Tax considerations form an essential part of a corporate strategy and play a key role in determining the success of a business.
For those seeking to invest into more than just one ASEAN economy, or looking for a jurisdiction to base their business, an inter-country tax comparison can help make a suitable, cost-effective decision.
In this article, we highlight some key difference in tax rates between individual member states.
Lately, the indirect form of taxation – VAT and GST, have become more established in ASEAN.
Five of the 10-member countries impose the VAT at a flat rate, ranging from 12% in the Philippines to 7% in Thailand.
Thailand is expected to raise the rate value to 10%.Vietnam, on the other hand, imposes a two-tier VAT rate – a standard rate of 10% and 5% for specific essential goods and services.
Singapore and Malaysia collect a VAT-like tax – GST, whereas Myanmar imposes a commercial tax with rates ranging from 5% to 12% .
Brunei does not employ any VAT or equivalent consumption tax.
The average rate of CIT in ASEAN has shown a considerable decline in rates over the last 10 years.
Currently, most of the ASEAN nations impose standard CIT rates that are all within a few percentage points of the 23% average, down from around 26% a decade before.
Among the 10 member states, Singapore imposes the lowest CIT rate at 17% of the taxable income.
In addition, it offers concessionary tax rates to new companies under its partial tax exemption scheme.
Cambodia, Thailand and Vietnam and Brunei also tax returns of domestic and foreign investors below the average ASEAN rate.
The highest CIT is imposed by the Philippines at 30% of a company’s taxable income.
PIT in almost all ASEAN countries relies on a progressive schedule with many brackets and a widely spread set of tax rates.
Among the ASEAN countries, Malaysia has the most number of tax brackets, totaling 11; while Cambodia and Indonesia have the lowest, with five and four respectively.
In general, all ASEAN countries have a progressive tax structure, with most of the ASEAN countries imposing a zero percent minimum PIT rate, exempting certain levels of income.
Vietnam and Indonesia, however, are an exception, imposing a minimum rate of 5 percent on PIT.
The Philippines, Thailand, and Vietnam have the highest maximum tax rate of 35%, whereas Singapore and Cambodia impose only 20% as their highest rate.
Tax laws of each ASEAN country define residency status of its taxpayers differently – and accord tax treatment accordingly.
In Malaysia, for example, foreigners working in the country for more than 60 days but less than 182 days are considered ‘non-residents’ and are subject to a flat tax rate of 28 percent.
Those working in the country for less than 60 days are exempt from paying taxes, whereas those working for more than 182 days are considered as ‘tax-resident’ and are subject to the standard rate of the PIT.
Before calculating taxable income, foreign individuals in ASEAN must consult tax professionals from local jurisdictions to determine their residency status.
ASEAN Market is the Future of Global Income.
Despite their distinct cultures, histories, and languages, the ten member states of ASEAN share a focus on jobs and prosperity.
Household purchasing power is rising, transforming the region into the next frontier of consumer growth.
Maintaining the current trajectory will require enormous investment in infrastructure and human-capital development.
A challenge for any emerging region but a necessary step toward ASEAN’s goal of becoming globally competitive in a wide range of industries.
The ASEAN Economic Community offers an opportunity to create a seamless regional market and production base.
If its implementation is successful, ASEAN could prove to be a case in which the whole actually does exceed the sum of its parts.