Taxation and Customs

Taxation in Cambodia, Laos, Myanmar, Thailand and Vietnam

DFDL MEKONG has created a dedicated Tax Practice Group covering the entire region with experienced professionals who are exclusively dedicated to tax advisory services. In conjunction with our corporate legal advisers, we are now uniquely positioned to provide tax advice to assist clients in identifying the major tax issues that will affect their investment and strategies to minimize unnecessary, adverse tax exposures and consequences.

Corporate Tax Planning Strategies

The corporate tax in Cambodia, Laos, Myanmar, Thailand and Vietnam can be a complexand dynamic situation. The theory of the law and the practice of the authorities must both be taken into account. DFDL Mekong is well placed to advise on corporate taxation through its on-the-ground-offices and strong local relationships, experienced local tax professionals and international tax advisers. Local withholding taxes and VAT may pose a significant burden on investment projects if not well planned in advance. Tax incentive regimes exist throughout the region and DFDL Mekong regularly advises on maximizing those benefits. Our tax advisers often liaise with tax  and investment regulators to secure tax exemptions in each country.

Some recent assignments:

• Obtaining a tax holiday in Cambodia for a listed real estate fund for US$180 M of commercial property projects
• Secure favorable rulings from national tax authorities in Vietnam for the transfer of assets to a new corporate structure
• Tax planning for a major manufacturing project of a multinational in the automotive industry on a regional basis
• Securing tax exemptions from the Government of Laos in relation to supply of equipment
• Restructuring the VAT offset for a multinational in the transport sector in Vietnam and Cambodia
• Review of budgeted tax costs for a listed property fund in Vietnam

DFDL Mekong assists a wide range of multinational enterprises, international groups and large local enterprises in their corporate tax planning.

Tax Efficient Market Entry Advisory Services

Advice on the tax implications of investment in Cambodia, Laos, Myanmar, Thailand and Vietnam is an important part of our tax practice. DFDL Mekong advises on the most tax efficient legal structure for the client’s project, taking into account short term and long term objectives. Issues of taxable presence are of concern even to clients that will not actually setup a local entity, but who will derive income from sources in the region. Our tax advisers benefit from working literally side-by-side their legal colleagues on the project, so that precious time is saved when it comes to coordinating the legal and regulatory side of your project with the tax aspects.

Some recent assignments:

• Tax structuring of a large forestry plantation (US$20 M)
• Advice and implementation on a tax efficient structure for a listed telecommunication enterprise in Cambodia
• Advice on a tax efficient market entry structure for a worldwide hotel management chain
• Local and national tax structure for VAT, CIT and Special Sales Tax for a listed mega-retailer in Vietnam
• Tax planning for integrating a representative office into a new local entity for a multinational enterprise
• Regional tax planning for distribution in consumer goods for a multinational enterprise; market entry in Thailand and Indochina
• Advice on import and distribution for an international telecommunication equipment supplier in Laos
• Regional tax structuring advice for large petrochemical joint venture project in Vietnam, including foreign contractor taxes, transfer pricing aspects and tax optimal profit repatriation;

Real Estate Tax Structuring

DFDL Mekong is uniquely placed to offer integrated tax and legal solutions to real estate development projects. We have extensive experience with both the legal side and the tax planning side of property development. DFDL also often assists individual property investors in clarifying and optimizing the tax aspects of their purchases.

Some recent assignments:

• Structuring of a US$2,000 M complex government-leased island resort in Cambodia, including airport, marinas, hotels and infrastructure
• Tax structure for infrastructure and villa leases of US$1,200 M on in Vietnam of resort project by private equity fund
• Urban and coastal resort tax optimization structure in Vietnam for a Singapore based private equity fund
• Tax optimization structure for an international developer of top luxury villa-hotels at multiple Vietnam coastal sites
• Tax structuring advice for a large developer of luxury condominiums in Thailand;
• Tax structuring advice for development of complex city and industrial zone developer in Cambodia
• Acquisition structure for a listed property fund in acquiring US$200 M Vietnam properties
• Villa resort legal and tax structure for an international developer in Laos of US$6 M resort project

Oil, Gas and Mining Tax Services

The Mekong region is rich in mineral resources. DFDL Mekong has developed unique hands-on experience in this sector that covers mining in gold, coal, bauxite, iron and sand, as well as natural gas and oil.

Some recent assignments:

• Tax structuring of an oil pipeline construction activity in Thailand for a multinational company
• Assist a large mining enterprise to secure tax exemptions in Laos
• Tax advice for a large oilfield services multinational in Vietnam
• Advice on changes in tax law for an oil production company in Cambodia
• Tax efficient structuring of an exploration sharing agreement in gold mining in the region and transfer of mining rights
• Customs duty advice and intervention for import and export of drilling equipment
• Tax implications for US$200 M  Sepon Mine financing in Laos
• Advice on tax dispute between the Government of Lao PDR and a foreign investor in the mineral sector

Expatriate Employee Tax Services

DFDL Mekong provides in a full range of international employee services, including tax calculation and tax optimization structures, to lodging tax returns and assuring full compliance with local tax laws. DFDL Mekong provides an international quality service throughout the entire process of employment income compliance. A particular specialty is tailor-made advice on tax efficient remuneration structures for expatriate employees.

Corporate Tax Compliance

Throughout Cambodia, Laos, Myanmar, Thailand and Vietnam, penalties and interest for failure to comply with company tax obligations in a timely fashion are high, and investors are advised to ensure that all tax obligations are properly discharged. DFDL Mekong provides a complete tax compliance service for clients in a complex and volatile tax environment. Covering all applicable monthly, quarterly and annual tax returns, filings and registrations, your small, medium or large enterprise can rest assured that all the necessary tax lodgings have been made on time.

DFDL Mekong also provides clients with a tax compliance review service, where our advisers double check tax returns that are made by your own accounting staff.

Customs and Excise Advisory

Customs duties and procedures are a challenge for doing business in many emerging developing countries. With Cambodia and Vietnam having recently joined the WTO, the GATT Agreement will apply to imports in those countries, as it does in Thailand. All the countries in the Mekong region are members of the ASEAN Free Trade Agreement (AFTA) which also results in lower tariffs on certain imports between the members.

Some recent assignments:

• Advice on unbundling of goods and software for an international supplier of gaming equipment applicable throughout the region
• Advice on relocation of manufacturing phases to maximize tariff reductions under AFTA for a multinational producer of beverages
• Obtaining customs duty exemptions for import of equipment of a non-profit organization
• Structuring of a manufacturing project and Special Economic Zone exemptions for a multinational in automotive industry in Cambodia
• Advice on creation of an Export Zone for a listed power producer in Thailand
• Customs dispute on seizure of goods in Cambodia for a multinational producer of cigarettes
• Consulting project for an international organization on rubber export taxes in Vietnam
• Obtaining change in excise duty calculation for beverages in Cambodia
• Advice on customs duty valuation for a manufacturer of tobacco products.

M&A and Tax Due Diligence

Acquisitions and restructuring poses obvious tax implications that are an important element of the transaction. Getting the deal through often depends on a detailed understanding of the applicable tax consequences. DFDL Mekong is well placed to offer an integrated tax and legal solution to clients, saving precious time and resources. We have extensive experience in carrying out due diligence assignments on targets for acquisition or before an IPO listing. Here are some of our recent tax assignments in relation to M&A deals.

• Tax due diligence for a “Big Four” accounting firm on a telecommunication enterprise in Cambodia prior to takeover by foreign investor
• Tax structuring of acquisition of group of seven local limited liability companies in Vietnam with real estate holdings for a listed foreign acquirer
• Tax due diligence on a group of seven local limited liability companies in Vietnam with real estate holdings for a listed foreign acquirer
• Tax advice in Thailand on transfer of property and assets of a private equity fund
• Structuring of introduction of new listed strategic investor in a large food and beverage group in Vietnam
• Tax due diligence of local entities of a multinational in the chemical sector prior to restructuring in Vietnam
• Tax due diligence on an agricultural enterprise in Laos for a listed acquirer
• Tax advice on an IPO listing in Thailand for a large local group
• Tax structuring of an internal corporate reorganization affecting subsidiaries in Laos, advice on tax incentives and treaty exemption

International and Regional Tax Optimization

Tax optimization is a particular specialty of DFDL Mekong’s Tax Practice Group. Our professional advisers adopt a dynamic and assertive approach, thinking “out of the box” to improve your tax situation where possible and avoid unnecessary adverse tax consequences.  Thailand and Vietnam have a large tax treaty network, which can offer useful benefits for investors. Strong local knowledge and relationships are crucial to assessing the practical impact of planning techniques. Our firm is independent of any auditing organization and is thus not affected by Sarbanes Oxley restrictions in this regard.   Some recent assignments include:

• Structuring of a regional profit repatriation scheme involving Vietnam, Thailand, Cambodia and Laos for a listed construction group
• Tax optimization of leasing of oil exploration equipment into Thailand
• Regional expatriate remuneration structure for an international manufacturer of consumer goods in Vietnam
• Tax optimization of a multinational transport enterprise in Cambodia
• Restructuring of sales of property to maximize tax benefits for a private equity fund in Thailand
• Creation and implication of tax optimization structure for a housing development in Cambodia for a listed Thai investor
• Tax optimization structure for repatriating profit from Cambodia for a listed property fund
• Reduction of withholding taxes on financing and management for a garment manufacturer in Laos
• Tax advice on restructuring for a European bank on loan to a Vietnam borrower

Transfer Pricing Advisory and Benchmarking

Thailand has introduced transfer pricing regulation in 2002 and Vietnam followed suit in 2005. The tax authorities of Cambodia and Laos may challenge transactions between related parties on a case by case basis. DFDL Mekong uses local, regional and international databases of company information to produce benchmarking reports on related party transactions for clients. Furthermore, our tax advisers can provide you with detailed advice to avoid transfer pricing disputes or assist in transfer pricing challenges.

Some recent assignments:

• Assistance in transfer pricing dispute for a multinational distributor of food and beverages in Cambodia with a positive conclusion
• Advice on transfer pricing documentation for a multinational in the chemical industry in Vietnam
• Advice on transfer pricing optimization for a construction project in Vietnam
• Transfer pricing comparables report for a toy producer in Thailand
• Tax advice on comparables and benchmarking for a garment manufacturer Laos and Vietnam

Taxation of Banks, Insurance & Financial Services

DFDL Mekong advises a number of banks and financial institutions on the tax treatment of their operations and products. Our service covers both direct and indirect taxation of financial services.

Some recent assignments:

• Consulting for Asian Development Bank on tax regime of financial leasing
• Tax structuring advice on financial services, VAT and withholding tax obligations in Laos and Vietnam
• Advice on tax regime of derivative products for a “Big Four” accounting firm for an international bank in Laos
• Advice on tax treatment of futures, options and swaps in Cambodia for a listed international bank
• Tax optimization advice on a lending transaction
• Tax advice and assistance in negotiating with authorities in Cambodia on withholding taxes on loans for a sovereign investment company

Tax Audits and Disputes

DFDL Mekong’s tax professionals are very frequently asked to assist in any disputes or audits with tax authorities. Our firm is independent of any auditing organization and is thus not affected by Sarbanes Oxley restrictions in this regard.

Some recent assignments:

• Assistance in transfer pricing dispute for a multinational distributor of food and beverages in Cambodia with a positive conclusion
• Dispute on tax treaty exemptions in Vietnam for multinational enterprise in the pharmaceutical sector
• Appeal in Tax Court for a foreign investor in the financial sector in Thailand
• Mutual Agreement Procedure (involving four countries) on tax treaty application for a multinational enterprise in the medical sector
• Obtaining tax clearance in Cambodia and Laos for various foreign owned enterprises.