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SINGAPORE: Tax experts said Asian countries are expected to find new ways to boost revenues following a string of fiscal stimulus measures to boost economic growth.
Among the possibilities is further scrutiny of transfer pricing which will affect multi-national companies that operate across borders.
Governments in Asia are spending in record numbers to boost economic growth and they are looking for more ways to fund their fiscal spending.
According to some experts at a regional tax conference, authorities are increasing their scrutiny on corporate taxes, particularly in transfer pricing.
Timothy Loh, tax manager, BDO Raffles (Singapore), said: "The tax authorities, the inland revenue board, have actually increasingly conducted tax audits on various taxpayers - especially multi-national companies - with a view to conduct checks to see whether the transactions with their related parties are conducted at arms length."
Transfer pricing allows multi-national companies with subsidiaries in more than one country to re-allocate profits within the group in order to reduce tax liabilities in certain jurisdictions.
Reports show countries like China have increased transfer pricing audits in recent years. According to BDO, transfer pricing-related income adjustments in China jumped from 5.9 billion renminbi in 2006 to 15.5 billion renminbi last year.
That resulted in some 1.24 billion renminbi in additional taxes collected by Chinese authorities.
Under such a backdrop, experts said tax planning is now even more important for firms to gain tax efficiencies when repatriating profits.
Alfred Choi, partner, BDO Tax (Hong Kong), said: "Generally, the repatriation strategies can be in the form of dividends, royalty charge, interest or service fee. But remember, all these repatriation policy will be subject to withholding tax or business tax in China.
"So, that's the reason why companies need to consider using a company from a tax treaty region or a tax treaty country because all these repatriation would be subject to withholding tax."
Already, countries like Singapore are stepping up efforts to ensure tighter tax regulation. - CNA/vm
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