Three taxes, three jurisdictions

When it comes to corporate tax rates, Asia varies widely with some countries operating very complex tax regimes, others preferring to keep things simple and low

The Philippines tax rate stands at 30% yet there are numerous schemes and exemptions available for companies. Malaysia’s tax rate is now at 24% with an effective tax rate even lower and Indonesia reduced its tax rate from 28% to 25%. Among the region a few jurisdictions stand out for their low and simple tax rates:

  • Hong Kong

Hong Kong is one of the leading business and finance centres in Asia with many firms attracted to the city due to its location near China and favourable tax rates. For corporations earning HK$2 million on assessable profits an 8.25% tax rate is applied. (the remaining profits after HK$2 million are taxed at 16.5%). Withholding tax ranges from 0% to 4.95% and property tax stands at 15%.

  • Labuan

Labuan International Business and Financial Centre (Labuan IBFC) is a successful mid-shore jurisdiction serving corporate and international financial services, located on the island of Labuan (one of the three federal territories of Malaysia). Labuan has a very preferential tax regime minimal foreign exchange controls and minimal taxes among other benefits. Corporate tax ranges from 3% (for international revenue) to 24% (for local Malaysian revenue) and there are few other taxes for firms and investors to think about. The jurisdiction keeps zero taxes on most other areas including Capital gains, Withholding tax (dividends, interest, management fee, royalty, technical fees), Sales and Service Tax (Outside Malaysia and within Labuan) among others.

  • Singapore

Singapore is a very business-friendly jurisdiction, and this is reflected in its corporate taxation policy. Taxes start at 17% although start-ups are exempt from taxation in the first three years of operation. Withholding tax ranges from 0% – 22% and real estate tax progressively rises from 0% to 20%. There is a 7% Goods and Services Tax and capital gains and dividends are not taxed.

All three jurisdictions have chosen to simplify and reduce their tax rates and have benefitted from the foreign and local investment and business activity that this generates. As we see the ASEAN region further integrate it will be interesting to see if other countries choose to replicate this model and harmonise their own tax rates with Singapore, Hong Kong and Labuan. Meanwhile, these three locations will continue to be the main low tax destinations in Asia.

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