1. Tax Planning for Corporate in Asia
January 12, 2019

2. Effective Tax Rate (ETR)
Shareholding structure
Supply chain and transfer pricing

3. Which is Hong Kong’s tax rate?
15% B.
8.25% C.
16.5% D.
7.5%

4. Headline tax rate Effective tax rate Applicable tax rate
Which one is more important?
1-> 2 tax planning
2-> 3 tax planning

5. Headline tax rate HK applicable tax rate China applicable tax rate
China got 5% rate? No. WHT

6. Effective Tax Rate (ETR)
Mainland China
Company A
Company B
Company C
Profit before tax a
1,000
Income tax b
(400)
(100)
ETR
c = - b/a
40%
10%
(10%)
1,000
(1,000)
100
(100)
Hong Kong
Company D
Company E
Profit before tax a
Income tax b
ETR
c = - b/a 0%
12%
Total
(1,200)
2,000
800
(240)
“Total”- ETR closely link to CMA work
30%
Base Erosion and Profit Shifting (BEPS) / Country-by-country reporting (CBCR)

7. Tax loss transfer and tax consolidation
South Korea
Malaysia
Japan
Singapore
Taiwan*

8. Effective Tax Rate (ETR)
Shareholding structure
Supply chain and transfer pricing

9. Shareholding structure
US Parent Co.
Hong Kong
Singapore
WHT locally when sending dividend to US -
WHT in Indonesia when sending dividend to Hold Co 5%
10%
Hold Co?
Local tax when receiving dividend from Indonesia -
Indonesia
Dividend WHT to overseas in domestic law 20%
Dividend WHT to US 10%

10. 15% (no US Singapore tax treaty)
Shareholder’s loan – thin capitalization
US Parent Co.
Hong Kong
Singapore
WHT locally when sending interest to US -
15% (no US Singapore tax treaty)
WHT in Indonesia when sending interest to overseas lender
10% ?
Local tax when receiving interest income from Indonesia -
- (note)
Indonesia
Interest WHT to overseas in domestic law 20%
Interest WHT to US10%
Note: in this case, Singapore incurs interest expense in relation to receiving interest income. Thus the taxable profit at 17% income tax rate is usually less than the withholding tax suffered in Indonesia (i.e. 10% of Singapore of interest income). Therefore, there is no additional Singapore tax imposed.

11. Effective Tax Rate (ETR)
Shareholding structure
Supply chain and transfer pricing

12. US Group and its China manufacturing sub
materials
goods US
China
sub
materials
goods US
Vietnam
factory
China
sub
0% customs duty possible due to temporary import (60+30 days) or FTA
0% customs duty possible due to ASEAN-China FTA (40% local value) 12

13. Transfer pricing materials $? goods US China sub $? $? materials goods
Vietnam
sub
China
sub
0% customs duty possible due to temporary import (60+30 days) or FTA
0% customs duty possible due to ASEAN-China FTA (40% local value) 13

14. Q & A