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This e-newsletter gives you an overview of international corporate tax developments being reported globally by KPMG firms in the Asia Pacific region between 1 April and 30 April 2013.

Asia Pacific Hong Kong Israel Taiwan
Australia India New Zealand Vietnam
China Indonesia Singapore  

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)
Asia Pacific
Other Tax facts March 2013 KPMG’s March 2013 report of tax developments in the Asia Pacific region concerning financial institutions includes descriptions of recent legislative, regulatory, and judicial developments.
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Australia
Proposed legislation Corporate income tax 3 April 2013 The Australian Assistant Treasurer released a discussion paper that details three proposals intended to improve the public understanding of the corporate tax system and to discourage aggressive tax minimization practices by large corporations.
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Budget 14 May 2013 The 2013-14 Australian Federal Budget is scheduled to be released 14 May 2013. Relevant to the resource sector in particular are potential changes to the thin capitalization, accelerated depreciation, exploration and fuel tax credit provisions.
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Tax legislation adopted and regulatory update Pension system 5 April 2013  Australia’s government announced reforms to improve the fairness, sustainability and efficiency of the superannuation (retirement plan) system.
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China
Tax legislation adopted and regulatory update VAT 1 August 2013 China’s State Council announced that the VAT pilot program, currently in force in selected cities and provinces across mainland China, will be expanded nationwide effective 1 August 2013.
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1 August 2013 With China’s plan to expand the VAT pilot program nationwide beginning August 2013, foreign contractors in the oil-and-gas sector may need clarification as to how the VAT pilot may apply with respect to labor services they provide in China.
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Other Tax facts April 2013 This edition of the China Financial Regulation Alert series for banking, insurance, and securities and futures contains the major laws and regulations issued in the first quarter of 2013 in the PRC which govern the banking, insurance securities and futures, mutual fund, private equity, guarantee and trust sectors.
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Hong Kong
Proposed legislation Tax information exchange agreements April 2013 A bill has been gazetted, and if enacted, would amend the Inland Revenue Ordinance to allow Hong Kong to enter into tax information exchange agreements and would enhance existing exchange of information arrangements.
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India
Tax legislation adopted and regulatory update Foreign trade policy 18 April 2013 India’s government announced updates to its foreign trade policy for 2009-14. The annual supplement to Foreign Trade Policy 2009-14 focuses on providing support to exporters by means of phased-in incentives, relaxing certain procedural rules, and providing measures to increase investor interest in special economic zones (SEZs).
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Employment tax April 2013 India’s Central Board of Direct Taxes issued a circular making it mandatory for employers to generate Part A of Form No. 16 from the TDS Reconciliation Analysis and Correction Enabling System (TRACES) Portal, thus allowing for verification before the information is issued to employees.
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Proposed legislation VAT March 2013 Indian state governments announced their budgets, which include proposed amendments to the VAT rules and rates, and other levies including entry tax and stamp duty. Certain proposals are effective by way of notifications.
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Administrative and case law Corporate income tax April 2013 Case law has been published with respect to the following subjects:
the expenditure on clinical trial incurred outside the approved in-house research and development facility is eligible for weighted deduction
exemption from tax on long-term capital gains on the sale of a long-term capital asset (other than residential property) is available under the Income-tax Act, 1961, if the proceeds are invested in new property (i.e. residential property) before the due date for filing an extended tax return.
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Corporate income tax/Service tax April 2013 Case law has been published with respect to the following subjects:
service rendered to a third party on customer’s request; thus, service recipient is ‘contractual recipient’ and not the third party, in terms of Service tax law
capital gains on transfer of Indian company shares by Dutch companies to Singapore companies are not taxable in India, but in the Netherlands. Since the business undertaking of the Indian company was approved by the India’s central government at the time of the sale of its shares, capital gains on such shares are exempt in India under the Income-tax Act
taxpayer did not violated any provision of law while making sales to its ’sister concerns’ at amounts lower than sales made to ’non-sister concerns’.
Interest received by a non-resident partner from an Indian partnership firm is taxable as interest income, and is not business income under the UAE income tax treaty.
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Corporate income tax April 2013 Case law has been published with respect to the following subjects:
payments made to third party, routed through related company, are not reimbursements
payments made for online advertisement on search engines not taxable in India.
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Corporate income tax April 2013 Case law has been published with respect to the following subjects:
export commission paid to foreign agents is not taxable in India because the foreign agents did not have any business connection or permanent establishment in India
taxpayer’s income from processing fees, late-payment interest, and loan pre-closure charges relate to the taxpayer’s business of long-term finance and are eligible for deduction.
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Indonesia
Tax legislation adopted and regulatory update VAT 1 April 2013 Certain transition relief concerning the new system to control VAT invoices has been provided by Indonesia’s Directorate General of Tax. The new VAT process in Indonesia is effective since 1 April 2013.
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Israel
Administrative and case law Indirect tax April 2013 -State of Israel - Israel Tax Authority - Department of Customs v. Hollis Industries Ltd. In a case concerning the classification of imports of ‘raw materials’ and ‘manufactured goods’, the Israeli Supreme Court held that under certain circumstances, an Israeli distributor may be entitled to a customs duty refund for overpayment of tax on imports due to a customs misclassification.
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New Zealand
Proposed legislation Corporate income tax April 2013 An issues paper released by New Zealand’s Inland Revenue and Treasury proposes changes to the taxation of land-related lease payments. The new proposal would introduce generic income, deduction, and timing rules for land-related lease payments. In general, any land-related lease payment would be treated as deductible to the payer and taxable to the recipient.
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Singapore
Proposed legislation Budget / Incentives 2013 Singapore’s Budget 2013 included proposals for changes to the productivity and innovation credit (PIC) regime. The proposals are viewed as representing the government’s acknowledgement that the PIC regime is critical for certain businesses in various industries.
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Tax legislation adopted and regulatory update Corporate income tax 28 February 2013 The Inland Revenue Authority of Singapore issued a tax guide to explain the tax treatment under a ‘rights-based approach’ in characterizing payments with respect to software and the use of, or right to use, information and digitized goods. Effective from 28 February 2013, the Inland Revenue Authority adopted a ‘rights-based approach’ which distinguishes whether the payments were for the transfer of a copyright ‘right’ or for the transfer of a copyright-protected article.
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Taiwan
Proposed legislation Corporate income tax April 2013 The Finance Committee of the Legislative Yuan in early April 2013 passed measures that, if enacted, would move toward completion of Taiwan’s anti-avoidance rules. The Ministry of Finance originally proposed five measures under the anti-avoidance package.
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Vietnam
Tax legislation adopted and regulatory update VAT April 2013 Vietnam’s tax authorities issued guidance (official letters) concerning the imposition of VAT on:
certain banking activities (e.g. loan services, fees related to credit service processing, and card transaction fees)
guidance for the real estate sector with respect to income relating to residential sales and office leases
invoices for international ocean transport by businesses that enter into contracts for international transportation services with domestic customers.
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