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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 July and 31 July 2013.

Asia Pacific India Oman Turkey
Australia Iraq Pakistan United Arab Emirates
China Japan Qatar Vietnam
Cyprus Korea Singapore  
Hong Kong Kuwait Sri Lanka  


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
KPMG publications Financial institutions June 2013 KPMG’s report of tax developments in the Asia Pacific region for financial institutions includes descriptions of recent legislative, regulatory, and judicial developments.
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Real estate industry July 2013 KPMG’s report on tax developments affecting the structuring of real estate funds in the Asia Pacific region includes a particular focus on the impact of changes on the tax efficiency of commonly used investment structures.
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Australia
Tax legislation adopted and regulatory update Asset management July 2013 The introduction of new International Standards Organisation (ISO) standards for asset management—ISO 5500x—highlights the evolving role of asset management in creating value for asset-intensive companies.
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Tax compliance 2013 The Australian Taxation Office included a disclosure item on the 2013 Form C (company tax returns) relating to rights to future income, consumable stores, and work- in-progress deductions claimed in the income year.
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Petroleum industry 30 June 2013 Taxpayers in Australia with interests in petroleum projects need to consider that:
recent judicial consideration of the meaning of the term “exploration”—in a petroleum resource rent tax (PRRT) context—requires an analysis of historical positions adopted in characterizing the expenditure as an exploration. This analysis is relevant also for taxpayers that inherited an exploration expenditure on acquiring an interest in a petroleum project.
legislative changes made after the judicial decision largely reinstate the historical industry and tax authorities’ view in relation to apportionment of an expenditure for PRRT purposes—although the requirement to “look through” certain related-party transactions must be considered.
amendments to the PRRT regulations (which make the legislated approach to determining a gas transfer price available to integrated onshore, gas to electricity, and the North West Shelf project) also require consideration for effected taxpayers.
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R&D 30 June 2013 Companies in Australia need to consider—now that the new R&D tax incentive is in the form of a tax offset—how to account for the tax effect of R&D offset claims in their financial statements.
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2013 Australia’s R&D tax incentive is jointly administered by the Australian Taxation Office and AusIndustry (on behalf of Innovation Australia).
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Corporate income tax/ public disclosure June 2013 Legislation enacted in late June 2013 requires the Australian tax authorities to disclose publicly certain information from the tax return of companies with a “reported total income” of greater than AUS $100 million (and those with a petroleum resource rent tax or mineral resource rent tax liability).
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Trusts 2013 As an indirect result of the repeal of the foreign investment fund regime, an Australian investor in any foreign trust now must calculate the Australian net income of the foreign trust and include in its assessable income its share of that income.
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Stamp duties/ mining industry 2013 Investments in Australian mining projects are often structured so that incoming investors earn an interest in an exploration tenement by funding exploration work—commonly known as a “farm-in arrangement.”
Recent developments illustrate that the duty (tax) implications of farm-in arrangements are not uniform among the Australian states.
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GST 1 July 2013 Australia’s introduction of the National Disability Insurance Scheme (NDIS)—effective 1 July 2013—may have GST implications for entities providing disability supplies or support to participants under the NDIS.
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Mining Industry 1 January 2015 The minerals exploration industry in Australia is currently seeking endorsement of both major political parties to introduce a mineral exploration tax credit to help stimulate investment in “greenfields exploration” in Australia.
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Proposed legislation R&D 2013 A bill introduced 26 June 2013 by the Australian government proposes R&D tax incentive changes. The proposed R&D measures would:
Repeal R&D tax incentives for corporate groups with assessable income greater than AUS $20 billion (approximately U.S. $18.3 billion)
Introduce a quarterly installment system, to allow company groups with less than AUS $20 million "aggregated turnover" to access their refundable tax offset in advance, on a quarterly basis.
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Corporate income tax 1 July 2014 The Australian government has announced the planned repeal of an offshore financing provision.
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Real property tax 1 July 2016 Australia’s government has proposed a non-final withholding tax when a foreign resident disposes of Australian real property interests, whether or not the interest is held on revenue or capital account. Under the proposal, the purchaser would be required to withhold and remit 10% of the proceeds from the sale.
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Administrative and case law GST Naidoo v. Commissioner of Taxation [2013] AATA 443 (28 June 2013) The Australian Commissioner of Taxation in a refund litigation case suggested that the circumstances when a taxpayer can obtain a refund of GST are limited. However, the court disagreed with this position.
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ATO ID 2013/40 A recent “interpretative decision” of the Australian Taxation Office reveals an ongoing aversion of the tax authorities to grant claims for refunds of GST unless they are completely satisfied that an unregistered recipient will obtain the full benefit of the GST refund.
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China
Tax legislation adopted and regulatory update VAT 1 July 2013 China’s State Administration of Taxation issued guidance providing that oil and gas companies engaging in coalbed methane and shale gas production—or providing production services for coalbed methane and shale gas production—are subject to VAT with respect to their production services.
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Automotive industry/ various taxes 2013 The automotive and auto component sector has been under increasing scrutiny of the Chinese tax authorities because of the industry’s operational scale, capital size, and organizational structure.
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Corporate income tax 2013 Chinese government agencies have launched a program for inspection of high technology enterprises.
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R&D 2013 China’s healthcare and life sciences industry sector currently is experiencing significant growth, with foreign multinational corporations continuously investing in the Chinese market. Read more
Tax compliance 1 September 2013 China’s State Administration of Taxation and the State Administration of Foreign Exchange jointly issued guidance that sets forth new tax registration requirements for Chinese residents making certain payments overseas—i.e., outbound remittances.
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Treaties FTA 6 July 2013 Representatives of China and Switzerland on 6 July 2013 signed a free trade agreement that is intended to reduce customs duty rates on trade between the two nations.
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Cyprus
KPMG publications Various taxes 2013 KPMG in Cyprus prepared a “tax card” that provides an easy-to-read overview of the tax system in Cyprus for 2013.
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Hong Kong
Tax legislation adopted and regulatory update Information exchange agreements July 2013 Legislation passed by the Legislative Council allows Hong Kong to enter into tax information exchange agreements as stand-alone agreements.
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India
Tax legislation adopted and regulatory update Transfer pricing 29 June 2013 India’s income tax authorities on 29 June 2013 announced the withdrawal of Circular 2 (concerning  the Profit Split Method as the preferred method for computing tax liability), and the modification of Circular 3 relating to the taxation of software development and other R&D centers.
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Special economic zones July 2013 India’s Central Government issued SEZ-related guidance providing an “up-front” service tax exemption on specified services received by a SEZ unit and SEZ developer that are “used exclusively for the authorized operations.” A prior condition of “wholly consumed” has been removed.
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Anti-avoidance July 2013 India’s Central Board of Direct Taxes introduced Rule 21AC to the Income-tax Rules, setting forth the procedures and documentation requirements for claiming a deduction when a payment is made with respect to an international transaction with a party located in a “notified jurisdictional area.”
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Securities 26 June 2013 Decisions of the Securities and Exchange Board concern:
SME listing on institutional trading platform without IPO
proposed amendments to buy-back of securities regulations; preferential issue; foreign institutional investors, sub accounts and qualified foreign investors to be classified as “foreign portfolio investors.”
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Corporate income tax 2013 How taxpayers are to set off and carry forward losses under sections 10A,10AA, 10B and 10BA of the Income-tax Act, 1961, has been uncertain. There has been no consistent approach by either the tax authorities or the courts. For instance, while some tribunals and courts have held that the losses of ineligible units must be set-off against the profits of the eligible units, others have taken the view that such losses are not to be set-off with the profits of eligible units in computing the amount of deduction under the sections.
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Foreign direct investment 2013 A committee appointed by India’s government to re-examine the foreign direct investment policy made recommendations that were followed up by the Minister of Commerce & Industry.
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Tax compliance 5 August 2013 The Central Board of Direct Taxes extended the due date for filing income tax returns from 31 July 2013 to 5 August 2013 in respect of financial year 2012-13 for certain specified taxpayers—e.g., non-company taxpayers and taxpayers who are not required to have their books of accounts audited including individuals and Hindu Undivided Family, Trusts.
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Social security agreements 2013 India has signed social security agreements with other countries, to achieve an exemption from social security contributions in the host countries for outbound employees, provided that the outbound employees contribute to social security in India. To obtain the exemption, an outbound employee must obtain a “certificate of coverage” from the EPFO, and the certificate serves as a proof of social security contribution in India. A recent circular provides future “certificates of coverage” will be issued by the local regional provident fund commissioner.
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Proposed legislation GST June 2013 A committee of India’s state finance ministers issued a discussion paper concerning state-level GST proposals. Comments from the public are requested.
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India
Tax legislation adopted and regulatory update Transfer pricing 10 June 2013 India’s Central Board of Direct Taxes this week issued guidance (Notification No. 41/2013/F. No. 142/42/2012) that expands the transfer pricing reporting requirements to require the reporting of the aggregate value of certain international transactions and certain “specified domestic transactions”.
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29 June 2013 India’s income tax authorities on 29 June 2013 announced the withdrawal of Circular 2 (concerning  the Profit Split Method (PSM) as the preferred method for computing tax liability), and the modification of Circular 3 relating to the taxation of software development and other R&D centers.
Read more
Special economic zones 11 June 2013 The Reserve Bank of India issued guidance providing that units operating in special economic zones (SEZs), that previously were permitted to realize and repatriate to India the full value of goods or software without any time limit, must now realize and repatriate the full value of goods, software, and services to India within a period of 12 months measured from the date of export.
Read more
Proposed legislation GST June 2013 A committee of India’s state finance ministers issued a discussion paper concerning state-level GST proposals. Comments from the public are requested.
Read more
Administrative and case law Various taxes July 2013 Case law has been published with respect to the following subjects:
amounts received by Indian branch for commercial services provided to U.S. head office are taxable in India
no withholding required when amount was already credited or paid before statutory amendment imposing a withholding liability
provisions concerning taxation of capital gains do not apply for transfers of stock-in-trade
only investments generating exempt income are considered under disallowance rule, not the total investment appearing on the balance sheet
determining CENVAT credit based on amount of service tax provided on invoice
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Corporate income tax/ application of tax treaties Bangkok Glass Industry Co. Ltd The Madras High Court found that payments made for services rendered for the transfer of know-how were royalties under Article 12 of the India-Thailand income tax treaty; and that payments made for services providing technical advice and assistance were covered under Article 7 (business profits) of the tax treaty. The court further held that because there was no PE in India, the “fees for technical services” were not subject to tax under Article 7 of the tax treaty, and because the payments did not fall under the category of “miscellaneous income” were not taxable under residuary article of the tax treaty.
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Transfer pricing HSBC Electronic Data Processing India Private Ltd. v. ACIT [ITA No. 1624/Hyd/2010] The Hyderabad Bench of Income-tax Appellate Tribunal issued a decision in a case concerning the comparability analysis with respect to companies selected by a taxpayer and those selected by the Transfer Pricing Officer, in connection with business process outsourcing services provided by the taxpayer to foreign related parties. The tribunal focused on parity between the taxpayer’s functions, assets, and risk profile and the profile of comparable companies.
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Capital gains taxation July 2013 Case law has been published in India with respect to the following subjects:
“improvement expenses” on new ready-made residence are eligible for capital gain exemption
long-term capital gain exemption prior to set off against long-term capital loss
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Corporate income tax/ application of tax treaties July 2013 Case law has been published in India with respect to the following subjects:
stock derivative loss not carried forward and applied against (non-speculative) business income
indian branch providing pre-sale activities and post-sale support for products supplied by parent and overseas group companies not a dependent agent PE; absent a PE, the “force of attraction rule” under income tax treaties does not apply
fees for employee training services did not satisfy “make available” condition under the India-UK income tax treaty and therefore not taxable in India
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Withholding tax Sundaram Asset Management Co. Ltd The Chennai Bench of the Income-tax Appellate Tribunal held that tax is not required to be withheld on payments by an asset management company to distributors of mutual fund units. The tribunal recognized that services provided by mutual fund distributors are specifically excluded from withholding under section 194H of the Income-tax Act, 1961, because this statutory provision excludes from withholding tax (i.e., “tax deducted at source”) requirements on commissions or brokerage fees paid on securities. Also, the tribunal found that these services are not “professional services” or “technical services” pursuant to section 194J.
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Corporate income tax Biocon Ltd. The Special Bench of the Bangalore Income-tax Appellate Tribunal held that a discount on the issuance of employees stock option plans is a deductible business expenditure because: (1) it represents consideration/compensation for services rendered by employees; and (2) it is an ascertained liability, since the employer incurs obligation to compensate the employees over the vesting period, notwithstanding the fact that the exact amount of discount is quantified only at the time of exercising the options.
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Iraq
Tax legislation adopted and regulatory update Foreign investment 2013 Foreign investors may view Iraq as offering certain opportunities. As the country emerges from years of conflict and economic sanctions, the government is undertaking massive reconstruction projects to restore its infrastructure and develop its economy.
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Japan
Tax legislation adopted and regulatory update Customs April 2013 The customs valuation rules in Japan have been clarified and reflect the transposition of principles from the GATT Agreement into Japanese customs law.
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Korea
Tax legislation adopted and regulatory update Gift tax/ tax compliance 31 July 2013 The first voluntary reporting by corporations for the deemed gift tax concerning the “unfair funneling of work to subsidiaries” is due 31 July 2013.
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Kuwait
Tax legislation adopted and regulatory update Corporate income tax/ tax compliance 2013 The Kuwait Tax Authority issued guidance (Circular No. 1 of 2013) requiring companies to submit reports in connection with their annual tax declarations.
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Oman
Proposed legislation VAT 2016 The Oman government and other Gulf Cooperation Council countries are considering a common framework for implementing a VAT.
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Pakistan
Tax legislation adopted and regulatory update Various taxes 1 July 2013 Pakistan's Finance Act 2013 (date of enactment, 1 July 2013) reflects changes as proposed by Finance Bill 2013.
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Qatar
Tax legislation adopted and regulatory update Inbound investment/ tax compliance 2009 Foreign investors thinking about investing in Qatar need to be aware of the compliance requirements imposed by Qatar Tax Law No. 21 (2009).
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Singapore
Tax legislation adopted and regulatory update Islamic finance tax July 2013 The commitment of the Monetary Authority of Singapore to developing Islamic financial services was recently reaffirmed.
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Sri Lanka
Proposed legislation Exchange control regulations 2013 Provisions in Sri Lanka’s 2013 budget included a proposal to “relax” Sri Lanka’s exchange control regulations.
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Turkey
Tax legislation adopted and regulatory update APAs July 2013 Turkey’s APA system is still viewed as being in its infancy, even though Turkey’s transfer pricing rules were effective beginning in 2007.
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United Arab Emirates
Treaties DTT/ air transport agreement First quarter of 2013 The United Arab Emirates during the first quarter of 2013 signed income tax treaties with Hungary, Benin, Libya, Japan, and Serbia, and an air transport agreement with Senegal.
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Vietnam
Tax legislation adopted and regulatory update Various taxes 1 July 2013 In Vietnam, new regulations are effective 1 July 2013 and concern individual income tax, tax administrative procedures, corporate income tax, and VAT.
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19 June 2013 Vietnam’s National Assembly on 19 June 2013 passed legislation that:
reduces the standard corporate income tax rate from 25 percent to 22 percent, effective 1 January 2014 and then further reduces the rate to 20 percent effective 1 January 2016
replies a 20 percent rate of corporate income tax for enterprises with total annual revenue not exceeding VND 20 billion (approximately U.S. $941,000)
replies a 10 percent rate of corporate income tax on income from the implementation of projects on investment/trading of social housing (effective 1 July 2013)
clarifies, under a tax incentives regime, which income items are subject to a corporate income tax rate of 10 percent or 20 percent for a 15-year period
adds to the list of goods exempt from VAT.
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Personal income tax 1 July 2013 Guidance intended to clarify certain individual (personal) income tax provisions that were effective 1 July 2013, concerns:
an expanded housing rental period (from 90 to 183 days) for purposes of determining who is a tax resident of Vietnam
new amounts for providing tax relief for individual taxpayers
new limits for excludable contributions to a voluntary pension funds
additional items added to list of exemption from individual income tax
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