                       foreign.airlines.in.Non-.Scheduled.and.Char-
        airlines,.and.Cargo.airlines          NRIs.invest-                       tered.airlines..Foreign.airlines.are.allowed.to.
                                              ment                               participate.in.the.equity.of.companies.oper-
                                                                                 ating.Cargo.airlines..Also.subject.to.sectoral.
                                                                                 regulations
e.      Helicopter.Services/Seaplane.services. 100%                  Automatic   Foreign.airlines.are.allowed.to.participate.in.
        requiring.DGCA.approval                                                  the.equity.of.companies.operating.Helicopter.
                                                                                 and.seaplane.airlines..Also.subject.to.sectoral.
                                                                                 regulations.
(iii)   Other services under Civil
        Aviation Sector
f.      Ground.Handling.Services                74%.–.FDI            Automatic   Subject.to.sectoral
                                                100%.–..for..                    regulations.and.security.clearance.
                                                NRIs.invest-
                                                ment




                                                                23
INDIA                                                                                                  Doing Business in Asia Pacific


g.     Maintenance.and.Repair                    100%                 Automatic
       organisations;.flying.training.
       institutes;.and.technical.training.
       institutions
16.    Asset Reconstruction                      49%                  FIPB         Where.any.individual.investment.exceeds.10%.
       Companies                                 (only                             of.the.equity,.provisions.of.Section.3(3)(f).of.
                                                 FDI)                              Securitization.and.Reconstruction.of.Financial.
                                                                                   Assets.and.Enforcement.of..Security.Interest.
                                                                                   Act,.2002.should.be.complied.with..
                                                                                   www.finmin.nic.in
17.    Banking.-.Private.sector                  74%.(FDI+FII)        Automatic    Subject.to.guidelines.for
                                                                                   setting.up.branches/.subsidiaries.of.foreign.
                                                                                   banks.issued.by.RBI..www.rbi.org.in
17A. Banking. –Public.sector                     20%.(FDI+.           FIPB         Subject.to.Section.3(2D).of.the.Banking.Com-
                                                 portfolio                         panies.(Acquisition.and.Transfer.of.Undertak-
                                                 investment)                       ings).Acts.of.1970/80.


18.    Broadcasting
a.     FM.Radio                                  FDI.+.FII.     FIPB               Subject.to.Guidelines.notified.by.Ministry.of.
                                                 investment.up.                    Information.&.Broadcasting..
                                                 to.20%                            www.mib.nic.in
b.     Cable.network                             49%.(FDI.+.          FIPB         Subject.to.Cable
                                                 NRI.+.PIO.                        Television.Network.Rules.(1994).Notified.by.
                                                 investment.                       Ministry.of.Information.&.Broadcasting..
                                                 +.portfolio.                      www.mib.nic.in
                                                 investments)
c.     Direct-To-Home                            49%.(FDI.+.     FIPB              Subject.to.guidelines.issued.by.Ministry.of.
                                                 NRI.+.PIO.                        Information.&.Broadcasting..
                                                 investment.                       www.mib.nic.in
                                                 +.portfolio.
                                                 investment).
                                                 Within.this.
                                                 limit,.FDI.com-
                                                 ponent.not.to.
                                                 exceed.20%
d.     Setting.up.hardware.facilities.such.as.   49%.(FDI.+.FII) FIPB              Subject.to.up-linking.policy.notified.by.Ministry.
       up-linking,.HUB,.etc                                                        of.Information.&.Broadcasting.
                                                                                   www.mib.nic.in
e.     Up-linking.a.News.and.Current.Affairs     26%.FDI+FII          FIPB         Subject.to.guidelines.issued.by.Ministry.of.
       TV.Channel                                                                  Information.&.Broadcasting..
                                                                                   www.mib.nic.in
f.     Up-linking.a.Non-.news.and.Current.       100%                 FIPB         Subject.to.guidelines.issued.by.Ministry.of.
       Affairs.TV.Channel                                                          Information.&.Broadcasting..
                                                                                   www.mib.nic.in
g.     Headend.In.the.Sky.(HITS).Broadcast-      74%                  FDI.up.to    Subject.to.guidelines.issued.by.Ministry.of
       ing.Service                               (FDI.     +.         49%.on.      Information.&.Broadcasting.
                                                 portfolio.           automatic.   www.mib.nic.in
                                                 investment)          route.
19.    Commodity.Exchanges                       74%.(FDI.            FIPB         FII.purchases.shall..be.restricted.to.secondary.
                                                 +.portfolio.                      market.only..No.foreign.investor/entity,.includ-
                                                 investment)                       ing..persons..acting.in.concert,.will.hold.more.
                                                                                   than.5%.of.the.equity.in.these.companies.




                                                                 24
INDIA                                                                                        Doing Business in Asia Pacific


20.    Construction.Development.proj-            100%        Automatic   Subject.to.conditions.including:.
       ects,.including.housing,.commercial.                              a..minimum.capitalisation.of.US$.10.million.for.
       premises,.resorts,.educational.institu-                           wholly.owned.subsidiaries.and.US$.5.million.
       tions,.recreational.facilities,.city.and.                         for.joint.venture.with.Indian.partner..The.funds.
       regional.level.infrastructure,.town-                              would.have.to.be.brought.within.six.months.of.
       ships..Note:.FDI.is.not.allowed.in.Real.                          commencement.of.business.of.the.company..
       Estate.Business                                                   Original.investment.cannot.be.repatriated.
                                                                         before.a.period.of.three.years.from.completion.
                                                                         of.minimum.capitalisation..Original.investor.
                                                                         may.be.permitted.to.exit.earlier.with.prior.ap-
                                                                         proval.of.the.government.through.FIPB
                                                                         b..minimum.area.to.be.developed.under.each.
                                                                         project.–.10.hectares.in.case.of.development.
                                                                         of.serviced.housing.plots;.and.built-up
                                                                         area.of.50,000m2...In.case.of.construction.
                                                                         development..project;.and.any.of.the.above.in.
                                                                         case.of.a.combination.project.
                                                                         c..at.least.50%.of.the.project.to.be.developed.
                                                                         within.a.period.of.five.years.from.the.date.of.
                                                                         obtaining.the.statutory.clearances..Undevel-
                                                                         oped.plots.cannot.be.sold.by.the.investor/
                                                                         investee.company.
                                                                         d..the.project.to.comply.with.applicable.rules.
                                                                         and.regulations.
                                                                         e..the.investor/investee.company.to.obtain.all.
                                                                         necessary.approvals.
20A. Development.of.Special.Economic.            100%        Automatic   Subject.to.Special.Economic.Zones.Act.2005.
       Zones.(SEZ)                                                       and.SEZ.Policy.of.the.Department.of.
                                                                         Commerce.
20B.   a..maintenance.of-.roads,.rail-beds,.     100%        Automatic
       bridges,.tunnels,.pipelines,.ropeways,.
       runways,.waterways.and.water
       reservoirs,.hydroelectric.projects,.
       power.plants.and.industrial.plants.
       b..constructionand.maintenance.of.
       roads.and.highways.offered.on.BOT.
       basis.including.collection.of.toll.
       c..construction.and.maintenance.of.
       Rural.Drinking.Water.Supply.Projects,.
       Package.Plants,.Rain.and.Rain
       Water.Harvesting.Structures,.Waste-.
       Water.Recycling.And.Re-Use.Tech-
       niques.And.Facilities,.Rain-.Water.Re-
       Charging.And.Re-Use.Techniques.Of.
       Ground.Water.




                                                        25
INDIA                                                                                               Doing Business in Asia Pacific


20C.   (a).Leasing.of.existing.Ports,.           100%              Automatic
       (b).Construction/creation.and.                              route
       maintenance.of.assets.suchnas-.con-
       tainer.terminals.bulk/break.bulk/
       multipurpose.and.specialised.cargo.
       berths,.warehousing,.container.freight.
       stations,.storage.facilities.and.tank.
       farms,.cranage/.handling.equipment,.
       setting.up.of.captive.power
       plants,.dry.docking.and.ship.repair.
       facilities.
       (c).Leasing.of.equipment.for.port.
       handling.and.leasing.of.floating.
       crafts.
       (d).Captive.facilities.for.port-based.
       industries.
20D. Mass.Rapid.Transport.Systems.in.Met- 100%                     Automatic
       ropolitan.Cities.including.associated
       development.of.real.estate
21.    Courier.services.for.carrying.pack-       100%              FIPB        Subject.to.existing.laws.and.exclusion.of..activ-
       ages,.parcels.and.other.items.which.                                    ity.relating.to.distribution.of.letters,.which.is.
       do.not.come.within.the.ambit.of.the.                                    exclusively.reserved.for.the.State..
       Indian.Post.Office.Act,.1898.                                           www.indiapost.gov.in
22.    Credit.Information.Companies              49.%.(FDI+FII). FIPB          Foreign.Investment.in.CIC.will.be.subject.to.
                                                 Investment.by                 Credit.Information.Companies.(Regulation).Act,.
                                                 Registered.FII                2005.
                                                 under.PIS.will.               FII.investment.will.be.subject.to.the.conditions
                                                 be.limited.to.                that:
                                                 24%.only.in.                  (a).No.single.entity.should..directly.or.indirectly.
                                                 the.CICs.listed.              hold.more.than10%.equity
                                                 at.the.Stock                  (b).Any.acquisition.in.excess.of.1%.will.have.to.
                                                 Exchanges..                   be.reported.to.RBI.as.a.reporting.requirement;.
                                                 within.the.                   (c).FIIs.investing.in.CICs.shall.not.seek.a.rep-
                                                 overall.limit.of              resentation.on.the.Board.of.Directors.based.
                                                 49%.foreign.                  upon.their.shareholding.
                                                 investment.
23.    Industrial.Parks.both.setting.up.and.in. 100%               Automatic   Conditions.applicable.for.construction.devel-
       established.Industrial.Parks                                            opment.projects.would.not.apply.provided.
                                                                               the.industrial.parks.meet.with.the.conditions.
                                                                               below:
                                                                               i..it.would.comprise.a.minimum.of.10.units.and.
                                                                               no.single.unit.shall.occupy.more.than.50%.of.
                                                                               the.allocable.area;
                                                                               ii..the.minimum.percentage.of.the.area.to.be.
                                                                               allocated.for.industrial.activity.shall.not.be.less.
                                                                               than.66%.of.the.total.allocable.area.
24.    Insurance                                 26%               Automatic   Subject.to.licensing.by.the.Insurance.Regula-
                                                                               tory.&.Development.Authority
                                                                               www.irda.nic.in
25.    Infrastructure.Company.in.the.            49%.(FDI.       FIPB          Subject.to.SEBI.regulations..FII.can.invest.only.
       Securities.Market                         –..26%.and.FII.               through.purchases.in.the.secondary.market
                                                 –.23%)




                                                              26
INDIA                                                                                                    Doing Business in Asia Pacific


26.      Non-Banking
         Finance Companies
i)       Merchant.Banking                          100%               Automatic      Subject.to:
ii)      Underwriting                                                                a.minimum.capitalisation..norms.for.fund-
                                                                                     based
iii)     Portfolio.Management.Services
                                                                                     NBFCs.–.US$..0.5.million.to.be.upfront.for.FDI.
iv)      Investment.Advisory.Services                                                up.to.51%;.US$.5.million.to.be.brought.upfront.
v)       Financial.Consultancy                                                       for.FDI.above.51%.and.up.to.75%;.and.US$.
vi)      Stock.Broking                                                               50.million.out.of.whichUS.$7.5.million.to.be.
                                                                                     brought.upfront.and.the.balance.in.24.months.
vii)     Asset.Management
                                                                                     for.FDI.beyond.75%.and.up.to.100%..
viii)    Venture.Capital                                                             b..minimum.capitalisation.norms.for.non-fund-
ix)      Custodial.Services                                                          based.NBFC.activities-.US$.0.5.million.
x)       Factoring                                                                   c..foreign.investors.can.set.up.100%.operating
xi)      Credit.Rating.Agencies                                                      subsidiaries.without.the.condition.to.disinvest.a.
                                                                                     minimum.of.25%.of.its.equity.to.Indian.entities
xii)     Leasing.and.Finance
                                                                                     subject.to.bringing.in.US.$50.million.without.
xiii)    Housing.Finance                                                             any.restriction.on.number.of.operating.subsid-
xiv)     Forex.Broking                                                               iaries.without.bringing.additional.capital.
xv)      Credit.card.Business                                                        d..joint.venture.operating.NBFCs.that.have.
                                                                                     75%,.or.less.than.75%,.foreign.investment.will.
xvi)     Money.changing
                                                                                     also.be.allowed.to.set.up.subsidiaries.for.un-
xvii)    Micro.Credit                                                                dertaking.other.NBFC.activities.subject.to.the.
xviii)   Rural.Credit                                                                subsidiaries.also.complying.with.the.applicable.
                                                                                     minimum.capital.inflow.
                                                                                     e..compliance.with.the.guidelines.of.the.RBI
                                                                                     f..The.minimum.capitalisation.norms.that.apply.
                                                                                     would.be.applicable.where.the.foreign.holding.
                                                                                     in.a.NBFC.(both.direct.and.foreign.holding.
                                                                                     direct..and..indirect).exceeds.the.limits.indi-
                                                                                     cated.at.(a).above.
                                                                                     g..The.capital.for.the.purpose.of.minimum.
                                                                                     capitalisation.norms.shall.consist.of.ordinary.
                                                                                     shares.only.


27.      Petroleum and Natural
         Gas Sector

a.       Refining                                  49%.in.case.of.    FIPB.(in.case. Subject.to.sectoral.policy.www.petroleum.nic.in
                                                   PSUs               of.PSUs).      and.no.divestment.or.dilution.of.domestic.
                                                   100%.in.case.      automatic.     equity.in.the.existing.PSUs.
                                                   of.private.        (in.case.of.
                                                   companies          private
                                                                      companies)
b.       Other.than.Refining.and.including.        100%.              Automatic      Subject.to.sectoral.regulations.issued.by.Minis-
         market.study.and.formulation;.invest-                                       try.of.Petroleum.&.Natural.Gas..
         ment/.financing;.setting.up.infrastruc-                                     www.petroleum.nic.in
         ture.for.marketing.in.the.Petroleum.
         and.Natural.Gas.sector.
28.      Print Media
a.       Publishing.of.newspapers.and.peri-        26%                FIPB           Subject.to.guidelines.notified.by.Ministry.of.
         odicals.dealing.with                                                        Information.&.Broadcasting..
         news.and.current.affairs                                                    www.mib.nic.in




                                                                 27
INDIA                                                                                                      Doing Business in Asia Pacific


    b.    Publishing.of.scientific.magazines/.      100%                FIPB          Subject.to.guidelines.issued.by.Ministry.of
          specialty.journals/.periodicals                                             Information.&.Broadcasting.
                                                                                      www.mib.nic.in
    29.   Telecommunications
    a.    Basic.and.cellular,.Unified.Access.       74%.(Including.     Automatic.    Subject.to.guidelines.notified.in.the.PN.3.
          Services,.National/.International         FDI,.FII,.NRI,.     up.to.49%..   (2007)
          Long.Distance,.V-Sat,.Public.Mobile.      FCCBs,.ADRs,.       FIPB.beyond
          Radio.Trunked.Services.(PMRTS),.          GDRs,.con-          49%.
          Global.Mobile.Personal.Communica-         vertible.prefer-
          tions.Services.(GMPCS).and.other.         ence.shares,.
          value.added.telecom.servicest             and.proportio-.
                                                    nate.foreign..
                                                    equity.in.
                                                    Indian.promot-
                                                    ers/Investing.
                                                    Company
    b.    ISP.with.gateways,.radio-.paging,.        74%                 Automatic.    Subject.to.licensing.and.security.requirements.
          end-to-.end.bandwidth                                         up.to.49%..   notified.by.the.Department.of.Telecommunica-
                                                                        FIPB.beyond   tions..
                                                                        49%.          www.dotindia.com
    c.    (a).ISP.without.gateway,                  100%                Automatic.    Subject.to.the.condition.that.such.companies.
          (b).infrastructure                                            up.to         shall.divest.26%.of.their.equity.in.favour.of.
          provider.providing.dark                                       49%.          Indian.public.in.five.years,.if.these.companies.
          fibre,.right.of.way,.duct.space,.tower.                       FIPB          are.listed.in.other.parts.of.the.world..Also.
          (Category.I);                                                 beyond        subject..to.licensing.and.security.requirements,.
          (c).electronic.mail.and.voice.mail                            49%..         where.required..
    d.    Manufacture.of.telecom.equipment          100%                Automatic     Subject.to.sectoral.requirements..
                                                                                      www.dotindia.com
    30.   Trading
    a.    Wholesale/cash.and.carry.trading          100%                Automatic     Subject.to.the.condition.that..the..test..market-
    b.    Trading.for.exports                       100%                Automatic     ing.approval.will.be.for.a.period.of.two.years.
                                                                                      and.investment.in.setting.up.manufacturing.
    c     Trading.of.items.sourced.from..small.     100%                FIPB
                                                                                      facilities.commences.simultaneously.with.test.
          scale.sector
                                                                                      marketing.
    d.    Test.marketing.of.such.items.for.which. 100%                  FIPB
          a.company.has.approval.for.manu-                                            Subject.to.guidelines.for.FDI.in.trading.issued.
          facture                                                                     by.Department.of.Industrial.Policy.&.
    e.    Single.brand.product.retailing            51%                 FIPB          Promotion.
    31.   Satellites.–.establishment.and.           74%                 FIPB          Subject.to.Sectoral.guidelines.issued.by.De-
          operation                                                                   partment.of.Space/ISRO..www.isro.org
    32.   Health.and.Medical.Services               100%                Automatic
    33.   Hotels.and.Tourism.related.industry       100%                Automatic
.

•. In.sectors/activities.not.listed.above,.FDI.is.permitted.up.to.100%.on.the.automatic.route.subject.to.sectoral.rules/regulations.

•. The.issue.price.of.shares.issued.to.persons.resident.outside.India.under.the.FDI.scheme,.shall.be.on.the.basis.of.Securities.
Exchange.Board.of.India.guidelines.in.case.of.listed.companies..In.case.of.unlisted.companies,.valuation.of.shares.has.to.be.done.
by.a.chartered.accountant.in.accordance.with.the.guidelines.issued.by.the.erstwhile.Controller.of.Capital.Issues.




                                                                   28
INDIA                                                                                                               Doing Business in Asia Pacific

Restrictions in Real Estate Acquisition                                        companies..The.rate.of.tax.on.profits.from.life.insurance.business.
•. Non.Resident.Indian.(NRI).(being.a.citizen.of.India.but.resident.           is.12.5.per.cent.
outside.India).or.a.Person.of.Indian.Origin.(PIO).(being.an.                   •. Surcharge.is.applicable.at.7.5.per.cent.if.total.income.is.in.
individual.not.being.citizen.of.Pakistan,.Bangladesh,.Sri.Lanka,.              excess.of.INR.10,000,000..Marginal.relief.may.be.available
Afghanistan,.China,.Iran,.Nepal.or.Bhutan.who.at.any.time.held.                •. Education.cess.is.applicable.at.3.per.cent.on.income.tax.
an.Indian.passport.or.whose.father.or.grandfather.was.a.citizen.               (inclusive.of.surcharge,.if.any).
of.India.by.virtue.of.the.Constitution.of.India.or.the.Citizenship.            •. The.effective.tax.rate.for.domestic.Indian.companies.is.33%.
Act.1955).is.allowed.to.acquire.immovable.property.in.India.
other.than.agricultural.land,.plantation.property.or.farm.house.               For Foreign Companies
•. For.acquisition.of.agricultural.land,.plantation.property.or.farm.          •. Foreign.companies.are.taxable.at.the.rate.of.40%.on.income.
house.by.NRI.or.PIO,.specific.approval.of.the.Reserve.Bank.of.                 derived.from.India.
India.is.required.                                                             •. Surcharge.is.applicable.at.2.5.per.cent.if.total.income.is.in.
•. Foreign..companies.permitted.to..open..branch..office..are..                excess.of.INR.10,000,000..Marginal.relief.may.be.available
allowed..to..acquire..any..immovable.property.in.India.which.                  •. Education.cess.is.applicable.at.3.per.cent.on.income.tax.
is.necessary.for,.or.incidental.to,.carrying.on.such.activity..                (inclusive.of.surcharge,.if.any).
Declaration.in.prescribed.form.(Form.IPI).is.required.to.be.filed.
with.the.Reserve.Bank.of.India.within.90.(ninety).days.of.the.                 Minimum Alternate Tax
acquisition.of.such.immovable.property.                                        •. Minimum.alternate.tax.(MAT).is.levied.at.18.per.cent.of.the.
•. Foreign.Companies.permitted.to.open.liaison.office.are.not.                 adjusted.book.profits.in.the.case.of.those.companies.where.
allowed.to.acquire.any.immovable.property.in.India,.however,.                  income.tax.payable.on.the.taxable.income.according.to.the.
such.liaison.offices.may.take.the.property.by.way.of..lease.not.               normal.provisions.of.the.Income.tax.Act,.1961.(the.act),.is.less.
exceeding.five.years.                                                          than.18.per.cent.of.the.adjusted.book.profits.
•. Payment.for.such.acquisition.of.immovable.property.can.be.                  •. MAT.credit.is.available.for.10.years.
made.by.NRI/PIO.only.out.of:                                                   •. Surcharge.is.applicable.at.7.5.per.cent.in.the.case.of.domestic.
o. Funds.remitted.to.India.through.normal.banking.channel;.or                  companies.if.the.adjusted.book.profits.are.in.excess.of.INR.
o. Funds.held.in.NRE/FCNR/NRO.account.maintained.in.India                      10,000,000..Marginal.relief.may.be.available
                                                                               •. Education.cess.is.applicable.at.3.per.cent.on.income.tax.
Approvals and licensing                                                        (inclusive.of.surcharge,.if.any)..
•. Appropriate.approvals.and.licences.are.required.for.the.
operation.of.any.business.activity..These.may.be.obtained.from.                Personal Income Tax
the.relevant.ministry,.government.agencies.etc.                                •. For.individuals,.Hindu.undivided.families,.association.of.
•. Application.process.and.prescribed.fee.payable.vary.                        persons.and.body.of.individuals:
depending.on.the.prescribed.condition.for.the.application.
                                                                               Total income                      Tax rates
                                                                                Up.to.INR.160,000                 Nil
EXCHANGE CONTROL
                                                                                INR.160,001.to.INR.500,000        10%
•. Governed.by.the.Exchange.Control.Department.of.the.                          INR.500,001.to.INR.800,000        20%
Reserve.Bank.of.India                                                           INR.800,001.and.above             30%
•. Authorisations..in..the..form..of..licences..to..deal..in..foreign..
exchange..are..granted..to..banks,.established.firms,.hotels.etc,.             (a)..In.the.case.of.a.resident.woman.below.the.age.of.65.years,.
permitting.them.to.deal.in.foreign.currency.notes,.coins.and.                  the.basic.exemption.limit.is.INR.190,000.
travellers.cheques.                                                            (b)..In.the.case.of.a.resident.individual.of.the.age.of.65.years.or.
•. All.foreign.investments.are.on.a.repatriation.basis.except.                 above,.the.basic.exemption.limit.is.INR.240,000.
for.the.cases.where.NRIs/OCBs.choose.to.invest.specifically.                   (c).Surcharge.is.not.applicable.
under.non-repatriable.schemes..Interests,.dividends.declared.                  (d).Education.cess.is.applicable.at.3.per.cent.on.income.tax.
on.foreign.investments,.rent,..business..income,.and.revenue..
incomes,.can..be..remitted.freely.through.an.authorised.dealer.                For firms [including Limited Liability Partnership (LLP)]
(AD)..Capital.gains.cannot.be.repatriated.                                     •. Firms.(including.LLP).are.taxable.at.30.per.cent.
                                                                               •. Surcharge.is.not.applicable.
                                                                               •. Education.cess.is.applicable.at.3.per.cent.on.income.tax.
TAXATION                                                                       .
[For.the.financial.year.2010/11]

Corporate Tax
For domestic companies
•. Domestic.companies.are.taxed.at.a.rate.of.30%.on.income.
•. Special.method.for.computation.of.total.income.of.insurance.


                                                                          29
INDIA                                                                                                           Doing Business in Asia Pacific

Securities Transaction Tax                                                  Interest.on.FCCB,.FCEB/divi- 10%
•. Securities.transaction.tax.(STT).is.levied.on.the.value.of.taxable.      dend.on.GDRs.(other.than.
securities.transactions.as.under:                                           dividends.on.which.dividends.
                                                                            distribution.tax.has.been.
 Transaction                        Rates          Payable by               paid)
 Purchase/sale.of.equity            0.125%         Purchaser/seller
 shares,.units.of.equity.                                                  •. In.case.the.non-resident.has.a.Permanent.Establishment.(PE).in.
 oriented..mutual.fund.                                                    India.and.the.royalty/fees.for.technical.services.paid.is.effectively.
 (delivery.based)                                                          connected.with.such.PE,.the.same.could.be.taxed.at.40.per.cent.
                                                                           (plus.surcharge.and.education.cess).on.net.basis.
 Sale.of.equity.shares,.units.of.   0.025%         Seller
                                                                           •. Tax.on.non-resident.sportsmen.or.sports.association.on.
 equity.oriented.mutual.fund.
                                                                           specified.income.at.10.per.cent.plus.applicable.surcharge.and.
 (non-delivery.based)
                                                                           education.cess.
 Sale.of.an.option. in.securities   0.017%         Seller
 Sale.of.an.option.in.securities,. 0.125%          Purchaser               Tax on capital gains
 where.option.is.exercised
 Sale.of.a.futures.in.securities    0.017%         Seller                   Particulars             Short-term          Long-term
 Sale.of.unit.of.an.equity-         0.25%          Seller                                           capital gains       capital gains tax
 oriented.fund.to.the.mutual.                                                                       tax rates           rates
 fund                                                                       Sale.transactions.of.   15%                 Nil
                                                                            equity
Wealth Tax                                                                  shares./unit.of.an.
•. Wealth.tax.is.imposed.at.1.per.cent.on.the.value.of.specified.           equity-oriented.
assets.held.by.the.taxpayer.on.the.valuation.date.(31.March).in.            fund.which.attract.
excess.of.the.basic.exemption.of.INR.3,000,000.                             STT
                                                                            Sale.transaction.
Dividend Distribution Tax                                                   other.than
•. Dividend.distributed.by.an..Indian.Company.is..exempt.                   listed.above:
from..income.tax.in..the..hands..of..its.shareholders..The.Indian.
                                                                            Individuals.(resident. Progressive.
Company.is.liable.to.pay.Dividend.Distribution.Tax.(DDT).at.
                                                                            and.non-residents)     slab.rates
16.609.per.cent.(i.e..inclusive.of.surcharge.and.education.cess).
on.such.dividends                                                           Firms.including.LLP.    30%                 20%..with..index-
                                                                            (resident                                   ation/10%
Special Rates for Non residents                                             and.non-resident)                           without.indexation.
The.following.incomes.in.the.case.of.non.resident.are.taxed.at.                                                         for.units/zero.cou-
special.rates.on.gross.basis:                                                                                           pon.bonds
                                                                            Resident.companies      30%
 Nature of Income                   Rate                                    Overseas.financial      40%.(corporate) 10%
                                                                            organisations.          30%.
 Dividend.(other.than.divi-         20%
                                                                            specified.in.section.   (non.corporate
 dends.on.which.dividend
                                                                            115AB
 distribution.tax.has.been.
 paid)                                                                      FIIs                    30%                 10%
 Interest.received.on.loans.        20%                                     Other.foreign.com-      40%                 20%..with.
 given.in.foreign.currency.to.                                              panies                                      indexation/10%
 Indian.concern.or.Govern-                                                                                              without.indexation.
 ment.of.India                                                                                                          for.units/zero.
                                                                                                                        coupon.bonds
 Income.received.in.respect.of. 20%
 units.purchased.in                                                         Local.authority         30%
 foreign.currency.of.specified.                                             Cooperative.society     Progressive.        20%.with.index-
 mutual.funds/UTI                                                                                   slab.rates          ation/10%
 Royalty.of.fees.for.technical.     For.agreements.entered.into:                                                        without.indexation.
 services                           After.31.May.1997.but.before                                                        for.units/zero.
                                    1.June.2005.–.at.20%.After.1.                                                       coupon.bonds
                                    June.2005.–.at.10%




                                                                      30
INDIA                                                                                                         Doing Business in Asia Pacific

Withholding tax                                                           •. A.company.is.said.to.be.resident.in.India.in.any.previous.
•. Withholding.tax.on.certain.types.of.payments.made.to.a.                year,.if:
non-resident.is.imposed..Interest.earned.in.India,.royalties,.and.        .. o It.is.an.Indian.company;.or
fees.for.technical.services.attracts.withholding.tax.of.10%.              .. o.During.that.year.the.control.and.management.of.its.affairs.
                                                                          is.situated.wholly.in.India.
Other taxes
•. Value.added.tax.imposed.by.the.respective.state.                       •. An.individual.is.not.ordinarily.resident.in.India.if.he.or.she.
government.on.sale.of.goods.at.various.rates.as.listed.in.the.            fulfils.either.of.these.two.conditions:
Value.Added.Tax.Act.of.the.respective.state.                              .. Has.been.a.non-resident.in.India.for.nine.out.of.10.preceding.
•. Service.tax.on.various.services.as.identified.by.the.Finance.          years;.or
Act:.10%.                                                                 .. During.the.seven.preceding.years.been.in.India.for.a.total.of.
•. Custom.duty:.ad.valorem.duty.at.various.rates.for.imported.            729.days.or.less.
items.as.per.the.Customs.Tariff.Act,.1975.
•. Selected.products.manufactured.in.India:.excise.duty.at.               •. A.HUF.shall.be.not.ordinarily.resident.in.India.if.the.manager.
various.rates.as.per.the.Central.Excise.Tariff.Act,.1985.                 of.the.HUF.fulfils.either.of.these.two.conditions;
•. Stamp.duty.on.certain.documents.executed.within.India:.                .. o Has.been.a.non-resident.in.India.for.nine.out.of.10.
nominal.or.ad.valorem.stamp.duty.on.the.basis.of.provisions.of.           preceding.years;.or
Indian.Stamp.Act.1899.                                                    .. o.During.the.seven.preceding.years.bee.n.in.India.for.a.total.
.                                                                         of.729.days.or.less.
Scope of total income chargeable to tax
•. In.respect.of.person.ordinarily.resident.in.India,.the.total.
income.of.any.previous.year.shall.include.all.income.from.                TAX AND INVESTMENT INCENTIVES
whatever.source.derived,.which:                                           .
.. o.Is.received.or.deemed.to.be.received.in.India.in.such.a.             •. The.Government.of.India.has.extended.a.host.of.incentives.
year.by.or.on.behalf.of.such.a.person.                                    and.concessions.to.eligible.corporations.in.certain.specific.
.. o.Accrues.or.arises.or.is.deemed.to.accrue.or.arise.to.him.in.         industries.
India.during.such.a.year.                                                 •. Broadly.the.tax.incentives.include.tax.holidays.for.corporate.
.. o.Accrues.or.arises.to.him.outside.India.during.such.a.year.           profits,.accelerated.depreciation.allowances.and.deductibility.
                                                                          of.certain.expenses.subject.to.fulfillment.of.prescribed.
•. In.respect.of.a.person.not.ordinarily.resident.in.India,.the.          conditions.
total.income.of.any.previous.year.shall.include.all.income.from.          •. The.profits.of.specified.new.industrial.undertakings.
whatever.source.derived,.which:                                           qualify.for.tax.exemption..New.undertakings.are.defined.as.
.. o.Is.received.or.deemed.to.be.received.in.India.in.such.a.             undertakings.that.are.formed.by.means.other.than.the.division.
year.by.or.on.behalf.of.such.a.person.                                    or.reconstruction.of.a..business..already.in..existence,.or..the..
.. o.Accrues.or.arises.or.is.deemed.to.accrue.or.arise.to.him.in.         transfer..to..a..new..business..of..machinery.or..plant.previously.
India.during.such.a.year.                                                 used.in.India.for.another.purpose.
.. o.Accrues.or.arises.to.him.outside.India.during.such.a.year.
from.a.business.controlled.in,.or.a.profession.set.up.in,.India.          Double taxation relief and tax treaties
                                                                          •. Taxpayers.have.the.option.to.choose.between.the.provisions.
•. In.respect.of.person.being.a.non.resident,.the.total.income.of.        of.the.tax.treaty.or.the.Income.Tax.Act,.whichever.is.beneficial.
any.previous.year.shall.include.all.income.from.whatever.source.          to.them.
derived,.which:                                                           •. If.the.foreign.income.source.of.a.resident.is.taxed.in.a.
.. o.Is.received.or.deemed.to.be.received.in.India.in.such.year.          country.with.which.no.double.taxation.avoidance.agreement.
by.or.on.behalf.of.such.person.                                           exists.and.such.income.is.also.taxed.in.India,.then.resident.
.. o.Accrues.or.arises.or.is.deemed.to.accrue.or.arise.to.him.in.         taxpayers.may.claim.a.tax.credit.in.respect.of.such.doubly.
India.during.such.year.                                                   taxed.incomes.to.the.extent.of.the.taxes.paid.in.the.source.
...o.An.individual.is.ordinarily.resident.in.India.in.any.previous.       country.or.the.rate.of.tax.in.India,.whichever.is.lower.
year,.if.he
   o.is.in.India.for.at.least.182.days;.or.has.stayed.for.at.least.
365.days.in.the.immediately.preceding.four.years.and.has.                 EMPLOYMENT LAW
stayed.for.at.least.60.days.in.that.year.
                                                                          •. Under.the.Constitution.of.India,.labour.is.a.subject.in.the.
•. A.Hindu.undivided.family.(HUF),.firm.or.other.association.             concurrent.list.where.both.the.central.and.state.governments.
of.persons.is.said.to.be.resident.in.India.in.any.previous.year.          are.competent.to.enact.legislation.subject.to.certain.matters.
in.every.case.except.where.during.that.year.the.control.and.              being.reserved.for.the.centre.
management.of.its.affairs.is.wholly.outside.India.                        •. There.are.various.acts.that.regulate.labour.and.employment.
                                                                          in.India,.including.the.Apprentices.Act,.1961,.Child.Labour.
                                                                          (Prohibition.and.Regulation).Act,.1986,.Maternity.Benefit.Act,


                                                                     31
INDIA                                                                                                      Doing Business in Asia Pacific

1961,.Minimum.Wages.Act,.1948,.Payment.of.Bonus.Act,.1965,.          •. Trademarks.are.governed.by.the.Trademarks.Act.of.1999,.
Payment.of.Gratuity.Act,.1972,.Payment.of.Wages.Act,.1936,.          copyrights.are.governed.by.Copyrights.Act,.geographical.
Employers’.Liability.Act,.1938,.Industrial.Disputes.Act,.1947,.      indications.are.governed.by.the.Geographical.Indications.of.
Factories.Act,.1948,.Workmen.compensation.Act,.1923.                 Goods.(Registration.and.the.Protection).Act,.1999,.industrial.
•. Different.labour.laws.have.different.eligibility.criteria.for.    designs.by.the.Designs.Act.2000,.and.patents.by.the.Patents.
establishments.as.well.as.to.the.workmen.                            Act.2000.
•. India.is.a.member.of.the.International.Labor.Organization.        •. Registered.patents,.trademarks/service.marks,.industrial.
(ILO).and.adheres.to.around.37.ILO.conventions.protecting.           design.and.geographical.marks.enjoy.monopoly.rights/
worker.rights.                                                       protection.
•. Industrial.relations.are.governed.by.the.Industrial.Disputes.     •. Unregistered.trademarks.are.protected.by.the.Indian.courts.
Act.of.1947,.which.curbs.unfair.labour.practices.by.employers,.      under.the.tort.of.passing.off.
workers.or.trade.unions.through.imposition.of.fines.and.             •. Literary,.dramatic,.musical.or.artistic.works,.sound.recordings,.
imprisonment.                                                        broadcasts,.cinematography.films.and.computer.programs.are.
•. Workers.may.form.or.join.unions.of.their.choice.                  covered.by.copyright.protection..
•. India.has.the.world’s.third-largest.pool.of.scientific.and.       •. India.is.a.member.of.the.World.Intellectual.Property.
technical.personnel,.which.serves.as.an.important.attraction.for.    Organization.(WIPO).and.a.signatory.to.the.Paris.Convention,.
foreign.investors.                                                   Berne.Convention.and.the.Agreement.on.Trade.Related.
•. The.Industrial.Disputes.Act.established.freedom.of.               Aspects.of.Intellectual.Property.Rights.(TRIPS).
association.and.collective.bargaining.rights.                        •. India’s..intellectual..property..laws..conform..to..international..
•. The.Factories.Act.regulates.working.conditions.in.                standards..and..provide..adequate.protection.to.both.local.and.
mechanised.factories.employing.more.than.10.employees.or.            foreign.investors.
non-mechanised.factories.employing.more.than.20,.prescribing.
standards.for.working.conditions,.working.hours,.handling.and.
storage.of.materials,.etc.                                           DISPUTE RESOLUTION
•. Payment.of.wages.is.governed.by.the.Payment.of.Wages.             .
Act,.1936.and.Minimum.Wages.Act,.1948.                               •. The.dispute.resolution.process.in.India.mainly.involves.the.
•. Retrenchment,.closure.and.layoffs.are.governed.by.the.            following:
Industrial.Disputes.Act,.which.requires.prior.government.            .o.litigation
permission.to.carry.out.layoffs.or.closure.of.businesses.              o.arbitration
employing.100.or.more.workers.                                       .o.conciliation
•. The.Workmen’s.Compensation.Act,.1923.provides.for.                .o.mediation
compensation.to.workers.for.industrial.accidents.and.                •. The.Supreme.Court.of.India.in.New.Delhi.is.the.highest.court.
occupational.diseases.resulting.in.disability.and.death.             of.appeal.
•. The.Maternity.Benefit.Act,.1961.covers.mandatory.maternity.       •. Each.state.has.a.High.Court.along.with.subsidiary.District.
benefits.                                                            Courts.
•. The.Payment.of.Gratuity.Act,.1972.requires.employers.to.          •. Civil.disputes.at.first.instance.may.be.heard.at.the.District.
pay.a.gratuity.to.workers.earning.less.than.a.certain.limit.upon.    Court.or.High.Court,.depending.on.complexity.and.value..
termination.of.service.                                              Cases.may.go.on.appeal.to.the.High.Court.and.then.to.the.
•. The.Equal.Remuneration.Act,.1976.prohibits.job.and.               Supreme.Court.
wage.discrimination.based.on.sex,.except.for.prohibiting.or.         •. A.civil,.criminal.or.commercial.dispute.may.be.filed.in.the.
restricting.the.employment.of.women.in.certain.categories.           court.having.territorial.jurisdiction.and.depending.upon.level.of.
of.work.                                                             crime.or.pecuniary.jurisdiction.
•. The.Child.Labour.(Prohibition.and.Regulation).Act,.1986.          •. The.place.of.cause.of.action.and.the.place.of.residence.of.
prohibits.child.labour.in.hazardous.occupations.and.regulates.it.    the.defendant.are.the.necessary.determinants.of.territorial.
in.non-hazardous.occupations.                                        jurisdiction.
•. The.Trade.Unions.Act,.1926.provides.for.registration.of.trade.    •. Every.judgement.delivered.by.the.Supreme.Court.becomes.
unions.                                                              the.Law.of.the.Land.to.be.followed.by.all.the.other.lower.
•. Other.laws.regulate.employment.of.women.and.children.and.         courts.
prohibit.bonded.labour.                                              •. A.number.of.special.courts.and.tribunals.have.been.
•. No.specific.permission.of.the.Government.of.India.or.the.         constituted.in.India.to.deal.with.specific.disputes:
RBI.is.required.for.a.foreign.national.to.take.up.employment.in.     .. o.Various.tax.tribunals
India.                                                               .. o.Consumer.dispute.redressal.forums
                                                                     .. o.Insurance.Regulatory.Authority.of.India
                                                                     .. o.Industrial.tribunals
INTELLECTUAL PROPERTY                                                .. o.Debts.recovery.tribunals
.                                                                    .. o.Company.law.board
•. Intellectual.property..protection..in..India..comprises..         .. o.Motor.accidents.claims.tribunals
patents,.trademarks,..industrial..design,.copyright.and.                                                                               .
                                                                     •. Alternative.dispute.resolution.(ADR).is.available,.and.includes.
geographical.indications.                                            arbitration,.conciliation..and.mediation.
                                                                32
INDIA                                                                   Doing Business in Asia Pacific



IMMIGRATION PROCEDURES
.
Passport and visa requirements
•. Foreign.nationals.desirous.of.coming.into.India.are.required.
to.possess.a.valid.passport.of.their.country.and.a.valid.
Indian.visa.
•. Foreign.passengers.should.ensure.that.they.are.in.possession.
of.valid.Indian.visa.before.they.start.their.journey.to.India.
except.nationals.of.Nepal.and.Bhutan.who.do.not.require.a.
visa.to.enter.India,.and.nationals.of.the.Maldives.who.do.not.
require.a.visa.for.entry.in.India.for.a.period.up.to.90.days.(a.
separate.visa.regime.exists.for.diplomatic/official.passport.
holders).
•. The.Consular.Passport.and.Visa.(CPV).Division.of.the.Ministry.
of.External.Affairs.is.responsible.for.issuance.of.Indian.visas.to.
the.foreign.nationals.for.their.visit.for.various.purposes..This.
facility.is.granted.through.various.Indian.missions.abroad.
•. The.Bureau.of.Immigration.handles.the.immigration.
procedures.at.the.major.international.airports.

Types of visa issued
•. Tourist.visas,.valid.for.six.months.and.one.year,.(six.months.
stay.each.time).are.available.
•. Entry.visa,.valid.for.six.months.to.one.year.stay.with.multiple.
entries.for.legitimate.purposes.
•. Business.visa,.valid.for.six.months.and.one.year.with.multiple.
entries..A.letter.from.the.sponsoring.organisation.indicating.the.
nature.of.applicant’s.business,.probable.duration.of.stay,.and.
places.and.organisations.to.be.visited.needs.to.accompany.the.
application.
.•.Student.visa:.depending.upon.the.duration.of.the.course,.
multiple.entry.student.visas.for.bonafide.students.to.pursue.
regular.studies.at.recognised.institutions.in.India.are.available..
Visas.are.valid.for.up.to.five.years.or.the.duration.of.the.course,.
whichever.is.less..A.letter.confirming.admission.from.such.an.
institution,.along.with.evidence.of.financial.arrangements.for.
stay.in.India,.should.accompany.the.application.
•. Transit.visa,.valid.for.single/double.entry.for.short.stop-over.
for.travelling.to.a.third.country.is.available.
•. Journalist.visas.are.given.to.professional.journalists.and.
photographers.for.three-month.stays.in.India.
•. Employment.visas.are.initially.issued.for.one-year.stay..A.
copy.of.the.contract.with.the.employer.must.be.provided.with.
the.application..The.employment.visa.is.given.only.for.jobs.that.
require.very.high.level.of.skills.and.expertise..The.period.can.
be.extended.by.the.Foreigners.Regional.Registration.Office.in.
India,.if.the.job.contract.continues..Spouses.and.children.are.
granted.co-terminus.entry.visas.on.request.
•. A.conference.visa.may.be.issued.if.application.is.
accompanied.with.a.letter.of.invitation.from.the.organiser.of.
the.conference.and.approvals.of.Indian.authorities.are.to.be.
submitted.along.with.the.visa.application.
•. Foreigners.holding.a.visa.for.more.than.180.days.must.get.
themselves.registered,.within.two.weeks.of.their.arrival,.at.
the.Foreigners.Regional.Registration.Office.(FRRO).at.Delhi,.
Mumbai,.Calcutta.or.Chennai..�



                                                                   33
INDONESIA

• Strategically located in Southeast Asia at the intersection between the Pacific and Indian
Oceans, bordering the Malacca Straits with an area of 1.922.570 km2.
• Practices democracy with a Republic system.
• Bahasa Indonesia is the national language. English is widely written and spoken
especially in urban areas and for business.
• Currency: Indonesian Rupiah (IDR or Rp).
• State recognised religions consists of Islam, Protestantism, Catholicism, Hinduism,
Buddhism and Confucianism.
• With a GDP of nearly US$ 550 billion in 2009, Indonesia has become the third fastest-
growing economy in Asia and the largest economy in Southeast Asia.
• Investment growth areas include transportation, telecommunications, infrastructure, food
industry and real estate.


BUSINESS PRESENCE                                                      •. Foreign.shareholding.restrictions.are.imposed.through.
                                                                       relevant.law.set.forth.in.a.negative.investment.list.issued.by.the.
•. Main.types.of.business.models.in.Indonesia:.locally.                government.and.periodically.modified.
incorporated.companies.in.the.form.of.limited.liability.
companies,.cooperatives,.permanent.establishments,.state-              Approvals and Licensing
owned.companies.or.regional-owned.companies,.sole.                     •. Appropriate.approvals.and.licences.are.required.for.the.
proprietorships.and.partnerships.                                      operation.of.all.business.activities..These.may.be.obtained.from.
•. Foreign.investment.must.take.the.form.of.limited.liability.         the.Indonesian.Investment.Coordinating.Board,.the.relevant.
companies.incorporated.pursuant.to.Indonesian.law.and.                 ministry,.government.agencies.and/or.regional.government.
domiciled.in.Indonesia.unless.otherwise.stipulated.by.law.             •. Application.process.and.prescribed.fees.payable.vary.
•. Representative.offices.of.foreign.companies.may.be.opened.in.       depending.on.the.prescribed.condition.for.the.application.and.
Indonesia..Three.types.of.representative.offices.are.recognised.       geographical.location.where.the.activity.is.proposed.
in.Indonesia:.(i).Foreign.company.representative.offices,.
which.are.utilised.by.foreign.companies.or.groups.of.foreign.
companies.for.purposes.of.managing.the.interests.of.a.company.         EXCHANGE CONTROL
or.affiliated.companies.and/or.preparing.for.the.establishment.
and.development.of.a.foreign.investment.company.in.Indonesia.          •. Exchange.controls.are.governed.by.Law.No..24.of.1999.dated.
and.in.other.countries;.(ii).trade.company.representative.offices,.    17.May.1999.concerning.Foreign.Exchange.Traffic.and.Exchange.
which.are.utilised.to.act.as.selling.agents,.manufacturing.            Valuation.System.
agents.and/or.buying.agents;.and.(iii).foreign.construction.           •. No.foreign.exchange.restrictions.are.imposed.on.flows.of.
service.company.representatives,.which.are.utilised.by.foreign.        foreign.exchange.except.with.regard.to.offshore.commercial.
construction.services.companies.to.be.licensed.to.engage.in.           loans.
construction.services.in.Indonesia.together.with.an.Indonesian.
participant.through.joint.operations.
                                                                       TAXATION

FOREIGN INVESTMENT RESTRICTIONS AND                                    Corporate Tax
CONDITIONS                                                             •. Domestic.companies.are.taxed.at.a.rate.of.25%.on.income.
                                                                       derived.from.Indonesia.
Restrictions in Shareholding Equity Participation                      •. Permanent.establishments.are.also.taxed.at.the.rate.of.25%.on.
•. All.business.sectors.or.business.categories.are.open.to.            income.derived.from.Indonesia.
investment.activities,.except.for.business.sectors.or.business.
categories.which.are.expressly.declared.closed.or.open.subject.        Personal Income Tax
to.certain.conditions.                                                 •. Tax.obligors.in.Indonesia.are.subject.to.graduated.tax.rates.
                                                                       from.5%.(five.percent).to.30%.(thirty.percent).on.income.accrued.
                                                                       in.or.derived.from.Indonesia.



                                                                  34
INDONESIA                                                                                                       Doing Business in Asia Pacific

•. A.person.is.categorised.as.a.tax.obligor.if.that.person.resides.        Ukraine;.United.Arab.Emirates;.United.Kingdom.of.Great.Britain.
or.is.present.in.Indonesia.for.at.least.183.days.in.period.of.12.          and.Northern.Ireland;.United.States.of.America;.Republic.
months.or.is.present.for.an.entire.tax.year.and.has.intention.to.          of.Uzbekistan;.Socialist.Republic.of.Vietnam;.and.Bolivarian.
reside.in.Indonesia.                                                       Republic.of.Venezuela.

Withholding Tax
•. Income.paid.by.tax.residents.and.permanent.establishments.              TAX AND INVESTMENT INCENTIVES
to.other.tax.residents.or.permanent.establishments.is.subject.
to.tax.withholding.of.15%.of.the.gross.amount.of:.(i).Dividends;.          General
(ii).interest,.including.premiums,.discounts.and.compensation.             •. The.Indonesian.government.provides.facilities.to.investors.
for.loan.repayment.guarantees;.(iii).royalties;.and.(iv).gifts.or.         who.undertake.business.expansion.or.conduct.new.capital.
rewards.                                                                   investments.which.fulfil.one.of.the.following.criteria:.(i).Absorb.a.
•. Withholding.of.2%.of.net.income.on.gross.amount.estimates.              large.amount.of.labor;.(ii).include.high.priority.scale.investments;.
are.required.for:.(i).Rents.and.other.income.connected.with.the.           (iii).include.development.infrastructure;.(iv).implement.
use.of.property;.and.(ii).compensation.connected.with.technical,.          technology.transfers;.(v).conduct.pioneering.industries;.(vi).
management,.construction,.consulting.and.other.services.other.             are.located.in.remote/isolated.areas,.underdeveloped.areas,.
than.those.received.by.individual.taxpayers.and.already.subject.           border.areas.or.other.areas.which.are.deemed.necessary;.(vii).
to.withholding.by.their.employers.                                         protect.environmental.preservation;.(viii).implement.research,.
•. Income.paid.by.tax.residents.or.permanent.establishments.to.            development.and.innovation.activities;.(ix).partner.with.micro,.
non-tax.residents.is.subject.to.a.20%.withholding.tax,.deemed.             small,.medium.or.cooperative.businesses;.or.(x).involve.industries.
final.in.nature.(subject.to.certain.exceptions),.on.the.following:.        which.utilise.capital.goods.or.machines.or.equipment.which.are.
(i).Dividends;.(ii).interest,.including.premiums,.discounts.and.           produced.domestically..(Art..18[1],.[2].and.[3].of.Law.No..20.of.
compensation.for.loan.repayment.guarantees;.(iii).royalties,.              2007).
rents.and.other.income.connected.with.use.of.property;.(iv).               •. Types.of.facilities.which.are.to.be.granted.to.investors.
compensation.for.services,.work.and.activities;.(v).gifts.and.             may.take.the.form.of:.(i).income.tax.through.reduction.of.
awards;.(vi).pensions.and.other.periodic.payments;.(vii).swap.             net.profits.up.to.certain.levels.in.relation.to.total.amount.of.
premiums.and.other.protected.value.transactions;.and.(viii).               capital.investment.which.is.undertaken.within.a.certain.time;.
profits.due.to.release.of.debt.                                            (ii).exemption.or.relief/reduction.from.import.duties.on.capital.
                                                                           goods,.machines.or.equipment.for.production.requirements.
Other Taxes                                                                which.are.not.yet.capable.of.being.produced.domestically;.
•. Export.and.import.taxes.are.stipulated.by.regulations.of.               (iii).exemption.or.relief/reduction.of.import.duties.on.basic.
the.Minister.of.Finance.as.determined.by.the.types.of.goods.               commodities.or.auxiliary.materials.for.production.requirements.
exported.or.imported.                                                      for.certain.periods.of.time.and.on.certain.conditions;.(iv).
•. Stamp.duty.is.payable.in.nominal.amounts.on.certain.                    exemption.or.postponement.of.value.added.tax.on.imports.
documents.executed.within.Indonesia.                                       of.capital.goods.or.machines.or.equipment.for.production.
                                                                           requirements.which.are.not.yet.capable.of.being.produced.
Double Taxation Treaties                                                   domestically.for.a.certain.period.of.time;.(v).accelerated.
•. Indonesia.has.signed.and.ratified.bilateral.tax.treaties.with.the.      depreciation.or.amortisation;.and/or.(vi).relief/reduction.from.tax.
following.countries:.People’s.Democratic.Republic.of.Algeria;.             on.land.and.buildings.especially.for.certain.business.sectors,.in.
Australia;.Republic.of.Austria;.People’s.Republic.of.Bangladesh;.          certain.territories.or.regions.or.zones..(Id..at.Art..18[4]).
Kingdom.of.Belgium;.Brunei.Darussalam;.Republic.of.Bulgaria;.
Canada;.People’s.Republic.of.China;.Czech.Republic;.Kingdom.
of.Denmark;.Arab.Republic.of.Egypt;.Republic.of.Finland;.                  EMPLOYMENT LAW
French.Republic;.Federal.Republic.of.Germany;.Hong.Kong.
Special.Administrative.Region.of.People’s.Republic.of.China;.              •. Normal.working.hours.include:.(i).seven.hours.per.day.and.40.
Hungarian.People’s.Republic;.Republic.of.India;.Italian.Republic;.         hours.per.week.for.a.six.work.day.week;.or.(ii).eight.hours.per.
Islamic.Republic.of.Iran;.Japan;.Hashemite.Kingdom.of.Jordan;.             day.and.40.hours.per.week.for.a.five.work.day.week.
Democratic.People’s.Republic.of.Korea;.Republic.of.Korea;.State.           •. Employees.are.entitled.to.statutory.benefits.which.include.rest.
of.Kuwait;.Grand.Duchy.of.Luxembourg;.Malaysia;.Republic.                  days,.public.holidays,.annual.leave,.Employee.Social.Security.
of.Mauritius;.United.Mexican.States;.Mongolia;.Kingdom.of.                 Program.(Jaminan.Sosial.Tenaga.Kerja).(‘Jamsostek’).and.
The.Netherlands;.New.Zealand;.Kingdom.of.Norway;.Islamic.                  termination.benefits.
Republic.of.Pakistan;.Republic.of.Philippines;.Republic.of.Poland;.        •. Minimum.wage.differs.from.one.region.to.another.as.
Portuguese.Republic;.Romania;.Russian.Federation;.Kingdom.                 determined.by.the.local.goverment.
of.Saudi.Arabia;.Republic.of.Seychelles;.Republic.of.Singapore;.           •. Every.employee/labourer.has.right.to.form.and.become.
Slovak.Republic;.Republic.of.South.Africa;.Kingdom.of.Spain;.              member.of.an.employee/labourer.union.
Democratic.Socialist.Republic.of.Sri.Lanka;.Republic.of.Sudan;.            •. Strikes.are.basic.rights.of.employees/labourers.which.must.
Syrian.Arab.Republic;.Kingdom.of.Sweden;.Swiss.Confederation;.             be.conducting.without.contravening.the.law.with.a.prior.
Kingdom.of.Thailand;.Republic.of.Turkey;.Republic.of.Tunisia;.             written.notice.to.the.enterpreneur/employer.and.the.local.of.


                                                                      35
INDONESIA                                                                                                     Doing Business in Asia Pacific

government.within.not.less.than.seven.business.days.

INTELLECTUAL PROPERTY                                                    IMMIGRATION PROCEDURES

•. Intellectual.property.protection.in.Indonesia.is.comprised.           Passport and Visa Requirements
of.copyrights,.industrial.designs,.integrated.circuits,.patents,.        •. Every.person.who.enters.the.territory.of.Indonesia.is.required.
trademarks,.trade.secrets,.and.protection.of.plant.varieties.            to.possess.a.valid.passport..Aliens.entering.Indonesia.are.
•. Copyrights,.industrial.designs,.integrated.circuits,.patents,.        required.to.possess.a.visa,.to.obtain.a.valid.entry.permit.and.to.
trademarks,.trade.secrets.and.protection.of.plant.varieties.             enter.and.exit.through.examination.by.immigration.officials.at.
may.be.transferred.by.inheritance,.gift/donation,.testamentary.          immigration.check.points.
disposition,.written.agreement.and.other.manner.in.accordance.           •. Application.for.a.visa.is.submitted.to.the.head.of.
with.provision.of.law.                                                   representative.of.the.Republic.Indonesia.abroad.or.to.officers.in.
•. Indonesia.is.a.signatory.to.the.Paris.Convention.for.Protection.      other.places.as.stipulated.by.the.government.of.the.Republic.of.
of.Industrial.Property..Indonesia.withdrew.its.reservations.relating.    Indonesia.
to.Arts..1-12.of.the.Paris.Convention..Indonesia.maintains.its.          •. Exceptions.to.the.obligation.to.possess.visas.include:.(i).aliens.
reservation.with.regards.to.Art..28.paragraph.[1].of.the.Paris.          who.are.state.citizens.of.a.country.which,.based.on.Presidential.
Convention.                                                              decree,.are.not.required.to.possess.a.visa;.(ii).aliens.who.possess.
•. Indonesia.has.ratified.the.Patent.Cooperation.Treaty.and.its.         re-entry.permits;.(iii).captains.and.crew.who.are.employed.on.
Regulations.resulting.from.the.State.Members.of.the.World.               means.of.transportation.which.anchor/dock.at.an.Indonesian.
Intellectual.Property.Organization.meeting.in.Washington.on.19.          port.or.which.land.at.an.Indonesian.airport;.and.(iv).transit.
June.1970.with.reservations.as.to.Article.59.of.the.treaty.              passengers.at.Indonesian.ports.or.airports.so.long.as.they.do.not.
•. Indonesia.has.ratified.the.Agreement.Establishing.World.              leave.the.place.of.transit.which.is.located.within.an.immigration.
Trade.Organization.and.has.adopted.the.Principle.Agreement.of.           check.point.zone.
Trade.Related.Aspects.of.Intellectual.Property.Rights,.including.
Trade.in.Counterfeit.Goods/TRIPS.as.part.of.the.Agreement.               Professional’s Passes and Work Permits
Establishing.World.Trade.Organization.                                   •. A.visit.visa.may.be.issued.to.an.alien.who.visits.Indonesia.for.
•. Indonesia.has.accepted.the.Trademark.Law.Treaty.dated.27.             business.purposes.for.a.maximum.of.60.days.from.the.date.of.
October.1994.as.drawn.up.by.the.State.Members.of.the.World.              grant.of.an.entry.permit.
Intellectual.Property.Organization.in.Geneva,.Switzerland.               •. A.limited.stay.visa.may.be.issued.to.an.alien.who.visits.
                                                                         Indonesia.for.the.purpose.of.investing.or.working.in.Indonesia.
                                                                         for.a.maximum.of.two.years.from.the.date.of.grant.of.an.entry.
DISPUTE RESOLUTION                                                       permit.
                                                                         •. Every.employer.who.employs.foreign.labour.is.required.to.
•. Civil.disputes.in.the.first.instance.may.be.heard.at.the.District.    possess.a.written.permit.from.the.Minister.of.Labor.Affairs.or.an.
Court..Cases.may.go.on.appeal.to.the.High.Court,.cassation.at.           authorised.official..Representatives.of.foreign.nations.are.exempt.
the.Supreme.Court.and.then.for.Supreme.Court.Judicial.Review.            from.the.obligation.to.possess.a.written.permit.for.utilisation.of.
•. Employment.disputes.are.heard.in.the.Industrial.Relations.            foreign.labour.as.diplomatic.and.consular.officials.
Court.
•. Alternative.Dispute.Resolution.(‘ADR’).is.available.and.includes.     Special Permanent Residency or Other Permits
out.of.court.settlement.through.consultation,.negotiation,.              •. Visit.permits.may.be.converted.to.become.limited.residence.
mediation,.conciliation.or.expert.evaluation.                            permits.on.the.basis.of.application.by.the.alien.and.his/her.
•. Disputes.subject.to.settlement.through.arbitration.are.only.          sponsor.with.the.condition.that.he/she.is.already.present.in.
those.disputes.in.the.trade/commercial.sector.concerning.                Indonesia.for.the.purpose.of,.among.others,.investing.or.working.
rights.which.according.to.prevailing.laws.and.regulations.are.           as.an.expert.or.company.manager.
fully.controlled.by.the.parties.to.the.dispute,.which.include,.          •. Limited.residence.permits.are.issued.to.aliens.to.reside.in.the.
among.other.fields:.(i).Matters.arising.in.the.field.of.trade.           territory.of.Indonesia.for.a.limited.period.of.time..The.status.
and.commerce;.(ii).banking.matters;.(iii).finance.matters;.(iv).         of.limited.residence.permits.may.be.converted.to.become.
investment.matters;.(v).industrial.matters;.and.(vi).intellectual.       permanent.residence.permits.based.on.application.by.the.alien.
property.rights.                                                         with.condition.that.he/she.has.already.been.present.in.Indonesia.
•. The.District.Court.has.no.authority.to.adjudicate.disputes.           for.at.least.two.continuous.years.for.the.purpose.of,.among.
arising.between.parties.who.are.already.bound.by.arbitration.            others,.investing.or.working.as.an.expert.possessing.unique.
agreements.                                                              qualifications.or.as.a.high-ranking.company.officer.
•. Indonesia.has.the.Indonesian.National.Board.of.Arbitration.           •. Permanent.residence.permits.are.issued.for.foreigners.to.
(Badan.Arbitase.Nasional.Indonesia).(‘BANI’),.an.independent.            reside.permanently.in.the.territory.of.Indonesia..�
institution.which.provides.various.services.relating.to.arbitration,.
mediation.and.other.forms.of.out.of.court.dispute.resolution..
The.cost.for.BANI.arbitration.varies.depending.on.the.value.of.
claims.in.dispute.


                                                                    36
J A PA N

• Japan is geographically located in East Asia with an area of 377,944 km2. It consists of
four main islands, laid out from north to south: Hokkaido, Honshu, Shikoku and Kyushu.
The capital city is Tokyo. Other large cities are Osaka, Yokohama, Sapporo, Nagoya,
Kyoto, Kobe, and Fukuoka.
• Japan has a royal family, though it holds no political or exclusive power. Japan is a
constitutional monarch with a parliamentary government. The top of the government is
the prime minister.
• The Diet consists of two houses; The House of Representatives being the lower house
and the House of Councillors being the upper house.
• Population of 127,080,000 people, comprising Japanese (99.1%), Korean (0.5%)
and Chinese (0.4%).
• Religious composition of the country consists of Shinto, Buddhist and Christianity.
• The national language is Japanese. English is studied from the age 10.
• Currency: Japanese Yen.
• Japan is a leading country in areas including machinery and equipment, metals and metal
products, textiles, autos, chemicals, electrical equipment, and processed foods.

BUSINESS PRESENCE                                                            submitted.by.foreign.investors.
                                                                             •. Japan.has.continuously.increased.the.opening.of.its.market.
•. Main.types.of.business.models.a.foreign.enterprise.can.                   to.foreign.investors;.however,.some.areas.remain.restricted.to.
take.to.make.business.presence.in.Japan.are:.unregistered.                   foreign.investors.–.such.as.the.telecom.sector.–.due.to.national.
representative.offices,.registered.branches,.corporate.subsidiary.           interest..
(Kabushiki.Kaisha,.Godo.Kaisha),.limited.liability.partnership,.
distributorship.arrangements.and.joint.ventures.                             Restrictions in Real Property Acquisition
•. Among.the.above,.use.of.locally.corporate.subsidiaries.is.                •. Generally,.there.are.no.restrictions.for.foreign.ownership.of.
most.common..These.may.be.established.by.completing.the.                     real.estate..However,.the.government.may.prohibit.or.restrict.
necessary.procedures.stipulated.in.the.law.and.registering.the.              such.ownership.if.the.foreigners’.country.prohibits.or.restricts.
corporation,.or.purchased.through.acquisition.of.a.Japanese.                 ownership.of.real.property.by.Japanese.
company.                                                                     •. Acquisition.of.real.property.of.a.non-resident.is.a.transaction.
•. Unregistered.representative.offices.are.the.easiest.to.establish..        subject.to.reporting.the.Ministry.of.Finance.under.the.Foreign.
There.are.no.registration.requirements..However,.the.ability.of.             Exchange.and.Foreign.Trade.Law.
such.offices.is.limited.and.cannot.engage.in.direct.profit-making.
or.commercial.activities.and.cannot.open.bank.accounts.in.the.               Permits and Licensing
name.of.the.office..                                                         •. Few.business.sections.require.permits.or.licenses,.
•. Registered.branches.may.be.the.simplest.means.of.                         such.as.utilities,.insurance,.broadcasting,.nuclear.power,.
establishing.a.foundation.for.business.in.Japan..The.largest.                pharmaceuticals,.civil.aviation.and.railroads.
difference.between.establishing.a.subsidiary.is.that.all.liability.          •. Importation.of.items.including.narcotics,.firearms,.explosives,.
resulting.from.the.action.of.the.branch.ultimately.lies.with.the.            counterfeit.currency,.pornography.and.products.that.violate.the.
foreign.company,.unlike.a.subsidiary.company.which.is.liable.for.            intellectual.property.law.is.prohibited..
its.own.acts.                                                                •. Importation.of.alien.animal.species,.medical.products,.
                                                                             pharmaceuticals,.food.products,.alien.plants,.drugs.and.
                                                                             chemicals.is.regulated,.due.to.the.effect.it.has.on.our.economy,.
FOREIGN INVESTMENT RESTRICTIONS AND                                          health.and.public.order.and.morality..
CONDITIONS                                                                   •. Exportation.of.certain.items.listed.in.the.Export.Trade.Control.
                                                                             Order.is.regulated.and.requires.licences.from.the.Minister.of.
Restrictions in Equity Participation                                         Economy,.Trade.and.Industry..
•. The.Foreign.Exchange.and.Foreign.Trade.Law.requires.
investors.to.report.foreign.investment.into.Japan,.and.the.
Bank.of.Japan.has.been.authorised.to.administrate.the.reports.



                                                                        37
J A PA N                                                                                                     Doing Business in Asia Pacific


EXCHANGE CONTROL                                                          •. Whether.certain.actions.in.connection.with.business.activities.
                                                                          a.company.or.individual.seeks.to.practice.are.subject.to.
•. Governed.by.the.Foreign.Exchange.and.Foreign.Trade.Act.                regulations.can.be.confirmed.in.advance.by.the.No-Action.Letter.
•. Notification.is.necessary,.when.importing.or.exporting.means.          System..When.a.No-action.Letter.is.submitted,.the.relevant.
of.payment,.securities.exceeding.the.amount.of.1,000,000.yen.             ministry.or.agency.will.respond.in.a.public.letter.
and.precious.metal.exceeding.one.kilogram.

                                                                          EMPLOYMENT LAW
TAXATION
                                                                          •. The.maximum.working.hours.are.40.hours.a.week.and.eight.
Corporate Tax                                                             hours.a.day..This.limit.may.be.exceeded.when.a.Notification.of.
•. A.foreign.corporation.is.liable.to.pay.corporation.tax.when.it.        Agreement.between.the.employer.and.employees.(labour.union).
has.domestic.source.income.                                               is.submitted.to.the.local.Labor.Standards.Inspection.Office..
•. In.principle,.companies.are.taxed.at.a.rate.of.30%.of.domestic.        Employer.must.pay.an.increased.wage.for.hours.which.exceed.
source.income;.however.a.corporation.whose.amount.of.stated.              the.limit,.at.a.rate.within.the.range.of.no.less.than.25%.and.no.
capital.or.amount.of.capital.contributions.is.not.more.than.              more.than.50%.over.the.normal.wage..However,.provided.that,.
100,000,000.yen,.are.taxed.at.a.rate.of.22%.on.income.up.to.the.          if.the.exceeding.hours.add.up.to.more.than.60.hours.per.month,.
amount.of.8,000,000.yen..                                                 the.employer.must.pay.an.increased.wage.at.a.rate.of.more.than.
                                                                          50%.for.the.hours.which.exceed.60.hours.
Personal Income Tax                                                       •. Employees.within.the.protection.of.the.Labor.Standards.Act.
•. Individuals.resident.in.Japan.are.subject.to.graduated.tax.rates.      are.entitled.to.statutory.benefits.such.as.rest.periods,.annual.
from.5%.to.40%.depending.on.income.                                       paid.leave,.maternity.leave,.child.care,.family.medical.leave.and.
•. Non.resident.individuals.are.subject.to.pay.tax.when.such.             allowance.for.absence.from.work..Sick.leave.is.not.required.
person.has.domestic.source.income..Tax.rate.is.20%.(15%.in.               by.law.
certain.cases).                                                           •. Employers.must.provide.health.insurance,.welfare.pension.
                                                                          insurance.and.employment.insurance..
Withholding Tax                                                           •. Minimum.wage.requirement.is.stipulated.in.the.Minimum.
•. The.amount.of.withholding.tax.imposed.varies.from.0%.                  Wages.Act,.according.to.region.and.industry.(e.g..the.minimum.
(income.of.less.than.88,000.yen.per.month).to.38%.(income.of.             wage.for.Tokyo.in.October.2010.was.821.yen.per.hour).
more.than.1,760,000.yen.per.month),.depending.on.income.and.              •. Labour.unions.have.a.constitutional.right.to.carry.out.their.
number.of.dependent.family.members..                                      activities,.such.as.request.for.collective.negotiation,.and.no.
                                                                          company.may.refuse.such.request.of.negotiation..
Real Property Gains Tax (RPGT)                                            •. Employers.may.not.prohibit.employees.from.joining.labour.
•. Any.gain.on.disposal.of.real.property.in.Japan.within.five.            unions,.nor.disadvantage.an.employee.because.of.union.
years.of.possession,.is.taxed.at.a.rate.of.20%.to.39%.depending.          membership.
on.the.years.of.position.of.the.real.property.and.whether.the.            •. Labour.dispute.action,.such.as.strike,.is.discharged.from.
property.is.for.residence.                                                civil.and.criminal.charge,.if.justifiable..Labour.dispute.action.
                                                                          is.prohibited.to.employees.of.certain.industries.such.as.
Other Taxes                                                               government.employees,.and.restrictions.for.public.projects.
•. Consumption.Tax:.5%.

                                                                          INTELLECTUAL PROPERTY
SUPPORT AND SERVICES ON INVESTING IN
JAPAN                                                                     •. Japanese.Intellectual.Property.law.protects.those.who.hold.
                                                                          rights.in.inventions,.utility.models,.designs,.trade.secrets,.
•. To.increase.foreign.direct.investment.in.Japan,.the.                   integrated.semiconductor.circuits,.copyrights,.trademarks,.trade.
government.founded.the.“Invest.Japan.Business.Support.                    names,.new.varieties.of.plants.and.geographical.indications
Centers.(IBSCs)”.within.the.Japan.External.Trade.Organization.
                                                                           Protected IP rights             Applicable law
(“JETRO”)..IBSCs.provide.various.information.on.investment.
                                                                           Inventions                      Patent.Law
to.help.foreign.companies.create.their.business.foundations.in.
Japan,.including.information.on.investment.opportunities.and.              Utility.models                  Utility.Model.Law
procedures.to.obtain.business.permits.and.licences.                        Designs                         Design.Law
•. To.improve.access.to.the.Japanese.market,.overseas.or.
domestic.enterprise.can.make.complaints.to.the.Office.of.Trade.            Product.forms                   Unfair.Competition.
and.Investment.Ombudsman.–.a.governmental.body.–.stating.                                                  Prevention.Law
how.the.government.regulations.are.an.obstacle.to.exporting.
                                                                           Trade.secrets                   Unfair.Competition.Preven-
and.investing.in.Japan..In.principle,.an.explanation.to.the.
                                                                           -.manufacturing.technologies    tion.Law
complaint.should.be.made.within.10.days.
                                                                           -.customer.lists
                                                                                                                                     cont'd
                                                                     38
J A PA N                                                                                                     Doing Business in Asia Pacific


 Protected IP rights              Applicable law                        DISPUTE RESOLUTION
 Inventions                       Patent.Law
                                                                        •. The.judicial.system.in.Japan.is.composed.of.five.types.of.
 Integrated.semiconductor.        Laws.for.Protection.of.               courts:.the.Supreme.Court,.High.Courts,.Family.Courts,.District.
 circuits                         Semiconductor.Chips                   Courts.and.Summary.Courts.
 Copyrights                       Copyright.Law                         •. The.court.of.first.instance.may.be.the.Summary.Court,.
 Trademarks                       Trademark.Law                         District.Court.or.High.Court,.depending.on.complexity,.value.
                                  Unfair.Competition.                   and.competency.by.law..Generally,.appeals.can.be.made.
                                  Prevention.Law                        twice,.and.three.times.in.cases.such.as.making.appeal.against.a.
                                                                        judgement.of.a.high.court.as.the.final.appellate.court.
 Trade.names                      Commercial.Law
                                                                        •. Alternative.dispute.resolution.(ADR),.such.as.mediation.and.
 New.varieties.of.plants          Seedling.Law                          arbitration.is.available.
 Geographical.indications         Unfair.Competition.                   .. o.Mediation.for.disputes.involving.loans,.trading.value,.
                                  Prevention.Law                        motor.vehicle.accidents,.payment.of.compensation,.rent.and.
                                  Liquor.Industry.Law                   eviction.from.property.are.prepared..Fee.for.mediation.varies.
                                                                        pursuant.to.the.amount.in.controversy.starting.at.the.minimum.
•. Inventions,.utility.models,.designs.and.trademarks.are.              500.yen.when.the.amount.of.controversy.is.below.100,000.yen.
registered.at.the.Patent.Office.and.are.protected.for.a.certain.        .. o.The.Japan.Commercial.Arbitration.Association.(JCAA).
period.of.time.                                                         provides.facilities.for.arbitration..The.arbitral.awards.made.in.
                                                                        such.procedures.have.the.same.effect.as.final.and.conclusive.
 Protected IP rights              Protection period
                                                                        judgements.and.the.enforceability.of.such.arbitral.awards.is.
 Inventions                       20.years.from.the.day.the.ap-         guaranteed.under.the.Japanese.Arbitration.Law.and.UNCITRAL.
                                  plication.was.filed                   Arbitration.Rules.
 Utility.Models                   10.years.from.the.day.the.ap-
                                  plication.was.filed
 Designs.                         20.years.for.the.day.of.regis-        IMMIGRATION PROCEDURES
                                  tration
                                                                        Passport and Visa Requirements
 Trademarks.                      10.years.from.the.day.of.
                                                                        •. Immigration.control.in.Japan.is.conducted.in.accordance.with.
                                  registration
                                                                        the.Immigration.Control.and.Refugee.Recognition.Act.and.the.
                                                                        Alien.Registration.Law..
•. Subject.of.protection.under.the.patent.law.are.technological.        •. All.persons.entering.into.and.out.of.Japan.are.required.to.
concepts.which.use.natural.laws.and.rules.characterised.by.a.           arrive.and.deport.through.immigration.with.possession.of.
high.level.of.technological.creativity.                                 a.valid.national.passport.with.an.affixed.valid.visa.or.other.
•. Subject.of.protection.under.the.Utility.Model.Law.are.forms.         internationally.recognised.travel.documents.valid.for.travelling.in.
of.products,.structures.or.combinations.of.related.items.which.         Japan..These.passports.or.travel.documents.must.be.valid.for.at.
are.created.using.creative.technological.concepts.based.on.             least.six.months.beyond.the.date.of.entry..
natural.laws.and.rules..
•. Subject.of.protection.under.the.Design.Act.are.shape,.               Business Passes and Work Permits
pattern.or.colour.or.any.combination.thereof,.of.an.article.            •. Japan.has.made.arrangements.with.61.countries.and.regions.
which.produces.an.aesthetic.impression.on.the.sense.of.sight.           around.the.world,.to.waive.requirement.of.a.visa.when.the.visit.
•. Subject.of.protection.under.the.Trademark.Law.are.                   is.subject.to.a.certain.short.period.of.time..The.purpose.of.such.
characters,.figures.signs.or.three-dimensional.shapes,.or.any.          stay.may.be.commerce,.conference,.tourism.or.visiting.relatives.
combinations.thereof,.used.to.certify.produced.commercial.              and.acquaintances..
merchandise.or.commercial.merchandise.of.parties.to.which.              •. A.stay.that.exceeds.90.days.and.in.which.the.applicant.will.
the.use.of.trademark.was.transferred.or.the.role.which.is.played.       perform.in.paid.work,.a.working.visa.and.family.visa.for.the.
by.the.commercial.activity.identified.by.the.trademark.or.by.the.       family.must.be.issued..Work.visas.and.family.visas.are.valid.for.
party.which.is.exercising.the.role.                                     one.or.three.years.
•. Trade.secrets.protected.under.the.Unfair.Competition.                •. The.number.of.days.required.from.application.to.issuance.
Prevention.Law.are.defined.as.technical.or.business.information.        of.the.visa.is.approximately.five.working.days..Although,.when.
useful.for.commercial.activities.such.as.manufacturing.or.              applying.for.a.long-term.visa,.if.a.Certificate.of.Eligibility.is.not.
marketing.methods.that.are.kept.secret.and.are.not.publicly.            submitted.with.the.application,.issuance.will.take.one.to.three.
known.                                                                  months.regardless.of.whether.there.is.a.problem.or.not..
•. Japan.is.a.member.of.the.World.Intellectual.Property.                •. All.foreign.residents.in.Japan.are.required.to.personally.
Organization.(WIPO).and.has.ratified.the.Paris.Convention,.             appear.and.register.themselves.at.the.municipal.office.of.the.city,.
Berne.Convention.and.the.Agreement.on.Trade.Related.                    ward,.town.or.village.in.which.they.are.resident,.and.receive.an.
Aspects.of.Intellectual.Property.Rights.(TRIPS)..                       alien.registration.card..The.alien.registration.card.is.required.to.
                                                                        be.carried.at.all.times..�

                                                                   39
M A L AY S I A

• Strategically located in Southeast Asia with an area of 329,750 km2.
• Practices parliamentary democracy with a Constitutional Monarch.
• Population comprises Malays (52%), Chinese (30%), Indians (8%) and other races (10%).
  Religious composition of the country consists of Islam (the official religion), Buddhism,
  Hinduism, Sikhism and Christianity.
• Bahasa Malaysia is the national language, whereas English is widely written and spoken
  especially in urban areas and for business.
• Currency: Malaysian Ringgit (RM)
• Investment growth areas include biotechnology industry (encompassing agriculture,
  food, industrial and medical biotechnology), tourism, environmental management,
  research and development, medical device industry, shipping and transportation
  industry, information and communication technology, manufacturing-related services
 and agriculture.

BUSINESS PRESENCE
                                                                            Approvals and Licensing
•. . ain.types.of.business.models.in.Malaysia:.locally.
   M                                                                           .
                                                                            •. Appropriate.approvals.and.licences.are.required.for.the.
   incorporated.companies.(may.be.limited.by.shares.or.by.                     operation.of.any.business.activity..These.may.be.obtained.
   guarantee),.sole.proprietorships,.partnerships.and.registered.              from.the.relevant.ministry,.government.agencies.and/or.local.
   branches.of.foreign.companies.                                              councils..
•. . se.of.locally.incorporated.companies.by.far.the.most.
   U                                                                           .
                                                                            •. Application.process.and.prescribed.fee.payable.vary.
   prevalent..These.may.be.incorporated.or.purchased.“off.the.                 depending.on.the.prescribed.condition.for.the.application.and.
   shelf.”                                                                     the.geographical.location.where.the.activity.is.proposed.
   R
•. . epresentative.offices.of.foreign.companies.may.be.opened.
   in.Malaysia..These.require.registration.with.the.Malaysian.
   Industrial.Development.Authority.(part.of.the.Ministry.of.               EXCHANGE CONTROL
   International.Trade.and.Industry)..Representative.offices.are.
   approved.only.for.the.purposes.of.receipt.and.dissemination.                .
                                                                            •. Governed.by.the.Exchange.Control.Act.1953.and.the.
   of.information.and.are.not.permitted.to.conduct.business.                   Exchange.Control.Malaysia.Notices.and.regulated.by.the.
                                                                               Central.Bank.of.Malaysia.
                                                                               .
                                                                            •. Generally.no.restrictions.on.repatriation.of.capital,.profits,.
FOREIGN INVESTMENT RESTRICTIONS AND                                            dividends,.interest.and.rental.income.by.foreign.investors..
CONDITIONS                                                                     However,.these.payments.must.be.remitted.in.a.currency.other.
                                                                               than.Ringgit.Malaysia.
Restrictions in Equity Participation
   G
•. . enerally.no.restrictions.are.imposed.on.foreigners.owning.
   equity.in.Malaysian.companies..However,.certain.sectors.                 TAXATION
   deemed.of.national.interest.such.as.banking,.insurance,.
   domestic.trade.(supermarkets/.).are.safeguarded.and.subject.             Corporate Tax
   to.foreign.ownership.restrictions.as.may.be.imposed.by.                      .
                                                                            •. Companies.are.taxed.at.a.rate.of.25%.on.income.derived.
   respective.sector.regulators..                                           ....from.Malaysia.
                                                                                .
                                                                            •. Branches.of.foreign.companies.are.also.taxed.at.the.rate.of.
Restrictions in Real Property Acquisition                                       25%.on.income.derived.from.Malaysia..
   E
•. . xcept.for.low/medium.cost.properties,.properties.on.Malay.                 .
                                                                            •. Labuan.incorporated.companies.carrying.on.an.offshore.
   reserved.land.and.properties.allocated.to.fulfil.Bumiputera.                 trading.activity.are.taxed.at.either.3%.of.net.audited.profits.or.
   quotas,.no.restriction.is.imposed.on.the.acquisition.by.                     RM20,000,.at.the.companies’.election.at.incorporation..
   foreigners.of.real.property.valued.between.RM500,000.00.and.
   RM20,000,000.00..                                                        Personal Income Tax
   R
•. . eal.property.acquisitions.are.subject.to.the.approval.of.State.           .
                                                                            •. Individuals.resident.in.Malaysia.are.subject.to.graduated.tax.
   Authorities.                                                                rates.from.1%.to.26%.on.income.accrued.in,.or.derived.



                                                                       40
M A L AY S I A                                                                                                  Doing Business in Asia Pacific

...from,.Malaysia.                                                           .
                                                                          •. Protection.against.nationalisation.of.investments.undertaken.in.
    A
•. . .person.is.“resident”.in.Malaysia.if.he.or.she.stays.in.Malaysia.       Labuan.
    for.at.least.182.days.in.a.calendar.year.
                                                                          Pioneer Status
Withholding Tax                                                              .
                                                                          •. Companies.undertaking.a.promoted.activity.or.production.
   W
•. . ithholding.tax.on.certain.types.of.payments.made.to.a.                  of.promoted.product.may.be.granted.“Pioneer.Status”..
   non-resident.is.imposed..Interest.earned.in.Malaysia.attracts.            Companies.with.pioneer.status.enjoy.having.only.a.portion.
   withholding.tax.of.15%.whilst.royalties,.guarantee.fees.and.              of.their.income.taxed.(e.g..30%).at.the.usual.corporate.rates..
   introducer.fees.earned.in.Malaysia.attract.withholding.tax.at.            Promoted.activities.include.research.and.development,.new.
   a.rate.of.10%..Contract.payments.earned.in.Malaysia.attract.              and.emerging.technologies,.strategic.knowledge.intensive.
   withholding.tax.of.10%.+.3%.                                              activity.and.the.automotive.component.modules.industry.

Real Property Gains Tax (RPGT)                                            Investment Tax Allowance
   A
•. . ny.gain.on.disposal.of.real.property.in.Malaysia.within.                .
                                                                          •. Allowance.between.60%.and.100%.of.qualifying.capital.
   five.years.from.the.date.of.the.original.sale.and.purchase.               expenditure.given.which.may.be.used.to.set.off.against.70%.
   agreement.is.taxed.at.a.rate.of.5%.                                       to.100%.of.statutory.income..These.allowances.are.given.
                                                                             to.companies.with.a.qualifying.project.or.approved.service.
Other taxes                                                                  project.such.as.projects.with.high.capital.expenditure.with.
•. Sales.tax.at.the.import.or.manufacturing.level:.10%.                      long.gestation.periods,.companies.in.the.hotel.and.tourism.
•. Service.tax:.6%.                                                          industry.or.companies.setting.up.in.particular.geographical.
•. Import.duty:.ad.valorem.duty.at.various.rates.                            areas.within.Malaysia.
   S
•. . elected.products.manufactured.in.Malaysia:.excise.duty.at.
   various.rates.
•. . tamp.duty.on.certain.documents.executed.within.Malaysia:.
   S                                                                      EMPLOYMENT LAW
   nominal.or.ad.valorem.stamp.duty..
                                                                              .
                                                                          •. The.maximum.working.hours.are.48.hours.a.week.or.eight.
                                                                              hours.a.day..This.limit.may.be.exceeded.under.certain.
TAX AND INVESTMENT INCENTIVES                                                 specified.circumstances..Maximum.overtime.permissible.in.a.
                                                                              month.is.104.hours.
General                                                                       .
                                                                          •. Retrenchment.selection.is.based.on.the.“Last-In-First-Out”.
   V
•. . arious.tax.exemptions.and.investment.incentives.exist.to.                rule.in.the.category..Foreign.workers.are.to.be.retrenched.first.
   stimulate.investment.in.promoted.activities.and.products.                  before.any.local.worker.in.the.same.category..
   such.as.manufacturing,.agricultural,.tourism,.environmental.               .
                                                                          •. Employees.within.the.protection.of.the.Employment.Act.
   management,.shipping.transportation,.information.and.                      1955.are.entitled.to.statutory.benefits.such.as.rest.days,.
   communication.technology,.and.multimedia.activities.                       public.holidays,.annual.leave,.sick.leave,.hospitalization.leave,.
   C
•. . ategories.of.investment.incentives.include.industrial.                   maternity.leave.and.termination.benefits.
   adjustment.allowance,.industrial.building.allowance,.double.               .
                                                                          •. Wages.are.determined.through.market.forces.and.therefore.
   deduction.of.expenses,.approved.agricultural.projects.                     there.is.no.minimum.wage.requirement..
   incentives,.research.and.development.incentives,.inbound.                  .
                                                                          •. Trade.unions.in.Malaysia.are.regulated.by.the.Industrial.
   tour.operators’.incentives,.incentives.for.approved.overseas.              Relations.Act.(IRA).1967..
   investments.and.incentives.for.overseas.construction.projects.             .
                                                                          •. Formation.of.employee.unions.are.subject.to.recognition.by.
   Q
•. . uantum.of.deduction.varies.depending.on.the.activity.                    employer..Upon.formation,.the.union.invites.the.employer.
   engaged.and.the.geographical.location.where.the.expenditure.               to.bargain.collectively.over.the.terms.and.conditions.of.
   is.incurred.                                                               employment..The.collective.agreement,.which.must.be.for.
   C
•. . ompany.granted.MSC.(Multimedia.Super.Corridor).Status,.                  a.minimum.period.of.three.years,.is.legally.binding.and.
   Industrialised.Building.System.Status,.BioNexus.Status.or.                 enforceable.if.it.has.been.taken.cognisance.of.by.the.
   Operational.Headquarters.Status.enjoy.further.tax.exemptions.          ....Industrial.Court..
   and.investment.incentives.                                                 .
                                                                          •. Strike.action.is.prohibited.in.respect.of.any.matter.already.
   V
•. . enture.Capital.Companies,.International.Procurement.                     covered.by.the.collective.agreement.
   Centers.and.Regional.Distribution.Centers.enjoy.further.tax.               .
                                                                          •. Employer.and.employee.must.make.a.statutory.contribution.
   exemptions.and.investment.incentives.                                      of.12%.and.11%.respectively.of.the.monthly.wages.to.the.
                                                                              Employees.Provident.Fund..
Labuan                                                                        .
                                                                          •. Social.Security.Organization.(SOCSO).provides.social.security.
   E
•. . ntities.incorporated.in.Labuan.enjoy.a.low.(offshore.tax.                protection.to.employees,.who.are.Malaysians.or.permanent.
   regime).and.can.also.take.advantage.of.Malaysia’s.double.                  residents,.and.to.their.family..An.employer.and.employee.
   taxation.agreements.with.over.50.countries..However,.Labuan-               contribute.1.75%.and.0.5%.respectively.of.the.employee’s.
   incorporated.entities.are.generally.not.allowed.to.do.business.            monthly.wages..
   in.Malaysia.



                                                                     41
M A L AY S I A                                                                                                 Doing Business in Asia Pacific

                                                                           ....or.Embassy.
INTELLECTUAL PROPERTY
                                                                           Business Passes and Work Permits
   I
•. .ntellectual.Property.protection.in.Malaysia.comprises.patents,.           .
                                                                           •. Visit.Passes.(Business).may.be.issued.to.a.foreigner.entering.
   trademarks,.industrial.design,.copyright,.geographical.                    Malaysia.for.the.purpose.of.looking.at.business.opportunities,.
   indications.and.layout.designs.of.integrated.circuits.                     investment.potential.or.introducing.their.goods.that.are.to.be.
   R
•. . egistered.patents,.trademarks/service.marks,.industrial.                 manufactured.in.Malaysia..This.pass.cannot.be.used.for.the.
   design.and.geographical.marks.enjoy.monopoly.rights/                       purposes.of.employment..
   protection.for.specific.periods.of.time.                                   .
                                                                           •. Visit.Passes.(Professional).may.be.issued.to.a.foreigner.who.
   U
•. . nregistered.trademarks.are.protected.by.the.Malaysian.                   holds.acceptable.professional.qualification.or.specialist.
   courts.under.the.tort.of.passing.off.                                      skills.entering.Malaysia.for.short-term.professional.work.not.
   C
•. . opyright.protection.for.literary,.musical.or.artistic.works,.            exceeding.12.months.at.any.one.time.
   sound.recordings,.broadcasts.and.films.                                    .
                                                                           •. Employment.Passes.are.required.for.foreigners.taking.up.
   M
•. . alaysia.is.a.member.of.the.World.Intellectual.Property.                  employment.under.contracts.of.service.in.Malaysia.for.a.
   Organization.(WIPO).and.a.signatory.to.the.Paris.Convention,.              minimum.of.two.years.earning.minimum.wages.of.RM3,000.
   Berne.Convention.and.the.Agreement.on.Trade.Related.                       per.month..The.spouse.and.children.of.a.foreigner.who.
   Aspects.of.Intellectual.Property.Rights.(TRIPS)..                          has.been.issued.with.an.Employment.Pass.may.be.issued.
   M
•. . alaysia’s.intellectual.property.laws.conform.to.international.           Dependant’s.Passes.
   standards.and.provide.adequate.protection.to.both.local.and.               .
                                                                           •. It.is.the.sole.responsibility.of.an.employer.to.submit.an.
   foreign.investors..                                                        application.for.work.permit..Work.permits.are.generally.valid.
                                                                              for.two.years.and.may.be.renewed.for.up.to.10.years.

DISPUTE RESOLUTION                                                         Malaysia My Second Home (MM2H) Program
                                                                              .
                                                                           •. The.program.is.open.to.citizens.of.countries.recognized.by.
    C
•. . ivil.disputes.at.first.instance.may.be.heard.at.the.Magistrates’.        Malaysia.regardless.of.race,.religion,.gender.or.age.and.allows.
    Court,.Sessions.Court.or.High.Court,.depending.on.                        an.applicant.to.bring.the.spouse,.parents.and.unmarried.
    complexity.and.value..Cases.may.go.on.appeal.to.the.Court.of.             children.below.the.age.of.21.and.parents.above.the.age.of.60.
    Appeal.and.then.to.the.Federal.Court.                                     as.dependants.
    E
•. . mployment.disputes.are.heard.in.the.Labour.Court.or.the.                 .
                                                                           •. An.applicant.below.50.years.of.age.must.open.a.fixed.deposit.
    Industrial.Court..                                                        account.of.RM300,000..A.withdrawal.of.up.to.RM150,000.may.
•. Matters.in.relation.to.Shariah.Law.are.heard.by.the.Shariah                be.made.after.a.year.and.a.minimum.balance.of.RM150,000.
....Court                                                                     must.be.maintained.from.the.second.year.onwards.throughout.
    A
•. . lternative.dispute.resolution.(ADR).is.available.and.include.            the.stay.
    mediation.and.arbitration.                                                .
                                                                           •. An.applicant.above.50.years.of.age.has.the.option.to.
o. .. he.Malaysian.Mediation.Centre.(MMC).mediates.disputes.
     T                                                                        open.a.fixed.deposit.account.of.RM150,000.or.show.proof.
     involving.construction.agreement.clauses,.business.                      of.government-approved.pension.funds.of.RM10,000..A.
     agreements.and.the.like..The.minimum.fee.for.an.MMC.                     minimum.balance.of.RM100,000.00.must.be.maintained.
     mediator.(per.party).starts.at.RM500.per.day.for.claims.of.              throughout.the.stay..�.
     RM100,000.and.below,.with.a.maximum.of.RM5,000.for.
     claims.exceeding.RM10,000,000.
o. .. he.Kuala.Lumpur.Regional.Centre.of.Arbitration.(KLRCA).
     T
     arbitrates.settlement.of.disputes.and.currently.provides.
     facilities.for.arbitration..The.arbitration.rules.are.based.on.
     UNCITRAL.Arbitration.Rules.1976.with.certain.modifications.


IMMIGRATION PROCEDURES

Passport and Visa Requirements
   A
•. . ll.persons.entering.Malaysia.must.possess.valid.national.
   passports.or.other.internationally.recognized.travel.documents.
   valid.for.travel.to.Malaysia..These.passports.or.travel.
   documents.must.be.valid.for.at.least.six.months.beyond.the.
   date.of.entry.into.Malaysia..
   A
•. . pplications.for.visas.(where.necessary).may.be.made.at.
   the.nearest.Malaysian.mission.abroad..In.countries.where.
   Malaysian.missions.have.not.been.established,.applications.
   can.be.made.to.the.nearest.British.High.Commission.



                                                                      42
NEW ZEALAND

 • A series of islands in the South Pacific, lying to the south east of Australia.
• A constitutional monarchy with one house of parliament responsible for all legislation.
• The monarch is the English monarch for the time being who acts through his or her
representative the Governor General in New Zealand.
• The executive function is performed by ministers headed by the Prime Minister, who are
all members of parliament.
• There is no federal structure and therefore no state governments.
• The next and only other level of government is the local authorities or councils.
• Laws are based on the English common law system with its mixture of legislation and
case law.
• Commercial law is often very similar to Australia. However, there are areas where
particular laws differ significantly, such as company law, employment law and its laws
protecting the rights and culture of its indigenous people, the Maori.
• Official languages are English and Maori.
• English is the main spoken language and, as such, almost all business is conducted in
English.
• Currency: New Zealand Dollar ($NZD)

BUSINESS PRESENCE                                                              •. Other.structures.include:
                                                                                o.Partnership
•. Various.forms.of.incorporation.are.provided.including:                       o.This.can.be.formed.by.contract.or.implied.by.law.if.two.or.
 o.limited.liability.company                                                   more.individuals.carry.on.a.business.together.with.a.view.to.
 o.unlimited.liability.company                                                 making.profit.
 o.limited.partnership                                                          o.Each.partner.can.bind.the.other.partner.and.is.jointly.and.
•. The.New.Zealand.Companies.Office.is.the.government.                         severably.liable.for.all.debts.of.the.partnership.
agency.responsible.for.the.administration.of.corporate.body.                    o.Trust
registers,.including.the.Companies.Register.                                    o.This.can.be.formed.by.contract.or.implied.by.law.from.certain.
•. A.company.may.also.have.an.optional.constitution.which.may.                 circumstances.
allow.it.to.change.some.of.the.‘default’.rules.for.companies.set.               o.Trustees.hold.property.in.trust.and.must.apply.the.property.for.
out.in.the.Companies.Act.1993.                                                 the.benefit.of.particular.beneficiaries.or.for.a.particular.purpose.
•. A.company.requires.at.least.one.director.and.one.shareholder,.               o.Trustees.are.personally.liable.for.the.debts.of.the.trust.unless.
who.can.be.the.same.person.                                                    it.is.agreed.by.the.creditor.that.liability.is.limited.to.the.assets.of.
•. Shares.do.not.have.a.fixed.or.‘par.value’.–.they.are.simply.                the.trust.
issued.at.an.agreed.price.or.a.price.specified.in.the.constitution.
•. A.limited.partnership.is.a.partnership.with.the.benefit.of.
limited.liability.for.the.limited.partners.but.unlimited.liability.for.        FOREIGN INVESTMENT RESTRICTIONS AND
the.general.partner,.who.must.be.responsible.for.management..                  CONDITIONS
•. Overseas.companies.must.register.with.the.New.Zealand.
Companies.Office.within.10.working.days.of.commencing.                         Restrictions on Foreign Investment
business.in.New.Zealand.                                                       •. There.are.no.blanket.restrictions.on.foreign.investment.in.
•. To.register.as.an.overseas.company.certain.information.must.                New.Zealand..However.consent.will.be.required.to.foreign.
be.supplied.to.the.Companies.Office.(Directors,.Shareholders.                  investments.involving.‘sensitive.land’,.or.‘significant.business.
etc).                                                                          assets’.
•. An.overseas.company.registered.with.the.Companies.Office.                   •. Where.consent.is.required,.application.must.be.made.before.
must.maintain.a.New.Zealand.address.and.a.person.located.in.                   the.assets.are.acquired.
New.Zealand.who.is.authorised.to.accept.service.of.documents.                  •. The.most.common.categories.of.‘sensitive.land’.are.non-urban.
on.behalf.of.the.company.                                                      land.of.over.5ha,.and.most.islands.other.than.the.North.or.South.
                                                                               Islands..In.addition.consent.will.be.required.where.land.over.0.4.
                                                                               ha.is,.contains.or.adjoins:


                                                                          43
NEW ZEALAND                                                                                                  Doing Business in Asia Pacific

 o.land.on.islands.other.than.the.North.or.South.Island                  goods.and.services.by.‘registered.persons’..
.o.land.on.any.foreshore                                                 •. The.only.exceptions.to.GST.are.‘exempt’.supplies,.such.as.
 o.seabed.and.any.bed.of.a.lake                                          financial.services,.sales.of.securities.and.residential.tenancies,.
.o.reserve.land                                                          and.‘zero.rated’.supplies,.such.as.exported.goods,.and.business.
•. ‘Significant.business.assets’.are:                                    sales..
 o.25%.or.more.of.the.ownership.or.control.of.a.New.Zealand.             •. There.are.a.limited.number.of.special.taxes.on.goods.such.as.
entity,.worth.in.excess.of.$100.million;                                 alcohol,.tobacco.and.motor.fuel..
 o.a.new.business.to.be.located.in.New.Zealand.where.the.set-up.         •. Local.authority.rates.(a.form.of.land.tax).are.also.payable.by.
costs.will.exceed.$100.million;.and                                      property.owners.
 o.assets.in.New.Zealand.used.in.carrying.on.a.business.in.New.
Zealand,.worth.in.excess.of.$100.million.                                Double Taxation Treaties
 o.interests.in.fishing.quota,.or.25%.or.more.interest.in.a.             •. New.Zealand.currently.has.Double.Taxation.Treaties.with.more.
company.which.holds.interests.in.fishing.quota.                          than.30.countries.
 o.Values.are.higher.for.Australian.investors.

                                                                         TAX AND INVESTMENT INCENTIVES
CENTRAL BANK EXCHANGE CONTROL
                                                                         •. There.are.almost.no.incentives.intended.to.encourage.
•. No.specific.approvals.are.required.for.moving.money.across.           foreign.investment.in.New.Zealand.such.as.Pioneer.Status,.
international.boarders.in.New.Zealand..                                  Capital.Allowances,.Investment/Reinvestment.Allowances.or.Tax.
•. There.are,.however,.reporting.requirements:                           Exemptions..One.notable.exception.is.tax.incentives.designed.to.
 o.Cash.in.any.currency.to.the.value.of.NZ$10,000.must.be.               encourage.the.film.industry.
declared.
 o.New.Zealand’s.money.laundering.rules.require.the.reporting.of.
suspicious.transactions.                                                 EMPLOYMENT LAW

                                                                         •. New.Zealand.employment.law.is.based.on.contract.but.
TAXATION                                                                 legislation.can.override.or.add.to.the.terms.of.the.contract.
                                                                         •. A.written.employment.agreement.is.required.for.all.employees.
Corporate Income Tax                                                     although.this.can.take.the.form.of.a.collective.agreement.where.
•. Company.profits.are.taxed.at.28%.(from.2011/12.tax.year).             the.employee.is.a.union.member.
•. Companies.can.issue.imputation.credits.equivalent.to.the.tax.         •. There.is.no.standard.notice.period.for.termination.and.this.
paid.on.their.profits.which.shareholders.can.use.to.avoid.paying.        must.be.set.in.the.employment.agreement..
double.taxes.on.distributions..                                          •. Notwithstanding.any.termination.period.provided.in.the.
                                                                         employment.agreement,.New.Zealand.law.provides.that.
Personal Income Tax                                                      termination.by.an.employer.is.only.possible.for.cause.or,.in.the.
•. Income.tax.rates.for.individuals.range.from.10%.to.33%.               case.of.redundancy,.and.then.only.after.appropriate.procedures.
depending.on.income.                                                     have.been.followed..
..                                                                       •. In.addition.fixed.term.agreements.can.only.be.relied.upon.
Capital Gains Tax                                                        where.the.particular.circumstances.justify.the.fixed.term..
•. New.Zealand.has.no.capital.gains.tax..However,.it.does.tax.           •. Minimum.wage.requirement.is.NZ$13.00.per.hour.
some.gains,.which.might.be.considered.capital.gains,.as.income,.         •. Trade.Unions.are.permitted.in.New.Zealand.but.not.
such.as.profits.from.the.sale.of.land.or.shares.made.by.traders.or.      compulsory..Whether.to.join.is.a.decision.of.the.individual.
dealers.                                                                 employee.

Withholding Tax                                                          Statutory Contributions
•. New.Zealand.has.a.comprehensive.withholding.tax.regime.               •. Employers.must.make.contributions.to.the.Accident.
requiring.deductions.from.payments.to.residents.and.overseas.            Compensation.Corporation.Scheme.(‘ACC’).on.behalf.of.the.
persons..                                                                employee..ACC.is.the.government.accident.insurance.scheme.
•. There.are.schemes.where.overseas.investors.can.avoid.or.              which.provides.accident.cover.regardless.of.blame..Levies.
reduce.the.amount.of.withholding.tax.on.dividends.and.interest.          depend.on.the.industry.accident.record.
payments.to.them.                                                        •. If.an.employee.does.not.elect.to.opt.out.of.Kiwi.Saver,.his.or.
•. There.is.also.a.‘pay.as.you.earn’.(PAYE).system,.where.               her.employer.can.be.required.to.contribute.the.equivalent.of.2%.
deductions.are.made.from.salaries.and.wages.on.account.of.               of.their.wage.or.salary.to.their.Kiwi.Saver.account.
income.tax.

Indirect Tax
•. GST.at.the.rate.of.15%.is.charged.on.almost.all.supplies.of.


                                                                    44
NEW ZEALAND                                                                   Doing Business in Asia Pacific


DISPUTE RESOLUTION

•. There.is.only.one.legal.jurisdiction,.which.covers.all.of.New.
Zealand.
•. The.law.of.New.Zealand.consists.of.statute.law.passed.by.
parliament,.and.case.law,.where.judicial.precedent.is.applied.in.
the.courts.by.judges..

Court System
•. Civil.disputes.at.first.instance.are.heard.in.the.District.Courts.
(for.lesser.claims).or.the.High.Court.
•. Cases.may.be.appealed.to.the.Court.of.Appeal.(Civil.Division).
and.then.to.the.Supreme.Court..
•. There.are.also.a.limited.number.of.specialised.courts.or.
tribunals,.which.deal.with.disputes.in.particular.areas.such.as.
employment.disputes,.family.disputes.and.environment.issues.

Alternative Dispute Resolution
•. Alternative.dispute.resolution.is.encouraged.in.New.Zealand,.
in.particular.mediation.
•. Various.organisations.exist.which.handle.alternative.dispute.
resolutions,.the.most.popular.of.which.is.LEADR.


IMMIGRATION PROCEDURES

Social Visit Pass
•. Visitors.need.to.obtain.a.visitor’s.visa.before.they.arrive.in.New.
Zealand.
•. Visitors.from.visa-exempted.countries.do.not.need.to.obtain.
visas.prior.to.their.arrival..Instead,.they.will.be.automatically.
issued.with.a.visitor’s.visa.on.arrival.

Professional’s Visit Pass
•. Professionals.who.want.to.enter.New.Zealand.to.perform.
specific.tasks.may.apply.for.a.limited.purpose.visa.or.a.work.
visa,.which.will.specify.the.period.they.are.allowed.to.remain.in.
New.Zealand,.and.the.tasks.they.are.allowed.to.perform.in.New.
Zealand..
•. Long-term.visas.are.available.for.employees.of.businesses.
relocating.to.New.Zealand,.or.entrepreneurs.who.want.to.
establish.a.business.in.New.Zealand..

Work Visas
•. Workers.with.the.desired.skills.may.be.granted.a.work.visa,.the.
duration.of.which.will.depend.on.their.skills.and.area.of.specialty.
•. Workers.who.possess.skills.that.are.deemed.under.shortage.
may.obtain.their.work.visa.through.fast.track.procedures..

Special Permanent Residency or other permits
•. Permanent.residency.in.New.Zealand.may.be.granted.under.
a.number.of.different.categories,.such.as.skilled.migrant,.family.
reunion,.entrepreneur.and.investor..�




                                                                         45
PHILIPPINES

• Southeast Asian region.
• One of the largest archipelagos in the world, composed of 7,107 islands with a total land
area of approximately 300,000 square kilometers.
• Presidential, representative and democratic republic with three separate and co-equal
branches of government: executive, legislative (bicameral) and judiciary.
• Philippines legal system – a diversified mix of civil law influenced by Spanish law,
common law based on Anglo-American law, and customary law. Muslim legal system is
also recognized.
• Two primary sources of law are statutes or statutory law and jurisprudence or case law.
• Language: English for business/contracts/laws/government and Filipino (Tagalog) for
spoken communications.
• Currency: Philippine peso (P or PhP)
• Multiracial and multidenominational. Predominantly Malay and Roman Catholic.
• Growing and emerging market. Liberalized and deregulated free market economy.
• Investment growth areas include:
 o Manufacturing
 o Business process outsourcing
 o Mining
 o Renewable energy
 o Pharmaceutical industry
 o Tourism

BUSINESS PRESENCE                                                           o.Foreign.Investments.Act.of.1991,.as.amended.(Republic.Act.
                                                                           No.7042,.“FIA”)
•.Corporations.may.be.wholly.owned.subsidiary.of.foreigners.if.             o.Omnibus.Investments.Code.of.1987.(Executive.Order.No.
industry.is.open.to.foreign.investment.                                    226)
•.Joint.venture.companies.with.Philippine.nationals.if.industry.            o.Philippine.Economic.Zone.Authority.Law.(Republic.Act.
falls.within.Foreign.Investments.Negative.List.                            No.7916)
•.Branches.may.be.given.license.to.do.business.by.Philippine.               o.Corporation.Code.(Batas.Pambansa.Blg.68)
Securities.and.Exchange.Commission.(SEC).to.perform.head.                   o.Other.industry-specific.special.laws.
office.activities.unless.a.restricted.industry.                             o.FIA.prescribes.Foreign.Investments.Negative.List.(FINL),.
Other.business.vehicles:                                                   currently,.8th.FINL,.which.lists.industries/business.activities.
.o.Representative.office.–.limited.to.non-income.generating.               where.foreign.investments.are.allowed,.composed.of.two.lists.–.
activities,.communications.and.coordination;.promotions.                   List.A.and.List.B:
and.liaison.                                                               List.A.–.consists.of.areas.of.activities.reserved.to.Philippine.
 o.Regional.Operating.Headquarters.–.income.generating.                    nationals.where.foreign.equity.participation.in.any.domestic.or.
activities.through.qualifying.services.to.head.office,.affiliates,.        export.enterprise.engaged.in.any.activity.listed.therein.shall.be.
subsidiaries.or.branches.in.the.Philippines,.and.other.markets.            limited.to.a.maximum.of.40%.as.prescribed.by.the.Constitution.
 o.Regional.or.Area.Headquarters.–.supervisory,.                           and.other.specific.laws;.and
communications.and.coordinating.center.for.subsidiaries,.                  List.B.–.consists.of.areas.of.activities.where.foreign.ownership.
affiliates.and.branches.in.the.region;.non-income.generating.              is.limited.pursuant.to.law.such.as.defense.or.law.enforcement-
Appointment.of.distributors.                                               related.activities,.which.have.negative.implications.on.public.
                                                                           health.and.morals,.and.small.and.medium-scale.enterprises.

FOREIGN INVESTMENT RESTRICTIONS AND                                        Equity.range.from:
CONDITIONS                                                                  o Up.to.100%.foreign.equity,.e.g..domestic.market.and.export.
                                                                           market.enterprises.not.falling.in.FINL.with.paid-in.equity.
Restrictions in Equity Participation                                       capital.of.not.less.than.US$200,000;.explosives.manufacturing.
•.Generally,.no.restrictions.on.foreign.investments.unless.limits.         authorized.to.have.greater.foreign.equity.by.police.authorities;.
on.foreign.equity.are.imposed.by.applicable.laws,.such.as:                 and.all.forms.of.gambling.covered.by.investment.agreements.
 o.Philippine.Constitution.of.1987
                                                                      46
PHILIPPINES                                                                                                 Doing Business in Asia Pacific

with.Philippine.Amusement.and.Gaming.Corporation.and..                  an.equivalent.amount.in.foreign.currency.based.on.prevailing.
operating.within.special.economic.zones.administered.by.the.            exchange.rate.within.five..consecutive.banking.days.except.
Philippine.Economic.Zone.Authority;.                                    those.between.a.covered.institution.and.a.person.who,.at.the.
.o.Up.to.60%.foreign.equity,.e.g..financing.companies.and.              time.of.transaction.was.a.properly.identified.client.and.the.
investment.houses.                                                      amount.is.commensurate.with.business.or.financial.capacity.
.o.Up.to.40%.foreign.equity,.e.g..exploitation,.development.            of.client;.or.those.with.an.underlying.legal.or.trade.obligation,.
and.uti.units.where.the.common.areas.in.the.condominium.                purpose,.origin.or.economic.justification..Also.refers.to.a.
project.are.co-owned.by.the.owners.of.the.separate.units.or.            single,.series.or.combination.or.pattern.of.unusually.large.and.
owned.by.a.corporation.                                                 complex.transactions.in.excess.of.four.million.Philippine.pesos.
.o.Up.to.30%.foreign.equity,.e.g..advertising.                          (Php4,000,000.00).especially.cash.deposits.and.investments.
.o.Up.to.25%.foreign.equity,.e.g..private.recruitment,.local.and.       having.no.credible.purpose.or.origin,.underlying.trade.
overseas.employment;.construction.contracts.for.locally.funded.         obligation.or.contract..
public.works.                                                           •.If.foreign.investment.is.to.be.registered.–.bank.remittance.
 o.Up.to.20%.foreign.equity,.i.e..private.radio.communications.         documents.and.proof.of.receipt.by.investee.required.–.BSP.
network.                                                                then.issues.Bangko.Sentral.Registration.Document.
 o No.foreign.investments,.e.g..mass.media;.practice.of.all.
professions;.retail.trade.with.less.than.US$2.5M.(full.foreign.
participation.allowed.with.paid-up.capital.of.US$2.5M.or.more,.         TAXATION
or.specializing.in.high-end.or.luxury.products,.provided.that.the.      General:
paid-in.capital.per.store.is.not.less.than.US$250,000;.small-           •.National.Internal.Revenue.Code.of.1997.(NIRC).–.general.
scale.mining;.etc.                                                      tax.law.administered.and.implemented.by.Bureau.of.Internal.
                                                                        Revenue.
Approvals and Licensing                                                 •.Local.Government.Code.–.grants.local.government.units.
•.Philippine.SEC.–.primary.government.agency.for.                       power.to.tax.certain.activities.within.their.jurisdiction.
incorporation.of.corporate.entities.
•.Board.of.Investments.–.grants.incentives.and.endorsements.            Corporate Taxation:
of.RHQs,.ROHQs.and.representative.offices.                              •.Domestic.corporations.–.those.incorporated.under.the.laws.
•.Philippine.Economic.Zone.Authority.–.registers.locators.in.           of.the.Philippines.–.are.subject.to.tax.on.worldwide.taxable.
special.economic.zones.                                                 income.(gross.income.less.allowable.deductions).at.30%.
•.Local.Government.Units.–.for.local.license.to.do.business.            corporate.income.tax.
                                                                        •.Foreign.corporations.are.subject.to.tax.only.on.income.
                                                                        derived.from.Philippines.sources.and.at.30%.of.taxable.income,.
EXCHANGE CONTROL                                                        if.resident,.and.gross.income,.if.non-resident.
                                                                        •.Improperly.Accumulated.Earnings.Tax.(IAET).equivalent.to.
•.Residents.and.non-residents.may.purchase.foreign.exchange.            10%.of.improperly.accumulated.taxable.income.or.profits.
from.Authorized.Agent.Banks.(AABs).duly.licensed.by.                    permitted.to.accumulate.instead.of.divided.or.distributed.to.
the.Bangko.Sentral.ng.Pilipinas.(BSP=central.bank.of.the.               stockholders,.if.domestic.corporation.
Philippines),.AAB-foreign.exchange.corporations.(AAB.forex.             •.Minimum.Corporate.Income.Tax.(MCIT).equivalent.to.2%.of.
corps).and.other.non-bank.entities.operating.as.FX.dealers/             gross.income.beginning.on.the.fourth.taxable.year.
money.changers.(FXDs/MCs).subject.to.specific.documentary.              immediately.following.the.year.in.which.such.corporation.
support/requirements.depending.on.amount.involved.                      commenced.business.operations,.when.MCIT.is.greater.than.
•.Optional.Registration.of.foreign.investments.(i.e..made.by.           corporate.income.tax..Amount.carried.forward.and.credited.
non-residents).with.BSP.or.AABs..Required.registration.only.            against.normal.income.tax.for.three.immediately.succeeding.
if.FX.for.repatriation.of.capital.and.remittance.of.dividends/          taxable.years.
profits.purchased.from.AABs.and.AAB.forex.corps.                        •.Domestic.and.resident.foreign.corporations.are.allowed.
•.Foreign.investments.duly.registered.with.BSP.entitled.to.full.        to.claim.all.business.deductions.under.NIRC.in.computing.
and.immediate.capital.repatriation.and.dividends,.as.well.as.           taxable.net.income..These.deductions.from.gross.income.
profit.remittance.privileges.without.prior.BSP.approval.and.at.         include.business.expenses,.interests,.taxes,.losses,.bad.debts,.
prevailing.exchange.rate..                                              depreciation.and.charitable.and.other.contributions..Branch.
•.Anti-Money.Laundering.Act.of.2001.in.force.                           may.deduct.only.such.items.as.are.specifically.allocable.or.
•.Anti-Money.Laundering.Council.has.jurisdiction.                       directly.related.to.Philippine.income.
•.Bangko.Sentral.ng.Pilipinas.enacted.regulations.imposing.the.         •.Branch.profit.remittance.tax.of.15%.based.on.total.profits.
customer-identification.(Know.Your.Client.–.KYC).requirements.          applied.or.earmarked.for.remittance.without.any.deduction.for.
on.banks;.record.keeping.systems;.and.introduces.a.suspicious.          tax.component.thereof,.further.reduction.subject.to.tax.treaty.
transaction.reporting.system.                                           •.Dividends.received.by.resident.foreign.corporation.from.
•.“Covered.transaction”.defined.as.a.single,.series,.or.                domestic.corporation.are.exempt.from.tax..Intercorporate.
combination.of.transactions.involving.a.total.amount.in.                dividends.received.by.non-resident.foreign.corporation.from.
excess.of.four.million.Philippine.pesos.(Php4,000,000.00).or.           domestic.corporation.generally.subject.to.final.withholding.tax.


                                                                   47
PHILIPPINES                                                                                                 Doing Business in Asia Pacific

of.35%..May.be.reduced.to.15%.tax.rate.if.country.of.domicile.          quarter’s.end..VAT.payments.are.on.a.monthly.basis.
of.non-resident.corporation.does.not.impose.tax.on.foreign-
sourced.dividends,.or.allows.credit.for.taxes.deemed.paid.              Capital Gains Tax:
in.the.Philippines.equivalent.to.17%.which.is.the.difference.           •.On.shares.of.stock.–.Capital.gains.realized.from.sale,.
between.regular.tax.(35%).on.corporations.and.tax.(15%).on.             exchange.or.disposition.of.shares.of.stocks.in.any.domestic.
dividends..May.also.be.reduced.by.tax.treaty.                           corporation.not.traded.through.local.stock.exchange.taxed.
•.Regional.area.headquarters.or.regional.operating.                     at.5%.for.gains.not.over.P100,000.00.and.10%.for.gains.over.
headquarters.of.multinational.companies.–.10%.of.taxable.               P100,000.00..
income.                                                                 •.Capital.gains.presumed.to.have.been.realized.from.the.sale,.
                                                                        exchange.or.disposition.of.shares.listed.and.traded.through.a.
Individual Income Taxation:                                             local.stock.exchange.is.taxed.at.0.5%.based.on.gross.selling.
•.Resident.citizens.engaged.in.trade.or.business.are.taxed.             price.of.the.shares.
upon.worldwide.net.income.(gross.income.less.allowable.                 •.On.real.property.(lands.and.buildings).–.final.tax.of.6%.on.the.
deductions.and.personal.exemptions).according.to.schedule.of.           gross.selling.price.or.fair.market.value,.whichever.is.higher,.if.
rates.ranging.from.3%.to.32%..                                          treated.as.capital.assets..[or.a.capital.asset]
•.Fringe.benefits.tax.of.32%.of.grossed-up.monetary.value.of.           •.On.other.capital.assets.–.taxed.as.business.income.
employee’s.benefits,.e.g..housing,.expense.accounts,.vehicles,.
household.personnel,.membership.fees.and.educational.fees.              Withholding Tax:
payable.by.employer,.who.is.responsible.for.withholding.and.            •.Domestic.corporations:
remitting.tax.                                                           o.Interest.from.foreign.currency.deposits.with.local.banks.–.
•.Resident.aliens.and.non-resident.citizens.are.subject.to.the.         7.5%.
same.graduated.tax.rates.but.only.for.income.derived.from.all.          .o Interest.from.deposits.and.yield.or.any.other.monetary.
sources.within.the.Philippines.                                         benefits.from.deposit.substitutes.and.from.trust.funds.and.
•.Non-resident.aliens.are.taxed.at.25%.of.gross.income.                 similar.arrangements,.and.royalties.–.20%.
from.sources.within.the.Philippines.if.their.stay.within.the.           •.Foreign.corporations:
country.does.not.exceed.180.days.in.the.calendar.year.                   o.Interest.income.derived.by.offshore.banking.units.from.
(deemed.not.doing.business)..Otherwise,.taxed.on.the.basis.             foreign.currency.loan.transactions.with.residents.–.10%.
of.graduated.rates.                                                      o.Interest.from.deposits.and.yield.or.any.other.monetary.
•.Aliens.employed.by.regional,.area.or.regional.operating.              benefits.from.deposit.substitutes.and.from.trust.funds.
headquarters.of.multinational.corporations,.representative.             and.similar.arrangements,.and.royalties.from.Philippine.
offices,.offshore.banking.units,.petroleum.service.contractors.         sources.–.20%.
and.subcontractors.are.subject.to.income.tax.at.15%.of.gross.
income.from.such.employers.(e.g..salaries,.annuities,.honoraria.        •.Non-resident.foreign.corporations:
and.allowances).                                                        .o.Interest.on.foreign.loans.–.20%.
•.Cash.and.property.dividends.from.domestic.corporations.and.           •.Citizens.and.resident.aliens:
shares.from.the.distributable.net.income.of.a.partnership.or.           .o.Interest.from.deposits.and.yield.from.deposit.substitutes.and.
joint.venture.–.10%;.if.non-resident.alien.–.20%.                       similar.arrangements,.and.royalties,.prizes.and.other.winnings,.
                                                                        from.Philippine.sources.–.20%.
Value Added Tax:                                                         o.Interest.from.foreign.currency.deposits.in.local.bank.–.7.5%
•.VAT.equivalent.to.12%.of.gross.selling.price.or.gross.value.in.       .o Interest.from.long-term.deposits.–.exempt.
money.of.goods.or.properties.sold,.bartered.or.exchanged..
•.Any.excise.tax.on.these.goods.is.also.part.of.the.gross.              Indirect Taxes:
selling.price..                                                         •.Documentary.stamp.taxes.levied,.collected.and.paid.for.
•.For.imported.goods,.VAT.is.based.on.the.total.value.of.goods.         upon.documents,.instruments,.loan.agreements,.and.papers,.
as.determined.by.the.Bureau.of.Customs.plus.customs.duties,.            and.upon.assignments.and.transfers.of.obligations,.rights.
excise.taxes.and.incidental.charges.                                    and.property..Rates.vary.depending.on.the.transaction.
•.An.indirect.tax.where.the.obligation.to.collect.and.remit.rests.      contemplated.
with.the.seller,.but.the.cost.of.tax.may.be.passed.on.to.the.           •.Donor’s.tax.imposed.at.progressive.rates.from.2%.to.15%..
buyer,.transferee.or.lessee.of.the.goods,.properties.or.services..      If.done.or.beneficiary.is.a.stranger,.the.rate.is.30%..Corporate.
•.A.VAT-registered.entity.may.credit.VAT.paid.on.purchases.of.          donations.are.taxed.at.30%..Gifts.given.to.government.and.
other.goods.and.services.against.tax.on.its.current.period.sales.       certain.accredited.institutions.are.exempt.from.donor’s.tax..
of.goods.or.services..If.the.amount.of.input.tax.is.greater.than.       •.Donor’s.taxes.paid.to.a.foreign.country.by.a.citizen.or.resident.
the.amount.of.output.tax,.excess.may.be.credited.against.the.           at.the.time.of.donation.are.creditable.
succeeding.period.output.VAT..
•.VAT-registered.entities.are.required.to.issue.an.invoice.or.          Double Taxation Treaties:
receipt.for.every.sale,.and.to.maintain.subsidiary.sales.and.           •.The.Philippines.has.tax.treaties.with.35.countries.in.order.to.
purchase.journals.exclusively.for.VAT.purposes..                        minimize.the.effects.of.double.taxation..
•.VAT.reports.are.submitted.on.a.quarterly.basis,.25.days.after.        •.Business.profits.of.a.resident.of.another.country.with.whom.


                                                                   48
PHILIPPINES                                                                                                   Doing Business in Asia Pacific

the.Philippines.has.a.tax.treaty are.taxable.in.the.Philippines.
only.if.the.resident.has.permanent.establishment.in.the.                  Minimum Wage Requirements:
Philippines.to.which.profits.are.attributable.                            •.Determined.by.Regional.Tripartite.Wages.and.Productivity.
•.Preferential.tax.rates.and.exemptions.are.provided.for.under.           Board.constituted.among.different.regions.in.the.Philippines..
the.treaties.                                                             Wage.orders.issued.after.consultation.with.various.sectors..
•.Treaty.provisions.take.precedence.over.domestic.tax.laws.in.            Payment.of.minimum.wage.is.mandatory..Non-compliance.
instances.where.treaty.rates.are.lower.                                   is.penalized.
                                                                          •.Other.labor.standards.or.minimum.requirements:
                                                                          .o.Holiday.pay.refers.to.payment.of.regular.daily.wage.for.any.
INVESTMENT INCENTIVES                                                     unworked.regular.holiday.
                                                                          .o.Premium.pay.refers.to.additional.compensation.for.work.
•.Incentives.under.the.Omnibus.Investments.Code.and.                      performed.within.eight.hours.on.non-work.days,.such.as.rest.
administered.by.the.Board.of.Investments.given.to.export-                 days.and.special.days.
oriented.businesses,.projects.in.less-developed.industries,.and.          .o.Overtime.pay.refers.to.additional.compensation.for.work.
registered.with.Philippine.Economic.Zone.Authority.                       performed.beyond.eight.hours.a.day.
•.Incentives.include.both.fiscal.and.non-fiscal.incentives.such.          .o.Night.shift.differential.refers.to.additional.compensation.of.
as:                                                                       ten.percent.of.an.employee’s.regular.wage.for.each.hour.of.
 o.Tax.and.duty-free.importation.of.capital.equipment,.                   work.performed.between.10pm.and.6am.
machinery.and.accompanying.spare.parts.                                    o.Service.charges.collected.by.establishments.are.apportioned.
 o.Tax.credit.on.domestic.capital.equipment.                              between.employees.and.management..85%.goes.to.all.
 o..Income.tax.holiday.for.four.years.for.new.non-pioneer.firms.          employees.in.equal.share,.while.15%.may.be.retained.by.
and.six.years.for.new.pioneer.firms.                                      management.to.answer.for.losses.and.breakages.or,.depending.
 o..Additional.deduction.for.labor.expenses.                              upon.its.discretion,.to.be.distributed.among.managerial.
 o..Exemption.from.contractor’s.tax.                                      employees..Ordinarily,.most.hotels.and.restaurants.collect.
 o..Simplification.of.customs.procedures.for.the.importation.of.          service.charges.
equipment,.spare.parts,.raw.materials.and.supplies.and.exports.           .o.Service.incentive.leave.of.five.days.with.pay.is.given.to.every.
of.processed.products.                                                    employee.who.has.rendered.at.least.one.year.of.service.
 o..Employment.of.foreign.nationals.                                       o.Maternity.leave.applies.to.all.female.employees,.whether.
 o..Tax.credit.for.taxes.and.duties.paid.on.raw.materials,.               married.or.unmarried.who.are.SSS.members.at.the.time.of.
supplies.and.semi-manufactured.products.used.in.the.                      delivery.or.miscarriage..They.are.entitled.to.maternity.benefit.
manufacture.of.export.products.                                           of.60.days.in.case.of.normal.delivery.or.miscarriage,.or.78.days.
 o..Access.to.bonded.warehouse.system.                                    in.case.of.Caesarian.section.delivery..
 o..Exemption.from.wharfage.dues.and.any.export.tax,.duty,..               o.Paternity.leave.benefit.is.granted.to.all.married.male.
impost.and.fees.                                                          employees.in.the.private.sector,.regardless.of.their.employment.
 o..Unrestricted.use.of.consigned.equipment.                              status.and.shall.apply.to.the.first.four.deliveries.of.the.
 o..Tax.and.duty.exemption.of.imported.spare.parts.and.                   employee’s.lawful.wife.with.whom.he.is.cohabiting.
supplies.for.export.producers.with.customs.bonded.warehouse.               o.Retirement.benefits.are.given.to.employees.who.shall.have.
exporting.at.least.70%.of.production.                                     reached.60.years.of.age.or.more.but.not.beyond.65.years.
                                                                          of.age,.and.who.shall.have.served.establishment.for.at.least.
                                                                          five.years.
EMPLOYMENT LAW                                                             o.Thirteenth.month.pay.is.given.to.rank.and.file.employees,.
                                                                          regardless.of.the.nature.of.employment.and.irrespective.of.the.
General Legal Framework:                                                  methods.by.which.wages.are.paid,.provided.they.worked.for.at.
•.Labor.Code.of.the.Philippines.is.general.governing.law,.                least.one.month.during.a.calendar.year,.and.should.be.given.
with.special.laws.to.govern.social.security,.employee’s.                  not.later.than.24.December.of.every.year.
compensation,.sexual.harassment,.and.disabled.persons,.
among.others.                                                             Rules on Termination of Employment:
•.Labor.law.is.subdivided.into.four.parts:.labor.standards,.labor.        •.Termination.by.Employer:.Employer.may.terminate.
relations,.law.on.termination.of.employment.and.other.special.            employment.for.just.or.authorized.cause..
laws.deemed.subsumed.within.the.first.three.classifications.              •.The.just.causes.for.termination.are.the.following:
                                                                          .o.Serious.misconduct.or.willful.disobedience.by.employee.of.
Sectoral Requirements:                                                    lawful.orders.of.his.employer.or.representative.in.connection.
•.Parental.leave.for.solo.parents.granted.under.the.Solo.                 with.his.work;
Parents’.Welfare.Act.of.2000.                                              o.Gross.and.habitual.neglect.by.employee.of.his.duties;.
•.Leave.for.victims.of.violence.against.women.employees.                  fraud.or.willful.breach.by.employee.of.trust.of.employer.or.duly.
and.their.children.extended.under.the.Anti-Violence.Against.              authorized.representative;.
Women.and.Their.Children.Act.of.2004.so.that.they.may.attend.              o.Commission.of.a.crime.or.offense.by.employee.against.
to.medical.and.legal.concerns.                                            employer.or.any.immediate.member.of.his.family.or.his.duly.


                                                                     49
PHILIPPINES                                                                                                  Doing Business in Asia Pacific

authorized.representatives;.and.other.analogous.causes.                 professionals,.diagnostic,.laboratory.and.other.medical.
•.Due.process.required.–.service.of.notice.stating.causes.for.          examination.services,.use.of.surgical.or.medical.equipment.
termination;.administrative.hearing.required.                           facilities,.prescription.drugs.and.biologicals.among.others,.and.
•.The.authorized.causes.are.the.following:                              outpatient.care.
.o.installation.of.labor-saving.devices                                 •.Home.Development.Mutual.Fund.or.the.Pag-Ibig.Fund.
 o.redundancy                                                           is.extended.to.all.Social.Security.System.(SSS.–.private.
 o.retrenchment.to.prevent.losses                                       employees).and.Government.Service.Insurance.System.(GSIS.–.
 o.closure.or.cessation.of.operation.of.establishment.or.               government.employees).members.earning.P4,000.and.above.
undertaking.unless.closing.is.to.circumvent.law.                        per.month.
   » One.month.written.notice.on.workers.and.Department.of.
Labor.and.Employment..
   » In.termination.due.to.installation.of.labor-saving.devices.or.     DISPUTE RESOLUTION
redundancy,.payment.of.separation.pay.equivalent.to.at.least.
one.month.pay.or.to.at.least.one.month.pay.for.every.year.of.           General Legal Framework:
service,.whichever.is.higher..                                          •.Judicial.Power,.or.the.duty.of.the.court.of.justice.to.settle.
   » In.retrenchment.to.prevent.losses.and.in.cases.of.closures.        actual.controversies.involving.legally.demandable.and.
or.cessation.of.operations.of.establishment.or.undertaking.not.         enforceable.rights,.and.to.determine.whether.there.has.been.
due.to.serious.business.losses.or.financial.reverses,.payment.of.       a.grave.abuse.of.discretion.amounting.to.lack.or.excess.of.
separation.pay.equivalent.to.one.month.pay.or.at.least.                 jurisdiction.on.the.part.of.any.branch.or.instrumentality.of.
one-half.month.pay.for.every.year.of.service,.whichever.is.             government,.is.vested.in.the.Philippine.Supreme.Court.and.
higher..A.fraction.of.at.least.six.months.shall.be.considered.          other.lower.courts.established.by.law.
one.whole.year.                                                         •.Actions,.civil.or.criminal,.and.special.proceedings.in.all.courts.
•.Other.authorized.causes.for.termination:.Employee.                    are.governed.by.the.Revised.Rules.of.Court..Election.cases,.
disease.where.continued.employment.is.prohibited.by.law.                cadastral,.naturalization.and.insolvency.proceedings,.and.
or.is.prejudicial.to.his.health.and.co-employees..Payment.of.           alternative.dispute.resolution.are.governed.by.their.own.rules.
separation.pay.of.at.least.one.month.salary.or.to.one-half.             of.procedure.and.by.analogy.or.of.a.suppletory.character.by.
month.salary.for.every.year.of.service,.whichever.is.greater,.a.        the.Revised.Rules.of.Court.
fraction.of.at.least.six.months.being.considered.one.whole.year..
Termination.by.employee:.The.employer.may.terminate.                    Court System:
employment.without.just.cause.upon.one.month’s.written.                 •.The.lower.courts.are.courts.of.law.and.in.special.cases,.equity,.
notice.on.the.employer..An.employer.upon.whom.no.such.                  under.the.supervision.of.the.Supreme.Court.and.these.are.the.
notice.was.served.may.hold.the.employee.liable.for.damages..            Court.of.Appeals,.the.Regional.Trial.Courts.and.the.Municipal.
•.Termination.without.notice.by.employee.for.any.of.the.                Trial.Courts..
following.just.causes:.                                                 •.Special.courts.for.cases.involving.government.officials.known.
.o.Serious.insult.by.the.employer.or.his.representative.on.the.         as.the.Sandiganbayan,.and.for.taxation.cases.known.as.the.
employee’s.honor.and.person;.                                           Court.of.Tax.Appeals.are.also.in.place.
 o.Inhuman.and.unbearable.treatment.by.the.employer.or.                 •.Parties.to.an.action.or.a.special.proceeding.are.represented.
his.representative;.                                                    by.the.counsel.of.their.choice.
 o.Commission.of.a.crime.or.offense.by.the.employer.or.his.
representative.against.employee.or.any.of.his.or.her.immediate.         Alternative Dispute Resolution:
family.members;.and.                                                    •.ADR.is.actively.promoted.by.the.Philippine.Government.and.
.o.Other.analogous.causes..                                             the.Philippine.Supreme.Court.through.the.Alternative.Dispute.
                                                                        Resolution.Act.of.2004.(ADR.Act).and.the.Special.Rules.of.
Trade Unions:                                                           Court.on.ADR.to.encourage.party.autonomy.in.the.resolution.
•.Labor.laws.set.minimum.standards.of.labor.relations..                 of.disputes.or.the.freedom.of.parties.to.provide.their.own.
Employers.and.employees.are.left.to.determine.or.enhance.               arrangements.to.resolve.disputes.
employment.terms.by.collective.bargaining.and.negotiations..            •.Other.laws.in.place.are.the.Arbitration.Law.of.the.Philippines.
Trade.unionism.is.both.a.constitutionally.and.statutorily.              which.governs.domestic.arbitration,.the.Construction.Industry.
guarded.right..Employers.required.by.law.to.collectively.               Arbitration.Law.of.1985.that.governs.construction.disputes,.and.
bargain.in.good.faith..Employees.also.have.a.constitutional.            the.arbitration.provisions.of.the.Labor.Code.of.the.Philippines.
right.to.participate.in.policy.and.decision-making.processes.           Organizations.such.as.the.Philippine.Dispute.Resolution.Centre,.
that.affect.their.rights.                                               Inc.(PDRCI),.the.Construction.Industry.Arbitration.Commission.
                                                                        (CIAC),.and.the.labor.arbiters,.provide.arbitration.venues.
Statutory Contributions:                                                International.commercial.arbitration.in.the.Philippines.is.
•.Social.security.benefits.are.packaged.under.a.Social.Security.        governed.by.the.Model.Law.on.International.Commercial.
Program.administered.by.the.government..They.include.death,.            Arbitration.adopted.by.the.United.Nations.Commission.on.
disability,.sickness,.maternity.and.old.age.                            International.Trade.Law.(UNCITRAL).
•.PhilHealth.benefits.are.given.to.Philippine.Health.Insurance.         Court-Annexed.Mediation.(CAM).and.Judicial.Dispute.
Corporation.members.(compulsory.for.private.employees).                 Resolution.(JDR).have.also.been.mandated.by.the.Philippine.
and.include.inpatient.hospital.care,.services.of.health.care.           Supreme.Court.in.recent.times.to.de-clog.courts.and.provide.
                                                                   50
PHILIPPINES                                                                                                   Doing Business in Asia Pacific

for.inexpensive.resolutions.of.disputes..CAM.is.an.enhanced.              o.Pre-arranged.employment.visa:.Given.to.foreigners.who.will.
pre-trail.procedure.for.the.settlement.of.cases.through.a.court.          engage.in.any.lawful.occupation.as.an.employee..Validity.of.
appointed.mediator..JDR.requires.the.judge.to.become.a.                   visa.is.usually.co-terminus.with.the.duration.of.employment.
mediator.if.a.settlement.cannot.be.reached.through.CAM.                    o.Immigrant.visa:.Grants.permanent.residency.status.to.a.
Voluntary.mediation,.whether.ad.hoc.or.institutional,.and.                foreigner.premised.on.principle.of.reciprocity.with.foreigner’s.
including.conciliation,.is.also.encouraged.under.the.ADR.Act.             country..Immigrant.visa.are.of.two.kinds,.(a).quota.and.
Foreign.arbitral.awards.are.recognized.and.enforced.under.the.            (b).non-quota.visa.
New.York.Convention.to.which.the.Philippines.is.a.signatory,.              o.Quota.visa:.Issued.only.to.50.foreigners.annually.for.each.
unless.the.award.is.not.covered.by.the.New.York.Convention,.              nationality.whose.countries.accept.Filipinos.as.immigrants.on.a.
in.which.case.the.Philippine.courts.may,.on.grounds.of.comity.            reciprocal.basis..Basic.requirements.are.that.foreigners.must.
and.reciprocity.still.recognize.and.enforce.the.non-convention.           have.lawfully.entered.the.Philippines.and.remain.under.a.lawful.
award.as.a.convention.award..It.entails.the.filing.of.an.action.          admission.status;.have.no.record.of.any.derogatory.information.
before.the.Regional.Trial.Court.of.the.Philippines,.and.when.so.          in.any.local.or.foreign.law.enforcement.agency;.
confirmed.by.said.court.is.enforced.in.the.same.manner.as.final.          have.not.been.afflicted.with.any.dangerous,.contagious.or.
and.executory.decisions.of.courts.of.law.of.the.Philippines.              loathsome.disease;.and.have.sufficient.capital.for.a.viable.and.
Special.conciliation.proceedings.among.residents.of.                      sustainable.investment.(US$40,000.00)..
a.barangay.(the.smallest.local.government.unit).or.a.                      o.Non-quota.visa:.Issued.on.the.basis.of.a.relationship.of.
neighborhood.are.also.in.place.under.the.barangay.justice.                an.applicant.with.a.Filipino.citizen,.either.by.marriage,.paternity.
system.provisions.of.the.Local.Government.Code.of.1991.                   or.filiation..Not.subject.to.any.numerical.limitation.or.order.
                                                                          of.preference.
                                                                           o.Special.non-immigrant.visa:.Under.Section.47(a).(2).of.the.
IMMIGRATION PROCEDURES                                                    Philippine.Immigration.Act,.the.President.is.authorized,.when.
                                                                          public.interest.warrants,.to.issue.a.special.non-immigrant.visa.
Entry into the Philippines:                                               subject.to.conditions.he.may.prescribe..The.President,.acting.
•.Foreigners.are.allowed.to.enter.the.Philippines.without.visas.          through.the.appropriate.government.agencies,.has.exercised.
for.stays.not.exceeding.21.days,.provided.they.hold.a.valid.              this.authority.to.allow.the.entry.of.foreign.personnel.in.the.
passport.valid.for.at.least.six.months,.and.valid.return..Upon.           following.areas:
arrival,.the.immigration.officer.will.grant/stamp.the.necessary.          ...».Oil.drilling.companies
visa.on.the.foreigner’s.passport..Restricted.nationals.required.to.          » Philippine.Economic.Zone.Authority.Registered.Enterprise
secure.a.proper.entry.visa.from.Philippine.Embassy/Consulate.             ...».Board.of.Investment.Registered.Enterprises
prior.to.entry.                                                           ...».Special.kind.of.visas..Granted.under.Special.Laws:.
                                                                          ...».Special.Visa.for.Employment.Generation.Special.(SVEG)...
Visas in the Philippines:                                                 –.issued.to.qualified.non-immigrant.foreigner.who.actually.
Two.kinds.of.visa.exist.under.the.Philippine.Immigration.Act:.            employs.at.least.10.Filipinos.in.lawful.and.sustainable.
(a).Non-immigrant.visa.and.(b).Immigrant.visa:                            enterprise,.trade.or.industry.
Non-immigrant.visa..The.non-immigrant.visa.provides.for.seven.            ...».Special.Investor’s.Resident.Visa.(SIRV).–.issued.to.an.
visa.categories,.namely:.                                                 investor.with.at.least.US$75,000.00.in.the.Philippines..
 o.Temporary.visitor.visa:.Granted.for.three.purposes:.(a).               ...».Special.Resident.Retiree.Visa.(SRRV).–.issued.to.foreign.
pleasure,.(b).business,.and.(c).health..                                  retirees.who.seek.an.easy.and.comfortable.lifestyle.with.a.
.o.Extension.of.temporary.visitor.visa:.Every.two.months.and.             deposit.of.US$75,000.00.or.US$50,000.00,.depending.upon.
up.to.16.months.without.prior.approval.from.the.Bureau.of.                retiree’s.age,.in.any.accredited.Philippine.bank.
Immigration.and.Deportation.(BID).
.o.Transient.visa:.Issued.to.a.person.in.transit.to.a.destination.        Work Permits:
outside.the.Philippines.                                                  •.Alien.Employment.Permit.(AEP):.Issued.by.the.Department.
.o.Seaman.visa:.Issued.to.a.seaman.serving.on.a.vessel.or.                of.Labor.and.Employment.(DOLE),.a.precondition.to.the.grant.
civilian.aircraft.arriving.at.a.Philippine.port.and.entering.             of.a.pre-arranged.employment.visa,.and.co-terminus.with.the.
temporarily.and.solely.as.a.seaman..                                      duration.of.a.foreigner’s.employment.
o.Treaty.Traders.Visa:.Alien.entering.under.a.treaty.of.                  •.Special.Working.Permit.(SWP):.For.assignments.not.
commerce.and.navigation.(1).solely.to.carry.on.substantial.               exceeding.six.months,.provided.the.foreigner.maintains.his.
trade.principally.between.the.Philippines.and.the.alien’s.                or.her.Temporary.Visitor/Business.Visa.for.the.duration.of.the.
country;.or.(2).solely.to.develop.and.direct.operations.of.an.            Philippine.stay..
enterprise.in.which,.in.accordance.with.Philippine.Constitution.
and.laws.he.has.invested.or.will.invest.a.substantial.amount.             Registration of Foreigners:
of.capital.                                                               •.All.covered.registered.aliens.are.required.to.procure.an.Alien.
.o.Diplomatic.visa:.Issued.to.an.accredited.official.of.a.foreign.        Certificate.of.Registration.(ACR).i-card.–.a.microchip-based.
government,.his.family,.attendants,.servants,.and.employees.              identification.card..The.ACR.i-card.serves.as.an.Emigration.
 o.Student.visa:.Issued.to.a.student.who.will.study.at.an.                Clearance.Certificate.(ECC),.Re-entry.Permit.(RP).and.Special.
accredited.Philippine.university,.seminary,.academy,.college.             Return.Certificate.(SRC).of.a.foreigner.upon.payment.of.
or.school.                                                                required.fees..�

                                                                     51
REPUBLIC OF KOREA

• Strategically located in Eastern Asia, neighbouring Japan and China, with an area of
100,210 km2.
• Adopted a presidential system with powers shared between the executive, legislative
and judiciary branches.
• Religious composition of the country consists of Buddhism 22.8%, Protestantism 18.3%,
Catholic 10.9%, other 1.5% and none 46.5%.
• Korean and Hangul, its written form, is the national language. English is also widely
written and spoken.
• Currency: South Korean Won (KRW).
• Korean economy is export-driven with production focuses in major industries such as IT,
electronics, semiconductor, automotive, shipbuilding, steel, and petrochemical industries.



BUSINESS PRESENCE                                                          Restrictions in FDI
                                                                           •. Generally,.a.foreign.investor.may.conduct,.without.restraint,.
•. Main.types.of.business.models.in.Korea:.unlimited.partnership.          various.activities.of.foreign.investment.in.Korea..However,.a.
(Hapmyung.Hoesa);.limited.partnership.(Hapja.Hoesa);.joint.                foreign.investor.is.restricted.from.investments.where.it.threatens.
stock.companies.(Chusik.Hoesa);.and.limited.liability.companies.           the.maintenance.of.national.safety.and.public.order;.where.
(Yuhan.Hoesa).                                                             it.has.harmful.effects.on.public.hygiene.or.the.environmental.
•. The.most.common.and.preferred.corporate.form.is.the.joint.              preservation.of.Korea,.or.is.against.the.morals.and.customs.of.
stock.company.as.shareholders’.liability.is.limited.to.the.amount.         Korean.society,.and.where.it.violates.any.relevant.Act.of.Korea.
of.shareholders’.investment.and.subject.to.fewer.restrictions.on.
the.sale.and.purchase.of.the.company’s.stock.                              Restrictions in Real Property Acquisition
•. A.domestic.branch.office.of.a.foreign.company.may.be.                   •. Subject.to.applicable.Acts.and.land.controls.and.regulations,.
established.in.Korea..A.report.must.be.filed.with.a.foreign.               a.foreign.investor.may.acquire.or.transfer.land.and.other.real.
exchange.bank.and.a.permit.must.be.obtained.from.the.                      property.in.the.territory.of.Korea..
government..In.the.case.of.a.branch.office.of.a.foreign.company.           •. To.encourage.foreign.investment.and.development.of.national.
engaged.in.financial.business,.registration.with.the.Ministry.             lands.in.accordance.with.capital.region.maintenance.and.
of.Strategy.and.Finance.will.be.required..Branch.offices.may.              zoning.plans,.a.variety.of.land.controls.and.regulations.and.tax.
operate.businesses.that.generate.profits.in.Korea,.and.are.not.            incentives.may.apply.depending.on.the.location.of.the.land.and/
recognised.as.a.form.of.foreign.direct.investment..Liaison.offices.        or.real.property..
may.not.carry.out.businesses.that.generate.profit.in.Korea,.but.
may.undertake.non-sales.functions,.such.as.business.liaison,.              Approvals and Licensing
market.research,.etc.                                                      •. Appropriate.approvals.and.licenses,.as.may.be.required.from.
                                                                           relevant.government.authorities.depending.on.the.industry.
                                                                           involved,.are.required.for.the.operation.of.certain.business.
FOREIGN INVESTMENT RESTRICTIONS AND                                        activities..Application.process.and.prescribed.fee.may.vary.
CONDITIONS                                                                 depending.on.the.business.activity.

Restrictions in Equity Participation                                       EXCHANGE CONTROL
•. Foreign.investment.is.facilitated.by.foreign.direct.investment.
(FDI).pursuant.to.the.Foreign.Investment.Promotion.Act.                    •. The.Foreign.Exchange.Transaction.Act.regulates.the.exchange.
•. FDI.includes.acquisition.of.shares.or.equity.of.a.domestic.             rate.system,.foreign.exchange.operations.and.other.certain.
corporation.or.business,.and.provision.of.long-term.loans.(five.           capital.movements,.as.supplemented.by.an.enforcement.decree.
years.or.more)..For.FDI.through.equity.acquisition,.the.foreign.           and.a.set.of.regulations..The.foreign.exchange.system.is.mainly.
investment.amount.must.be.at.least.100.million.Korean.Won.and.             operated.by.the.Ministry.of.Strategy.and.Finance.and.the.Bank.
the.foreigner.equity.ratio.must.be.10%.or.more.of.the.voting.              of.Korea.
stocks.of.the.target.company.or.its.total.equity.investment.               •. Subject.to.the.Foreign.Exchange.Transaction.Act,.any.person.
                                                                           who.intends.to.perform.a.capital.transaction,.including.the.



                                                                      52
REPUBLIC OF KOREA                                                                                              Doing Business in Asia Pacific

remittance.of.capital,.profits,.dividends,.interest,.and.rental.          •. Valued.added.tax:.10%..However.a.zero-tax.rate.and.tax.
income,.he/she.is.required.to.submit.a.report.on.such.capital.            exemptions.apply.to.certain.goods.and.services,.such.as.goods.
transaction,.to.the.Bank.of.Korea.or.any.other.foreign.exchange.          to.be.exported,.services.provided.abroad;.and.goods.and.
bank.                                                                     services.for.national.welfare,.related.to.culture.and.personal.
                                                                          services.
TAXATION
                                                                          TAX AND INVESTMENT INCENTIVES
Corporate Tax
•. Companies.subject.to.corporate.income.taxes.can.be.                    General
classified.according.to.the.status.of.the.corporation:.domestic.          •. Special.tax.exemption.or.reduction.may.apply.to.qualified.
or.foreign.and.for.profit.or.non.profit..Generally,.companies.are.        foreign.investors.based.on.their.investment.and.investment.ratio.
taxed.at.10%.for.income.equal.to.or.less.than.KRW.200.million.            and.location.of.the.investment.
and.22%.for.income.greater.than.KRW.200.million..Corporate.               •. Categories.of.qualified.investments.include.research.and.
tax.applies.to.Korea-derived.income.                                      human.resources.development,.international.capital.transactions,.
•. Generally,.a.branch.office.of.a.foreign.company.is.taxed.as.           investment.promotion.including.energy-economising.
a.domestic.company.on.Korean-source.income..If.a.tax.treaty.              and.environmental.conservation.facilities,.constructions,.
between.Korea.and.the.country.in.which.the.foreign.company.               manufacturing,.telecommunications,.information.services.and.
resides.allows.for.the.imposition.of.a.branch.profits.tax,.such.          other.scientific.technology.service.businesses.
branch.profits.tax.is.imposed.on.the.branch.office.as.provided.
for.in.the.applicable.treaty.                                             Incentives
                                                                          •. An.array.of.incentives.are.granted.to.qualified.foreign.invested.
Personal Income Tax                                                       companies.established.in.Foreign.Investment.Zones,.Free.
•. Resident.individuals.in.Korea.are.taxed.on.their.worldwide.            Trade.Zones,.and.Free.Economic.Zones,.which.include.various.
income..Non-resident.individuals.are.taxed.only.on.their.Korea-           reductions.or.exemptions.on.corporate.and.property.tax,.custom.
derived.income..Individual.income.is.subject.to.graduated.tax.            duties,.national.or.local.government.cash.grants,.and.certain.
rates.from.6%.to.35%.                                                     deregulations.to.help.facilitate.foreign.investments.
•. A.person.is.‘resident’.in.Korea.if.he.or.she.holds.his.or.her.
domicile.in.Korea.or.has.held.his.or.her.temporary.domicile.in.
Korea.for.one.year.or.more.                                               EMPLOYMENT LAW

Withholding Tax                                                           •. The.maximum.working.hours.are.40.hours.a.week.or.eight.
•. A.foreign.corporation.that.has.no.domestic.place.of.business.          hours.a.day..This.limit.may.be.exceeded.under.certain.specified.
in.Korea.is.subject.to.tax.on.its.Korea-derived.income,.including.        circumstances..
dividends,.interest.and.royalties,.on.a.withholding.basis.in.             •. Workers.within.the.protection.of.the.Labor.Standard.Act.are.
accordance.with.the.relevant.tax.law.and.tax.treaties..                   entitled.to.statutory.benefits.such.as.rest.days,.public.holidays,.
                                                                          annual.leave,.sick.leave,.hospitalisation.leave,.maternity.leave.
Real Property and Capital Gains Tax                                       and.termination.benefits.
•. Any.capital.gains.made.by.a.foreign.company.from.its.transfer.         •. Minimum.wage.for.2011.is.Korean.Won.4,320.per.hour.
of.real.property.is.subject.to.the.applicable.corporate.tax.rate,.        •. Subject.to.the.Trade.Union.and.Labor.Relations.Adjustment.
10%.for.income.equal.to.or.less.than.KRW.200.million.and.22%.             Act,.workers.are.free.to.establish.and/or.join.a.trade.union..Trade.
for.income.greater.than.KRW.200.million..Capital.gains.made.              unions.may.engage.employers.or.employer’s.associations.to.
by.transfer.of.stocks.or.equity.in.a.Korean.company.may.be.               bargain.and.enter.into.collective.agreements..
subject.to.withholding.taxes.unless.a.relevant.tax.treaty.provides.       •. Employers.and.employees.are.statutorily.required.to.withhold.
otherwise.                                                                pension.and.social.security.contributions.which.includes.
•. Foreign.individuals.may.be.subject.to.taxation.for.capital.gains.      National.Pension.(9%),.Medical.Insurance.(5.64%),.Long-term.
made.from.the.transfer.of.real.property.and.stocks.or.securities.         Care.Insurance.(13.1%.of.withheld.Medical.Insurance.amount),.
of.a.domestic.corporation..However.in.the.case.of.capital.gains.          and.Unemployment.Insurance.(1.15%),.and.Industrial.Accident.
from.the.transfer.of.real.property,.foreigners.may.benefit.from.          Compensation.Insurance.(between.0.7.to.3.6%).
a.special.long-term.holding.deduction.of.a.maximum.of.30%.
based.on.the.period.of.ownership.of.the.real.property..
                                                                          INTELLECTUAL PROPERTY
Other taxes
                                                                          •. Intellectual.property.rights.such.as.patents,.copyrights,.
•.Stamp.tax:.varies.between.KRW.100.and.KRW.350,000.
                                                                          trademarks,.trade.secrets.and.other.industrial.property.rights.are.
depending.on.the.type.of.taxable.document
                                                                          recognised.under.Korean.law..For.the.protection.of.such.rights,.
•. Customs.duty:.rate.varies.depending.on.the.classification.of.
                                                                          appropriate.application.and.registration.procedures.permit.the.
product
                                                                          holder.of.such.right.to.enjoy.exclusive.rights.and/or.protection.
•. Excise.tax:.rate.varies.between.2%.and.20%.depending.on.the.
                                                                          for.specific.periods.of.time..Registration.applications.for.patents,.
type.of.product


                                                                     53
REPUBLIC OF KOREA                                                            Doing Business in Asia Pacific

utility.models,.industrial.designs.and.trademarks.are.filed.with.
the.Korea.Intellectual.Property.Office..Copyrights.are.registered.
with.the.Korea.Copyright.Commission.
•. Korea.is.a.party.to.numerous.international.agreements.and.
treaties,.including.the.WTO.Agreement.on.Trade.Related.
Aspects.of.Intellectual.Property.Rights,.TRIPs.Agreement,.the.
Paris.Convention,.the.Patent.Cooperation.Treaty.(PCT),.the.
Budapest.Treat,.the.Universal.Copyright.Convention.(UCC).and.
the.Berne.Convention..
•. Korea’s.intellectual.property.law.conforms.to.international.
standards.and.provides.adequate.protection.to.both.local.and.
foreign.investors..



DISPUTE RESOLUTION

•. The.court.of.first.instance.for.both.criminal.and.civil.claims.is.
the.District.Court..Cases.may.go.on.appeal.to.the.High.Court.
and.then.to.the.Supreme.Court..Employment.disputes.are.heard.
by.the.District.Court..
•. Alternative.dispute.resolution.(‘ADR’).is.available.and.includes.
conciliation,.mediation.and.arbitration.
•. The.Korea.Commercial.Arbitration.Board.(‘KCAB’).is.the.
major.body.governing.domestic.and.international.commercial.
arbitration.in.Korea..The.fee.for.a.KCAB.arbitrator.varies.
depending.on.the.amount.of.money.in.dispute.
•. The.Korea.Copyright.Commission.provides.various.ADR.
services.for.the.settlement.of.copyright-related.disputes..


IMMIGRATION PROCEDURES

Passport and Visa Requirements
•. In.principle,.all.foreign.visitors.must.have.a.valid.passport.and.
obtain.a.visa.from.a.Korean.embassy.or.consulate.in.a.foreign.
country.in.order.to.enter.Korea..If.a.national.of.a.visa.waiver.
country,.such.person.can.enter.Korea.without.a.visa.as.long.as.
the.purpose.of.his/her.visit.is.tourism.or.other.temporary.visit..

Business Investment Visas and Work Visa
•. Depending.on.the.length.of.stay.and.the.nature.of.the.
business.activities.to.be.undertaken,.a.temporary.business.visa.
or.other.long-term.business.visa.can.be.issued.to.those.seeking.
entry.for.business.purposes..Family.members.of.a.person.eligible.
for.any.of.the.long-term.business.visas.may.be.eligible.for.a.
family.dependency.visa..A.temporary.employment.visa.or.other.
long-term.work.visa.may.also.be.issued.to.those.seeking.entry.
for.employment.purposes.depending.on.the.length.of.stay.and.
the.nature.of.the.employment.activity.
•. Foreigners.who.have.entered.Korea.on.a.long-term.visa.(not.
less.than.91.days).visa.must.apply.for.alien.registration.within.90.
days.of.his/her.arrival.in.Korea.at.a.local.immigration.office..�




                                                                        54
SINGAPORE

• Singapore is located on the southern tip of the Malaysian peninsula, 137 kilometres north
of the equator.
• Singapore has a British-based legal system and its corporate law operates on a common
law basis.
• English is the main spoken language and, as such, almost all business is conducted
in English.
• Currency: Singapore Dollar (SGD).
• Multi-racial.
• Singapore is an international finance and investment hub, a regional base for MNCs
and the world’s fourth-largest foreign exchange centre. With low taxes, double taxation
treaties, political and economic stability and international repute for compliance, it is an
ideal base for regional headquarters and holding companies, and a gateway for foreign
investments into the emerging Asian markets for businesses as well as high net worth
individuals.
• Investment growth areas include global logistics hub, technology and urban solutions
hub, manufacturing, investments, printing and imaging industry, research and
development, and intellectual property management hub.

BUSINESS PRESENCE                                                           before.a.foreigner.can.invest.in.Singapore..
                                                                            •. Licensing.requirements.are.largely.dependent.on.the.type.
•. Local.incorporation:.sole.proprietorship,.partnership,.limited.          of.business.activity.to.be.carried.on.in.Singapore.and.thus.the.
partnership,.limited.liability.partnership,.private.company.limited.        nationality.of.the.investor.will.not.affect.the.license.requirements..
by.shares,.public.company.limited.by.shares,.public.company.                 o.Some.of.the.business.sectors.which.may.require.a.license,.
limited.by.guarantee.                                                       depending.on.the.exact.scope.of.activities,.includes.food.and.
•. Branch.of.foreign.corporation:.Singapore.branch.of.a.foreign.            beverage.outlets,.employment.agencies,.hotels,.businesses.
company.                                                                    in.the.manufacturing.sector,.and.businesses.in.the.wholesale.
•. Others:.representative.office.                                           (import,.export,.and.distribution).sector..
                                                                             o.All.traders.who.import.and.export.goods.into.and.out.of.
                                                                            Singapore.are.required.to.apply.for.a.Central.Registration.
FOREIGN INVESTMENT RESTRICTIONS AND                                         Number,.which.will.be.the.identifying.number.used.for.all.
CONDITIONS                                                                  applications.for.import.and.export.permits..Today,.almost.all.
                                                                            business.licenses.and.permits.may.be.applied.for.over.the.
Restrictions in equity participation                                        internet.and.are.usually.processed.by.the.relevant.authorities.
                                                                            within.a.few.days.to.a.couple.of.weeks.
•. Generally,.there.are.no.restrictions.on.foreign.ownership.
of.a.corporate.entity.except.for.certain.industries.for.policy.
considerations.                                                             EXCHANGE CONTROL
•. Broadcasting.company:.foreign.ownership.of.equity.is.limited.
to.49%.                                                                     •. The.Exchange.Control.Act.governs.dealings.in.gold.and.
•. Newspaper.company:.there.are.two.classes.of.shares.in.                   foreign.currency,.and.payments.in.and.out.of.Singapore,.among.
a.newspaper.company.–.management.and.ordinary.shares..                      other.things..
No.management.shares.shall.be.issued.or.transferred.except.                 •. Singapore.generally.does.not.have.a.policy.for.capital.controls..
to.citizens.of.Singapore.or.corporations.that.have.been.                    Both.residents.and.non-residents.are.free.to.remit.Singapore.
granted.written.approval.by.the.Minister.for.Information,.                  dollar.funds.into.and.out.of.the.country,.and.to.purchase.or.sell.
Communications.and.the.Arts.                                                Singapore.dollars.in.the.foreign.exchange.market.
                                                                            •. Excessive.speculation,.whether.or.not.amounting.to.
Approvals and licensing                                                     ‘manipulation’,.is.abhorred.on.the.exchange.level..Futures.
•. Since.there.are.generally.no.restrictions.on.foreign.ownership.          and.securities.exchanges,.therefore,.have.rules.on.position.
of.corporate.entities,.special.approval.is.generally.not.required.          limits,.margin.levels,.large.position.reporting.and.financial,.


                                                                       55
SINGAPORE                                                                                                         Doing Business in Asia Pacific

administrative,.and.accounting.requirements.for.market.                   Directors’.fees,.consultation.fees.and.all.other.income.received.
participants.                                                             by.a.director.is.taxed.at.the.rate.of.20%..

                                                                          •. Tax.rates.for.resident.individuals
TAXATION
                                                                           Chargeable income      Rate (%)                Gross tax payable ($)
Corporate Tax
                                                                           First.$20,000          0                       0
•. A.company.is.taxed.at.a.flat.rate.of.17%.on.its.chargeable.
                                                                           Next.$10,000           2                       200
income.regardless.of.whether.it.is.a.local.or.foreign.company..In.
addition.to.the.low.tax.rate,.all.Singapore.companies.can.benefit.         First.$30,000          -                       200
from.either.the.partial.or.full.tax.exemption.schemes.in.place.            Next.$10,000           3.50                    350
•. Full.tax.exemption.scheme:.A.qualifying.company.will.enjoy.             First.$40,000          7                       550
a.full.tax.exemption.on.the.first.S$100,000.of.its.chargeable.             Next.$40,000                                   2,800
income.and.a.50%.tax.exemption.on.the.next.S$200,000.of.                   First.$80,000          11.5                    3,350
its.chargeable.income..The.exemption.applies.for.the.initial.              Next.$40,000                                   4,600
three.consecutive.years.of.assessment,.meaning.the.qualifying.
                                                                           First.$120,000         15                      7,950
company.will.enjoy.an.effective.tax.rate.of.only.about.5.7%.on.
                                                                           Next.$40,000                                   6,000
the.first.S$300,000.of.chargeable.income..A.company.will.qualify.
for.the.full.tax.exemption.scheme.if.it.satisfies.the.following.           First.$160,000         17                      13,950
criteria:.                                                                 Next.$40,000                                   6,800
 o.The.company.must.be.incorporated.in.Singapore.
 o.The.company.must.be.tax.resident.in.Singapore.for.the.year.of.          First.$200,000         18                      20,750
assessment.in.question.(a.company.is.tax.resident.in.Singapore.if.         Next.$120,000                                  21,600
control.and.management.of.the.company’s.business.is.exercised.
in.Singapore).                                                             First.$320,000         20                      42,350
 o.The.company.must.not.have.more.than.20.shareholders.                    Above.$320,000
 o.The.company.must.have.at.least.one.shareholder.who.is.an.
individual.beneficially.and.directly.holding.at.least.10%.of.the.
issued.ordinary.shares.of.the.company,.or.all.of.the.company’s.           Withholding Tax
shareholders.must.be.individuals.beneficially.and.directly.holding.       •. Interest,.commission,.fee.or.other.payment.in.connection.with.
the.shares.in.their.own.names.                                            any.loan.or.indebtedness:.15%**
•. Partial.tax.exemption.scheme:.Companies.that.do.not.qualify.           •. Royalty.or.other.lump.sum.payments.for.the.use.of.movable.
for.the.aforementioned.full.tax.exemption.scheme.may.benefit.             properties:.10%**
from.the.partial.tax.exemption.scheme.pursuant.to.which.a.                •. Payment.for.the.use.of,.or.the.right.to.use,.scientific,.technical,.
company.will.enjoy.a.75%.tax.exemption.on.the.first.S$10,000.             industrial.or.commercial.knowledge.or.information:.10%**
of.its.chargeable.income.and.a.50%.tax.exemption.on.the.next.             •. Rent.or.other.payments.for.the.use.of.movable.properties:.
S$290,000.of.its.chargeable.income..                                      15%**
 o.The.partial.tax.exemption.scheme.applies.to.Singapore-                 •. Technical.assistance.and.service.fees:.prevailing.corporate.tax.
incorporated.companies.as.well.as.Singapore.branches.of.                  rate..
foreign.companies,.regardless.of.when.they.were.incorporated.             •. Management.fees:.prevailing.corporate.tax.rate..
or.registered.
 o.The.scheme.applies.regardless.of.the.country.of.tax.residence.         **These.rates.apply.where.income.is.not.derived.by.the.non-
 o.There.are.no.restrictions.on.shareholding.for.the.scheme.to.           resident.person.through.its.operations.in.Singapore:.in.such.a.
apply.                                                                    case,.the.rates.are.to.be.applied.on.the.gross.payment.and.the.
                                                                          resultant.tax.payable.is.a.final.tax..However.if.income.is.derived.
Personal Income Tax                                                       by.the.non-resident.person.through.its.operations.in.Singapore,.
Different.tax.rates.apply.for.tax.residents.and.non-residents..A.         the.tax.rate.to.be.applied.on.the.gross.payment.will.be.20%.for.
person.will.be.treated.as.a.tax.resident.for.a.particular.year.of.        non-resident.individuals.and.the.prevailing.corporate.tax.rate.for.
assessment.if.he.is.a.Singapore.citizen,.a.Singapore.permanent.           persons.other.than.individuals..
resident.who.has.established.a.permanent.home.in.Singapore,.
or.a.foreigner.who.has.stayed.or.worked.in.Singapore.for.183.             Capital Gains Tax
days.or.more.in.the.previous.year.(except.for.a.director.of.a.            •. Capital.gains.are.not.subject.to.tax.in.Singapore,.however,.
company)..                                                                gains.regarded.as.trading.gains.may.be.considered.revenue.and.
                                                                          subject.to.income.tax..Therefore,.while.one-off.profits.from.the.
•. Tax.rates.for.non-resident.individuals                                 sale.of.shares.and.real.property.will.not.generally.be.taxed,.a.
 o.Employment.income:.Employment.income.is.taxed.at.15%.or.               vendor.who.deals.in.shares/property.on.a.regular.basis.may.be.
the.resident.rate,.whichever.gives.rise.to.a.higher.tax.amount.           taxed.on.profits.received.
 o.Directors’.fees,.consultation.fees.and.all.other.income:.


                                                                     56
SINGAPORE                                                                                                    Doing Business in Asia Pacific

Indirect taxes                                                            •. Investment.Allowance:.Given.for.fixed.capital.expenditure.for.
•. .Stamp.Duty.on.Transfer.of.Shares.in.Private.Companies..The.           certain.projects..This.serves.as.a.further.capital.allowance.on.
stamp.duty.payable.in.respect.of.share.transfers.in.Singapore.            qualifying.equipment.costs.incurred.within.a.set.period.
is.S$0.20.for.every.S$100,.or.any.part.thereof,.of.the.amount.of.         •. Overseas.Enterprise.Incentive:.Provides.tax.exemption.on.
the.consideration.or.the.net.asset.value.(the.‘NAV’),.whichever.          qualifying.income.from.approved.overseas.investment/projects.
is.higher..NAV.is.computed.based.on.the.difference.between.               for.up.to.10.years.
the.assets.and.the.liabilities.of.a.company..Exemptions.may.be.           •. Enterprise.Investment.Incentive:.An.eligible.investor.of.an.
available.in.specific.limited.instances.                                  approved.start-up.company.may.be.able.to.deduct.losses.arising.
• Goods.and.Services.Tax.(‘GST’). GST.is.a.self-assessed.                 from.the.sale.of.qualifying.shares.held.by.him.from.such.start-up.
tax..Businesses.are.required.to.continually.assess.the.need.to.           company.or.the.liquidation.of.the.start-up.company.
be.registered.for.GST..In.most.cases,.registering.for.GST.is.             •. Research.Incentive.Scheme.for.Companies:.Provides.co-
compulsory.when:.the.turnover.of.your.business.is.more.than.$1.           funding.to.support.the.set-up.of.research.and.development.
million.for.the.past.12.months;.or.you.are.currently.making.sales.        centres.and/or.the.development.of.in-house.research.and.
and.you.can.reasonably.expect.the.turnover.of.your.business.to.           development.capabilities.in.strategic.areas.of.technology.
be.more.than.$1.million.for.the.next.12.months..A.business.can.           •. Innovation.Development.Scheme:.Provides.co-funding.to.
also.choose.to.be.voluntarily.registered.for.GST.                         support.innovation.in.products,.processes.and.applications.
                                                                          •. Initiatives.in.New.Technology:.Provides.co-funding.to.support.
Double taxation treaties                                                  manpower.development.in.the.application.of.new.technologies,.
•. Singapore.currently.has.comprehensive.double.taxation.                 industrial.R&D.and.professional.know-how..
treaties.(‘DTA’).with.more.than.60.countries.and.seven.limited.           •. Double.Deduction.for.Overseas.Investment.Development.
DTAs.(relating.to.limited.sources.of.income,.generally.from.              Expenditure:.This.encourages.Singapore-registered.businesses.
shipping.and.air.transport)..                                             to.explore.overseas.investment.opportunities.by.allowing.
•. The.scope.of.the.DTAs.is.confined.to.residents.of.Singapore.           double.deductions.for.eligible.expenses.such.as.airfare,.
and.the.treaty.partner.only..Non-residents.of.either.country.will.        accommodation,.rental.and.maintenance.of.office.facilities,.
not.enjoy.the.concessionary.benefits.provided.under.the.DTA..             subsistence.for.employees.and.consultation.fees..
                                                                          •. Headquarters.Programme:.To.encourage.companies.to.use.
                                                                          Singapore.as.a.base.for.conducting.headquarters.management.
TAX AND INVESTMENT INCENTIVES                                             activities..Concessionary.tax.rates.are.applicable.for.entities.
                                                                          incorporated.or.registered.in.Singapore.which.provide.
Productivity and Innovation Credit                                        management,.technical,.corporate.support.and.headquarters-
•. The.Productivity.and.Innovation.Credit.(the.‘P&I.Credit’).             related.services.and.business.expertise.to.its.offices.or.
provides.significant.tax.deductions.for.investments.in.a.                 associated.companies.outside.Singapore.on.a.regional.or.global.
broad.range.of.activities.along.the.innovation.value.chain..              basis.
All.businesses.will.be.eligible.for.the.P&I.Credit.from.year.             •. Approved.Foreign.Loan.Incentive:.This.incentive,.which.
of.assessment.(‘YA’).2011.to.YA.2015,.based.on.the.amount.                provides.for.reduced.rates.of.withholding.tax,.is.available.to.
they.invest.in.any.of.the.following.activities:.research.and.             companies.wanting.to.raise.a.loan.of.not.less.than.S$200,000.
development,.registration.of.intellectual.property,.acquisition.          from.a.non-resident.by.means.of.a.financial.agreement.whereby.
of.intellectual.property.rights,.training.of.employees,.purchase/         credit.facilities.are.granted.for.the.purchase.of.productive.
lease.of.prescribed.automation.equipment,.and.investments.in.             equipment.for.the.purposes.of.its.trade.or.business.
approved.design.projects.                                                 •. Approved.Royalties.Incentives:.Full.or.partial.exemption.on.
•. Businesses.can.deduct.from.their.taxable.income.400%.of.the.           withholding.tax.for.royalty.payments.or.technical.assistance.
expenditure.on.each.of.these.six.activities,.subject.to:                  fees.payable.to.non-residents..This.includes.royalties,.fees.and.
 o.YA.2011.and.YA.2012:.a.combined.cap.of.S$800,000.of.                   contributions.to.R&D.costs.paid.for.the.transfer.of.technology.
expenditure.for.each.activity.                                            •. Venture.Capital.Fund.Incentive:.An.approved.venture.
 o.YA.2013.to.YA.2015:.a.combined.cap.of.S$1,200,000.of.                  company.may.be.exempt.or.subject.to.the.concessionary.tax.
expenditure.for.each.activity..                                           rate.on.qualifying.income.derived.from.approved.investments,.
                                                                          subject.to.various.conditions.
Incentives and programmes: All.incentive.schemes.come.with.a.             •. Double.Tax.Deduction.Scheme:.This.allows.an.approved.
list.of.qualifying.conditions.which.must.be.met.before.the.benefit.       company.to.deduct.approved.project.expenses.twice.against.
of.the.tax.concession/exemption.is.granted.                               their.taxable.income..
                                                                          •. Global.Trader.Programme:.The.programme.grants.a.
•. Pioneer.Incentive:.Tax.relief.may.be.granted.to.a.pioneer.             concessionary.tax.rate.on.offshore.trading.income.from.
industry..Income.derived.from.its.pioneer.activities.will.be.             qualifying.commodities.and.products.
tax.exempt.for.a.period.of.up.to.15.years.provided.specified.
conditions.are.satisfied.
•. Development.and.Expansion.Incentive:.Entitles.the.company.
to.be.taxed.at.the.concessionary.rate.of.not.less.than.5%.on.
expansion.income.from.qualifying.activities..


                                                                     57
SINGAPORE                                                                                                                           Doing Business in Asia Pacific


EMPLOYMENT LAW                                                                                 court.and.small.claims.tribunals..A.senior.district.judge.overlooks.
                                                                                               the.subordinate.courts..
Statutory contributions
•. Central.Provident.Fund:.Working.Singaporeans.and.their.                                     Alternative Dispute Resolution
employers.make.statutory.monthly.contributions.to.the.CPF.and.
these.contributions.go.into.three.accounts:                                                    •. Singapore.is.now.recognised.as.the.leading.choice.for.
 o.Ordinary.Account:.the.savings.can.be.used.to.buy.a.home,.                                   Alternative.Dispute.Resolution.(‘ADR’).in.Asia..Singapore.is.also.
pay.for.certain.types.of.insurance,.investment.and.education.                                  a.party.to.the.Convention.on.the.Recognition.and.Enforcement.
 o.Special.Account:.for.old.age,.contingency.purposes.and.                                     of.Foreign.Arbitral.Awards.1958.(the.‘New.York.Convention’).and.
investment.in.retirement-related.financial.products.                                           hence,.arbitral.awards.rendered.here.are.potentially.enforceable.
 o.Medisave.Account:.the.savings.can.be.used.for.hospitalisation.                              in.more.than.140.jurisdictions.
expenses.and.approved.medical.insurance.                                                       •. The.Singapore.Mediation.Centre.(‘SMC’),.which.is.a.company.
                                                                                               limited.by.the.guarantee.of.the.Singapore.Law.Academy,.
•. CPF.Contribution.and.Allocation.Rates                                                       provides.ADR.services.(such.as.mediation.and.adjudication).
.                                                                                              and.ADR.training.(in.negotiation,.mediation.and.conflict.
                                                              Credited.into                    management)..The.SMC.has.deep.sector-specific.competencies.
 Employee.   Contribu-   Contribu-   Total.con-   Ordinary.    Special.       Medisave.
                                                                                               in.construction,.medical,.technology.and,.more.recently,.sport.
 age         tion.by.    tion.by.    tribution    account      account        account          mediation.
 (years)     employer    employee    (%.of.       (%.of.       (%.of.         (%.of.
             (%.of.      (%.of.      wage)        wage         wage)          wage)
             wage)       wage)

 35.and. 15.5            20          35.5         23           5.5            7                IMMIGRATION PROCEDURES
 below
 36–45       15.5        20          35.5         21           6.5            8                Passport and visa requirements
 46–50       15.5        20          35.5         19           7.5            9                •. Entry.visa:.Most.foreigners.are.exempt.from.being.required.
                                                                                               to.obtain.an.entry.visa.prior.to.travel.into.Singapore..Foreigners.
 51–55       11.5        18          29.5         13           7.5            9
                                                                                               who.require.a.visa.include.citizens.of.China,.India,.Myanmar,.
 56–60       15.5        12.5        21           11.5         0.5            9                Georgia,.Nigeria.and.the.Commonwealth.of.Independent.States..
 61–65       6           7.5         13.5         3.5          0.5            9.5              •. Social.visit.pass:.A.social.visit.pass.valid.for.between.14.days.
 66.and. 6               5           11           1            0.5            9.5              and.three.months.will.be.issued.to.all.visitors.to.Singapore..The.
 above                                                                                         duration.of.the.pass.depends.on.the.nationality.of.the.person.
                                                                                               and.how.often.he/she.travels.into.Singapore.


DISPUTE RESOLUTION                                                                             Work passes
                                                                                               A.person.who.wishes.to.stay.and.work.in.Singapore.is.required.
•. Being.a.former.British.colony,.the.legal.system.in.Singapore.                               to.obtain.the.appropriate.pass.from.the.Ministry.of.Manpower.
is.based.on.English.common.law..Singapore’s.law.is.founded.on.                                 before.commencing.work..
four.pillars:.constitution,.legislation,.subsidiary.legislation.and.
legal.decisions.made.by.judges.                                                                •. Employment.Pass.(‘EP’):.The.EP.is.for.foreigners.who.earn.
•. Singapore’s.common.law.is.characterised.by.the.practice.                                    a.fixed.monthly.salary.of.more.than.S$2,500.and.who.have.
of.judicial.precedent..In.other.words,.the.law.is.created.by.                                  recognised.qualifications..There.are.various.categories.of.EP.
judgements.handed.down.by.the.courts..In.this.regard,.the.                                     depending.on.the.monthly.salary.and.qualifications.of.the.
judges.are.only.required.to.apply.the.ratio.decidendi.(or.the.                                 foreigner..
operative.reason.for.the.decision).of.the.higher.court.within.the.                             •. S.pass:.This.pass.is.for.foreign.mid-level.skilled.workers.who.
same.hierarchy..                                                                               earn.a.fixed.monthly.salary.of.at.least.S$1,800..
•. Major.portions.of.Singapore.law,.particularly.contract.law,.                                •. Personalised.Employment.Pass.(‘PEP’):.The.PEP.is.similar.to.
equity.and.trust.law,.property.law.and.tort.law,.are.largely.judge-                            the.EP,.except.a.PEP.holder.is.not.tied.to.any.particular.employer.
made,.though.certain.aspects.have.now.been.modified.to.some.                                   and.can.switch.employment.any.time.he/she.wishes.without.
extent.by.statutes..On.the.contrary,.Singapore’s.criminal.law.is.                              having.to.apply.for.another.pass..Additionally,.a.PEP.holder.can.
largely.statutory.in.nature.and.can.be.traced.to.the.exhaustive.                               remain.in.Singapore.for.up.to.six.months.in.between.jobs.to.
penal.code..                                                                                   evaluate.new.employment.opportunities..The.PEP.is.valid.for.
                                                                                               five.years.and.will.be.granted.on.the.strength.of.an.EP.holder’s.
Court system                                                                                   individual.merits.and.provided.certain.conditions.are.met..
•. The.Chief.Justice,.who.is.appointed.by.the.President,.is.the.                               •. Work.Permit:.A.work.permit.is.for.unskilled.or.semi-skilled.
head.of.the.judiciary..The.judiciary.is.made.up.of.the.supreme.                                foreigners.earning.a.monthly.basic.salary.of.not.more.than.
court.and.the.subordinate.courts..The.supreme.court.hears.                                     S$1,800.
both.civil.and.criminal.matters.and.is.separated.into.the.court.
of.appeal.and.the.high.court..The.subordinate.courts.consist.
of.district.courts,.magistrates’.courts,.juvenile.courts,.coroners’.

                                                                                          58
SINGAPORE                                                              Doing Business in Asia Pacific

Permanent residence
•. Foreigners.may.apply.for.permanent.residence.through.a.
variety.of.schemes..
•. The.most.common.method.of.obtaining.permanent.residence.
is.to.work.in.Singapore.under.an.EP.or.S.pass.for.a.couple.of.
years.before.applying.for.permanent.residence..
•. Applicants.who.are.not.working.in.Singapore.may.also.obtain.
permanent.residence.by.investing.certain.minimum.sums.in.
Singapore.(in.business,.venture.capital,.property,.etc)..�




                                                                  59
SRI LANKA

• Sri Lanka boasts a recorded history of over 25 centuries. Before the advent of the
westerners, the country was ruled by the Sinhala kings and, at times, by the Tamil kings
who came to the country from south India.
• Sri Lanka is located in the Indian Ocean, between 79°42’ and 81°52’ east longitude and
5°55’ to 9°50’ north latitude, 650km north of the equator.
• The island was known as Ceylon for over one and a half centuries until it became a
republic in 1972 and adopted its indigenous name Sri Lanka. Since the adoption of the
second republican constitution in 1978, its official name has been the Democratic Socialist
Republic of Sri Lanka.
• The present constitution provides for an executive presidency with a parliamentary
system of government.
• The former administrative capital, Colombo, remains the commercial capital. Sri
Jayawardenapura, which was a suburban town, and which is home to the new parliament is
the new administrative capital of the country.
• Though the country may be small in size, it has a multi-ethnic, multi-religious and
multilingual population of more than 20 million people. The Sinhala people comprise 73.8
per cent of the community, while 18.5 per cent are Tamils and the balance are Moors and
others.
• The main religious distribution is 69.3 per cent Buddhists, 15.5 per cent Hindus, 7.5 per
cent Muslims and 7.6 per cent Christians. Others constitute 0.1 per cent.
• Sinhala and Tamil are the official languages. English is adopted as a link language and
widely used in all commercial matters.
• Sri Lanka has a rich legal heritage, with a blend of English law and principles of Roman-
Dutch law constituting the common law of the country. Sri Lanka has also preserved
customary laws such as Kandyan, Thesawalamai and Muslim law – though these mainly
govern personal relations they sometimes impact on property matters.
• Currency: Sri Lankan rupee (LKR)

FORMS OF BUSINESS UNDERTAKINGS                                             listed.as.quoted.companies.on.the.Colombo.Stock.Exchange.if.
BUSINESS PRESENCE                                                          they.comply.with.the.rules.of.the.Colombo.Stock.Exchange.
                                                                           •. The.doctrine.of.‘ultra.vires’.is.no.longer.a.rule.of.Sri.Lanka’s.
•. Three.types.of.business.undertakings.exist.in.Sri.Lanka:.               company.law.
proprietorships,.partnerships.and.companies.                               •. A.company.need.not.have.authorised.capital.or.par.value.for.
•. The.Law.of.Partnership.in.Sri.Lanka.is.the.English.law,.subject.        shares.under.the.new.Act..A.stated.capital.concept.has.been.
to.certain.provisions.contained.in.the.Partnership.Ordinance..             introduced.by.the.new.act..Provisions.are.included.in.the.Act.to.
•. In.terms.of.the.Prevention.of.Frauds.Ordinance,.any.                    protect.minority.shareholders.
agreement.for.establishing.a.partnership.should.be.in.writing.if.          •. Minority.buy-out.rights.are.also.recognised.in.the.new.law
the.capital.of.the.partnership.exceeds.Rs.1,000..
•. Proprietorships.and.partnerships.can.carry.on.businesses.               OVERSEAS COMPANY
under.business.names.registered.under.the.Business.Names.                  A.company.incorporated.outside.Sri.Lanka.can.establish.a.place.
Statutes.                                                                  of.business.in.Sri.Lanka.and.register.its.branch.in.Sri.Lanka.under.
•. The.most.accepted.form.of.business.undertaking.is.                      the.provisions.of.Part.XVIII.of.the.Companies.Act.subject.to.
establishment.of.companies..Companies.can.be.either.public.or.             stipulations.made.by.or.under.the.Exchange.Control.Act.
private.(companies.incorporated.for.charitable.objects.etc.are.
classified.as.guarantee.companies)..Public.companies.can.be.



                                                                      60
SRI LANKA                                                                                                         Doing Business in Asia Pacific


FOREIGN INVESTMENT AND ITS PROTECTION                                        Law,.if.they.meet.certain.criteria.
                                                                             •. General incentives under the normal laws of the country
•. Foreign.investment.in.the.local.equity.market.is.open.to.                 – permission under Section 16 of the BOI law:.The.incentives.
approved.country.funds.and.regional.funds.(approval.is.given.by.             offered.under.this.regime.are.also.available.to.both.local.and.
the.Ministry.of.Finance,.which.is.a.formality),.citizens.of.foreign.         foreign.investors..Firms.that.do.not.qualify.for.concessions.under.
states.(whether.resident.in.Sri.Lanka.or.outside.Sri.Lanka).and.Sri.         Section.17.of.the.BOI.law.may.seek.incentives.available.under.
Lankans.resident.outside.Sri.Lanka..Foreign.investors.may.invest.            the.normal.laws.of.the.country,.such.as.the.Inland.Revenue.Act,.
in.up.to.100.per.cent.of.the.issued.capital.of.a.limited.company.            Turnover.Tax.Act,.Excise.(Special.Provisions).Act.and.Customs.
(subject.to.certain.exclusions,.limitations.and.conditions.as.               Ordinance..Foreign.investment.entry.to.operate.under.the.
detailed.in.this.document)..The.investment.in.an.unlisted.                   normal.laws.is.conferred.under.Section.16.of.the.BOI.law.
company.requires.prior.approval.from.the.relevant.authorities..              which.entities.the.enterprise.to.repatriate.profits.and.dividends.
•. Foreign.investment.is.permitted.in.all.sectors.of.the.economy,.           attributable.to.foreign.shareholders..
excluding.the.following.activities,.which.are.reserved.for.citizens.         •. Resident visas:.Foreign.investors.who.make.substantial.
of.Sri.Lanka:.(a).money.lending;.(b).pawn.broking;.(c).retail.trade.         investments.in.Sri.Lanka.are.eligible.for.a.resident.visa.
with.a.capital.investment.of.less.than.US$.1.million;.(d).coastal.
fishing;.(e).provision.of.security.services.including.security.
management,.assessment.and.consulting.to.individuals.or.                     STRATEGIC DEVELOPMENTS PROJECTS ACT
private.organisations.                                                       NO.14 OF 2008
•. In.certain.areas.foreign.investment.is.restricted.to.40%.or.such.
other.percentage.stipulated.by.the.Board.of.Investment.(BOI).of.             •. This.new.law.has.been.enacted.to.promote.strategic.
Sri.Lanka.or.the.Control.of.Exchange.                                        development.projects.with.large.investments.(over.US$100M),.
                                                                             to.provide.a.tax-free.period.and.also.exemptions.from.various.
                                                                             revenue.and.exchange.control.statutes.
PROTECTION OF FOREIGN INVESTMENT                                             •. Such.benefits.and.exemptions.will.be.subject.to.cabinet.
                                                                             approval.and.parliamentary.sanction.
•. Foreign.investment.is.guaranteed.protection.by.Article.157.of.
the.Constitution.of.the.Republic.of.Sri.Lanka..
•. Sri.Lanka.has.entered.into.investment.protection.agreements.              EXCHANGE CONTROL
with.several.countries,.including.Belgium,.China,.Denmark,.
Egypt,.France,.Finland,.Germany,.Italy,.Indonesia,.India,.Iran,.             •. SECURITIES INVESTMENT ACCOUNT (SIA).–.The.
Japan,.Korea,.Luxembourg,.Malaysia,.The.Netherlands,.Norway,.                media.through.which.foreigners.can.invest.in.the.equity.of.Sri.
Romania,.Singapore,.Sweden,.Switzerland,.Thailand,.The.UK.                   Lankan.companies..
and.The.USA..Bi-lateral.agreements.are.valid.for.10.years..They.             •. SIA.can.only.be.credited.with.inward.remittances.or.transfer.
are.extended.automatically.unless.terminated.by.either.party..If.            from.a.non-resident.foreign.currency.account.or.from.an.
the.agreements.are.terminated,.investments.already.made.are.                 offshore.unit.of.a.bank.and.converted.into.Sri.Lanka.Rupees.at.
protected.for.another.10.years..                                             the.prevailing.rate.of.exchange..The.credits.to.this.account.will.
•. Sri.Lanka.is.also.a.founder.member.of.the.Multilateral.                   comprise.inward.remittances,.sale.proceeds.of.shares,.dividends.
Investment.Guarantee.Agency.(MIGA).of.the.World.Bank,.which.                 and.commissions.to.such.transactions..Funds.in.this.account.may.
provides.guarantees.against.non-commercial.risks,.such.as.                   be.utilised.for.all.payments.related.to.share.transactions,.such.as.
those.arising.out.of.political.changes.or.political.instability.and.         brokers’.fees.and.bank.charges,.and.account.holder’s.expenses.
insecurity..MIGA.issues.guarantees.including.co-insurance.and.               in.Sri.Lanka,.subject.to.certain.limits..Tax.clearance.must.be.
re-insurance.of.investments,.against.non-commercial.risks.such.              obtained.for.remittance.of.dividends.abroad,.confirming.that.
as.losses.resulting.from.expropriation,.breach.of.contract,.war.             withholding.tax.has.been.paid..Sale.proceeds.of.shares.of.listed.
and.civil.disturbances..                                                     companies.may.be.remitted.without.delay..Such.remittances.
                                                                             are.made.by.banks.without.the.need.for.prior.exchange.control.
                                                                             approval..Although.remittances.are.subject.to.the.production.of.
INCENTIVE PACKAGES                                                           a.tax.clearances.certificate,.the.procedure.for.the.issuance.of.this.
                                                                             certificate.has.been.streamlined..
•. As.an.impetus.to.the.development.effort,.the.BOI.provides.                •. The.Controller.of.Exchange.has.granted.a.general.permission.
a.wide.range.of.incentives.and.concessions..These.incentives.                for.issue.of.debentures.in.Sri.Lankan.Rupees.in.a.company.
and.concessions.depend.on.the.type.of.project.proposed..The.                 classified.as.a.specified.business.enterprise.in.terms.of.the.Sri.
incentives.offered.belong.to.two.classes.or.‘regimes‘,.and.the.              Lanka.Accounting.and.Auditing.Standers.Act.No.15.of.1995.
enterprise.may.become.eligible.for.incentives.offered.by.either.             to.foreign.investors.subject.to.terms.and.conditions.set.out.in.
of.these.two.regimes..Reproduced.below.are.the.investment.                   Gazette.No.1681/11.dated.22.November.2010..
incentives.as.announced.by.the.BOI..                                         •. Exchange.control.regulations.in.respect.of.setting.up.by.
•. BOI incentives under Section 17 of the BOI law:.Special.                  a.Sri.Lankan.company.and.maintaining.a.branch.or.liaison/
incentives,.outside.identified.laws.of.the.country,.are.available.to.        representative.office.have.now.been.relaxed.subject.to.certain.
enterprises.approved.by.the.BOI,.under.Section.17.of.the.BOI.                stipulations.made.by.the.Controller.of.Exchange..Likewise.


                                                                        61
SRI LANKA                                                                                                      Doing Business in Asia Pacific

exchange.control.restrictions.applicable.to.foreign.liaison.            Employees.(Regulation.of.Employment.and.Remuneration).Act,..
branch/representative.offices.in.Sri.Lanka.have.also.been.              Factories.Ordinance,.Industrial.Disputes.Act,.and.the.Termination.
relaxed.                                                                of.Employment.of.Workmen.(Special.Provisions).Act.
                                                                        •. Normal working hours:.not.to.exceed.nine.hours.in.any.
                                                                        one.day.(including.one.hour.for.meals.and.rest),.and.not.to.
LAWS OF PROPERTY AND CONTRACTS                                          exceed.45.hours.in.any.week.
                                                                        •. Employee benefits:.employees.are.entitled.to.various.
•. Roman-Dutch.Law.is.the.foundation.of.the.law.of.property,.but.       benefits,.including.overtime.payments,.annual.leave,.sick.leave,.
it.has.been.much.amended.by.legislation.and.local.custom.               casual.leave.and.maternity.benefits.for.females,.employment.
•. In.view.of.the.provisions.of.section.2.of.the.Prevention.of.         provident.fund,.employee.trust.fund,.and.gratuity.payments.
Frauds.Ordinance,.the.following.classes.of.contracts.are.of.no.         under.various.statutes..The.government.has.announced.the.
force.or.avail.in.law.unless.in.writing.and.signed.in.Sri.Lanka.        proposed.enactment.of.legislation.to.provide.pension.benefits.
in.the.presence.of.a.licensed.notary.public.and.two.or.more.            to.private.sector.employees.
witnesses.and.attested:                                                 •. Termination of Employment of Workmen (Special
 o.Any.sale.purchase.transfer.assignment.or.mortgage.of.land.or.        Provisions) Act No.45 of 1971.(as.amended.by.Law.No.44.
other.immovable.property;                                               of.1976.and.Act.No.51.of.1988).contains.stringent.provisions.
 o.Any.promise.bargain.contract.or.agreement.for.effecting.             in.respect.of.the.termination.of.employment.of.workers..Any.
any.such.object.and.for.establishing.any.security.interest.or.          employer.employing.15.or.more.workmen.on.average.in.a.
encumbrance.affecting.the.land.or.other.immovable.property,.            scheduled.employment.shall.not.terminate.(for.any.reason.
and;                                                                    whatsoever.other.than.by.reason.of.a.punishment.imposed.
 o.Any.contract.or.agreement.for.the.future.sale.or.purchase.of.        by.way.of.disciplinary.action).the.services.of.a.workman.who.
land.or.other.immovable.property.                                       has.one.year.or.more.service.under.the.employer.without.the.
•. If.a.foreigner.wants.to.purchase.a.property.he.or.she.will.          workman’s.prior.written.consent.or.the.prior.written.approval.
have.to.pay.100.per.cent.tax..This.tax.is.intended.to.discourage.       of.the.Commissioner.of.Labour..Termination.that.contravenes.
foreigners.from.acquiring.property.in.Sri.Lanka..However.there.         this.act.is.illegal.and.null.and.void..Any.complaint.to.the.
are.certain.qualifications.to.this.rule.                                Commissioner.of.Labour.in.respect.of.a.termination.that.violates.
•. The.restriction.on.ownership.of.agricultural.land.brought.in.by.     this.act.should.be.lodged.within.six.months.of.the.termination.
the.Land.Reform.Law.still.continues..An.individual.or.company.
can.own.a.maximum.of.50.acres.of.agricultural.land,.of.which.the.
paddy.lands.should.not.exceed.25.acres.                                 INTELLECTUAL PROPERTY LAWS

                                                                        •. Intellectual.property.law.in.Sri.Lanka.took.a.step.forward.with.
TAXATION                                                                the.promulgation.of.the.Intellectual.Property.Act.No.36.of.2003..
                                                                        This.new.Act,.which.came.into.effect.on.12.November.2003,.
•. The.annually.voted.Inland.Tax.Revenue.Act.constitutes.the.           repealed.the.Code.of.Intellectual.Property.Act.No.52.of.1979,.
basis.for.the.stipulation.of.tax.rates..The.fiscal.year.runs.from.1.    and.all.amendments.made.thereunder.
April.to.31.March..                                                     •. As.well.as.incorporating.many.of.the.provisions.of.the.old.act,.
•. Personal income tax:.tax-free.allowance,.Rs.500,000.00.              the.new.act.also.includes.a.number.of.new.provisions.designed.
per.annum,.with.a.maximum.rate.of.tax.of.24%                            to.bring.Sri.Lanka’s.IP.law.into.compliance.with.the.TRIPs.
•. Corporate taxation:.maximum.rate.28%                                 Agreement.
•. Capital.gains,.wealth.tax.and.estate.duty.are.abolished.             •. In.particular,.the.new.act.includes.substantial.revisions.in.the.
•. Value.added.tax.is.payable.at.12%                                    areas.of.copyright,.patents.and.designs..The.provisions.relating.
•. Stamp.duty.is.payable.on.certain.transactions.to.provincial.         to.unfair.competition.have.also.been.expanded.
council.and.on.others.to.the.central.government.at.rates.               •. The.current.act.provides.for.both.certification.marks.and.
specified.for.different.categories.of.transactions.                     collective.marks..Special.provisions.have.been.introduced.with.
•. Double taxation treaties:.double.tax.agreements.are.in.              regard.to.geographical.indications..There.is.also.provision.for.the.
force.with.a.number.of.countries,.including.Australia,.Belgium,.        protection.of.well-known.marks.and.the.criteria.that.should.be.
Canada,.China,.Denmark,.Finland,.France,.Germany,.India,.               taken.into.account.in.determining.whether.a.mark.is.well-known..
Indonesia,.Italy,.Japan,.Korea,.Kuwait,.Malaysia,.Mauritius,.           •. Well-known.marks.will.not.be.registered.if.they.are.identical,.or.
Nepal,.Netherlands,.Norway,.Pakistan,.Poland,.Romania,.Russia,.         sufficiently.similar,.to.constitute.a.translation.or.transliteration.of:.
Saudi.Arabia,.Singapore,.Sweden,.Switzerland,.Thailand,.The.UK,.        i).marks.for.identical.or.similar.goods.or.services.of.a.third.party;.
The.UAE.and.The.USA.                                                    or.ii).marks.well-known.or.registered.in.Sri.Lanka.for.goods.or.
                                                                        services.that.are.not.identical.to.or.similar.to.those.in.respect.of.
                                                                        which.registration.has.been.applied.for..
LABOUR LAWS                                                             •. Under.the.current.act,.a.mark.will.not.be.registered.in.respect.
                                                                        of.goods.or.services.that.are.prohibited.from.trading.in.Sri.Lanka.
•. Principal laws.that.regulate.the.various.aspects.of.the.             •. The.current.act.also.expands.the.provisions.relating.to.unfair.
employer–employee.relationship.include..Shop.and.Office.                competition,.which.is.classified.as.any.act.in.relation.to.any.


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SRI LANKA                                                                 Doing Business in Asia Pacific

goods.or.marks.in.the.course.of.industrial.or.commercial.activity.
that.is.contrary.to.honest.practice..These.provisions.apply.
independently.and.in.addition.to.other.provisions.in.respect.of.
infringement.of.intellectual.property.rights..


RECIPROCAL ENFORCEMENT OF FOREIGN
JUDGEMENTS AND DISPUTE RESOLUTION

Judgements.of.foreign.courts.of.only.a.few.commonwealth.
jurisdictions.are.enforceable.in.Sri.Lanka.by.virtue.of.the.
Reciprocal.Enforcement.of.Foreign.Judgments.Ordinance..
However,.foreign.arbitral.awards.can.be.enforced.in.terms.of.the.
Arbitration.Act.No.11.of.1995,.which.was.enacted.to.give.effect.
to.the.New.York.Convention.

For.more.details.of.the.legal.aspects.of.doing.business.in.Sri.
Lanka,.visit.www.mnlaw.lk..�
.




                                                                     63
TA I W A N

• Taiwan is geographically located North of the Philippines and south east of China,
proximity to the East China Sea, South China Sea, Philippine Sea and Taiwan Strait.
• Total area: 36,188 square kilometers.
• Climate: Oceanic and subtropical monsoon.
• Population: 23 million inhabitants.
• Population density: 637 people per square kilometer.
• Ethnic background : Hakka, Fujianese, Indigenous, Mainland Chinese.
• Population by age: about 16.3% of the total population is less than 15 years of age, and
10.6% is greater than 65 years of age.
• Taiwan has two levels of government, the Central Government and the Local/Municipal
Government. The Central Government is composed of five branches: Executive,
Legislative, Judicial, Control and Examination Yuan.
• In contrast to countries such as the United States or England, the legal system in Taiwan
is based on civil law, similar to Germany or Japan. The primary source of law comes from
statutes rather than judicial decisions.
• One significant fact for foreign nationals doing business in Taiwan is: unless otherwise
provided by law, legal documents do not have to be in Chinese. English legal documents
are accepted in general and are as binding and effective as if they were written in Chinese.
• Mandarin Chinese (official language), Taiwanese, Hakka and other Chinese dialects.
 English and Japanese are the most commonly used foreign languages.
• Ethnic Groups: Taiwanese (including Hakka) 84%, mainland Chinese 14%, indigenous 2%.
• Religions: mixture of Buddhist and Taoist 93%, Christian 4.5%, other 2.5%.
• Investment Growth Areas : as the economy has shifted from labor-intensive industries to
knowledge-based and capital-intensive industries, there are a variety of new investment
opportunities available in Taiwan. Some of the world’s leading high-tech players are
located in Taiwan. The prime industries for potential investment include: semi-conductors,
opt-electronics, precision machinery and instrumentation, metals, computers and
communication equipment, electrical products, aviation, and automotive, biomedical and
pharmaceutical products.
• Currency: New Taiwan dollar (NT$)

HISTORICAL AND CURRENT BUSINESS                                          shift.in.manufacturing.focus.allowed.the.economy.to.grow.at.an.
ENVIRONMENT                                                              average.annual.rate.of.almost.10.per.cent..This.was.more.than.
                                                                         double.the.economic.growth.rate.of.industrialized.countries.
•. Taiwan’s.economy.has.gone.through.several.distinctive.phases..        during.the.same.period..The.1980s.and.1990s.saw.industrial.
Until.the.1950s,.Taiwan’s.economy.was.mainly.agrarian..This.             output.shifting.to.chemical.and.high.tech.production..Plastics.
was.due.to.its.subtropical.climate,.which.allowed.agricultural.          became.one.of.Taiwan’s.largest.industries.along.with.steel,.
products.to.flourish..After.land.reform.policies,.the.government.        fertilizers,.and.cement..Rubber,.glass.products,.bicycles,.food.
implemented.a.series.of.policies.aimed.at.making.Taiwan.self-            processing.and.pharmaceutical.manufacturing.also.flourished..
sufficient..Consequently,.the.manufacturing.sector.expanded.             Recently,.with...its...highly...educated...workforce,.Taiwan...has...
dramatically.in.the.1950s.and.Taiwan.became.a.major.exporter.            seen...impressive.growth.in.knowledge-based.and.service-
of.textiles.and.cheap.manufactured.goods.                                oriented.industries..Taiwan.is.a.major.global.competitor.in.
•. In.the.1960s,.Taiwan’s.manufacturing.sector.shifted.to.electrical.    semiconductors,.computer-related.products,.telecommunications.
equipment.and.electronic.goods..Between.1962.and.1985.this.              equipment,.precision.tools,.optical.machines,.optical.supplies.
                                                                         and.biotechnology..


                                                                    64
TA I W A N                                                                                                          Doing Business in Asia Pacific


BUSINESS PRESENCE REGULATIONS                                                  comply.with.the.measures.set.out.in.“The.Statute.Governing.
                                                                               Foreign.Exchange”..The.statute.applies.to.any.inflow.or.outflow.
Local Incorporation                                                            of.foreign.currency.funds.that.involves.an.exchange.of.New.
•. All.companies.in.Taiwan.must.be.incorporated.and.certified.by.              Taiwan.dollars.
the.Ministry.of.Economic.Affairs..
•. There.are.four.different.types.of.corporate.structure.in.Taiwan:.           Reporting Requirements
unlimited.company,.unlimited.company.with.limited.liability.                   •. For.any.inflow.or.outflow.of.foreign.currency.involving.an.
shareholders,.limited.company.and.company.limited.by.shares.                   exchange.of.New.Taiwan.dollars,.the.following.measures.apply:
                                                                               •. Business.entities.may.conduct.transactions.of.up.to.US$50.
Branch of Foreign Corporations                                                 million.a.year.for.payments.that.are.not.related.to.trade.
•. To.establish.a.branch.office.in.Taiwan,.a.foreign.parent.                   •. Non-residents.of.Taiwan.may.exchange.up.to.US$100,000..
company.must.obtain.recognition.by.the.Ministry.of.Economic.                   There.is.no.time.or.frequency.limitation.to.currency.exchanges.
Affairs..Upon.obtaining.the.recognition,.the.parent.company.                   for.non-residents.
must.register.with.the.local.City.Bureau.of.Economic.
Development.in.order.to.obtain.a.company.license.for.the.
branch.office..The.branch.office.must.also.register.with.the.local.            TAXATION
tax.authorities.
                                                                               Corporate Income Tax
                                                                               •. According.to.Taiwan’s.Income.Tax.Law,.taxable.income.is.
FOREIGN INVESTMENT RESTRICTIONS AND                                            defined.as.gross.revenue.minus.allowable.deductions..For.any.
CONDITIONS                                                                     business.with.a.head.office.in.Taiwan,.gross.income.is.income.
                                                                               derived.from.within.or.outside.Taiwan..Locally.incorporated.
Restrictions in Shareholdings                                                  companies.with.overseas.operations.can.deduct.taxes.paid.in.
•. A.company.where.more.than.one.shareholder.has.limited.                      those.foreign.countries..
liability.is.a.“limited.company.”.The.shareholders.are.liable.for.             •. Any.business.with.a.head.office.outside.Taiwan,.but.with.a.
debts.and.obligations.incurred.by.the.company.only.to.the.                     local.branch.office.in.Taiwan.is.liable.for.tax.on.income.derived.
extent.of.their.capital.contribution..There.are.strict.restrictions.on.        from.local.sources..These.entities.are.taxed.at.the.same.rate.
the.transfer.of.shares.                                                        (17%).as.domestic.Taiwanese.companies..
•. A.limited.company.must.have.at.least.NT$250,000.of.capital..                •. Income.tax.of.overseas.businesses.with.no.fixed.office.or.
At.least.50%.of.the.shareholders.must.be.Taiwanese.citizens.                   agent.in.Taiwan.is.withheld.at.a.rate.of.20%.at.source.
domiciled.in.Taiwan..The.capital.invested.by.these.Taiwanese.
citizens.must.be.more.than.50%.of.the.total.capital.of.the.                    Individual Income Tax
company.                                                                       •. Anyone.who.maintains.domicile.in.Taiwan.or.resides.in.Taiwan.
•. A.“company.limited.by.shares”.has.at.least.two.shareholders.                for.more.than.183.days.in.a.taxable.year.is.considered.a.Taiwan.
or.at.least.one.government.or.legal.entity.as.a.shareholder..It.               resident,.and.must.pay.income.tax.according.to.the.income.tax.
is.similar.to.a.US.corporate.structure..The.minimum.amount.                    rates.(up.to.40%).
of.required.capital.is.NT$500,000..The.total.capital.is.divided.
into.shares.and.each.shareholder.is.liable.for.the.debts.and.                  Withholding Tax
obligations.of.the.company.only.to.the.extent.of.his.or.her.                   •. The.withholding.tax.rate.on.dividends.distributed.by.a.
holdings..Shares.may.be.transferred.freely.one.year.after.the.                 company.or.profit.distributed.by.a.cooperative.is.20%.
company’s.incorporation,.but.10.to.15%.of.newly.issued.shares.
must.be.set.aside.for.employee.stock.purchase.plans.                           Indirect Tax
                                                                               •. The.business.tax.rate.for.business.entities.other.than.
Approvals and Licensing                                                        those.previously.outlined,.namely.VAT.(Value.Added.Tax).
•. A.foreign.investment.approved.(FIA).company.must.satisfy.                   business.entities,.shall.be.between.5%.and.10%.subject.to.the.
the.requirements.of.“The.Statute.for.Investment.by.Foreign.                    prescription.of.the.Executive.Yuan..The.current.applicable.VAT.
Nationals”,.and.be.approved.by.the.Ministry.of.Economic.                       rate.is.5%.
Affairs..Although.an.investment.plan.is.required,.there.is.no.cost.            •. The.VAT.on.transactions.related.to.banking,.insurance,.
to.apply.and.status.is.usually.granted.unless.it.falls.under.the.              securities.brokerages.etc,.shall.be.2%,.and.VAT.on.reinsurance.
“Negative.List.for.Investment.by.Overseas.Chinese.and.Foreign.                 transactions.is.1%.
Nationals”.designation.
                                                                               Double Taxation Treaties
                                                                               •. Taiwan’s.policy.toward.tax.treaties.is.to.avoid.double.taxation,.
CENTRAL BANK EXCHANGE CONTROL                                                  prevent.fiscal.evasion.and.improve.bilateral.economic.and.
                                                                               investment.relations..The.tax.treaties.that.Taiwan.has.negotiated.
Approvals Required                                                             follow.the.OECD.and.UN.models;.these.take.into.consideration.
•. There.are.currently.no.foreign.exchange.controls.in.Taiwan..                matters.relating.to.the.political.and.fiscal.status,.economic.and.
However,.any.financial-type.foreign.exchange.accounts.must.                    trade.of.the.mutual.parties.involved.


                                                                          65
TA I W A N                                                                                                         Doing Business in Asia Pacific

•. As.of.30.June.2010,.there.are.18.comprehensive.income.                    EMPLOYMENT LAW
tax.treaties.and.14.international.transportation.income.tax.
agreements,.which.have.been.signed.by.Taiwan.and.are.currently.              General Legal Framework
active.                                                                      •. The.Labor.Standards.Law,.enacted.in.1984,.provides.the.basic.
                                                                             guidelines.for.workers.and.employers.with.respect.to.their.rights.
                                                                             and.obligations.
TAX AND INVESTMENT INCENTIVES                                                •. The.objective.of.the.Labor.Standards.Law.is.to.provide.
                                                                             minimum.standards.of.working.conditions,.protect.labor.rights,.
Pioneer Status                                                               and.to.promote.social.and.economic.development.
•. Located.at.the.heart.of.Asia-Pacific.
•. Less.than.three.hours’.flying.time.to.seven.major.cities.in.the.          Sector Requirements
Western.Pacific..                                                            •. Employers.may.only.hire.foreign.workers.for.employment.
•. 2.5.days.average.sailing.time.to.five.major.Asia-Pacific.ports..          opportunities.that.qualify.under.certain.categories.and.
•. Key.geographic.and.linguistic.advantages.to.deal.with.the.                conditions..These.are.set.out.in.the.Employment.Service.Act..
Chinese.Market..                                                             Some.examples.include:.specialized.or.highly.technical.workers.
•. OEM.and.ODM.manufacturer.for.high-tech.industries..                       and.Executive/Management.for.an.investment.project..Work.
•. R&D.and.test.centers.for.products.aimed.at.the.global.ethnic.             permits.are.generally.valid.for.three.years.with.the.possibility.for.
Chinese.markets.                                                             the.employer.to.apply.for.extensions.if.required.

Capital Allowances                                                           Minimum Wage Requirements
•. Investment.as.referred.to.in.this.“Statute.for.Investment.by.             •. In.accordance.with.the.regulation.of.Article.21.of.the.Labor.
Foreign.Nationals”.shall.be.as.follows:                                      Standards.Act,.wages.should.be.paid.in.accordance.with.the.
(1).Holding.shares.issued.by.a.Taiwanese.company,.or.                        agreement.between.employers.and.employees,.and.the.wage.
contributing.to.the.capital.of.a.Taiwanese.company:                          should.not.be.lower.than.the.basic.minimum.wage..As.of.1.July.
(2).Establishing.a.branch.office,.a.proprietary.business.or.a.               2007,.the.basic.minimum.wage.is.NT$17,280.per.month,.and.
partnership.in.Taiwan;.and.                                                  NT$95.per.hour.
(3).Providing.loan(s).to.the.invested.business.referred.to.in.the.           •. A.worker’s.normal.working.hours.should.not.exceed.eight.
preceding.two.points.for.a.period.exceeding.one.year.                        hours.per.day.and.the.cumulative.total.working.hours.for.each.
•. If.the.capital.invested.in.the.enterprise.is.more.than.45%.of.            two-week.period.should.not.exceed.84.hours.
the.paid-in.capital.and.such.investment.capital.remains.to.be.
more.than.45%.of.the.total.for.20.years.from.the.inception.of.the.           Trade Unions and Insurance
enterprise,.the.invested.enterprise.shall.not.be.expropriated.or.            •. Taiwan’s.workforce.is.divided.into.two.major.categories:.
acquired.                                                                    workers.with.fixed.employers,.and.workers.without.fixed.
                                                                             employers..Workers.with.fixed.employers.are.insured.through.
Investment Tax/Reinvestment Allowances                                       their.companies,.while.workers.without.fixed.employers.must.
•. For.the.purposes.of.improving.and.modernizing.industrial.                 join.a.trade.union.and.be.insured.through.the.union.
production,.an.investment.tax.credit.of.5%.to.20%.against.profit-
seeking.enterprise.income.tax.is.available.for.investments.made.             Statutory Contributions
in.equipment.or.technology.used.for.automation,.reclamation.                 •. Labor.insurance.premiums.are.calculated.as.follows:
of.resources,.pollution.control,.etc..If.the.investment.is.for.R.&.D.        •. Employers.contribute.70%,.the.government.contributes.10%,.
or.staff.training,.an.investment.tax.credit.of.up.to.35%.may.be.             and.the.worker.contributes.20%..Workers.are.covered.for.injury.
applicable.                                                                  and.illness,.childbirth,.loss.of.functioning.ability,.medical.costs.
•. For.the.purposes.of.balancing.the.distribution.of.industries.in.          resulting.from.occupational.accidents,.old-age.pension.and.
various.geographical.areas,.an.investment.tax.credit.of.20%.is.              death.
available.for.corporations.                                                  •. National.Health.Insurance.is.a.compulsory.social.insurance.in.
                                                                             Taiwan.
Tax Exemptions                                                               •. Insured.persons.need.only.to.receive.their.NHI.IC.card.
•. A.non-resident.individual.or.a.non-resident.enterprise,.which.            and.pay.their.premiums.regularly..In.cases.of.injury,.illness,.or.
has.been.approved.to.make.investments.in.Taiwan.under.the.                   childbirth,.they.are.insured.and.can.access.full.medical.care.for.
“Statute.for.Investment.by.Overseas.Chinese”.or.the.“Statute.for.            a.small.registration.fee.and.partial.payment.for.treatment.or.
Investment.by.Foreign.Nationals”.and.receives.dividends.from.                hospitalization.
a.Taiwanese.enterprise.or.profits.from.a.Taiwanese.partnership,.
shall.benefit.from.reduced.income.tax.payable..The.tax.rate.
will.be.reduced.to.20%,.and.shall.be.withheld.at.the.time.of.                DISPUTE RESOLUTION
payment.
                                                                             General Legal Framework
                                                                             •. Law.in.Taiwan.is.mainly.based.on.the.civil.law.system..The.
                                                                             legal.structure.is.organized.into.the.six.codes:.the.Constitution,.

                                                                        66
TA I W A N                                                                                                          Doing Business in Asia Pacific

the.Civil.Code,.the.Code.of.Civil.Procedures,.the.Criminal.Code,.               employment,.investment,.medical.treatment,.missionary.work,.
the.Code.of.Criminal.Procedures.and.Administrative.laws.                        or.other.legitimate.activities..A.holder.of.a.Resident.Visa.must,.
                                                                                within.15.days.of.entry.into.Taiwan,.or.within.15.days.following.
Court System                                                                    the.issuance.of.a.Resident.Visa.to.replace.another.type.of.visa,.
•. The.court.system.in.Taiwan.is.divided.into.three.levels:.District.           apply.to.the.Bureau.of.Consular.Affairs.County/City.Service.
Court,.High.Court.and.the.Supreme.Court..There.are.20.District.                 Station.at.his.or.her.place.of.residence.for.an.Alien.Resident.
Courts.in.Taiwan,.each.divided.into.civil,.criminal.and.summary.                Certificate.(ARC).and.Re-entry.Permit..The.ARC.is.valid.between.
divisions..Almost.all.civil.and.criminal.cases.in.the.first.instance.is.        one.to.three.years.
heard.in.District.Court.                                                        •. Citizens.of.applicable.countries.and.certain.foreign.nationals.
                                                                                who.meet.specific.criteria.may.enter.Taiwan.without.a.visa.for.a.
Alternative Dispute Resolution                                                  maximum.30-days.stay.(Visa.Exempted.Permit).�
•. Reconciliation.is.a.form.of.dispute.resolution.whereby.the.
parties.to.a.dispute.voluntarily.agree.to.try.to.settle.the.matter.
privately.with.the.assistance.of.a.neutral.third.party..It.is.not.a.
compulsory.procedure.
•. Arbitration.is.another.form.of.dispute.resolution.recognized.in.
Taiwan.and.commonly.used.to.resolve.commercial.disputes.


IMMIGRATION PROCEDURES

Social Visit Pass
•. Visitor.visas.are.used.by.foreign.nationals.who.hold.ordinary.
passports.or.other.travel.documents.and.plan.to.stay.in.Taiwan.
for.less.than.six.months.for.transit,.tourism,.family.visits,.study.
and.business..Information.about.visitor.visa.application.can.be.
obtained.from.the.Bureau.of.Consular.Affairs,.Ministry.of.Foreign.
Affairs.

Professional’s Visit Pass
•. A.“One-stop.Center.for.Work.Permits.applications.for.Foreign.
Professionals”.was.set.up.by.the.Council.of.Labor.Affairs.(CLA).
on.15.January.2004.in.order.to.make.the.application.procedures.
easier.for.foreign.nationals.seeking.work.permits.in.Taiwan..The.
employers.of.the.foreign.workers.must.submit.applications.for.
work.permits,.together.with.required.documentation.to.the.
relevant.authority.
•. Work.permits.for.foreign.professionals.are.valid.for.a.maximum.
of.three.years;.if.further.employment.is.needed,.the.employer.
may.apply.for.an.extension.four.months.prior.to.expiration.of.the.
original.work.permit.

Work Permits
•. In.order.to.legally.work.in.Taiwan,.a.foreign.national.must.
apply.for.employment.authorization,.also.known.as.a.work.
permit..The.employer.must.file.the.application..Foreign.nationals.
may.not.be.self-employed.in.Taiwan..The.employer.may.only.
hire.foreign.nationals.for.employment.opportunities.that.qualify.
under.the.categories.set.out.in.the.Employment.Service.Act.
(see.Sector.Requirements.under.Employment.Law)..Except.as.
otherwise.provided.by.law,.work.permits.are.generally.valid.for.
three.years.with.the.possibility.for.the.employer.to.apply.for.
extension.

Special Permanent Residency or Other Permits
•. Resident.visas.can.be.issued.to.applicants.who.want.to.stay.
for.more.than.six.months.and.whose.reason.for.staying.in.Taiwan.
includes.one.of.the.following:.joining.family,.study.or.research,.


                                                                           67
THAILAND

• Thailand is situated in the heart of the Southeast Asian mainland, covering an area of
513,115km², from North 5˚ 30’ to 21˚’ and from East 97˚ 30’ to 105˚ 30’. Thailand borders
the Lao People’s Democratic Republic, Cambodia and the Gulf of Thailand to the east,
Myanmar and the Indian Ocean to the west and Malaysia to the south. Thailand has
maximum dimensions of about 2,500 kilometers north to south and 1,250 kilometers east
to west, with a coastline of approximately 1,840 kilometers on the Gulf of Thailand and
865 kilometers along the Indian Ocean.
• The climate is tropical – rainy, warm, cloudy, south-west monsoon from mid-May to
September and dry, cool, north-east monsoon from November to mid-March. The terrain
consists of a central plain, an eastern plateau and mountains elsewhere.
• The country’s official name is Kingdom of Thailand and in short, Thailand. The capital is
Bangkok.
• The government is a constitutional monarchy. The King is head of state, while the leader
of the government is the Prime Minister. Other chief executives also include cabinet
members and ministers, together with high-ranking government officials in ministries,
bureaus and agencies. As head of state, the King has the authority to exercise sovereign
power through the National Assembly, the Council of Ministers, and the Courts. The Prime
Minister functions in the name of the King, and is responsible for all royal commands
regarding the affairs of the country.
• Thai is the national and official language and English is moderately written and spoken in
general and business dealings.
• The population of Thailand, estimated at 67,500,000 million in 2009, includes ethnic
Chinese, Malays, Cambodians, Vietnamese, Indians, and others. Immigration is controlled
by a quota system.
• Buddhism, the national religion, is the professed faith of 95 percent of the population.
Islam (3.8%), Christianity (0.5%), Hinduism (0.1%), others (0.6%) are embraced by the rest
of the population. There is absolute religious freedom. The King of Thailand, under the
constitution and in practice, is patron of all major religions.
• The literacy rate in Thailand is quite high and in recent years there has been an increased
emphasis on education. The development of the Kingdom’s human resources is its highest
priority.
• Currency: Thai Baht (THB).
• Time zone: GMT+7 (12 hours ahead of East Coast USA during Standard Time)
• Internet TLD: .th
• Calling code +66

BUSINESS PRESENCE                                                        foreign.investors.in.Thailand.is.the.private.limited.company,.
                                                                         which.requires.a.minimum.of.three.promoters.and.must.file.
•. As.in.most.countries,.generally,.there.are.four.kinds.of.business.    a.memorandum.of.association,.convene.a.statutory.meeting,.
organisations.in.Thailand:.sole.proprietorships,.partnerships.           register.the.company,.and.obtain.a.tax.identity.card.and.value.
(unregistered.and.registered),.private.limited.companies.and.            added.tax.license,.in.order.to.set-up.and.commence.operation.
public.limited.companies.                                                of.a.private.limited.company.
•. The.most.common.form.of.business.organisation.among.                  •. Established.business.organisations.in.Thailand.must.also.follow.



                                                                    68
THAILAND                                                                                                        Doing Business in Asia Pacific

accounting.procedures.specified.in.the.Civil.and.Commercial.               customs.of.the.nation;
Code,.the.Public.Company.Act,.the.Revenue.Code.and.the.                     o.Advantages.and.disadvantages.to.conservation.of.natural.
Accounts.Act..Audited.financial.statements.must.also.be.                   resources,.energy.and.environmental.preservation;
prepared.once.a.year.and.filed.with.the.Department.of.Revenue.              o.Advantages.and.disadvantages.to.consumer.protection;
and.Commercial.Registration.                                                o.Size.of.business.and.expenditure.estimation;
•. Additionally,.there.are.other.forms.of.business.set-up.for.              o.Employment.of.labour;
specific.activities,.such.as.Branch.Office,.Representative.Office,.         o.Technology.transfer;
and.Regional.Office,.considerable.under.a.specific.law.know.as.             o.Research.and.development;.and
the.‘Foreign.Business.Act.B.E..2542.(1999)’.                                o.Benefits.to.the.nation.from.allowing.non-Thai.to.engage.in.
•. Joint.Venture,.Distributorship,.Licensing.and.Agency.are.also.          the.activities.
widely.used.in.foreign.investment.into.Thailand.
                                                                           •. There.are.certain.exemptions.from.being.subject.to.the.FBL.
FOREIGN INVESTMENT RESTRICTIONS AND                                        under.the.FBA..Those.are.American.individuals.and.entities.
CONDITIONS                                                                 under.the.provisions.of.the.Treaty.of.Amity.and.Economic.
                                                                           Relations.between.the.Kingdom.of.Thailand.and.the.United.
Foreign.Business.Act.B.E..2542.(1999)                                      States.of.America.and.those.that.received.promotional.status.
                                                                           from.the.Board.of.Investment,.Thailand,.where.they.could.apply.
•. For.all.foreign.investors,.a.specific.law.so-called.Foreign.            for,.and.be.granted,.a.Foreign.Business.Certificate.for.businesses.
Business.Act.B.E..2542.(1999).(‘FBA’).must.always.be.looked.at..           under.Categories.II.and.III.
FBA.prescribes.certain.business.activities.that.(1).may.not.at.all.
be.done.by.a.foreigner,.or.(2).may.be.engaged.by.a.non-Thai,.              Other Restrictions
but.only.if.Foreign.Business.License.(‘FBL’).is.applied.for.and.           •. Foreign.ownership.of.land.is.not.allowed,.except.for.small.
granted.                                                                   area.for.residential.housing,.in.industrial.estates.or.with.approval.
•. Business.considerable.as.a.‘foreigner’.if.it.is:.(1).a.juristic.        of.the.Board.of.Investment..Note.that.ownership.of.certain.
person.not.registered.in.Thailand;.or.(2).half.or.more.of.capital.         condominium.units.registered.for.foreign.ownership.is.allowed.
of.juristic.person.is.owned.by.foreign.individual.and/or.foreign.          •. Separate.laws.control.foreign.ownership.in.other.business.
entity;.or.(3).half.or.more.of.the.value.of.the.total.capital.being.       activities.such.as.banking,.insurance,.finance.and.shipping.
invested.by.foreign.individual.and/or.by.foreigner.in.names.of.            .
Thai.individuals.and/or.Thai.entity.
•. FBA.is.a.restrictive.and.negative.written.law.applicable.on.            EXCHANGE CONTROL
physical.business.undertakings.and.project-by-project.basis.
grantable.by.discretion.of.the.Cabinet.or.the.Foreign.Business.            •. The.legal.basis.for.exchange.control.in.Thailand.is.derived.
Committee.under.the.Ministry.of.Commerce,.as.the.case.may.                 from.the.Exchange.Control.Act.(B.E..2485).and.Ministerial.
be..FBA.divides.businesses.into.three.categories.as.follows:               Regulation.No..13.(B.E..2497).issued.under.the.Exchange.
(a).Category.I.is.absolutely.prohibited.to.foreigners.unless.there.        Control.Act..These.laws.set.out.the.principles.of.controls.under.
is.an.exception.contained.in.a.special.law.or.treaty..By.way.of.           which.Notifications.of.the.Ministry.of.Finance.and.Notices.of.the.
example,.they.are.business.of.and.about.newspaper,.radio,.                 Competent.Officer.are.issued.
television,.rice.farming,.forestry,.fishery,.trade.and.auction.of.         •. The.Bank.of.Thailand.has.been.entrusted.by.the.Ministry.
Thai.antiques.or.objects.of.national.historical.values,.and.trading.       of.Finance.with.the.responsibility.of.administering.foreign.
of.land.                                                                   exchange..The.governor.of.the.Bank.of.Thailand.shall.appoint.
(b).Category.II.refers.to.businesses.involved.in.national.safety.or.       the.officials.of.the.Bank.of.Thailand.as.the.Competent.Officers.
security,.culture,.traditional.custom,.handicraft,.national.resources.     under.the.Exchange.Control.Act.(B.E..2485).
and.environment..Grant.of.FBL.under.this.category.is.subject.to.           •. All.foreign.exchange.transactions.are.to.be.conducted.
permission.by.the.Minister.of.Commerce.with.the.approval.of.               through.commercial.banks.and.through.authorised.non-banks.
the.Cabinet.                                                               that.are.granted.foreign.exchange.licenses.by.the.Minister.of.
   .
(c).Category.III.is.regarded.as.those.in.which.Thai.nationals.             Finance.namely.authorised.money.changers,.authorised.money.
are.not.ready.to.compete.with.foreigners.at.present..These.                transfer.agents.and.authorised.companies..Any.transactions.not.
businesses.were.permitted.to.apply.for.FBL.provided.that.                  conducted.through.the.said.licensees.requires.approval.from.the.
approval.is.first.received.from.the.Foreign.Business.Committee.            Competent.Officer.on.a.case.by.case.basis.
•. Generally,.the.following.factors.must.be.satisfied.under.the.           •. Foreign.currencies.can.be.transferred.or.brought.into.
FBA.for.the.FBL.to.be.issued:                                              Thailand.without.limit..Any.person.receiving.foreign.currencies.
 o.Advantages.and.disadvantages.to.national.safety.and.security;           from.abroad.is.required.to.sell.such.foreign.currencies.to.an.
 o.Advantages.and.disadvantages.to.national.economic.and.                  authorised.financial.institution.or.to.deposit.them.in.a.foreign.
social.development;                                                        currency.account.with.an.authorised.financial.institution.within.
 o.Advantages.and.disadvantages.to.public.order.or.good.                   360.days.of.receipt,.except.for.foreigners.temporarily.staying.in.
morals;                                                                    Thailand.for.not.more.than.three.months,.foreign.embassies.and.
 o.Advantages.and.disadvantages.to.arts;                                   international.organisations.including.their.staff.with.diplomatic.
 o.Advantages.and.disadvantages.to.culture.and.traditional.                privileges.and.immunities..


                                                                      69
THAILAND                                                                Doing Business in Asia Pacific

•. Foreign.currency.purchased.with.authorised.banks.is.generally.
allowed.upon.submission.of.the.underlying.international.
trade.and.investment..Corporations.in.Thailand.can.engage.in.
derivatives.transactions.with.authorised.banks.to.hedge.against.
foreign.exchange.risk,.provided.that.supporting.documents.
indicating.future.foreign.currency.receipts.or.obligations.are.
submitted.
•. Any.person,.who.brings.into.or.takes.out.of.Thailand.an.
aggregate.amount.of.foreign.currency.exceeding.USD.20,000.or.
its.equivalent,.must.declare.to.a.customs.officer.
•. There.is.no.restriction.on.the.amount.of.Thai.Baht.that.may.be.
brought.into.the.country.
•. Non-residents.may.maintain.foreign.currency.accounts.with.
authorised.banks.in.Thailand.without.limit..The.accounts.can.be.
freely.credited.with.funds.originating.from.abroad.
•. Non-residents.may.open.Thai.Baht.accounts.(1).Non-resident.
Baht.Account.for.Securities.(NRBS).and.(2).Non-resident.Baht.
Account.(NRBA).with.authorised.banks.in.Thailand.
•. Transfers.in.foreign.currency.for.direct.and.portfolio.
investments.in.Thailand.are.freely.permitted..Proceeds.must.be.
surrendered.to.an.authorised.financial.institution.or.deposited.in.
a.foreign.currency.account.with.an.authorised.financial.institution.
in.Thailand.within.360.days.
•. Repatriation.of.investment.funds.and.repayment.of.overseas.
loans.can.be.remitted.freely.upon.submission.of.supporting.
documents.to.an.authorised.financial.institution..In.case.of.
repatriation.of.investment.funds,.evidence.of.sale.or.transfer.of.
such.investment.shall.be.submitted..In.case.of.loan.repayment,.
evidence.of.inward.remittance.of.such.loan.and.loan.agreement.
shall.be.submitted.
•. Investing.in.or.lending.to.affiliated.business.entities.abroad.
is.allowed.in.an.aggregate.amount.not.exceeding.USD.100.
million.per.year..Investing.in.or.lending.to.parent.companies.
abroad,.which.hold.shares.or.have.an.ownership.not.less.than.
10%.of.resident.entity,.or.affiliated.business.entities.of.such.
parent.companies.abroad.is.allowed.in.an.aggregate.amount.not.
exceeding.USD.100.million.per.year..
•. Individuals.are.allowed.to.purchase.shares.of.related.
companies.abroad.under.employee.benefit.plans.of.up.to.USD.
1.million.per.person.per.year..Individual.or.corporate.investors.
can.invest.in.securities.abroad,.other.than.those.under.employee.
benefit.plans,.through.private.funds,.or.securities.companies.
subject.to.the.Securities.and.Exchange.Commission’s.guidelines.
and.approval.from.the.Bank.of.Thailand.
•. Purchase.of.immovable.properties.abroad.is.allowed.up.to.
USD.5.million.per.person.per.year..
•. Any.person.purchasing,.selling,.depositing,.or.withdrawing.
foreign.currencies.with.an.authorised.financial.institution.in.an.
amount.of.USD.20,000.or.above.shall.be.required.to.report.
such.foreign.exchange.transactions.to.an.authorised.financial.
institution.in.the.form.as.prescribed.by.the.Competent.Officer.




                                                                   70
THAILAND                                                                       Doing Business in Asia Pacific


TAXATION

Corporate Income Tax                                                                                 Rate
A. Tax on net corporate profits
(1).Ordinary.company                                                                                   30%
(2).Small.company.(paid.up.capital.<5m.Baht)
-.Net.profit.over.1.Baht.but.not.>.150,000.Baht                                                    Exempt
-.Net.profit.over.150,001.Baht.but.not.>.1m.Baht                                                       15%
-.Net.profit.over.1m.Baht.but.not.>.3m.Baht                                                            25%
-.Net.profit.exceeding.3m.Baht                                                                         30%
(3).Company.listed.on.Stock.Exchange.of.Thailand.(SET)
-.Net.profit.for.first.300m.Baht                                                                      25.%
-.Net.profit.for.the.amount.exceeding.300m.Baht                                                        30%
(4).Company.listed.in.Market.for.Alternative.Investment.(MAI)
-.Net.profit.for.first.20m.Baht                                                                        20%
-.Net.profit.for.the.amount.exceeding.20m.Baht                                                         30%
(5).Company.newly.listed.on.Stock.Exchange.of.Thailand.(SET)
-.Net.profit.for.first.three.accounting.periods                                                        25%
-.Net.profit.after.first.three.accounting.periods                                                      30%
(6).Company.newly.listed.in.Market.for.Alternative.Investment.(MAI)
-.Net.profit.for.first.three.accounting.periods                                                        20%
-.Net.profit.after.first.three.accounting.periods                                                      30%
(7).Regional.Operating.Headquarters.(ROH)                                                              10%
(8).Bank.deriving.profits.from.International.Banking.Facilities.(IBF)                                  10%
B. Tax on gross receipts
(1).Association.and.foundation
-.For.income.under.Section.40.(8)                                                                       2%
-.Otherwise                                                                                            10%
(2).Foreign.company.engaging.in.international.transportation                                            3%
C. Remittance tax                                                                                        %
Foreign.company.disposing.profits.out.of.Thailand                                                      10%
D. Foreign company not carrying on business in Thailand but receiving income
from Thailand
(1).Dividends.                                                                                         10%
(2).Interests.....                                                                                     15%
(3).Professional.fees                                                                                  15%
(4).Rents.from.hiring.property                                                                         15%
(5).Royalties.from.goodwill,.copyright.and.other.rights                                                15%
(6).Service.fees                                                                                       15%


Personal Income Tax                                                                                   Rate
Level of taxable income (Baht)
1–150,000                                                                                          exempt
150,001–500,000                                                                                        10%
500,001–1,000,000                                                                                      20%




                                                                  71
THAILAND                                                                                                    Doing Business in Asia Pacific


TAXATION cont’d
 Corporate Income Tax                                                                                                              Rate
 1,000,001–4,000,000                                                                                                                30%

 Over.4,000,000                                                                                                                     37%


 Value Added Tax                                                                                                                   Rate
 Level.of.taxable.income
 Over.1,800,000.Baht                                                                                                                  7%


 Double Taxation Agreements exist with the following countries:
 Armenia,.Australia,.Austria,.Bahrain,.Bangladesh,.Belgium,.Bulgaria,.Canada,.China,.Cyprus,.Czech.Republic,.Denmark,.Finland,.
France,.Germany,.Hong.Kong,.Hungary,.India,.Indonesia,.Israel,.Italy,.Japan,.Korea,.Kuwait,.Laos,.Luxembourg,.Malaysia,.Mauritius,.
Nepal,.the.Netherlands,.New.Zealand,.Norway,.Oman,.Pakistan,.the.Philippines,.Poland,.Romania,.Seychelles,.Singapore,.Slovenia,.
South.Africa,.Spain,.Sri.Lanka,.Sweden,.Switzerland,.Turkey,.Ukraine,.United.Arab.Emirates,.United.Kingdom.of.Great.Britain.and.
Northern.Ireland,.United.States,.Uzbekistan,.and.Vietnam
 Other Taxes
 (1).Import.duties.are.ad.valorem.duty.and.fixed.at.various.rates.
 2).Excise.tax.is.charged.on.petroleum.products,.non-alcoholic.beverages,.electrical.appliances,.crystal.products,.motor.vehicles,.
 motorcycles,.entertainment,.telephone.service,.fermented.liquors,.distilled.spirits,.special.spirits,.absolute.alcohol,.tobacco,.
 playing.cards,.and.perfume.
 3).Stamp.duty.is.charged.on.certain.documents.and.instruments,.including.rental.agreements,.share.transfer.instruments,.proxy,.
 power.of.attorney,.insurance.policies,.and.arbitration.awards.


TAX AND INVESTMENT INCENTIVES

•. Tax.and.investment.incentives.in.Thailand.are.governed.by.the.      (c).For.a.concession.project.or.privatisation.of.a.state.enterprise.
Investment.Promotion.Act.B.E..2520.(1977).(as.amended),.which.         project,.the.criteria.shall.be.based.on.the.cabinet’s.decision.
is.implemented.and.supervised.by.the.Board.of.Investment.              dated.25.May.1998,.as.follows:
•. In.determining.the.suitability.of.a.project.for.which.              1..Projects.of.state.enterprises.shall.not.be.granted.promotion;
investment.promotion.privileges.are.requested,.the.Board.of.           2..For.a.Build.Transfer.Operate.or.Build.Operate.Transfer.
Investment.applies.the.following.criteria:.                            concession.project.by.the.private.sector,.the.state.agency.
.(a).For.a.project.with.investment.capital.(excluding.cost.of.         that.owns.the.project.must.submit.its.project.to.the.Board.for.
land.and.working.capital).not.exceeding.500.million.Baht,.the.         consideration.prior.to.any.invitation.to.bid,.and.bidders.shall.be.
following.criterias.are.used:                                          informed.of.any.promotional.privilege.entitled.to.them,.prior.to.
1..The.value.added.is.not.less.than.20.per.cent.of.sales.              the.bidding..In.principle,.the.Board.will.not.consider.a.project.
revenue,.except.projects.that.manufacture.electronic.products.         where.the.private.sector.pays.for.a.concession,.unless.such.
and.parts.or.process.agricultural.produce,.and.projects.granted.       payment.is.deemed.to.represent.a.reasonable.investment.for.
special.approval.by.the.Board;                                         the.state;
2..Ratio.of.liabilities.to.registered.capital.should.not.exceed.       3..For.a.Build.Own.Operate.project,.including.a.lease.by.the.
three.to.one.for.a.newly.established.project..Expansion.projects.      private.sector.or.rental.payment.to.the.state,.normal.criteria.are.
shall.be.considered.on.a.case.by.case.basis;                           used;.and
3..Modern.production.processes.and.new.machinery.are.used..            4..For.privatisation.of.state.enterprises,.only.expansions.after.
In.cases.where.old.machinery.will.be.used,.its.efficiency.must.        the.privatisation.shall.be.considered.for.promotion.
be.certified.by.reliable.institutions.and.the.Board’s.approval.
must.be.obtained;.and                                                  •. Criteria.for.Shareholding.by.Foreign.Investors
4..Adequate.environmental.protection.systems.are.installed..For.       To.relax.the.limitation.of.foreign.shareholding.in.manufacturing.
projects.with.a.potential.environmental.threat,.the.Board.shall.       activities.and.to.facilitate.investors.on.their.investment,.the.
prescribe.special.conditions.on.both.the.location.of.the.project.      following.criteria.are.used:.
and.the.manner.of.pollution.treatment.                                 (a).For.projects.in.agriculture,.animal.husbandry,.fishery,.mineral.
(b).For.a.project.with.investment.capital.(excluding.cost.of.          exploration.and.mining.and.service.business.under.Category.
land.and.working.capital).exceeding.500.million.Baht,.criteria.        1.of.the.FBA,.Thai.nationals.must.hold.shares.totaling.not.less.
under.2.1.shall.be.used.and.a.feasibility.study.of.the.project,.as.    than.51.per.cent.of.the.registered.capital;.
prescribed.by.the.Board,.must.be.submitted..                           (b).For.manufacturing.projects,.in.all.zones,.foreign.investors.

                                                                  72
THAILAND                                                                                                    Doing Business in Asia Pacific

may.hold.a.majority.or.all.shares.in.promoted.projects;                   holding.consultations.between.employees.and.their.employers.
(c).The.Board.may.specifically.fix.the.shareholding.of.foreign.           4..Act.on.the.Establishment.of.Labor.Courts.and.Labor.Court.
investors.on.some.promoted.projects.when.it.is.deemed.                    Procedure.B.E..2522.(1979)
appropriate.                                                              The.act.introduces.the.establishment.of.the.Labor.Court.and.
•. Investment.Zones:.There.are.three.Investment.Zones.based.              labour.litigation..The.Labor.Court.is.competent.for.cases.
on.economic.factors,.such.as.the.level.of.income.and.the.                 dealing.with.disputes.between.employers.and.the.employees.
availability.of.infrastructure.in.each.province..                         arising.from.the.employment.contracts.or.that.are.concerned.
•. Priority.Activities                                                    with.the.rights.of.the.employers.and.employees.under.the.laws.
(a).The.Board.places.priority.on.promoting.the.following.types.           of.labour.protection.and.labor.regulations.
of.projects:                                                              5..The.Social.Security.Act.B.E..2533.(1990)
1..Agriculture.and.agricultural.products;.                                The.act.regulates.the.establishment.of.a.Social.Security.Office.
2..Direct.involvement.in.technological.and.human.resource.                and.Social.Security.Fund.and.requires.the.employers,.the.
development;                                                              employees.and.the.Government.to.pay.monthly.contributions.
3..Public.utilities.and.infrastructure;.                                  in.order.to.help.compensate.employees.in.cases.of.injuries,.
4..Environmental.protection.and.conservation;.and                         illness,.disability,.death,.maternity,.ageing.and.unemployment..
5..Targeted.industries.                                                   The.benefits.also.includes.spouses.and.children.of.the.
(b).The.priority.activities.or.industries.will.be.entitled.to.the.        employees.
following.privileges:.                                                    6..The.Workmen’s.Compensation.Act.B.E..2537.(1994)
1..Exemption.of.import.duty.on.machinery.regardless.of.                   The.law.deals.with.the.employer’s.liabilities.in.case.of.
location;.                                                                employer’s.death.or.loss.as.a.consequence.of.working.for.the.
2..Corporate.income.tax.exemption.for.eight.years,.regardless.            employer..Therefore,.the.act.establishes.a.compensation.fund.
of.location;.                                                             whereas.collection.is.to.be.made.from.employers..In.addition,.
3..Other.privileges.entitled.for.each.zone                                the.Act.governs.conditions.and.procedures.in.making.claims.for.
•. List.of.Activities.Eligible.for.Promotion:                             employer’s.compensation.
(a).Agriculture.and.Agricultural.Products;                                •. Work.Rules.and.Employment.Conditions
(b).Mining,.Ceramics.and.Basic.Metals;                                    Every.employer.with.10.or.more.employees.must.establish.
(c).Light.Industry;                                                       written.rules.and.regulations.governing.working.conditions..
(d).Metal.Products,.Machinery.and.Transport.Equipment;                    These.work.rules.must.be.in.Thai.language.and.be.displayed.at.
(e).Electronic.Industry.and.Electric.Appliances;                          the.workplace..Furthermore,.the.work.rules.or.any.amendment.
(f).Chemicals,.Paper.and.Plastics;.and                                    to.them.have.to.be.submitted.to.the.Labor.Registrar.(Director-
(g).Services.and.Public.Utilities.                                        General,.Department.of.Labor.Protection.and.Welfare).for.his.
                                                                          approval.within.15.days.from.the.date.the.workforce.reaches.
.                                                                         10.in.number..In.the.case.that.the.work.rules.provides.less.
EMPLOYMENT LAW                                                            rights.and.interests.to.employees.than.those.specified.by.laws.
                                                                          (please.see.below).these.rules.are.void..Thus,.clauses.waiving.
•. Principally,.labour.and.employment.issues.are.scattered.in.a.          employers’.rights.are.not.enforceable..Though.work.rules.are.
series.of.laws,.government.announcements.and.regulations.of.              not.recited.or.incorporated.in.the.employment.agreement,.they.
the.Ministry.of.Labor,.which.are.most.commonly.referred.to.as.            have.binding.effect.on.the.employer.and.all.its.employees.
follows.                                                                  The.minimum.requirements.to.be.covered.by.the.work.rules.are.
1..Civil.and.Commercial.Code.(‘CCC’)                                      as.follows:
The.provisions.regulating.the.rights.and.duties.of.employers.             (a).Working.Days,.Normal.Working.Hours.and.Rest.Period;
and.employees.are.set.out.under.Title.6.of.Book.3.of.the.CCC,.            (b).Holidays.and.Rules.Governing.Holidays;
Sections.577.to.586.(‘Hire.of.Services’)..                                (c).Rules.on.Overtime.and.Work.During.Holidays;
2..Labor.Protection.Act.B.E..2541.(1998)                                  (d).Dates.and.Place.of.Payment.of.Wages,.Overtime.and.Pay.
The.Labor.Protection.Act.principally.describes.the.minimum.               for.Work.on.Holidays;
labour.and.employment.requirements.and.standards.                         (e).Leave.and.Rules.for.Taking.Leave;
such.as.duties.of.the.employer.in.using.labour,.arranging.                (f).Disciplinary.Measures.and.Punishment;
compensation,.the.use.of.labour.consisting.of.women.and.                  (g).Submission.of.Complaints;.and
minors,.providing.welfare.and.safety.measures.at.work.as.well.            (h).Termination.of.Employment,.Severance.Pay.and.Special.
as.governing.severance.pay.for.termination.of.employment..                Severance.Pay.
3..Labor.Relations.Act.B.E..2518.(1975):                                  Employers.are.obliged.to.maintain.a.register.of.employees.
The.Labor.Relations.Act.deals.with.the.procedures.of.                     in.Thai.language.containing.full.personal.details.of.each.
negotiations.and.bargaining.as.regards.labour.issues.                     employee.(name,.sex,.nationality,.date.of.birth,.address.etc.).
between.employers.and.employees,.i.e..the.settlement.of.                  and.particulars.of.each.employee’s.remuneration.(wages.and.
labour.disputes,.labour.strikes.and.lockout,.the.rights.of.the.           other.benefits)..Documents.on.wage.calculation.and.payment.
employees.to.set.up.associations.and.labour.unions.as.well.as.            must.show.working.days.and.working.hours,.wage.rates,.
the.rights.and.duties.of.these.organisations..The.act.also.covers.        overtime.pay.and.holiday.pay.
the.establishment.of.employee.committees.as.a.vehicle.for.


                                                                     73
THAILAND                                                                                                  Doing Business in Asia Pacific

• Legal Entitlements under the Labor Protection Act B.E. 2541 (1998)

              Issue                      Description
 1.           Working Days               •.Not.more.than.six..days.a.week.
 2.           Working Hours              •.Not.more.than.eight.hours.a.day.
                                         •.Not.more.than.48.hours.a.week.
                                         •.There.must.be.one.hour.rest.period.each.day.after.the.end.of.the.fifth.hour.of.work.
                                         •.With.employee’s.consent,.rest.period.lasting.less.than.one.hour.is.possible,.but.the.
                                         total.rest.period.for.the.day.must.not.be.less.than.one.hour.
                                         •.When.overtime.work.lasts.for.not.less.than.two.hours.beyond.normal.working.hours,.
                                         not.less.than.20.minutes.of.rest.period.must.be.allowed.before.the.employee.starts.to.
                                         work.overtime.
 3.           Wages                      •.For.Work.During.Normal.Working.Day:.Basic.wages.must.not.be.less.than.minimum.
                                         wages.prescribed.from.time.to.time.by.the.Ministry.of.Labour.and.Social.Welfare..Cur-
                                         rently,.minimum.wages.for.Bangkok.area.is.Baht.169.00.per.day.
                                         •.For.Work.during.Holiday:.Additionally,.not.less.than.one.multiple.of.hourly.wages.per.
                                         hour.on.a.normal.working.day.
 4.           Overtime                   •.Maximum.overtime.is.36.hours.per.week
 5.           Overtime Pay               •.For.Work.During.Normal.Working.Day:.Not.less.than.one.and.a.half.times.the.rate.of.
                                         the.hourly.wages.earned.in.normal.working.day.
                                         •.For.Work.During.Holiday:.Not.less.than.three.times.the.rate.of.the.hourly.wages.
                                         earned.in.normal.working.day.
 6.           Holidays                   •.Weekly.Holiday:.There.must.be.at.least.one.day.weekly.holiday,.not.necessarily.Sun-
                                         day,.and.the.interval.between.each.weekly.holiday.must.not.be.longer.than.six.days.
                                         •.Annual.Traditional.Holidays:.Minimum.of.13.days.of.annual.public.holidays.to.be.an-
                                         nounced.annually.by.the.employer.
                                         •.Annual.Vacation.Holidays:.Minimum.of.six.days.vacation.holidays.for.an.employee.
                                         who.has.worked.continuously.for.one.full.year.
                                         Employees.who.have.worked.less.than.one.year.may.be.granted.annual.vacation.holi-
                                         days.on.a.pro-rata.basis.
                                         If.agreed,.annual.vacation.holidays.not.taken.may.be.cumulative.and.postponed.to.the.
                                         following.year.
 7.           Leaves                     •.Sick.Leave:.As.long.as.employee.is.sick,.but.with.pay.not.exceeding.30.days.
                                         •.Maternity.Leave:.90.days,.but.with.only.45.days.with.pay.
                                         •.Personal.Leave:.Pursuant.to.the.period.prescribed.in.the.company’s.work.rules,.with.
                                         pay..Generally,.most.companies.allow.five.to.10.business.days.for.personal.leave.
                                         annually.
                                         •.Leave.for.Sterilisation:.Pursuant.to.the.period.prescribed.by.the.doctor,.with.pay.
                                         •.Military.Service.Leave:.Pursuant.to.the.period.notified.for.such.in.accordance.with.
                                         laws.governing.military.service.with.pay.not.more.than.60.day.a.year.
                                         •.Leave.for.Training.and.Professional.Improvement:.Not.more.than.30.days.annually.
                                         with.pay.and.applicable.only.for.employees.younger.than.18.years.of.age.

INTELLECTUAL PROPERTY                                                  (b).Copyright,.pursuant.to.the.Copyright.Act.B..E..2537.
                                                                       (1994),.means.exclusive.right.to.do.anything.under.this.act.in.
•. Thailand.recognises,.accepts.and.protects.the.following.as.         connection.with.the.work.created.by.the.author.
intellectual.properties.                                               According.to.Copyright.Act,.‘work’.comprises.of.literary.work,.
(a).Trademark,.which.according.to.the.Trademark.Act.B..E..             computer.program,.dramatic.work,.artistic.work,.musical.work,.
2534.(1991),.means.a.mark.used.or.proposed.to.be.used.on.              audiovisual.material,.cinematograph.film.and.sound.recording..
or.in.connection.with.goods.to.distinguish.the.goods.bearing.          Under.the.law,.‘author’.refers.to.the.person.creating.or.causing.
the.trademark.of.the.proprietor.of.such.trademark.from.goods.          the.creation.of.any.work.qualified.to.gain.copyright.under.the.
under.another.person’s.trademark..Under.the.same.act,.‘mark’.          Act..However,.like.any.other.copyright.law.in.other.countries,.
means.a.photograph,.drawing,.device,.brand,.name,.word,.               Thailand.also.grants.neighbouring.rights.to.the.performer.
phrase,.letter,.number,.signature,.group.of.colours,.figure.or.        which.refers.to.the.actor/actress,.musician,.singer,.dancer.and.
shape.of.material.or.any.combination.thereof.                          anyone.acting,.singing,.speaking,.playing.according.to.his/her.
                                                                       role.or.in.any.other.description.

                                                                  74
THAILAND                                                                                                       Doing Business in Asia Pacific

(c).Patent,.which.pursuant.to.the.Patent.Act.B..E..2522.(1979).           IMMIGRATION PROCEDURES
amended.in.B..E..2535.(1992),.means.letter.issued.to.protect.
the.invention.or.product.design.as.determined.in.this.act.                Passport/Visa Requirements
(d).Trade.name.means.name.used.in.trading.or.doing.business               •. Generally,.a.foreign.citizen.who.wishes.to.enter.the.Kingdom.
(e).Trade.secrets,.which.according.to.the.Trade.Secrets.Act.B..           of.Thailand.is.required.to.obtain.a.visa.from.the.Royal.Thai.
E..2545.(2002),.means.trade.information.not.generally.known.              Embassy.or.the.Royal.Thai.Consulate-General..However,.
to.the.public.or.not.accessible.by.person(s),.who.basically.              nationals.of.certain.countries.do.not.require.a.visa.if.they.meet.
deal.with.such.information;.however,.such.information.shall.              visa.exemption.requirements.as.follows:.
have.trade.benefit.due.to.its.confidence.and.it.shall.be.                 (1).They.are.nationals.of.countries.which.are.exempted.from.
kept.confidential.by.proper.measurement.employed.by.the.                  visa.requirements.when.entering.Thailand.for.tourism.purposes..
controller.of.such.trade.secrets.                                         Such.nationals.will.be.permitted.to.stay.in.the.Kingdom.for.a.
(f).Integrated.circuit,.which.according.to.the.Protection.of.             period.not.exceeding.30.days..For.more.information,.please.
Layout-Design.of.Integrated.Circuit.Act.B..E..2543.(2000),.               see.http://www.mfa.go.th..
means.arrangement.of.electrical.circuit.in.the.semi-conductor.            (2).They.are.nationals.of.countries.which.hold.bilateral.
or.super-.conductor.material.such.as.an.electrical.part.called.IC.        agreements.with.Thailand.on.the.exemption.of.visa.
                                                                          requirements..For.more.information,.please.see.http://www.
                                                                          mfa.go.th.for.a.list.of.countries.that.have.agreements.with.
DISPUTE RESOLUTION                                                        Thailand.on.exemption.of.visa.requirements.
.                                                                         •. Nationals.of.certain.countries.may.apply.for.visa.upon.arrival.
• System of Court of Justice                                              in.Thailand..Travellers.with.this.type.of.visa.are.permitted.to.
                                                                          enter.and.stay.in.Thailand.for.a.period.of.not.exceeding.15.
(a).The.Thai.system.of.justice.is.based.on.civil.law..All.                days..For.more.information,.please.see.http://www.mfa.go.th.
administration.of.justice.must.conform.to.written.legislation..           for.visa.on.arrival.
Thailand.has.no.juries..Judges.preside.over.the.courts..Different.        •. To.apply.for.a.visa,.a.foreigner.must.possess.a.valid.passport.
numbers.of.judges.and.levels.of.specialised.judicial.expertise.           or.travel.document.that.is.recognised.by.the.Royal.Thai.
are.required,.depending.on.the.level.and.type.of.court.                   Government.and.comply.with.the.conditions.set.forth.in.the.
(b).The.Court.system.in.Thailand.is.divided.into.three.levels:.           Immigration.Act.of.Thailand.B.E.2522.(1979).and.its.relevant.
The.Courts.of.First.Instance,.which.are.the.first.level.lower.            regulations..In.addition,.the.visa.applicant.must.be.outside.
courts,.where.trials.take.place..The.Courts.of.Appeal,.where.             of.Thailand.at.the.time.of.application..The.applicant.will.be.
points.of.fact.or.points.of.law.are.appealed..The.Supreme.                issued.with.a.type.of.visa.in.accordance.to.his.or.her.purpose.
Court.hears.questions.of.law.and.some.cases.on.questions.                 of.visit..For.more.information.on.types.of.visas.and.general.
of.fact.from.the.Courts.of.Appeal.as.well.as.from.specialised.            requirements.for.each.type.of.visa,.please.see:.
courts.                                                                   http://www.mfa.go.th.
(c).Additionally,.there.are.other.special.courts,.which.hear.             •. Please.note.that.the.period.of.visa.validity.is.different.from.
specific.areas.of.laws.in.dispute..They.are.Juvenile.and.Family.          the.period.of.stay..Visa.validity.is.the.period.during.which.a.
Court,.Bankruptcy.Court,.Central.Intellectual.Property.and.               visa.can.be.used.to.enter.Thailand..In.general,.the.validity.of.
International.Trade.Court,.Labor.Court.and.Tax.and.Duty.Court             a.visa.is.three.months,.but.in.some.cases,.visas.may.be.issued.
                                                                          to.be.valid.for.six.months,.one.year.or.three.years..The.validity.
• Alternative Dispute Resolution                                          of.a.visa.is.granted.with.discretion.by.the.Royal.Thai.Embassy.
                                                                          or.Royal.Thai.Consulate-General.and.is.displayed.on.the.visa.
(a).Thailand’s.arbitration.law.is.the.Arbitration.Act.B.E..2545.          sticker..
(2002),.which.is.based.substantially.on.the.UNCITRAL.Model.               •. On.the.other.hand,.the.period.of.stay.is.granted.by.an.
Law..As.recognised.globally,.it.is.an.alternative.to.court.trials.        immigration.officer.upon.arrival.at.the.port.of.entry.and.in.
                                                                          accordance.with.the.type.of.visa..For.example,.the.period.of.
(b).Under.the.law,.parties.may.agree.to.submit.civil.disputes.            stay.for.a.transit.visa.is.not.exceeding.30.days,.for.a.tourist.visa.
to.arbitration,.provided.that.there.is.an.agreement.or.written.           is.not.exceeding.60.days.and.for.a.non-immigrant.visa.is.not.
evidence.between.or.among.the.parties.to.do.so..There.                    exceeding.90.days.from.the.arrival.date..The.period.of.stay.
are.two.arbitration.institutes.in.Thailand..They.are.(1).Thai.            granted.by.the.immigration.officer.is.displayed.on.the.arrival.
Commercial.Arbitration.Institute.of.the.Board.of.Trade.and.(2).           stamp..Travellers.who.wish.to.stay.longer.than.such.period.may.
Thai.Arbitration.Institute.of.the.Alternative.Dispute.Resolution.         apply.for.extension.of.stay.at.offices.of.the.Immigration.Bureau..
Office,.Ministry.of.Justice.                                              For.information.on.application.for.extension.of.stay,.please.see.
                                                                          the.Immigration.Bureau.website.at.www.immigration.go.th.
(c).If.the.party.declines.to.comply.with.the.arbitral.award,.             •. Royal.Thai.Embassies.and.Royal.Thai.Consulates-General.
court.order.must.be.sought.to.enforce.such.award..There.is.no.            have.the.authority.to.issue.visas.to.foreigners.for.travel.to.
difference.between.arbitral.awards.rendered.in.Thailand.and.              Thailand..The.authority.to.permit.entry.and.stay.in.Thailand,.
those.in.foreign.countries,.so.long.as.the.foreign.arbitral.award.        however,.is.with.the.immigration.officers.
is.governed.by.a.treaty,.convention.and/or.agreement.which.
Thailand.is.a.party.to.


                                                                     75
THAILAND                                                               Doing Business in Asia Pacific

Work Permit/Temporary Stay Permit/Re-Entry Permit
•. Foreigners.entering.Thailand.are.not.permitted.to.work,.
regardless.of.their.types.of.visa,.unless.they.are.granted.a.Work.
Permit..Those.who.intend.to.work.in.Thailand.must.hold.the.
correct.type.of.visa.to.be.eligible.to.apply.for.a.Work.Permit,.
which.generally.is.a.‘Non-Immigrant.B’.visa.
•. With.the.‘Non-immigrant.B’.visa,.foreigners.are.allowed.by.
the.Immigration.Bureau.to.have.a.short.term.stay.permit.of.90.
days.from.the.arrival.date..The.90-days.window.opens.a.period.
where.foreigners.can.still.legally.stay.in.Thailand.and.process.an.
application.for.a.permit.of.a.long-stay.(‘Temporary.Stay.Permit’).
to.work.in.Thailand,.which.(once.granted).will.be.on.an.annual.
basis.and.renewable.
•. Application.for.Temporary.Stay.Permit.with.the.Immigration.
Bureau.is.conditional.that.an.application.for.a.Work.Permit.is.
first.applied.for.with.the.Alien.Occupational.Control.Division..
Therefore,.it.is.essential.that.an.application.for.a.Work.Permit.
is.filed.first.and.followed.by.an.application.for.Temporary.
Stay.Permit..Please.note.that.the.Immigration.Bureau.shall.
not.extend.a.short-term.stay.permit.simply.to.allow.time.for.a.
foreigner.to.apply.for.a.Work.Permit.
•. Temporary.Stay.Permit.is.granted.one.year.at.a.time.and.
renewal.is.required.annually.(unless.under.special.rules,.e.g.,.
those.of.the.Board.of.Investment)..Work.permits.are.also.
granted.and.renewable.on.an.annual.basis,.so.long.as.the.
Temporary.Stay.Permit.remains.valid..Therefore,.it.is.important.
to.note.and.recognise.that.once.the.Work.Permit.and.
Temporary.Stay.Permit.are.granted,.they.are.inseparable.
•. Despite.the.grant.and.validity.of.the.Work.Permit.and.
Temporary.Stay.Permit,.foreigners.are.also.required.to.apply.for.
and.obtain.a.‘Re-Entry.Permit’.to.travel.in.and.out.of.Thailand..
Leaving.Thailand.without.a.Re-Entry.Permit.shall.affect.
automatic.cancellation.of.the.granted.and.valid.Work.Permit.
and.Temporary.Stay.Permit.

Permanent Residency
•. Foreigners.may.apply.for.permanent.residency.in.Thailand.if.
he/she.has.held.a.Temporary.Stay.Permit.for.more.than.three.
consecutive.years.
•. The.annual.quota.for.granting.permanent.residency.in.
Thailand.is.a.maximum.of.100.persons.per.country..The.Interior.
Minister.is.responsible.for.issuing.the.announcement.each.year.
that.the.quota.is.open.for.submission.of.applications,.usually.
from.October.to.the.end.of.December.
•. The.Immigration.Commission.has.the.power.to.define.
all.regulations.concerning.permanent.residency..The.
Immigration.Bureau.is.the.agency.that.handles.all.procedures.
concerning.permanent.residency.applications..For.information.
on.application.for.permanent.residency,.please.see.the.
Immigration.Bureau.website.at.www.immigration.go.th..�
.




                                                                  76
VIETNAM

• Located in Southeastern Asia, bordering the Gulf of Thailand, Gulf of Tonkin, and South
China Sea, alongside China, Laos, and Cambodia. Extending 1,650km north to south, the
country is only 50km across at its narrowest point.
• Vietnam is a socialist country under the leadership of the Vietnam Communist Party.
• Legal system is largely based on communist legal theory and French civil law system.
• Vietnamese is the official language. English is increasingly favoured as a second
language, some French, Chinese, Khmer, and mountain area languages (Mon-Khmer and
Malayo-Polynesian).
• Currency: Vietnamese Dong (VND).
• Races include 86.2% Kinh (Viet), 1.9% Tay, 1.7% Thai, 1.5% Muong, 1.4% Khome, and
others 7.3% (1999 census).
• Religions include approximately 50% Buddhist, 8–10% Catholic, 1.5–4%
Hoa Hao, 1.1% Cao Dai, 0.5% Protestant, and 0.1% Muslim.
• Strong economic growth, ongoing reform and a large population of 85.79 million,
half of which are under the age of 30, have combined to create a dynamic and enticing
commercial environment in Vietnam.
• Investment growth areas include aviation, telecommunications, information technology,
oil and gas exploration and power generation.

BUSINESS PRESENCE                                                           contact.point.within.a.local.provincial/city.people’s.committee..
                                                                            It.will.be.incumbent.on.the.DPI.to.obtain.all.of.the.necessary.
•. Local.incorporation.of.100%.foreign.owned.entity.(‘FOE’).or.             approvals.and.opinions.from.the.relevant.ministries,.departments.
joint.venture.(‘JV’)..                                                      and.other.relevant.authorities.prior.to.issuing.any.IC.
•. Both.can.take.the.form.of.limited.liability.companies.with.two.          •. The.length.of.time.it.takes.for.an.IC.to.be.issued.can.vary.
or.more.members,.one.member.limited.liability.companies,.                   widely,.depending.on.a.variety.of.factors..The.estimated.time.
partnership,.private.enterprises.and.shareholding.companies.                required.for.a.licensing.authority.to.issue.an.IC.is.typically.
(also.called.joint.stock.companies).                                        between.two.and.six.months.from.the.date.of.submission.of.the.
•. Other.possible.forms.of.doing.business.in.Vietnam.include.               application..It.can.take.longer.for.more.complex.and.sensitive.
representative.office,.build-operate-transfer.(BOT).for.                    projects.
infrastructure.projects,.business.co-operation.contract,.agency,.
and.distributors.and.franchising..
                                                                            EXCHANGE CONTROL

FOREIGN INVESTMENT RESTRICTIONS                                             •. Governed.by.Ordinance.No..28.and.Decree.No..160.on.
AND CONDITIONS                                                              Foreign.Exchange.Control.and.under.the.control.of.State.Bank.of.
                                                                            Vietnam.(‘SBV’).
Restrictions in equity participation                                        •. All.domestic.business.transactions.must.be.in.the.Vietnamese.
•. There.are.no.general.restrictions.on.foreign.investment.and.             currency.
shareholdings.in.Vietnamese.companies..Any.such.restrictions.               •. Foreign.invested.enterprises.and.foreign.parties.to.business.
are.determined.on.an.industry-by-industry.and.sometimes.even.               co-operation.contracts.must.open.a.foreign.currency.deposit.
a.case-by-case.basis.                                                       account.at.an.authorised.bank.to.process.all.capital.transactions..
                                                                            They.are.also.required.to.open.a.foreign.currency.and/
Approvals and licensing                                                     or.Vietnam.Dong.account.for.their.operations.in.Vietnam,.
•. The.local.provincial/city.people’s.committees.and.                       through.which.all.business.transactions.are.to.be.conducted..
management.boards.of.industrial.zones.are.the.primary.licensing.            Foreign.currency.accounts.outside.Vietnam.of.foreign.invested.
authorities.to.issue.an.investment.certificate.(‘IC’).for.most.type.        enterprises.may.be.permitted.only.upon.the.SBV’s.approval.
of.foreign.investment.within.provinces/cities/industrial.zones.
•. The.Department.of.Planning.and.Investment.(‘DPI’).is.the.



                                                                       77
VIETNAM                                                                                                          Doing Business in Asia Pacific


TAXATION                                                                     The.period.starts.from.the.first.year.in.which.the.enterprise.
                                                                             generates.revenue.
Corporate Tax                                                                •. Since.1.January.2009,.CIT.preferences.have.been.limited.
•. Both.domestic.and.foreign.invested.enterprises.are.subject.               to.high.technology.and.education.sectors..(Use.of.high.
to.corporate.income.tax.(‘CIT’).with.the.standard.CIT.rate.of.               technologies,.scientific.research,.technology.development,.
25%.(reduced.from.28%.on.1.January.2009).on.their.worldwide.                 development.of.especially.important.infrastructure.for.the.state,.
trading.profits,.capital.gains.and.other.assessable.income.                  software.production,.education.and.training,.vocational.training,.
•. The.CIT.rate.applicable.to.business.establishments.conducting.            health,.culture,.sports,.and.the.environment.)
exploration.and.exploitation.of.oil.and.gas.and.other.valuable.
and.rare.natural.resources.is.between.32%.and.50%.                           Capital allowances
                                                                             •. Depreciation.can.be.claimed.on.fixed.assets.used.for.business.
Personal Income Tax                                                          purposes..
•. An.individual.who.stays.in.Vietnam.for.183.days.or.more.                  •. Depreciation.is.calculated.using.the.straight-line.method.or.
during.a.period.of.12.consecutive.months.from.the.date.of.                   an.accelerated.depreciation.method.in.the.case.of.technology.
arrival,.who.leases.a.house.with.a.term.of.90.days.or.more.within.           renovation.purposes..
the.tax.calculation.year,.or.who.is.registered.at.a.permanent.               •. The.accelerated.rate.must.not.be.more.than.twice.the.rate.as.
residence.in.Vietnam.is.classed.as.a.resident.individual..                   that.applied.under.the.straight-line.method..
•. Income.tax.rates.for.resident.individuals.range.from.5%.to.               •. Fixed.assets.are.depreciated.for.a.minimum.of.a.full.month.
35%.on.assessable.income.generated.both.inside.and.outside.of.               •. Entities.wishing.to.allocate.the.cost.of.assets.over.different.
Vietnam,.regardless.of.where.it.is.paid.or.received..                        periods.from.the.set.schedule.of.useful.lives.of.the.assets.must.
                                                                             obtain.approval.from.the.Ministry.of.Finance.
Withholding Tax
•. Vietnamese.enterprises.that.make.cross-border.payment.to.a.               Tax exemptions
foreign.contractor/provider.pursuant.to.a.contract,.the.payments.            •. An.exemption.from.CIT.for.a.maximum.of.four.years.and.
of.interest,.royalties,.services,.construction,.management.fees.             50%.CIT.reduction.for.nine.subsequent.years,.is.available.for.
and.the.like.except.pure.trading.transactions.(unless.such.                  investment.in:
transaction.is.from.a.distributor.to.a.manufacturer).are.subject.to.         •. Geographical.locations.with.especially.difficult.socio-economic.
withholding.tax.                                                             conditions.
                                                                             •. Economic.and.high-tech.zones.
Real Property Gains Tax (RPGT)                                               •. In.the.sectors.of.high-tech,.scientific/technological.research.
•. Any.gain.earned.by.a.resident.individual.from.the.sale.of.real.           and.development,.important.infrastructure.facilities.of.the.state,.
estate.is.taxable.at.the.rate.of.25%..A.rate.of.2%.will.be.charged.          and.education.
for.sale.proceeds.when.purchase.price.and.related.expense.                   •. An.exemption.from.CIT.for.maximum.of.two.years.and.
cannot.be.determined..                                                       50%.CIT.reduction.for.four.subsequent.years.is.available.for.
•. Tax.rate.of.2%.is.applicable.to.non-resident.individuals.for.the.         investment.in.geographical.location.with.difficult.socio-economic.
gain.earned.from.the.sale.of.real.estate.                                    conditions.
                                                                             •. Import/export.tax.exemption.will.apply.to.certain.goods.and.
Other taxes/fees                                                             goods.imported/exported.pursuant.to.certain.conditions.and/or.
•. Special.Sales.Tax.(Excise.Tax):.ranges.from.10%.to.70%.for.               purposes.
goods.and.services.at.the.production.stage..Products.for.export.             •. Income.derived.from.technology.transfers.involved.with.
are.exempt..                                                                 relevant.projects.that.are.entitled.to.investment.incentives.may.
•. Value.added.tax.(VAT):.ranges.from.0%.to.10%.for.various.                 be.exempted.
goods.and.services..                                                         •. Exemption.or.reduction.of.land.use.tax.in.certain.preferential.
•. Registration.fees:.0.5%.for.buildings.and.land,.and.1%.for.               investment.sectors.and.geographical.areas.may.be.available.
boat/ships..The.duty.payable.is.capped.at.VND500millions.per.
asset.per.transaction,.except.for.passenger.vehicles.with.fewer.
than.10.seats..0.5.to.15%.is.levied.on.transfer.of.property.                 EMPLOYMENT LAW

Double taxation treaties                                                     General
•. Vietnam.currently.has.double.taxation.treaties.with.more.than.            •. The.main.statute.dealing.with.employment.is.the.labour.code.
30.countries.                                                                and.its.implementing.instruments,.including.decrees,.decisions,.
                                                                             and.circulars..The.labour.code.governs.both.Vietnamese.and.
                                                                             foreign.employees.
TAX AND INVESTMENT INCENTIVES                                                •. Employees.can.be.classified.as.either.fixed-term.or.indefinite.
                                                                             term.employees,.and.this.classification.impacts.the.rights.and.
General                                                                      obligations.of.both.the.employer.and.employee.
•. Preferential.CIT.rates.of.20%.and.10%,.in.the.form.of.                    •. Vietnam.does.not.have.an.at-will.employment.regime,.and.the.
incentives,.apply.if.the.enterprise.meets.certain.specific.criteria..        employer.must.make.sure.that.it.has.proper.cause.to.terminate.


                                                                        78
VIETNAM                                                                                                        Doing Business in Asia Pacific

the.employment.relationship,.and.has.strict.notice.requirements.          instances.and.courts.of.appeal..The.judgements.are.susceptible.
•. Vietnam.also.requires.severance.pay.to.be.paid.in.most.cases.          to.further.reviews.under.special.circumstances.
                                                                          •. The.court.system.consists.of.the.Supreme.Court,.the.provincial.
Minimum wage requirement                                                  People’s.Courts.and.the.district.People’s.Courts..There.are.
•. As.of.1.January.2011.to.the.areas.set.out.in.Appendix.1.and.as.        specialised.courts.at.the.Supreme.Court.and.at.the.provincial.
of.1.July.2011.to.the.areas.whose.category.has.been.changed.as.           level..These.include.the.Criminal.Court,.Civil.Court,.Economic.
set.out.in.Appendix.2.of.Decree.107-2010-ND-CP,.the.minimum.              Court,.Administrative.Court.and.Labour.Court.
wage.for.employees.working.for.foreign-invested.enterprises.are.
as.follows:                                                               Alternative dispute resolution
•. Level.1:.VND.1,550,000.per.month,.applicable.to.enterprises.           •. Alternative.dispute.resolution.(ADR).is.available.and.includes.
operating.in.Area.I;                                                      mediation.and.arbitration.
•. Level.2:.VND.1,350,000.per.month,.applicable.to.enterprises.           •. Mediation:.a.mandatory.part.of.certain.litigation.procedures.
operating.in.Area.II;                                                     such.as.civil.litigation,.labour,.marriage.and.family.litigation..The.
•. Level.3:.VND.1,170,000.per.month,.applicable.to.enterprises.           State.encourages.the.resolution.of.civil.and.family.disputes.and.
operating.in.Area.III;.and                                                violations.of.the.law.which.do.not.amount.to.criminal.offences.
•. Level.4:.VND.1,100,000.per.month,.applicable.to.enterprises.           by.means.of.mediation..At.the.local.community,.groups.of.non-
operating.in.Area.IV.                                                     professional.mediators.are.set.up.to.carry.out.this.mediation.
                                                                          mandate.
Trade union                                                               •. Arbitration:..
•. The.local.trade.union.and.the.industry.trade.union.where.the.           o.Vietnam.is.a.member.of.the.1958.New.York.Convention.on.the.
enterprise.is.located.have.the.responsibility.for.setting.up.an.          Recognition.and.Enforcement.of.Foreign.Arbitral.Awards.
internal.union.organisation.in.such.enterprise.                            o.Commercial.Arbitration.Law.came.into.effect.on.1.January.
•. Enterprises.in.both.public.and.private.sectors.are.required.to.        2011,.which.now.allows.for.greater.enforceability.of.arbitral.
contribute.a.fund.to.support.the.operation.of.the.trade.union.            awards,.and.foreign.arbitrators.to.be.appointed.to.arbitration.
                                                                          tribunals.in.Vietnam.
Social Insurance Fund contribution                                         o.The.most.well-known.Vietnamese.arbitration.organisation.
•. The.employer.is.obliged.to.contribute.an.amount.equal.to.              is.the.Vietnam.International.Arbitration.Centre.at.the.Vietnam.
16%.of.an.employee’s.salary.to.the.Social.Insurance.Fund..The.            Chamber.of.Commerce.and.Industries.
employer.will.contribute.an.additional.1%.every.two.years.until.
the.contribution.reaches.18%.–.the.next.increase.is.scheduled.
for.2012..                                                                IMMIGRATION PROCEDURES
•. The.employee.is.obligated.to.contribute.6%.of.his.salary..The.
employee’s.contribution.will.increase.by.1%.every.two.years.until.        Passport and visa requirements
it.reaches.8%.–.the.next.increase.is.scheduled.for.2012.                  •. Immigration.law.allows.individuals.from.most.ASEAN.countries.
                                                                          as.well.as.those.involved.in.a.bilateral.or.unilateral.treaty.with.
Health Insurance Fund contribution                                        Vietnam.to.enter.without.the.need.of.a.visa,.but.only.up.to.a.
•. The.employer.is.obliged.to.contribute.an.amount.equal.to.3%.           maximum.of.30.days..
of.an.employee’s.salary.to.the.Health.Insurance.Fund..                    •. Tourist.visas.are.issued.only.for.single.entry,.with.a.validity.
•. The.employee.is.obligated.to.contribute.1.5%.of.his.salary..           period.not.exceeding.three.months..Diplomatic,.business,.official.
                                                                          and.other.types.of.visas.should.be.acquired.from.the.official.
Unemployment Insurance Fund                                               agencies.or.government.or.business.sponsor..
•. The.employer.is.obliged.to.contribute.an.amount.equal.to.1%.           •. Business.passes.and.work.permits
of.an.employee’s.salary.to.the.Unemployment.Insurance.Fund..              •. Foreign.entrepreneurs,.investors,.and.businessmen.get.
•. The.employee.is.obligated.to.contribute.1%.of.his.salary..             multiple.entry.options.with.a.validity.period.lasting.anywhere.
                                                                          between.three.and.six.months..
                                                                          •. Work.permits.are.required.for.foreign.labours.to.work.in.
DISPUTE RESOLUTION                                                        Vietnam..A.labour.contract.must.also.be.signed.in.accordance.
                                                                          with.the.work.permit.and.the.labour.law.of.Vietnam..The.
General                                                                   employer.shall.be.responsible.for.filing.a.copy.contract.to.the.
•. The.Chief.Justice.of.the.Supreme.Court.is.elected.by.the.              issuing.body.
National.Assembly;.judges.of.lower.level.courts.are.appointed.
by.the.Chief.Justice.of.the.Supreme.Court.                                Special permanent residency and other permits
•. Independent.judgements.rendered.but.not.publicly.published,.           •. A.residence.permit.is.required.after.arrival.in.Vietnam..The.
and.it.is.difficult.to.get.access.to.past.judgements.                     multiple.entry.business.visa.(‘MEBV’).can.be.continually.renewed.
•. Commitment.under.the.2000.US–Vietnam.Bilateral.Trade.                  every.six.months.or.when.the.employee.has.stayed.in.the.
Agreement.and.under.the.pressure.to.adhere.to.the.World.Trade.            country.for.a.minimum.of.six.months..
Organization.                                                             •. Employees.may.also.choose.to.apply.for.a.permit.card.for.
                                                                          temporary.residence,.which.is.usually.issued.for.the.duration.of.
Court System                                                              the.work.permit..A.residence.permit.replaces.the.MEBV.for.the.
•. Vietnam.has.a.two-tier.court.system,.including.courts.of.first.        employee.and.their.dependants,.if.appropriate..�

                                                                     79

				
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