Inbound Investment In Australian Real Estate Asian Investor Base

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Inbound Investment In Australian Real
EstateAsian Investor Base
Pieter L. de Ridder
Loyens Loeff

Singapore
Tel [phone] pieter.de.ridder_at_loyens
loeff.com
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CONTENTS

• Landscape in Asia
• Singapore
• Japan
• Hong Kong
• China
• India

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INCOME TAX RATES
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JAPAN
S. KOREA
52.55
42.54
CHINA
32.5
Bangladesh
Pakistan
HONG KONG
54.5
INDIA
16.5
43.5
THAILAND
39.77
PHILIPPINES
37
44.75
MALAYSIA
25
SINGAPORE
17
42.4
AUSTRALIA
INDONESIA
30
5
VAT TURNOVER TAX RATES
6
SOUTH KOREA
10
5
JAPAN
CHINA
17
3-5
INDIA
TAIWAN
5
12.5
THAILAND
1-3
7
PHILIPPINES
12
5-15
SINGAPORE
20
10
7
MALAYSIA
SRI LANKA
PNG
10
10
INDONESIA
AUSTRALIA
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SINGAPORE INVESTORS
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SINGAPORE

• State owned enterprises (Temasek, GIC)
• Investment funds
• Pension funds
• Local corporates

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SINGAPORE

• General rules apply territorial system of
  taxation
• Discretionary exemption given by the Comptroller
  if in the public interest
• Capital gains non taxable
• Foreign dividends taxable unless (1) offshore
  sourced or the tax exemptions of s.13 ITA apply

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SINGAPORE

• S.13(8) ITA foreign dividends exemption
• Two conditions must be satisfied (1) headline
  tax rate in subsidiary country of at least 15
  and (2) income of subsidiary must have been taxed
• S.13(12) ITA is a concessionary exemption at the
  discretion of the Comptroller
• Same rules apply to SREITS or business trusts

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Capital gains non-taxable
Singapore investor
Offshore sourced or tax exempt dividends or
interest?
Australian property company
12
Qualifying Singapore fund manager
Foreign or domestic investment fund
10 income tax on management fees
Investments in securities and debt instruments
non-taxable for income Tax
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JAPAN

• No Sovereign wealth institutions (yet)
• Pension funds not taxable on pension income
  earnings unrelated income is taxable
• Pension fund eligible for tax treaty protection?
  Japan/US DTA explicitly says so
• Local corporates (investing through offshore
  structures, e.g. Caymans or Luxembourg FCPs)
• Japanese Anti Tax Haven Legislation (CFC)

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Japanese cy owns (diretly or indirectly) 5 of
shares of foreign cy?
YES
NO (NO JATHL)
Are 50 of for cys shares owned by Japanese sh
holders?
NO (NO JATHL)
YES
Is for cy taxed _at_ 25 or less?
NO (NO JATHL)
YES
Do safe harbour rules apply?
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• Safe harbour rules place of management test,
  related party transactions test (50 or more?)
  and substance test
• If CFC current taxation in Japan (42)
• Tax credits for foreign profits tax of subsidiary
  and foreign dividend withholding tax provided
  Japanese company owns 25 or more of shares of
  foreign company
• And for profits tax of the 2nd tier subsidiary
  provided certain conditions are met

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Japanese investor
Dutch holding cy
Australian property company
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HONG KONG

• Investment funds
• Government owned institutions (HKMA)
• Hong Kong businesses

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HONG KONG

• Offshore vs onshore
• Qualifying fund managers managing offshore funds
  (investments in listed equities, non HK private
  equities) tax exempt from Profits Tax in HK
• Discretionary tax exemption for companies (Chief
  Executive) e.g. HKMA
• MPF funds privately managed by the banks (HSBC)

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Hong Kong investor
Australian property company
20
Hong Kong licensed fund manager
Foreign investment fund
Investments in securities and debt instruments
non-taxable for Profits Tax
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CHINA (PRC)

• Worldwide income taxation principle, no schedular
  system
• Tax credits available for foreign dividend
  withholding tax and underlying profits tax
• No limitation in tiers for tax credit
• CFC applies if the Chinese company, either or not
  together with other Chinese investors, directly
  or indirectly, either (1) owns 50 or more of the
  voting stock of a foreign company which has an
  effective income tax burden of less than half the
  Chinese income tax rate (25) and does not
  distribute its profits without a legitimate
  commercial reason, or (2) has substantive
  economic control of this foreign company (in
  terms of equity, funding, operations, purchases
  and sales and similar matters)
• Interest on funding is tax deductible
• Exchange controls apply to foreign investments
  (SAFE)

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Chinese investor
Australian property company
23
Chinese investor
Hong Kong or Singapore holdco
Australian property company
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INDIA

• Worldwide income taxation principle
• Tax credits for foreign dividend withholding tax
  and in principle not for underlying profits tax
• Tax sparing credit in the India/Mauritius and
  Cyprus/India DTA 15 resp 10
• Capital gains are taxable (short term or long
  term gain, with corresponding different rates,
  22 resp 33.99) and a tax credit is given for
  overseas income tax on the gain
• No CFC
• Interest on funding an overseas acquisition is
  tax deductible against income from that
  subsidiary
• Exchange controls apply when investing overseas,
  based on the net wealth of the Indian investor
  administered by RBI

25
Indian investor
Mauritius, Cypriot or Singapore holdco
Australian property company
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THANK YOU