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This e-newsletter gives you an overview of international corporate tax developments being reported globally by KPMG member firms in the Asia Pacific region between 1 March and 31 March 2013.

Australia India New Zealand Vietnam
China Indonesia Singapore  
Hong Kong Korea Turkey  

For a full summary of global tax developments, visit kpmg.com/TaxNewsFlash.

To contact the Global International Corporate Tax Group email go-fmglobalict@kpmg.com.

  Tax area concerned Relevant date/case reference Description of measures and publication link
(Considerations in italic where necessary)
Australia
Tax legislation adopted and regulatory update Corporate income tax March 2013 Australian Taxation Office (ATO) Commissioner, in outlining his vision for the future of tax administration in Australia, indicated that the ATO would focus on multinational entities as well as profit-shifting and other areas.
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China
Tax legislation adopted and regulatory update VAT March 2013 China’s State Administration of Taxation issued guidance clarifying that if a non-resident enterprise derives certain China-sourced passive income that falls within the scope of the VAT reform pilot program, the VAT arising on such passive income is not included in the tax base used to calculate the amount of corporate income tax to be withheld on behalf of the non-resident income recipient.
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China’s State Administration of Taxation issued guidance clarifying the VAT treatment of sales revenue of “direct sales enterprises.”
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Service industry cooperation zone March 2013 China’s National Development and Reform Commission in early March 2013 issued guidance listing six eligible industrial sectors under the Qianhai Shenzhen-Hong Kong modern service industry cooperation zone.
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Hong Kong
Treaties DTT 7 March 2013 An income tax treaty between Hong Kong and Mexico entered into force 7 March 2013.
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Proposed legislation Budget 2013/2014 Hong Kong’s 2013-14 Budget set in motion two important developments for the funds industry in Hong Kong.
For the private equity industry, the government announced its intention to amend and extend the current offshore fund exemption to private equity funds, so that they qualify for the same tax exemption as other offshore funds.
For the broader funds sector, the government will also review the legal, tax, and regulatory framework to allow open-ended investment companies to be domiciled in Hong Kong.
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India
Tax legislation adopted and regulatory update Reporting requirements March 2013 India’s Central Board of Direct Taxes issued guidance amending the Income-tax Rules, 1962, concerning forms known as the “statement of deduction of tax” and the “statement of collection of tax” and amending the requirement to furnish a “certificate from an accountant.”
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Budget 28 February 2013 India’s Union Budget 2013 was presented on 28 February 2013 by the Finance Minister. The proposed amendments relating to direct taxes will apply from Assessment Year 2014-15, and the changes in the rates of central excise and customs duties are effective immediately. Further, changes in service tax provisions will be effective either on the day of enactment of the Finance Bill, 2013 or from 1 April 2013 or from a date to be subsequently established.
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1 June 2013 The Union Budget 2013 includes a provision that, effective 1 June 2013, an additional tax — at a rate of 20 percent (plus applicable surcharge and cess levy) — would be imposed on any amount distributed by an Indian company with respect to the buy-back of unlisted shares.
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SEBI March 2013 The Securities and Exchange Board of India (SEBI) clarified how to compute the 5 percent limit with respect to a “creeping acquisition” under Regulation 3(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (Takeover Regulation).
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Treaties Social security agreement March 2013 India and Portugal sign social security agreement.
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Administrative and case law Service tax/Corporate income tax March 2013 Case law has been published with respect to the following subjects:
Service tax has no element of profit, and is not included in the service provider’s total receipts when computing presumptive income.
Payments for testing with automated machinery, not involving human intervention, are not “fees for technical services”.
Provision for bonus not added back to “book profit” for the minimum alternative tax computation.
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Corporate income tax March 2013 Case law has been published with respect to the following subjects:
Tax on transfer of shares of Indian company, without consideration, in a group reorganization.
No penalty when expatriate employees made voluntary disclosure, and had bona fide reason for underreporting salary.
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Corporate income tax March 2013 Case law has been published with respect to the following subjects:
Taxpayer’s refunds cannot be used to offset tax liability owed by another member company of the corporate group.
Conditions for carrying forward, offsetting accumulated losses in amalgamation.
Several independent housing units can constitute “a residential house” for purposes of the exemption under section 54.
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Treaties March 2013 Case law has been published with respect to the following subjects:
Payments for fabric designs are “fees for technical services” under India-UK income tax treaty.
Tax residency certificate, issued by Netherlands tax authority, sufficient evidence of beneficial ownership for purposes of India-Netherlands income tax treaty.
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Corporate income tax/Withholding tax March 2013 Case law has been published with respect to the following subjects:
Interest relating to share purchases disallowed.
Delhi High Court directs tax authorities to reduce taxpayer hardships encountered in claiming withholding tax credit.
No penalty given that a retroactive tax law change reflects that the issue was “debatable” and unresolved.
Assessing Officer’s order giving effect to a tribunal’s decision cannot be modified by a successor Assessing Officer; defects in the earlier order can be rectified only under certain procedures.
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Indonesia
Tax legislation adopted and regulatory update VAT 1 April 2013 A new VAT process in Indonesia is effective 1 April 2013.
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Korea
Tax legislation adopted and regulatory update Budget 2012 Among the 2012 tax amendments are measures concerning:
increased alternative minimum tax (AMT) rate for large corporate and high-income individuals
extension of the production improvement facility tax credit
a lowered threshold on taxable profits from financial investment, for individual income tax purposes
deemed income on certain related-party transactions, for inheritance and gift tax purposes.
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New Zealand
Tax legislation adopted and regulatory update Corporate income tax March 2013 New Zealand’s Inland Revenue “clarified” its position on the taxation of employer-provided accommodation and accommodation allowances when an employee is traveling for work.
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Lease taxation March 2013 Proposals to tax the value of employer-provided car parks have been withdrawn.
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Singapore
Administrative and case law Corporate income tax Company X v. Comptroller of Income Tax (2013) MSTC 50-013 Singapore’s Income Tax Board of Review held that a taxpayer’s lump-sum payment for the grant of a facilities-based operator license and certain radio frequency spectrum rights for mobile telecommunication services, for a period of 20 years, was capital in nature, and not a deductible expense.
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Turkey
Other Tax facts 2013 KPMG in Turkey prepared a report that examines corporate taxation, transfer pricing rules, indirect taxation (VAT) and trade and customs rules, individual income tax, company law requirements, and rules for mergers, acquisitions, and reorganizations.
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Treaties Free trade agreement 21 March 2013 Procedures to implement a free trade agreement between Turkey and South Korea have been completed, so that the free trade agreement enters into force with the 21 March 2013 publication of a Council of Ministers decree in Turkey’s official gazette.
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Vietnam
Tax legislation adopted and regulatory update Corporate income tax/VAT March 2013 Vietnam’s tax authorities issued guidance with respect to:
a tax extension and reducing land rental fees for eligible entities (effective 25 March 2013)
guidance for the real estate sector with respect to income relating to residential sales and office leases
interest-free loans between a company and its foreign related party
late declarations of VAT for construction and installment activities
guidance when assets under a business cooperation contract have been fully depreciated and the rules relating to VAT declarations
VAT treatment when companies are in dissolution and transfer a project
foreign contractor tax liability of foreign courier companies.
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Corporate income tax/VAT March 2013 Official letters issued by Vietnam’s General Department of Taxation provide guidance concerning:
the “export turnover” to be used in determining income subject to corporate income tax
the deduction of sales discounts
additional payments made to female employees for corporate income tax deduction purposes
incremental income derived from investments in and construction of a new production line, expansion of scale, technology renovation, or manufacturing capacity enhancement
the deadline for enterprises eligible for a VAT payment extension which is 20 August 2013.
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