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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
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1. Australia............................................................................................. 4
2. China. ................................................................................................ 11
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3. Guam................................................................................................. 14
4. Hong.Kong........................................................................................ 17
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5. India................................................................................................... 20
6. Indonesia........................................................................................... 34
7. Japan................................................................................................. 37
8. Malaysia............................................................................................. 40
9. New.Zealand...................................................................................... 43
10. Philippines......................................................................................... 46
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11. Republic.of.Korea.............................................................................. 52
12. Singapore. ......................................................................................... 55
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13. Sri.Lanka. ........................................................................................... 60
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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.
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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.
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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
