Asia Pacific economies have emerged as a preferred investment destination and prudent tax policies were largely instrumental for this development. Despite the rising uncertainty and risk aversion, the sentiments on Asia Pacific is generally cautiously optimistic, as these economies excluding Japan are not under debt constraints like their western counterparts.
However, it must noted that the region is comprised of economies with diverse stages of development. Therefore, taxation policies towards various components of tax – personal income, business income, consumption, capital gains etc – also varies significantly. Post financial crisis, the region is witnessing a trend towards robust tax administration and shift towards fiscal consolidation – a move away from the fiscal stimulus scenario that was prevalent during the crisis.
The lowering of corporate tax rates is the most widely-adopted strategy among governments to augment long-term growth. Lowered corporate tax attracts investments, creates jobs, widens the tax base and thus contributes to long-term growth. Along with potential economic growth, an attractively low corporate tax rate is a key factor that makes a country stand out to investors and the business community. Since 2008, governments across the board are trying to attract foreign investment inflow by cutting headline corporate tax rates.
Amid the prevailing global uncertainty, Asia Pacific holds a lot of traction for investors and corporations. The region is stable owing to prudent fiscal policies adopted by governments. This in turn results in low public debt. Asia Pacific is growing in importance and tax is an important consideration, therefore corporations and entrepreneurs need to familiarize themselves with the prevailing tax landscape in the region in order to make informed decision.
This report provides an overview of the headline corporate tax rates in key economies of the region i.e. Australia, China, Malaysia, Hong Kong, Indonesia, New Zealand, Japan and Singapore. The objective of this report is to provide you with an overview of the tax regime in some of the key economies of the region without making policy recommendations or judgments.
The report is merely a comparison of the headline tax rates of the countries and limited to comparing the taxes at the federal level only. The report does not delve into the idiosyncrasies regarding treatment of depreciation, losses, bad debts etc or other specific allowances, subsidies or reliefs extended to the taxpayers.
Among the Asia Pacific economies, Hong Kong has the lowest headline corporate tax rate at 16.5% and Japan has the highest effective rate of 38.01%. However, Singapore’s effective tax rate is the most competitive with the partial tax exemption scheme. For instance, a company with a chargeable income of S$300,000 will have an effective tax rate of 8.36% only, which is less than half of the headline tax rate. The table below provides a snapshot of the headline corporate tax rates of said APAC countries as of 2012.
|Country||Corporate Tax||Dividend Tax||Capital Gains Tax|
|China||25%||0% – 25%||25%|
|Japan||28.05%||0% – 28.05%||28%|
|Korea||24.2%||0% – 24.2%||24.2%|
|New Zealand||28%||0% – 28%||0%|
All Asia Pacific economies are focused on maintaining an enterprise-friendly tax regime amidst the growing economic uncertainty. Countries such as Korea, Malaysia, Indonesia and Singapore are keen on stimulating SME growth and have rolled out measures to reduce the tax burden on them. Singapore scores well not only in terms of the effective tax rate but also in terms of political stability, strength of the local currency, free market concept, economic strength and infrastructural prowess. It is only natural that Singapore invariably holds the top-most rank in several of the economic surveys that gauge the enterprise environment in the region.
For more information on corporate taxes, read our Singapore corporate tax guide.