Guide to Investing in ASEAN Member States

This section is currently being developed. It will contain the latest information on relevant investment-related legislations laws, and policies; as well as processes and regulations related to investment application, investment protection, foreign equity, incentives, taxation, foreign exchange administration, employment of foreign workers, and land and building ownership, among others.

 

Relevant investment legislation

Business License Act (Amendment) of 2016
The Miscellaneous License Act (Amendment) of 2015
Business Names Act (Chapter 92)
Companies Act (Chapter 39)
Insolvency Order, 2016

Other Related Investment Legislation

  • Custom Act (Chapter 36)
  • Custom Import Duties Order, 2007
  • Excise Duties Order, 2007
  • Employment Order, 2009
  • Workmen Compensation Act, 1957
  • Workplace Safety and Health Order, 2009
  • Employment Agencies Order, 2004
  • Employment Information Act, 1974
  • Industrial Co-ordination Order, 2001
  • The Competition Order, 2015

In Brunei Darussalam, there are sector-specific laws and policies that are related to foreign investment, amongst others are: utilities, construction, building control, safety, health and environment, land acquisition, food safety and financial sectors.

The Brunei Economic Development Board (BEDB) is a Statutory Board established in November 2001 to grow and diversify the economy towards achieving the Brunei Vision 2035 (Wawasan Brunei 2035).

The BEDB also acts as a frontline agency to facilitate foreign investment into the country and will work closely with investors to understand their business needs. The BEDB will assist in providing information on the local investment climate, developmental requirements, laws and regulations, cost of doing business and project specific information.
Further information can be obtained from www.invest.gov.bn/

Intellectual Property Rights
In Brunei Darussalam, the Brunei Intellectual Property Office (BruIPO) is responsible for the registration of Patents, Trademarks, Industrial Designs and Plant Varieties Protection (PVP).

Further infromation can be obtained from www.bruipo.gov.bn

The Brunei Economic Development Board (BEDB) promotes Brunei Darussalam as the preferred investment destination for the five priority business areas, namely Downstream Oil & Gas, Manufacturing & Other Services, Food, Tourism and Info-Communications Technology. At the same time, BEDB is also keen to hear from other industries which can bring about economic benefits to Brunei Darussalam while keeping in line with our national interests.

Tax Rates
Income Tax in Brunei Darussalam is governed by the Income Tax Act (Chapter 35) and Income Tax (Petroleum) Act (Chapter 119), Laws of Brunei. Under Section 8 (1) of this Act, income accrued in, derived from, or received in Brunei Darussalam by any corporations, registered locally or elsewhere was taxed at the rate of 30%. The provisions of the Act shall not have effect in respect of incomes of any other persons or bodies of person.

Effective from 1 January 2008, the corporate tax rate has been revised as follows:

  • Year of Assessment 2008: 27.5%
  • Year of Assessment 2009: 25.5%
  • Year of Assessment 2010: 23.5%
  • Year of Assessment 2011: 22%
  • Year of Assessment 2012 – 2014: 20%
  • Year of Assessment 2015 and subsequent years: 18.5%


Profit of companies engaged in the exploration and production of oil and gas will be taxed at 55%.

Tax Threshold (Newly Incorporated and Existing Companies)

  • For the first $100,000 of chargeable income: taxed at 25% of the applicable tax rate
  • For the next $150,000 (i.e. $100,001 to $150,000): taxed at 50% of the applicable tax rate
  • Remaining balance: taxed at the applicable tax rate


Administration / General

  • Registration of Income Tax Payer: A company registered with the Registrar of Companies is required to register online via STARS website.
  • Filing of Income Tax Return: Companies must submit estimated chargeable income within 3 months after the end of the accounting period. Returns must be filed within 3 months of form issuance, accompanied by audited financial statements.
  • Record Keeping: Records of business transactions must be kept for 7 years.
  • Change of Address: Notify the Collector of Income Tax with a Notification of New Address Form.
  • Assessment: Done on a preceding year basis, payment due within 30 days of Notice of Assessment.


Types of Taxable Income

  • Employment gains or profits
  • Net value of land and improvements
  • Dividends, interest, or discounts
  • Pensions, annuities, charges
  • Rents, royalties, premiums
  • Other profits from property


Allowable Deductions

  • Interest on borrowed money
  • Rent on land and buildings used for business
  • Repairs to premises, plant, machinery
  • Bad debts
  • Employer contributions to approved pensions (e.g. TAP, SCP)
  • Religious dues such as zakat or fitrah


Disallowable Deductions

  • Private/domestic expenses
  • Capital withdrawals or improvements
  • Insurance recoverable amounts
  • Non-approved pension/provident fund contributions
  • Donations (unless approved institutions)


Motor Vehicles

  • Deduction capped at $50,000 on motor vehicles (passenger vehicles under 3,000kg).
  • Expenses are proportionately deductible (e.g., $50,000/$60,000 ratio applied).


Industrial Buildings and Structures

  • Includes hotel-keeping capital allowance at 4% annual allowance.
  • Capital allowance revised after 2008 to allow higher initial and annual rates.


Capital Allowances

  • Depreciation not allowed, replaced by capital allowances.
  • Balancing allowances/charges apply on disposal of plant/building.
  • Unabsorbed allowances can be carried forward indefinitely against same trade income.


Withholding Tax
Rates for payments to non-residents:

  • Interest/loan-related payments: 2.5%
  • Royalties/use of property: 10%
  • Scientific/technical knowledge: 10%
  • Management services: 10%
  • Rent of movable property: 10%
  • Non-resident directors’ remuneration: 10%


Penalties: 5% for late payment, plus 1% monthly up to max 15%.

Stamp Duty

  • Ad valorem duties on property transfers, leases, securities, bonds.
  • Fixed duties on legal/commercial instruments (e.g., insurance, promissory notes).
  • 2017 amendment removed stamping for Memorandum and Articles of Association and Share Certificates for incorporation.


Customs Import Tax and Excise Duties

  • Companies importing/exporting must register with RCED via BDNSW.
  • Customs agents must be licensed.
  • Applications can be done online or via RCED HQ.

The application of Foreign Workers License (FWL) is provided by the Department of Labour under the Ministry of Home Affairs. Prior to submitting application, businesses must fulfil the following requirements:

  • Acquire confirmation or approval from government agencies, statutory bodies, or associations (if applicable).
  • Register your company in JobCentre Brunei and advertise vacancies in their portal.
  • Provide a list of local employees and obtain verification from Employee Trust Fund (TAP). The verification can be done through e-amanah.

Industrial Sites
Darussalam Enterprise (DARe) is a Statutory Body that was formed in February 2016 to nurture and support business enterprises from start-up to growth. DARe’s initiatives include developing and managing Brunei Darussalam’s industrial sites to support the growth of businesses.

DARe works closely with the FDI Action and Support Centre (FAST), Brunei Economic Development Board (BEDB), and other relevant Government Agencies to facilitate the implementation of investors’ projects.

Under the DARe’s Industrial Site Management (ISM) Team, DARe provides and manages 26 Industrial Parks to cater to the development of businesses and the economy of Brunei Darussalam. Under ISM, DARe has continued to develop key infrastructure based on the needs of FDI investors within the designated industrial parks. This includes infrastructure development projects such as the upgrade of roads, utilities, and the construction of major infrastructures.

For the list of Industrial Sites available for use, please visit the DARe website at www.dare.gov.bn/space

Brunei Economic Development Board (BEDB)

The Brunei Economic Development Board (BEDB) is a Statutory Board established in November 2001 to grow and diversify the economy towards achieving the Brunei Vision 2035 (Wawasan Brunei 2035).

The BEDB also acts as a frontline agency to facilitate foreign investment into the country and works closely with investors to understand their business needs. The BEDB assists in providing information on:

  • The local investment climate
  • Developmental requirements
  • Laws and regulations
  • Cost of doing business
  • Project-specific information

Contact Information:
Brunei Economic Development Board (BEDB)
Level 4, Tower Block
Ministry of Finance & Economy
Commonwealth Drive
Bandar Seri Begawan BB3910
Brunei Darussalam
General Line: +673-223-0111
Fax Line: +673-223-0074
Email: info@bedb.com.bn | info@invest.gov.bn
Website: http://www.bedb.com.bn/ | http://www.invest.gov.bn/

Useful Websites

Relevant investment legislation

1. Law on Investment (LOI)

  • Drafting of the new LOI was completed in 2020, followed by its enactment by the National Assembly and Senate, and promulgation on 15 October 2023.
  • The new LOI provides provisions to attract more investments into Cambodia, including market access, investment facilitation, and generous incentives.

Qualified Investment Projects (QIPs) under LOI:

  • Export Qualified Investment Project: sells or transfers any proportion of its products outside of Cambodia.
  • Supporting Industry Qualified Investment Project: supplies products to export industries.
  • Domestically Oriented Qualified Investment Project: does not export or supply to exporters.

Restrictions and requirements under LOI:

  • Land ownership: only permitted for individuals/entities with Cambodian nationality. Foreign investors may use land through concessions and long-term leases.
  • Use of foreign employees: only allowed if skills/expertise are not available among Cambodians. Requires a “foreign employee quota” from the Ministry of Labour and Vocational Training.

2. Sub-Decree on the Implementation of the LOI

  • Issued on 26 June 2023 to complement and fully implement the LOI.
  • Provides detailed lists of investment activities:
    • List 1 (Negative List): activities not qualified as QIP and not entitled to incentives such as income tax exemption.
    • List 2: activities entitled to basic incentives, classified into:
      • Group 1 → nine-year income tax exemption
      • Group 2 → six-year income tax exemption
      • Group 3 → three-year income tax exemption
    • List 3: activities entitled only to customs duty, special tax, and VAT exemption on imports of construction material, equipment, and production equipment (no income tax exemption).
  • Also outlines procedures for expansion of QIPs and related income tax exemptions.

3. Labour Law

  • Employers must not discriminate based on race, colour, sex, creed, religion, political opinion, birth, social origin, or union membership.
  • Prohibits compulsory labour.
  • Sets 15 as the minimum age for certain kinds of work.

Key provisions:

  • Employment contracts:
    • Fixed Duration Contracts (FDC): up to 2 years, extendable.
    • Undetermined Duration Contracts (UDC).
  • Severance payments:
    • FDC employees receive at least 5% of total wages over the contract term.
  • Seniority payments:
    • UDC employees receive 15 days of wages and fringe benefits annually (since 2019), paid twice a year.
  • Paid leave:
    • 1.5 days/month of annual leave.
    • Up to 7 days special leave for family matters.
    • Public holidays, weekly day off (24 hours, usually Sunday), sick leave, maternity leave.
  • Minimum wage:
    • USD 200/month for garment, footwear, travel goods, and bag sectors (effective 1 Jan 2023).
      • Piece-rate pay allowed only if total exceeds minimum wage.
      • Possible cross-sectoral minimum wage under discussion.
  • Work shifts (amendment):
    • Maximum 8 hours per shift.
    • Maximum 48 hours per week.
  • Dispute resolution (amendment):
    • Expanded jurisdiction for Labour Arbitration Council.
  • Pension scheme:
    • Employers and employees each contribute 2% of wages (USD 100–300 range) for first 5 years.
    • Contribution rate to increase after 5 years.

Special Economic Zone/Industrial Land

  • Sub-Decree No.57 on the Establishment of Poipet “O Neang” Special Economic Zone (Jun 2006)
  • Sub-Decree No.148 on the Establishment and Management of the Special Economic Zone (2005)
  • Sub-Decree No.147 on the Organization and Functioning of the CDC (2005)
  • Sub-Decree No.10 on the Creation of the Nearng Kok Industrial Zone, Koh Kong Province (2002)
  • Sub-Decree No.33 on Creation of Development Zone (2001)
  • Sub-Decree on the Establishment of the Sihanoukville Industrial Zone (1995)

Banking and Finance

  • Law on Government Securities (In preparation)
  • Law on Securities and Exchange (In preparation)
  • Law on Insurance (2000)
  • Ministerial Order on the Licensing of Banks (2000)
  • Ministerial Order restructuring the Foreign Trade Bank of Cambodia (FTRC) (1999)
  • Law on Banking and Financial Institutions (1999)
  • Law on the Organization and Functioning of the National Bank of Cambodia (1996)

Infrastructure, Transport and Land

  • Law on Merchant Shipping (In preparation)
  • Law on Water Supply (In preparation)
  • Law on Geographical Indication (In preparation)
  • Sub-Decree on Implementation of the Law on Concessions (Draft)
  • Law on the Telecommunications (Draft)
  • Sub-Decree No.106 (RGC) on Establishment of the National Airline Company (2009)
  • Sub-Decree No.01 (RGC) on the Establishment of Phnom Penh Port Business Center (2009)
  • Law on the Civil Aviation (2008)
  • Decision No.01 (RGC) on Creation of Commission for Preparing Legal Standards and Procedures on Land Use in Provinces-Municipalities and Urban Areas of the Kingdom of Cambodia (2008)
  • Law on Concessions (2007)
  • Sub-Decree No.124 (RGC) on Granting Concession of Cambodian Royal Railway (2007)
  • Ministerial Order No.830 (MEF) on Creation of Working Group for Managing Oil Revenue of the Ministry of Economy and Finance (2007)
  • Sub-Decree No.114 (RGC) on the Mortgage and Transfer of the Rights over a Long-Term Lease or an Economic Land Concession (2007)
  • Law on the Water Resources Management (2007)
  • Highway Code
  • Sub-Decree No.129 (RGC) on Rules and Procedures of Reclassification of Public Properties of the State and of Public Legal Persons (2006)
  • Sub-Decree No.146 on Economic Land Concessions (2005)
  • Sub-Decree on the State Land Management (2005)
  • Instruction on Hearing Procedure of the National Cadastral Commission (2005)
  • Sub-Decree No.19 on Social Land Concessions (2003)
  • Ministerial Order on the Guidelines and Procedures of the Cadastral Commission (2002)
  • Sub-Decree No.48 on Sporadic Land Registration (2002)
  • Sub-Decree No.47 on Organization and Functioning of the Cadastral Commission (2002)
  • Sub-Decree No.46 on Procedures of Establishing Cadastral Index Map and Land Register (2002)
  • Sub-Decree No.131 on the Determination of Maximum License Fee for Electric Power Service Providers in Cambodia (2001)
  • Law on Land (2001)
  • Law on Electricity (2001)
  • Sub-Decree on Management of Forest Concession (2000)
  • Circular on Management of Means of Water Transport (2000)
  • Sub-Decree No.11 on Build-Operate-Transfer (BOT) Contract (1998)
  • Law on Land Use Planning, Urbanization and Construction (1994)
  • Decision No.34 on the Creation of a National Committee for Land Planning and Urbanization of Areas surrounding Phnom Penh, Towns and Provinces (1993)

Tourism

  • Law on Tourism (2009)
  • Ministerial Order No.105 (RGC) on Classification of Hotels (2009)
  • Law on the Suppression of Gambling (1996)
  • Law on the Protection of Cultural Heritage (1996)


Agriculture and Environment

  • Law on the Amendment to the Law on Forest (Draft)
  • Law on Fisheries (Draft)
  • Sub-Decree No.123 (RGC) on Determination of Category/Type of Products and Endangered Fishery Products/Resources (2009)
  • Ministerial Order No.402 (MAFF) on Forms of Registers, Certificates and Permits to be used for the Cambodian Specified Rubber Label and Official Letter of Recognition (2008)
  • Ministerial Order on Control/Inspection of Food Safety of Agricultural Products (2007)
  • Ministerial Order No.002 (MAFF) on List of Maximum Residue Limits of Pesticide in Fruit and Vegetables (2007)
  • Sub-Decree No.131 (RGC) on the Specification of Forest Products and Sub-products Permitted to be Exported and Imported (2006)
  • Law on Forestry (2002)
  • Sub-Decree on The Control of Air Pollution and Noise Disturbance (2000)
  • Sub-Decree on the Water Pollution Control (1999)
  • Sub-Decree on Management of Solid Waste (1999)
  • Law on Environment Protection and Natural
  • Resource Management (LEPNRM) (1997)
  • Sub-Decree on Conferring the Right to Sell and Export Rubber Products to the Ministry of Agriculture, Forestry and Fisheries (1994)
  • Sub-Decree on the Creation of a National Permanent Commission for Coordinating the Privatization and the Promotion of Rubber Plantations (1994)
  • Decision No.65 on the Annulment of the Existing Procedure for Timber Export (1994)
  • Royal Decree on the Protection of Natural Areas (1993)

Once a business plan is in place, investors can commence the investment process. Under the Law on Commercial Enterprises of Cambodia, a business must be registered to operate legally in Cambodia. A business can register to operate as a company, foreign company, sole proprietorship, or partnership company.

The registration process may need to be conducted through multiple ministries or by using an online registration platform. Before registering, it is important to check if your business qualifies as a Qualified Investment Project (QIP). If so, it will be entitled to incentives under the Law on Investment (LOI) and its Sub-Decree. A registration certificate must be obtained through the Council for the Development of Cambodia (CDC) or the Provincial-Municipal Sub-Committees (PMIS) to access QIP incentives.

For QIP eligibility, investors must understand definitions, entitled sectors/activities, the negative list, and the guarantee and incentive schemes.

  • Projects with investment capital exceeding USD 5 million: application must be submitted to the Cambodian Investment Board (CIB) of the CDC (in-person or online).
  • Projects with investment capital less than USD 5 million: application must be submitted to the relevant PMIS.

If approved, a QIP registration certificate is issued within 20 working days. The certificate includes a technological identification code (barcode/QR code) for use in other registrations.

If a project is not eligible for QIP, investors must register through the standard business process under the Law on Commercial Enterprises. This involves:

  • Ministry of Commerce (MoC) – company name reservation and business registration.
  • General Department of Taxation (GDT) – Certificate of Tax Registration.
  • Ministry of Labour and Vocational Training (MoLVT) – notice for enterprise opening.

Additional sectoral licenses may also be required.

QIP Registration

  1. Application
    Submission of an investment proposal to the CDC or a PMIS.
  2. Approval or Denial
    • Certificate issued within 20 working days if requirements are met.
    • CDC/PMIS may postpone or deny registration if:
      • The application does not meet Sub-Decree procedures
      • The application is incomplete.
      • The project is highly sensitive and requires consultation with the Council of Ministers or the Royal Government.
  3. Issuing the Registration Certificate
    Delays by authorities do not impede implementation of the investment project.
  4. Implementation
    The date of issuance of the registration certificate marks the commencement of the project.

Other Actions

  • Changes to investment proposal: require approval (e.g., head office address, place of business, company name, shareholders).
  • Revocation of certificate: may occur in cases of fraud, misrepresentation, or failure to start activities within six months (except concession contracts with specific periods).
  • Cancellation: investors may request cancellation of registration.

Auditing, Reporting, and Compliance Requirements

To access incentives, QIPs must receive a yearly compliance certificate from the CDC or PMIS. Compliance is monitored via inspections and reporting. Requirements include:

  • Annual financial statement
  • Customs duty exemption reporting
  • Certificate of tax obligation satisfaction from GDT
  • Quarterly report on import of production equipment and inputs
  • Quarterly report on export of finished products
  • Annual inventory of immovable properties
  • Investment information form
  • Independent audit report (for certain tax incentives)

All investors who have successfully registered their investment project as a QIP under the LOI can benefit from the following guarantees and protections:

  • Discrimination Protection: Foreign investors will be protected against any discriminatory treatment under laws or regulations based on their nationality. The law guarantees non-discrimination in relation to economic remedies (e.g., restitution, compensation) in the event of investment losses.
  • Nationalization Protection: The State shall not undertake any nationalization actions which may affect the asset of the investors in Cambodia.
  • Expropriation Protection: The State will not undertake any expropriation, except for the purpose of public interest and such expropriation will meet the following conditions: non-discriminatory, fairly compensated, and compliant with laws and regulations.
  • Price Control Protection: The Government will not fix the price of products or services created or rendered by the investment project.
  • Free Purchase and Repatriation of Foreign Currency: In accordance with applicable laws and regulations, investors are entitled to freely purchase foreign currencies and to repatriate those foreign currencies to settle financial obligations associated with their investment through authorized intermediary banks.
  • Intellectual Property: Investors are protected in accordance with the laws and regulations related to the intellectual property of Cambodia.
  • Right to Use Land: Investors have the right to use land through economic land concessions or perpetual leases or leases for a fixed duration in accordance with the laws and regulations in force.

Further rights for investors include:

  • Hire foreign employees with qualifications, skills, and expertise not available among the Cambodian workforce. Investors must obtain approval on foreign employee quotas from the Ministry of Labour and Vocational Training.
  • Obtain temporary long-term stay permits for foreign employees and their spouses and minor children during the valid period of the employment contract.
  • Obtain a work permit and employment book for oneself and foreign employees.

1. LOCAL CONTENT
Currently, there is no local content requirement in Cambodia, or in other words, there is no restriction on the use of important materials, parts and components unless they are harmful to the health, environment or society. However, exporters in Cambodia should take into account the rules of origin requirements (ROO) for the GSP including the EBA (Everything-But-Arms Initiative) scheme for exports to the EU market. The EBA provides special arrangements for least developed countries, including Cambodia. Practically all products (excepting arms and ammunition) covered by the EBA are granted duty free access to the EU market if they fulfill the ROO requirements.

Under the GSP, exported products have to originate in the beneficiary country. For products manufactured with materials from other countries, final products can be considered as originating in the beneficiary country if the materials have undergone sufficient working or processing. The requirements for ROO refer to technical criteria, the added value or other economic criteria.

Under the EBA, the ROO requires that at least 40% of the contents of exported products have to originate in the country. One exception, however, is that under the special waivers, certain textile products from Cambodia are allowed to have cumulative origin with ASEAN countries of the EU. The ROO lay down that all products have to be accompanied by a certificate of origin Form A (issued by competent authorities in the country of export, namely the Ministry of Commerce in Cambodia) or an invoice declaration in order to prove the origin or the imported materials in the beneficiary country, and that they have to be shipped direct to the countries of import.

For exports from Cambodia to the USA under the GSP, the ROO requirement is a minimum 35% and the qualifying member countries of ASEAN, namely, Cambodia, Thailand, Indonesia and the Philippines, are treated as one country for the GSP rule-of-origin requirements.

2. EMPLOYMENT

  • Article 17 to Article 18 of the “Law on Investment”
    Investors in the Kingdom of Cambodia shall be free to hire Cambodian nationals and foreign nationals of their choosing in compliance with labor and immigration laws.

Investors shall be allowed to hire foreign employees provided that:

  • The qualification and expertise are not available in the Kingdom of Cambodia among the Cambodian populace. In the event of such hiring, appropriate documentation including photocopies of the employee’s passport, certificate and/or degree and curriculum vitae shall be submitted to the Council for the Development of Cambodia.
  • A letter asserting the need for hiring foreign employees shall be required. Investors shall obtain an approval and a permit from the Ministry of Labor.
  • Before working for investors, the foreign employee shall obtain a permit for work in the Kingdom of Cambodia, issued by the Ministry of Labor.

Investors shall perform the following obligations:

  • Provide adequate and consistent training to Cambodian staff.
  • Promotion of Cambodian staff to senior positions will be made over time.

The Ministry of Labor has established a labor book and work permit mechanism and employers are required to submit various documents needed to have the Ministry of Interior issue long-term visas to foreign workers. There are no limitations on appointing foreign workers to higher-level positions. However, a ceiling of 10% foreigners of an employer’s total workforce is enforced, with exceptions being made upon a demonstration of need to the Ministry of Labor.

3. EXPORT ORIENTATION
Under the Amended Law on Investment, Export QIPs (see “Chapter IV, Investment”) can import production equipment, construction materials and production materials free from customs duty, unless Export QIPs operate under the customs bonded warehouse mechanism. By being approved as Export QIPs, they are also granted a tax holiday or special depreciation scheme. For exports, VAT is also refunded or credited as to the materials for exported products.

Equity Regulations
A foreign investor shall not be treated in any discriminatory way by reason only of the investor being a foreign investor, except in respect of ownership of land as set forth in the Land Law. (Article 8, Law on Investment).

Investment Projects Eligible for Incentives
The new LOI provides generous incentives for a wide range of sectors and investment activities:

  • High-tech industries involving innovation or research and development
  • Innovative or highly competitive new industries or manufacturing with high-added value
  • Industries supplying regional and global production chains
  • Industries supporting agriculture, tourism, manufacturing, regional and global production, and supply chains
  • Electrical and electronic industries
  • Mechanical and machinery industries
  • Agriculture, agro-industry, agro-processing industry, and food processing industries serving the domestic market or export
  • Small and medium-sized enterprises in priority sectors, SME cluster developments, industrial parks, and science, technology and innovation parks
  • Tourism and tourism-related activities
  • Investment in special economic zones
  • Digital industries
  • Education, vocational training, and productivity promotion
  • Health
  • Physical infrastructure
  • Logistics
  • Environmental management and protection, biodiversity conservation and circular economy
  • Green energy and technology development, contributing to climate change adaptation and mitigation
  • Other sectors and investment activities not listed by the LOI but deemed by the Royal Government of Cambodia to have potential for socio-economic development

Categories of Incentives
The incentives are classified into three categories: basic incentives, additional incentives, and special incentives.

Basic Incentives
Granted to investment activities in the listed sectors, provided they are not within the negative list of the Sub-Decree on the implementation of the LOI.

Investors of QIPs (Qualified Investment Projects) can choose between:

Option 1:

  • Income tax exemption for 3–9 years depending on sector and activity
  • After exemption, progressive income tax rate:
    • 25% for first two years
    • 50% for next two years
    • 75% for the last two years
  • Prepayment tax exemption during the tax holiday
  • Minimum tax exemption if audited independently
  • Export tax exemption unless otherwise provided by law

Option 2:

  • Deduction of capital expenditure through special depreciation
  • Deduction of up to 200% of specific expenses for up to nine years (to be determined in LOFM/Sub-Decree)
  • Prepayment tax exemption for a specified period
  • Minimum tax exemption if audited independently
  • Export tax exemption unless otherwise provided by law

Additional benefits:

  • Export QIPs and Supporting Industry QIPs: exemptions from customs duty, special tax, and VAT on imports of materials and equipment
  • Domestically Oriented QIPs: exemptions from customs duty, special tax, and VAT on imports of materials and equipment

Additional Incentives
Designed to promote backward linkages and encourage R&D, human resource development, and worker welfare.

These include:

  • VAT exemption on purchases of locally made production inputs
  • Deduction of 150% from the tax base for activities such as:
    • Research, development, and innovation
    • Vocational training for Cambodian workers
    • Worker accommodation, food courts, infirmaries, and welfare facilities
    • Machinery upgrades for production
    • Transportation and welfare facilities for workers

Special Incentives
Specific sectors or activities with high potential for national economic development may receive tailored incentives, subject to LOFM provisions.

Special Economic Zones (SEZs)

  • Designed for industrial and related activities; may include industrial zones and export processing zones
  • SEZs include production, free-trade, service, residential, and tourism areas
  • Investors in SEZs enjoy all LOI-prescribed incentives plus:
    • VAT exemption on imports related to exports
    • Administrative service clusters for streamlined operations

Zone developers are entitled to:

  • Profit tax exemption for up to 9 years
  • Exemptions on import duties for equipment, construction materials, and machinery
  • Other tax incentives and guarantees as per LOI

QIP investors in SEZs are entitled to:

  • Tax incentives and guarantees under LOI
  • Clustered administrative services

Financial and Fiscal Incentives

Tax Incentives for Listed Companies

  • 50% reduction in Corporate Income Tax for first three years (or period approved by MEF)
  • Waivers on CIT, WHT, VAT, specific tax on certain merchandise and services, Accommodation Tax, and Public Lighting Tax
  • 50% reduction of WHT on interest/dividends from securities
  • Not applicable to QIP companies during tax holidays

Other Tax Incentives

  • Prakas incentives for rice sector:
    • Domestic supply/export of rice: 0% VAT
    • Input VAT for rice sector creditable or refundable
    • Government bears VAT for imported inputs and equipment for rice export
  • Zero-rate VAT also applies to:
    • Goods/services from Supporting Industry QIPs
    • Services performed in Cambodia but used outside Cambodia
    • Services performed outside Cambodia for non-resident entities
    • Domestic agricultural products (fertilizers, seeds, animal medicine, feed, species, machinery, tools)
    • Cut, Make and Trim (CMT) services in garment sector
    • International transportation services
    • Supporting industries for garments, textiles, and footwear
  • These enterprises also benefit from tax holidays exempting them from 1% CIT prepayment.

Tax Credits for Resident Taxpayers

  • Foreign income tax paid abroad can be credited against Cambodian tax liabilities.

Customs Incentives for SMEs

  • Two Sub-Decrees:
    • Sub-Decree 50 (2019) on customs
    • Sub-Decree 124 (2018) on tax incentives
  • SMEs may obtain duty exemptions on imports of equipment, materials, and raw inputs if engaged in priority sectors (e.g., clean water supply, exports, supporting industries, IT R&D, industrial zones).

While the LOI places priority on more than 18 sectors, the following sectors are particularly interesting for investors:

Agri-Food

  • Favourable location: most of the population is concentrated in lowlands and hills where freshwater (from rivers, lakes, and underground sources) is abundant.
  • Thanks to heavy rainfall during the monsoon season (May to October), Cambodia enjoys favourable climate conditions, with temperatures remaining high during the period.
  • Cambodian agriculture is experiencing rapid transformation due to a combination of increased yields, more productive use of labour due to mechanization, and the expansion of farmland.

Automotive

  • Cambodia has a growing number of automotive startups and suppliers, with untapped linkages to the regional and global value chains.
  • According to CDC data, investment capital in automotive assembly and components manufacturing from 2020 to 2022 was USD 1.38 billion.
  • Automotive components manufacturers and vehicle assemblers have been growing in Cambodia.
  • Japan, Korea and China are major investors, while the main export markets include Thailand and Japan.
  • The Royal Government adopted the Cambodia Automotive and Electronics Sectors Development Roadmap in 2022, an indicator of the importance of the sector for further economic growth.
  • According to GDCE data, from 2020 to 2022, exports of automotive components were USD 484.78 million, with a compound annual growth rate of 10 per cent.
  • Cambodia has a thriving domestic motorcycle market, attracting both assembly and component manufacturing.

Electrics and Electronics

  • Electronics is a fast-growing sector in Cambodia with Japanese and Chinese firms as major investors.
  • Cambodia’s electrical and electronics (E&E) exports have significantly increased in recent years, especially to the United States in 2021, when investors steered sourcing orders to Cambodia following supply chain disruptions.
  • According to CDC data, investment capital in electrics and electronics from 2020 to 2022 was USD 264.62 million.
  • From wire manufacturers to PCB assemblers, Cambodia is home to some of Asia’s top electronic manufacturers.
  • According to GDCE data, annual exports in 2022 were USD 1,970.20 million (up 22 per cent from 2021).
  • Based on the same calculation, compound annual growth rate was 34 per cent from 2020 to 2022.
  • In 2022, the top 5 export markets were the United States, ASEAN, China, Japan, and South Korea.
  • Industrial development in Cambodia offers opportunities for firms operating in neighbouring countries such as Thailand and Vietnam to form a regional supply chain model to benefit from comparative advantages of both nations.

Bike and Parts

  • According to MOC data, Cambodia now ranks first in ASEAN and fifth globally for exports of bikes and bike parts.
  • More than 1.5 million bicycles are exported from SEZs each year.
  • According to GDCE data, exports in 2022 reached around USD 1 billion (an increase of 54 per cent from 2021).
  • In 2022, Cambodia became a major exporter to Europe, destination of more than two-thirds of exports.


Textile and Apparel

  • A major powerhouse, Cambodia’s textile and apparel sector has been serving the global market and growing at a solid pace over the years.
  • While diversification of the economy takes place, the garment sector will remain the largest employer for a while.
  • Cambodia is a major garment producer in the world.
  • In 2022, according to GDCE, the total exports of garment and footwear were approximately USD 13 billion and the sector accounted for 63 per cent of Cambodia’s export earnings.
  • In 2022, Cambodia had a total of 1,968 large-scale factories, two-thirds of their production exported to foreign markets.
  • Moving from a labour-intensive model to a high value and skill-intensive garment production model is key for the sector to develop in the future.

Furniture and Plywood

  • The furniture and plywood industry is one of Cambodia’s rapidly rising sectors, attracting major investments and showing increased export potential.
  • According to CDC, Cambodia exported furniture and plywood products to many destinations, including ASEAN, the United States, and the United Kingdom, with a total value of approximately USD 99 million in 2019 and approximately USD 147 million in 2020.
  • Total investment capital in furniture and plywood is USD 332 million.
  • The sector currently employs more than 9,000 local workers.

Cambodia Corporate Tax Regime
Cambodia’s corporate tax regime is competitive in comparison to other ASEAN countries, with a standard rate of 20 per cent for most activities.

Article 20 of the Law on Taxation outlines the tax rates as follows:

  • 20% for taxable income realized by a legal person.
  • 30% for taxable income realized under an oil or natural gas production sharing contract and the exploitation of natural resources including timber, ore, gold, and precious stones.
  • 5% on the gross premium income for insurance companies and 20% on other income derived from non-insurance/reinsurance activities.
  • 0% for taxable income of a QIP during its tax exemption period as determined by the CDC.
  • Progressive rates (0–20%) for a physical person or sole proprietorship as determined by MEF Sub-Decree.

Tax Regime

  • Since 2016, Cambodia has a singular self-assessed tax regime under which all businesses pay tax on a self-declaration basis based on annual turnover.
  • A revised taxpayer classification was introduced in January 2021 through the Prakas on the Reclassification of Taxpayers. This allows the GDT to re-determine classification if declared turnover does not reflect actual turnover.
  • There is no yearly individual income tax in Cambodia, but the possibility of introducing one in the medium term is being considered.

Tax Audit

  • Losses may be carried forward for a maximum of five years.
  • Tax losses cannot be offset against previous years’ profits.
  • Tax losses are forfeited upon a change in ownership of the business, a change in business activity, or a unilateral reassessment by the GDT.
  • The GDT may audit taxpayers and reassess liabilities within three years of submission of a return (extendable to 5–10 years in cases of tax evasion).
  • In January 2016, the Committee of Tax Arbitration (CTA) was established to review, resolve, and decide on tax/customs disputes.

Taxpayer Classification System

Small Taxpayer

  • Annual assets: KHR 200 million (USD 49,000) – KHR 1 billion (USD 245,500) for commercial, service, agriculture.
  • Annual assets: KHR 200 million (USD 49,000) – KHR 2 billion (USD 491,000) for industrial.

Medium Taxpayer

  • Annual assets: KHR 1 billion (USD 245,500) – KHR 2 billion (USD 491,000) for commercial, service, agriculture.
  • Annual assets: KHR 2 billion (USD 491,000) – KHR 4 billion (USD 982,000) for industrial.

Large Taxpayer

  • Annual assets: over KHR 2 billion (USD 491,000) for commercial, service, agriculture.
  • Annual assets: over KHR 4 billion (USD 982,000) for industrial.

Types of Taxes in Cambodia

Annual Taxes (due by 31 March of following year)

  • Tax on Income
  • Minimum Tax

Monthly Taxes

  • Prepayment of Income Tax
  • Withholding Tax
  • Tax on Salary
  • Value-added Tax (VAT)

Other Significant Taxes

  • Patent Tax
  • Specific Tax on Certain Merchandise and Services
  • Accommodation Tax
  • Tax on Public Lighting
  • Tax on Unused Land
  • Tax on Immovable Property
  • Additional Tax on Dividend Distribution

VAT on E-commerce Transactions

  • Applicable to non-resident e-suppliers with no permanent establishment if VAT revenue threshold is met.
  • B2C transactions: non-resident e-commerce businesses must register for VAT, file monthly returns, and pay 10%.
  • B2B transactions: resident taxpayers must collect 10% VAT under the reverse charge mechanism.
  • Non-resident e-suppliers are recommended to register via a tax agent in Cambodia.

Tax Administration

  • Investors are advised to contact a registered tax agent before starting any tax procedure.
  • The GDT website provides up-to-date guidance.


Double Taxation Agreements (DTAs)

Signed and in effect:

  • Republic of Korea
  • Malaysia
  • Hong Kong
  • Vietnam
  • Indonesia
  • Brunei Darussalam
  • Thailand
  • China
  • Singapore
  • Macau (effective 2024)
  • Turkey (signed Feb 2022)

Currently negotiating:

  • Philippines
  • Japan
  • Laos
  • UAE
  • Myanmar

Taxes covered under DTAs:

  • Income Tax
  • Withholding tax on dividends, interest, royalties
  • Additional tax on dividend distribution
  • Capital gains tax

Banking Sector
Cambodia has made remarkable strides in improving access to credit for both individuals and businesses, positioning itself as the 7th country in terms of Getting Credit in the Doing Business Report. This achievement has been accomplished through the implementation of new regulations that allow credit bureaus to collect and distribute both positive and negative credit information.

One of the key players in this progress is Credit Bureau Cambodia, which has established an industry-wide system encompassing 7 million individuals and commercial entities. This extensive credit reporting system enables 190 Banking and Financial Institutions (BFIs) to conduct reliable assessments of creditworthiness for individuals, SMEs, and corporations by promoting transparency within the financial sector and facilitating wider access to finance. Additionally, it promotes cross-border credit report sharing in the region, further expanding opportunities for financial access beyond national borders.

Types of Banks
Based on the Banking Law, the following types of banks are allowed to operate in Cambodia:

  • Commercial Banks (60): carry out a wide range of banking operations under the form of a public limited company and must have a minimum registered capital of USD 75 million.
  • Specialized Banks and Financial Institutions (10): can engage in a limited subset of activities compared to commercial banks. Specialized banks need to be locally incorporated and have a minimum registered capital of USD 15 million.
  • Microfinance Institutions (82): authorized to engage in credit services and savings.
  • Microfinance Deposit Taking Institutions (5): collect deposits from the public.

In addition, at the end of 2022, there were 223 rural credit institutions, 16 financial leasing companies, and 24 payment service providers.

Anti-corruption and Money Laundering
Under the 2007 Law on Anti-Money Laundering and Combatting Terrorism Financing, banks and other financial institutions, together with real estate professionals, casinos, lawyers, and accountants, must report entities or individuals when they engage in certain finance-related activities. In 2012, a National Coordination Committee on Anti-Money Laundering and Combatting the Financing of Terrorism was established to supervise the implementation of laws and compliance with international standards. The Cambodian Financial Intelligence Unit (CAFIU) is responsible for analysing suspicious activities and advising law enforcement authorities. Recently, Cambodia has been officially removed from the Financial Action Task Force (FATF) grey list.

Insurance
The 2000 Insurance Law strengthens the protection of rights of parties under insurance contracts and the supervision and control of insurance professionals. Insurance companies, agents, and brokers must be authorized to operate in Cambodia and are regulated by the Ministry of Economy and Finance (MEF).

Exchanging and Remitting Funds
Cambodia is essentially a cash-based society, but recent years have seen a surge of e-payment systems and credit cards. The national currency is the Khmer Riel, but the US Dollar is commonly used and traded throughout the country (mainly in major cities). Foreign exchange and remitting policies are determined by the 1997 Law on Foreign Exchange and the Law on Investment.

According to the laws, there are no restrictions on foreign exchange operations, transfers, capital flows, and international settlements, as long as they are performed through authorized financial institutions. Foreigners are also allowed to hold foreign currency freely and loans can be freely contracted, as long as they are processed by an authorized bank.

Cambodia is accommodating regarding foreign exchange operations and the remittance of profits. With the digitalization of banking systems, it is very easy to manage and access money in personal bank accounts globally. Since 2021, the Law on Investment has reinforced protections for the repatriation of foreign currency, allowing investors to freely purchase and repatriate foreign currencies, if settled by authorized intermediary banks.

Employment of Foreigners in Cambodia

Companies can hire foreign employees subject to visa and work permit administrative procedures. Foreign employees must not exceed 10 per cent of the total number of Cambodian employees. However, employers can seek approval to go beyond this quota.

Foreigners working in Cambodia must meet the following requirements:

  • Hold a valid work permit or employment card.
  • Hold a valid passport or residence permit.
  • Not have a contagious disease.

Administrative procedures for foreign employees can be managed through the Foreign Worker Centralized Management System, administered by the Ministry of Labour and Vocational Training.

Special Provisions for Investors under the 2021 Law on Investment (LOI):
Foreign investors with registered QIP (Qualified Investment Project) can also:

  • Hire foreign employees to manage or operate an investment project if no qualified Cambodian employees are available.
  • Obtain a temporary long-term stay permit for themselves, their spouses, and minor children during the operation period of the investment project.
  • Request temporary long-term stay permits for foreign employees, their spouses, and minor children during the period of employment contracts.
  • Obtain a work permit and employment book for themselves and foreign employees.

Work Permits
Work permits are issued by the Ministry of Labour and Vocational Training.

  • Most permits are valid for one year (until 31 December of the year of issuance).
  • Renewal is possible before 31 May of the following year.
  • Applications can be submitted through a specialized agency or online.
  • All workers are required to have an employment card.
  • Workers have the right to access the National Social Security Fund (NSSF).

Foreign Ownership of Land in Cambodia

Cambodia generally restricts foreign ownership of land. Private land and building ownership can only be registered to Cambodian citizens or legal entities, with limited exceptions. However, it is relatively easy to set up a company with 100% foreign ownership.

Company Classification

  • Cambodian companies: entities with a registered office in Cambodia with at least 51% ownership by Cambodian nationals or legal entities.
  • Foreign companies: legal entities formed under the law of a foreign country, with a place of business and business activities in Cambodia.

Law and Administration
Land ownership, registration, and transfer regimes for immovable properties are governed by the 2001 Law on Land, administered by the Ministry of Land Management, Urban Planning and Construction.

Types of Land Ownership

  • Public Land Ownership
    • State Public Land: land of public interest which cannot be sold to the private sector. Under limited circumstances, it can be acquired through leasehold possession for up to 15 years. It can be reclassified as private land once it loses its public interest nature.
    • State Private Land: land not classified as state public land and not legally possessed by an individual or community. It can be exchanged, leased, granted on concession, and sold to private individuals or legal entities, subject to special laws and regulations.
  • Private Land Ownership
    • Land legally owned by an individual or private legal entity.
  • Collective Ownership
    • Immovable property of monasteries or indigenous communities.

Eligible Owners of Land in Cambodia

  • Cambodian citizens
  • Public territorial collectives
  • Public institutions
  • Cambodian communities or associations
  • Public enterprises
  • Cambodian civil or commercial enterprises
  • Any Cambodian organization recognized by law as a legal entity

Ways Foreigners Can Buy or Acquire Property

  • Strata Titles: Foreigners may own up to 70% of private residential units in condominiums or office buildings. Landed property ownership is not permitted. Requirements differ for foreign buyers, local buyers, Cambodian citizens, and companies.
  • Long-Term Leases: Foreigners can sign leases for extended periods, but ownership remains with the Cambodian owner. Perpetual leases can be assigned, sub-leased, mortgaged, or transferred through succession.

Other Ways Foreigners Can Hold Property

  • Designated Khmer Nominee: A Cambodian citizen is nominated as the legal landowner under a trust agreement with the foreign entity.
  • Licensed Trust Company: A trust company can purchase land and grant usage and ownership-like rights to foreigners.
  • Land Holding Company (LHC): A joint venture between a foreigner (up to 49% ownership) and a Cambodian citizen (51%). Control can be secured by the foreigner through bylaws, special power of attorney, or other legal instruments.
  • Government Concession (Economic Land Concession – ELC): Foreign investors can obtain land use rights for up to 50 years, subject to government approval. Criteria for approval include:
    • Increasing agricultural or agro-industrial production with modern technology.
    • Creating employment opportunities.
    • Promoting living standards.
    • Protecting the environment and managing natural resources.
    • Minimizing adverse social impacts.
    • Ensuring linkages between social land concessions and ELCs.
    • Processing raw agricultural materials, as specified in the concession contract.

Protection of Ownership Rights
No person may be deprived of their ownership unless it is for public interest. Expropriation must follow legal procedures and fair compensation must be provided.

Council for the Development of Cambodia (CDC)
Cambodian Investment Board (CIB)
Government Place, Sisowath Quay, Wat Phnom
Phnom Penh, Cambodia

Tel: +855 99 799 579; +855 98 799 579
Email: helpdesk@cdc.gov.kh, info@cdc.gov.kh
Website: https://cdc.gov.kh/

Relevant investment legislation

1. INVESTMENT LAW
Law No. 25 of 2007 on Investment (Investment Law) as amended by Law No. 11 of 2020 on Job Creation (Job Creation Law)
The Investment Law as amended by Job Creation Law features:

i) Equal Treatment
The Indonesian Government shall accord equitable treatment to all investors of any country that carry out investment activities in Indonesia in accordance with the provisions of its laws and regulations. The Government provides investment facilities including fiscal incentives to domestic as well as foreign investment in Indonesia. The corporate tax obligations are the same for both domestic as well as foreign investment.

ii) Free to Repatriate Investment and Profit
Any investor may transfer assets they own to parties of the investors’ choice in accordance with the provisions of the laws and regulations.
Any investor shall be granted the following rights to transfer and repatriate in foreign currencies, inter alia:

  • capital;
  • profits, bank interest, dividends, and other income;
  • funds that are needed:
    to purchase raw materials and components, intermediate goods or finished goods; or
    to replace capital goods in order to protect the viability of the investments
  • additional funds that are needed for investment financing;
  • funds for repayment of loans;
  • royalties or fees that are payable;
  • income of foreign nationals who work for an investment company;
  • proceeds of the sale or liquidation of an investment;
  • compensation for damages;
  • compensation for acquisitions;
  • payments made in connection with technical assistance, fees payable for technical and management services, payments made under a project contract, and payments related to intellectual property rights; and
  • proceeds of the sale of assets.

iii) Legal Certainty
The principle of legal certainty is the principle by which provisions of laws and regulations laid down by the state to form the foundation of any investment policy and measure. To give greater certainty for investor, it is stressed under Job Creation Law that the Investment Law is the primary reference for investment in all sectors in Indonesia.

iv) Dispute Settlement
Where an investment dispute arises between the Government and an investor, then such parties shall first settle the dispute through deliberations to reach a consensus.
Where the dispute settlement through deliberations fails, such dispute may be settled through arbitration or alternative dispute resolution or a court of law in accordance with provisions of laws and regulations.
Where an investment dispute arises between the Government and a domestic investor, then such parties may go to an arbitration for settlement based on an agreement of the parties, and if the dispute cannot be settled through the arbitration, then the dispute settlement shall be conducted in a court of law.
Where an investment dispute arises between the Government and a foreign investor, then such parties shall settle the dispute through an international arbitration that must be agreed by the parties.

2. COMPANY LAW
Law No. 40 of 2007 on Limited Liability Company (Limited Liability Company Law) as amended by Law No. 11 of 2020 on Job Creation (Job Creation Law)
Based on Investment Law, foreign investment must be in the form of limited liability company and subject to Indonesian Limited Liability Company Law, which have the following characteristics:

i) Establishment and Capital
Establishing a limited liability company requires at least two shareholders.
Under Limited Liability Company Law, companies which are exempted from this provision are: state-owned companies; a company managing the stock exchange; clearing and guarantee Institutions; depository and settlement institutions; other institutions regulated under the Capital Market Law (Law No. 8 of 1995 on Capital Market).
Under Limited Liability Company Law, there is an increase in the minimum authorized capital from 20 million Rupiah to 50 million Rupiah and more than 50 million Rupiah for certain business activities, such as banking, insurance and freight forwarding. This provision is amended by Job Creation Law which stipulates that the amount of authorized capital of the company shall be determined based on the decision of the company founder with no range limitation.
Limited Liability Company Law states that all issued shares must be fully paid up by the time of the company’s establishment with legitimate deposit receipts.
Changes have also been made to filing or registration deadlines.

ii) Electronic Applications for Legal Entity Status
Limited Liability Company Law provides that applications to obtain legal entity status can be submitted by the founders electronically which will no longer require a notary’s assistance, unless the founders delegate the task to a notary. The application must at least contain the name and domicile of the company; term of the company; aim and purposes of the company; amount of authorized, issued and paid-up capital; and complete address of the company.
To obtain approval from the Minister of Law and Human Rights (“MLHR”), an application must be submitted at the latest 60 days after the deed of establishment has been signed.
The company will obtain its legal entity status as of the date of issuance of the MLHR’s Decree approving the legal entity.

iii) Company Registry
Limited Liability Company Law regulates the responsibility of the MLHR to organize the Company Registry and publication in the State Gazette.

iv) Crossholdings
Limited Liability Company Law prohibits a company from owning shares in another company which owns shares directly or indirectly in the first company. The exception is if the shares are gained by law, gift or will on condition that the shares are transferred to another party within one year.

v) Business Plan and Interim Dividends
One of the new concepts under Limited Liability Company Law is the obligation of the Board of Director (BOD) to prepare a Business Plan prior to commencement of the financial year. However, Limited Liability Company Law does not regulate what the minimum content of the Business Plan is except that it must contain the company’s budget. If no Business Plan is prepared, the previous year’s business plan will prevail.
Limited Liability Company Law now recognizes interim dividends and allows a company to distribute interim dividends before the financial year end. If after the financial year end the company suffers a loss, then the interim dividend must be returned. If the company suffers a loss and the shareholders do not return the interim dividend, Directors and Commissioners are jointly and individually liable for the company’s loss. Limited Liability Company Law does not provide a mechanism for returning the interim dividend.

vi) Corporate Social and Environmental Responsibility (CSER)
A company doing business related to natural resources or whose business may affect the environment must undertake CSER. This provision differs slightly from the previous draft which imposed the obligation on all companies without specifying particular business fields. The cost of implementing CSER programs must be included in the calculation of the costs of the company.

vii) General Meeting of Shareholders (GMS)
A major change is in the concept of the GMS which Limited Liability Company Law does not place the GMS as the highest organ in the company; the new definition places the GMS at the same level as the Board of Directors (BOD) and Board of Commissioners (BOC).
One of the breakthroughs of Limited Liability Company Law is that the GMS can be held through a teleconference, video-conference or other electronic media which enables all participants to see and hear directly and to participate in the meeting. The minutes still have to be agreed and signed by all GMS participants.

viii) Board of Directors (BOD), Board of Commisioners (BOC) and their Liabilities
Every member of the BOD is liable for losses suffered by the Company. However, members of the BOD are not liable for company losses if they can prove that:

  • the losses were not caused by their negligence or fault;
  • they have managed the company in good faith and with due care;
  • they do not have a direct or indirect conflict of interest in its management thereby causing the losses; and
  • they have taken precautionary measures and mitigated the losses.

Every member of the BOC must fulfill his/her duty to supervise and provide advice to the BOD in good faith. As a consequence of failing to carry out his/her duties and thereby causing a loss to the company, the relevant member of the BOC is liable for the loss.
However, if the member can prove that:

  • he/she has fulfilled his/her supervisory duties in good faith; according to the aim and purposes of the company;
  • he/she does not have any personal interest either directly or indirectly in the actions of the BOD which caused the loss; and
  • he/she has provided advice to the BOD to prevent the loss, then he/she will not be held liable for the loss.

ix) Amendment to Articles of Association (AOA)
There will be too many changes necessary but it will also be possible of course now to include provisions on holding a GMS by conference call and on interim dividends. Amended AOA will not now need to name the shareholders of the company in Article 4 nor are the names of directors and commissioners deemed to be part of the AOA of a company. Certain timing provisions for certain corporate actions may also need to be inserted into the revised AOA.

x) Acquisitions
Of practical importance are the revised provisions relating to ‘acquisitions’. Limited Liability Company Law now makes it mandatory in all acquisitions where there is a change of control in the Board of Directors of the company planning to make the acquisition to announce a summary of the acquisition plan in at least one newspaper and also to announce it in writing to their employees not less than 30 days before the summons of the GMS. Creditors have 14 days from the announcement to object to the acquisition.

xi) Business Segregation
Limited Liability Company Law now acknowledges the concept of business “segregation”, being (a) pure segregation and (b) non-pure segregation. This will be further implemented by a Government Regulation.

xii) Dissolution, Liquidation and Termination of Legal Entity Status
In accordance to Limited Liability Company Law, dissolution of a limited liability company can be done due to several matters, among others are: (i) decision of the General Meeting of Shareholders; (ii) terms of establishment as stated in the Articles of Association has been matured; (iii) decision of court; (iv) revocation of bankruptcy status by the commercial court but the bankruptcy estate of the company is not sufficient to cover the bankruptcy fee; (v) the company is declared bankrupt and the bankruptcy assets are in a state of insolvency; and (vi) revocation of business license that cause company to carry out its liquidation.
However, dissolution of a company does not cause the company to lose its status as a legal entity until the liquidation process has been completed and the liquidator’s report has been approved by the GMS or court. As a follow up, such report must be submitted to the Ministry of Law and Human Rights before the Ministry record the termination of such company and announce the termination of the legal entity status of that company in the State Gazette.


3. MINIMUM INVESTMENT VALUE PROVISION
Government Regulation No. 5 of 2021 on Implementation of Risk-Based Business Licensing
Presidential Regulation No. 10 of 2021 on Investment Business Fields as amended by Presidential Regulation No. 49 of 2021
Indonesia Investment Coordinating Board (BKPM) Regulation No. 4 of 2021 on Guidelines and Procedures on Risk-Based Business Licensing and Investment Incentive

These regulations stipulate that foreign investment is required to have total investment value above 10 billion Rupiah, excluding the value of its land and building, for each business field (5-digit business code/KBLI) in each location. However, there are some exemptions as follow:

  • regarding the wholesale trading, the investment value excluding value of land and buildings shall be above 10 billion Rupiah for each 4-digit KBLI;
  • regarding the service sector related to food and beverages which is allowed for foreign investment, the investment value excluding value of land and buildings shall be above 10 billion Rupiah for each 2-digit KBLI in each location;
  • regarding the construction service which is allowed for foreign investment, the investment value excluding value of land and buildings shall be above 10 billion Rupiah in one activity for each 4-digit KBLI;
  • regarding the manufacturing sector producing several different products (i.e. different 5-digit KBLI) in one production line, the investment value excluding value of land and buildings shall be above 10 billion Rupiah;
  • regarding the property development and management:
    if such property taking form of whole building or integrated housing complex, then the investment value including value of land and buildings shall be above 10 billion Rupiah; or
    if such property taking form of only a part of the whole building or integrated housing complex, then the investment value excluding value of land and buildings shall be above 10 billion Rupiah.

Moreover, foreign investment is required to have the issued capital/paid-up capital at least 10 billion Rupiah, unless otherwise stipulated in any laws and regulations.


4. OTHER INVESTMENT-RELATED LEGISLATION
Law No. 5 of 1999 on the Prohibition on Monopolistic Practices and Unfair Business Competition as amended by Law No. 11 of 2020 on Job Creation
Law No. 2 of 2004 on Settlement of Industrial Relation Dispute
Law No. 23 of 2014 on Local Government as amended several times and lastly by Law No. 11 of 2020 on Job Creation
Law No. 11 of 2020 on Job Creation
Government Regulation No. 5 of 2021 on Implementation of Risk-Based Licensing
Government Regulation No. 34 of 2021 on Usage of Foreign Workers
Presidential Regulation No. 10 of 2021 on Investment Business Fields as amended by Presidential Regulation No. 49 of 2021
BKPM Regulation No. 7 of 2020 on List of Business Fields and Types of Production of Pioneer Industry as well as Guidelines and Procedures on Granting Tax Holiday
BKPM Regulation No. 3 of 2021 on Online Single Submission System
BKPM Regulation No. 4 of 2021 on Guidelines and Procedure on Risk-Based Licensing and Investment Incentives
BKPM Regulation No. 5 of 2021 on Guidelines and Procedures on Risk-Based Licensing Supervision

Sector-specific laws and regulations that affect the establishment, expansion or operations of foreign investment, among others, as as follow:

Law No. 4 of 2009 on Mineral and Coal Mining as amended several times and lastly by Law No. 11 of 2020 on Job Creation
For more details see:
https://jdih.esdm.go.id/storage/document/UU 4 2009.pdf
https://jdih.esdm.go.id/storage/document/UU No. 3 Thn 2020.pdf
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

Law No. 20 of 2008 on Micro, Small and Medium Enterprise as amended by Law No. 11 of 2020 on Job Creation
For more details see:
https://peraturan.bpk.go.id/Home/Download/29221/UU Nomor 20 Tahun 2008.pdf
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

Law No. 30 of 2009 on Electricity as amended by Law No. 11 of 2020 on Job Creation
For more details see:
https://jdih.esdm.go.id/storage/document/UU 30 2009.pdf
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

Law No. 13 of 2010 on Horticulture as amended by Law No. 11 of 2020 on Job Creation
For more details see:
http://hortikultura.pertanian.go.id/wp-content/uploads/2015/06/UU-No.13-Tahun-2010-Tentang-Hortikultura.pdf
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

Law No. 3 of 2014 on Industry as amended by Law No. 11 of 2020 on Job Creation
For more details see:
www.kemenperin.go.id/download/5181/Undang-Undang-No-3-Tahun-2014-Perindustrian
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

Law No. 7 of 2014 on Trade as amended by Law No. 11 of 2020 on Job Creation
For more details see:
http://jdih.kemendag.go.id/peraturan/download/443/2
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

Law No. 32 of 2014 on Maritime as amended by Law No. 11 of 2020 on Job Creation
For more details see:
https://peraturan.bpk.go.id/Home/Download/28039/UU Nomor 32 Tahun 2014.pdf
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

Law No. 41 of 1999 on Forestry as amended several times and lastly by Law No. 11 of 2020 on Job Creation
For more details see:
https://peraturan.bpk.go.id/Home/Download/33873/UU Nomor 41 Tahun 1999.pdf
https://peraturan.bpk.go.id/Home/Details/40518/uu-no-19-tahun-2004
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

Law No. 2 of 2017 on Construction Services as amended by Law No. 11 of 2020 on Job Creation
For more details see:
https://jdih.pu.go.id/internal/assets/assets/produk/UU/2017/01/UU02-2017.pdf
https://uu-ciptakerja.go.id/wp-content/uploads/2020/11/Salinan-UU-Nomor-11-Tahun-2020-tentang-Cipta-Kerja.pdf

1. Agencies Involved in Administering Investment Application and Granting of Incentives

The Ministry of Investment/Indonesia Investment Coordinating Board (MoI/BKPM – Badan Koordinasi Penanaman Modal) is the ministry/government institution that is responsible as the OSS Institution to manage the Online Single Submission System (OSS System). Since the launching of the new version of the OSS System on 9 August 2021, which is the risk-based OSS System, all processes to administer the investment application and grant the investment incentives have been conducted electronically through the OSS System. The investor can access the OSS System through: https://oss.go.id/.

All types of business licenses from various sectors are processed and issued in the OSS System. Therefore, the OSS System also connects all Ministries, Institutions, and regional governments who are involved in verifying and approving such licenses as well as supervising the implementation of business activities by investors.

In regard to the investment incentives, the MoI/BKPM has also been mandated by the Ministry of Finance to process the incentives applied by investors through the OSS System. The verification process is shorter than before since the process is mainly done in the MoI/BKPM.

2. Conditions Including Timetable for Processing of Applications

The Indonesian government launched the risk-based OSS System based on the following regulations:

  • Law No. 11 of 2020 on Job Creation
  • Government Regulation No. 5 of 2021 on Implementation of Risk-Based Licensing

In October 2020, the Government issued the “Omnibus” Law through Law No. 11 of 2020 on Job Creation (Job Creation Law), which amended 79 laws in order to improve the investment climate, including simplifying the licensing process to conduct business in Indonesia.

To implement this Law, on 2 February 2021, the Government issued Government Regulation No. 5 of 2021 on Implementation of Risk-Based Licensing. This stipulates how business licensing is implemented through the risk-based approach, thus not all business activities are required to have a permit (“Izin”) before they can conduct their business. That regulation also stipulates the risk level, type of business license, requirements and obligations, validity period, service level agreement, as well as the designated authority for each business field/activity.

The simplification of Business Licensing through the implementation of the risk-based approach is essentially determining the type of Business Licenses and quality/frequency of supervision based on the assessed risk of each business activity.

  • Low risk and medium low risk businesses may only need minimal licensing (NIB or NIB + Certificate of Standard).
  • Medium high risk and high risk businesses require more stringent licensing and verification.

The OSS System is designed to simplify lengthy bureaucratic procedures, attract more direct investment, and make business registration in Indonesia easier. Several key permits such as location permit, environmental approval and building approval (under certain conditions) can be obtained directly after submitting required data.

The integrated OSS System is supported by systems from various ministries and government agencies, including the Indonesia National Single Window (INSW), the General Law Administration System of the Ministry of Justice and Human Rights, and the Information System of Population Administration of the Ministry of Home Affairs.

Exceptions: some sectors such as financial and oil and gas are not included in the OSS System since they do not fall under MoI/BKPM authority.

Additionally, investors must adhere to Presidential Regulation No. 10 of 2021 on Investment Business Fields (as amended by Presidential Regulation No. 49 of 2021). This replaced Presidential Regulation No. 44 of 2016. The new regulation:

  • Provides a list of priority business fields that can obtain investment incentives.
  • Provides a list of business fields allocated only for Micro, Small, and Medium Enterprises (MSME) and Cooperatives, or requiring partnership with them.
  • Reduces the number of business fields open under conditions from about 350 to only 37.

This reform significantly improves the investment climate.

3. Procedures for Investment Applications

The procedures are stipulated in the following regulations:

  • Government Regulation No. 5 of 2021 on Implementation of Risk-Based Licensing
  • BKPM Regulation No. 3 of 2021 on Online Single Submission System
  • BKPM Regulation No. 4 of 2021 on Guidelines and Procedure on Risk-Based Licensing and Investment Incentives

Under the Job Creation Law, the risk-based approach affects the type of business licenses required for each specific field/activity. Risks are categorized into four levels:

  • Low Risk → Requires only NIB (Nomor Induk Berusaha)
  • Low Medium Risk → Requires NIB + Certificate of Standard (issued after self-declaration by investor)
  • High Medium Risk → Requires NIB + Certificate of Standard (issued after verification by authorities)
  • High Risk → Requires NIB + Permit (issued after verification by authorities)

1. FOREIGN EXCHANGE REGIME
The swap system to avoid exchange risks caused by the depreciation of the Rupiah is available.

2. EXPROPRIATION AND COMPENSATION
Based on the Law No. 25 of 2007 on Investment
The Government will not undertake any nationalisation action or take over the ownership rights of the investor, unless by law. In case of any nationalisation, compensation paid by the government will be based on market value. If there is no agreement on the compensation value, settlement will be conducted in arbitration.

3. INVESTMENT GUARANTEE AGREEMENTS
As of 2021, Indonesia has concluded a total of 67 Bilateral Investment Treaties (BITs), 21 still in force to this date and 26 BITs were terminated. The list of Indonesia’s BITs that are still in force to this date can be seen through the table below.

List of Indonesia’s BITs in force as of 2021
No — Country — Validity Period — Entry Into Force
  • Singapore — 10 years — 9 March 2021
  • South Korea — 10 years — 10 March 1994
  • Thailand — 10 years — 30 October 1998
  • Jordan — 10 years — 09 February 1999
  • Bangladesh — 10 years — 22 April 1999
  • Czech Republic — 10 years — 21 June 1999
  • Syria — 10 years — 20 February 1999
  • Mongolia — 10 years — 13 April 1999
  • Cuba — 10 years — 29 September 1999
  • Turkmenistan — 10 years — 20 October 1999
  • Iran — 10 years — 28 March 2009
  • Denmark — 10 years — 15 October 2009
  • Russia — 10 years — 15 October 2009
  • Mauritius — 10 years — 28 March 2000
  • Morocco — 10 years — 20 March 2002
  • Sudan — 10 years — 17 August 2002
  • Sweden — 10 years — 08 February 1993
  • Poland — 10 years — 01 July 1993
  • Finland — 10 years — 02 August 2008
  • Qatar — 10 years — 17 February 2018
  • Taiwan — 10 years — 19 December 1990


4. INTELLECTUAL PROPERTY RIGHTS (IPR)
Law No. 13 of 2016 on Patent as amended by Law No. 11 of 2020 on Job Creation
Patents are exclusive rights granted by the state to inventors for the results of their inventions in the field of technology for a certain period of time implementing the invention themselves or giving approval to other parties to implement it. Products and production processes are in principle patents and are subject to certain requirements. The law provides protection for a period of 20 years for patents and 10 years for simple patents, both of which cannot be extended.

Law No. 28 of 2014 on Copyrights
The law provides protection to people’s creations on science, arts and literature. The copyright is valid during the period of the author’s life and until 70 years from the date of the author’s death. The period of protection is 70 years from the date of the copyright notification for broadcasting creation used such as on TV, radio, video, and movie, created song or music with or without lyrics, recorded voice or sound, arts (painting, statue), cinematography, and for 50 years from the date of copyright notification for photography, computer programs, and cover designs.

Law No. 20 of 2016 on Trademarks and Geographical Indication as amended by Law No. 11 of 2020 on Job Creation
Trademarks are brands that are used on goods traded by a person or several people jointly or a legal entity to differentiate from other similar goods. Geographical Indication is a sign that shows the area of origin of an item and/or product which due to geographical environment factors including natural factors, human factors or a combination of these two factors gives reputation, quality, and certain characteristics to the goods and/or products produced.

Law No. 30 of 2000 on Trade Secret
Trade Secret is unknown information by the public in the field of technology and/or business, has economic value because it is useful in business activities and is kept confidential by the owner of the trade secret. The scope of protection includes production methods, processing methods, sales methods or other information in the field of technology and/or business that has economic value and is not known by the general public.

Law No. 32 of 2000 on Integrated Circuit
Integrated Circuit is a product in the form of finished or semi-finished, which inside there are various elements and at least one of these elements are active elements, which are partially or wholly interrelated and formed integrated in a semiconductor material intended to produce electronic functions. The period of protection of the Right to Integrated Circuit Layout Design is 10 years, calculated from the Receipt Date or from the date the Layout Design of the Integrated Circuit is first exploited commercially.

Law No. 31 of 2000 on Industrial Design
Industrial Design is a creation of the shape, configuration, or composition of lines or color, or lines and colors, or a combination thereof in the form of three dimensions or two dimensions that give an aesthetic impression and can be realized in three-dimensional or two-dimensional pattern and can be used to produce products, goods, industrial commodities, or handicrafts. Protection is granted by the government if requested through registration procedures by the designer, or legal entity entitled to the Industrial Design Right.


5. DISPUTE SETTLEMENT
Law No. 25 of 2007 on Investment as amended by Law No. 11 of 2020 on Job Creation
(Please see No. 1 of the Section on Relevant Investment Legislation on the features of the Investment Law)

Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution
The system is facilitated by the Indonesia National Board of Arbitration (BANI). Mediation processes may be governed by internationally accepted norms such as the UNCITRAL Arbitration Rules of 1976.

As a member of WTO, Indonesia is obligated to follow commitments relating to prohibition of performace requirements as mentioned in Agreement.

Foreign investment taking form of joint ventures need to comply with Presidential Regulation No. 10 of 2021 on Investment Business Fields as amended by Presidential Regulation No. 49 of 2021, regarding the foreign equity participation.
100% foreign equity ownership is allowed in all areas except for certain business fields as stipulated in such regulation.

Tax Holiday and Mini Tax Holiday
The government simplifies the bureaucracy procedures and flows of granting income tax exemption and reduction facilities for certain investments. Withdrawing the authority of several ministries/institutions and fully delegating it to the Ministry of Investment/BKPM to determine the eligibility of tax holiday recipients. In essence, an income tax reduction of up to 100% or a tax holiday can be given for a maximum of 20 years to companies whose business fields are included in the list of 18 pioneer industries as previously determined. However, the pioneer industry criteria do not strictly refer only to the 18 business fields determined. The companies that are not included in the list of business fields mentioned may receive tax reduction incentives as long as they meet the following conditions: (1) have widely interrelated business activities; (2) provide added value and high externalities; (3) introduce new technology; and (4) have a strategic value for the national economy.

Tax Allowance
Tax allowance is regulated by Government Regulation No. 18 of 2015 jo. No. 78 of 2019 and Minister of Finance Regulation No. 11 of 2020 jo. No. 96 of 2020. Tax allowance is given by the Minister of Investment/Chairman of BKPM on behalf of Minister of Finance. Determination of the suitability of the fulfillment of business fields, investment destination areas, criteria, and requirements for obtaining facilities is carried out through the OSS System. Those criteria are absorbing a large amount of manpower, high investment value to export, and acquire a high level of local content. There are several schemes available, such as a yearly reduction in net income by 5% from the total value of investment for 6 years, acceleration to depreciation of intangible fixed assets and acceleration to amortization of intangible assets, imposition of 10% income tax on dividends, and compensation for losses that are longer than 5 years but no more than 10 years.

Super Deductible Tax
A resident corporate taxpayer making a new investment or expanding its business in a business in a labour-intensive industry; and not entitled for any tax facility under Article 31A of the Indonesian Income Tax Law or any tax facility under the Indonesian Investment Law, may receive an income tax facility in the form of 60% net income reduction from the total investment of tangible fixed assets, including lands used for the taxpayer’s main business activities, which will be charged for a certain period.
A resident corporate taxpayer that conducts job training, apprenticeship, and/or learning activities in the framework of fostering and developing certain competence to human resources may receive up to 200% tax deductible facility from the total cost incurred for such job training, apprenticeship, and/or learning activities.
Under the new regulation, competency-based activities are defined as activities that improve the labour quality through strategic job practice, apprenticeship and/or learning programs, which are designed to achieve effectiveness and efficiency of labour and are conducted as part of an investment in the human resources sector by the taxpayer.
A resident corporate taxpayer that conducts certain R&D activities in Indonesia may receive up to 300% tax deductible facility from the total cost incurred for such R&D activities in Indonesia, which would be charged for a certain period. These R&D activities are defined as activities that result in inventions, innovations, mastery in new technologies and/or transfer of technology that enhance the competitiveness of Indonesia’s national industry.

Exemption of Import Duty of Machine/Equipment and/or Raw Materials
This facility is eligible for several sectors, such as industry, industrial services, electricity for public purposes, and contract of work. For industry and industrial services sectors, the exemption of import duty of machine/equipment is granted for 2 years and eligible for another 2 years for renewal. Meanwhile, the exemption of import duty of raw materials is granted for 2 years with the possibility of 1 year for renewal.

Investment Allowances
This incentive offers deduction on net income by 60% of total investment for 6 years or 10% each year. This incentive is eligible for the industry sector which employs at least 300 persons and its business fields are stipulated by Minister of Finance Regulation No. 16 of 2020.

Green Lane Facility
Starting 2016, the government accelerates custom clearance process for imported capital goods, aiming at speeding up projects under construction. Capital goods no longer need screening at the ports, reducing the processing time from five days to only 30 minutes.

Bonded Zone
The industrial companies located in the bonded areas are provided with many incentives as follows:

  • Exemption from import duty, excise duty, income tax of Article 22, Value Added Tax on Luxury Goods, importation of capital goods and equipment including raw materials for the production process.
  • Allowed to divert products amounting to 50% of exports (in term of value) for the final products, and 100% of exports (in term of value) for other than final products to the Indonesian customs area, through normal import procedure including payment of customs duties.
  • Allowed to sell scrap or waste to the Indonesian custom area as long as it contains, at the highest, tolerance of 5% of the amount of the material used in the production process.
  • Allowed to lend their own machinery and equipment to their subcontractors located outside bonded zones for no longer than 2 years in order to further process their own products.
  • Exemption of Value Added Tax and Sales Tax on Luxury Goods on the delivery of products for further processing from bonded zones to their subcontractors outside the bonded zones or the other way around as well as among companies in these areas.


Immigration

  • Limited stay permit is granted for 2 years and can be renewed up to 6 years.
  • Permanent stay permit (permanent resident status) is granted for 5 years and can be renewed.


Export Manufacturing
There are many incentives provided for exporting manufactured products. Some of these incentives are as follows:

  • Restitution (drawback) of import on the importation of goods and materials needed to manufacture the exported finished products.
  • Exemption from Value Added Tax and Sales Tax on Luxury goods and materials purchased domestically, to be used in the manufacturing of the exported products.
  • The company can import raw materials required regardless of the availability of comparable domestic products.

1. PRIORITY/PROMOTED SECTORS OR INDUSTRIES
As of 2020, the Indonesian Government has laid the new focus on several business sectors as planned in The Indonesia National Medium-Term Development Plan of 2020-2024 (RPJMN 2020-2024) and The Investment Strategic Planning of 2020–2024. In RPJMN 2020-2024, there are 41 Major Projects as priority sectors which are selected based on the economic advantages, growth factors, and productivity aspects. These Major Projects, among others, are as follows:

  • Industry 4.0 in 5 (five) Priority Sub Sectors including food and beverages, textile and clothing, automotive, electronic, as well as chemistry and pharmacy.
  • 10 (ten) Priority Tourism Destinations including Toba Lake, Borobudur Temple, Lombok-Mandalika, Labuan Bajo, Manado-Likupang, Wakatobi, Raja Ampat, Bromo-Tengger-Semeru, Bangka Belitung, and Morotai.
  • 9 (nine) Industrial Zones outside Java and 31 Smelters.
  • Renewable Energy Development: Palm Oil-based Green Fuel.
  • The integration of Fishery Port and International Fish Market.


The details of these Major Projects can be accessed through:
https://peraturan.bpk.go.id/Home/Download/122196/Perpres Nomor 18 Tahun 2020 – Lamp. II.pdf
https://jdih.bkpm.go.id/jdih/userfiles/lampiran/SALINAN_Lampiran_PerBKPM_2_Tahun_2020.pdf

In addition, the government also offers the investment incentives to the priority/promoted sectors listed in Annex I Presidential Regulation No. 10 of 2021 on Investment Business Fields as amended by Presidential Regulation No. 49 of 2021. The investment incentives that can be applied such as Tax Holiday, Tax Allowance, and Investment Allowance. The list of these business fields can be accessed through:
https://peraturan.bpk.go.id/Home/Download/161563/Perpres Nomor 49 Tahun 2021 – Lampiran I.pdf

2. PROMOTED INVESTMENT
Indonesia’s National Development Planning Agency (BAPPENAS) annually announces the list of infrastructure projects that will be developed under PPP scheme. The list will be periodically updated in PPP Book coordinated by BAPPENAS. The projects are categorized into the following:

  • under preparation project
  • ready to offer project


The details of projects in PPP Book Year 2020 can be accessed through:
https://www.bappenas.go.id/files/7816/1433/1978/PPP_BOOK_2020.pdf

Due to the nature of PPP which requires cross-sector and cross-agency coordination to ensure the success of the PPP project, a coordination system between government agencies is needed. Responding to those needs, in December 2016, PPP Joint Office was established.

This PPP Joint Office was established to assist the GCA and investors, and also to answer any queries about the PPP Scheme in Indonesia. The PPP stakeholders from the central government and institutions agreed to establish the PPP Joint Office in Jakarta. PPP Joint Office now acts as a ‘one-stop service’ for PPP scheme in Indonesia. Hence, the use of a PPP scheme could be accelerated in an accountable method. It has no structural system between the agencies but works as a coordination system.

On September 2020, a new Memorandum of Understanding was signed. Now, members of the PPP Joint Office are Coordinating Ministry for Economic Affairs, Coordinating Ministry for Maritime and Investment Affairs, Ministry of Finance, Ministry of Home Affairs, Ministry of National Development Planning/National Development Planning Agency (BAPPENAS), Ministry of Investment/BKPM, National Public Procurement Agency (LKPP) and Indonesia Infrastructure Guarantee Fund (IIGF).

3. RESTRICTIONS
Presidential Regulation Number 10 of 2021 on Investment Business Fields as amended by Presidential Regulation Number 49 of 2021 replaced the Presidential Regulation Number 44 of 2016 on the List of Business Fields that are Closed for Investment and Business Fields that are Open Under Certain Conditions for Investment. The old regulation provided a long list of business fields which were closed entirely for all investors, closed for foreign investors, and open with certain conditions for investment including limitation of foreign ownership. The new regulation provides more positive message to investors, particularly that the business climate is now more attractive and competitive. The most notable differences between the new and old regulation is that the new regulation provides a list of priority business fields which can obtain investment incentives.

 
 

1. INCOME TAX
A tax resident (corporate or individual) is taxed on worldwide income. Resident taxpayers and Indonesian Permanent Establishments (PE) of foreign companies have to settle their tax liabilities either by direct payments, third party withholding or a combination of both.

  • Corporate Income Tax (CIT): A flat CIT rate of 25% applies to net taxable income. CIT rate concessions are available for certain taxpayers.
  • Withholding Tax (WHT): Indonesian income tax is also collected through a WHT system. Where a particular item of income is subject to a WHT, the payer is generally held responsible for withholding or collecting the tax. The types of WHT are PPh 21, PPh 22 (various rates ranging from 0.1% to 7.5%), PPh 23 (at 2% or 15%), PPh 26 (at 20%) and PPh Final (various rates ranging from 2% to 15%).
  • Employee Income Tax (EIT): Employers are required to withhold EIT/PPh 21 from the salaries payable to their employees and pay the tax to the State treasury on their behalf. The same withholding tax is applicable to other payments to non-employee individuals.
  • Individual Income Tax: A tax resident is taxed on worldwide income. Most income earned by individual tax residents is subject to income tax at progressive tax rates (from 5% to 30%). Non-resident individuals are subject to withholding tax (PPh 26) in respect of their Indonesian-sourced income. Concessions are, however, available where a DTA is in force.


2. VALUE ADDED TAX (VAT)
VAT is applicable on deliveries of goods and services within Indonesia at a rate of 10%. VAT on export of goods is zero-rated while import of goods is subject to VAT at a rate of 10%. Zero-rated VAT is also applicable on exported services, however it is subject to a Ministry of Finance (MoF) limitation.


3. LUXURY GOODS SALES TAX (LGST)
Some goods (e.g. certain household appliances, sport equipment, motor vehicles, luxury residences) are subject to LGST upon import or delivery by the manufacturer to another party. The LGST tariff is between 10% and 200%.


4. STAMP DUTY
Stamp duty is nominal and payable as a fixed amount of IDR 10,000 on certain documents, such as letters of agreement, proxy letters, statement letters and notarial deeds.


5. LAND AND BUILDING TAX
Land and buildings tax (Pajak Bumi dan Bangunan/PBB) is a part of regional taxes, which are governed under Regional Taxes and Retribution (Pajak Daerah dan Retribusi Daerah or PDRD) Law and enacted by a Regional Government Regulation (Peraturan Pemerintah Daerah/PERDA). The PBB rate is a maximum of 0.3% on NJOP (Nilai Jual Objek Pajak/the sales value of the tax object) deducted by nontaxable NJOP (set at a minimum of 10 million Rupiah). The scope of PBB under the PDRD Law covers all land and buildings except for forestry, plantation, and mining areas, which are governed by separate regulations.

6. DUTY ON THE ACQUISITION OF LAND AND BUILDING RIGHTS
In a land and building transfer, the acquirer is liable for duty on the acquisition of land and building rights (Bea Pengalihan Hak atas Tanah dan Bangunan or BPHTB) at a maximum of 5% of the greater of the transaction value or the government-determined value. BPHTB is a part of regional taxes and collected by the local provincial government through a relevant PERDA.

1. BORROWING REGULATIONS

  • Indonesia Central Bank Regulation No. 16/21/PBI/2014 on Reporting of Foreign Exchange Activities and Reporting of Activities to Implement Prudential Principles in Managing Foreign Debt by Non-Banking Company as amended by Indonesia Central Bank Regulation No. 18/4/PBI/2016
    Any company is allowed to borrow overseas and should report to the Indonesia Central Bank.
  • Minister of Finance Regulation No. 169/PMK.010/2015 on Determination of Comparison between Liabilities and Equity of Company for the Purpose of Calculating Income Tax
    For the purpose of calculating income tax, the Debt to Equity Ratio should not be more than 4:1.
  • Minister of Finance RegulationNo. 130/PMK.010/2020 on Tax Holiday
    Companies conducting business in pioneer industries that are eligible for Tax Holiday must fulfill the requirement of a maximum Debt to Equity Ratio of 4:1.


2. FOREIGN EXCHANGE REGULATIONS

  • Law No. 24 of 1999 on The Foreign Exchange Activities and Exchange Rate System
    Any residents can own and use foreign exchange. The use of foreign exchange for domestic transactions must comply with domestic laws and regulations.
  • Indonesia Central BankRegulation No. 20/13/PBI/2018 on Derivative Transaction of Rupiah Rate
    Derivative transactions, such as swap, forward, futures, and option, can be conducted to avoid exchange risks caused by the depreciation of the Rupiah.


3. SOURCE OF FINANCING
In general, foreign investors are free to search for alternative sources of investment funds. Private sector offshore borrowings need to be reported to the Indonesia Central Bank.
Sources of financing can be in the form of equity, debt, or a combination of both.

4. REPATRIATION OF CAPITAL/PROFITS

  • Law No. 25 of 2007 on Investment
    Foreign investors are guaranteed the right to transfer abroad all company profits, proceeds from the sale of shares, compensation in the case of nationalisation, and repatriation of remaining investment capital in the case of liquidation, principal loan, interest, royalty fees, and expenses of expatriates without any restrictions.

1. CONDITIONS FOR THE APPROVAL OF FOREIGN EMPLOYEES (FOR MANAGERIAL, SUPERVISOR, UNSKILLED)
AccordingArticle 42 paragraph (4) and (5) of Law No. 13 of 2003 on Employment as amended by Law No. 11 of 2020 on Job Creation, foreign labor can only be employed in Indonesia for a certain position and duration.

As a follow up to the above regulation, the government enacted Government Regulation No. 34 of 2021 on Employment of Foreign Workers stipulating that the foreign workers can be employed for certain position and duration as well as possess relevant skills.
The detailed procedures on employment of foreign workers are further stipulated in Minister of Manpower Regulation No. 8 of 2021 on Implementing Regulation of Government Regulation No. 34 of 2021 on Employment of Foreign Workers.

2. WORK PERMIT PROCESSING AND REQUIREMENTS (FOR MANAGERIAL, SUPERVISOR, UNSKILLED)
According to Government Regulation No. 34 of 2021 on Employment of Foreign Workers, employers who will employ foreign worker shall have Plan on Employment of Foreign Worker (RPTKA) approved by Minister of Manpower or appointed official. The employer must apply electronically through link https://tka-online.kemnaker.go.id/. The detailed requirements can be accessed through link https://tka-online.kemnaker.go.id/syarat.asp.

1. REGULATION ON ACQUISITION OF LAND AND BUILDING
Law No. 5 of 1960 on Basic Regulation on Agrarian Principles
The 1960 Basic Agrarian Law allow legal entities establishedin Indonesia, including foreign companies, to obtain the Land Cultivation Right (HGU), the Right of Building on Land (HGB) and Right of Use on Land (HP).

Law No. 25 of 2007 on Investment
TheLand Cultivation Right (HGU)can be granted up to 95 years, the Right of Building on Land (HGB) can be granted up to 80 years, and Right of Use on Land (HP)can be granted up to 70 years.

Law No. 28 of 2002 on Buildings as amended by Law No. 11 of 2020 on Job Creation and Government Regulation No. 16 of 2021 on Implementing Regulation of Law No. 28 of 2002 on Buildings
The owner of buildings has to possess building permit (Persetujuan Bangunan Gedung/PBG) and Certificate of Proper Function of Building (Sertifikat Laik Fungsi/SLF), that can be applied electronically through link https://simbg.pu.go.id/.

2. RESTRICTIONS
Foreigners cannot be granted Right of Ownership on Land and Building, except for apartment unit in accordance with laws and regulations.

Ministry of Investment / Indonesia Investment Coordinating Board (BKPM)
Jl. Jend. Gatot Subroto No. 44, Jakarta 12190, Indonesia
P.O. BOX 3186
Telephone: (62-21) 525 2008, 08071002576, 1500765 (Contact Center)
Fax: (62-21) 520 2050, 525 4945
Website: www.bkpm.go.id
Twitter: @bkpm, @investIDN
Instagram: @bkpm_id, @investidn
Facebook: BKPMINDONESIA, Invest Indonesia
YouTube: BKPMTV, Invest Indonesia
LinkedIn: Ministry of Investment / Indonesia Investment Coordinating Board (BKPM)

The Ministry of Investment/Indonesia Investment Coordinating Board (BKPM) is a Government Agency in charge of implementing policy and service coordination in investment in accordance with laws and regulations. As the primary interface between business and government, the Ministry of Investment/BKPM is mandated to boost domestic and foreign direct investment through creating a conducive investment climate. Moreover, this investment promotion agency’s goal is not only to seek more domestic and foreign investment but also to seek higher-quality investments that may drive the Indonesian economy and absorb a large amount of manpower.

Established in 1973, the Ministry of Investment/BKPM replaced the functions previously undertaken by the Investment Technical Committee, a Government Institution established in 1968. To ensure the successful implementation of the Omnibus Law, particularly in simplifying the business licensing process and facilitating the realization of investment plans by investors, the Government of Indonesia upgraded the status of the Indonesia Investment Coordinating Board (BKPM) to become the Ministry of Investment on 28 April 2021 through Presidential Regulation Number 32 of 2021 on Amendment of Presidential Regulation Number 68 of 2019 on State Ministry Organization. Along with this new status, the authority of the institution has been expanded—not only to implement investment policies but also to lead investment policymaking. This structural reform is designed to create greater certainty in doing business as well as to further enhance the investment climate, taking into account that investment policies will be carried out mainly through the Ministry of Investment/BKPM.

No information available

Relevant investment legislation

1. INVESTMENT ACT
Industrial Coordination Act 1975
It is a legislation relating to the licensing of manufacturing activities to ensure a coordinated and orderly development of the manufacturing sector in Malaysia.

2. COMPANIES ACT 2016
It is a legislation for the registration, administration and dissolution of companies and corporations in Malaysia.

3.LIMITED LIABILITY PARTNERSHIPS ACT 2012
It is a legislation for the registration, administration and dissolution of limited liability partnerships in Malaysia.

4.REGISTRATION OF BUSINESSES ACT 1956 (revised 1978)
It is a legislation for the registration of business in Peninsular Malaysia and Federal Territory of Labuan.

5. MINIMUM LEVEL OF INVESTMENT
No minimum level of investment is required.

6. OTHER RELATED INVESTMENT LEGISLATION
Free Zones Act, 1990
This Act enables companies operating in free zones to enjoy minimum customs control and duty-free imports in the exportation of their finished products.

There are other specific laws, regulations, and policies relating to investment in other specific sectors, e.g. telecommunications, financial services etc.

1. AGENCIES INVOLVED IN ADMINISTERING INVESTMENT APPLICATION AND GRANTING OF INCENTIVES
For the manufacturing sector, the relevant Ministries are:

  • Ministry of International Trade and Industry (MITI)
    MITI is responsible to promote and safeguard Malaysia’s interest in the international trade arena, to spur the development of industrial activities, and to further enhance Malaysia’s economic growth.
  • Malaysian Investment Development Authority (MIDA)
    MIDA is the government’s principal agency for the promotion of the manufacturing and services sectors in Malaysia. It is the first point of contact for investors intending to set up manufacturing and manufacturing related services operations in Malaysia.
  • Ministry of Finance
    The Ministry of Finance is responsible for the formulation, planning and implementation of fiscal and budgetary policies to promote sustainable economic growth, improve national economic resilience and ensure a more equitable sharing of the national wealth.
    For other sectors, other relevant Ministries are responsible for administering investment applications such as telecommunications, financial services, etc.

2. CONDITIONS INCLUDING TIMETABLE FOR PROCESSING OF APPLICATION
https://mycoid2016.ssm.com.my/. MyCoID portal is a gateway which enables automatic population of data for simultaneous registration with the relevant Government Agencies upon incorporation.
Industrial Coordination Act, 1975. Applications for manufacturing licences are to be submitted to the MIDA.

3. SPECIAL SERVICES FOR EXPEDITING APPLICATION

  • Advisory Services Centre in MIDA
    The Advisory Services Centre is represented by officials from key government departments and agencies. It provides advice and assistance to investors on how to set up a manufacturing project, and in the implementation of the project.
  • One-Stop Centers at State/Regional Government Level
    The Centre assists investors in obtaining licenses, permits and approvals as well as to implement their projects at the state/regional level.

1. CONVERSION, REPATRIATION AND TRANSFERS
Foreign investors are free to repatriate their investment including capital, divestment proceeds, profits, dividends, rental and interest.

2. EXPROPRIATION AND COMPENSATION
The relevant laws relating to expropriation and compensation are:

  • Land Acquisition Act 1960 (Act 486). The latest amendment to Act 486 was made by the Land Acquisition (Amendment) Act 2016 (A1517) which came into operation on 1 December 2017.
  • Sabah Land Acquisition Ordinance (Cap.69) 1950.
  • Sarawak Land Code (Cap.81) 1958.

Foreign investors are entitled to fair compensation in the event that their private properties are acquired for public purposes.

4. INVESTMENT GUARANTEE AGREEMENTS
Malaysia has signed and ratified 66 Investment Guarantee Agreements with the following grouping and countries (in alphabetical order):

Groupings

  • Association of South-East Asian Nations (ASEAN)*

Countries:
Albania, Algeria, Argentina, Austria, Bahrain, Bangladesh, Belgo-Luxembourg, Burkina Faso, Cambodia, Canada, Chile, China, Croatia, Cuba, Czech Republic, Denmark, Egypt, Ethiopia, Finland, France, Germany, Ghana, Guinea, Hungary, India*, Indonesia*, Iran, Italy, Jordan, Kazakhstan, Korea (North), Korea (South), Kuwait, Lebanon, Macedonia, Mauritius, Mongolia, Morocco, Namibia, Netherlands, Norway*, Pakistan, Peru, Poland, Qatar, Romania, Russia, San Marino, Saudi Arabia, Senegal, Singapore, Slovak, Spain, Sri Lanka, Sudan, Sweden, Switzerland, Syrian Arab Republic, Taiwan, Thailand, Turkey, Turkmenistan, United Arab Emirates, United Kingdom, United States of America, Uruguay, Uzbekistan, Vietnam, Yemen, Zimbabwe.

IGAs that have been terminated:

  • IGA Malaysia – Norway was terminated on 5 December 2001.
  • ASEAN IGA was terminated on 29 March 2012 upon entry into force of the ASEAN Comprehensive Investment Agreement (ACIA) in February 2012.
  • IGA Malaysia – Indonesia was terminated on 20 June 2015.
  • IGA Malaysia – India was terminated on 23 March 2017.

4. INTELLECTUAL PROPERTY RIGHTS (IPR)
Intellectual property (IP) protection in Malaysia covers patents, trademarks, industrial designs, copyright, geographical indications and layout designs of integrated circuits, for the IP that has statutory protection in Malaysia. Other forms of unregulated IP in Malaysia consist of confidential information or trade secret, know-how and passing off.

Malaysia is a member of the World Intellectual Property Organization (WIPO), a UN agency, and a signatory to the Paris Convention (industrial property rights) and the Berne Convention (copyright and related rights). It is also a signatory to the TRIPS Agreement under the WTO.

Malaysia is a member of the following treaties:

  • Patent Cooperation Treaty (PCT)
  • Nice Agreement
  • Vienna Agreement
  • WIPO Copyright Treaty (WCT)
  • WIPO Performances and Phonogram Treaty (WPPT)

IP legislations administered by MyIPO include:

  • Intellectual Property Corporation of Malaysia Act 2002
  • Trade Marks Act 1976
  • Patents Act 1983
  • Copyright Act 1987
  • Industrial Designs Act 1996
  • Geographical Indications Act 2000
  • Layout-Designs of Integrated Circuits Act 2000

5. DISPUTE SETTLEMENT
To promote and protect foreign investment, the Malaysian government ratified the Convention on the Settlement of Investment Disputes on 8 August 1966. This Convention, under the International Bank for Reconstruction and Development (IBRD), provides for international conciliation or arbitration through the International Centre for Settlement of Investment Disputes (ICSID) located in Washington.

6. ASIAN INTERNATIONAL ARBITRATION CENTRE (AIAC) (Formerly known as Kuala Lumpur Regional Centre for Arbitration)
Formed pursuant to the host country agreement between Malaysia and the Asian-African Legal Consultative Organisation (AALCO), the AIAC is a not-for-profit, non-governmental international arbitral institution. It has been accorded independence and certain privileges by the Government of Malaysia.

The AIAC was the first in the world to adopt the UNCITRAL Rules for Arbitration (as revised in 2013). It has its own sets of procedural rules, including:

  • AIAC Arbitration Rules
  • AIAC i-Arbitration Rules
  • AIAC Fast Track Rules
  • AIAC Mediation Rules

The AIAC also serves as an official Court of Arbitration for Sports (CAS) alternative hearing centre. It provides institutional support for domestic and international arbitrations, hearing facilities, administrative services, and also organizes training programmes, forums and capacity-building courses in areas such as sports arbitration, domain name dispute resolution, and Islamic finance.

Malaysia adheres to the performance prohibition requirements under WTO Agreement Trade-Related Investment Measures (TRIMs).

1. Equity Policy Applicable to New Investments, Expansion or Diversification in the Manufacturing Sector
Since June 2003, foreign investors could hold 100% of the equity in all investments in new projects, as well as investments in expansion/diversification projects by existing companies, irrespective of the level of exports.

2. Equity Policy Applicable to Existing Companies in the Manufacturing Sector
Equity conditions imposed on existing companies will be maintained. However, companies can request for these conditions to be removed and approval will be given based on the merits of each case.

3. Equity Policy Applicable for Services Sector
Liberalisation of the services sector is undertaken progressively, taking into account Malaysia socio-economic development objectives.
Thus far, 45 services sub-sectors have been liberalised with no foreign equity restrictions. These sub-sectors are categorised under computer and related services, health and social services, tourism services, transport services, business services, private hospital services; medical and dental specialist services; architectural, engineering, accounting and taxation, legal services; courier services; education and training services; as well as telecommunication services. This initiative will allow up to 100% foreign equity participation in selected sub-sectors.

Malaysia offers attractive investment incentives to promote the development of promoted/targeted industries and activities in the manufacturing, agriculture and services sectors that can contribute to the future growth and development of the Malaysian economy. Relevant legislations include: Promotion of Investments Act 1986, Income Tax Act 1967, Customs Act 1967, and Free Zones Act 1990. The direct tax incentives grant tax exemption/deduction from income for qualifying expenditure for a specified period, while indirect tax incentives are in the form of exemptions from import duty, sales tax and excise duty.
Information on investment incentives is available at MIDA’s website: https://incentives.mida.gov.my.

1. PROMOTED FIELDS/SECTORS/PRODUCTS
List of promoted products/activities are available at the MIDA website:http://www.mida.gov.my

2. Restrictions
Generally, all industries in the manufacturing sector are open to foreign investment. However, there are a few industries which are closed for investment due to excess capacity, raw material shortage, public safety, health and national security reasons such as sugar refining, alcoholic beverages, tobacco processing and cigarettes, hot rolled steel bars and wire rods, biodiesel, and collection, storage treatment and disposal of hazardous and toxic wastes.
Malaysia will continue to progressively liberalise restrictions in other sectors in line with her socio-economic development objectives.

1. CORPORATE TAX
For corporate income tax, the Government has reduced the tax rate by 1 percentage point (1%) from 25% to 24% in year of assessment (YA) 2016.
For smaller companies, the tax rate for the first RM 500,000 chargable income is reduced from 19% to 18% from YA 2017. The tax rate is further reduced from 18% to 17% from YA 2019 in order to enhance the competitiveness of SME and to boost the conomic growth of the nation.
In addition, upstream petroleum companies are subject to petroleum income tax at a flat rate of 38%.

2. SALES AND SERVICE TAX
The Government has reinstated the Sales and Service Tax (SST) effective 1 September 2018 to replace Goods and Service Tax (GST). SST comprises of two independent taxes, governed by separate legislations, namely the Sales Tax Act 2018 and the Service Tax Act 2018. Whilst maintaining the salient features of the previous SST, the new SST incorporates enhancements to minimise the inherent weaknesses associated with SST and increase tax efficiency.
Sales tax is a single-stage tax and only levied at the manufacturer level or at the point of importation on taxable goods. Sales tax is levied at 5% or 10% of the sale value depending on the types of taxable goods, except on petroleum products which are taxed at specific rates. The Government also exempt basic necessities and widely used items such as fresh food items, medicine and basic construction materials. Exemption is also given on raw materials, packaging and components used in manufacturing to ensure that the cost of production is kept minimal.
Service tax is also a single-stage tax and is levied only on taxable services, as stipulated in the Service Tax Act 2018 and prescribed under the Service Tax Regulation 2018. Service Tax is imposed at a standard rate of 6%.
Under SST, there is no input tax credit mechanism which will eliminate the cash-flow problem that businesses faced during the GST era. However, exemption facilities are given under the Schedule A, B and C, Sales Tax (Persons Exempted from Payment of Tax) Order 2018 and credit system was introduced to facilitate and redue the cost of doing business.
For complete information on SST treatment/ regulation, visit mysst.customs.gov.my.

3. WITHHOLDING TAX
Income of a non-resident person in relation to:
Payment for services in connection with the use of property or rights, installation of or operation of any plant, machinery or other apparatus;
Payment for advice, assistance or services in connection with any scientific, industrial or commercial undertaking, venture, project or scheme; or
Rent or other payments made under any agreement or arrangement for the use of any moveable property
is subject to withholding tax of 10%.

4. PERSONAL INCOME TAX
All individuals are liable to tax on income accrued in, derived from or remitted to Malaysia. However, a non-resident individual will be taxed only on income earned in Malaysia. The rate of tax depends on the resident status of the individual which is determined by the duration of his stay in the country as stipulated under Section 7 in the Income Tax Act 1967. Generally, an individual is resident in Malaysia if he is in Malaysia for more than 182 days in a year.
A resident individual is taxed on his chargeable income after deductin personal reliefs at a graduated rate from 0% to 28% with effect from the year of assessment 2016.
Effective from year of assessment 2016, a non-resident individual is liable to tax at the rate of 28% without any personal relief.

5. LAND/PROPERTY TAX
Land tax (Quit rent) is charged by all state governments. The rate varies according to location, area of the land and land use.

6. REAL PROPERTY GAINS TAX
Capital gains are generally not subject to income tax in Malaysia. However real property gains tax is charged on chargeable gains arising from the disposal of real property situated in Malaysia or of interest, options or other rights in or over such land as well as the disposal of shares in real property companies.
Effective from 1 January 2014, gains from the disposal of residential and commercial properties are taxed between 5% and 30% depending on the holding period of real properties.
For further information on company and individual tax, visit www.hasil.gov.my

7. ESTATE DUTY
None.

8. STAMP DUTY
Stamp duty is chargeable on certain instruments and documents. The rate of duty varies according to the nature of the instruments/documents and transacted values.

9. IMPORT DUTY
Import duty is mostly imposed ad valorem although some specific duties are imposed on a number of items. Nevertheless, in line with trade liberalisation, import duties on a wide range of raw materials, components and machinery have been abolished, reduced or exempted.
Furthermore, Malaysia is committed to the ASEAN Common Effective Preferential Tarrifs (CEPT) scheme under which all industrial goods traded within ASEAN are imposed import duties of 0% to 5%.
Malaysia continues to participate in negotiations of free trade arrangements in areas of trade in goods, rules of origin, and investments. To date, Malaysia has concluded bilateral free trade agreement with Japan, Pakistan, New Zealand, India, Chile, Australia and Turkey; and the regional agreements under ASEAN with China, Japan, Korea, Australia/New Zealand and India. Import duties between FTA partners are subject to specific reduction and elimination schedules under these agreements.

10. MUNICIPAL TAXES
Municipal Taxes (assessment) are charged by local authorities. The rate of assessment vaties according to the location and type of building.

11. OTHER TAXES
ExciseDuty
Based on the 2019 Budget, Malaysia will implement excise duty on sugar sweetened beverages as a measure to curb the rising trend of diabetic disease in the nation. The enforcement of the order will take effect on 1st April 2019.
To encourage the export of locally manufactures goods, companies with Licensed Manufacturing Warehouse (LMW) status that manufacture goods subject to excise duty are exempted from being licensed under the Excise Act 1976.

1. FOREIGN EXCHANGE RULES
Malaysia continues to maintain liberal foreign exchange policies, which are part of broad prudential toolkits to maintain monetary and financial stability. Bank Negara Malaysia is committed in ensuring the policy continues to support competitiveness of the economy through facilitation of a more conducive environment for cross-border real economic activities.
The Malaysian markets are easily accessible by global investors. There is free mobility of inflow and outflow of capital for investments in Malaysia.
Non-residents are free to invest in any for of ringgit assets either as direct or portfolio investments; and
Non-residents are free to remit out divestment proceeds, profits, dividends or any income arising from these investments in Malaysia
There are no restrictions for the non-residents to convert foreign currency to ringgit or vice versa, with licensed onshore banks, for the purchase of ringgit assets or for repatriation of funds arising from these ringgit investments. Non-residents are also allowed to undertake the settlement of ringgit investments through an appointed overseas office of the licensed onshore bank's banking group.

3. ACCESSIBILITY TO FINANCING
Resident entities are free to borrow any amount in foreign currency from licensed onshore banks and related entities. In addition, resident entities are also free to borrow any amount in ringgit from their non-resident related entities (other than financial institutions or special purpose vehicles which are used to obtain borrowing from any non-related entities) for financing activities in the real sector in Malaysia. In addition, resident entities are free to issue ringgit-denominated redeemable preference shares (RPS) to any non-resident for use in Malaysia.
Non-residents are also free to borrow any amount in foreign currency from licensed onshore banks. Non-residents (other than financial institutions) are also allowed to borrow in ringgit from residents to finance activities in real sector in Malaysia.
Please refer to Bank Negara Malaysia (The Central Bank of Malaysia) website for further details on Foreign Exchange Policy at http://www.bnm.gov.my/fxadmin.

The Malaysian government is desirous that Malaysians are eventually trained and employed at all levels of employment. Thus, companies are encouraged to train more Malaysians so that the employment pattern at all levels of the organisation reflects the multi-racial composition of the country. Notwithstanding this, where there is a shortage of trained Malaysians, companies are allowed to bring in expatriate personnel i.e. ‘key post’ or ‘time post’. Key posts are posts that are permanently filled by foreigners whereby time post are position filled on specified time.

1. GUIDELINES ON THE EMPLOYMENT OF EXPATRIATE PERSONNEL
The Malaysia Expatriate Talent Service Centre (MYXpats Centre) processes and issues all Employment Pass and related documents for expatriates wanting to work in Malaysia. Once a company is registered and approved by the Expatriate Services Division (ESD) system, it can submit applications for the Employment Pass and related passes. Once the application for an Expatriate Pass has been submitted, MYXpats Centre will evaluate expatriates for their suitability for jobs. The approval process will take five (5) working days, as per the Client Charter of the ESD. Located in the Klang Valley, the MYXpats Centre brings together multiple resources under one roof, in one location to improve efficiency and the delivery of services to employers and expatriates.

BEFORE SUBMISSION
STEP 1 – Log in to the ESD Website.
STEP 2 – Make sure all the documents are ready

DURING SUBMISSION
STEP 3 – Fill in the required information of expatriates and dependants (if applicable).
STEP 4 – Fill the position by selecting through the lists at “Position Setup”.
STEP 5 – Upload all documents as required.
STEP 6 – Submit completed application

AFTER SUBMISSION
STEP 7 – Status notification will be sent via system – approved or rejected.
STEP 8 – If approved, print the approval letter though the system. Applicable Immigration fees will be advised. Visa with Reference (VWR) letter can be collected at MYXpats Centre or ESD Putrajaya, if applicable.
STEP 9 – Passport endorsement can be done at MYXpats Centre, ESD Putrajaya or any Immigration state office once immigration fees payment is made.

2. WORK PERMIT PROCESSING AND REQUIREMENTS (MANAGERIAL, SUPERVISOR, UNSKILLED)
The Malaysia Expatriate Talend Service Centre (MYXpats Centre) processes and issues all Employment Pass and related documents for expatriates wanting to work in Malaysia.

Professional Visit Pass
Effective 15 January 2019, an applicant is allowed to have a Professional Visit Pass (PVP) with a maximum duration of 12 months only. If a company wishes to apply for an extension, the company is required to apply for an Employment Pass (EP) based on the requirements for EP application.

Visit Pass (Temporary Employment)
Visit Pass (Temporary Employment) is issued only to the foreign maid of the expatriate and the period follow suit the expatriate’s pass.

Dependant’s Pass
No changes regarding the aplication except for unmarried and unemployed childredn of the employment pass holder which is allowed up to 25 years only.

Please visit https://esd.imi.gov.my and refer to Expatriate Services Division (ESD) Online Guidebook https://esd.imi.gov.my/portal/pdf/esdguidebook.pdf for further information on latest policy of expatriate application.

Malaysian Investment Development Authority (MIDA)
MIDA Sentral
No.5, Jalan Stesen Sentral 5
Kuala Lumpur Sentral
50470 Kuala Lumpur, Malaysia
Tel: 603 2267 3633
Fax: 603 2274 7970
Website: www.mida.gov.my
E-mail: investmalaysia@mida.gov.my

MIDA is the one-stop agency responsible for promoting and facilitating foreign and domestic investments in the manufacturing and related services sectors. Besides a global network of offices, MIDA has branch offices at the various states/regional levels to assist investors in the establishment and operation of their projects. MIDA provides assistance to investors from the pre-establishment stage (e.g. in obtaining approvals and incentives) through to the post-establishment stage (e.g. overcoming any problems that may arise in the implementation and operation of the projects).

Up-to-date information pertaining to Malaysia’s investment regime is available on the websites of the Malaysian Investment Development Authority (www.mida.gov.my) and Ministry of International Trade and Industry (www.miti.gov.my). The websites are also linked to relevant major ministries/agencies, Chamber of Commerce/industry associations and regional and international organisations (e.g., ASEAN, APEC and WTO).

Relevant investment legislation

1. The Myanmar Investment Law (October 2016) and the Myanmar Investment Rules (35/2017)
The objectives of the Myanmar Investment Law are as follows:

  • to develop responsible investments which do not cause harm to the natural environment and the social environment for the interest of the Union and its citizens;
  • to protect the investors and their investments in accordance with the law;
  • to create job opportunities for the people;
  • to develop human resources;
  • to develop highly efficient productivity, service, and trading sectors;
  • to develop technology, agriculture, livestock and industrial sectors;
  • to develop various professional fields including infrastructure around the Union;
  • to enable the citizens to be able to work alongside with the international community; and
  • to develop businesses and investments that meet international standards.

According to the Myanmar Investment Law Section 36, the investors shall submit a proposal to the Myanmar Investment Commission and invest after receiving the Permit for the following investment activities:

  • investment activities that are essential to the National Strategy;
  • large capital intensive investment projects;
  • projects which are likely to cause a large impact on the environment and the local community;
    • investment activities which use state-owned land and buildings;
    • investment activities which are designated by the Government to require the submission of a proposal to the Myanmar Investment Commission.

The investment activities that are essential to the National Strategy are as follows:

  • investment exceeding USD 20 million in any business in the area of communication and information technology, pharmaceutical technology, biotechnology, similar technologies and transport infrastructure, energy infrastructure and urban development, extraction of natural resources and media;
  • investment exceeding USD 20 million, under the grant for the land use right or use of other property agreement on such concession or similar authorization by the government department and government organization;
  • investment by foreign investor or investment exceeding USD one million by Myanmar citizen investor along the borderline between the boundary of the Union and other country or the conflict area;
  • cross-border investment by the foreign investor or investment exceeding USD one million by Myanmar citizen investor;
  • investment across the Regions or States within the Union;
  • investment in agriculture on more than 1000 acres of land;
  • investment to carry out other business except agriculture on more than 100 acres of land.

An investment is taken to be a large capital intensive investment if the expected investment value exceeds USD 100 million.

An investment shall be deemed to have a large impact on the environment and the local community if it conforms to any of the following stipulations:

  • being or being likely to be a type of project requiring an Environmental Impact Assessment;
  • being the investment business located in a designated, or a proposed, protected area, forest reserved area, Key Biodiversity Area or areas selected and specified to support the ecosystem services and cultural and natural heritage, cultural monuments and unspoiled natural areas proposed or specified under the existing laws, procedures and notifications, including the Environmental Conservation Law;
  • the land to be used or leased for investment activity:
    • has been or is likely to be acquired through expropriation by paying compensation, compulsory acquisition procedure or by agreement in advance of such expropriation or compulsory acquisition procedure in accordance with the laws of the Union and will either cause the relocation of at least 100 individuals permanently residing on such land or comprise an area of more than 100 acres;
    • comprises an area of more than 100 acres and would be likely to cause involuntary restrictions on land use and access to natural resources to any person having a legal right to such land use or access;
    • is likely to cause conflict with the proposed investment activity due to litigation in good faith by a person or disputing over ownership of land in obtaining more than 100 acres of land to occupy or use;
    • may adversely impact at least 100 individuals by continual occupying such land scrutinized by a body which has right to scrutinize in applying to occupy or use land.

Investment on the land or building at the disposal of the government department and the government organization is stipulated as investment activities using state-owned land and building.

It is not required to submit a proposal to the Myanmar Investment Commission for other investment activities except investment activities stipulated under section 36. The investors only need to submit the endorsement to the Myanmar Investment Commission or to the State & Regional Branch Offices. To enjoy the right to use land, one or more than one or all of the exemptions and reliefs, the endorsement application must be submitted in the stipulated form to the Commission Office.

The following investment activities are stipulated as prohibited investments:

  • investment activities which may bring or cause hazardous or poisonous wastes into the Union;
  • investment activities which may bring technologies, medicines, flora and fauna and instruments which are still being tested abroad, or which have not obtained approvals to use, plant or cultivate, except the investments which are made for the purpose of research and development;
  • investment activities which may affect the traditional culture and customs of the ethnic groups within the Union;
  • investment activities which may affect the public;investment activities which
  • may cause an enormous harmful impact to the natural environment and ecosystem;
  • investment activities which manufacture goods or provide services that are prohibited under the applicable laws.

The following investment activities are stipulated as the restricted investments:

  • investment activities allowed to be carried out only by the Union;
  • investment activities that are not allowed to be carried out by Foreign investors;
  • investment activities allowed only in the form of a joint venture with any citizen owned entity or any Myanmar citizen; and
  • investment activities to be carried out with the approval of the relevant ministries.

2. Guarantees
The Government guarantees to the investors fair and equitable treatment in respect of the following:

  • the right to obtain the relevant information on any measures or decision which has a significant impact on the investors and their direct investments;
  • the right to due process of law and the right to appeal on similar measures, including any change to the terms and conditions under any license, a Permit or an Endorsement granted by the Government to the investors and their direct investments.

The Government guarantees not to nationalize any investment carried out in accordance with the law. Except under the following conditions, the Government guarantees not to take any measures which expropriate or indirectly expropriate or are likely to result in the termination of an investment:

  • necessary for the public interest;
  • in a non-discriminatory manner;
  • in accordance with due process of law;
  • on payment of prompt, fair and adequate compensation.

3. Transfer of Foreign Currency
Foreign investors may transfer the following funds abroad relating to the investments made under the Myanmar Investment Law:capital designated under the provisions relating to capital account rules stipulated by the Central Bank of Myanmar;

  • proceeds, profits from the asset, dividends, royalties, patent fees, license fees, technical assistance and management fees, shares and other current income resulting from any investment under the Myanmar Investment Law;
  • proceeds from the total or partial sale or liquidation of an investment;
  • payments made under a contract, including a loan agreement;
  • payments resulting from any settlement of investment disputes;
  • other compensation or money as compensation under the investment or expropriation;
  • remuneration, salary and earnings of foreign experts legally employed in the Union.

With respect to transferring a loan or taking a loan, it shall be transferred and taken with the approval of the Central Bank of Myanmar, in accordance with the stipulated regulations.

Any transfer of funds shall be allowed only after paying all tax obligations imposed on the amount to be transferred in accordance with the stipulated tax laws.

Foreign experts with legal work permits may make remittance abroad without any further deduction from the amount of money paid after the tax obligations under the Income Tax Law, through banks authorized with a foreign exchange dealer license and established in the Union.

In respect of transfers of funds made by foreign investors for the above points, such funds, including capital accounts or current accounts under the Foreign Exchange Management Law, may be transferred through banks authorized with a foreign exchange dealer license and legally established in the Union with freely usable currencies.

OTHER RELATED INVESTMENT LEGISLATIONS

The Myanmar Special Economic Zones Law (2014)
Promotes the flow of domestic and foreign investments in the SEZ and establishes linkages in continuity among the industries in and the SEZ with the creation of new jobs.

Environmental Conservation Rules (2014)
Implements the Environmental Conservation Law 2012.

Consumer Protection Law (2014)
Ensures the fulfillment of goods or services that meet high quality standards for safety, health, and consumer satisfaction.

The Competition Law (2015)
Controls unfair market competition in internal and external trade and economic development, and prevents the abuse of dominant market power.

The Small and Medium Enterprise Development Law (2015)
Reduces difficulties and obstacles in business operations of small and medium enterprises, helps them reach local and international markets, and enhances their competitiveness.

Financial Institutions Law 2016
Ensures that financial institutions within the State conduct financial services activities in line with international standards, maintaining the stability, safety, and soundness of the financial system.

Law Amending the Income Tax Law (2014)

Law Amending the Commercial Tax Law (2014)

Law Amending the National Drug Law (2014)

Law on Standardization (2014)
Supports export promotion by enhancing the quality of production organizations and their products, production processes, and services. It protects consumers and users by ensuring that imports and products meet prescribed standards and are safe from health hazards, and facilitates technological transfer and innovation by using standards to support national economic and social development in line with the national development programme.

1. AGENCY INVOLVED IN ADMINISTERING INVESTMENT APPLICATION
A person who desires to invest or the representative authorized by a person who desires to invest or a subsidiary involved in the business of which a person desires to invest shall submit the proposal to the Myanmar Investment Commission or endorsement application to the Myanmar Investment Commission Office or relevant Region or State Committee Office.

Every submission shall be carried out in accord with the following stipulations:

  • it shall be in writing;
  • it shall be in Myanmar or, if desired, it may be both in Myanmar and English;
  • where it is a proposal, a summary of the proposed investment shall be in Myanmar or, if desired, it may be both in Myanmar and English;
  • it shall be signed by a relevant applicant;
  • the stipulated form shall be completed;
  • it shall contain the information prescribed by the Commission;
  • it shall contain the information which is true and complete and shall not be disclosed fraudulently;
  • it shall be submitted to the Commission Office or relevant Region or State Committee Office; and
  • the relevant application fee shall be paid.

The investor shall submit the following matters to the Commission after obtaining the permit or endorsement, although it is not required to mention such matters in the submission:

  • where the investment is carried out with foreign loan, the repayment schedule, including the loan amount, the sum of principal and interest, remittance amount and the timeline; and
  • the receiving bank of capital and loan from abroad and the banking channel for remittance and settlement.

In submitting the proposal, if an investment involves any of the following conditions among investment activities to be obtained the permit in section 36 of the Law, the proposal shall be submitted through the relevant ministry:

  • having a significant ownershipinterest in the investment by government department and government organization;
  • having been granted or intending to grant concessions to the investor by government department and government organization; or
  • being required or authorized by law to do so by government department and government organization.

If a person who desires to obtain the right to use land, or tax exemption or relief, applications for them may be submitted together with the proposal.

The Commission shall assess the proposal within 60 days from the date of receipt of the proposal. If the Commission determines to allow, it shall issue the permit within 10 working days.

If the Commission or the State and Region Investment Committee decide to approve the endorsement application, after screening it within 30 days from the date of receipt, the Commission shall issue the endorsement within 10 working days from the date of decision.

The Myanmar Investment Commission (MIC) is a government-appointed body which is responsible for verifying and approving investment proposals, and regularly issues notifications about sector-specific developments. The MIC is comprised of representatives and experts from government ministries, departments, and governmental and non-governmental bodies. The State and Regional Branch Offices of the Directorate of Investment and Company Administration are the Secretariat Offices of the State and Regional Investment Committees.

Addresses:

  • THE MYANMAR INVESTMENT COMMISSION
    No.1, Thitsar Road, Yankin Township, Yangon Republic of the Union of Myanmar
    Ph: +951 658102, +951 658103
  • NAY PYI TAW BRANCH, NAYPYIDAW UNION TERRITORY
    Office No. 32, Nay Pyi Taw
    Ph: +9567 406124, 067 406166
  • MANDALAY BRANCH, MANDALAY REGION
    No. (Ma-47), 55 Street, Between 40×41 Street, Yemontaung Quarter, Maharaungmyay Township, Mandalay
    Ph: +952 2848241, +952 2848242, +952 2848243 / Fax: +952 4065881
  • TAUNGGYI BRANCH, SHAN STATE
    Awayyar Fire Balloon Field Street, Kyanng Gyi Su Quarter, Taunggyi, Shan State
    Ph: +9581 2124293 / Fax: +9581 2124974
  • MAWLAMYAING BRANCH, MON STATE
    Mee Laung Pyin Street, Mandalay Ward, Mawlamyaing, Mon State
    Ph: +9557 2023395 / Fax: +9557 2023385
  • PATHEIN BRANCH, AYEYARWADDY REGION
    OSS Office, Myatto Ward, Pathein
    Ph: +9542 29256, +9542 29258
  • MONYWA BRANCH, SAGAING REGION
    Myittar Yeik Myon Street, Chan Myawaddy Quarter, Monywa
    Ph: +9571 26274
  • DAWEI BRANCH, TANINTHARYI REGION
    Padomar Street, Sanchi Myothit Quarter, Dawei Township
    Ph: +9559 22230 / Fax: +9559 22233
  • HPA AN BRANCH, KAYIN STATE
    Combined Office, Quarter No.5, Bogyoke Road, Hpa-An Township
    Ph: +9558 22750, +9558 22785, +9558 22786 / Fax: +9558 22749
  • BAGO BRANCH, BAGO REGION
    Bago Region Government Office Compound, Taunggu Street, Younegyi Quarter, Bago Township
    Ph: +9552 2201747 / Fax: +9552 2201748
  • MAGWAY BRANCH, MAGWAY REGION
    Combined Office, Pyi Taw Thar (1) Street, Pyi Taw Thar Quarter, Magway Township
    Ph: +9563 28748 / Fax: +9563 28748
  • LOIKAW BRANCH, KAYAH STATE
    15/Sa, U Ni Street, Naungyar Kha Quarter, Loikaw
    Ph: +9583 2224184 / Fax: +9583 2224185
  • MYITKYINA BRANCH, KACHIN STATE
    Kanar Street, Ayar Quarter, Myitkyina Township, Kachin State
    Ph: +9574 2524201 / Fax: +9574 2520103
  • SITTWE BRANCH, RAKHINE STATE
    Rakhine State Government Office Compound, May Yu Road, Bawlonkwin Quarter, Sittwe Township, Rakhine State
    Ph: +9543 2024528 / Fax: +9543 2024529
  • HAKHA BRANCH, CHIN STATE
    Bogyoke Road, District Compound Office, Zay Thit Quarter, Hahka Township, Chin State
    Ph: +9570 22584 / Fax: +9570 21323
  • YANGON BRANCH OFFICE AND ONE STOP SERVICES (OSS) BRANCH, YANGON REGION
    No. 49, Sein Lae May Lane Street, Kabar Aye Pagoda Road, Yankin Township, Yangon
    Ph: +9501 658263 / Fax: +951 658264

2. PROCEDURES FOR INVESTMENT APPLICATION

  • Stage 1: Collect information from DICA: Seek advice and details from DICA.
  • Stage 2: Prepare Documents: Purchase Investment Proposal form, then fill in and submit to DICA.
  • Stage 3: Review by DICA Proposal Assessment Team (PAT): DICA assesses the Application Package and organizes a PAT meeting.
  • Stage 4: Review by Myanmar Investment Commission (MIC): Investors sign contracts with service providers, and proposals by investors are assessed by MIC.
  • Stage 5: Obtaining results: Pick up the MIC Permit, if MIC accepts the proposal.

3. BUSINESS REGISTRATION IN MYANMAR
Business Registration options:

  • Company limited by shares (such as private and public companies)
  • Company limited by guarantee
  • Overseas corporations (need to register in DICA)
  • Associations
  • Partnership
  • Special Companies (incorporated with Special Company Acts-1950)

In case of limited liability company, foreign ownership is allowed up to 35% in local companies. This is a significant liberalization measure as foreign investors can now own up to 35% of the equity in Myanmar owned companies (directly or indirectly) without changing the company’s status to a “foreign company.”

There are no restrictions on the transfer of shares in companies between local and foreign shareholders, but any change in a “foreign company” status must be notified to DICA.

The law allows companies with a single shareholder and single director to be established. It requires all companies established in Myanmar to appoint at least one director who is “ordinarily resident” in Myanmar. A person will be considered to be ordinarily resident if they hold permanent residency or is resident in Myanmar for at least 183 days in each 12-month period. Public companies must appoint at least 3 directors, and at least one of the directors must be a Myanmar citizen who is ordinarily resident in Myanmar.

No minimum capital requirements for incorporation of a company.

Required Documents for Registration:
The Directorate of Investment and Company Administration (DICA) provides and persuades to do online registration which started from 1st August 2018. DICA online registry is more reliable and requires minimal material documents. Overseas corporations must submit their company constitution such as charter, MOA & AOA and others.

4. COMPANIES LAW

  • Special Company Act (1950): Specially promulgated for the incorporation of private and public companies in which the State has equity.
  • Myanmar Companies Law (2017): Company incorporation is carried out by DICA in accordance with the terms of The Myanmar Companies Law (2017).

1. INVESTMENT PROTECTION (MYANMAR INVESTMENT LAW)
In dealing with the investors:

  • The Government shall accord to foreign investors and their direct investments treatment no less favorable than it accords to Myanmar citizen investors in respect of the expansion, management, operation, and the sale or other disposition of direct investments, according to this Law except in any other stipulated laws, rules, and notifications.
  • The Government shall accord, in like circumstances, to foreign investors and their direct investments from one country, treatment no less favorable than it accords to investors of any other country and their direct investments in respect of establishment, acquisition, expansion, management, operation, and the sale or other disposition of direct investments.

The Government guarantees to the investors fair and equitable treatment in respect of the following:

  • the right to obtain the relevant information on any measures or decision which has a significant impact on the investors and their direct investments;
  • the right to due process of law and the right to appeal on similar measures, including any change to the terms and conditions under any license, a Permit or an Endorsement granted by the Government to the investors and their direct investments.

2. BILATERAL INVESTMENT AGREEMENTS
The following Bilateral Investment Agreements signed by Myanmar are the EIF Agreements:

  • The Promotion and Protection of Investments Agreement with China (12 December 2001)
  • Promotion and Reciprocal Protection of Investments Agreement with Laos (5 May 2003)
  • Promotion and Protection of Investments Agreement with Thailand (14 March 2008)
  • Encouragement and Reciprocal Protection of Investments with Kuwait (6 August 2008)
  • The Liberalization, Promotion and Protection of Investment with Japan (15 December 2013)
  • Promotion and Protection of Investments with Korea (5 June 2014)
  • Reciprocal Promotion and Protection of Investments with Israel (5 October 2014)
  • Promotion and Protection of Investments with Singapore (24 September 2019)

3. FOREIGN EXCHANGE REGIME
The Foreign Exchange Management Law was enacted in August 2012 and lifted the restrictions on currency exchange and abolished multiple currency practices. Both state-owned banks and private banks are now free of the restrictions that previously prevented them from providing payment and transfer services for current account transactions.

During the financial year of 2012-13, the SDR Pegged Exchange Rate System was abolished and a managed floating exchange rate system was introduced. It is based on market exchange rates.

1. CORPORATE INCOME TAX/INCOME TAX ALLOWANCE
A company incorporated in Myanmar under the Myanmar Companies Law or the Special Company Act 1950, as well as businesses approved by the Myanmar Investment Commission (MIC), are subject to corporate income tax at a rate of 25% on total net profits, except for salaries of employees who remain abroad.
The MIC grants income tax exemptions based on regional development zones:

  • Zone (1) – Less developed regions: 7 consecutive years (including year of commencement of commercial operation).
  • Zone (2) – Moderately developed regions: 5 consecutive years.
  • Zone (3) – Developed regions: 3 consecutive years.

Exemptions apply only to sectors specified by MIC under Notification No. 13/2017 (Classification of Promoted Sector).

2. EXEMPTION FROM OR REDUCTION OF TAXES ON IMPORTED CAPITAL GOODS
The MIC may grant exemptions or reliefs from customs duty or internal taxes on:

  • Machinery, equipment, instruments, components, spare parts, construction materials unavailable locally, and other necessary materials imported during the construction or preparatory period of investment.
  • Additional machinery, equipment, and construction materials if the investment volume increases with MIC approval during the permitted investment period.

3. EXEMPTION FROM OR REDUCTION OF TAXES ON IMPORTED RAW MATERIALS
The MIC may approve exemptions or reliefs from customs duty or internal taxes on:

  • Raw materials and partially manufactured goods imported by export-oriented businesses for manufacturing export products.
  • Reimbursement of customs duty or internal taxes on imported raw materials or semi-finished goods used to produce export products.

4. EXEMPTIONS OR RELIEFS FROM COMMERCIAL TAX
Commercial tax applies to imported and locally produced goods, trading sales, and services.

  • Export of electricity – 8% commercial tax.
  • Export of crude oil – 5% commercial tax.
  • Other exports – Exempt from commercial tax.

5. OTHER INCENTIVES
The MIC may also grant the following benefits:

  • Exemption or relief from income tax on reinvested profits if reinvested in the same or similar type of investment activities within one year.
  • Accelerated depreciation for income tax purposes from the year of commercial operation, based on rates lower than the stipulated asset lifetime.
  • Deduction of expenses incurred for research and development (R&D) relating to investment activities in Myanmar that are necessary for the Union’s economic development.

PRIORITY/PROMOTED SECTORS OR INDUSTRIES
The Notification No. 13/2017 provides the Classification of Promoted Sectors.

PRIORITIZED INVESTMENT ACTIVITIES
The following investment activities are designated as prioritized:

  • Agriculture and related services, including value-added production of agricultural products
  • Livestock production, breeding, and production of fishery products
  • Export promotion industries
  • Import substitution industriesPower sector
  • Logistic industries
  • Education services
  • Health care industry
  • Construction of affordable housing
  • Establishment of industrial estates

1. COMMERCIAL TAX
Except for the exceptions of trade and goods under the Union Tax Law 2019, including the specialist goods under Section 11, the following activities are subject to a 5% commercial tax:

  • Sale locally or by importing goods
  • Trading

Except for the goods specified in Section 14 of the Union Tax Law 2019, other goods manufactured locally are subject to 5% commercial tax.

Except for the services specified in Section 14(d) of the Union Tax Law 2019, the income from other services conducted in Myanmar is subject to 5% commercial tax.

The commercial tax levied on the export of electricity is 8% and on crude oil is 5%.

2. WITHHOLDING TAX
According to the Publication of the Internal Revenue Department, Withholding Tax (1/2017), withholding tax is a type of income tax deducted from payments by the person responsible for payment (other than salaries). Types of payments subject to withholding and the rates are:

  • Interest payment for a loan, indebtedness, or similar transaction:
    • Resident Citizens and Resident Foreigners: No withholding
    • Non-resident Foreigners: 15%
  • Royalty payment for the use of licenses, trademarks, patents, etc.:
    • Resident Citizens and Resident Foreigners: 10%
    • Non-resident Foreigners: 15%
  • Payments for purchase of goods, work performed, acquisition of services, or hire of services within the country under a tender, contract, quotation, or other modes:
    • Resident Citizens and Resident Foreigners: 2%
    • Non-resident Foreigners: 2.5%

3. TAX RATE ON SPECIALIST GOODS
There are 14 goods subject to specialist tax rates ranging from 5% to 80%.

4. PERSONAL INCOME TAX FOR FOREIGNERS
Other sources of income, excluding income from the title of the non-resident foreigner, are taxed at 25% on total annual income before relief.

5. IMPORT DUTIES
For information on import duties, please refer to the Myanmar customs tariff, harmonized commodity description, and coding system. For various import duties, contact:

Customs Department
Maha Bandula Road, 49th Street & 50th Street, Yangon, Myanmar
Website: www.myanmarcustoms.gov.mm

1. BORROWING REGULATIONS
Domestic borrowing in foreign currencies is not available. Domestic borrowing in local currencies can be provided by the commercial banks operating in the country.

2. FOREIGN EXCHANGE REGULATIONS
There is a 15% withholding tax for interest paid to non-resident lenders.

3. SOURCE OF FINANCING
Foreign borrowings and foreign equity investments would require prior approval from MIC. All foreign investments should be registered with MIC to enable applications for capital repatriation and profit remittance.

4. REPATRIATION OF CAPITAL / PROFITS
Remittances of profit and capital repatriation are subject to prior approval of MIC and are also subject to Exchange Control regulations.

According to the Myanmar Investment Law, an investor:

  • may appoint any citizen who is a qualified person as a senior manager, technical and operational expert, or advisor in his investment within the Union in accordance with the laws;
  • shall appoint them to replace, after providing capacity building programs, in order to be able to appoint citizens to positions of management, technical and operational experts, and advisors;
  • shall appoint only citizens for work which does not require skill;
  • shall appoint skilled citizens and foreign workers, technicians, and staff by signing an employment contract between employer and employee in accordance with the labor laws and rules;
  • shall ensure that workers obtain the entitlements and rights in the labor laws and rules, including minimum wages and salaries, leave, holidays, overtime fees, damages, compensation of the workman, social welfare, and other insurance related to workers, when stipulating the rights and duties of employers and employees and occupational terms and conditions in the employment contract;
  • shall settle disputes arising among employers, among workers, and between employers and workers, technicians, or staff in the investment in accordance with the applicable laws.

According to the Myanmar Investment Law, the investor may use land and buildings as follows:

  • An investor who obtains a Permit or an Endorsement under this Law has the right to obtain a long-term lease of land or building from privately owned property or from the relevant government departments, governmental organizations managed by the Government, or State-owned land or buildings, in accordance with the stipulations, in order to carry out investment. Citizen investors may invest in their own land or building in accordance with relevant laws.
  • A foreign investor may lease land or buildings either from the Government or governmental organizations, or from owners of private land or buildings, commencing from the date of receipt of a Permit or an Endorsement of the Commission, for an initial period of 50 years in accordance with the stipulations.
  • After the expiry of the initial lease term, an extension for a consecutive period of 10 years and a further consecutive period of 10 years may be obtained with the approval of the Commission.
  • The investor shall register the land lease contract at the Office of Registry of Deeds in accordance with the Registration Act.
  • The Government may grant more favorable terms and conditions for the lease and use of land to Myanmar citizen investors.

Myanmar Investment Commission (MIC)
No.1, Thitsar Road, Yankin Township, Yangon, Myanmar
Tel : +951 658102, +951 568103
Fax : +951 658143
E-Mail : dica.ip.mm@gmail.com, dica@mptmail.net.mm
Website : www.dica.gov.mm

Relevant investment legislation

1. INVESTMENT ACT

1967 Economic Expansion Incentives Act
Law which principally consolidates investment incentives.

2. BUSINESS NAMES REGISTRATION ACT, COMPANIES ACT, LIMITED LIABILITY PARTNERSHIPS ACT, AND LIMITED PARTNERSHIPS ACT

  • Business Names Registration Act
    Sets out the requirements and procedures for registering business names, and the obligations of registrants.
  • The Companies Act
    Sets out the requirements and procedures for registration of local and foreign companies, and the obligations of such companies and their officers.
  • Limited Liability Partnerships Act
    Sets out the requirements and procedures for registration of limited liability partnerships (LLPs), and the obligations of LLPs and their offices. This Act was enacted in Apr 2005.
  • Partnerships Act
    Sets out the requirements and procedures for registration of limited partnerships, and the obligations of the partners. This Act was enacted in May 2009.

3. MINIMUM INVESTMENT LEVEL
No minimum investment level requirement.

4. OTHER RELATED INVESTMENT LEGISLATION

1968 Employment Act and 1966 Industrial Relation Act
Regulates employment and labour relations.

Details of all Singapore laws mentioned are available at:
http://statutes.agc.gov.sg

License requirements, if any, stem mainly from special conditions of the specific sector, mostly financial activities, such as banking, insurance and stock-broking, and manufacture of a small number of items, such as:

  • optical discs listed in the Manufacture of Optical Discs Act
  • beer and stout, cigars and cigarettes, drawn steel products, chewing gum and matches listed in the Control of Manufacture Act
  • Securities and Futures Act
  • Banking Act
  • Finance Companies Act

Monetary Authority of Singapore Act

Joint ventures may take the form of equity investment in a limited liability company, unlimited partnership or limited liability partnership. The laws of companies or partnerships apply where appropriate.

M&As in Singapore are subject to non-statutory rules in Singapore Code on Takeovers and Mergers which is administered and enforced by the Securities Industry Council.

Details of all Singapore laws mentioned are available at:
http://statutes.agc.gov.sg

1. AGENCIES INVOLVED IN ADMINISTERING INVESTMENT APPLICATIONS AND GRANTING OF INCENTIVES
a) AGENCIES INVOLVED IN ADMINISTERING INVESTMENT APPLICATIONS
Economic Development Board (EDB), Enterprise Singapore (ESG), Maritime and Port Authority of Singapore (MPA) and Monetary Authority of Singapore (MAS).

b) AGENCIES INVOLVED IN GRANTING OF INCENTIVES
Economic Development Board (EDB), Enterprise Singapore (ESG), Infocomm and Media Development Authority (IMDA), Maritime and Port Authority of Singapore (MPA) and Monetary Authority of Singapore (MAS).

2. CONDITIONS INCLUDING TIMETABLE FOR PROCESSING OF APPLICATIONS
There is no screening of potential foreign investments in Singapore. Hence, no screening forms are issued. Investors need only to register with the Accounting and Corporate Regulatory Authority (ACRA). No authorisation is required on threshold in value of investment in Singapore. With the exception of foreign equity limits for sectors outlined under “Foreign Equity Policy”, guidelines, conditions, requirements, laws and regulations apply to investors irrespective of nationality.

Every person wanting to carry out a business in Singapore must be registered (subject to a few exceptions). The requirement also applies to any firm, individual or corporation conducting business as a nominee, trustee or agent for any foreign corporation. Business registration guidelines are available online at http://www.acra.gov.sg/

A foreign company setting up a branch in Singapore would also need to register with ACRA and have two local agents appointed to accept notices served on the foreign company. These must be natural persons who must be resident in Singapore.

Foreign entities that are keen on exploring the viability of doing business in Singapore, or are interested in using Singapore as a launch pad into the Asia Pacific, may wish to set up a Representative Office (RO). A RO has the benefit of allowing a foreign entity to assess the business environment in Singapore before deciding to set up a permanent establishment. For more details on RO registration procedures and online application form, please visit the Enterprise Singapore website at https://roms.enterprisesg.gov.sg
Representative offices from the finance-related industries may register with the Monetary Authority of Singapore. Forms are available at http://www.mas.gov.sg
Licenses, if required under specific sectors, may be obtained from the respective organisations at their websites.

Entrepreneurs can also apply for licenses online at http://licence1.business.gov.sg
through a step-by-step license search facility. Reasons for rejection of a license are given. An applicant can make an appeal for review with the same organisation. It may take between 14 days to 2 months to get all the necessary licenses.

3. INWARD INVESTMENT PROMOTION AND FACILITATION
Since 1961, the Economic Development Board (EDB) has been creating sustainable economic growth, with vibrant business and good job opportunities for Singaporeans. The EDB undertakes investment promotion and industry development, and works with international businesses, both foreign and local, by providing information, connection to partners and access to government incentives for their investments.

Steering the growth of industry, in manufacturing and traded services, the EDB provides one-stop investment facilitation, from setting up in Singapore, securing infrastructure and manpower, to linking with the business community.

4. PROCEDURES FOR INVESTMENT APPLICATIONS
A step-by-step guide to registering a business or company in Singapore is provided at http://www.acra.gov.sg/

1. FOREIGN EXCHANGE REGIME
There are no exchange controls. The Singapore dollar is freely convertible. Foreign investors are free to move funds in and out of Singapore arising from investment purposes. The Monetary Authority of Singapore manages the Singapore dollar against a basket of currencies to promote price stability conducive to sustained growth of the economy.

2. EXPROPRIATION AND COMPENSATION
Under the Land Acquisition Act, the Singapore Government is empowered to acquire land for any public purpose and for residential, commercial and industrial purposes. The Act provides for payment of compensation to the owners of such land and for appeals against awards of compensation made by the Collector of Land Revenue. Appeal Boards hear appeals from such awards. Other than the Land Acquisition Act, the provision for expropriation and compensation is usually included in bilateral investment guarantee agreements and in investment chapters of FTAs.

3. INVESTMENT GUARANTEE AGREEMENTS
In the 41 bilateral investment guarantee agreements and the 23 FTAs that Singapore has signed and has entered into force, there are provisions to ensure investors the free transfer of their capital and the returns from their investments on a non-discriminatory basis.

4. INTELLECTUAL PROPERTY RIGHTS (IPR)
Intellectual Property (IP) in the form of patents, trademarks, registered designs, copyrights, layout designs of integrated circuits, trade secrets and confidential information are protected in Singapore. The Intellectual Property Office of Singapore (IPOS) is the lead agency that:

  • formulates and regulates IP laws;
  • processes and grants patent, registered design, trademark, and plant variety rights in Singapore;
  • promotes IP awareness and provides the infrastructure to facilitate greater development of IP in Singapore; and

focuses on helping enterprises grow through IP and innovation strategies, developing skills and expertise in these areas, and creating a vibrant ecosystem where today’s ideas become tomorrow’s assets.

Singapore is a member of the following international bodies/treaties:
WIPO, TRIPS, Patent Cooperation Treaty, Paris Convention for the Protection of Industrial Property, Budapest Treaty on the International Recognition of the Deposit of Micro-organisms for the Purposes of Patent Procedure, Berne Convention for the Protection of Literary and Artistic Works, Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks, Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, International Convention for the Protection of New Varieties of Plants, Hague Agreement Concerning the International Registration of Industrial Designs, WIPO Copyright Treaty, WIPO Performance and Phonograms Treaty, Singapore Treaty on the Law of Trademarks, Marrakesh Treaty to Facilitate Access to Published Works for Persons Who are Blind, Visually Impaired or Otherwise Print Disabled, and Brussels Convention Relating to the Distribution of Programme-Carrying Signals Transmitted by Satellite.

For further information see: http://www.ipos.gov.sg

4. DISPUTE SETTLEMENT
Singapore has a well-developed dispute settlement ecosystem to support investors and investments. In addition to a progressive legislative framework for dispute resolution, Singapore has a range of reputable dispute resolution service providers, and is today recognised as the 3rd most preferred seat of arbitration globally.

International Conventions
Singapore has acceded to the following conventions:

  • Convention on the Settlement of Investment Disputes (the ICSID Convention) in 1968
  • Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) in 1986

Convention on the Choice of Court Agreements (The Hague Convention) in 2016

Legislation
Singapore enacted the Arbitration (International Investment Disputes) Act to implement the ICSID Convention. The Arbitration Act was enacted to make provision for the conduct of international commercial arbitrations based on the UNCITRAL Model Law on International Commercial Arbitration and to give effect to the New York Convention. The Arbitration Act applies to the conduct of domestic arbitration. Singapore also enacted the Mediation Act to introduce a legislative framework for the conduct of mediation, and to facilitate the enforcement of mediated settlement agreements.

Institutions
Key dispute resolution institutions in Singapore include:

  • The Singapore International Arbitration Centre (SIAC), which is the 3rd most preferred arbitral institution globally, with a proven track record in providing neutral, efficient and reliable arbitration services to the international community since its establishment in 1991. SIAC awards have been enforced in many jurisdictions. The SIAC Investment Rules, launched in 2017, were also the first set of dedicated investment arbitration rules to be developed by a commercial arbitration institution.
  • The Singapore International Mediation Centre (SIMC), which was established in 2014 to provide international commercial mediation services, and has an international panel of experienced mediators. Together with SIAC, the SIMC also administers an innovative Arbitration-Mediation-Arbitration Protocol, which has been well received by users.
  • For domestic mediation cases, the Singapore Mediation Centre (SMC), which was set up in 1997, offers cost-effective and efficient mediation services.

The Singapore International Commercial Court (SICC) also offers the option of a court-based dispute resolution mechanism for international commercial disputes, even where the dispute has no connection with Singapore and is not governed by Singapore law. Cases are heard by eminent judges, including international judges from common and civil law jurisdictions.

For further information on these institutions, see:
SIAC: http://www.siac.org.sg

SIMC: http://www.simc.com.sg

SMC: http://www.mediation.com.sg

SICC: http://www.sicc.gov.sg

Dispute Resolution Facilities
Disputes can also be heard at Maxwell Chamber, the world’s first integrated dispute resolution complex, housing purpose-built hearing facilities as well as the offices of international dispute resolution institutions, arbitrators and arbitration practitioners.

For more information on Maxwell Chambers, see http://www.maxwellchambers.com

Singapore does not have an approval process for foreign investments; investors need only to register with the Accounting and Corporate Regulatory Authority (ACRA).

EQUITY REGULATIONS
With exceptions for national security purposes and in certain industries, no restrictions are placed on foreign ownership of Singapore corporations.

The following sectors are some of the exceptions:

  • Airlines
  • Shipping
  • Public utility services – electricity, gas and water
  • Newspaper publishing
  • Arms and ammunitions are subject to a government approval.

1. TAX INCENTIVES
Tax incentives may be awarded to encourage companies to grow capabilites and conduct new or expanded economic activities in Singapore.

2. SCHEMES AND GRANTS
Grants may be awarded to encourage certain research and development, capability development and resource transformation activities in Singapore.

Singapore is open to foreign investment in almost all industries with few exceptions. The sectors/areas that have attracted investment from foreign investors include electronics, logistics, chemicals, communications and pharmaceuticals.

1. TAXABLE INCOME
A taxable person (e.g. company, partnership, individual) is liable to pay tax on income in respect of:

  • Gains or profits from any trade or business
  • Income from investment such as dividends, interest and rental
  • Royalties, premiums and any other profits from property

Other gains of an income nature

Singapore does not impose tax on capital gain.

Basis of Taxation
Singapore adopts a remittance basis of taxation. Generally, only income earned in or derived from Singapore is subject to tax in Singapore. The tax year is known as a Year of Assessment (YA), and tax is imposed on a preceding year basis. This means that the basis period for any YA is the financial year ending in the year preceding the YA. For example, profits for a financial year ending in December 2017 are taxed in the YA 2018. For individuals, the basis period for a YA is the preceding calendar year.

Residential Status of a Company in Singapore
A company is a tax resident in Singapore if the control and management of its business is exercised in Singapore. A tax resident company is entitled to the benefits conferred under the Avoidance of Double Taxation Agreements which Singapore has concluded with treaty countries.

2. CORPORATE INCOME TAX
General Corporate Income Tax Rate, Exemptions and Reductions
The corporate income tax rate of 17% applies to both tax resident and non-tax resident companies.
All companies can enjoy the partial tax exemption on the first $300,000 of normal chargeable income until YA 2019. From YA 2020, partial tax exemption is allowed on the first $200,000 of normal chargeable income.

Business Expenses
Generally, business expenses are tax deductible if they are (i) wholly and exclusively incurred in the production of income; (ii) are revenue in nature; and (iii) must not be specifically prohibited under the Singapore Income Tax Act. Capital allowances (tax depreciation) are available for fixed assets bought and used for the purposes of a trade or business.

Double Tax Relief (DTR)
Singapore has 60 comprehensive Avoidance of Double Taxation Agreements (DTAs) and 7 limited DTAs in force, including DTAs with all ASEAN Member States. Generally, DTR is limited to the lower of the foreign tax paid and the Singapore tax payable on that income and it is computed on a jurisdiction-by-jurisdiction, source-by-source basis. However, the resident taxpayer may elect to claim foreign tax credit under the pooling method, subject to conditions.

Unilateral Tax Credit (UTC)
Subject to conditions, a UTC will be granted for foreign tax suffered on all foreign-sourced income received in Singapore by resident taxpayers from jurisdictions that do not have DTAs with Singapore.

Un-utilised Trade Losses (UL), Capital Allowances (UCA) and Donations (UD)
Subject to qualifying conditions, UCA and UL can be carried forward indefinitely while UD can be carried forward for up to 5 YAs. The UCA, UL and UD can only be deducted against future income if companies satisfy the Shareholding Test. For UCA, there is an additional condition that the company continues to carry on the same trade or business that gave rise to the capital allowances.

3. DOMESTIC WITHHOLDING TAX RATES
Dividend: Not withholding tax
Interest: 15%
Royalty: 10%
Withholding taxes at the prevailing corporate income tax rate (i.e. 17%) also apply to certain other payments to non-residents, such as technical assistance fees and management fees for services performed in Singapore.

4. PERSONAL INCOME TAX
Individuals who are tax residents are taxed at graduated personal income tax rates of 0–22%, depending on the income tax bracket.

5. VALUE ADDED TAX / SALES TAX / SERVICE TAX
The Goods and Services Tax (GST) system in Singapore is a broad-based tax system with few exemptions. GST is imposed at a rate of 7% on the supply of goods and services in Singapore and on the importation of goods into Singapore.

6. LAND / PROPERTY TAX
Property tax is calculated as a percentage of the annual value of all houses, lands, buildings and tenements. The Annual Value of a property is not dependent on the type of industry the property is used for.

The common methods of determining the annual value are:

  • Using the rental value of comparable properties in similar locations
  • Applying a reasonable return on the capital investment in the property (commonly used for properties with no alternative use)

Adopting 5% of the market value for vacant land or land with insignificant buildings

The tax rate on all properties is 10%. For owner-occupied residential properties, owner-occupied properties are taxed at progressive tax rates of 0–16%, while non-owner-occupied properties are taxed at progressive tax rates of 10–20%, depending on the annual value of the property.

7. ESTATE DUTY
The estate duty has been removed with effect from 15 February 2008.

8. STAMP DUTY
Stamp duty is a tax on executed instruments effecting a transfer of interest in immovable properties in Singapore, and stocks and shares. Stamp duty is computed based on the consideration or market value, whichever is higher.

There are three types of stamp duties for immovable properties:

  • Buyer’s Stamp Duty (BSD)
  • Seller’s Stamp Duty (SSD)

Additional Buyer’s Stamp Duty (ABSD)

Buyer’s Stamp Duty (BSD)
BSD is levied on all purchases of property, e.g. residential, commercial or industrial properties. With effect from 20 February 2018, the BSD rate for residential properties is 1–4%, while the BSD rate for non-residential properties is 1–3%.

Seller’s Stamp Duty (SSD)
On February 2010, SSD was introduced on sale of residential properties within the holding period, as part of the Government’s measures to ensure a stable and sustainable property market. With effect from 11 March 2017, the SSD is applicable if a residential property is sold within 3 years from purchase, and ranges from 4% to 12% depending on the holding period of the property. SSD is also applicable on the sale of industrial properties bought on or after 12 January 2013 that is sold within 3 years from purchase, and ranges from 5% to 15% depending on the holding period of the property.

Additional Buyer’s Stamp Duty (ABSD)
On 8 December 2011, ABSD was introduced to moderate demand by local and foreign buyers of residential property and promote a stable and sustainable market. ABSD applies on top of BSD on purchase of residential properties in Singapore. With effect from 6 July 2018, the ABSD rate on foreigners’ purchases is at 20%, while the ABSD rate on Singapore Citizens’ and Permanent Residents’ purchases is up to 15%, depending on the number of properties they own at the time of purchase. Entities purchasing residential properties are subject to ABSD rate of 25%. An additional non-remittable 5% is applicable if the entity is a developer which engages in the business of construction and sale of housing units in respect of the property purchased.

9. OTHER TAXES
Customs & Excise Duties
Singapore is a free port and has relatively few customs and excise duties. All dutiable goods imported into or manufactured in Singapore are subject to customs and excise duties in accordance with the Schedule to the Singapore Customs (Duties) Order.

Where the goods are dutiable, ad valorem or specific rates may be applied. An ad valorem rate is a percentage of the assessed value of the imported goods such as 20% ad valorem. A specific rate is a specified amount per unit of weight or other quantity such as $130 per kg.

Excise duties are imposed principally on motor vehicles, tobacco, petroleum products and biodiesel blends, as well as intoxicating liquors. Also, very few products (e.g. stout beer, samsu and medicated samsu) are subjected to customs duties.
More information is available on the Customs & Excise Duties website at www.customs.gov.sg

Motor Vehicle Taxes
Singapore uses the Vehicle Quota System and vehicle ownership tax to moderate the growth of the vehicle population at a rate that can be supported by the country’s road network. Under the Vehicle Quota System, any person who wishes to register a vehicle must first obtain a Certificate of Entitlement in the appropriate vehicle category. Below are the vehicle ownership taxes payable to register a car:

  • Registration Fee of $220

Additional Registration Fee (ARF), which is based on a percentage of the Open Market Value (OMV) of the vehicle:

OMV of Car | ARF Rate
First $20,000 | 100% of OMV
Next $30,000 (i.e. from $21,000 to $50,000) | 140% of Incremental OMV
Above $50,000 | 180% of Incremental OMV

  • Used Car Surcharge of $10,000 (applicable to imported used cars that are less than 3 years old. Used cars more than 3 years of age are not allowed for registration)
  • Road Tax

Special Tax (applicable to non-petrol propellant cars)

Cars with low levels of pollutant emissions (hydrocarbons, carbon monoxide, nitrogen oxides, particulate matters, carbon dioxide) will qualify for Vehicular Emissions Scheme (VES) rebates of between $10,000 and $20,000, which will be offset against the car’s ARF payable. Cars with high pollutant emissions will incur a corresponding VES surcharge between $10,000 and $20,000.
For more information on the Vehicle Quota System, vehicle tax structure and CEVS are available on the Land Transport Authority website at www.lta.gov.sg

Betting Taxes
Betting taxes include betting and sweepstake duties, casino tax and private lotteries duty. These activities are subject to tax at different rates from 5% to 30%. Betting activities such as horse racing and sports betting are subject to a betting duty and the duty rate is 25% of “net” bets.

Note: More information on taxation is available on the Inland Revenue Authority of Singapore website www.iras.gov.sg

1. FOREIGN EXCHANGE REGULATIONS
There are no foreign exchange controls.

2. SOURCE OF FINANCING
Sources of financing for foreign investors include share or bond flotation, loans from banks and other financial institutions, and trade credits. Foreign investors may also use sources derived from their enterprises, such as undistributed profits, funds borrowed from shareholders, and new issues of equity shares.

3. REPATRIATION OF CAPITAL / PROFITS
No restrictions on flow of investment proceeds.

Note: More information is available on the Monetary Authority of Singapore website www.mas.gov.sg

1. EMPLOYING FOREIGN EMPLOYEES IN SINGAPORE
All foreigners who intend to work in Singapore must have a valid pass before they start work. Employers apply for the pass on the employee’s behalf.

While pursuing manpower-lean growth for higher productivity, Singapore remains committed to enhancing the quality of the foreign workforce. Flexibilities are provided to businesses to support economic transformation.

Singapore’s work pass framework is designed for a complementary and sustainable foreign workforce. This means that there are foreign workers in every sector and at every level. As different industries and businesses have different needs, there are different passes with different conditions:

Employment Pass (EP): For foreign professionals, managers and executives, or professionals in a specialised job. Employment Pass holders are not subject to any quota. Candidates need to earn at least $3,600 a month and have either acceptable academic qualifications, such as a good university degree, professional qualifications, or specialist skills. Older, more experienced candidates need higher salaries to qualify. Employers may use the Self-Assessment Tool from Singapore’s Ministry of Manpower (MOM) to check if the candidate qualifies. MOM works closely with relevant sector agencies to exercise selective flexibility for EP applicants who do not meet the requirements but have specialised skills-in-demand.

S Pass: For mid-level skilled staff. Companies employing S Pass holders are subject to quota and levy requirements. Candidates also need to earn at least $2,200 a month and have acceptable qualifications, usually a degree or diploma. Technical certificates such as those for qualified technicians or specialists may be considered, provided the certification covers at least 1 year of full-time study. Older, more experienced applicants need higher salaries to qualify. Employers may use the Self-Assessment Tool from MOM to check if the candidate qualifies.

Work Permit: For semi-skilled foreign workers in the construction, manufacturing, marine shipyard, processing or services sectors. Companies employing Work Permit holders are subject to quota and levy requirements. No minimum qualifying salary is required.

2. STARTING A BUSINESS IN SINGAPORE
EntrePass: For eligible foreign entrepreneurs wanting to start and operate a new business in Singapore. Candidates must have started or intend to start a private company registered with the Accounting and Corporate Regulatory Authority (ACRA) and meet the innovative criteria stated on the Ministry of Manpower’s (MOM) website.

3. BRINGING FAMILY MEMBERS TO SINGAPORE
Employers may support foreign employees in applying for passes to bring their family members to Singapore. MOM provides dependant privileges for foreigners who contribute economically to Singapore. To qualify for dependant privileges, MOM considers whether work pass holders meet the qualifying salary to upkeep their dependants.

Staying in Singapore
Eligible Employment Pass or S Pass holders may bring certain family members to Singapore on a Dependant’s Pass or a Long Term Visit Pass (LTVP). EP and S Pass holders need to earn at least $6,000 a month and be sponsored by an established, Singapore-registered company. To obtain the LTVP for parents, EP and S Pass holders need to earn at least $12,000 a month. EntrePass holders must meet the requirements for minimum business spending and local jobs created to bring their family into Singapore.

Family Member – Pass Type

Legally married spouses – Dependant’s Pass

Unmarried children under 21 years – Dependant’s Pass

Parents – Long Term Visit Pass

Common-law spouses – Long Term Visit Pass

Step-children – Long Term Visit Pass

Handicapped children – Long Term Visit Pass

Working in Singapore
Dependants of EP and EntrePass holders who wish to work in Singapore may obtain a Letter of Consent. An employer or appointed employment agent must apply for the Letter of Consent. Dependants of S Pass holders must apply for a Work Permit, S Pass or Employment Pass instead.

Note: More information on other work passes (e.g. for training purposes) and Work Pass Exempt activities are available on the Ministry of Manpower website www.mom.gov.sg

1. FOREIGN EXCHANGE REGULATIONS
There are no foreign exchange controls.

2. SOURCE OF FINANCING
Sources of financing for foreign investors include share or bond flotation, loans from banks and other financial institutions, and trade credits. Foreign investors may also use sources derived from their enterprises, such as undistributed profits, funds borrowed from shareholders, and new issues of equity shares.

3. REPATRIATION OF CAPITAL / PROFITS
No capital controls on flow of investment proceeds.

Note: More information is available on the Monetary Authority of Singapore website www.mas.gov.sg

1. REGULATIONS ON ACQUISITION OF LAND AND BUILDINGS
In principle, foreign companies use land in the form of lease from the government. The lease terms and rates vary with respect to the locations. It is possible to buy factory buildings.

2. RESTRICTIONS
Land ownership
Foreign persons (including Permanent Residents and foreign entities) require approval from the Singapore Land Authority before they can purchase landed residential property.

More information is available on the Singapore Land Authority website at http://www.sla.gov.sg

Economic Development Board (EDB)
Set up in 1961 to spearhead Singapore’s economic development and as a one-stop agency to lead Singapore’s industrialisation drive by attracting and facilitating inward investment.

Economic Development Board
250 North Bridge Road
#28-00 Raffles City Tower
Singapore 179101
Tel: 65-68326832
Fax: 65-68326565
Website: www.sedb.com

Enterprise Singapore
Enterprise Singapore is the government agency championing enterprise development. We work with committed companies to build capabilities, innovate and internationalise. We also support the growth of Singapore as a hub for global trading and startups. As the national standards and accreditation body, we continue to build trust in Singapore’s products and services through quality and standards.

Enterprise Singapore
230 Victoria Street #10-00
Bugis Junction Office Tower
Singapore 188024
Tel: 65-68981800
Website: www.enterprisesingapore.gov.sg

Relevant investment legislation

1. INVESTMENT ACTS

  • Foreign Investments Act of 1991 (RA No. 7042 as amended by RA No. 8179)
    Governs the entry of foreign investments and the conduct of doing business in the Philippines.
  • Eleventh Regular Foreign Investment Negative List (EO No. 65)
    Provides for the coverage of investment areas/activities which are reserved to Filipino nationals and/or open to foreign investors subject to foreign equity limitations prescribed therein.
  • Omnibus Investments Code of 1987 (EO No. 226)
    Provides the investment incentives rules by which foreign and local investments may qualify.
  • Bases Conversion and Development Act of 1992 (R.A No. 7227, as amended by R.A No. 9400), Special Economic Zone Act of 1995 (R.A No. 7916 as amended by RA 8748), Cagayan Special Economic Zone Act of 1995 (R.A No. 7922), An Act Creating the Philippine Veterans Investment and Development Corporation (PD No. 243 as amended by PD No. 353), Creating the Philippine Retirement Park System (EO No. 1037, s. 1985), Zamboanga City Special Economic Zone Act of 1995 (R.A. No. 7903), Establishing the Aurora Special Economic Zone in the Province of Aurora (R.A. No. 9490), Freeport Area of Bataan Act of 2009 (R.A. No. 9728), Creating and Establishing the PHIVIDEC Industrial Authority (PD No. 538, as amended by PD No. 1491), Devolving the Powers and Functions of the Board of Investments over Investments within the Autonomous Region in Muslim Mindanao to the Autonomous Regional Government (EO No. 458)
    Provides for incentives to enterprises located in economic, freeport, and special zones.
  • Build Operate Transfer Law (R.A No. 7718, as amended)
    Allows wholly foreign-owned corporations to undertake infrastructure projects and for variations of Build-Operate-Transfer schemes in undertaking such projects.
  • Export Development Act of 1994 (R.A No. 7844)
    Formulated the Philippine Export Development Plan (PEDP), the country’s annual and medium-tem export thrusts, strategies, programs and projects, and created the Export Development Council which oversees the implementation of the PEDP as well as advocates the policy reforms that will facilitate and enhance Philippine exports.
  • Retail Trade Liberalization Act of 2000 (R.A. 8762), as amended by R.A. No. 1180
    Encourages Filipino and foreign investors to forge an efficient and competitive retail trade in the interest of empowering the Filipino consumer through lower prices, higher quality goods, better services and wider choices.
  • Philippine Competition Act (R.A. No. 10667)
    Provides for the national competition policy prohibiting anti-competitive mergers and acquisitions, and establishing the Philippine Competition Commission.
  • E-Commerce Act (R.A. 8792)
    Provides recognition and use of electronic commercial and non-commercial transactions and documents, penalties for unlawful use thereof and other purposes.
  • An Act Allowing the Full Entry of Foreign Banks in the Philippines (R.A. No. 10641)
    Allows foreigners to own up to 100% of domestic banks and facilitate the entry of established, reputable and financially sound foreign banks in the Philippines.
  • An Act Amending Investment Restrictions in Specific Laws Governing Adjustment Companies, Lending Companies, Financing Companies and Investment Houses Cited in the Foreign Investment Negative List and for other Purposes (R.A. No. 10881)
    Lifted the foreign ownership restriction on adjustment, lending and financing companies as well as investment houses.
  • Investor’s Lease Act (R.A. No. 7652)
    Allows the long term lease of private lands by foreign investors of up to a period of fifty (50) years, renewable for another twenty-five (25) years.
  • Condominium Act (R.A. No. 7899)
    Filipino citizens and corporations to own condominiums. The Act also allows foreigners to own corporations subject to certain equity limit.
  • Cabotage Law (R.A. 10668)
    An act allowing foreign vessels to transport and co-load foreign cargoes for domestic transshipment.
  • Ease of Doing Business Act (R.A. No. 11032)
    The objective of the law is to shorten the number of days in processing permits and licenses for all business-related transactions. The Act also includes stricter rules like the two-strike policy for government officials who will fail to issue permits in the given period.
  • 2017 Investment Priorities Plan (Memorandum Order No. 12)
    Provides the list of promoted areas of investments by the Board of Investments.

2. RELEVANT BUSINESS LAWS

  • Corporation Code of the Philippines (BP Blg. 68)
    Provides the rules for the registration, licensing, regulation and supervision of all corporations and partnerships organised in the Philippines.
  • Business Names Law (Act No. 3883, as amended by R.A. No. 4147 and R.A. No. 863)
    Registers the business name of entities.
  • Anti-Dummy Law (C.A. No. 108)
    An act restricting foreign control over a company.
  • Customs Modernization and Tariff Act (R.A. No. 10863)
    Amended the Tariff and Customs Code of the Philippines (TCCP) with the aim of modernizing Customs rules and procedures for faster trade, reduce opportunities for corruption, improve Customs service delivery and supply chain.

3. MINIMUM INVESTMENT LEVEL REQUIREMENT
Foreign-owned small and medium-sized enterprises whose products/services are intended for the domestic market with paid-in equity capital of more than the equivalent of Two Hundred Thousand US dollars (US$200,000.00) are allowed.
If, (1) they involved advanced technology; or (2) they employ at least fifty (50) direct employees, then a minimum paid-in equity capital of One Hundred Thousand US dollars (US$100,000.00) shall be allowed.

[1] Refers to a Republic Act issued by the Congress of the Philippines
[2] Refers to an Executive Order issued by the President of the Philippines.
[3] Refers to a Presidential Decree issued by the President of the Philippines.
[4] Refers to a Batas Pambansa issued by the Congress of the Philippines.

1. TELECOMMUNICATIONS
The Policy to Improve the Provision of Local Exchange Carriers Service (EO No. 109, s. 1993) opened up the telecommunications sector to new players to participate in the supply of telecommunication facilities all over the country.

The Public Telecommunications Policy Act of the Philippines (R.A. No. 7925) provides the comprehensive guidelines in regulating the Philippine telecommunications industry and improving the delivery of public telecommunications services.

2. AUTOMOTIVE
The Comprehensive Automotive Resurgence Program (CARS) (EO No. 182, s. 2015) attracts new investments, stimulate demand and effectively implement industry regulations that will revitalize the Philippine automotive industry, and develop the country as a regional automotive manufacturing hub.

Motor Vehicle Development Program (EO No. 156, s. 2002) allows foreign-owned enterprises to engage in the manufacture/assembly of motor vehicles for the primary purpose of establishing and/or expanding production facilities to increase the export of CBUs and its parts and components.

3.ENERGY
The Electric Power Industry Reforms Act of 2002 (R.A. No. 9136) aims to bring down power rates and improve delivery of supply through greater competition and efficiency in the industry.

An Act Promoting the Development, Utilization and Commercialization of Renewable Energy Resources (R.A. No. 9513) provides for the accelerated development and advancement of renewable energy resources and the implementation of a strategic program to increase its utilisation.

Creating The Energy Investment Coordinating Council in order to Streamline the Regulatory Procedures Affecting Energy Projects (E.O. No. 30, Series of 2017) aims to harmonize, integrate and streamline regulatory processes, requirements and forms relevant to the development of energy investments in the country, primarily with regard to Energy Projects of

National Significance, to uphold transparency and accountability among concerned agencies through the creation of the Council that will spearhead and coordinate national government efforts.

4.TOURISM
The Tourism Act of 2009 (R.A. No. 9593) provides for the development of the country as a prime tourist hub in Asia by promoting sustainable development and encouraging private sector participation.

The Farm Tourism Development Act of 2016 (R.A NO. 10816) disseminates the value of agriculture in the economic and cultural development of the country, serves as a catalyst for the development of agriculture and fishery communities, and provides additional income for farmers, farmworkers, and fisherfolk.

In support to the Philippines’ agenda to increase competitiveness and ease of doing business, the following government initiatives were established:

Philippine Business Registry
The Philippines Business Registry is a government-initiated project that facilitates business registration-related transactions by integrating all agencies involved in business registration, such as the Department of Trade and Industry (DTI), Bureau of Internal Revenue (BIR), Social Security System (SSS), Home Development Mutual Fund (Pag-IBIG), Philippine Health Insurance Corporation (PhilHealth), Local Government Units (LGUs) and other permit/license-issuing agencies.
In particular, it is a web-based system that serves as a one-stop shop for entrepreneurs who need to transact with several agencies to be able to start operating a business. Each of the agencies’ computerized registration systems will be interlinked so that applicants need not physically go to each agency to register their businesses.
At present, sole proprietors can validate existing or register their business names from the DTI, get or validate their existing Tax Identification Numbers (TINs) from the BIR and employer registration numbers from the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth) and Home Development Mutual Fund (Pag-IBIG Fund) through the PBR system.

Business Permits and Licensing System (BPLS)
The Nationwide Streamlining of Business Permits and Licensing Systems (BPLS) Program aims to address the high cost of doing business in the Philippines as a constraint to the competitiveness of the country. The program aims to streamline the BPLS of cities and municipalities nationwide.

National Competitiveness Council (NCC)
In October 2006, the Public-Private Sector Task Force on Philippine Competitiveness was created by virtue of Presidential Executive Order No. 571 to promote and develop national competitiveness, and was amended by E.O. 44 renaming the Task Force as the National Competitiveness Council. The NCC envisions a more competitive Philippines, and to instill a culture of excellence, through public-private sector collaboration as means to reduce poverty through inclusive growth.

A. Registration of Business Entities

  • All applications and supporting documents must be in four (4) copies and have cover sheets
  • Documents signed abroad must be authenticated by the Philippine Embassy or Consulate in the country where signed
  • All Audited Financial Statements and special audit reports must be certified by an independent Certified Public Accountant (CPA), with Statement of Representation filed with the SEC. Said Statement must indicate the CPA Cert. No., PRC/BOA No. and the PTR No. of the CPA
  • All applications must indicate the Tax Identification Number (TIN) of the incorporators, stockholders/members for corporations, and partners for partnerships
  • For foreign incorporator, subscriber or director, indicate passport number for purposes of incorporation and Tax Identification Number for amendment of the Articles of Incorporation.

Registration for Domestic Stock Corporation
Stock Corporation
Paid-Up: Cash
100% Filipino Equity

Basic Requirements

  • Name verification slip
  • Articles of Incorporation and By-Laws
  • Treasurer’s Affidavit/Authority to Verify Account
  • Bank Certificates of Deposit notarized in place where bank signatory is assigned
  • Joint affidavit of two incorporators undertaking to change corporate name, as provided in its Articles of Incorporation or as amended thereafter, immediately upon receipt of notice or directive from the Securities and Exchange Commission that another corporation, partnership, or person has acquired a prior right to the use of that name or that name has been declared misleading, deceptive, confusingly similar to a registered name, or contrary to public morals, good customs or public policy. (Not required if the Articles of Incorporation have a provision on this commitment).

Additional Requirement
Endorsement/clearance from other government agencies if to engage in any of the following:

  • Air Transport – CAB
  • Banking, pawnshops and other financial intermediaries with quasi-banking functions – BSP
  • Educational institutions: Elementary to high school – DEPED, College, tertiary course – CHED, Technical/Vocational Course – TESDA
  • Electric power plants – DOE
  • Hospitals – DOH
  • Insurance – Insurance Commission
  • Operation of radio, TV and telephone – NTC
  • Recruitment for overseas employment – POEA
  • Securities Agency – PNP
  • Water transport, construction and building vessel – MARINA
  • For corporations with foreign equity: Proof of remittance by non-resident aliens and foreign corporate subscribers to register their investment with the Bangko Sentral ng Pilipinas (BSP) or an affidavit that they will not register their investment with the BSP
  • For corporations with more than 40% foreign equity: application form required by the Foreign Investments Act of 1991 (R.A. 7042), as amended.

60% Filipino – 40% Foreign Equity

Documentary Requirements

  • Name verification slip
  • Articles of Incorporation and By-Laws
  • Treasurer’s Affidavit/Authority to verify bank account
  • Bank Certificate of Deposit notarized in place where bank signatory is assigned
  • Written joint undertaking to change corporate name signed by two (2) Incorporators/Directors
  • Proof of Inward Remittance by non-resident aliens, and foreign corporations

Note: All documents executed abroad must be authenticated by the Philippine Embassy.

More than 40% Foreign Equity

New Corporations

Documentary Requirements

  • Form F-100
  • Name verification slip
  • Articles of Incorporation and By-Laws
  • Treasurer’s Affidavit/Authority to verify bank account
  • Bank Certificates of Deposit notarized in place where bank signatory is assigned
  • Written joint undertaking to change corporate name signed by two (2) Incorporators/Directors
  • Proof of Inward Remittance by non-resident aliens, and foreign corporation

Walk-in application at PBR Kiosk at Securities and Exchange Commission (SEC) Main Office

  • Applicant fills out the PBR application form and submits to the Teller processing.
  • Applicant submits photocopies of complete SEC registration documents (i.e., SEC registration certificate, Articles of Partnership/Corporation). Original copies are required for verification.
  • Teller transmits application for employer registration numbers (ERNs) to SSS, Philhealth, and Pag-IBIG and applicant gets PBR-generated ERNs.
  • Certificate of Registration or Employer ID can be secured from agencies upon presentation of PBR-generated ERNs.
  • Only partnerships or corporations already registered with SEC can apply.

Export-oriented Corporations under PEZA & Similar Zones (Exempted from Application Under the Foreign Investment ACT (FIA))

Documentary Requirements

  • PEZA/SBMA/CDC certificate indicating location
  • Same as for new corporations

Paid Up: Cash and Properties

Real Estate

Documentary Requirements (in addition to requirements given in Paid-Up: Cash; submit 6 copies)

  • Deed of Assignment duly presented to the Register of Deeds for primary entry where the properties are located
  • Written consent of the mortgage/creditor on the assignment of the property, together with a certification on the outstanding loan balance
  • Certified True Copy(ies) of Transfer Certificate of Title (CCT/TCT)
  • Photocopy of tax declaration sheet and official receipt of real estate tax payment/s for the current year to be checked against original copy(ies) thereof
  • Appraisal report not exceeding six (6) months prior to filing of the application, to be rendered by an independent real estate appraiser if the transfer value of the property is based on current fair market value (not more than 6 mos. old)
  • BIR Certificate of Zonal Value (if the transfer value is based on zonal value)
  • Statement of assets and liabilities under oath by Treasurer-in-Trust (TIT)

Motor Vehicles, Machinery and Equipment

Documentary Requirements

  • Detailed inventory of the properties certified by company accountant
  • Deed of Assignment executed by the owner in favor of the corporation
  • Appraisal Report to be rendered by an independent and licensed mechanical engineer if the transfer value of the property is based on current fair market value
  • Copy of the corresponding bill of lading, BSP release certificates, and customs declaration, if the machineries and equipment are purchased abroad
  • Bangko Sentral ng Pilipinas (BSP) valuation/appraisal report for imported properties
  • Photocopies of motor vehicle certificate of registration & official receipt of annual registration fee for current year

Shares of Stock

Documentary Requirements (submit 6 sets)

  • Description of the shares of stock showing the name of stockholder, stock certificate number, number of shares and the basis of transfer value (market value or book value) signed by treasurer of the corporation
  • Audited Financial Statements of the investee company as of the last fiscal year, stamped received by the SEC and BIR
  • Deed of assignment of the shares of stock to the corporation
  • Certification by the corporate secretary of the investee company that the shares are in the name of the assignor
  • Photocopy of the stock certificates (the original copy should be presented for verification)
  • If shares of stock are listed in the stock exchange: Latest market quotation in the newspaper or certification from the stock exchange/broker on the latest market price of the shares of stock; and
  • Affidavit of undertaking by any incorporator or director to submit the proof of transfer within the prescribed period.

Inventories/Furniture/Personal Properties

Documentary Requirements

  • Description of the property and the basis of transfer value (market value or book value) signed by the treasurer of the corporation
  • Special audit report by an independent CPA on the verification and valuation of the property, or appraisal report by an accredited appraisal company, which is not more than six (6) months old, on the valuation of the property
  • Deed of assignment of the property to the corporation; and
  • Deed of assignment of the property to the corporation; and

Registration for Domestic Non-Stock Corporations

Foundations, Associations and Other Non-Stock Organizations

Documentary Requirements

  • Name verification slip
  • Articles of Incorporation and By-Laws
  • Written joint undertaking to change corporate name signed by two (2) Incorporators/Directors
  • Resolution of the Board of Directors that the Corporation will comply with SEC
  • List of members certified by the Secretary and undertaking to submit list of additional members to the Securities and Exchange Commission (SEC) from time to time
  • List of contributors and amount contributed certified by the Treasurer
  • For Foundations: notarized Certificate of Bank Deposit of the capital contribution of not less than PhP 1,000,000.00 and statement of willingness to allow SEC to conduct and edit

Religious Corporations

Documentary Requirements

  • Name verification slip
  • Articles of Incorporation and By-Laws
  • Written joint undertaking to change corporate name signed by two (2) Incorporators/Directors
  • Resolution of the Board of Directors that the Corporation will comply with SEC requirement for non-stock corporation
  • List of members certified by the Secretary and undertaking to submit list of additional members to the Securities and Exchange Commission (SEC) from time to time
  • List of contributors and amount of contributions certified by the Treasurer
  • For religious corporations, refer to Sections 109-116 of the Corporation Code and add affidavit or affirmation or verification by the chief priest, minister, rabbi, or presiding elder.

Requirements
Procedure
Processing Time
(Application to be filed at any nearest Department of Trade and Industry (DTI) Office or through:
http://bnrs.dti.gov.ph/ or
http://www.business.dti.gov.ph/)

Must be a Filipino Citizen, at least 18 years old

  • Filipinos whose names are suggestive of alien nationality must submit proof of citizenship such as birth certificate, PRC ID, Voter’s ID, passport
  • Naturalization Certificate and Oath of Allegiance,
  • Valid ID card issued by the Integrated Bar of the Philippines (IBP) or Professional Commission (PRC)
  • Processing Fee of PhP 300.00 and PhP 15.00 Documentary Stamp

Requirements for Foreign Investor (to submit 5 copies)

  • Interview sheet with interviewer’s findings and recommendation
  • Duly accomplished Forms:
    • Form #16 – Business Name Application
    • Form #17 – Foreign Investor’s Application
  • ID pictures (passport size)
    • Foreign investor – 7 copies
    • Filipino resident agent – 7 copies
  • ACR/ICR, Special Investors Resident Visa (SIRV) or passport
  • Notarized appointment of Filipino resident agent
  • For non-resident alien:
    • Proof of Inward remittance of foreign currency with peso conversion
    • Bank Certificate of Deposit
    • Authority to verify Bank Accounts/Bank Certificate of Deposit
    • Certification from resident alien not seeking remittance of profits and dividends abroad
    • If investment includes assets other than foreign exchange, copy of valuation report from the Central Bank
  • Clearance/Certification from other involved agencies
    • PNP/DND – if engaged in defense-related activities
    • DOST – if investment involves advanced technology

Fees/Charges – in Cash: For Business Name Registration Certificate

  • Single Proprietorship – PhP 300.00
  • Filing Fee – PhP 500.00
  • Registration Fee – PhP 5,000.00
  • Biodata of Foreign Investor
  • In case of alien retailer, current year’s permit to engage in retail business per RA 1180 (Amended by RA 8762 – Retail Trade Rationalization of 2000)

Over the counter – can be done at any of the following:

  • DTI Regional/Provincial/Field Offices. Visit http://www.bnrs.dti.gov.ph/web/guest/contactus for the complete list of offices. Office schedule is from Monday to Friday, 8:00 am to 5:00 pm
  • SM Business Service Centers
  • Negosyo Centers

Online application – can be done online through http://www.bnrs.dti.gov.ph or http://www.business.dti.gov.ph

Hybrid application – application lodged online and pay through over-the-counter

Walk-in application at DTI Office

  • Applicant fills out the PBR application form and submits to DTI Teller for processing.
  • DTI Teller secures applicant’s Tax Identification Number (TIN). (If there is an existing TIN, PBR will validate against records)
  • Business Name (BN) Certificate and Employer’s Registration Numbers (ERNs) are processed.
  • A Transaction Reference Number (TRN) is presented to Cashier for BN fee.
  • Official Receipt of Payment is presented to the DTI Releasing Office for the BN Certificate.
  • Applicant gets SSS, Philhealth, and Pag-IBIG ERNs from DTI Teller.
  • Certificate of Registration or Employer ID can be secured from agencies upon presentation of PBR-generated ERNs.

Validity:
The Certificate of Business Name Registration is valid for 5 years and shall be valid only at the business address indicated thereon. In the event the registered owner thereof should opt to open branch offices within the Philippines, he must apply for separate registration for each of the branch office so established.

Five (5) working Days Application filed in other DTI-Field Offices

Where to Register:
National Capital Region Business Center:
Area I – Manila, Pasay, Parañaque

  • 2nd Flr., Park and Ride, Lawton, Manila
  • Tel No. (+632) 536-7153

Area II – Makati, Pasig, Pateros, Taguig, Muntinlupa, Las Piñas

  • Unit 208, 2nd Flr. Atrium Bldg., Makati Avenue, Makati City
  • Tel No. (+632) 864-0847 / 864-0829

Area III – Mandaluyong, Marikina, Quezon City, San Juan

  • Ground Floor, Highway 54 Plaza, Mandaluyong City
  • Tel No. (+632) 706-1767 / 706-1703

Area IV – Caloocan, Malabon, Navotas, Valenzuela

  • 5th Flr. Araneta Square, Monumento, Caloocan City
  • Tel No. (+632) 362-7664 / 332-0854

For Businesses outside Metro Manila, proper DTI-Provincial Office where business is located

Filed Directly with SEC:

  • Create an account in the Company Registration System (CRS) at crs.sec.gov.ph
  • Verify the created account through e-mail
  • Encode data for registration documents
  • Upload CRS-Generated or CRS Non-Generated documents
  • Receive notification through e-mail and CRS account
  • If for compliance, open the compliance section in CRS
  • If for payment, print the Order of Payment (if payment is through SEC Cashier, proceed to CRMD for the issuance of Payment Assessment Form)
  • Pay the filing fee online with Landbank, GCash, and on collection with Landbank, or SEC
  • Upload proof of payment of filing fee (not required if payment is online) and signed and notarized documents
  • Submit hard copies of uploaded documents at CRMD Receiving Unit
  • Verify/reserve proposed name via internet using SEC i-register
  • Prepare Articles of Incorporation and other required documents
  • Present accomplished forms/docs for pre-processing at CRMD
  • Present endorsement to the agency concerned, if endorsement is given by the concerned agency includes the endorsement in the registration documents
  • Pay filing fees to cashier
  • Claim Certificate of Incorporation from Releasing Unit, HRAD

General Partnership

Documentary Requirements

  • Name verification slip
  • Articles of Partnership
  • Written joint undertaking to change corporate name signed by two (2) Incorporators/Directors
  • Clearance/endorsement from other government agencies, if applicable

Limited Partnership

Documentary Requirements

  • Name verification slip
  • Articles of Partnership
  • Joint affidavit of two partners undertaking to change partnership name, provided in its Articles of Partnership or as amended thereafter, immediately upon receipt of notice or directive from the Securities and Exchange Commission that another corporation, partnership, or person has acquired a prior right to the use of that name or that name has been declared misleading, deceptive, confusingly similar to a registered name, or contrary to public morals, good customs, or public policy (not required if Articles of Partnership has provision on this commitment).
  • Clearance/endorsement from other government agencies if needed
  • If limited partnership, the word “limited” or “Ltd” should be added to the name. Articles of partnership or limited partnership should be under oath (Jurat) and not acknowledged before a notary public

For online registration:

  • Create an account in the Company Registration System (CRS) at crs.sec.gov.ph
  • Verify the created account through e-mail
  • Encode data for registration documents
  • Upload CRS-Generated or CRS Non-Generated documents
  • Receive notification through e-mail and CRS account
  • If for compliance, open the compliance section in CRS
  • If for payment, print the Order of Payment (if payment is through SEC Cashier, proceed to CRMD for the issuance of Payment Assessment Form)
  • Pay the filing fee online with Landbank, GCash, and on collection with Landbank, or SEC
  • Upload proof of payment of filing fee (not required if payment is online) and signed and notarized documents
  • Submit hard copies of uploaded documents at CRMD Receiving Unit

Filed Directly with SEC

  • Verify/reserve proposed name
  • Buy Articles of Partnership forms from Express Lane
  • Get endorsement from other government agencies if needed
  • Present accomplished forms/documents for pre-processing at CRMD
  • Pay filing fees to the cashier
  • Claim Certificate of Incorporation from the Releasing Unit Records Division

Branch Office

Documentary Requirements

  • Form F103
  • Name verification slip
  • Authenticated copy of Board Resolution authorizing establishment of office in the Philippines designating resident agent and stipulating that in absence of such agent or upon cessation of business in the Philippines any summons may be served to SEC as if the same is made upon the corporation at its home office
  • Financial statements as of a date not exceeding one year immediately prior to the application certified by an independent CPA of home country and authenticated before the Philippine Consulate/Embassy
  • Authenticated copies/certified copies of the Articles of Incorporation/Partnership
  • Proof of inward remittance (US$200,000.00 minimum)
  • Resident Agent’s acceptance of appointment (if not signatory in application form)

Representative Office

Documentary Requirements

  • Form F-104
  • Name verification slip
  • Authenticated copy of Board Resolution authorizing establishment of office in the Philippines; designating resident agent & stipulating that in absence of such agent or upon cessation of business in the Philippines. Any summons may be served to SEC as if the name is made upon the corporation at its home office.
  • Financial statements as of a date not exceeding one year immediately prior to the application, certified by an independent CPA of home country and authenticated before the Philippine consulate/embassy.
  • Affidavit executed by the resident agent stating that mother office is solvent and in sound financial condition
  • Authenticated copies of Articles of Incorporation with an English translation if in foreign language other than English
  • Proof of inward remittance (US$ 30,000.00 minimum) such as bank certificate
  • Resident Agent’s acceptance of appointment (if not signatory in application form)

Regional Headquarters/Regional Operating Headquarters

Documentary Requirements

  • Application form for RHQ/ROHQ
  • Name verification slip
  • Authenticated certification that foreign firm is engaged in international trade with affiliates, subsidiaries, or branch offices in the Asia Pacific region & other foreign markets
  • Authenticated certification from principal officer of foreign entity that it was authorized by its Board of Directors or governing body to establish RHQ in the Philippines
  • BOI endorsement indicating its approval of RHQ/ROHQ

Foreign Partnership

Documentary Requirements

  • Name verification slip
  • Get F-105 Form from CRMD
  • Articles of Partnership
  • Written joint undertaking to change corporate name signed by two (2) Incorporators/Directors
  • Clearance/endorsement from other government agencies, if applicable
  • Proof of remittance of foreign partners (only for those partners who want to register their investments with BSP)

For online registration:

  • Create an account in the Company Registration System (CRS) at crs.sec.gov.ph
  • Verify the created account through e-mail
  • Encode data for registration documents
  • Upload CRS-Generated or CRS Non-Generated documents
  • Receive notification through e-mail and CRS account
  • If for compliance, open the compliance section in CRS
  • If for payment, print the Order of Payment (if payment is through SEC Cashier, proceed to CRMD for the issuance of Payment Assessment Form)
  • Pay the filing fee online with Landbank, GCash, and on collection with Landbank, or SEC
  • Upload proof of payment of filing fee (not required if payment is online) and signed and notarized documents
  • Submit hard copies of uploaded documents at CRMD Receiving Unit

Single Proprietorship
Where to Register
Timetable

Single/Sole Proprietorship
Ownership by an individual who has full control/authority of its own and owns all the assets, personally owes and answers all liabilities or suffers all losses but enjoys all the profits to the exclusion of others

  • If an applicant is a foreigner, secure VOLUNTARY REGISTRATION in lieu of Alien Certificate of Registration (ACR) with the Bureau of Immigration before securing DTI registration and opening an account with any commercial banks under his/her name.

DTI-NCR
Bureau of Immigration

  • Within the day
  • Within two (2) days

Tax Identification Number (TIN)
Bureau of Internal Revenue (BIR)

  • Three (3) to five (5) minutes provided that all necessary requirements have been submitted.

Incentives Availment (OPTIONAL)

  • BOI
  • PEZA
  • SBMA
  • CDC
  • CEZA
  • ZCSEZA
  • PIA
  • Tourism Infrastructure and Enterprise Zone Authority (TIEZA)
  • PPFZ
  • John Hay Special Economic Zone
  • AFAB
  • PRA
    • Within twenty (20) working days
    • One (1) month
    • Three (3) weeks to one (1) month
    • Two (2) to three (3) weeks
    • Thirty (30) days
    • One (1) month
    • Ten (10) working days
    • Three (3) weeks/twenty one (21) days
    • One (1) to three (3) days
    • 30 days upon receipt of complete and correct requirements
    • One (1) month upon approval
    • Thirty (30) days after visa issuance

Mayor’s Permit (License to Operate) and Barangay Clearance
Local Government Unit (Office of the Mayor) where business/project is located

  • One (1) to Two (2) Hours

Department of Labor and Employment (DOLE) Registration/Permits
DOLE

  • Five (5) to ten (10) working days

Environmental Clearance Certificate (ECC) or Certificate of Non-Coverage (CNC)
Environmental Management Bureau – Department of Environment and Natural Resources (EMB-DENR)

  • ECC – twenty (20) days
  • CNC: one (1) day

Visas
Bureau of Immigration

  • Treaty Traders: One (1) to two (2) months from filing and submission of complete documents
  • Retiree’s Visa: Five (5) to seven (7) days

Partnership/Corporation
Where to Register
Timetable

Corporation/Partnership
Corporations are juridical persons established under the Corporation Code and regulated by the SEC with a personality separate and distinct from that of its stockholders. It consists of at least five (5) to fifteen (15) incorporators, each of whom must hold at least one (1) share.
A partnership is treated as juridical person having a separate legal personality from that of its members. It consists of two (2) or more partners

SEC
SEC

  • Within the day
  • Within the day

Incentives Availment (OPTIONAL)

 

  • BOI
  • PEZA
  • SBMA
  • CDC
  • CEZA
  • ZCSEZA
  • PIA
  • PPFZ
  • John Hay Special Economic Zone
  • AFAB
  • PRA
    • Within twenty (20) working days
    • Within the day/two (2) weeks
    • Three (3) weeks to one (1) month
    • Two (2) to three (3) weeks
    • Thirty (30) days
    • One (1) month
    • Ten (10) working days
    • Three (3) weeks/twenty one (21) days
    • 30 days upon receipt of complete and correct requirements
    • One (1) month upon approval
    • Thirty (30) days after issuance of Special Resident Retiree’s Visa (SSRV)

Mayor’s Permit (License to Operate) and Barangay Clearance
Local Government Unit (Office of the Mayor) where business/project is located

  • One (1) to two (2) hours

Department of Labor and Employment (DOLE) Registration/Permits
DOLE

  • Five (5) to ten (10) working days

Environmental Clearance Certificate (ECC) or Certificate of Non-Coverage (CNC)
Environmental Management Bureau – Department of Environment and Natural Resources (EMB-DENR)

  • ECC – twenty (20) days
  • CNC – One (1) day

Visas
Bureau of Immigration

  • Treaty Traders: One (1) to two (2) months from filing and submission of complete documents
  • Investor’s Visa (probationary): Fourteen (14) working days
  • Retiree’s Visa: Five (5) to seven (7) days
  • Employment Visa: Fifteen (15) days

1. CONVERSION, REPATRIATION AND TRANSFERS
The Philippines has adopted a floating rate system where the determination of the peso to dollar exchange rate is left to market forces. The Bangko Sentral ng Pilipinas (BSP) occasionally intervenes in the foreign exchange market by selling or buying dollars with the intention of smoothing out sharp fluctuations in the exchange rate, providing indicative guidance and ensuring stability in the foreign exchange market.

As a general policy, foreign investments need not be registered with the BSP. The registration of a foreign investment with the BSP is only required if the foreign exchange needed to service the repatriation of capital and remittance of dividends, profits and earnings accruing on said foreign investments shall be sourced from the domestic banking system. For private sector foreign loans that are not guaranteed by the public sector, registration with BSP is required if the foreign exchange needed to service these loans shall be sourced from AABs or AAB forex corps. For public sector and publicly-guaranteed private sector foreign loans, prior BSP approval and registration are required regardless of source of foreign exchange for servicing of these loans. Given this general policy, BSP-registered foreign investments enjoy full and immediate repatriation of capital and remittance of dividends, profits, and earnings that accrue thereon.

  • EXPROPRIATION AND COMPENSATION
    There shall be no expropriation by the government of the property represented by investments or of the property of the enterprise except for public use or in the interest of national welfare or defense and upon payment of just compensation. In such cases, foreign investors or enterprises shall have the right to remit sums received as compensation for the expropriated property in the currency in which the investments was originally made and at the exchange rate at the time of remittance.

  • INVESTMENT AGREEMENTS
    The Philippines signed investment promotion and protection agreement with forty-five (45) countries, namely: Argentina, Australia, Austria, Bahrain, Bangladesh, Belgium/Luxembourg, Brunei Darussalam, Cambodia, Canada, Chile, China, Czech Republic, Denmark, Equatorial Guinea, Finland, France, Germany, India, Indonesia, Iran, Italy, Japan, Kingdom of Saudi Arabia, Korea, Kuwait, Lao People’s Democratic Republic, Malaysia, Mongolia, Myanmar, Netherlands, New Zealand, Pakistan, Portugal, Romania, Russia, Spain, Singapore, Sweden, Switzerland, Syria Arab Republic, Thailand, Turkey, United Kingdom of Great Britain and Northern Ireland, Venezuela, and Vietnam.

  • INTELLECTUAL PROPERTY RIGHTS (IPR)
    i) Intellectual Property Laws
    Republic Act No. 8293 also known as the Intellectual Property Code of the Philippines (IP Code), as amended, codified the minimum IPR system committed under the WTO Agreement, in particular the Agreement on Trade-Related Aspects of IPR (TRIPs).
    The IPRs recognized by the IP Code are: patent, utility model and industrial design, copyright and related rights, trademark and service mark, geographical indication, lay-out designs (topographies) of integrated circuits and protection of undisclosed information.
    The agency mandated to implement the IP Code is the Intellectual Property Office of the Philippines (IPOPHL).

Other IP-related laws are:

  • Republic Act No. 8792 (Electronic Commerce Act, June 2000)
  • Republic Act No. 9150 (Act Providing for the Protection of Layout Design (Topographies) of Integrated Circuits, August 2001)
  • Republic Act No. 9168 (An Act to Provide Protection to New Plant Varieties and Establishing the National Plant Variety Protection Board, June 2002)
  • Republic Act No. 9239 (An Act Regulating Optical Media, February 2004)
  • Republic Act No. 10088 (Anti-Camcording Act, July 2009)
  • Republic Act No. 10055 (Philippine Technology Transfer Act of 2009)
  • Republic Act No. 10667 (Philippine Competition Act)
  • Republic Act No. 10175 (Cybercrime Prevention Act)
  • Republic Act No. 9711 (Food and Drug Administration Act)
  • Republic Act No. 9502 (Universally Accessible Cheaper and Quality Medicines Act)
  • Republic Act No. 9160 (Anti-Money Laundering Act), as amended
  • Republic Act No. 8203 (Special Law on Counterfeit Drug)
  • Republic Act No. 7394 (Consumer Act)
  • Republic Act No. 3720 (Food, Drugs & Devices, and Cosmetics Act)
  • Republic Act No. 623 (An Act To Regulate The Use Of Duly Stamped Or Marked Containers, as amended)
  • Republic Act No. 8423 (Traditional and Alternative Medicine Act of 1997)
  • Republic Act No. 7459 (Inventors and Invention Incentives Act)
  • Republic Act No. 8371 (Indigenous People Rights Act of 1997)

ii) Enforcement Efforts
The Philippine government enforces IPR through the National Committee on Intellectual Property Rights (NCIPR), an inter-agency coordinating body created pursuant to Executive Order No. 736.
The 2017-2022 Philippine Action Plan launched in 2016 provides synchronized enforcement and education efforts. IPOPHL also took on enforcement functions after RA 10372 (2013), including sending warnings, inspections, case building, and warrant applications.

iii) Enforcement Procedures and Penalties for Infringement
Cases may be filed before special commercial courts or the IPOPHL Bureau of Legal Affairs. Remedies include administrative penalties, business permit cancellation, seizure and destruction of infringing goods, imprisonment, and fines.

iv) International Treaties
The Philippines is a signatory to:

  • Berne Convention (1951)
  • Paris Convention (1965)
  • WIPO Convention (1980)
  • Budapest Treaty (1981)
  • Rome Convention (1984)
  • WTO TRIPs Agreement (1995)
  • Patent Cooperation Treaty (2001)
  • WIPO Copyright Treaty (2002)
  • WIPO Performances and Phonograms Treaty (2002)
  • Madrid Protocol (2012)

5. DISPUTE SETTLEMENT
i) Disputes between Governments
The Philippines follows WTO dispute settlement procedures.

ii) Disputes between Private Parties and Government
ASEAN FTAs and bilateral agreements provide options for amicable settlement, domestic courts, or ICSID arbitration.

iii) Disputes between Private Parties
Philippines recognizes alternative dispute resolution (ADR). Applicable laws include:

  • RA No. 9285 (ADR Act of 2004)
  • RA No. 876 (Arbitration Law)
  • EO No. 1008 (Construction Industry Arbitration Law)
  • RA No. 8293 (IP Code dispute settlement provisions)
  • EO No. 78 (mandates ADR in PPP and government contracts)

The Philippine Dispute Resolution Center Inc. (PDRCI) under the Philippine Chamber of Commerce and Industry provides arbitration and dispute resolution services.

Local content requirement under the soap and detergent industry
EO 259 requires the use of at least 60% locally produced cocochemical surfactant. With RA No. 8970, soap and detergent manufacturers are now allowed to use soft surfactants that are not necessarily coconut-based.

100% foreign equity ownership is allowed in all areas except those identified in the Regular Foreign Investment Negative List in effect at the time of investment.
As a general rule, there are no restrictions on the extent of foreign ownership of export enterprises with at least 60% export.

Non-Filipino companies registered with the Board of Investments are required to become Filipino companies within 30 years by reducing foreign ownership ratio to less than 40% except for those export-oriented enterprises.

1. BORROWING REGULATIONS
Foreign Firm’s Access to Peso
Peso financing of Authorized Agent Banks (AABs) to non-residents is disallowed unless permitted by the Bangko Sentral ng Pilipinas (BSP). This is in reference to the General Policy on Loans and Guarantees, Section 22 of BSP’s Manual of Regulations on Foreign Exchange Transactions (FX Manual) unless explicitly allowed under BSP rules. The FX Manual is detailed under Circular No. 645 series of 2009 issued by the BSP, which was amended by Circular No. 984 series of 2017.
A key consideration by banks in extending loans, credit accommodations, and guarantees to any person, partnership association, corporation or other entity is the Single Borrower’s Limit (SBL). This places the maximum value on the said activities to twenty five percent (25%) of the net worth of a bank. This may be increased by an additional twenty five percent (25%) provided that additional loans, credit accommodations and guarantees are for the purpose of undertaking infrastructure and/or development projects under the Public-Private Partnership (PPP) Program of the government. It may also be further increased by an additional fifteen percent (15%) of the net worth of such quasi-bank provided that the additional loans, credit accommodations and guarantees are granted to finance oil importation of oil companies which are not subsidiaries or affiliates of the lending quasi-bank engaged in energy and power generation. The rules and regulations on SBL are detailed under Circular No. 425 series of 2004 issued by the BSP, which was amended by Circular No. 710 and 712 series of 2010 and 2011, respectively.

Access to Foreign Loans
Loans shall be registered with the BSP to be eligible for servicing using foreign exchange purchased from AABs or their subsidiary/affiliate foreign exchange corporations. All public and private sector publicly guaranteed obligations from foreign creditors, offshore banking units, foreign currency deposit units (FCDU)/expanded foreign currency deposit units (EFCDU) shall be referred to the BSP for prior approval, unless otherwise indicated in relevant BSP regulations. Other private sector loans that are not publicly guaranteed from these creditors and other financing schemes/arrangements shall require prior registration to the BSP if these will ultimately involve foreign exchange purchased from AABs or their subsidiary/affiliates foreign exchange corporations.

Loans Requiring Prior Bangko Sentral Approval
As a general policy, the BSP shall regulate foreign/foreign currency loans/borrowings (including those in the form of bonds/notes/other debt instruments) so that these can be serviced in an orderly manner and with due regard to the economy’s overall debt servicing capacity.

  • Foreign loans/borrowings (including those in the form of bonds/notes/other debt instruments and those covered by derivatives transactions) as well as foreign currency loans from banks operating in the Philippines to be obtained by the public sector as well as the private sector that will be publicly-guaranteed.
  • Foreign loans/borrowings (including those in the form of bonds/notes/other debt instruments and those covered by derivatives transactions) of the private sector that are not publicly-guaranteed shall be registered with the BSP if these will ultimately be serviced with FX resources of AABs/AAB forex corps.
  • Prior Monetary Board approval shall be obtained for public sector foreign/foreign currency loans/borrowings.
  • Prior BSP approval, and registration with the BSP shall be obtained for private sector loans/borrowings if to be serviced with FX resources of AABs/AAB forex corps, shall be obtained for publicly-guaranteed private sector foreign/foreign currency loans/borrowings, including issuances.

Loans Not Requiring BSP Approval

  • Foreign loans/borrowings (including those in the form of bonds/notes/other debt instruments)/foreign currency loans (including interbank loans) that are not publicly-guaranteed obtained by private sector banks operating in the Philippines, as well as those obtained by private sector non-bank financial institutions with quasi-banking functions.
  • Short-term interbank borrowings.
  • Short-term foreign currency loans of the following from banks operating in the Philippines that are duly reported to the BSP:
    • Commodity and service exporters: provided these loans are used to finance export-related import costs of goods and services as well as peso cost requirements. Service exporters refer to Philippine residents engaged or proposing to engage in rendering technical, professional or other services which are paid for in FX. Indirect exporters may likewise borrow in foreign currency from banks operating in the Philippines to fund export-related costs in FX and pesos.
    • Producers/manufacturers, including oil companies and public utility firms: provided these loans are used to finance import costs of goods and services necessary in the production of goods by the borrower.

The following private sector loans shall not require prior BSP approval and subsequent registration; provided these are duly reported to the BSP by the borrower/creditor:

  • Foreign currency loans of resident borrowers from banks operating in the Philippines: provided the obligations are not publicly-guaranteed and are reported by the creditor bank to the BSP.
  • Short-term loans in the form of export advances from buyers abroad of resident exporters/borrowers.
  • Foreign obligations of residents under deferred letters of credit (L/Cs) or under documents against acceptance or open account (D/A-O/A) arrangements with a term of more than one (1) year that are not guaranteed by foreign governments/official export credit agencies.
  • Short-term trade loans of resident exporters/importers from OBUs and non-resident non-bank creditors that have been granted under BSP-reported lending programs.

2. FOREIGN EXCHANGE REGULATIONS
The country adopts a floating rate system where the determination of the peso to dollar exchange rate is left to market forces. The BSP occasionally intervenes in the foreign exchange market by selling or buying dollars with the intention of smoothing out sharp fluctuations in the exchange rate, providing indicative guidance and ensuring stability in the foreign exchange market.

3. REPATRIATION OF CAPITAL / PROFITS
As a general policy, foreign investments need not be registered with the BSP. The registration of a foreign investment with the BSP is only required if the foreign exchange needed to service the repatriation of capital and the remittance of dividends, profits and earnings shall be sourced from the AABs or their subsidiary/affiliate foreign exchange corporations. For purposes of registration, foreign investments may be in the form of:

  • foreign direct investment in Philippine firms or enterprises,
  • investments in peso-denominated government securities,
  • investments in securities listed in the Philippine Stock Exchange (PSE),
  • investments in peso-denominated money market instruments, and
  • investments in peso time deposits with AABs with a minimum maturity of ninety (90) days.

BSP-registered foreign investments enjoy full and immediate repatriation of capital and remittance of profits, dividends, and other earnings which accrue thereon.

4. OTHER SPECIAL REGULATION
Capital Exports
Regulations/institutional measures that limit capital or the outflow of foreign investment:

  • A Philippine resident may invest abroad without prior BSP approval if funded by the following:
    • their foreign currency deposit account’s (whether offshore or onshore); and/or
    • FX purchased from AABs or AAB-forex corps up to USD60 million or its equivalent in other foreign currency per investor per year, or per fund per year for qualified investors (QIs)
  • Investments by residents (except AABs) funded with foreign exchange purchased from AABs or AAB-forex corps in excess of the USD60 million limit per investor per year shall require prior approval by

The coverage, description and entitlement to incentives of the following listed activities shall be defined and clarified in the General Policies and Specific Guidelines to be issued by the Board of Investments (BOI).

1. PRIORITY/PROMOTED SECTORS OR INDUSTRIES UNDER THE 2017 INVESTMENT PRIORITIES PLAN
The government acknowledges the vital role of private sector in nation building thus highlighting the promotion of public-private partnership (PPP) projects in the current IPP.

A. Preferred Activities

  • All Manufacturing Activities including Agro-Processing
  • Agriculture, Fishery, and Forestry
  • Strategic Services
  • Healthcare Services including Drug Rehabilitation Centers
  • Mass Housing
  • Infrastructure and Logistics including LGU-PPPs
  • Innovation Drivers
  • Inclusive Business (IB) Models
  • Environment or Climate Change-Related Projects
  • Energy

B. Export Activities

  • Production and manufacture of export products
  • Service exports
  • Activities in support of exporters

C. Special Laws
This covers activities where inclusion in the IPP is mandated for purposes of incentives, as follows:

  • Industrial Tree Plantation (P.D. 705)
  • Exploration, Mining, Quarrying and Processing of Minerals (R.A. 7942) (limited to capital equipment incentive)
  • Publication or Printing of Books/Textbooks (R.A. 8047)
  • Refining, Storage, Marketing and Distribution of Petroleum Products (R.A. 8479)
  • Rehabilitation, Self-Development and Self-Reliance of Persons with Disability (R.A. 7277)
  • Renewable Energy (R.A. 9513)
  • Tourism (R.A. 9593)

2. INDUSTRY DEVELOPMENT PROGRAM
The Philippine government, through the Department of Industry-Board of Investments (DTI-BOI), collaborated with the private sector in crafting industry roadmaps covering the short, medium, and long term growth of their respective industries. These roadmaps are focused on building and enhancing competitiveness of Philippine industries and will be used as one of the major considerations in formulating the succeeding Investments Priorities Plan (IPP).

As of September 2018, the Philippines already implemented the following thirty seven (37) industry roadmaps:

  1. Automotive
  2. Automotive Parts
  3. Biodiesel
  4. Cements
  5. Ceramic Tiles
  6. Chemicals
  7. Copper Products
  8. Furniture
  9. Mass Housing
  10. Motorcycle
  11. Petrochemicals
  12. Rubber Products
  13. Tool and Die
  14. Electric Vehicles
  15. Electronics
  16. Iron and Steel
  17. IT-BPM
  18. Manufacturing
  19. Natural Health Products
  20. Pulp and Paper
  21. Plastics
  22. Aerospace
  23. IC Design
  24. Retirement
  25. Book Publishing
  26. Chocolate and
  27. Confectionaries – Tablea/Cacao
  28. Healthcare Services for Medical Travel and Wellness Tourism
  29. Printing
  30. Processed Fruits – Dried Mango
  31. Processed Shrimps/Prawns
  32. Seaweed/Carageenan
  33. Bamboo
  34. Coco Coir
  35. Gifts and Houseware
  36. Holiday Decors
  37. Meetings, Incentives, Conferences and Exhibition
  38. Metalcasting
  39. RESTRICTIONS
    Most Favored Nation Treatment
    The Philippines does not discriminate against any investment source economy.

National Treatment
As a general rule, the Philippines applies the principles of National Treatment on Investments except for those provided under its constitution and other laws.

The Foreign Investments Act (FIA) provides for the rules and regulations governing foreign investments without incentives. The law states that the domestic market is open to foreign investors as long as the activity is not included in the Foreign Investment Negative List (FINL). For an export enterprise, which exports 60% or more of its output, there are no restrictions on the extent of foreign ownership unless the activity falls within those provided under the FINL.

The current FINL, the 11th Regular Foreign Investment Negative List (EO No. 65 dated 29 October 2018), may be accessed at this website: http://www.officialgazette.gov.ph/downloads/2018/10oct/20181029-EO-65-RRD.pdf

[1] Contact centers and non-voice business processing activities that will be located in Metro Manila no longer be qualified for incentives availment with the Board of Investments under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, as amended, by year 2020.

1. INCOME TAX
Income Tax is a tax on a person’s income, emoluments, profits arising from property, practice of profession, conduct of trade or business or on the pertinent items of gross income specified in the Tax Code of 1997, as amended, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income, by the Tax Code or other special laws.

2. VALUE ADDED TAX
Value-Added Tax is a form of sales tax. It is a tax on consumption levied on the sale, barter, exchange or leases of goods or properties and services in the Philippines and on importation of goods into the Philippines. It is an indirect tax, which may be shifted or passed into the buyer, transferee or lessee of goods, properties or services.

3. PERCENTAGE TAX
Percentage tax is a business tax imposed on persons, entities, or transactions specified under Sections 116 to 127 of the National Internal Revenue Code of 1997 (also known as Tax Code), as amended, and as required under special laws.

4. DOCUMENTARY STAMP TAX
Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto.

5. EXCISE TAX
Excise tax applies to goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported.

6. REAL PROPERTY TAX
Real property tax is the tax levied on real property by the Local Government Unit (LGU).

7. TAX TREATIES
The Philippines has effective tax treaties with thirty-seven (41) countries namely, Australia, Austria, Bahrain, Bangladesh, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Indonesia, Israel, Italy, Japan, Korea, Kuwait, Malaysia, Netherlands, New Zealand, Nigeria, Norway, Pakistan, Poland, Qatar, Romania, Russia, Singapore, Spain, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States of America, and Vietnam.

1. CONDITIONS FOR THE APPROVAL OF FOREIGN EMPLOYEES (MANAGERIAL, SUPERVISOR, UNSKILLED)
Foreign nationals who wish to come to the Philippines can enter as a tourist without visa under EO No. 408, or secure a temporary visitor’s visa under Section 9(a) of the Philippine Immigration Act, as amended, before any Philippine consular posts abroad. Section 9(a) visa can either be for business, pleasure, or health. Foreign nationals admitted under E.O. No. 408 (non-visa required nationals admitted for 30 days) may extend their stay in the Philippines beyond 30 days through the application of visa waiver entitling them to an additional valid stay of 29 days. This will allow them to stay in the country for a period of 59 days. Foreigners holding a temporary visa pursuant to Philippine Immigration Act and EO No. 408 may extend beyond the 59-day period every two months for a total stay of not more than twenty-four (24) months for visa-required nationals and thirty-six (36) months for non-visa required nationals. Foreign nationals whose stay will exceed 59 days must secure extensions of stay with the Bureau of Immigration (BI).
While in the Philippines, the BI may allow the alien to convert his immigration status from tourist/temporary visitor to another visa category without the necessity of leaving the country to secure the new visa.

WORK PERMIT PROCESSING AND REQUIREMENTS (MANAGERIAL, SUPERVISOR, UNSKILLED)
Alien Employment Permit (AEP)
Article 40 of the Labor Code provides that any alien seeking admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the Department of Labor and Employment. An Alien Employment Permit (AEP) is a document issued by the Department of Labor and Employment authorising a foreign national to work in the Philippines.

Foreign nationals required to apply for an AEP:

  • All foreign nationals who intend to engage gainful employment in the Philippines

Exempted from securing an AEP:

  • Members of the diplomatic services and foreign government officials accredited by the Philippine government
  • Officers and staff of international organisations of which the Philippine government is a cooperating member, and their legitimate spouses desiring to work in the Philippines
  • Owners and representatives of foreign principals whose companies are accredited by the Philippine Overseas Employment Agency (POEA), who come to the Philippines for a limited period and solely for the purpose of interviewing Filipino applicants for employment abroad
  • Foreign nationals who come to the Philippines to teach, present and/or conduct research studies in universities and colleges as visiting, exchange or adjunct professors under formal agreements between universities or colleges in the Philippines and foreign universities or colleges; or between the Philippine government and foreign government; provided that the exemption is on a reciprocal basis
  • Permanent resident foreign nationals and probationary or temporary resident visa holders under Section 13 (a-f) of the Philippine Immigration Act of 1995 (RA 7917)
  • Refugees and Stateless Persons recognized by DOJ pursuant to Article 17 of the UN Convention and Protocol Relating to status of Refugees and Stateless Persons
  • All foreign nationals granted exemption by law

Excluded from securing an AEP:

  • Members of the governing board with voting rights only and do not intervene in the management of the corporation or in the day to day operation of the corporation
  • President and Treasurer, who are part-owner of the company
  • Intra corporate Transferee who is a manager, executive or specialist and an employee of the Foreign Service supplier for at least 1 (one) year continuous employment prior to deployment to a branch, subsidiary, affiliate or representative office in the Philippines
  • Contractual service supplier who is a manager, executive or specialist and an employee of a Foreign Service supplier which has no commercial presence in the Philippines
  • Representative of the Foreign Principal/Employer assigned in the Office of Licensed Manning Agency (OLMA) in accordance with the POEA law, rules and regulations

Multiple Entry Visa Holder Requirements
The expatriates of BOI-registered firms who qualify for special non-immigrant visa under Section 47(a)(2) of the Philippine Immigration Act may apply for multiple entry visa by securing Emigration Clearance Certificate (ECC) and multiple Special Return Certificate (SRC) before departure from the Philippines with the Bureau of Immigration. ECCs serve as their Exit Clearance while SRC’s enable them to be admitted upon their return to the country under the same category when they left.

Any alien, except nationals classified restricted by the Department of Foreign Affairs and who meets the following qualifications may be issued the following types of visas:

  • Special Investors Resident Visa (SIRV): Investment of at least US$75,000; holder may reside in the Philippines as long as the investment exists; applicable to spouse and unmarried children under 21
  • Pre-arranged Employment Visa under Sec. 9(g): Employment in any technical, executive or managerial position
  • International Treaty Investors Visa under Sec. 9(d): Investment of at least US$120,000; available only to Germans, Japanese and Americans
  • Special Non-Immigrant Visa under PD No. 1034: For foreign personnel of offshore banks licensed by BSP; multiple entry and exempt from immigration fees and fingerprinting
  • Special Non-Immigrant Visa under Sec. 47(a)(2): For EO No. 226 and RA No. 7916-registered enterprises, allowing foreign nationals in supervisory, technical or advisory positions during the first five years of registration; may employ foreign nationals as President, Treasurer, and General Manager beyond five years
  • Special Non-Immigrant Visa under RA No. 8756: Multiple entry visas to executives of Regional Headquarters or Regional Operating Headquarters of Multinational Companies
  • Special Subic Work Visa: For foreign nationals employed by Subic Bay Freeport Locators; valid for employment contract duration and extendible

Regulations relating to personnel management of foreign firms, e.g. minimum wage laws, minimum requirements for training or employment of local staff:

  • The Wage Rationalization Act (RA No. 6727, effective July 1989) created regional tripartite wage and productivity boards to determine and fix minimum wage rates on the regional, provincial and industry levels
  • The Labor Code of the Philippines sets the minimum conditions of employment in its Book III and the health, safety and social welfare benefits in its Book IV
  • The Occupational Safety and Health Standards promulgated pursuant to Article 162 of the Labor Code prescribe the different rules for the protection of workers from workplace hazards

Regulation on Acquisition of Land and Building
1. LAND OWNERSHIP
Ownership of alienable lands of public domain is limited to Filipino citizens and corporations or associations with at least 60 percent capital stock outsanding is owned by such citizens.

2. LEASE OF LAND
Any foreign investor investing in the Philippines shall be allowed to lease private lands for a period of fifty (50) years, renewable for another period of twenty-five (25) years in accordance with domestic laws and subject to certain conditions. The leased land shall be used solely for purposes of investment.
Any foreign investor may also own a condominium project, or membership or shareholdings in a corporation. They are also allowed to acquire condominium units and shares in a condominium corporation up to not more thatn 40 percent of the total and outstanding capital stock of a Filipino-owned or controlled condominium corporation.

Investment Promotion Agencies (IPAs) and Agencies Involved in the Registration of Investments and the Granting of Incentives.

Agency
Contact Person/Address/Telephone/Fax

Board of Investments (BOI)
Ms. Ma. Corazon Halili-Dichosa
Executive Director, Industry Development Services
Industry & Investments Bldg.
385 Gil J. Puyat Ave., Makati City
Tel: (63 2) 895-3983
Fax: (63 2) 895-3978
E-mail: MCHDichosa@boi.gov.ph
Website: www.boi.gov.ph
or
Atty. Bobby G. Fondevilla
Director
Investments Assistance Service
Board of Investments
G/F Industry and Investments Bldg.
385 Sen. Gil Puyat Avenue, Makati City
Tel: (632) 895-3989
Email: BGFondevilla@boi.gov.ph

Department of Trade and Industry–National Capital Region (DTI-NCR)
Anacleto C. Blanco Jr.
Regional Director
2F Metro House Bldg. 345 Sen. Gil J. Puyat Ave., Makati City
Tel: (632) 811-8277
Fax: (632) 811-8271
E-mail: NCR@dti.gov.ph
or
Ms. Corona Olivia Rivera
Division Chief, Enterprise Development Division
Tel: (632) 811-8232

Securities and Exchange Commission (SEC)
Emilio B. Aquino
Chairperson
Secretariat Building, PICC Complex, Roxas Boulevard, Pasay City, 1307
Tel: (632) 818-5343 loc. 205 or 818-5767 loc. 229
Email: ebaquino@sec.gov.ph
Website: www.sec.gov.ph
or
Atty. Ferdinand B. Sales
Director, Company Registration and Monitoring Department
Tel: (632) 818-5811
Email: fbsales@sec.gov.ph

Philippine Economic Zone Authority (PEZA)
Ms. Charito B. Plaza
Director General
Building 5, DOE-PNOC Complex, Energy Center, 34th Street, Bonifacio Global City, Taguig City, Metro Manila 1634
Tel: (632) 551-3454/55 or 551-3432
Fax: (632) 891-6380
E-mail: odg@peza.gov.ph
Website: www.peza.gov.ph

Subic Bay Metropolitan Authority (SBMA)
Atty. Wilma T. Eisma
Chairperson and Administrator
Building 229, Waterfront Road, Subic Bay Freeport Zone, Subic Zambales, Olongapo City
Tel: (6347) 252-4381
Fax: (6347) 252-3014
E-mail: wteisma@sbma.com
Website: www.sbma.com

Clark Development Corporation (CDC)
Mr. Noel F. Manankil
President and CEO
Bldg. 2122, C.P. Garcia St., Clark Freeport Zone, Pampanga
Tel: (6345) 599-9000 loc. 102/103/104
Fax: (6345) 599-2507
E-mail: noel.manankil@clark.com.ph
Website: www.clark.com.ph

Bases Conversion Development Authority (BCDA)
Mr. Vivencio Dizon
President and CEO
2nd Floor, Bonifacio Technology Center, 31st Street Corner 2nd Avenue, Bonifacio Global City, Taguig City, Philippines, 1634
Tel: (632) 816-0915 / 575-1703
Fax: (632) 816-0915
Email: vbdizon@bcda.gov.ph
Website: www.bcda.gov.ph

Cagayan Economic Zone Authority (CEZA)
Mr. Raul L. Lambino
Administrator & CEO
10th Floor Greenfield Tower, William St. cor. Mayflower St., Greenfield District, Mandaluyong City
Tel: (632) 370-5627 / (632) 370-5476 / (632) 370-5519
E-mail: info@ceza.gov.ph
Website: www.ceza.gov.ph

PHIVIDEC Industrial Authority
Atty. Franklin Quijano
Administrator
Administration Bldg, Mindanao Container Terminal Complex, Tagoloan, Misamis Oriental 9001
Tel: (088) 567-0315 loc. 215
Fax: (088) 567-0243
E-mail: oapia@piamo.gov.ph
Website: www.piamo.gov.ph

Philippine Retirement Authority (PRA)
Atty. Bienvenido K. Chy
CEO
29th Floor Citibank Center, 8741 Paseo de Roxas, Makati City
Tel: (632) 848-1412 loc. 2002
E-mail: ogm.pra@gmail.com; ogm@pra.gov.ph
Website: www.pra.gov.ph

Zamboanga City Special Economic Zone Authority (ZCSEZA)
Mr. Christopher Lawrence S. Arnuco
Chairman and Administrator
San Ramon, Zamboanga City
Telefax: (63 62) 991-3155
Email: zamboecozone.arnuco@gmail.com; oca.zcseza@gmail.com
Website: www.zfa.gov.ph

Aurora Pacific Economic Zone and Freeport Authority (APECO)
Mr. Israel F. Maducdoc
President and CEO
1 Corporate Campus, Sitio Motiong, Barangay Esteves, Casiguran, 3204 Aurora
Manila Office: 4th Floor, Unit 2C, One Ecom Building, Ocean Drive, MOA Complex, Pasay City
Tel: 737-9391
Email: izra112005@yahoo.com

Authority of the Freeport Area of Bataan (AFAB)
Mr. Emmanuel D. Pineda
Chairman and Administrator
2/F AFAB Administration Bldg., Freeport Area of Bataan, Mariveles, Bataan
Tel: (6347) 935-4004 loc. 8002 / 8021
Fax: (6347) 935-4004 loc. 8002
Email: emmy.pineda@afab.gov.ph
Website: www.afab.gov.ph

John Hay Management Corporation (JHMC)
Mr. Allan Garcia
President and CEO
John Hay Special Economic Zone, Camp John Hay, Baguio City
Tel./Fax: (6374) 444-5823
Email: allan.garcia@jhmc.com.ph
Website: www.jhmc.com.ph

Mindanao Development Authority (MINDA)
Mr. Datu Abul Khayr Dangcal Alonto
Chairperson
Old Davao Airport Terminal Building, Old Davao Airport Road, Sasa, Davao City
Telefax: (6382) 221-6929
Email: ak.alonto@minda.gov.ph
Website: www.minda.gov.ph

Poro Point Management Corporation (PPMC)
Atty. Felix S. Racadio
President and CEO
Gov. Joaquin Ortega Avenue, Poro Point, San Fernando City, La Union
Tel.: (6372) 242-4016
Fax: (6372) 242-0683
Email: sherwinrigorppmc@yahoo.com
Website: www.poropointfreeport.gov.ph

Regional Board of Investments–ARMM (RBOI-ARMM)
Atty. Ishak Mastura
Chairman and Managing Head
RBOI Bldg., ARMM Complex, Cotabato City
Telefax: (6364) 421-9202
Email: ishakmastura@gmail.com
Website: www.rboi.armm.gov.ph

Tourism Promotions Board
Ms. Marie Venus Tan
COO
4th Floor, Legaspi Towers, 300 Roxas Boulevard, Manila
Tel.: 525-9318 loc. 201 / 202 / 205
Fax: 521-6165
Email: info@tpb.gov.ph
Website: www.tpb.gov.ph

Tourism Infrastructure and Enterprise Zone Authority
Mr. Pocholo Paragas
COO and General Manager
6th & 7th Floors, Tower 1 Double Dragon, Meridian Tower, Diosdado Macapagal Ave. cor. EDSA Extension, Pasay City
Tel: (02) 512-0462
Email: ocoo@tieza.gov.ph
Website: www.tieza.gov.ph

All agencies that process investment applications and grant incentives are also responsible for handling complaints and related appeals thereon. In addition, the Office of the Resident Ombudsman can receive and act on reports or complaints against officials and employees of the above agencies.

Participative Environment
The Philippines encourages participation of the private sector in its actions as part of the democratic process. As required by most of the country’s laws, public hearings or consultations are conducted in the formulation of policies and in the enactment of laws (e.g., investment liberalisation laws). The private sector and civil society are also represented in certain government councils/committees.

Relevant investment legislation

The Thailand Board of Investment (BOI) is a government agency under the Office of the Prime Minister. Its main roles and responsibilities are to promote investment. The Thailand Board of Investment prescribes the investment promotion policies which grant investment incentives under Investment Promotion Act B.E. 2520 (1977), Amendment Acts No. 2 B.E. 2534 (1991), No. 3 B.E. 2544 (2011) and No. 4 B.E. 2560 (2017).

In order to obtain investment incentives, the BOI applicant must follow the conditions prescribed by the Thailand Board of Investment as specified in the BOI promotion certificate in which the Tax and Non-Tax incentives will be granted.

According to the Announcement of the Board of Investment No.2/2557 (2/2014) announced on December 3, 2014, BOI classifies criteria for granting investment incentives into 2 groups which are Activity-based Incentives and Merit-based Incentives and enforced on BOI applications submitted from January 1, 2015 onward.

Full details of updated relevant information on investment promotion, including the above Announcements on investment promotion policy can be found on the Thailand Board of Investment (BOI) website www.boi.go.th

For information about doing business in Thailand, choose “Resource Center” followed by “Publications” and then “A Business Guide to Thailand.”
For information about BOI, choose “Resource Center” followed by “Publications” and then “A Guide to the Board of Investment.”

1. INVESTMENT ACT
Investment Promotion Act B.E. 2520 (1977), as amended by the Investment Promotion Act (Revision 2) B.E. 2534 (1991), the Investment Promotion Act (Revision 3) B.E. 2544 (2001) and Investment Promotion Act (Revision 4) B.E. 2560 (2017) sets forth tax and non-tax incentives for both local and foreign investors in activities and areas promoted by the Government. Further information on incentives could be found at BOI website (choose “Investment Promotion,” then “Investment Promotion Criteria and Incentives” and subsequently “Incentives”):
https://www.boi.go.th/index.php?page=incentive&language=en

2. COMPANIES ACT
Under Thai law there are various forms of business. Partnerships and private limited companies are registered according to the provisions of the Civil and Commercial Code. The operation of a public limited company is addressed under the provisions of the Public Limited Company Act. Cooperatives are under the Cooperative Act.

A concise account of Types of Business Organizations can be found on BOI website www.boi.go.th in “A Business Guide to Thailand” Chapter 1: Procedures for Establishing a Company.

See also Type of Business Organization in the website of Department of Business Development; choose “Type of Business Organization” under “Business Registration”:
www.dbd.go.th/dbdweb_en/news_view.php?nid=3975

The Factory Act of 1969 (amended in 1972, 1975, 1979 and 1992)
The Factory Act stipulates regulations for factory construction, operation and expansion, and safety requirements. The latest revision of the Act also imposes strict controls on industrial pollution. The Act is administered by the Ministry of Industry.

The following websites provide information on Thailand business laws:

Industrial Estate Authority of Thailand Act
The Industrial Estate Authority of Thailand Act B.E.2522 (1979) was enacted by the Industrial Estate Authority of Thailand (I-EA-T). To improve effectiveness and efficiency as a potential and performance-enhancing tool for investors and operators in industrial estates, the Act was amended and re-enacted as the Industrial Estate Authority of Thailand Act B.E.2550 (2007) to meet the needs of today’s dynamic marketplace and obligations under World Trade Organization (WTO) agreements.
www.ieat.go.th

3. BUSINESS NAMES ACT
Steps for company registration are as follows:

  • Corporate Name registration
  • Filing a Memorandum of Association
  • Convening a statutory meeting
  • Registration
  • Registering for tax document
  • Registering for Employer account under the Social Security Act

The first step of the company registration process is the reservation of the company’s name. To reserve the name, one of the promoters is required to submit a signed Name Reservation Form to the Department of Business Development of the Ministry of Commerce.

A promoter is required to supply the requested company name together with two alternate names. The registrar will then examine the application in order to ensure that:

  • No similar company names have previously been reserved
  • The names do not violate any ministerial rules

If the applicant’s intended name is in conflict with either of the above, that name will be rejected, and the registrar will consider the alternative names submitted. This process can normally be completed within two or three days. If all three names submitted are rejected the applicant will be required to re-submit the form with three new names.

The registrar has considerable discretion with regard to the consideration of company names. Many times, the first name or even the first two names are rejected for violating one of the two rules stated above. Once approved, the corporate name reservation is valid for 30 days, with no extensions.

For a brief account on the registration process, please refer to Chapter 1: Procedures for Establishing a Company in “A Business Guide to Thailand” on the BOI website www.boi.go.th
See also “Business Registration” on the website of Department of Business Development:
www.dbd.go.th/dbdweb_en/main.php?filename=index

4. MINIMUM INVESTMENT LEVEL
According to Foreign Business Act B.E. 2542 (1991), the minimum capital requirement for foreign company in general is 2 million baht and 3 million baht for foreign company operating business under List 2 or List 3 of the Act.

For more information, please contact:
Department of Business Development
44/100 Nonthaburi 1 Rd., Bangkrasor, Muang Nonthaburi
11000 Thailand
Tel (+662) 528-7600
Website: www.dbd.go.th

5. OTHER RELATED INVESTMENT LEGISLATION
The 1972 Alien Business Law was replaced with The Foreign Business Act B.E. 2542 (1999). The Act, which is more liberal, entered into force on 3 March 2000. It provides the lists of prohibited and restricted businesses, namely, List 1, List 2, and List 3. It introduces the minimum capital requirement for businesses; both listed and not listed in the Act.

The Act regulates the activities in which companies designated as “foreign” may engage in. While some activities are completely prohibited, some may be engaged in with prior approval from a designated government agency, and some do not require any special approval at all.

According to the Act, a company is foreign if it is registered under the laws of:

  • another country (including all branches, representative offices, and regional offices of overseas companies opening in Thailand).
  • Thailand, and 50 percent or more of its shares are held by non-Thais (individuals or business entities).

The Foreign Business Act of 1999 has identified three lists of activities in which foreign participation may be prohibited or restricted.

Activities stated in List 1 are designated as “business not permitted for foreigners to operate due to special reasons.” Foreign companies are completely restricted from engaging in the activities contained in List 1.

Activities stated in List 2 are designated as “business related to national safety or security, or affecting arts and culture, traditional and folk handicraft, or natural resources and environment.” Foreign companies can operate business in the activities stated in List 2 only where not less than forty percent of its shares are held by Thai nationals or juristic persons which are not foreigners under this Act, otherwise, they are approved with prior Cabinet approval.

Activities stated in List 3 are designated as “business in which Thai nationals are not yet ready to compete with foreigners.” To engage in activities stated in List 3, the foreign company must apply for and obtain a Foreign Business License prior to commencing the activities.

For List 2 or List 3, a foreign company may obtain an exemption from the above stated rule if it is promoted under the Investment Promotion Act or permitted under the law governing Industrial Estate Authority of Thailand or other laws.

The three Lists mentioned in the Foreign Business Act could be obtained from the following website address:
www.dbd.go.th/dbdweb_en/more_news.php?cid=329

Alternatively, please refer to Chapter 5 of “A Business Guide to Thailand” at the BOI website.

Note: the official collection of all Thai laws is also available in Thai language at the website of the Office of the Council of State
www.krisdika.go.th

Office of the Council of State
1 Phra Arthit Road, Khet Phranakorn
Bangkok 10200
Tel: (+662) 222 0206 – 9
Fax: (+662) 226 3612, (+662) 226 6102

Some of Thailand’s important sector-specific laws include the following sectors:

The Lists in Foreign Business Act, Air Transport, Banking, Education, Finance Companies, Food and Drugs, Insurance, Maritime Transport, Mining, Road Transport Service, Telecommunications, Tourism, Real Estate, Cinema, Tobacco Product, Playing Cards.

1. AGENCY INVOLVED IN ADMINISTERING INVESTMENT APPLICATIONS AND GRANTING OF INCENTIVES
The Thailand Board of Investment (BOI)
The BOI is the government agency responsible for promoting investment in Thailand.

2. CONDITIONS INCLUDING TIMETABLE FOR PROCESSING OF APPLICATIONS
To qualify for incentives, an investor shall file its application with the Office of the Thailand Board of Investment (OBOI). A wide range of activities including both manufacturing and service sectors are eligible for promotion.
The approval process will normally take 15-60 working days from the submission of the complete project application documentation, for projects with investment value under 2,000 million baht, and 90 working days for larger projects.
Please refer to BOI’s website for Procedures to Apply for BOI Promotions
https://www.boi.go.th/index.php?page=pdf_page&menu_id=604&language=en
and for BOI’s application form
https://www.boi.go.th/index.php?page=form_app2&language=en

3. SPECIAL SERVICES FOR EXPEDITING APPLICATIONS
BOI Thailand offers one-stop services including:

The Investment Services Center
Investment Services Center assists in setting up a business, provides advice, suggestions, and investment information to help investors locate appropriate investment opportunities and provide useful information for making investment decisions. Also, the Foreign Expert Services Unit under Investment Services Center provides both foreign and Thai companies with expedited services related to bringing in expatriates to work on BOI-promoted project by coordinating with a One-Stop Service Center for Visas and Work Permits.
The Investment Services Center is located at:
Office of the Board of Investment
555 Vibhavadi-Rangsit Road, Chatuchak
Bangkok 10900, Thailand
Tel: +66 (0) 2553-8216
Fax: +66 (0) 2553-8222, +66 (0) 2553-8316
Website: www.boi.go.th
Email: head@boi.go.th

One Start One Stop Investment Center (OSOS)
The One Start One Stop Investment Center or OSOS started its operation in November 2009. Its presence offers investors greater convenience in dealing with multiple agencies located throughout Bangkok. The OSOS, which operates as a part of the Thailand Board of Investment, brings together staff from investment-related agencies at one location on the 18th floor of the Chamchuri Square Building in Bangkok’s Central Business District. For businessmen interested in investing in Thailand, Thai or foreign, big or small, BOI-promoted or not, the One Start One Stop Investment Center offers investors a wide range of investment-related services.
To begin with, OSOS offers advice to investors on how to establish company in Thailand. Investors can consult with representatives from related agencies on what is needed to register a company, obtain investment promotion privileges, obtain a foreign business license, complete an environment impact assessment, request permission to use land for industrial operation, obtain utilities etc.
One Start One Stop Investment Center (OSOS) is located at:
18th Floor, Chamchuri Square Building,
319 Phayathai Road, Pathumwan
Bangkok 10330, Thailand
Tel: +66(0)2 209 1100
Fax: +66(0)2 209 1199
Email: osos@boi.go.th

Industrial Linkage Development Division (ILDD)
The Industrial Linkage Development Division or ILDD is upgraded from the BOI Unit for Industrial Linkage Development or BUILD under Thailand Board of Investment (BOI) to support industrial linkages and use of industrial parts manufactured in Thailand. BUILD services offer channels to connect competitive Thai small and medium enterprises (SMEs) and large manufacturers with parts and components suppliers.
Also, ILDD will continue to encourage growth in supporting industries in Thailand through providing information on subcontracting opportunities by linking parts suppliers with the right manufacturers. ILDD also assists Thai SMEs to achieve industrial standards required for entering into productive subcontracting arrangements. With its extensive database on subcontractors in Thailand, ILDD is now your best partner to provide sourcing and business matching services. With these services, firms can be assured that their procurement process is well facilitated while saving production costs and time spent in finding domestic parts manufacturers.
ILDD will further strengthen its activities by organizing seminars, workshops, and networking forums in targeted industries of Thailand to provide in-depth information and help support Thai SMEs to be part of global supply chain of the growing next generation industries.
Industrial Linkage Development Division or ILDD is located at:
Office of the Board of Investment
555 Vibhavadi-Rangsit Road, Chatuchak
Bangkok 10900, Thailand
Tel: +66(0)2 553 8111
Fax: +66(0)2 553 8325
E-Mail: build@boi.go.th
Website: www.build.boi.go.th

4. PROCEDURES FOR UTILIZATION OF PROMOTIONAL PRIVILEGES OF BOI PROMOTED PROJECTS
In order to make the work of the Office of the Thailand Board of Investment (BOI) faster and more efficient, so as to better facilitate promoted investors, the BOI has laid out procedures for applying and implementing promotion privileges, according to the BOI announcement No.1/2553 regarding the “Time Frame for Investment Promotion Procedures”.
Source: www.boi.go.th/index.php?page=procedures&language=en

1. FOREIGN EXCHANGE REGIME
The Exchange Control Act, B.E. 2485 (A.D. 1942), as amended, governs all matters involving foreign exchange. In general, the Bank of Thailand is in charge of foreign currency regulations, permission and requirements. Since 1990, the Bank of Thailand has considerably liberalized capital transfer of foreign investors. Foreign investors can bring in capital to invest in Thailand without any restrictions and repatriate capital and earnings freely by presenting documents as identified in the Act.

Since July 1997, Thailand has adopted the managed-float exchange rate regime, which is also consistent with the inflation targeting regime that has been in place since 2000. Under the inflation targeting framework and the managed-float, the value of the baht is allowed to be determined by market forces, reflecting demand and supply for the baht in the foreign exchange market.

Under the managed float, the Bank of Thailand:
(1) does not target a fixed level for the exchange rate,
(2) stands ready to intervene in the case of excess volatility, particularly resulting from speculative capital flows, in a manner consistent with the Bank’s inflation targeting framework.

In some instances, however, supply and demand may be at a disequilibrium, leading to excessive volatility in the value of the baht. The Bank of Thailand aims to ensure that the value of the baht is allowed to fluctuate under the following conditions:

  • the Bank of Thailand stands ready to intervene in the foreign exchange market such that volatility of the exchange rate is at a level that the economy can tolerate,
  • maintaining national competitiveness, as measured through the Nominal Effective Exchange Rate (NEER), which comprises currencies of important trading partners and not just the US Dollar,
  • any intervention does not go against economic fundamentals which would otherwise lead to further imbalances.

The Bank of Thailand Act, B.E. 2551 (2008) enacted on 3 March states the Bank of Thailand’s objectives and responsibilities as the nation’s central bank, in maintaining monetary stability, stability of the financial system, and stability of the payments system.

For further information on the transfer of capital, please contact:
Bank of Thailand (Headquarter)
273 Samsen Road, Watsamphraya,
Phra Nakhon District, Bangkok 10200 Thailand
Tel: (+662) 283-5353
Fax: (+662) 280-0449, (662) 280-0626
Website: www.bot.or.th

2. EXPROPRIATION AND COMPENSATION
Under the Immovable Property Expropriation Act, B.E. 2530 (1987), the Thai Government may acquire land for the purposes of providing necessary public utility, national defense, acquisition of natural resources, town and city planning, the development of agriculture and industry, land reform or other public purposes. The Act also provided for payment of compensation to the owners of such lands and injured persons as prescribed by law.

Expropriation and compensation provision is usually included in Bilateral Investment Treaties (BITs) and Free Trade Agreements (FTAs) with investment protection provisions. It provides for compensation equivalent to the fair market value of the expropriated investment at the time when the expropriation was publicly announced or when the expropriation occurred, whichever is earlier.

The Investment Promotion Act B.E. 2520 (1977) provides investment projects promoted by the Thailand Board of Investment with guarantees against:

  • nationalization
  • competition from new state enterprises
  • monopolization of sales of similar products
  • price control
  • export restrictions
  • duty-free imports by government agencies or state enterprises

Foreigners can acquire land ownership in Thailand for business purposes in accordance with four Thai laws, namely: the Land Code, the Investment Promotion Act B.E. 2520 (1977), the Industrial Estate Authority of Thailand Act B.E. 2522 (1979) and the Petroleum Act B.E. 2514 (1971). Further, foreigners can also own land in Thailand for residential purpose in accordance with the Land Code and the Investment Promotion Act B.E. 2520 (1977).

The Board of Investment Announcement No. 1/2551 effective June 2, 2008 permits foreign promoted juristic entities to own land as follows:

  • Office of promoted entity – must not exceed 5 rai
  • Residences of executives or experts – must not exceed 10 rai
  • Residences of employees – must not exceed 20 rai

Under the 1999 amendment to the Land Code, foreigners who invest a minimum of 40 million Baht are permitted to buy up to 1,600 square meters of land for residential use, with the permission of the Ministry of Interior.

3. INVESTMENT GUARANTEE AGREEMENTS
Since October 2000, Thailand has become a full member of the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group that promotes cross-border investment in developing countries by providing guarantees (political risk insurance and credit enhancement) to investors and lenders.

MIGA guarantees protect investments against noncommercial risks and can help investors obtain access to funding sources with improved financial terms and conditions.

For more information please visit www.miga.org

4. INTELLECTUAL PROPERTY RIGHTS (IPR)
The following laws govern intellectual property rights in Thailand:

  • Trademark Act B.E. 2534 (1991), amended by Trademark Act (No.2) B.E. 2543 and Trademark Act (No.3) B.E. 2559
    Provides legal protection through registration of: trademark, service mark, certification mark, collective mark.
  • Copyright Act B.E. 2537 (1994), amended by Copyright Act (No.2) B.E. 2558 (2015) and Copyright Act (No.3) B.E. 2558 (2015)
    Protects literary, artistic works and performance rights. Includes software, audiovisual, musical, literary, dramatic, scientific, and artistic works. Copyright lasts lifetime of the creator plus 50 years, or for juristic persons, 50 years from creation/publication; applied artistic works last 25 years.
  • Patent Act B.E. 2522 (1979), amended by the Patent Act (No.2) B.E. 2535 and Patent Act (No.3) B.E. 2542
    Protects inventions, product designs, and pharmaceuticals. Thailand is a party to the Paris Convention (since 2008) and Patent Cooperation Treaty (since 2009).
    Patent terms: invention patent – 20 years, petty patent – 6 years (extendable twice for 2 years each), design patent – 10 years.

For details:
Department of Intellectual Property
563 Nonthaburi 1 Rd., Bangkrasor, Muang Nonthaburi 11000 Thailand
Tel: (+622)-547-4621-25
Website: www.ipthailand.go.th/en/home-eng.html

5. DISPUTE SETTLEMENT
Disputes between State/Government and State/Government
BITs and FTAs with investment protection provisions, including the ASEAN Comprehensive Investment Agreement (ACIA), usually contain provisions on State-to-State dispute settlement regarding application and interpretation.

Disputes between State/Government and Private Entities
Under BITs and FTAs, Thailand has provided for international arbitration as a dispute settlement mechanism under UNCITRAL, ICSID, or other arbitration rules.

Alternative Dispute Resolution
The Office of the Judiciary is the primary agency for promoting and supporting the judicial administration of the Courts of Justice in Thailand. This includes collaboration with other agencies to support alternative dispute resolution (ADR), including mediation, conciliation, and arbitration. The Office of Judicial Affairs and the Thai Arbitration Institute (TAI) are the two main divisions under the Office of the Judiciary in charge of ADR.

Previous conditions on exports and use of local materials are repealed so that the criteria for promotion will be in line with international trade and investment agreements.

Under the Foreign Business Act (FBA) referred to in section 1 (v), foreign investors who are permitted to operate businesses in Lists 2 or 3 with foreign majority ownership may be requested to comply with certain conditions.

Under the Investment Promotion Act B.E. 2520 (1977), as amended by the Investment Promotion Act (No.2) B.E. 2534 (1991), the Investment Promotion Act (No.3) B.E. 2544 (2001), and the Investment Promotion Act (No.4) B.E. 2560 (2017), the BOI may stipulate conditions in the promotion certificate for compliance by the promoted person in one or more areas.

In 2000, the Ministry of Industry and the Board of Investment lifted the local content requirement to align with the TRIMs Agreement under the WTO.

The new investment promotion policy launched by the Board of Investment on August 1, 2000 abolished both the local content and export requirements for investment promotion.

1. EQUITY REGULATIONS
To relax the limitations on foreign shareholdings in manufacturing activities and to facilitate investors in their investment, the BOI set up the following criteria for foreign shareholding in projects that apply for investment promotion:

  • For projects in activities under List One annexed to the Foreign Business Act, B.E. 2542, Thai nationals must hold shares totaling not less than 51% of the registered capital.
  • For projects in activities under List Two and List Three annexed to the Foreign Business Act, B.E. 2542, there are no equity restrictions for foreign investors except as specified in other laws.
  • The Board may set foreign shareholding limits for certain activities eligible for investment promotion, as deemed appropriate.

Note: Please refer to “A Guide to the Board of Investment” available on BOI’s website: www.boi.go.th/upload/content/BOI-A Guide_EN.pdf
See also Section VIII.3 for equity requirements on activities in List 2 and List 3 of the Foreign Business Act if they are not exempted either under BOI, IEAT or other laws.

2. CONDITIONS/RESTRICTIONS
According to the Foreign Business Act B.E. 2542 (1999), businesses are classified into 3 categories:

  • List 1: Consists of businesses strictly prohibited to aliens.
  • List 2: Prohibited to aliens unless permission is granted by the Commerce Minister by and with the resolution of the Cabinet. Alien juristic entities allowed to engage in the businesses in List 2 must meet the following 2 qualifications:
    • At least 40% of all the shares are held by Thai persons or non-alien juristic entities. (The minimum threshold may be lowered to 25% given reasonable grounds.)
    • Two-fifths of the members of the Board of Directors are Thai.
  • List 3: Prohibited to aliens unless permission is granted by the Director-General of the Department of Business Development, Ministry of Commerce, by and with approval of the Foreign Business Board.

An alien can engage in businesses in List 2 and/or List 3 if they are a promoted investor in accordance with either the Investment Promotion Act, Industrial Estate Authority of Thailand Act, or other laws.

To obtain information on the three lists, please refer to the Department of Business Development’s website: www.dbd.go.th
The lists are in the last part of the Foreign Business Act.

See also Chapter 5: Legal Issues for Foreign Investors in “A Business Guide to Thailand 2019” on BOI’s website for more information on the Foreign Business Act of 1999 and Activities Restricted to Thai Nationals.

1. Activity-Based Incentives
The Board classifies 2 groups of incentives based on the importance of activities:

  • Group A: Activities that receive corporate income tax incentives, machinery and raw materials used in production for export import duty incentives, and other non-tax incentives. This group is divided into 4 subgroups:
    • A1: Knowledge-based activities focusing on R&D and design to enhance the country’s competitiveness.
    • A2: Infrastructure activities for the country’s development, activities using advanced technology to create value-added, with no or very few existing investments in Thailand.
    • A3: High technology activities important to the country’s development, with a few investments already existing in Thailand.
    • A4: Activities with lower technology than A1–A3 but which add value to domestic resources and strengthen the supply chain.
  • Group B: Activities that receive only machinery and raw materials used in production for export import duty incentives, and other non-tax incentives. This group is divided into:
    • B1 and B2: Supporting industries that do not use high technology but are important to the value chain.

2. Merit-Based Incentives
These incentives are designed to attract and stimulate more investment or spending on activities that benefit the country or industry as a whole.

2.1 Merit on competitiveness enhancement
Additional tax incentives are offered to projects with qualified investments or expenditures such as:

Research and development in technology and innovation (in-house R&D, outsourcing in Thailand, or joint R&D with overseas institutes).

  • Donations to Technology and Human Resources Development Funds, educational institutes, specialized training centers, research institutes, or governmental agencies in science and technology in Thailand, as approved by the Board.
  • Advanced technology training.

2.2 Merit on decentralization

Projects located in investment promotion zones in 20 provinces with low per capita income receive additional incentives:

  • Group A1 or A2 projects: 50% reduction in corporate income tax for 5 years.
  • Additional corporate income tax exemption of up to 3 years.
  • Double deduction for transportation, electricity, and water costs for 10 years.
  • Deduction of 25% from the net investment of the cost of the project’s infrastructure installation or construction.

The 20 provinces with low per capita income are: Kalasin, Chaiyaphum, Nakhon Phanom, Nan, Bueng Kan, Buri Ram, Phrae, Maha Sarakham, Mukdahan, Mae Hong Son, Yasothon, Roi Et, Si Sa Ket, Sakhon Nakhon, Sa Kaew, Sukhothai, Surin, Nong Bua Lamphu, Ubon Ratchathani, and Amnatcharoen (excluding border provinces in Southern Thailand and Special Economic Development Zones which have separate incentive packages).

2.3 Merit on industrial area development
Projects located within industrial estates or promoted industrial zones are granted one additional year of corporate income tax exemption.

The BOI promotes a wide range of activities across sectors regardless of location.

For further information, please see: A Guide to the Board of Investment
https://www.boi.go.th/upload/content/BOI-A Guide_EN.pdf

For inquiries, contact:
Investment Services Center
Office of the Board of Investment
555 Vibhavadi-Rangsit Rd., Chatuchak,
Bangkok 10900 Thailand
Tel: (662) 537-8111
Fax: (662) 537-8177

Note: Updated information on “Additional Investment Policies and Promotional Measures” as well as “Additional Incentives under the Skill, Technology and Innovation (STI) Scheme” can be found on BOI’s website under the heading “Investment Promotion.”

1. CORPORATE TAX
The corporate income tax rate in Thailand is 20% on net profit (accounting periods starting on or after 1st January 2015). However, the rates vary depending on types of taxpayers.

Taxpayer / Tax Base / Rate

  1. Small company [1]
    • Net profit not exceeding 300,000 Baht → Exempted
  2. Net profit over 300,000 Baht but not exceeding 3 million Baht → 15%
    • Net profit exceeding 3 million Baht → 20%
  3. Regional Operating Headquarters (ROH)
    • Net profit → 10%
  4. Bank deriving profits from Bangkok International Banking Facilities (BIBF)
    • Net profit → 10%
  5. Association and foundation
    • For income under Section 40 (8) → 2%
    • Otherwise → 10%
  6. Foreign company engaging in international transportation (Section 67)
    • Gross receipts → 3%
  7. Foreign company disposing profit out of Thailand
    • Amount disposed → 10%

Foreign company not conducting business in Thailand but receiving income from Thailand

  • Dividends → 10%
  • Interests → 15%
  • Professional Fees → 15%
  • Rents from hiring property → 15%
  • Royalties from goodwill, copyright and other services → 15%
  • Service fees → 15%

2. VALUE ADDED TAX
Level of taxable income (Baht) / Rate

  • No more than 1,800,000 → Exempted
  • Over 1,800,000 → 7%

3. WITHHOLDING TAX FROM BANK DEPOSIT

  • For individuals → 15%
  • For companies → 1%
  • For foundations → 10%

4. PERSONAL INCOME TAX
Level of taxable income (Baht) / Marginal Tax Rate

  • 0 – 150,000 → Exempted
  • 150,001 – 300,000 → 5%
  • 300,001 – 500,000 → 10%
  • 500,001 – 750,000 → 15%
  • 750,001 – 1,000,000 → 20%
  • 1,000,001 – 2,000,000 → 25%
  • 2,000,001 – 5,000,000 → 30%
  • More than 5,000,001 → 35%

Refer to: Tax Rates and Double Taxation Agreements of “Cost of Doing Business in Thailand” on BOI Website:
www.boi.go.th/upload/content/Cost of Doing Business 2019_Online_5c6a5d3a3c43b.pdf

5. PROPERTY TAX
The latest Land and Building Tax Act B.E. 2562 (2019) was published in the Government Gazette on 12 March 2019 and tax collection under the Act commenced on 1 January 2020. It replaced the Household and Land Tax Act B.E. 2475 (1932) and Local Land Development Tax Act B.E. 2508 (1965).
For more information (Thai language):
www.ratchakitcha.soc.go.th/DATA/PDF/2562/A/030/T_0021.PDF

6. REAL PROPERTY GAINS TAX
There is no real property gains tax.

7. ESTATE DUTY
There is no estate duty.

8. STAMP DUTY
The Revenue Code contains the Stamp Duty Schedule listing transactions subject to stamp tax. Rates depend on the nature of the transaction, and fines for failure to stamp documents are very high.
For more information: Chapter VI of Title II of the Revenue Code
www.rd.go.th/publish/21986.0.html

Revenue Department
90 Revenue Department Building, Phaholyothin Road, Soi 7, Bangkok 10400
Tel: (+662) 2728000
Website: www.rd.go.th

9. IMPORT DUTY
The majority of imported articles are subject to two taxes:

  • Tariff duty = CIF value of goods × duty rate
  • VAT levied on total sum (CIF value + duty + excise tax, if any)

Duties are based on CIF price under GATT price system and CEPT rates. The Notification of Import Duty by the Ministry of Finance is used for import duty.

The Customs Department has improved services by computerizing procedures with the Electronic Data Interchange (EDI) system. This reduces costs and time for entrepreneurs by allowing preliminary submission of entry data for verification.

More info: www.customs.go.th

  1. OTHER TAXES
    Municipal Taxes
    • Land/Property tax
    • Signboard tax (rates under Signboard Tax Act B.E. 2510, depending on location)

Contact office (Bangkok):
Revenue Division, Finance Department
Bangkok Metropolitan Administration
173 Dinso Road, Phra Nakhon District, Bangkok 10200
Tel: (+662) 2212141-69
Website: www.bma.go.th

Local Development Tax
Levied according to average cost of land in each area at different rates.

Contact office (Bangkok):
Bangkok Metropolitan Administration
173 Dinso Road, Phra Nakhon District, Bangkok 10200
Tel: (+662) 2213811
Website: www.bma.go.th

Specific Business Tax (SBT)
Imposed in lieu of VAT on the following sectors:

  • Banking, Finance and similar business → 3.0%
  • Finance, securities and credit foncier → 3.0%
  • Life Insurance → 2.5%
  • Pawn Brokerage → 2.5%
  • Business similar to commercial banks → 3.0%
  • Real Estate → 0.1%
  • Sale of securities in a securities market → 0.1% (Exempted)

Remark: Local tax at 10% is imposed on top of SBT.

More info: Tax Base and Tax Rates of Specific Business Tax, www.rd.go.th/publish/6042.0.html

[1] A small company refers to any company with paid-up capital less than 5 million baht and revenue not exceeding 30 million Baht.

1. CURRENCY REGULATION
Non-Residents
Thai emigrants who are permanent residents abroad or working abroad, foreigners temporarily staying in Thailand for not more than 3 months, foreign embassies, international organizations, including their staff with diplomatic privileges and immunities, may normally bring foreign currency and negotiable instruments into Thailand without limit. They may also freely take out of the country all foreign currency they had brought in, without limit.

There is no restriction on the amount of Thai currency that can be brought into the country. A person traveling to Vietnam, the People’s Republic of China (only Yunnan province), and Thailand’s bordering countries is allowed to take out up to THB 2,000,000. Taking out Thai Baht bank notes in an amount exceeding THB 450,000 requires declaration to a Customs Officer. A person traveling to other countries is allowed up to THB 50,000.

Residents
There is no restriction on the amount of foreign currency a resident may bring into Thailand. However, all such currency must be sold to, or deposited into, a foreign currency account with an authorized bank within 360 days of receipt or entry into the country.

Investors
There is no restriction on the amount of foreign currency transferred into Thailand for direct or portfolio investments. Such foreign currency, however, must be sold or deposited into a foreign currency account with an authorized bank, within 360 days from the date of receipt or entry into the country. Repatriation of investment funds and repayment of overseas loans are freely permitted subject to submission of supporting documents to an authorized bank.

Any person who brings into or takes out of Thailand foreign currency bank notes or coins in an aggregate amount exceeding USD 20,000 or equivalent at market rate must declare such funds to a Customs Officer. Furthermore, any transaction involving the sale, exchange, withdrawal, or deposit of foreign currencies in an amount exceeding USD 50,000 or its equivalent shall be reported to an authorized bank in a Foreign Exchange Transaction Form as prescribed by the Competent Officer.

2. BANK ACCOUNTS
Foreign Currency Accounts of Thai Residents
Thai residents are allowed to maintain foreign currency accounts with authorized banks, and deposit or withdraw funds from such accounts under the following conditions:

Deposit

  • Foreign currencies originating from abroad (foreign-source) can be deposited without limit.
  • Foreign currencies purchased or borrowed from authorized banks (domestic-source) can be deposited into two types of accounts:
    i) Foreign currency accounts with future obligations: deposits can be made in an amount not exceeding future obligations to pay in foreign currencies to entities abroad.
    ii) Foreign currency accounts without future obligations: the total outstanding balance shall not exceed USD 5 million for both a natural person and a juristic person.
  • Deposit of foreign currency notes and coins must not exceed USD 10,000 per person per day.

Withdrawal

  • For payment to entities abroad of the account holder’s or subsidiaries’ obligations.
  • For payment to authorized banks of the account holder’s or subsidiaries’ foreign currency liabilities.
  • For deposit into another foreign currency account of the same account holder.
  • For conversion into another foreign currency, prior to deposit into another account or for payment abroad.
  • For conversion into Baht.

Thai companies having export proceeds in foreign currency from overseas are allowed to transfer funds from their foreign-source foreign currency accounts to deposit into foreign currency accounts of their counterparties in Thailand for payment of goods or services.

Foreign Currency Accounts for Non-Thai Residents
Nonresidents may maintain foreign currency accounts with authorized banks in Thailand without limit. The accounts can be freely credited with funds originating from abroad. Payments from Thai residents or borrowing from authorized banks can be deposited subject to supporting evidence. Balances on such accounts may be freely withdrawn.

Non-Resident Baht Account
Nonresidents may open Thai Baht accounts with authorized banks in Thailand:

  • Non-resident Baht Account for Securities (NRBS): For investment in securities and other financial instruments such as equity, debt, unit trusts, derivatives transactions on the Thailand Futures Exchange and the Agricultural Futures Exchange of Thailand.
  • Non-resident Baht Account (NRBA): For general purposes (other than investment in securities) such as trade, services, FDI, immovable assets, and loans.

The total daily outstanding balances for each type of account shall not exceed THB 300 million per nonresident. Transfers between different types of accounts are not allowed.

3. TRADING
Imports
Importers may purchase or withdraw foreign currencies from their own foreign currency accounts for import payments upon submission of supporting documents. Letters of credit may also be opened without authorization. Traveling expenses are also freely permitted on submission of supporting evidence.

Exports
Export proceeds in an amount equivalent to USD 50,000 or above shall be repatriated immediately after payment is received and within 360 days from the export date. The proceeds must be sold to or deposited in a foreign currency account with an authorized bank in Thailand within 360 days of receipt.

Services
All proceeds from services in an amount equivalent to USD 50,000 or above shall be repatriated immediately after payment is received and within 360 days from the transaction date. The proceeds must be sold to or deposited in a foreign currency account with an authorized bank in Thailand within 360 days of receipt.

Outward remittances of amounts properly due to nonresidents are permitted for items of a noncapital nature such as service fees, interest, dividends, profits, or royalties provided that supporting documents are submitted to an authorized bank. Traveling expenses or educational expenses of residents are also freely permitted upon submission of supporting documents.

Source: Bank of Thailand, as of November 2018: www.bot.or.th
Please refer to Chapter 5 Legal Issues for Foreign Investors in “A Business Guide to Thailand” available on BOI website for additional related information.

1. WORK PERMIT (INVESTMENT PROMOTION)
The Foreign Working Act of 2008 requires all foreigners working in Thailand to obtain a work permit prior to starting work in the Kingdom and describes the procedures for issuance and maintenance of work permits and lists certain occupations from which the foreigners may be excluded.

A foreigner seeking permission to work in the Kingdom under the Investment Promotion Act must submit an application for a work permit within 30 days of notification by the BOI that the position has been approved. A foreigner in this category may engage in authorized work while the application is being processed.

For a regular position, a work permit will be issued for one year, but for an executive position or experts, a work permit will be issued for two years. A work permit must be renewed before its expiry date or it will lapse.

Please refer to the Investment Promotion Act and Chapter 5: Legal Issues for Foreign Investors in “A Business Guide to Thailand” available in BOI website for additional related information.

2. THAILAND’S SMART VISA
The Thai government has launched “SMART Visa,” a new visa category to facilitate foreigners working or investing in technology-based production activities and services as well as in the 10 targeted (S-Curve) industries. The SMART Visa comprises four categories which are (1) Talents in science and technology (2) Investors (3) Executives and (4) Startup entrepreneurs.

The SMART Visa holders will be waived from a work permit requirement and will receive a number of benefits such as up to 4-year renewable visa validity and yearly report to the Immigration Department instead of every 90 days. SMART Visa holders’ family members will also enjoy the similar benefits. In order to provide foreign investors with greater convenience, the government has improved qualifications and relaxed criteria for SMART Visa application as well as provided more benefits to the visa holders.

SMART Visa Unit is located at One Stop Service Center for Visas and Work Permits:
18th Floor, Chamchuri Square Building,
319 Phayathai Road, Pathumwan, Bangkok 10330
Tel: +66(0)2 209 1100 ext. 1109-1110
Fax: +66(0)2 209 1194
Email: smartvisa@boi.go.th

In response to feedback from investors, the BOI coordinated the establishment of a One-Stop Service Center for Visas and Work Permits. Through joint cooperation with the Immigration Bureau and the Ministry of Labor, the center can process applications or renewals of visas and work permits.

One Stop Service Center for Visas and Work Permits is located at:
18th Floor, Chamchuri Square Building,
319 Phayathai Road, Pathumwan, Bangkok 10330
Tel: +66(0)2 209 1100
Fax: +66(0)2 209 1194
Email: visawork@boi.go.th

REGULATION ON ACQUISITION OF LAND AND BUILDINGS
In general, non-Thai businesses and citizens are not permitted to own land in Thailand unless the land is on government-approved industrial estates. However, companies that are more than 50% Thai-owned may legally own land. An exception to the rule relates to projects approved by the Thailand Board of Investment.

Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. The rule is that foreigners may own no more than 49% of the total units in the building at any one time.
Please refer to Chapter 5: Legal Issues for Foreign Investors in “A Business Guide to Thailand” available in BOI website for additional related information.

Thailand Board of Investment serves as a one-stop service center, helping investors in three key ways:

  • To reduce the risks associated with investment
  • To reduce initial investment costs and improve the overall rate of return on investment
  • To provide support services at all times

Office of the Board of Investment (BOI)
555 Vibhavadi-Rangsit Road, Chatuchak,
Bangkok 10900, Thailand
Tel: (+66) 2553 8111
Fax: (+66) 2553 8315
E-Mail: head@boi.go.th
Website: www.boi.go.th

Relevant investment legislation

Law on Investment 2020 (LOI 2020)
Released 17 June 2020, effective 1 January 2021. Designed to create a more attractive legal framework for foreign investors.

Clearer Rules on Market Access

  • Foreign investors not allowed in sectors under List A of Appendix I of Decree 31/2021/ND-CP
  • Foreign investors allowed with conditions (ownership ratio, investment form, scope, capability, etc.) in List B sectors
  • Same access as domestic investors in sectors not listed in A or B

Simpler Licensing Procedures

  • LOI 2014 required Prime Minister approval for projects ≥ VND 5,000 billion (~USD 215 million)
  • LOI 2020 removes this requirement, reducing procedures for large-scale projects

Special Incentives and Support (Decision 29/2021/QD-TTg)
Subjects

  • A: Projects in sectors subject to special incentives with capital ≥ VND 30,000 billion (~USD 1.3 billion) and disbursement ≥ VND 10,000 billion within 3 years
  • B: Innovation and R&D centers with capital ≥ VND 3,000 billion (~USD 130 million) and disbursement ≥ VND 1,000 billion within 3 years
  • C: National Innovation Center by Prime Minister decision

Non-Subjects

  • Projects approved before LOI 2020 effective date
  • Mineral mining, special excise tax industries (except auto, aircraft, yacht manufacturing), commercial housing construction

Incentive Packages

  • General: CIT 9% for 30 years, 5-year CIT exemption, 50% reduction for 10 years, land/water rental exemption 18 years, 55% reduction afterwards
  • Subject A: CIT 7% for 33 years, 6-year exemption, 50% reduction for 12 years, land rental exemption 20 years, 65% reduction afterwards
  • Subject B or advanced A: CIT 5% for 37 years, 6-year exemption, 50% reduction for 13 years, land rental exemption 22 years, 75% reduction afterwards

High-technology level, Vietnamese supplier participation, technology transfer, and value-added ratios determine eligibility for enhanced packages

Restructuring and M&A
LOI 2020 allows investors to amend project objectives/scale, merge/separate projects, change investors, or transfer projects partly or wholly

Law on Enterprise 2020 (LOE 2020)
Released 17 June 2020, effective 1 January 2021. Reduces compliance burden and strengthens governance

Company Seal

  • Enterprises decide seal type, form, content, and quantity; no longer required to follow compulsory registration rules

Simplified Administrative Procedures

  • No requirement to notify authorities about management changes or private placement of joint-stock companies

Minority Shareholder Protection

  • Threshold lowered to 5% (from 10%) of shares to request a General Meeting or inspection committee investigation
  • No requirement to hold shares for 6 months

Management of LLCs

  • No longer required to have inspection committee/inspector (except SOEs and subsidiaries)

Law on Tax Administration 2019 (effective 1 July 2020, e-invoice rules from 1 July 2022)
Reforms tax administration to be more business-friendly

Conflict Avoidance

  • No penalties if taxpayers followed tax authority guidance even if it caused tax deficits or refund surpluses

Extended Compliance Deadlines

  • Personal Income Tax finalization extended by 1 month, to last day of the 4th month after year end

Electronic Invoices and Documents

  • Mandatory for most enterprises from July 2022
  • Aimed at improving accuracy, efficiency, and transparency

Legal Framework Overview for Investment and Related Sectors in Vietnam

Foreign Exchange Control

  • Ordinance No. 28/2005/PL-UBTVQH11 dated 13/12/2005 (Standing Committee of National Assembly): Ordinance on foreign exchange control
  • Decree 160/2006/ND-CP dated 28/12/2006 (Government): Guidance on implementation of the Ordinance on Foreign Exchange Control
  • Decree 134/2005/ND-CP dated 1/11/2005 (Government): Regulation on foreign borrowing and repayment of enterprises

Labour

  • Labour Code dated 23/6/1994 (National Assembly): Law on Labour
  • Law No. 35/2002/QH10 dated 2/4/2002 and Law No. 74/2006/QH11 dated 29/11/2006 (National Assembly): Amendments to Labour Code
  • Decree 34/2008/ND-CP dated 25/3/2008 (Government): Recruitment and management of foreigners working in Vietnam
  • Decree No. 46/2011/ND-CP dated 17/6/2011 (Government): Amendments to Decree 34

Land

  • Law No. 13/2003/QH11 dated 26/11/2003 (National Assembly): Law on Land
  • Decree 181/2004/ND-CP dated 29/10/2004 (Government): Guidance for implementation of Land Law
  • Decree 17/2006/ND-CP, Decree 84/2007/ND-CP, Decree 41/2009/ND-CP: Amendments and additional guidance
  • Decree 182/2004/ND-CP: Sanctions for administrative violations in land area
  • Decree 142/2005/ND-CP dated 14/11/2005: Regulation on land rental
  • Decree 121/2010/ND-CP dated 30/12/2010: Amendments to Decree 142

Intellectual Property

  • Law No. 50/2005/QH11 dated 29/11/2005 (National Assembly): Law on Intellectual Property
  • Law No. 80/2006/QH11 dated 29/11/2006 (Government): Law on Technology Transfer
  • Law No. 36/2009/QH12: Amendments to Law on Intellectual Property
  • Decree 103/2006/ND-CP dated 22/9/2006 (Government): Guidance on industrial property
  • Decree 122/2010/ND-CP dated 31/12/2010 (Government): Amendments to Decree 103

Import-Export

  • Law No. 45/2005/QH11 dated 27/6/2005 (National Assembly): Law on Import–Export
  • Law No. 29/2001/QH10 and Law No. 42/2005/QH11: Customs Law
  • Decree 87/2010/ND-CP dated 13/8/2010: Implementation of Export/Import Duties

Taxes

  • Law No. 78/2006/QH11 dated 29/11/2006: Tax Management Law
  • Law No. 14/2008/QH12 dated 12/6/2008: Corporate Income Tax Law
  • Decree 124/2008/ND-CP and Decree 122/2011/ND-CP: Implementation of CIT Law
  • Circular 123/2012/TT-BTC: Detailed CIT guidance
  • Law No. 13/2008/QH12 dated 12/6/2008: VAT Law
  • Decree 123/2008/ND-CP and Circular 129/2008/TT-BTC: VAT implementation
  • Law No. 27/2008/QH12 dated 28/11/2008: Special Sales Tax Law
  • Decree 26/2009/ND-CP and Circular 64/2009/TT-BTC: Special Sales Tax guidance
  • Law No. 04/2007/QH12 dated 5/12/2007: Personal Income Tax (PIT) Law
  • Decree 100/2008/ND-CP and Decree 106/2010/ND-CP: PIT implementation and amendments
  • Circulars 84/2008/TT-BTC and 62/2009/TT-BTC: PIT guidelines

Real Estate and Housing

  • Law No. 63/2006/QH11 dated 29/6/2006: Real Estate Business Law
  • Decree 153/2007/ND-CP: Guidance on real estate law
  • Law No. 56/2005/QH11 dated 29/11/2005: Resident Housing Law
  • Decree 71/2010/ND-CP: Guidance on Resident Housing Law

Education

  • Law No. 38/2005/QH11 dated 14/6/2005: Education Law
  • Decree 73/2012/ND-CP: Cooperation and investment with foreign investors in education

Post & Telecommunication

  • Law 49/2010/QH12: Post Law
  • Decree 47/2011/ND-CP: Implementation of Post Law
  • Law No. 41/2009/QH12: Telecommunications Law
  • Decree 25/2011/ND-CP: Guidance on Telecommunications Law

Transportation

  • Law No. 35/2005/QH11 dated 14/6/2005: Railways Law
  • Law No. 66/2006/QH11 dated 29/6/2006: Civil Aviation Law
  • Law No. 40/2005/QH11 dated 14/6/2005: Maritime Law
  • Decree 115/2007/ND-CP: Conditions for sea shipment services
  • Decree 87/2009/ND-CP: Multimodal transport regulation
  • Decree 91/2009/ND-CP: Road transport business and conditions

Domains Banned from Investment (per Investment Law 2005, Chapter V, Article 30)
a. Projects harmful to national defense, security, and public interests
b. Projects prejudicial to historical/cultural relics, morals, or customs
c. Projects harmful to health, natural resources, or environment
d. Hazardous waste treatment from abroad, toxic chemicals, or banned agents

Conditional Investment Domains

  • National defense, security, social order and safety
  • Financial and banking sectors
  • Public health
  • Culture, information, press, publishing
  • Entertainment services
  • Real estate
  • Survey, prospecting, exploration, and exploitation of natural resources and environment
  • Education and training development
  • Other domains as provided by law

For foreign investors, additional conditional domains are linked to Vietnam’s international treaty commitments. If a foreign-invested enterprise is operating in a domain later added to the conditional list, it may continue operations. Equal investment conditions may apply to foreign investors if Vietnamese partners hold ≥51% of charter capital.

Foreign Investors can set up a business in Vietnam by way of setting up an investment project and a business organization to manage the project. Investment in conditional sector activities is subject to in-principle approval of higher-level competent authorities (nuclear power plant, special-use forests, headwater protection forests or border protection forests; construction of airports, terminals; petroleum processing; betting and casino for foreigners; golf courses; etc.). The process in conditional sectors takes more time and involves specialized competent authorities.

Procedures and Timeline of Registration Process
Projects not subjected to in-principle approval
Projects inside EZs, IZ, EPZ, high-tech zones (Zones)
Submitted to → Zones Management Board
15 days → IRC Issued

Projects outside EZs, IZs, EPZ, high-tech zones
Submitted to → Provincial DPI
15 days → IRC Issued

Procedures and Timeline of Approving in Principle
Projects subjected to in-principle approval

National Assembly’s approval
→ Ministry of Planning & Investment
Established 15 days
→ State Appraisal Council (established by Prime Minister)
Submit 90 days
→ Government
Submit 60 days prior to a National Assembly’s Session
→ National Assembly
Resolution on in-principle approval
→ Provincial DPI/Zones Management Board
5 days
→ IRC Issued

Prime Minister’s approval
→ Ministry of Planning & Investment
Appraised 40 days
→ Prime Minister
In-principle approval

Provincial Authority’s approval
→ Provincial DPI or Zones Management Board
Appraised 25 days
→ Provincial People’s Committee
In-principle approval

Projects at EZs, IZs, EPZs, high-tech zones
→ Zones Management Board
In-principle approval 25 days → IRC Issued

Procedures and Timeline of Setting Up Company
Application dossier for setting up company, including IRC
Online Submission → Provincial Business Registration Office
Three working days → ERC issued

Foreign Investment Agency
Ministry of Planning and Investment (MPI)

FIA, an organization belonging to the Ministry of Planning and Investment of Vietnam, is commissioned to advise the Minister of Planning and Investment to implement state management functions related to FDI activities in Vietnam and Vietnam direct investment activities abroad.

Divisions under Foreign Investment Agency include:

  • Administration Office
  • Statistics and General Information Division
  • Foreign Investment Division
  • Outward Investment Division
  • Investment Promotion Division

Address: No 6B, Hoang Dieu Street, Ba Dinh District, Ha Noi, Viet Nam
Tel: +84 80 48461
Fax: +84 24 3734 3769
E-mail: fiavietnam@mpi.gov.vn
Website: http://fia.mpi.gov.vn

Investment Promotion Center – Northern Vietnam
65 Van Mieu Street, Dong Da District, Hanoi, Vietnam
Tel: +84 24 3747 5998
Fax: +84 24 3843 7927
Email: ipcn@mpi.gov.vn
Website: http://ipcn.mpi.gov.vn

Investment Promotion Center – Southern Vietnam
289 Dien Bien Phu Street, Vo Thi Sau Ward, District 3, Ho Chi Minh City, Vietnam
Tel: +84 28 3930 3287
Fax: +84 28 3930 5413
Email: ipcstttl@gmail.com
Website: https://ipcs.mpi.gov.vn

Under the LOI 2020, the Government provides the following investment protection to foreign investors:

Investment Protection to Foreign Investors

  • Legally owned assets
    • No appropriation or confiscation
    • Compensation in case of confiscation for national defense, security, or national interests
  • Changes of Laws
    • Entitled to new incentives if more favourable
    • Keep current incentives if less favourable than before
    • If incentives are withdrawn for national defense and security reasons, relevant compensation may be applied
  • Business activities
    • No priority given to domestic goods, services, or vendors
    • No restriction on export ratio, quantity, value, or types of goods and services
    • Self-balance of import-export, import substitution, and R&D ratio
    • Freedom to decide headquarters location or place to provide goods/services
  • Transfer of assets to overseas
    • Investment capital and liquidation
    • Income from business activities
    • Lawful money and other assets

No performance requirements imposing limits on trade and investment or any TRIMs.

Investors are not compelled to satisfy conditions on compulsory sales markets (exports or domestic sales), localisation rations, development of domestic resources or other requirements relating to technology transfer and labour recruitment.

The LOI 2020 provides the following forms of investment incentives and government support:

Forms of Investment Incentive

  • Investment incentives
    • Import duties exemption
    • Accelerated depreciation, increasing deductible expenses when calculating taxable income
    • CIT incentives: preferential tax rate and tax holiday
    • Exemption and reduction of land levy and rental
  • Forms of Investment support
    • Development of technical and social infrastructure inside and outside the investment project
    • Training and development of human resources
    • Credit supports
    • Access to business premises and business relocation under regulatory agencies’ decisions
    • Science, technology, and technology transfer
    • Market development and information provision
    • R&D

Projects eligible for investment incentives

  • Investment projects in encouraged sectors (Clause 1, Article 16 of the LOI 2020)
  • Investment projects in encouraged areas (Clause 2, Article 16 of the LOI 2020)
  • Large investments with capital from VND 6,000 billion (with specific conditions on disbursement, revenue, or labor)
  • Social housing construction projects; projects in rural areas employing at least 500 workers; projects employing persons with disabilities under relevant laws
  • Hi-tech enterprises, science and technology enterprises/organizations, projects involving encouraged technology transfer (Law on Technology Transfer No. 07/2017/QH14; Law on High Technology No. 21/2008/QH12; Law on Science and Technology No. 29/2013/QH13; Law on Environmental Protection No. 55/2014/QH13)
  • Innovation start-up projects, national innovation centers, and R&D centers
  • Investment in SME product distribution chains; technical establishments supporting SMEs; SME incubators; co-working spaces for SMEs and innovation startups (Law on SMEs)

Investment incentives and support in IZs and EZs

  • Industrial Zones (IZs)
    • CIT: Tax exemption for 2 years and 50% tax reduction for the following 4 years
    • Import duty:
      • Exported goods from EPZs and imported goods to EPZs for processing exports not subject to customs duty
      • IZ infrastructure development projects and projects located in IZs exempt from import duty on goods to create fixed assets
      • IZ infrastructure development projects exempt from import duty for materials/components not produced domestically, for 5 years from operation date
    • Land: IZ infrastructure development projects exempt from land rental between 11 years to the entire term depending on conditions
    • Credit: Eligible for investment loans under Decree 32/2017/ND-CP
    •  Construction:
      • Some key facilities supported by State budget
      • Expenses for construction/operation/rental of dormitories and social infrastructure for workers deductible for CIT calculation
      • Projects for housing and facilities for workers entitled to social housing construction incentives
  • Economic Zones (EZs)
    • CIT: 10% incentive rate for 15 years; tax exemption for 4 years and 50% tax reduction for the following 9 years (excluding real estate transfer income)
    • Import duty:
      • Exempt from import duty for materials/components not produced domestically for 5 years from operation date
      • Projects in coastal EZs exempt from import duty on goods to create fixed assets
    • Land: Projects in EZs exempt from land rental between 11 years to the entire term depending on conditions
    • Credit: EZs allowed to mobilize funds for socio-technical infrastructure (bonds, ODA, preferential credit, PPP, investor advances, etc.)
    •  Construction:
      • Some key facilities supported by State budget
      • Expenses for construction/operation/rental of dormitories and social infrastructure for workers deductible for CIT calculation
      • Projects for housing and facilities for workers entitled to incentives for social housing construction and related fields

Sectors Entitled to Investment Incentives
Issued with Government Decree No. 108/2006/ND-CP (22 September 2006) guiding implementation of the Law on Investment

List of sectors to which special investment incentives shall be given
a) Production of new materials and energy; high-tech, biotech, IT; manufactured mechanical products

  • Production of composite materials, light construction materials, rare/precious materials
  • Production of high-quality steel, alloy, special metals, sponge iron; steel billets
  • New energy: plants using solar, wind, biogas, geothermal, tidal energy
  • Medical equipment for analytical/extractive technologies; orthopedic instruments, wheelchairs, specialized instruments for the disabled
  • Projects applying advanced technology/biotechnology to produce medicines meeting international GMP standards; production of drug materials for antibiotics
  • Computers; information, telecommunications and Internet equipment; pivotal IT products
  • Semiconductors and high-tech electronic components; software products and website applications; provision of software services; IT research; IT human-resource training
  • Precision mechanical equipment; equipment/machinery for safety examination and control in industrial production; industrial robots

b) Cultivation and processing of agricultural, forestry, aquatic products; salt; man-made strains/seeds/breeds

  • Afforestation and forest care
  • Cultivation in uncultivated land/unexploited waters
  • Offshore catching of marine products
  • Production of new strains; propagation/hybridization of seeds and animal breeds with high economic efficiency
  • Production, exploitation and refining of salt

c) Use of high technology/modern technology; environmental protection; R&D and fostering of high technology

  • Application of high/new technologies not yet applied in Viet Nam; biotechnology
  • Pollution treatment and environmental protection; manufacture of equipment for environmental treatment/observation/analysis
  • Collection and treatment of liquid/gaseous/solid waste; recycling and reuse
  • Research, development and fostering of high technology

d) Employment of large numbers of employees

  • Projects regularly employing 5,000+ employees

e) Construction and development of infrastructure and important projects

  • Construction/operation of infrastructure in IZs, EPZs, high-tech zones, EZs; important projects decided by the Prime Minister

f) Facilities in education, training, medical, gymnastic and sports

  • Drug/tobacco detoxification centers
  • Establishments providing sanitation services to prevent/fight epidemics
  • Geriatric and relief centers caring for the disabled and orphans
  • Sports centers for training/coaching high-performance athletes; sports centers for the disabled; centers meeting international sporting event requirements

g) Other production and services

  • R&D investment accounting for ≥25% of turnover
  • Sea salvage services
  • Construction of tenements for IZ/EPZ/high-tech zone/EZ employees; dormitories for college students; housing for people entitled to social benefits

2. List of sectors to which investment incentives shall be given

a) New materials/energy; high-tech, biotech, IT; manufactured mechanical products

  • Production of sonic/electric/thermal highly-insulating materials; wood-substitute synthetics; fire-proof materials; construction plastics; fiberglass; special cement
  • Non-ferrous metals; cast-iron refining
  • Moulds for metal and non-metal products
  • New power plants; electricity transmission/distribution networks
  • Medical equipment; storage for pharmaceuticals and reserves for disaster/epidemics
  • Equipment for testing toxic substances in foodstuffs
  • Petrochemical development
  • Coke; activated carbon
  • Crop protection drugs, insecticides; preventive/curative drugs for animals/aquatic creatures; veterinary drugs
  • Drug materials; vaccines; medical bioproducts; medicines from pharmaceutical materials; oriental medicines
  • Establishments for biological testing/evaluating drug effects; facilities meeting production/preservation/testing criteria; cultivation/reaping/processing of pharmaceutical materials
  • Development of pharmaceutical resources and drugs from them; research on oriental prescriptions; testing criteria and surveys/statistics; collection/inheritance/application of oriental prescriptions; search/exploitation/utilization of new pharmaceutical materials
  • Electronic products
  • Machinery/equipment/components for petroleum, mining, energy; large lifting equipment; metal-processing machine tools; metallurgy equipment
  • High/medium voltage electric devices; large generators
  • Diesel engines; shipbuilding/repair; equipment/spare parts for cargo ships/fishing boats; dynamic/hydraulic machinery; compressors
  • Equipment/vehicles/machinery for construction; technical equipment for transportation; locomotives and carriages
  • Machine tools/machinery/equipment/spare parts for agriculture/forestry; food processors; irrigation equipment
  • Equipment/machinery for textile/garment; machinery for leather industry

b) Cultivation/processing of agricultural, forestry, aquatic products; salt; man-made strains/seeds/breeds

  • Cultivation of medicinal plants
  • Post-harvest preservation of agricultural products; preservation of agricultural/aquatic products and foodstuffs
  • Bottled/canned fruit juice
  • Feed for cattle/poultry/aquatic creatures
  • Technical services supporting cultivation of industrial/forestry plants, animal husbandry, aquaculture, plant/animal protection
  • Production/propagation/hybridization of seeds and animal breeds

c) High technology/modern technology; environmental protection; high-tech R&D/fostering

  • Equipment for dealing with oil spills
  • Equipment for waste treatment
  • Laboratories and experimental stations for applying new technologies; research institutes

d) Employment of many employees

  • Projects regularly employing 500–5,000 employees

e) Construction/development of infrastructure facilities

  • Infrastructure for cooperatives and community life in rural areas
  • Infrastructure operation/production in rural industry-trade complexes
  • Water plants/supply systems for living/industry; drainage systems
  • Construction/improvement of bridges, roads, airports, ports, rail stations, bus stations, parking lots; opening new rail routes

  • Technical infrastructure for densely populated areas in Appendix B of the Decree

f) Facilities in education, training, medical, sports and national culture

  • Infrastructure of educational/training establishments; private/people-founded schools at all levels (pre-school, popular schools, secondary vocational, colleges, universities)
  • People-founded and private hospitals
  • Sports centers; exercise clubs; manufacturing/repair of sports equipment
  • National cultural houses; performance groups; theatres; film studios/printing/developing; cinemas; manufacture/repair of national musical instruments; renovation/conservation of museums, cultural houses and cultural/artistic schools
  • National tourism areas, eco-tourism; cultural parks including sports and entertainment areas

g) Development of traditional trades

  • Formulation/development of traditional trades in fine-art/handicrafts; processing of agricultural products/food; cultural products

h) Other production or service sectors

  • Internet connection/access/application services; telephone booths in regions in Appendix B
  • Public transportation means: development of ships/airplanes; rail means; ≥24-seat passenger automobiles; modern/high-speed river boats; container ships/ocean-going vessels
  • Relocation of production establishments out of inner cities
  • Construction of type-I markets and exhibition areas
  • Production of children’s toys
  • Raising and lending capital by People’s Credit Funds
  • Legal consultancy; IP and technology transfer consultancy
  • Materials for pesticides
  • Basic/purified/specialized chemicals and dyes
  • Materials for cleansers and chemical additives
  • Paper/cardboard/artificial planks from domestic agro-forestry materials; paper pulp
  • Weaving fabric; finishing textile products; silk and fibers; tanning/semi-processing of hides
  • Investment projects in industrial zones established by decision of the Prime Minister

3. List of geographical regions of investment incentives

  1. Bac Kan — All districts and towns
  2. Cao Bang — All districts and towns
  3. Ha Giang — All districts and towns
  4. Lai Chau — All districts and towns
  5. Son La — All districts and towns
  6. Dien Bien — All districts and Dien Bien city
  7. Lao Cai — All districts; Lao Cai city
  8. Tuyen Quang — Na Hang, Chiem Hoa; Ham Yen, Son Duong, Yen
  9. Son; Tuyen Quang town
  10. Bac Giang — Son Dong; Luc Ngan, Luc Nam, Yen The, Hiep Hoa
  11. Hoa Binh — Da Bac, Mai Chau; Kim Boi, Ky Son, Luong Son, Lac
  12. Thuy, Tan Lac, Cao Phong, Lac Son, Yen Thuy
  13. Lang Son — Binh Gia, Dinh Lap, Cao Loc, Loc Binh, Trang Dinh, Van Lang, Van Quan; Bac Son, Chi Lang, Huu Lung
  14. Phu Tho — Thanh Son, Yen Lap; Doan Hung, Ha Hoa, Phu Ninh, Song Thao, Thanh Ba, Tam Nong, Thanh Thuy
  15. Thai Nguyen — Vo Nhai, Dinh Hoa; Dai Tu, Pho Yen, Phu Luong, Phu Binh, Dong Hy
  16. Yen Bai — Luc Yen, Mu Cang Chai, Tram Tau; Tran Yen, Van Chan, Van Yen, Yen Binh; Nghia Lo town
  17. Quang Ninh — Ba Che, Binh Lieu, Co To island district and other islands/isles; Cam Pha district
  18. Hai Phong — Bach Long Vy and Cat Hai island districts
  19. Ha Nam — Ly Nhan, Thanh Liem
  20. Nam Dinh — Giao Thuy, Xuan Truong, Hai Hau, Nghia Hung
  21. Thai Binh — Thai Thuy, Tien Hai
  22. Ninh Binh — Nho Quan, Gia Vien, Kim Son, Tam Diep, Yen Mo
  23. Thanh Hoa — Muong Lat, Quan Hoa, Ba Thuoc, Lang Chanh, Thuong Xuan, Cam Thuy, Ngoc Lac, Nhu Thanh, Nhu Xuan; Thach Thanh, Nong Cong
  24. Nghe An — Ky Son, Tuong Duong, Con Cuong, Que Phong, Quy Hop, Quy Chau, Anh Son; Tan Ky, Nghia Dan, Thanh Chuong
  25. Ha Tinh — Huong Khe, Huong Son, Vu Quang; Duc Tho, Ky Anh, Nghi Xuan, Thach Ha, Cam Xuyen, Can Loc
  26. Quang Binh — Tuyen Hoa, Minh Hoa, Bo Trach; remaining districts except those three
  27. Quang Tri — Huong Hoa, Dac Krong; remaining districts except those two
  28. Thua Thien–Hue — A Luoi; Phong Dien, Nam Dong, Quang Dien, Huong Tra, Phu Loc, Phu Vang
  29. Da Nang — Hoang Sa island district
  30. Quang Nam — Dong Giang, Tay Giang, Nam Giang, Phuoc Son, Bac Tra My, Nam Tra My, Hiep Duc, Tien Phuoc, Nui Thanh; Cu Lao Cham island; Dai Loc, Duy Xuyen
    Quang Ngai — Ba To, Tra Bong, Son Tay, Son Ha, Minh Long, Binh Son, Tay Tra; Ly Son island district; Nghia Hanh, Son Tinh
  31. Binh Dinh — An Lao, Vinh Thanh, Van Canh, Phu Cat, Tay Son; Hoai An, Phu My
  32. Phu Yen — Song Hinh, Dong Xuan, Son Hoa, Phu Hoa; Song Cau, Tuy Hoa, Tuy An
  33. Khanh Hoa — Khanh Vinh, Khanh Son, Truong Sa island district and other islands; Van Ninh, Dien Khanh, Ninh Hoa; Cam Ranh town
  34. Ninh Thuan — All districts
  35. Binh Thuan — Phu Quy island district; Bac Binh, Tuy Phong, Duc Linh, Tanh Linh, Ham Thuan Bac, Ham Thuan Nam
  36. Dac Lac — All districts
  37. Gia Lai — All districts and town
  38. Kon Tum — All districts and town
  39. Dak Nong — All districts
  40. Lam Dong — All districts; Bao Loc town
  41. Ba Ria–Vung Tau — Con Dao island district; Tan Thanh district
  42. Tay Ninh — Tan Bien, Tan Chau, Chau Thanh, Ben Cau; remaining districts except those four
  43. Binh Phuoc — Loc Ninh, Bu Dang, Bu Dop; Dong Phu, Binh Long, Phuoc Long, Chon Thanh
  44. Long An — Duc Hue, Moc Hoa, Tan Thanh, Duc Hoa, Vinh Hung, Tan Hung
  45. Tien Giang — Tan Phuoc; Go Cong Dong, Go Cong Tay
  46. Ben Tre — Thanh Phu, Ba Tri, Binh Dai; remaining districts except those three
  47. Tra Vinh — Chau Thanh, Tra Cu; Cau Ngang, Cau Ke, Tieu CanDong Thap — Hong Ngu, Tan Hong, Tam Nong, Thap Muoi; remaining districts except those four
  48. Vinh Long — Tra On
  49. Soc Trang — All districts; Soc Trang town
  50. Hau Giang — All districts; Vi Thanh town
  51. An Giang — An Phu, Tri Ton, Thoai Son, Tan Chau, Tinh Bien; remaining districts except those five
  52. Bac Lieu — All districts; Bac Lieu town
  53. Ca Mau — All districts; Ca Mau city
  54. Kien Giang — All districts and islands/isles; Ha Tien town, Rach Gia town
  55. Other regions — High-tech zones and EZs entitled to incentives (Prime Minister’s decision); IZs and EPZs established under the Prime Minister’s decision

4. List of conditional investment sectors applicable to foreign investors
(Issued with Decree No. 108/2006/ND-CP, 22 September 2006)

Viet Nam reserves the right to restrict foreign investment in sensitive “conditional sectors.” Projects must satisfy specified conditions and comply with international treaties to which Viet Nam is a member. Conditional sectors include:
a) Radio-broadcasting, televising
b) Production, publication, distribution of cultural products
c) Exploitation and processing of minerals
d) Telecoms infrastructure; broadcasting/transmission networks; provision of telecoms and Internet services
e) Public postal networks; postal and express services
f) Construction/operation of river, sea ports, airports
g) Transportation by rail, air, land, sea, inland waterway
h) Catching of marine products
i) Production of cigarettes
j) Real-estate business
k) Export-import and distribution
l) Education and training
m) Hospitals, clinics
n) Other sectors under international treaties requiring restricted market opening

  • Conditions must conform to applicable international treaties.
  • Conditional sectors also include all sectors where international treaties (e.g., WTO accession commitments) limit market access.
  • For sectors conditional under international commitments, apply the requirements in the relevant treaty/commitment (e.g., early WTO timelines for certain professional services).
  • For conditional sectors not mentioned in international agreements, applicable conditions derive from domestic laws (e.g., Law on Real Estate Business for real estate).

5. Restrictions (areas prohibited by law)
a) Projects detrimental to national defense, security, and the public interest
b) Projects detrimental to historical/cultural traditions and ethics/customs of Viet Nam
c) Projects harming people’s health or destroying natural resources/environment
d) Projects treating toxic waste imported to Viet Nam; projects manufacturing toxic chemicals banned by international law

1. Borrowing Regulations
Enterprises with foreign-owned capital may borrow from credit institutions permitted to operate in Viet Nam. They may mortgage assets attached to land and the value of land use rights as security for such loans.

2. Foreign Exchange
The Government sets macro foreign-exchange policy; the State Bank of Viet Nam (SBV) regulates and implements policy and oversees currency transactions. The Foreign Exchange Ordinance (passed 13 December 2005; effective 1 June 2006) governs the foreign exchange market to support WTO integration.

a) Bank Accounts

  • Accounts in Viet Nam — Enterprises with foreign-owned capital and foreign parties to BCCs must open a direct investment capital foreign-currency account at an authorized credit institution for:
    • Receipt of charter capital, direct investment capital, and medium/long-term foreign loans
    • Receipt from a foreign-currency savings account of a resident FIC/BCC party
    • Disbursement into a resident foreign-currency savings account of a FIC
    • Outbound payment of principal, interest, and fees on foreign medium/long-term loans
    • Outbound remittance of capital, profits, and other lawful income to foreign investors
    • Other revenues/disbursements related to direct foreign investment activities
      In addition, FICs and BCC parties may open other foreign-currency and VND accounts at banks in Viet Nam.
  • Accounts outside Viet Nam — Opening/operation of offshore accounts requires SBV approval. FICs may open offshore accounts in special cases (e.g., BOT companies for financing-security purposes or equity remittance).

b) Conversion
FICs and foreign BCC parties may buy foreign currency for current and other permitted transactions per FX regulations. No prior approval is required for conversion, but purchases depend on banks’ foreign-currency availability.

  • Government guarantee — The Government will support foreign-exchange balancing when authorized credit institutions cannot meet investors’ FX needs for certain important projects in Energy, Waste Treatment, and Traffic Infrastructure.
  • Conversion purposes — Residents may buy FX to meet legitimate payment needs, subject to selling bank verification. In Viet Nam, payments and remittances related to current transactions by residents and non-residents are freely conducted in compliance with regulations. Under Decree 160 (28 December 2006), current-transaction payments include: (i) repayment of foreign-loan principal/interest/fees; (ii) overseas remittance of net income and depreciation of investment capital (if applicable); (iii) payments for imports of goods/services and other current transactions; (iv) other consumption remittances and similar transactions.

c) Foreign-Currency Payments
Foreign-currency payments within Viet Nam are strictly prohibited except in limited circumstances under the Ordinance/Decree 160. Prohibited (save exceptions): FX sale/purchase, payments, loans, or posting prices in FX. Examples of permitted cases include:

  • Transactions with licensed FX service providers
  • Internal transfers in FX via bank accounts within an organization and its dependent unit
  • Capital contributions in FX for foreign investment projects in Viet Nam
  • FX payments via bank transfer under entrusted import/export contracts
  • FX payments via bank transfer by investors/principal contractors to resident contractors (domestic or foreign) for payments and outbound remittances
  • Insurers receiving FX via bank transfer for reinsurance overseas
  • Duty-free businesses, services in isolated border-gate areas, customs-bond warehouses receiving FX and VND
  • Customs/police at international border-gates and bond warehouses receiving FX from non-residents for taxes/fees/visas/services
  • Diplomatic missions/consulates collecting visa fees/charges in FX
  • Individuals (foreign non-residents and residents) receiving wages/bonuses/allowances in FX via bank transfer
  • Non-residents transferring FX via bank accounts to other non-residents or paying residents for exports
  • SBV-approved FX transactions on a case-by-case basis
    Note: Breach may render the related contract invalid.

d) Rates of Exchange
SBV announces a daily average interbank VND/USD rate used for:

  • Calculating import/export duties
  • Bid considerations for national projects at bid opening
  • Valuing capital contributions to JVCs/BCCs at contribution time
  • Commercial banks set and publish their buy/sell rates within SBV-permitted ranges.

  1. Source of Financing
    From the date of the investment certificate, FICs may obtain loans (and grant security) from onshore and offshore lenders, subject to Vietnamese law.

a) Borrowing Limit
The investment certificate specifies total investment capital and charter capital; the difference is the loan capital. Aggregate onshore/offshore loans (including shareholder loans) must not exceed loan capital, except:

  • Offshore working-capital loans ≤1 year obtained after construction is completed and the project is operational
  • Refinancing an existing loan with a new loan
    Exceeding the loan-capital limit requires Licensing Authority approval unless an exception applies. Capital structure should be planned accordingly.

b) Registration

  • Offshore loans ≤1 year for working capital are not subject to SBV registration. If extended so total term >1 year, registration is required.
  • Offshore loans >1 year (including from offshore shareholders) must be registered with SBV within 30 days from signing and before first drawdown. Standard application plus Vietnamese translation of the loan agreement are required. Prior SBV approval is needed if any finance-document provision conflicts with Vietnamese law.
  • Amendments to registered details (including assignments) must be registered with SBV within 30 days of the amendment and before it takes effect.
  • Within 15 working days of receiving a complete, valid dossier, SBV issues an official letter approving or rejecting overseas borrowings or international bond issues by state-owned commercial banks; rejections must state reasons.
  • State-owned commercial banks must report monthly and yearly on overseas borrowings to SBV (deadlines: by the 10th of the following month; by 31 January for the annual report).
  • Foreign and domestic borrowings are allowed.

4. Repatriation of Capital / Profits
After fully discharging obligations to the State of Viet Nam, foreign investors may remit abroad:

  • Profits from business activities
  • Payments from providing technology/services and IP
  • Principal and interest on foreign loans
  • Invested capital and proceeds from liquidation

Other lawfully owned sums and assets
Foreigners working in Viet Nam for an investment project may remit lawful income after fulfilling tax/obligations. Remittances are made in freely convertible currency at the trading exchange rate of the investor’s chosen commercial bank and follow FX-control procedures. Foreign investors have the right to transfer abroad profits, technology/service payments, foreign-loan principal/interest, invested capital, and other lawful sums/assets.

5. Accounting

  • Regime — The Law on Accounting is the highest authority, supplemented by decisions, decrees, circulars, official letters, and Vietnamese Accounting Standards (VAS).
  • Standards — 26 VAS (2001–2005) primarily based on then-current IAS/IFRS; not yet fully updated for newer IFRS (e.g., IFRS 9/15/16). Viet Nam has a roadmap to narrow the gap and anticipated voluntary IFRS adoption from 2022.
    • System — Circular 200/2014/TT-BTC (22 December 2014) guides the Vietnamese Accounting System (VAS framework and application).

Initial accounting setup for new entities

  • Framework: Vietnamese Accounting System
  • Language: Vietnamese (may be combined with a common foreign language)
  • Financial year: 12 months; fiscal year-end may be calendar year-end or quarter-end (31 Mar, 30 Jun, 30 Sep)
  • Currency: Records generally in VND; entities with mainly foreign-currency transactions may adopt a foreign currency if requirements are met
  • Chief accountant: Must appoint a qualified chief accountant. If unavailable, appoint an acting person-in-charge (max 12 months) meeting criteria, or outsource to a qualified service provider.

Accounting records & financial statements

  • Documents: Vouchers and books may be stored physically or electronically; printing required only upon competent authorities’ request.
  • Retention:
    • 5 years: documents for management/operations
    •  10 years: accounting data and books
    • Unlimited: documents important to the economy, national security, and defense
  • Annual financial statements (per VAS & Circular 200):
    • Balance sheet (with off-balance-sheet schedule)
    • Income statement
    • Cash flow statement 
    • Notes to the financial statements

FS must be approved by the chief accountant and legal representative; submit a copy to local authorities within 90 days after fiscal year-end. For statutory reporting, entities using a non-VND accounting currency must translate FS into VND under regulations. Foreign-invested entities must have annual FS audited by an MOF-approved audit firm.

Requirements for Employment of Foreigners in Vietnam

Foreigners may only be employed in positions of managers, executive directors, specialists, or technical workers where Vietnamese workers cannot meet the professional requirements. Hiring foreign employees requires written approval from competent authorities.

Work permit
The maximum duration is two years and it can only be extended once for a maximum of two more years. After expiry, a new work permit must be obtained. The employment contract duration must not exceed the work permit duration. Multiple definite-term contracts may be entered into with foreigners.

Procedure and timeline for work permit and visa application

  1. Submit demand for using foreign nationals: Sponsoring entity submits to government body at least 30 days before recruitment or transfer.
  2. Demand approval or refusal: Local DOLISA responds within 15 days.
  3. Submit work permit application: Filed with local DOLISA at least 15 business days before start date. Processing time 5 business days.
  4. Submit labor visa application: Filed with Immigration authority. Processing time 5 business days.
  5. Visa issuance: Granted by Immigration authority after the applicant enters Vietnam with the correct visa. Processing time 5 business days.

Entry visas
All foreigners must have a passport valid for at least 6 months and a visa, unless exempted under bilateral or unilateral agreements. Visa must match entry purpose. Work visas require submission of work permits or exemption certificates. Maximum validity: work visa 24 months, investor visa 5 years, business visa 12 months. Processing time 5 working days.

Work permit exemptions
Exemptions apply for: owners or contributing members of LLCs, board members of JSCs, foreigners staying less than 3 months to offer services, intra-company transferees in 11 service industries under WTO commitments, and specialists/managers working under 30 days per entry not exceeding 90 days per year. Sponsoring entity must apply for exemption at least 7 business days before work start. DOLISA issues certificate within 3 working days or provides a written rejection.

Temporary residence card
Serves as a multiple-entry visa. Minimum validity 1 year, maximum equal to the shortest of work permit or exemption, business license, or passport validity. Granted to foreigners with valid work permit or exemption certificate longer than 1 year and their legal spouse and children under 18. Proof of relationship must be legalized and translated. Granted only after valid visa entry. Processing time 5 business days.

Land
The Law on Land No. 45/2013/QH13, effective from 1 July 2014, regulates the forms of land use for foreign-invested enterprises (FIE).

Forms of land use

  • Land allocated from the State
  • Land leased from the State or real estate developers

Financial obligations in relation to land use rights
For granting land use right certificate: land use fee, land use right registration fee, evaluation fee for issuance of land use right certificate, license fee, land compensation fee (if applicable).
During operation: land lease fee, non-agricultural land use fee, agricultural land use fee, natural resource tax (if applicable).

Land rental fee exemptions

  • Projects in encouraged investment sectors: 3 years
  • Projects in difficult socio-economic geographical areas: 7 years
  • Projects in especially difficult socio-economic geographical areas or encouraged investment sectors located in difficult socio-economic geographical areas: 11 years
  • Projects in encouraged investment sectors located in especially difficult socio-economic geographical areas: 15 years
  • Projects eligible for special investment incentives under Article 20 of LOI 2020: up to 22 years
  • Projects in especially encouraged investment sectors located in especially difficult socio-economic geographical areas or in high-tech industrial zones: whole project lifetime

Each exemption is subject to specific conditions under relevant regulations.

Housing
Foreign individuals may buy, rent, purchase, receive, or inherit commercial housing in Vietnam, which includes apartments and separate houses in housing construction investment projects.

Foreign Exchange Control

In principle, transactions in Vietnam must be dominated and undertaken in VND, except for a few permitted cases. All buying, selling, lending and other foreign currency transactions must be made through credit instutions and banks authorized by the SBV.

Foreign investors may recognize payments (including payment from overseas) for the pre-license expenses as part of contributed investment capital. Foreign investors are allowed to repatriate profit from their investment in Vietnam after completino of all legal, tax and financial obligations to the State Budget i.e. completion of tax finalization, submission of audited financial statements, no more accumulated loss and notification to tax authority. The profit repatriation can be made annually at the end of each fiscal year or upon the termination of the subsidiary in Vietnam.

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