Cross border billings

stealing in progress?

Have you been doing cross border billings? Of course, you have not. I hope...

For those who are not familiar with it, here is the explanation. Imagine you have a company in China and also a company in Hong Kong. For businesses secured and completed in China, the billing ie. the invoice is issued from the Hong Kong company.

Why?

Apparently many SMEs, with the above set up, are taking advantage of the 9% discrepancy between the corporate tax rates of two countries (Hong Kong 16.5% and China 25%).

They have been booking their mainland's revenue in the lower tax region in Hong Kong.

So can we do the same between Singapore and regional countries? You better not as apparently Chinese and Hong Kong authorities are said to be working together to clamp down on such arrangement.

Tax on your Windfall...

Last month, the Malaysian government decided to implement the provision under the Windfall Profit Levy Act 1998 ie. impose a 30 per cent levy on returns on assets above the 9 per cent threshold of the Independent Power Producers' (IPPs) audited accounts.

Apparently, the law would effectively mean a higher corporate tax rate on profits made by companies.

While at this moment, the impact is limited to IPPs. But should the government's fiscal conditions worsen, will this "martial law" be suddenly applied on other sectors that too are doing well.

Such laws confuse investors. They blur visibility in investing in a country. While the law has been around since 1998 (apparently), it was not implemented.