Your Snapshot of Key Legal Developments in Asia
Issue 2 - Apr/May/Jun 2014
- Prakas No. B5-014-068P on Oversea Fund Transfer of Banking and Financial Institutes
- Prakas No. 311 MEF.P on VAT Tax Incentive for Exportation of Garments, Textiles, Footwear, Bags and Hats
- Prakas No. 312 MEF.P on VAT Incentive for Agricultural Sector
- Prakas No. 313 MEF.P on VAT Tax Incentive for Contracting Rice Supplier for Export
- Letter No. 426 to Director of Departments, Branches and Offices of Customs and Excise
- Framework of the Construction Industry Payment and Adjudication Act 2012
- Anti-Dumping Duties and Countervailing Measures in Malaysia
- Singapore Unveils 10-year Infocomm Media Masterplan 2025
- FATCA: Singapore Concludes Discussions with the US on Model 1 IGA
- New and Enhanced Regime for the Protection of Geographical Indications
Prakas No. B5-014-068P on Oversea Fund Transfer of Banking and Financial InstitutesPursuant to this Prakas, dated 24 February 2014, all Banking and Financial Institutes ("BFIs") are no longer allowed to transfer monies in US Dollars to foreign countries without first going through the National Bank of Cambodia ("NBC"). This prohibition applies to all BFIs that obtained a banking license from the NBC.
The NBC requires the transferring BFIs to submit certain prescribed documents, such as an Oversea Transfer Order, Local Sources and Uses of Fund, and other relevant documents. Moreover, the transfer shall be subject to an interest rate of 0.12% of the proposed transfer amount plus a minimum of KHR 30,000.00 (approximately USD 8.00 [eight US Dollars]) and a SWIFT of KHR 120,000.00 (approximately USD 30.00 [thirty US Dollars]). These fees will be deducted from the current account of the transferring BFIs opened with the NBC.
Prakas No. 311 MEF.P on VAT Tax Incentive for Exportation of Garments, Textiles, Footwear, Bags and HatsThis Prakas, dated 9 March 2014, serves to recognise the major role played by the garment, textile, footwear, bag and hat industries in Cambodia's economic development, granting Value-Added Tax ("VAT") preferences for supporting industries and contractors in these industries.
For supporting industries, the Royal Government of Cambodia ("RGC") will bear the VAT for the import of raw materials and production equipment, while local purchases of goods and services will be subject to VAT of 10%. The supply of goods and services to these industries for the purpose of export will be subject to a 0% VAT, while the supply to local markets will incur a 10% VAT and other taxes in accordance with the law.
For contractors, the import or local purchase of raw materials and production equipment will incur a 10% VAT and other taxes in accordance with the law. The supply of goods and services to these industries for the purpose of export will be subject to a 0% VAT, while the supply to local markets will be subject to 10% VAT.
Prakas No. 312 MEF.P on VAT Incentive for Agricultural SectorUnder this Prakas, dated 19 March 2014, the RGC will bear the VAT for the import of products in relation to the agricultural sector, such as all types of fertilizer to be used in farming and plantation, animal feed and medicine, crop seeds, and other agricultural machinery.
The RGC aims to encourage the development of the agriculture sector by allowing sufficient access to imported products needed by farmers in their production processes.
Prakas No. 313 MEF.P on VAT Tax Incentive for Contracting Rice Supplier for ExportUnder this Prakas, dated 19 March 2014, the RGC will bear the VAT on behalf of contractors importing any raw materials or other products to be used in the production of rice for export. Further, the contractors supplying rice or providing rice production services for the purpose of export shall be subject to 0% VAT.
However, in order to obtain such incentives, the contractor must submit an application form to the General Department of Taxation of the Ministry of Economy and Finance.
This Prakas is only applicable to the export of rice. Any domestic purchase or supply of rice shall be subject to 10% VAT and other applicable taxes.
Letter No. 426 to Director of Departments, Branches and Offices of Customs and ExciseThe General Department of Customs and Excise has issued this Letter, dated 14 March 2014, in order to assist investors and businesspersons who have high legal compliance in fulfilling customs formalities. The Letter instructs all Customs and Excise Officers to:
- implement the Post Clearance Audit mechanism only on high-risk businesspersons;
- increase the speed of customs clearance at all international ports, ensuring that customs clearance is completed no later than 4 hours from the time of registration of the customs declaration to the time the goods are permitted to be taken out of customs;
- create and introduce the Master List to decentralise the issuance of customs permits;
- dispense with the need for prior authorisation from the customs and excise unit in the delivery of goods (raw materials, semi-finished products or finished products) between contractors and factories in the preferential areas; and
- strengthen the effectiveness of the implementation of professional ethics and behavior of customs and excise officers to ensure sustainability in providing public service.
Notification No. 951 MIH/2014 on Registration of Small and Medium EnterpriseThis Notification, dated 26 May 2014, dictates a change in the process of setting up a company in Cambodia. In the interest of efficiency, businesspersons and investors may submit their company registration application forms to the One-Window Service Office of the Secretariat of Small and Medium Enterprise under the Ministry of Industry and Handicraft. The officials of the One-Window Service Office will provide the assistance needed for the applicants to obtain all relevant approval from the competent authorities.
This Notification also clearly sets out the categories of SMEs by capital, such as Small Enterprise (USD 50,000 – USD 250,000) and Medium Enterprise (USD 250,000 – USD 500,000), and by the number of employees, such as Small Enterprise (10 – 50 employees) and Medium Enterprise (51 – 100 employees).
However, the Notification has yet to take effect and, as a matter of practice, applicants must still submit their company registration application forms to the Ministry of Commerce.
China Promulgates New Rules to Relax Foreign Exchange Control over the Cross-Border GuaranteeOn 12 May 2014, the State Administration for Foreign Exchange ("SAFE") of the People's Republic of China ("PRC") promulgated a new regulation titled "The Regulations on Foreign Exchange Administration of the Cross-Border Guarantee (跨境担保外汇管理规定)" (the "Cross-Border Guarantee Regulations"), which took effect on 1 June 2014. The Cross-Border Guarantee Regulations abolish a series of regulations previously issued by SAFE and bring substantial changes to the current cross-border guarantee regime.
The Cross-Border Guarantee Regulations divide cross-border guarantees into the following three categories:
- guarantees provided by an onshore guarantor for a debt owed by an offshore debtor to an offshore creditor (内保外贷, literally translated as "Onshore Guarantee & Offshore Loan");
- guarantees provided by an offshore guarantor for a debt owed by an onshore debtor to an onshore creditor (外保内贷, literally translated as "Offshore Guarantee & Onshore Loan"); and
- cross-border guarantees in other forms.
According to the new rules, PRC entities are no longer required to obtain the approval or quota from SAFE prior to providing "Onshore Guarantee & Offshore Loan" or "Offshore Guarantee & Onshore Loan", subject to certain conditions and requirements. Meanwhile, it is specifically provided that "individuals in China" are not prohibited from providing "Onshore Guarantee & Offshore Loan". In both of the aforesaid situations, the guarantors are required to file the guarantee with the local agency of SAFE within 15 working days after executing the guarantee documents. However, such filing is no longer a requirement for the validity of the guarantee documents.
In the event that the guarantor has to perform the guarantee obligations, there is no need to obtain SAFE approval with respect to such performance. Nevertheless, where an offshore debtor has not repaid the guaranteed amount to an onshore guarantor (unless the failure to repay the guaranteed amount is due to insolvency or liquidation of the offshore debtor), the onshore guarantor shall refrain from providing an additional “Onshore Guarantee & Offshore Loan” without SAFE approval.
In addition, with regard to providing cross-border guarantees in other forms, the guarantor is not subject to any SAFE approval or registration in general.
Indonesia's New Negative Investment ListIn an effort to increase investment in Indonesia and to align with the treaties of the ASEAN Economic Community, the Indonesian Government recently issued a new Negative Investment List ("NIL"). The revised NIL specifies more clearly business activities which are either entirely closed or conditionally open to foreign direct investment.
While the revised NIL allows for higher caps for foreign direct investment from ASEAN-based investors in certain sectors, it also sets greater limits on a number of sectors such as retail, agriculture and energy. However, foreign investors can take some comfort in knowing that foreign investment companies (PMA companies) which have already obtained the Capital Investment Coordinating Board (BKPM) approval will be not affected by the changes in the NIL (unless changes are favourable).
For more information, please refer to the firm's update here.
Recommendations on City Planning - Improvement of Zoning CodeVientiane authorities should make land use regulations clearer for easy enforcement and to bolster urban planning in the city. This was the recommendation made by Japan International Cooperation Agency ("JICA") at a meeting to review the implementation of the technical cooperation project for urban development management between JICA and Vientiane.
Unlike in progressive countries where only hard requirements are set out in their zoning codes, Vientiane's zoning code consists of both tolerance and hard requirements. The mixed and unclear requirements in the zoning code make it difficult for developers to comply with the overall requirements of constructing infrastructure projects. This has also resulted in compromises in the control measures carried out in Vientiane and the eventual construction of non-compliant buildings.
JICA has therefore recommended that Vientiane rearrange the items in its zoning code to include only the hard requirements needed for the construction of infrastructure and leave out tolerance.
The improvement of policies in Vientiane such as the zoning code is part and parcel of the overall enhancement of the area's land use and building controls aimed at modernising the Lao capital city.
Framework of the Construction Industry Payment and Adjudication Act 2012The Construction Industry Payment and Adjudication Act 2012 ("CIPAA") came into force on 15 April 2014. The main purpose of CIPAA is to facilitate regular and timely payment. The CIPAA has effectively put in place a speedier adjudication mechanism and remedies for the recovery of payment in the construction industry.
Pursuant to the CIPAA, conditional payment arrangements are now prohibited. Further, a claimant can now claim (successfully) adjudicated payment directly from its contractor's main principal, in accordance with CIPAA. Upon the receipt of the adjudication decision, the unpaid party is allowed to reduce / suspend the progress of works, until it gets paid, without having to breach the contract.
Parties may apply to the High Court to enforce (in the case of claimant) or stay (in the case of respondent) a particular adjudication decision.
Anti-Dumping Duties and Countervailing Measures in Malaysia"Dumping" is an anti-competitive practice of international price discrimination, which occurs when a product being sold is priced significantly lower in the importing country compared to its market price in the exporting country. Although it may be seen as a positive step for increasing competition in the industry, overproduced imports are alleged to be of low quality with unreliable documentation. The Malaysian Ministry of International Trade and Industry ("MITI") therefore is empowered under the Countervailing and Anti-Dumping Duties Act 1993 to take action against such 'dumping'. After investigating complaints made against an importer, MITI will decide on whether to impose anti-dumping duties on said importer and the tariffs rate thereof. In March this year, MITI imposed anti-dumping duties of up to 31.14% on two Thai manufacturers for cellulose fibre reinforced cement flat sheets. Anti-dumping duties are also imposed on the import of four industrial raw materials: electrolytic tinplates, biaxially-oriented polypropylene, steel wire rods, and polyethylene terephthalate.
Imposing Anti-dumping measures is protective only and cannot prevent anti-competition trade practices. In addition, such measures could be seen as lacking transparency or allowing local manufacturers to monopolise the domestic market, and could create international economic and political strife. Therefore, such investigations into anti-dumping must be thorough and the duties imposed must be reasonable.
New Media Laws PassedThe media landscape in Myanmar has undergone major reforms as new laws and regulations attempt to shift the country away from its authoritarian past and towards a new liberalised society. Two sets of media laws were recently enacted in Myanmar - the Media Law and the Printing and Publishing Law ("PPL").
These two media laws were enacted to, among other things, repeal the 1962 Printers and Publishers Registration Law ("PPRL"). Previously, under the PPRL, any form of press freedom was substantially constrained and any form of publication was subject to strict censorship rules implemented by the Press Scrutiny and Registration Division ("PRSD"). In anticipation of the new media laws, the PSRD was abolished on 24 January 2013.
The Media Law primarily concerns press freedom and the conduct of journalists in Myanmar. The Media Law provides that all publications shall be free from censorship and guarantees the protection of journalists from arbitrary arrests. In addition, the new law affords various press freedoms to journalists such as the right to conduct investigative journalism and the right to openly criticise the shortcomings of the legislature, executive and judiciary, subject to general journalism ethics and standards. Such standards have yet to be specified under the Media Law. The right to undertake investigative journalism also includes the right to investigate and to have access to non-confidential information held by governmental departments.
The Media Law also establishes the Myanmar Media Council ("MMC") as an official and independent media organisation comprising representatives from the Myanmar Government, news agencies, journalists, printers and publishers. The MMC has various functions and powers including the ability to create a fund, financed through donations from the Myanmar Government as well as local and international non-governmental organisations, for media-related activities and programmes. In addition, the MMC has a role in resolving disputes involving journalists. Complaints from and against journalists may be brought to the MMC. If the dispute cannot be settled by the MMC, the case can then be brought before the Myanmar courts.
The PPL primarily concerns licensing and registration of media-related activities and requires all media enterprises to be registered with the Myanmar Ministry of Information. However, in keeping with Myanmar’s recent reforms, journalists are afforded recourse to the Myanmar courts if they have reason to believe the Ministry of Information has unfairly denied them a licence to publish. The PPL also removes the penalty of imprisonment for journalists as was previously the case under the PPRL. However, despite the removal of such penalties, journalists can still be imprisoned under other laws such as criminal defamation laws. In contrast with the rights of the press under the Media Law, the PPL institutes certain limitations to press freedom in Myanmar. For example, the PPL states that printers and publishers cannot publish articles which might be contrary to the interests of national security, public stability and a citizen's individual rights.
The Ministry of Information is currently in the process of drafting by-laws for the PPL which may cover specific industries such as broadcasting and films. In addition, regulations may be issued to provide greater clarity under the Media Law. However, it remains to be seen the extent to which the Media Law and the PPL will interact and simultaneously function in practice. Nonetheless, the enactment of such laws demonstrates the dramatic strides Myanmar has been taking with its political and legal reforms.
Singapore Unveils 10-year Infocomm Media Masterplan 2025On 30 March 2014, the Infocomm Media Masterplan Steering Committee issued a consultation document setting out the vision to grow and transform Singapore's Infocomm and Media ("ICM") sectors. The goal of the Masterplan is to establish Singapore as a Smart Nation that will lead the world in tapping the potential of ICM and nurture innovative talent and enterprises.
As a clear sign of the pervasiveness of the ICM sectors in Singapore, the Masterplan will focus on the key pillars of infrastructure development, talent development, industry development and economic/social transformation through ICM. Stakeholders in ICM-related industries are invited to contribute their views and ideas through the consultation on how to grow the ICM industry.
For more information, please refer to the firm's update here.
FATCA: Singapore Concludes Discussions with the US on Model 1 IGAOn 6 May 2014, The Singapore Ministry of Finance and the Monetary Authority of Singapore announced that Singapore and the US have substantially concluded discussions on the Intergovernmental Agreement ("IGA") that will facilitate compliance with the US Foreign Account Tax Compliance Act ("FATCA") by Singapore-based financial institutions. Both countries initialled the Model 1 IGA.
What this means for Singapore-based financial institutions is that they will report US account-holder information to the Inland Revenue Authority of Singapore ("IRAS"). IRAS will in turn forward the information directly to the US IRS. Being under Model 1 IGA means Singapore-based financial institutions will not have to enter into an agreement directly with the IRS. Once they report to IRAS, their reporting obligations will be deemed to have been met. This substantially eases their compliance burden.
Singapore and the US expect to sign the official agreement in the second half of 2014. Singapore-based financial institutions have until the end of 2014 to register as a Foreign Financial Institution with Model 1 IGA jurisdiction. This will ensure that there will be no FATCA-related withholding tax on payments made to them from the US.
For further information, please refer to the firm's update here.
New and Enhanced Regime for the Protection of Geographical IndicationsThe Geographical Indications Bill ("GI Bill"), introduced in Parliament on 5 March 2014, was passed on 14 April 2014. When it comes into full force, it will pave the way for a GI registry which will improve the certainty of protection given to GIs. Owners of all registered GIs will also have access to improved border enforcement measures.
Currently, GIs are already protected in Singapore under the Geographical Indications Act ("Act"). This is in accordance with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) standards. However, the Act does not require GIs to be registered before they enjoy the relevant type of protection under TRIPS.
The GI Bill is the result of the recently-concluded Free Trade Agreement negotiations with the European Union. Under that agreement, Singapore has agreed to take steps to strengthen the country's GI regime.
For more information, please refer to the firm's update here.
Watch this space for more updates in the next edition
Developments in the Law on LandOn 15 May 2014, the Government issued Decree No. 43/2014/ND-CP ("Decree 43") and Decree No. 44/2014/ND-CP ("Decree 44"), which take effect from 1 July 2014. Decree 43 guides the implementation of a number of articles of the Law on Land. Some of its more significant provisions are:
- It provides details on the conditions applicable to individuals and organisations using land to implement investment projects;
- It establishes requirements for the transfer of land in relation to investment activities;
- It establishes procedures for registering the changes of land use rights; and
- It regulates permitted extensions in the time frame for the usage of land in the implementation of investment projects.
- setting forth the methods of determining land prices;
- regulating the base and ceiling prices of land in certain areas; and
- establishing price brackets for urban land, agricultural land, and assorted land.
Developments in the Law on Loans and GuaranteesOn 31 March 2014, the State Bank of Vietnam promulgated Circular No. 12/2014/TT-NHNN ("Circular 12") which sets out the requirements for taking offshore loans that are not guaranteed by the Government, and takes effect on 15 May 2014. Below are some significant points:
- The borrower is allowed to use medium-term and long-term offshore loans for commercial projects to which the borrower makes a direct capital contribution.
- The borrower must not take short-term loans to serve medium-term and long-term purposes.
- For medium-term and long-term loans, state-owned companies must have plans appraised and approved by competent authorities.
- Circular 12 also sets out the limits for medium-term and long-term loans by non-state-owned companies.
Developments in Commerce LawOn April 14, 2014, the Government issued Decree No. 30/2014/ND-CP ("Decree 30") regulating conditions for sea shipping and sea shipping support service business. Decree 30 takes effect on 1 July 2014. Some of the significant provisions are as follows:
- Persons who are engaged in the sea shipping business in Vietnam must establish enterprises as prescribed by law, and must obtain a license for sea shipping.
- Organisations and individuals providing sea shipping agency services must register their business and must establish enterprises in accordance with legal provisions.
- Organisations and individuals providing sea shipping towage services in Vietnam must register their business and must establish enterprises in accordance with legal provisions. Further, they must have the appropriate professional liability insurance, as well as sea shipping towage contracts for each specific shipment or for a specific time limit.