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1、AN INTRODUCTION TODoing Business in ASEAN2023Investing in ASEAN 2023 growth opportunities amid bureaucratic reformsSpecial FocusThis edition of Doing Business in India was produced by a team of professionals atDezan Shira&Associates,with Ayman Falak as Editor.Creative design of the guide was provide
2、d by Aparajita Zadoo.2023 Dezan Shira&Associates DisclaimerThe contents of this guide are for general information only.For advice on your specific business,please contact a qualified professional advisor.Copyright 2023,Asia Briefing Ltd.No reproduction,copying,or translation of materials without pri
3、or permission of the publisher is permitted.VISIT US ON FACEBOOKFOLLOW US ON TWITTERDezanShiraASEANBriefingVISIT US ON LINKEDINChina GuideIndia GuideVietnam GuideASEAN GuideIndonesia GuideHong Kong GuideRussia GuideSingapore GuideBelt&Road GuideTHE DOING BUSINESS IN ASIA GUIDES SERIES3AN INTRODUCTIO
4、N TO DOING BUSINESS IN ASEAN 2023About Dezan Shira&AssociatesAt Dezan Shira&Associates,our mission is to guide foreign companies through Asias complex regulatory environment and assist them with all aspects of establishing,maintaining and growing their business operations in the region.Since its est
5、ablishment in 1992,Dezan Shira&Associates has grown into one of Asias most versatile full-service consultancies with operational offices across China,Hong Kong,India,Singapore and Vietnam,as well as liaison offices in Italy,Germany and the United States,and partner firms across the ASEAN region.With
6、 over 25 years of on-the-ground experience and a large team of professional advisers,we are your reliable partner in Asia.4AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023This publication is designed to introduce the fundamentals of investing in all ten ASEAN countries and includes a guide to corpora
7、te establishment,tax advisory,and bookkeeping,in addition to HR and payroll,double tax agreements,and audit and compliance.An Introduction to Doing Business in ASEAN 2023,the latest publication from Dezan Shira&Associates is out now and available for download through the Asia Briefing Publication St
8、ore.The Association of Southeast Asian Nations(ASEAN)was established in 1967 by Indonesia,Malaysia,Philippines,Singapore,and Thailand to accelerate the economic growth and social development in the region.Brunei Darussalam joined in 1987,Vietnam in 1995,Lao DPR and Myanmar in 1997,and Cambodia in 19
9、99.ASEAN is home to more than 600 million people(larger than the EU and North America)and has the third-largest labor force behind India and China.Since its inception,the bloc has seen growth in myriad sectors,such as manufacturing,retail,transportation,and telecommunications.The bloc is expected to
10、 become the worlds fourth largest economy by 2030 with domestic consumption expecting to reach US$4 trillion.However,the onset of the COVID-19 pandemic has severely impacted ASEAN states as protracted lockdowns resulted in sharp downturn in industrial production,exports,and consumption.In response,A
11、SEAN members have quickened the pace of key reforms to improve the ease of doing business and attract foreign investment in new areas,such as high-value manufacturing capabilities and digital technology.These new growth drivers,among others,will make ASEAN attractive to foreign investors,including f
12、or those looking to move a part or all of their manufacturing activities from China.This publication,designed to introduce the fundamentals of investing in ASEAN,was compiled by experts at Dezan Shira&Associates,a specialist foreign direct investment practice,providing corporate establishment,busine
13、ss intelligence,tax advisory and compliance,accounting,payroll,due diligence and financial review services to multinationals investing in emerging Asia.An Introduction to Doing Business in ASEAN 2023 covers the following:Corporate establishment;Tax and accounting;Human resources and payroll;and Audi
14、t and compliance.PrefaceCONTACTDezan Shira&Associates ALBERTO VETTORETTIManaging PartnerDezan Shira&Associates5AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Whats New in This Guide?ASEAN countries have implemented an array of regulatory reforms as the bloc looks to increase its attractiveness as a
15、destination for foreign investment.The level and type of reforms varies between members.Indonesia for instance,has enacted its biggest attempt at bureaucratic reform since independence.We provide highlights of some of the key changes in ASEAN states.CambodiaCambodia issued a decree for new income ta
16、x thresholds for 2023,and also introduced the Law on Investment.The Law governs both domestic and foreign investments in the country.The Cambodian government first enacted the predecessor to the Law in 1995 and amended it in 2003.The Law aims to modernize and streamline Cambodias investment environm
17、ent,bringing regulations closer in line with ASEAN best practices.IndonesiaIndonesia enacted the Job Creation Law in 2020 and its implementing regulations in 2021.The Job Creation Law-also known as the Omnibus Law-is touted as Indonesias biggest attempt at bureaucratic reforms since independence.The
18、 Law amends more than 75 current laws that aims to simplify the process to obtain business licenses and start a business,formalize special economic zones,and amend the countrys strict labor laws.Further,Indonesia has liberalized emerging sectors of interest for foreign investors such as construction
19、,healthcare,and telecommunications,among others.LaosLaos joins other ASEAN member states in implementing tax obligations for non-resident e-commerce and digital platform providers.MalaysiaMalaysia has amended its Employment Act to be in line with international standards.This is to come into force in
20、 January 2023.The country has also introduced new visa types for expatriates,which includes ASEANs first digital nomad visa.PhilippinesIn a bid to boost its business competitiveness,the Philippines has made amendments to the Public Service Act,the Retail Trade Liberation Act,and the Foreign Investme
21、nt Act.6AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023The amendments to the Foreign Investment Act allow,international investors to set up and fully own domestic enterprises(including micro and small enterprises)in the Philippines for the first time.Under the amended Retail Trade Liberation Act,the
22、 minimum paid-up capital requirements to establish a foreign retail enterprise has been lowered to PHP 25 million(US$500,000).Finally,the amended Public Service Act now allows for the 100 percent foreign ownership of public services in the country.SingaporeSingapore has introduced a new points syste
23、m for Employment Pass(EP)applicants from 2023,in addition to higher qualifying salary thresholds.The government hopes that the new system laid out under the Complementarity Assessment Framework(COMPASS)will improve the capacity of Singaporean businesses to select high-quality foreign professionals a
24、nd ensure workforce diversity.The country has also introduced the Overseas Network&Expertise Pass,which allows high-earners and achievers to live in Singapore without the need to secure employment first.ThailandThailand now offers new incentives to attract high-net worth investors and tourists.7AN I
25、NTRODUCTION TO DOING BUSINESS IN ASEAN 2023COVID-19 has put every world economy to the test.In Asia,the 10-member Association of Southeast Asian Nations(ASEAN)has shown incredible resilience through the height of the pandemic as a destination for foreign investment.The key driver for increasing fore
26、ign direct investment(FDI)into this region has been a diversification of manufacturing supply chains from businesses based in China,in addition to investments in Southeast Asias growing consumer market.ASEAN economic growth rebounded in 2021 to 3.4 percent from a contraction of 3.2 percent in 2020.F
27、DI into the ASEAN region reached some US$179 billion annually in both 2019 and 2021 having been disrupted due to the pandemic in 2020,reaching US$137 billion.Manufacturing supply chain diversificationCOVID-19 lockdowns in China and ongoing uncertainties surrounding the US-China trade war have gotten
28、 manufacturers to rethink the resilience of their supply chains.As such,they have turned to Southeast Asia for new growth opportunities.Countries like Vietnam,Thailand,and Malaysia have seen gains from the restructuring of supply chains.For instance,American chip giant Intel,and South Koreas Samsung
29、 have operations in the region.Going forward,Southeast Asia will become increasingly intertwined in global trade,especially with the ratification of the Regional Comprehensive Economic Partnership(RCEP),the worlds largest free trade agreement,covering a market of 2.2 billion people.Companies should
30、first look at the complexity of their supply chains before considering diversifying their operations to Southeast Asia.Companies engaged in traditional manufacturing of goods with short supply chains,such as apparel are more likely to relocate their whole supply chain,whereas those in more value-add
31、ed industries are likely to relocate part of their supply chain.A growing middle-class and active consumersSoutheast Asia is seeing a steady growth of active consumers and the middle-class demographic,beefing up demand for products ranging from electronics to automobile to education to leisure,among
32、 others.ASEAN itself has a population of over 630 million,or nine percent of the world population and enjoys favorable demographics.According to the IMF,more than half of the blocs population is under 30,and the bloc enjoys more people coming online than any other region in the world.Further,65 perc
33、ent of the regions total population is expected to be in the middle-class by 2030.Why ASEAN?“The key driver for increasing foreign directinvestment into ASEAN has been a diversification of manufacturing supply chains frombusinesses based in China,in addition to investments in Southeast Asias growing
34、 consumermarket.”MARCO FRSTERManagerASEAN Advisory UnitDezan Shira&AssociatesHo Chi Minh City Office8AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Why ASEAN is an Attractive Investment Destination:Quick FactsProjected GDP Growth in 2023(%)Labor force participation rate(%)(2020)ASEAN top 5 FDI sourc
35、es(2021)ASEAN population(2021)FDI(2021)ASEANIndonesia MalaysiaPhilippines SingaporeThailand Vietnam BruneiCambodia Indonesia Lao DPR Malaysia Myanmar Philippines Singapore Thailand VietnamUSAEU(Intra-ASEAN)ChinaJapanAround 663 millionUS$179 billion64.445.81.545.8 65.287.467.840.868.459.459.568.167.8
36、74US$40.2 billionUS$26.5 billionUS$23.5 billionUS$13.8 billionUS$11.9 billion9AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Table of ContentsPreface04Whats New in This Guide?05Why ASEAN?07Part 1|Corporate Establishment 12Country-wise business structures and setup process 13Brunei13Cambodia15Indones
37、ia22Laos41Malaysia42Myanmar50Philippines51Singapore61Thailand70Vietnam77ASEANs free trade agreements82Part 2|Taxation in ASEAN 84Country-wise tax structure 85Brunei85Cambodia8710AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Table of ContentsIndonesia92Laos105Malaysia110Myanmar116Philippines118Singa
38、pore125Thailand136Vietnam141Part 3|Human Resources&Payroll in ASEAN144Employment permits and relevant visa categories145Brunei145Cambodia147Indonesia154Laos173Malaysia176Myanmar187Philippines190Singapore200Thailand224Vietnam228Minimum wages in ASEAN234Brunei234Cambodia234Indonesia23411AN INTRODUCTIO
39、N TO DOING BUSINESS IN ASEAN 2023Table of ContentsLaos238Myanmar238Malaysia238Philippines239Singapore239Thailand240Vietnam241Assessing current talent in selected ASEAN242Indonesia242Malaysia242Singapore243Thailand244Vietnam245Factors impacting HR development in ASEAN246Part 4|Auditing and Compliance
40、 in ASEAN248Brunei249Cambodia252Indonesia255Laos257Malaysia260Myanmar262Philippines265Singapore268Thailand271Vietnam27412AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Country-wise business structures and set up process ASEANs free trade agreementsCorporate Establishment113AN INTRODUCTION TO DOING B
41、USINESS IN ASEAN 20231ASEANs economic performance has outperformed the global average in recent years as it aims to enhance its attractiveness to foreign investors.ASEAN members are trying to realize their potential by issuing initiatives to liberalize trade and standardize regulatory and legal fram
42、eworks.These perquisites vary among member states,and can impact the transparency,length,and cost of establishing a company in the region.BruneiBrunei Darussalam has seen a gradual increase in the World Banks Ease of Doing Business report,ranking 105 in 2014 to 66 in 2020.In the report,the country m
43、aintained its number one joint-ranking for the getting credit category with New Zealand,which reflects the strength of Bruneis credit reporting system.In terms of starting a business,Brunei was ranked 16th.Registering a business can now be done online by creating an account on the One Common Portal(
44、OCP)system on the Ministry of Finance and Economy website.Limited liability companyEstablishing a limited liability company(Sdn Bhd)is the preferred option for most foreign investors as there is no minimum share capital required.The advantages are that the foreign investor can own all the shares in
45、the company and that the shareholders liabilities are limited to their share capital contributions.IncorporationThe first step in the incorporation process is to research the available names at the Registrar of Companies.Once a name has been approved,the applicant should submit the following through
46、 the online submission form:Articles of association(including share capital and allotment of shares);Memorandum;Signed copy of the directors national identity card or passport;Details of directors;Office address;and Declaration of compliance.“Despite recording a downturn,ASEAN economies offer compel
47、ling investment prospects for prominent businesses and niche industries given the regions well-established trade networks,growing middle-class cohort,and a young and educated workforce.”DAVID STEPATSenior ManagerInternational Business AdvisoryDezan Shira&AssociatesSingapore OfficeCountry-wise busine
48、ss structures and setup process14AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023The company requires a minimum of two shareholders,which can be natural persons or legal entities with the maximum number of shareholders set at 50.The minimum number of directors required is two,where one must be a Brun
49、ei citizen or a resident.Additionally,there is a BND 300(US$221)fee for incorporating a private limited company and BND 30(US$22)fee for registering a business name.Branch officeEstablishing a branch office is the ideal choice for foreign investors who do not want to go through the process of appoin
50、ting a local director.However,the branch office must still appoint a local agent.The incorporation procedure is similar to that of a limited liability company except the complementing documents are different.The applicant will need to submit the following materials:A consent letter from the main bra
51、nch A certified certificate of incorporation or registration in place or origin or similar document A certified true copy of the company charter or articles of associations defining the constitution of the parent company;A memorandum of appointment or power of attorney(including the name and address
52、 of two or more individuals resident in Brunei Darussalam authorized to accept service of process and any notices,with the parent company seal)List of directors(Form IV(F);An original copy of the company resolution approving the establishment of a branch office in Brunei;A list of authorized persons
53、;Undertaking letter;and Notice of office registration in Brunei.The branch office must have a registered office and will be subject to the corporate tax rate of 18.5 percent on income derived from or received in Brunei.15AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023CambodiaMost industries in Cambo
54、dia allow for 100 percent foreign ownership,although this exception only when a company owns land in which case the company must have majority Cambodian ownership.Cambodias Law on InvestmentOn October 15,2021,Cambodia promulgated a new Law on Investment,officially called the Law on Investment in the
55、 Kingdom of Cambodia(the“Law”).The Law governs both domestic and foreign investments in the country.The Cambodian government first enacted the predecessor to the Law in 1995 and amended it in 2003.The Law aims to modernize and streamline Cambodias investment environment,bringing regulations closer i
56、n line with ASEAN best practices.It was spurred,in part,by the governments need to stimulate Cambodias economic recovery from the effects of COVID-19.General provisionsArticle 1 of the Law sets out its overall objectives:to create an open,transparent,predictable,and favorable legal environment to at
57、tract and promote domestic and foreign investment in Cambodia.It lists the four ways the Law intends to do so:1.Increasing Cambodias competitiveness to make its economic structure more diversified and resilient to crises;2.Modernizing and increasing the productivity of local industries and strengthe
58、ning connectivity with regional and global supply chains,including by promoting capital inflows and transfer of technology,knowledge,and know-how;3.Establishing an investment incentive regime that is transparent,predictable,non-discriminatory,and competitive to support socio-economic development pol
59、icies;and4.Providing protection to investors rights and legitimate interests through the establishment of a comprehensive and equitable legal framework in line with national interests.The Law advances these objectives by simplifying registration procedures,strengthening investor guarantees,and encou
60、raging investments in strategic sectors,among other areas.Registration proceduresChapter 4 of the Law contains updated procedures for registering and implementing investment projects.Per Article 10,investments can be registered with the Council for the Development of Cambodia(CDC)or Municipal-Provin
61、cial Investment Sub-Committees under three categories:16AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023 Qualified Investment Project(QIP):Eligible for investment incentives,as confirmed through a registration certificate.Expanded Qualified Investment Project(EQIP):An expansion of a QIP,such as throu
62、gh increasing production,implementing new technologies,or upgrading infrastructure.Guaranteed Investment Project(GIP):Not eligible for tax incentives.The Law introduces the ability of investors to register projects online through a one-stop portal.As described in Article 12,relevant ministries will
63、review and decide on investment applications submitted on the one-stop portal within 20 working days.According to Article 13,investment projects may be implemented upon receipt of the registration certificate,as long as other permits and requirements are met.Investment guarantees and protectionsThe
64、Law includes several new measures on investment guarantees and protections in Chapter 5.A key provision is Article 19,which states that investors are entitled to freely purchase foreign currencies and to repatriate those foreign currencies to settle financial obligations associated with their invest
65、ment through authorized intermediary banks.Such transfers expressly include:1.Capital contributions,including initial capital contributions;2.Income,capital gains,dividends,royalties,license fees,management,and technical assistance fees,interest,and other income from investments;3.Income from the to
66、tal or partial sale or dissolution of the company implementing the investment project;4.Payment of import and repatriation of both principal and interest of the loan;5.Payment of compensation in case of civil disturbance,expropriation,or confiscation by the state;6.Payment arising from the settlemen
67、t of a dispute by any means including court decisions or arbitration awards;and7.Other income and salary of employees.The Law contains many other articles describing guarantees and protections,including Article 22,which describes the right to obtain and/or request stay permits in Cambodia for invest
68、ors,foreign employees,and their families.To be noted,these provisions come with a number of caveats,such as permission to hire foreign employees based on circumstances and requirements to meet other visa application procedures.Encouraged industriesChapter 6 of the Law delineates incentives for encou
69、raging industries and activities.The Law lists encouraged industries and activities in Article 24.Many of these industries are in strategically important areas for the government to develop,such as high-tech and green 17AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023technology,as opposed to areas wh
70、erein Cambodia is already strong,such as garment manufacturing.Encouraged industries are as follows:1.High-tech industries involving innovation or research and development;2.Innovative or highly competitive new industries or manufacturing with high added value;3.Industries supplying regional and glo
71、bal production chains;4.Industries supporting agriculture,tourism,manufacturing,regional and global production chains,and supply chains;5.Electrical and electronic industries;6.Spare parts,assembly,and installation industries;7.Mechanical and machinery industries;8.Agriculture,agro-industry,agro-pro
72、cessing industry,and food processing industries serving the domestic market or export market;9.Small and medium-sized enterprises in priority sectors and small and medium-sized enterprise cluster development,industrial parks,and science,technology,and innovation parks;10.Tourism and tourism-related
73、activities;11.Special economic zones;12.Digital industries;13.Education,vocational training,and product promotion;14.Health;15.Physical infrastructure;16.Logistics;17.Environmental management and protection,biodiversity conservation,and the circular economy;18.Green energy and technology contribute
74、to climate change adaptation and mitigation;and19.Other sectors and investment activities deemed by the government of Cambodia have the potential for socio-economic development.Investment incentivesAccording to Article 25,investments in encouraged industries are eligible for basic tax and/or customs
75、 duties incentives,unless they are included in the Negative List.Investors can claim the incentives after obtaining a registration certificate that certifies the investments Qualified Investment Project(QIP)status.QIP registration certificates can be issued by the Council for the Development of Camb
76、odia and Municipal-Provincial Investment Sub-Committees.Eligible investors have two options for claiming basic tax incentives,as laid out in Article 26:Option 1:Income tax exemption for three to nine years,depending on the nature of the investment.Afterward,investors pay 25 percent of the total tax
77、due for two years,50 percent 18AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023for the following two years,and 75 percent for the next two years.Investors are also exempt from prepayment tax,minimum tax if an independent audit has been carried out,and export tax,unless otherwise required.Option 2:Ded
78、uction of capital expenditure through special depreciation as stated in tax regulations in force.Deduction of up to 200 percent of specific expenses incurred for up to nine years,depending on investment activities.As with Option 1,investors are exempt from prepayment tax,minimum tax if an independen
79、t audit has been carried out,and export tax,unless otherwise required.In addition to these two options,customs duty,value-added tax(VAT),and special tax exemptions are available for imports and exports of construction materials and equipment,and production equipment and inputs.Moreover,per Article 2
80、7,investments with a QIP registration certificate are eligible for additional incentives,namely:VAT exemption for the purchase of locally made production inputs for the implementation of the QIP.Deduction of 150 percent of the tax base for the following activities:Research,development,and innovation
81、;Human resource development through the provision of vocational training and skills to Cambodian workers/employees;Construction of accommodation,food courts,or canteens where reasonably priced foods are sold,nurseries,and other facilities for workers/employees;Upgrade of machinery to serve the produ
82、ction line;and Provision of welfare for Cambodian workers/employees,such as comfortable means of transportation to commute from their homes to factories,accommodation,food courts,or canteens where foods are sold at reasonable prices,nurseries,and other facilities.Income tax exemption for the expansi
83、on of a QIP.Finally,Article 28 states that investments in areas that contribute to national economic development may receive special incentives set forth in the Law on Financial Management.Private limited companiesPrivate limited companies are the most favored investment vehicles for foreign investo
84、rs.This is because for most business sectors,there are no limitations on foreign ownership.Furthermore,the start-up capital is fairly modest at US$1,000.The Cambodian authorities,however,can ask for higher capital requirements for some selected industries.The private limited company would still requ
85、ire two shareholders and one director,and these persons do not have to be a Cambodian national.19AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Branch officeForeign branch offices are considered as extensions of the parent company and are allowed to buy and sell goods and services in the manufacturi
86、ng,processing,and construction industries.However,these must be in-line with the business activities of the parent company.Representative officeRepresentative offices(ROs)are prohibited from earning any income in Cambodia and are often used to test the market before entry.There are no registered cap
87、ital requirements to set up this type of business entity.IncorporationTo incorporate all business entity types,the government launched the Single Portal,an online business registration system,to facilitate this process.Launched in June 2020,the portal aims to approve applications within eight workin
88、g days.There are six ministries integrated into the system:The Ministry of Interior,Economy and Finance,Commerce,Labor and Vocational Training,the General Department of Taxation,and the Council for the Development of Cambodia.This means investors can register their business and taxes under one platf
89、orm.Further,all fees are done online through various e-payment channels.How do you apply for a business license?There are several steps investors need to follow to begin their application.Creating an accountAfter opening the Sigle Portal website,visitors should open the Register Business icon,which
90、will instruct the user to download the CamDigiKey app for either Android or iOS.Visitors should download the app on their mobile device and create an account.Once this has been approved,scan the QR code on the Single Portal website with the CamDigiKey app;the user can then begin registering their bu
91、siness.In addition to entering their basic information details,there are various documents that investors will need to upload into the system.20AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023To register a foreign company,the following documents are required:Lease agreement or land title of the busin
92、ess location;A photo of the current Director,which should be no older than three months and taken on a white background;Passport ID or national ID card of the Director;The companys or parent companys articles of association;Letter of appointment of the Director in the case of a representative office
93、 or branch office;and Any special licenses.Tax registrationOnce the business is registered,the applicant should then fill out the tax registration section.Foreign companies will need to upload the following documents:Property information of where the business is domiciled or proof of payment of prop
94、erty tax;and Bank account details(this information must be given in digital form within 15 working days after tax registration.Notice of enterprise openingThe Notice of Enterprise section requires the applicant to enter details regarding the estimated number of employees(local and foreign)and their
95、gender.Moreover,the applicant must state the type of weekly holidays available for employees and the number of working hours per week.Pricing schemeThe final step is the payment,which can be done through debit/credit cards or through the ABA Bank app.The cost of business registration varies based on
96、 the type of enterprise and its taxpayer classification by the General Department of Taxation.Foreign companies will first need to reserve a company name at a cost of 25,000 riels(US$6).The business registration fee will cost 1 million riels(US$246).21AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023N
97、otice for enterprise opening feeThere is a fee for the notice for enterprise opening set at 120,000 riels(US$30)for all enterprise types.Applying for QIP projectsThrough the Single Portal,investors can also apply for QIP(Qualified Investment Projects)projects.QIPs are projects that are eligible to r
98、eceive fiscal and non-fiscal incentives from the Cambodian Investment Board.They are divided into three types domestic QIPS,export QIPs,and supporting industry QIPs.Cambodian companies now required to use national domain nameAs of April 2022,companies registered in Cambodia must use a level 2 nation
99、al domain .kh in addition to any Cambodian email addresses and social media accounts.The requirement has been implemented under joint Notification No.873,issued by the Ministry of Commerce(MOC)and the Ministry of Posts and Telecommunications(MPTC).Registered businesses in Cambodia have been given un
100、til January 1,2023,to implement the domain name changes.The designation of domain names in CambodiaA national domain name includes:A domain name ending with gov.kh is reserved for ministries and state institutions;The domain name edu.kh is reserved for public and private educational establishments;T
101、he domain .kh is designated for private and public enterprises that are registered with the MPTC;A domain name ending .kh is designated for a company providing computer,or internet network services;and The domain name.org.kh is reserved for non-government organizations,a union,or an association.The
102、domain names can be in the Khmer language or in a foreign language.However,the name must be a letter,hyphen,number,or a combination of all three.Further,the ministry has the right to reject any request for domain names,or reserved domain names,which are deemed offensive to local tradition,or religio
103、us beliefs.22AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023After expiration,and if the renewal fees are not paid,the domain will be temporarily suspended.After 60 days without payment,the domain name will be deleted.How can a business apply for a domain name in Cambodia?To apply for a domain name,b
104、usinesses must prepare several documents for the MPTC.Businesses must first fill out an application form for registering a new domain name.In addition,they need to prepare:A copy of the companys certificate of incorporation,certified by a public notary in Cambodia or by the One Window Service;A cert
105、ified copy of the applicants passport(if the applicant is a foreigner)or Khmer national ID,also certified by either a public notary or by the One Window Service;and A certified copy of the companys Cambodian trademark registration(if applicable).FeesThe registration fee is approximately 406,000 riel
106、(US$100),and the initial annual fee is 121,000 riel(US$30).The following years fee is the same amount.IndonesiaIndonesias government has sought to simplify the corporate establishment process through the Omnibus Law.As such,Omnibus Law has amended several aspects of the corporate establishment proce
107、ss and norms of doing business in Indonesia.One of the changes under the Omnibus Law is the increase in minimum capital requirement for a foreign investment company or PT PMA,to 10 billion rupiah(US$696,000)from the previous 2.5 billion rupiah(US$174,135).Further,the government has also implemented
108、a new risk-based approach to the issuance of business licenses.Business activities will be assessed on the scale of the hazards they can potentially create(low risk,medium-low risk,medium-high risk,and high risk).Previously,foreign businesses had to endure multi-layered bureaucratic structures that
109、involved multiple local and federal authorities,making it difficult for investors to determine which business licenses to obtain.Another important and new amendment is the introduction of individually-owned companies for Indonesian citizens.It is a new type of company category that can be incorporat
110、ed by a single individual.23AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023The positive investment listPrior to setting up,applicants should study the new Positive Investment List(PIL)to see which business sectors are unavailable or restricted for foreign ownership.The general principle under the po
111、sitive investment list is that a business sector is open to 100 percent foreign investment unless it is subjected to a specific type of limitation.The regulation presents one of the greatest liberalizations in foreign ownership limitations in Indonesia since the negative investment list was first in
112、troduced in the 1980s.The design of the positive investment listThe government has classified business fields into four categories.1.Priority sectors;2.Business fields that stipulate specific requirements or limitations;3.Businesses fields open to large enterprises,including foreign investors,but ar
113、e subject to a compulsory partnership with cooperatives and micro,small,and medium-sized enterprises(MSMEs);and4.Business fields that are fully open to foreign investment.Businesses open to 100 percent foreign investmentThe following business fields are open to 100 percent foreign investment.Oil and
114、 gas construction;Onshore upstream oil installation;Onshore and offshore distribution pipelines;Onshore and offshore oil and gas drilling service;Oil and gas well maintenance service;Electricity generation;Construction of electricity installation;Geothermal electricity generation;Supermarkets(with a
115、reas less than 1,200 sqm);Department store(with areas between 400 2,000 sqm);Ports;Airport and airport supporting services;Maritime cargo handling;Telecommunications;E-commerce;Pharmaceutical industry;and Hospitals.24AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Priority sectors To classify as a pr
116、iority sector,business enterprises must meet the following criteria:Must be labor intensive;Must be capital intensive;Must be part of a national project/program;Must be export-oriented;Must involve a pioneer industry(renewables,oil refining,metals,etc.);Must utilize advanced technologies;and Must im
117、plement research and development activities.There are 245 business fields under this category that can be found under Exhibit 1 of the positive investment list.Moreover,businesses in priority sectors are eligible for a range of fiscal and non-fiscal incentives.Fiscal incentives include a 50 percent
118、corporate income tax reduction for investments between 100 billion rupiah(US$6.9 million)and 500 billion rupiah(US$34.9 million)for a period of five years and 100 CIT reduction for investments over 500 billion rupiah(US$34.9 million)for a period between five and 20 years.In addition,there are tax al
119、lowances available in the form of a reduction in the taxable income of 30 percent of the total investment for six years,a special withholding tax rate on dividends of 10 percent,and tax losses carried forward for up to 10 years.Examples of non-fiscal incentives are the provision of supporting infras
120、tructure,simplified business licensing procedures,and the guaranteed energy supply or raw materials.We explore a few examples of the prioritized business lines and their incentives below.Examples of Priority Business Sectors and their IncentivesBusiness fieldsIncentive typeTextile and garment indust
121、ryTax allowance and investment allowancePharmaceutical industryTax allowanceDigital economy(hosting,data processing etc.)Tax holidayGeothermal(exploring and drilling)Tax allowanceCooking palm oil industryTax allowanceIron and steel industryTax allowanceAutomotive industryTax allowanceOil and gas ref
122、ineryTax holidayCosmetics industryTax allowanceCoal gasificationTax allowance25AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Business fields that stipulate specific requirements or limitationsUnder this category,business fields are open to foreign investments but are subject to the following types
123、of restrictions:Lines of business reserved for domestic investors;Lines of business subject to foreign ownership limitations;and Lines of business that require special licenses.Business Fields with Specific RequirementsBusiness fieldsRequirementsPublishing of newspapers,magazines(press)100 percent d
124、omestic capital required for establishment,and up to 49 percent foreign capital ownership for business development and expansionPrivate broadcasting agency100 percent domestic capital required for establishment,and up to 20 percent foreign capital ownership for business development and expansionSubs
125、cription based broadcasting agency100 percent domestic capital required for establishment,and up to 20 percent foreign capital ownership for business development and expansionCommunity radio agency100 percent domestic capital required for establishment,and up to 20 percent foreign capital ownership
126、for business development and expansionCommunity television agency100 percent domestic capital required for establishment,and up to 20 percent foreign capital ownership for business development and expansionPostal servicesMaximum foreign capital ownership of 49 percentDomestic scheduled air transport
127、ationForeign capital ownership of 49 percent.However,domestic capital ownership needs to be the single majorityDomestic non-scheduled air transportationForeign capital ownership of 49 percent.However,domestic capital ownership needs to be the single majorityAir transport activitiesForeign capital ow
128、nership of 49 percent.However,domestic capital ownership needs to be the single majorityDomestic passenger liner and tramp activitiesMaximum foreign capital ownership of 49 percent26AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Business Fields with Specific RequirementsBusiness fieldsRequirementsDo
129、mestic sea transport for tourismMaximum foreign capital ownership of 49 percentDomestic liner and tramp sea freight for goodsMaximum foreign capital ownership of 49 percentDomestic sea transportation for special goodsMaximum foreign capital ownership of 49 percentPioneer domestic sea transportation
130、of goodsMaximum foreign capital ownership of 49 percentDomestic sea transportation using public shippingMaximum foreign capital ownership of 49 percentOverseas liner and tramp sea freight for goodsMaximum foreign capital ownership of 49 percentOverseas sea transportation for special goodsMaximum for
131、eign capital ownership of 49 percentInterprovincial sea public transportMaximum foreign capital ownership of 49 percentInterprovincial sea public transport(pioneering)Maximum foreign capital ownership of 49 percentInterprovincial city/regency public transportMaximum foreign capital ownership of 49 p
132、ercentInterprovincial city/regency public transport(pioneering)Maximum foreign capital ownership of 49 percentInter-city and regency public transportMaximum foreign capital ownership of 49 percentRiver and lake transportation with non-fixed and irregular routesMaximum foreign capital ownership of 49
133、 percentRiver and lake transportation with non-fixed and irregular routes for tourismMaximum foreign capital ownership of 49 percentRiver and lake transportation for general goods and/or animalsMaximum foreign capital ownership of 49 percentRiver and lake transportation for special goodsMaximum fore
134、ign capital ownership of 49 percentRiver and lake transportation for dangerous goodsMaximum foreign capital ownership of 49 percentWeapons equipment industryCapital ownership based on approval from Ministry of DefenseHorticultureMaximum foreign capital ownership of 30 percentTraditional medical prod
135、ucts(for humans)100 percent Domestic capitalFish processing industry100 percent Domestic capitalWood-based building products100 percent Domestic capitalCoffee processing industry100 percent Domestic capital27AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023The foreign ownership limitations(bullet poin
136、t 2)do not apply in the following circumstances:The investments are conducted in special economic zones;Investments are in the form of non-direct investments taken through the Indonesian stock exchange;Investments subject to more favorable treatment under a treaty between Indonesia and the investors
137、 country of origin;or Any investments approved prior to the issuance of the positive investment list.The positive investment list provides for this through a grandfathering policy.Business fields open to foreign investors but are subject to a compulsory partnership with MSMEsBusiness fields under th
138、is category are open to foreign investors or large-scale enterprises through a compulsory partnership agreement with an MSME.There are 89 business lines for this category,being:Business lines that do not use advanced technology;Are labor-intensive businesses,characterized by a special cultural herit
139、age;or The capital for the business activities does not exceed 10 billion rupiah(US$701,000).Business Fields with Specific RequirementsBusiness fieldsRequirementsRendang industry100 percent Domestic capitalShip industry Outriggers;and Traditional vessels100 percent Domestic capitalTraditional handic
140、rafts100 percent Domestic capitalRaw materials for traditional medicine(for humans)100 percent Domestic capitalBatik industry100 percent Domestic capitalCrackers and chips industry100 percent Domestic capitalHajj and Umrah activities100 percent Domestic capital and must be Muslim28AN INTRODUCTION TO
141、 DOING BUSINESS IN ASEAN 2023Further,they cover businesses that are commonly carried out by MSMEs and/or sectors that have the potential to enter the larger supply chain.The partnership arrangement can be in the form of operational cooperation,profit sharing,subcontracting,outsourcing,or distributio
142、n.What business activities are closed for investments?There are six business sectors closed for investments for both domestic and foreign companies.These are:Class-I narcotics and cultivation;All forms of alcohol production and distribution activities;All forms of gambling activities;Fishing of enda
143、ngered species;Utilization of corals found in nature for the production of jewelry,souvenirs,building materials,etc.;Chemical weapons production;Alcoholic beverage manufacturing;Manufacturing of beverages containing alcohol-Wine;Manufacturing of Beverages Containing Alcohol-Malt;and Industrial ozone
144、-depleting substances industries and industrial chemicals.The foreign investment companyEstablishing a foreign investment company or PT PMA,is the preferred structure for companies looking to have a legal presence in the country.Foreign investors will need to have a minimum paid-up capital equivalen
145、t of 10 billion rupiah(US$696,000),an increase from the previous 2.5 billion rupiah(US$174,135),as the government aims to attract more high-value investments into the country.There are several advantages of PT PMAs,including:Special financial and non-financial incentives,particularly in pioneer indu
146、stries;Incentives for setting up in special economic zones(SEZs);Foreign investors can own as little as one percent and as much as 100 percent of the company(depending on the industry);Able to participate in government sponsored business tenders in the country;Ease of processing for business license
147、s;Ease of processing for work permits;Lower tax and import duties;Simple organization structure(requiring only one director,one commissioner,and two shareholders);and Ability to sponsor foreign executives.29AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023There are no restrictions on where the PT PMA
148、can set up in the country,but the business can only focus on one specific sector or area.Setup requirementsAccording to the Investment Coordinating Board Regulation No.4 of 2021(BKPM Reg 4/2021),investors looking to incorporate a PT PMA need to adhere to the following requirements:A minimum paid up
149、capital of 10 billion rupiah(US$696,000)to cover operational activity;Appointment of two shareholders(these can be foreign individuals or corporations-the percentage of local involvement will depend on the foreign ownership limitation based on the Positive Investment List);The appointment of at leas
150、t one commissioner and a director(these can be held by foreign individuals),although it is advisable to have one local director for the ease of administration;and The director will be responsible for running the day-to-day activities of the company.Set up process for a PT PMA 1.Reserve a company nam
151、e with the Ministry of Law and Human Rights(which should not be similar to the name of other companies or contain vulgar language),Further the company name shall consist of 3 words and can be in English;2.Determine the industrial business classification code(KBLI),based on the intended business acti
152、vities;3.Establish a legal entity with the companys activities stated in the Deed of Establishment(this must be done with a local notary and the Deed of Establishment will have to be ratified by the Ministry of Law and Human Rights);4.Obtain a taxpayer identification number from the local tax office
153、 and domicile letter from the district government(businesses establishing in Jakarta do not require a domicile letter);5.Obtain a tax registration certificate through the tax office where the business is domiciled;6.Obtain a Business Identification Number(NIB)by applying through the Online Single Su
154、bmission(OSS)system.The NIB applies as the companys import identification number,customs ID,and registration certificate.Further,the NIB will also automatically register your company under the governments health and social security scheme;and7.Some companies may need to apply for additional business
155、 licenses(such as for mining and fintech).Business licenses will now be issued based on the assessment of business risk level determined by the scale of hazards a business can potentially create.30AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Risk based business licensing for a PT PMAGovernment Reg
156、ulation 5 of 2021(GR 5/2021)an implementing regulation of the Omnibus Law introduces new criteria on how business licenses are issued in the country.Business licenses will now be issued based on the assessment of business risk level,determined by the scale of hazards a business can potentially creat
157、e.To determine the risk level,the government will conduct a risk analysis of each application before deciding on issuing a business license.This will comprise of:1.Identifying the relevant business activity;2.Assessing the hazard level;3.Assessing the potential occurrence of hazards;4.Determining th
158、e risk level and business scale rating;and5.Determining the type of business license.Based on the aforementioned risk analysis,the businesses activities undertaken by the applicant company will be classified into one of the following risk-level types:Low-risk businesses;Medium-low risk businesses;Me
159、dium-high risk businesses;and High-risk businesses.Based on this risk-based approach,the lower the business risk,the simpler the business licensing requirements will be.What sectors are impacted?The government will undertake the risk-analysis for business activities in the following sectors:1.Mariti
160、me affairs and fisheries;2.Agriculture;3.The environment and forestry;4.Energy and mineral resources;5.Nuclear energy;6.Industry;7.Trading;8.Public works and housing;9.Transport;31AN INTRODUCTION TO DOING BUSINESS IN ASEAN 202310.Health,medicine,and food;11.Education and culture;12.Tourism;13.Religi
161、ous affairs;14.Post,telecommunications,broadcasting,and electronic system,and transactions;15.Defense;and16.Employment.What are the requirements to obtain a business license?The requirements vary depending on the risk level of the business with those in the high-risk categories requiring more permit
162、s and licenses.The first stage of the process is obtaining a business registration number(Nomor Induk Berusaha NIB)through the OSS system.To register for an NIB,businesses will need to provide the following information:Taxpayer number(Nomor Pokok Wajib Pajak NPWP);Business activity code according to
163、 the KBLI;Business profile;The capital structure of the business;and The proposed location of the business.Furthermore,the OSS system will be linked to all relevant ministries,such as the Ministry of Finance,the Ministry of Home Affairs,and the Ministry of Law and Human Rights.Low-risk business acti
164、vitiesLow-risk business activities are only required to obtain an NIB to commence their operations.In addition to serving as the formal identity of the business,the NIB also serves as a companys import identification number,as well as the number for registering with the national social insurance pro
165、gram.Medium-low risk business activitiesBusiness activities in this category must obtain a NIB and Certificate of Standards before beginning operations.A Certificate of Standards is a statement of the fulfillment of certain business or product standards,which must be filled in through the OSS system
166、.The NIB allows the business to conduct activities from preparation to the commercial stage.The preparation stage includes:32AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023 The procurement of tools or facilities;Land acquisition;Recruitment of manpower;Feasibility studies;Financing operations for th
167、e construction phase.The commercial-stage includes:The production of goods/services;Distribution of goods/services;Marketing of goods/services;and Other commercial activities.Medium-high risk business activitiesFor medium-high risk business activities,companies will need to obtain a NIB and Certific
168、ate of Standards.However,the certificate will need to be verified by the central or regional government.A company with a NIB and an unverified Certificate of Standards are only permitted to conduct activities deemed in the preparation stage of operations.Once the central or regional government is sa
169、tisfied the business has fulfilled the specific business standards,they will issue the verified certificate and the company can begin the commercial stage of operations.High-risk business activitiesHigh-risk business activities will require a NIB and a license to operate.The license will be issued o
170、nce the business has fulfilled certain conditions and verifications set out by the central or regional government,which may include an environmental impact analysis.The NIB,however,allows the business to conduct activities in the preparation stage of operations.Depending on the products or services
171、being provided,businesses may have to obtain other supporting licenses to conduct commercial activities regardless of what risk level their activities are classified as.An illustration of the licensing requirements can be seen in the following table.33AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023R
172、isk based business licensing for micro and small enterprisesMicro and small enterprises(MSEs)(which are only allowed to be owned by Indonesian citizens)have a much simpler process to obtain a business license.Owners of MSEs only need to submit their national ID and a business certificate from the he
173、ad of their neighborhood/community association(rukun tetangga or RT).Representative officesOpening a representative office(RO)is the fastest and simplest way of establishing a legal entity in the country.This set up is a temporary arrangement ROs are not allowed to engage in any commercial activitie
174、s,issue invoices,sign contracts,or earn any revenue.Foreign investors,however,can own 100 percent of this business entity and dont have to contribute the same paid-up capital required by PT PMAs.Indonesias Omnibus Law has made amendments to ROs and introduces four types:Foreign representative office
175、(FRO);Representative office for a foreign trading company(TRO);Representative office for a foreign construction company(BUJKA);and Representative office for a foreign electricity company(JPTLA).In addition,the law has simplified the process for establishing an RO in Indonesia.The business activities
176、 of ROs are limited to market research activities,obtaining information on potential clients,developing trade contacts,and gather information on regulations and laws.However,a BUJKA and JPTLA can generate revenue.Business lineBusiness scaleRisk levelLicenseIssuing authorityWholesale distributionMicr
177、o,small,medium,and largeLowNIBGovernor,or Regent or MayorE-commerce operatorLarge and mediumHighNIB and licenseMinistry of TradeFreight forwardingAll sizesMedium-highNIB and Certificate of StandardsGovernor34AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Foreign representative office(FRO)An FRO is i
178、deal for investors who are still exploring opportunities in Indonesia.The FRO is limited to non-commercial activities and there are no restrictions on the employment of foreign nationals.However,if an FRO does employ foreign workers,then it is also obligated to employ Indonesian citizens.FROs are li
179、mited to:Acting as a liaison,coordinator,or supervisor to the foreign parent company;Preparing for the incorporation of a foreign investment company in Indonesia;Not participating in the management of the parent companys branch office or subsidiary in Indonesia;and Not seeking revenues from Indonesi
180、a.The FRO must be incorporated in an office building in the capital city of any province in Indonesia.Further,FROs are classified as low-risk business entities and thus only requires a business identification number(NIB)and an FRO registration to begin operations.Representative office for a foreign
181、trading company(TRO)A TRO acts as a selling,buying,or manufacturing agent for the foreign parent company and is prohibited from engaging in any trade or sales activities.To establish a TRO,an NIB and a TRO Business License for the Trade Sector(Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing
182、 Bidang Perdagangan Melalui Sistem Elektronik “SIUP3A Bidang PMSE”)is required.Each TRO must have a SIUP3A,and if the TRO wants to conduct imports,then must be done through a local company holding a business license or a foreign investment company holding a general import identification number.Forei
183、gn e-commerce organizers must establish a TRO if they fulfil the following criteria:Having more than 1,000 transactions with customers within a one-year period;and/or Delivered over 1,000 packages for customers within a one-year period.Representative office for a foreign construction company(BUJKA)A
184、 BUJKA is an RO for foreign construction companies,and unlike the KPPA and KP3A entities,a BUJKA can undertake projects in Indonesia through a joint venture with a local construction company.the BUJKA entity is required to obtain an NIB and a business entity certificate(Sertifikat Badan Usaha)(SBU).
185、35AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023In addition to making a joint venture with a local construction firm,the BUJKA is also required to adhere to the following:Fulfill all business licensing requirements;Hire an Indonesian as head of the BUJKA representative office;Utilizing sophisticate
186、d,efficient,and environmentally friendly technology;Prioritize the use of local construction materials;Employ more Indonesian workers than foreign workers in the expert level;and Carry out the transfer of knowledge and technology to Indonesian workers.The joint venture with the local construction fi
187、rm must also fulfil the various technical criteria such as stating the rights,responsibilities,and obligations in a written agreement between the cooperating businesses.Further,at least 50 percent of the cost value of any construction work undertaken by the joint venture must be done onshore,and at
188、least 30 percent of the cost value of the project shall be borne by the BUJK entity.Representative office for a foreign electricity supporting services(JPTLA)A JPTLA is a representative office for businesses in the field of electricity supporting services.The JPTLA must obtain an NIB and a business
189、entity certificate.The JPTLA business licensing is granted to the following activities:Construction of electricity installation;Consultation for electricity installation;and Maintenance of electricity installation.The JPTLA can undertake high-cost electricity supporting services with the following t
190、hreshold:Projects for the construction and installation of electricity infrastructure worth at least 100 billion rupiah(US$6.9 million);or Projects for the consultation in the field of electricity maintenance and installation worth at least 10 billion rupiah(US$696,000).Further,the JPTLA representat
191、ive office must appoint an Indonesian citizen in charge of the office and conduct technology and knowledge transfers to Indonesian workers.The JPTLA must prioritize the utilization of domestic products as well as use high-tech and environmentally friendly technology.36AN INTRODUCTION TO DOING BUSINE
192、SS IN ASEAN 2023General setup requirements for ROsForeign investors looking to open general RO will need to fulfil the following requirements:Register through the OSS online system;The parent companys Articles of Association legalized by a notary and the Indonesian Embassy of the parent companys cou
193、ntry of origin;Letter of Appointment by the Indonesian Embassy located in the parent companys country of origin;Latest financial statements of the parent Letter of intent legalized by a notary and the Indonesian Embassy located in the parent companys country of origin;Certificates demonstrating comp
194、etency in the relevant industry or sub-sector;Lease agreements;Must be located in the capital of a province;and A letter that states the RO will not engage in any commercial activities in Indonesia.As mentioned above,those seeking to open a BUJKA or JPTLA representative offices will require to obtai
195、n additional licenses.Individually incorporated companiesGovernment Regulation 8 of 2021(GR 8/2021),an implementing regulation of the Omnibus Law,which makes amendments to the Company Law of 2007 by introducing the concept of“individually owned companies”as well as leaving the required minimum paid-
196、up capital to the discretion of the founder(s)of the company.Individually owned companies are a new type of company category in Indonesia that can be incorporated by a single individual,who is at least 17 years of age.Investors should note that GR 8/2021 only impacts Indonesian nationals.GR 8/2021 s
197、ets out the criteria for businesses to get classified as micro or small enterprises,which was not previously regulated.Through this reform,the government hopes to increase the number of officially registered micro and small enterprises who will thus pay tax as well as contribute to the national soci
198、al security programs.Currently,the majority of Indonesias 64 million or so micro,small,and medium enterprises(MSMEs)are in the informal sector and employ more than 70 million informal workers.37AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Minimum authorized capital requiredGR 8/2021 stipulates tha
199、t the amount of paid-up capital is be agreed upon by the founder(s)of the company.However,this does not apply to companies in certain business fields that are obligated to have paid-up capital before starting operations.Under the 2007 Company Law,companies needed to have paid-up capital of at least
200、50 million rupiah(US$3,450).Once the founder(s)of the company has agreed to the amount of authorized capital,they must pay at least 25 percent of the total paid-up capital,and the proof of payment must be electronically submitted to the Ministry of Law and Human Rights(MOLHR)within 60 days from the
201、date of establishment.Importantly,an individually owned company is only applicable to businesses categorized as micro or small enterprises.GR 8/2021 states that businesses categorized as micro or small enterprises must fulfill the following capital or annual sales criteria.Enterprise scaleCapitalAnn
202、ual salesMicroUp to 1 billion rupiah(US$69,000),excluding land and buildingsUp to 2 billion rupiah(US$138,000)SmallMore than 1 billion rupiah(US$345,000),excluding land and buildingsMore than 2 billion rupiah(US$138,000)and up to 15 billion rupiah(US$1 million)Further,the incorporation of an individ
203、ually owned company does not require a deed of establishment,rather the individual only needs to fill out an establishment statement through the MOLHR website to obtain a registration certificate.The statement must include the following information:Name and domicile of the company;Purpose and busine
204、ss activities of the company;The amount of authorized,issued,and paid-up capital of the company;Number of shares of the company;Details of the founder of the company;and Tax number of the founder of the company.The individually owned company must change its legal status to a limited liability compan
205、y if the number of shareholders is more than one person,or the business no longer meets the criteria of a micro or small business.38AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Another important aspect with regards to an individually owned company,their liability is limited to the companys capital
206、.New protection and empowerment measures for small businessesIndonesias Government Regulation 7 of 2021(GR 7/2021)looks to provide greater protection and empowerment to Indonesias cooperatives,micro,small,and medium-sized enterprises(MSMEs).GR 7/2021 provides several facilities to encourage the grow
207、th of local MSMEs,such as mandating regional governments to provide at least 30 percent of the total land area for commercial areas for the promotion and development of MSMEs.In addition,the regulation has made it easier for MSMEs to obtain a business license,tax reductions,and reliefs,and are exemp
208、t from paying the provincial or the regency/city minimum wage.New MSME criteriaGR 7/2021 expands the criteria for an MSME.Previously,there were only two criteria:assets and revenue,and each had its own threshold for a company to be recognized as an MSME.Under GR 7/2021,MSMEs are categorized by their
209、 business capital or annual sales.The criteria exclude land and buildings.Micro enterprisesMicro enterprises are businesses that have capital of no more than 1 billion rupiah(US$69,900)and annual sales of no more than 2 billion rupiah(US$139,800).Small enterprisesSmall enterprises are businesses tha
210、t have capital of more than 1 billion rupiah(US$69,900)and annual sales of more than 2 billion rupiah(US$139,000)but less than 5 billion rupiah(US$349,551).Medium enterprisesMedium enterprises are businesses with a capital of more than 5 billion rupiah(US$349,551)and annual sales of more than 15 bil
211、lion rupiah(US$1.04 million)but less than 50 billion rupiah(US$3.5 million).39AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Ease of obtaining a business licenseThe Omnibus Law has implemented a centralized business licensing system.An MSME only needs to submit their national ID and a reference lett
212、er from their neighborhood association online to receive their business number.The government will provide technical guidance,consultation,and training for all MSMEs in this process,hoping it will also increase their knowledge of national standards,such as for Halal certification,as well as other re
213、gulatory certificates.Ease of obtaining financing and incentivesMSMEs are able to use their business activity as a form of credit guarantee to obtain financing.Additionally,their tax administration process has been simplified.Micro and small enterprises are eligible for incentives in the form of:Reg
214、ional tax reduction or relief;Regional fee reduction or relief;Subsidized loans;Capital for MSMEs with innovative products that have market potential or are technology-based;Financing of intellectual property rights;Vocational training;and Support for research and development.The government can act
215、as a guarantor for up to 80 percent of loans or financing provided by banks and other non-bank financial institutions to MSMEs.Micro and small businesses must first fulfill the following criteria:Must have just started business operations or are already operating;Have a gross income of no more than
216、7.5 billion rupiah(US$524,381)per year;The business activities are in:Agriculture;Plantations;Livestock;Guesthouses/hostels;Boarding houses;Campgrounds;Industry;Transportation;Restaurants;and40AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023 Stalls;and/or Procure government goods or services electron
217、ically.Medium-sized enterprises and large businesses can also receive the above-mentioned incentives if they develop export-oriented products,hire a local workforce,utilize micro or small enterprises to expand the business,and train and provide upskilling programs for micro or small businesses.MSMEs
218、 are also exempt from paying the regional/city minimum wage rates.Priority location and developmentGR 7/2021 mandates that ministries,state-owned enterprises,and regional-owned and private businesses must allocate 30 percent of their commercial areas,shopping centers,and public infrastructure for th
219、e promotion and development of MSMEs.Public infrastructure includes airports,toll road rest and service areas,railway stations,and terminals.The rental fee for the area used for the promotion of the MSME should not exceed 30 percent of the commercial rental fee.Government and state-owned entities to
220、 help facilitate demandThe central and regional government(s)are obligated to allocate 40 percent of their goods and services procurement budget for MSMEs.CooperativesThere are new provisions to assist Indonesian cooperatives.GR 7/2021 reduces the requirement of primary cooperatives from 20 members
221、to nine,and cooperatives can now be either single-purpose or multi-purpose cooperatives,aimed at attracting more members through this enterprise.Shariah-based cooperativesGR 7/2021 allows for the establishment of shariah-based cooperatives,but the entity must contain the word shariah in the official
222、 name,and the shariah principles must be stated in the cooperatives articles of association.Obligation to file financial statementsFinancial statements of individually owned companies must be submitted within six months of the end of their accounting period.Failure to submit financial statements wil
223、l result in administrative sanctions ranging from a written warning to the suspension of business activities.41AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023LaosLimited liability companies and representative offices are the most efficient options available for foreign investors looking to establish
224、 a business entity in the country.Laos is notorious for being one of the most difficult countries in which to do business,although the government has pushed for regulatory reforms to ease doing business in the country.Several industries are closed to foreign investment,including fisheries,constructi
225、on,and the restaurant sectors.Limited liability companyThis is the most used structure by foreign investors in Laos and requires a minimum of two shareholders and one director to operate.The liability of the shareholders is limited to the share capital that they invested.The Ministry of Industry has
226、 abolished the minimum registered requirements for foreign investors;however,this may not cover industries that have specific regulations regarding the minimum capital requirements.Branch officeThe scope of business of a foreign branch office in Laos is defined by the parent company,but they are lim
227、ited to operating in specific sectors insurance,foreign banks,airline companies,and financial institutions.Representative officeA representative office(RO)can be established in Laos for a minimum of one year and it can be extended twice,one year each time.The RO is prohibited from earning an income
228、in Laos.The ROs activities are limited to:Information gathering and market research;Monitoring the implementation of contracts between the parent company;and Coordinating with the parent company to facilitate its business activities in the country.Setup requirementsTo register a business in Laos,inv
229、estors must first know the LSIC code-the classification-of the business activity they intend for the company to conduct in the country.The LSIC business activity code can be found on the Ministry of Industry and Commerce website.A company can register multiple business activities.42AN INTRODUCTION T
230、O DOING BUSINESS IN ASEAN 2023Note that some business activities are restricted and require additional assessment during the business registration procedure,which could extend the processing time.The Ministry of Industry and Commerce made amendments to the business registration process in February 2
231、018,reducing the average time to register a legal entity from 174 days to 17 days.The process is as follows:1.Enterprise registration the investors apply for an enterprise registration certificate(ERC)at the Ministry of Industry.The applicant will receive a tax identification number and will be regi
232、stered for VAT simultaneously with the ERC.The process takes 10 working days.2.Company seal the next step is to obtain the company seal,which can be obtained from the Ministry of Public Security.This process takes five working days.3.Social security the investor applies for social security registrat
233、ion at the National Social4.Security Fund.This process takes two working days.Investors should note that this process relates to registering the legal entity and does not include business operating license schemes.Documentation requirementsAmong the documents the company will need to register in Lao
234、s are:Articles of association;Bank statements demonstrating the financial viability of the investor;Lease agreement(the company will need to lease a premise before registering;and Business plan.MalaysiaForeign investors looking to establish a business entity in Malaysia must register under either th
235、e Registration of Business Act 1956(ROBA 1956),Companies Act 2016(CA 2016),or the Limited Liability Partnerships Act 2012.There are seven types of business entities in Malaysia:Limited liability partnerships;Partnerships;Sole proprietorship;Company limited by shares;Company limited by guarantee;Unli
236、mited company;and Branch of a foreign company.43AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Foreign investors are only allowed to establish a company limited by shares(Sdn Bhd)or a branch office unless the persons has permanent residence status,in which case they are eligible to start a partnersh
237、ip or a sole proprietorship.Private limited companyThis type of business entity is more well known as Sendirian Berhad(private limited company)or Berhad(public limited company)and is the most common type of business entity in Malaysia.A foreign investor can own the majority shares(100 percent)of a p
238、rivate limited company,depending on the industry the business is engaging in.The CA 2016 restricts the members of a private limited company to 50 and restricts the rights of members to transfer their shares.Establishing a private limited company is the most common type of business entity in Malaysia
239、 for foreign investors.Setup requirementsThe registration process can take between five to 10 working days,and there are several documents that applicants need to submit to the Companies Commission of Malaysia,or Suruhanjaya Syarikat Malaysia(SSM).The SSM is the governing body that oversees companie
240、s operating in Malaysia.To begin the setup,applicants must provide the following documentation:Company name;Constitution of the company Declaration of compliance with the Companies Act;Primary business activities;Details of directors and shareholders;Address in Malaysia;Minimum paid-up capital;Perce
241、ntage of the shareholding of each shareholder;and A declaration by the directors that they have not been convicted of any offense and are not undischarged bankrupts.There must be at least one shareholder who can be a foreign or local individual or private entity,and at least one resident director wh
242、o ordinarily resides in Malaysia.Further,the company must have a company secretary who must be a qualified person living in the country.44AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Registration feesThere is a flat rate of 1,000 ringgit(US$238)to register the company with the SSM,however,the fee
243、is determined by the nominal share capital.Registration Fees for Privated Limit Companies in MalaysiaNominal share capitalFeesUp to 1 million ringgit(US$238,380)5,000 ringgit(US$1,191)Exceeding 1 million ringgit(US$238,380)but not more than 10 million(US$2.38 million)20,000 ringgit(US$4,767)Exceedin
244、g 10 million(US$2.38 million)but not more than 50 million ringgit(US$11.9 million)40,000 ringgit(US$9,535)Exceeding 50 million ringgit(US$11.9 million)but not more than 100 million ringgit(US$23.8 million)60,000 ringgit(US$14,302)Exceeding 100 million ringgit(US$23.8 million)70,000 ringgit(US$16,686
245、)If the foreign company does not prescribe any share capital,then the registration fee is charged at the flat rate of 1,000 ringgit(US$238).Paid-up capitalIncorporating a company in Malaysia requires no paid-up capital.However,if the company wants to issue work permits for foreign employees,a 100 pe
246、rcent foreign-owned company must commit to a minimum paid-up capital,the amount of which is decided as follows:Advisory and consultancy businesses 500,000 ringgit(US$119,000);Import,export,trading,and restaurant businesses 1 million ringgit(US$238,380);Joint venture with a Malaysian partner(with at
247、least 50 percent shares)350,000 ringgit(US$83,433)in paid-up capital and 500,000 ringgit(US$119,190);and Non-export-oriented industries 100,000 ringgit(US$23,838)and with a minimum with total minimum sales of 2 million ringgit(US$476,460).45AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Advantages o
248、f a private limited companyThere are some key characteristics of a private limited company in Malaysia.Limited liabilityThe companys shareholders are liable for the debts accrued by the company in accordance with the amount they invested,and no more.Status as a separate legal entityThe private limit
249、ed company is a separate legal entity from its shareholders and thus allows the company to operate regardless of if the directors and shareholders have retired,died,or changed unless the entity is dissolved.Ease of fundraisingThe Sdn Bhd company can raise loans and the entity can borrow from banks a
250、t lower rates compared to other business structures.This is because many banks view loans issued to private limited companies as a lower risk compared to loans for other business entities.Financial and non-financial incentivesThere are more financial and non-financial incentives given to private lim
251、ited companies compared to other business structures,such as an investment tax allowance.Branch officeEstablishing a branch office can be a quick and cost-effective way for foreign businesses looking to explore the Malaysian market.Operations and characteristics of branch offices in MalaysiaIntroduc
252、ed in 2016,the Malaysian Companies Act allows foreign organizations to set up branch offices in Malaysia by registering through the Companies Commission of Malaysia(SSM).Unlike a representative office,a Malaysian branch office can act independently and engage in legitimate profit-making activities.H
253、owever,the branch office is not viewed as a separate legal entity from the foreign parent company,and thus the legal obligations,liabilities,debts,as well as all the contracts the branch office enters into,shall be enforceable against the foreign parent company.Moreover,46AN INTRODUCTION TO DOING BU
254、SINESS IN ASEAN 2023as a sub-division of the parent company,any management decisions undertaken by the branch office must be approved by the parent company.The branch office is only taxed on income in Malaysia and is also subject to double taxation agreements Malaysia is a party to,an advantage for
255、foreign businesses who are new to the market.Setup requirementsAs the branch office would be seen as an extension of the parent organization,several legal requirements must be met:The branch office must use the same brand and name as its parent organization;Branch offices must perform the same busin
256、ess activities as parent organizations;As a result of the control a parent organization has over its branch office,the office is therefore considered a non-resident entity in Malaysia and will not be authorized for certain tax exemptions and incentives otherwise reserved for local organizations;and
257、The branch office must appoint a branch agent who is a Malaysian resident and this individual will also be legally bound to the branch office in the case of any legal breaches.What is the registration process for establishing a branch office in Malaysia?The registration process for establishing a br
258、anch office in Malaysia is as follows.Name approvalThe organization must propose a name to the SSM system at a fee of 50 ringgit(US$11.94)The name must be the same as the foreign parent company.Required documentationWithin 30 days of the name approval,the following information must be provided to th
259、e SSM:Name,identification,nationality,and place of residence of all shareholders and employees within Malaysia;List of shareholders from organizations place of origin;If the foreign organization has share capital,the details of class and number of shares in the organizations place of origin;Certifie
260、d copy of the certificate of incorporation/registration of foreign organization;and Certified copy of the memorandum and articles of association or another constitutional certificate.47AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023All documents must be submitted in either Malay or English.How much
261、are the registration fees?In the event a foreign organization does not prescribe any share capital,a flat rate of RM70,000(US$16,718)shall be paid to SSM.However,in the event share capital is issued,the fees are as follows.Registration Fees for Foreign Branch Offices in MalaysiaAuthorized share capi
262、talFeesNot more than 1 million ringgit(US$239,120)5,000 ringgit(US$1,195)Exceeds 1 million ringgit(US$239,120)but less than 10 million ringgit(US$2.3 million)20,000 ringgit(US$4,782)Exceeds 10 million ringgit(US$2.3 million)but less than 50 million ringgit(US$11.9 million)40,000 ringgit(US$9564)Exce
263、eds 50 million ringgit(US$11.9 million)but less than 100 million ringgit(US$23.9 million)60,000 ringgit(US$14,347)Exceeds 100 million ringgit(US$23.9 million)70,000 ringgit(US$16,738)Representative officeEstablishing a representative office(RO)is the fastest way of establishing a legal entity and st
264、udying the local market before determining if setting up operations in Malaysia is a viable proposition.Foreign businesses should also know that the RO is a non-trading entity and is thus not governed by the regulations under the Companies Act 2016.The RO is not permitted to earn any revenue in Mala
265、ysia.48AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Setup requirementsMost applications(excluding tourism,banking,and finance)are submitted to the Malaysian Investment Development Authority(MIDA).Applications for ROs in banking and finance must be submitted to the Central Bank of Malaysia,and RO a
266、pplications for tourism services must be submitted to the countrys Ministry of Tourism.What are the required documents for setting up the representative office in Malaysia?All documents must be certified by the notary and must be in the English language.The required documents include:1.Company profi
267、le of the parent company;2.A completed application form stating the purpose of establishment,the activities of the proposed RO,the benefits the RO will bring to Malaysia,and the estimated cash flow and human resources requirements;3.Copy of the parent companys certificate of incorporation;4.A copy o
268、f the parent companys latest annual reports and audited accounts from the last two years;5.Tenancy agreement for their business address in Malaysia;6.Copy of passport for the approved expatriate;7.Copy of their resume;8.Copies of employment testimonials;and9.One passport-size recent photo.What are t
269、he permissible activities of a representative office in Malaysia?The RO can undertake any of the following activities:Gathering information on investment opportunities in Malaysia and the region;Identifying components,sources of raw materials,or suppliers;Undertake market research and development;Ac
270、t as a coordination center for the parent companys affiliates,agents,and subsidiaries in the region;and Other activities that do not result in commercial transactions.49AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023What activities are representative offices not permitted to do in Malaysia?In additi
271、on to commercial activities,ROs are also prohibited from:Signing business contracts;Participate in the daily operations of any subsidiaries or branches in Malaysia;and Lease warehousing facilities.What is the duration of the representative office?A company can establish the RO for a minimum of two y
272、ears,which can be considered for extension depending on the companys commitment to operating expenditure and based on the merits of each case.For government entities or trade associations,the RO duration is for a maximum of five years,which can also be extended based on the merits of each case.What
273、is the operational expenditure to set up a representative office in Malaysia?The ROs operational expenditure must be at least 300,000 ringgit(US$71,000)per annum.Further,the RO needs to be financed from sources outside of Malaysia.Expatriate postsThe RO is eligible for expatriate hiring,although exp
274、atriates can only be considered for managerial and technical posts.Further,the expatriate must be currently working for the parent company or within the group or subsidiary.Their tax is based on the portion of chargeable income attributed to the number of days they are in Malaysia.50AN INTRODUCTION
275、TO DOING BUSINESS IN ASEAN 2023MyanmarPrior to establishing a business entity in Myanmar,investors are advised to consult the Myanmar Companies Law(MCL)2017,which regulates the countrys corporate framework.Limited liability entityUnder the MCL,it is possible to set up a wholly foreign-owned company,
276、in the form of a private or public company limited by shares.Businesses in which foreign ownership does not exceed 35 percent are considered local companies and are thus permitted to engage in sectors that are closed to foreign investors.A private company may have a maximum of 50 members(not includi
277、ng employees),whereas a public company can have an unlimited number of members.A private company only requires one shareholder to be incorporated in addition to one director,whether a Myanmar or foreign citizen(they need to be a resident in the country).A public company,however,must have at least th
278、ree directors,one of whom must be a citizen and ordinary resident of Myanmar(defined as a person with permanent residency or resides in Myanmar for at least 183 days in each 12-month period).There is no minimum capital requirement unless the company engages in the services or manufacturing industrie
279、s in which case the company needs to invest US$50,000 and US$150,000 respectively.Joint venture with a local partnerUnder this structure,the company requires two shareholders(one foreign and one local)and US$50,000 in capital.Additionally,the foreign investor can own up to 80 percent of the shares w
280、ithin this business entity.Branch officeThe MCL allows for the establishment of a foreign branch office,but the parent company will be liable for its activities.The branch office needs one shareholder to operate in addition to an authorized company representative in the country,who can also be a for
281、eigner.The parent company will need to also inject US$50,000 as a minimum capital requirement and the branch will be subject to a 35 percent corporate income tax rate as opposed to the 25 percent rate applicable to companies incorporated in Myanmar.51AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Re
282、presentative officeThe representative office(RO)can be foreign owned,requiring only one shareholder and one company representative in the country.The RO cannot operate any commercial activities and can only engage in market research or liaison activities on behalf of the parent company.There is,howe
283、ver,a minimum US$50,000 capital requirement.Incorporation processNew companies can be registered via the Myanmar Companies Online(MyCO)website.The first step to incorporation is checking the availability of a company name on the website of the Directorate of Investment and Company Administration(DIC
284、A)website.During this process,the company should submit the details of its directors.Once a name has been approved,the applicant can obtain the company registration forms at DICA.There are no fees to incorporate a new company,provided the documents are submitted electronically.A service fee of up to
285、 2.5 million kyats(US$1,395)will be charged for documents submitted in hard copy to the DICA office.To register a branch office,applicants must pay 500,000 kyats(US$279)in stamp duty and a registration fee through the One Stop Service(OSS)or to the Inland Revenue Service.At this point the applicant
286、can obtain a temporary incorporation certificate and permit to trade if desired.After the registration forms are completed and signed,all government fees are paid and evidence of the transfer of any minimum capital is provided(if required),the applicant will receive the company incorporation certifi
287、cate from DICA.PhilippinesThe Philippines amended its Foreign Investment ActOn March 2,2022,President Rodrigo Duterte signed Republic Act No.11647(Act 11647),which amended the Foreign Investment Act(FIA),also known as Republic Act No.7042.The amendments aim to promote and attract foreign investments
288、 by allowing,for the first time,international investors to set up and fully own domestic enterprises(including micro and small enterprises)in the Philippines.52AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Foreign ownership of small and medium-sized enterprisesUnder the FIA,micro,small,and medium-s
289、ized enterprises(MSME)with paid-in capital of less than US$200,000 are reserved for Philippine nationals.However,under the amendments,foreign nationals can own an MSME with a minimum paid-in capital of US$100,000 provided that the enterprises meet the following conditions:1.Utilize advanced technolo
290、gy(to be determined by the Department of Science and Technology);2.Are endorsed as startup enablers or as a startup in accordance with the Innovative Startup Act;or3.The company hires no less than 15 Filipino employees,a reduction from the previous requirement of 50.The new Inter-Agency Investment P
291、romotion Coordination CommitteeUnder the amended FIA,the government will create the Inter-Agency Investment Promotion Coordination Committee(IIPCC)which is a body that integrates all the promotion and facilitation efforts to encourage foreign investments.An inter-agency body will provide a uniform a
292、pproach to foreign investment promotion,since various government agencies may have different strategies when it comes to foreign investment promotion and facilitation.The President has the power to suspend,prohibit,or limit foreign investmentsTo safeguard national interests,the amened FIA gives the
293、President of the Philippines power to order the IIPCC to review foreign investments that may threaten the safety,security,and well-being of Filipinos.Examples include foreign investments involving cyberinfrastructure,military-related industries,and pipeline transportation,among others.Understudy or
294、skills development program for foreign nationalsForeign businesses employing foreign nationals and are enjoying fiscal incentives must devise an understudy or skills development program that benefits Filipino workers.This ensures that local workers receive the knowledge and skills from their foreign
295、 colleagues.The program that companies develop will be monitored by the Department of Labor and Employment.53AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Foreign ownership of public servicesThe Philippines Senate passed the third and final reading of Senate Bill(SB)2094,which amends the Public Ser
296、vice Act by enabling 100 percent foreign ownership of public services.SB 2094 makes a clear distinction between the definition of public services and public utilities.Under the 1987 Constitution,only firms that are at least 60 percent owned by Filipinos are given the authorization,certificate,and fr
297、anchise to operate as a public utility.SB 2094 narrows public utilities to just the following:Electricity distribution;Electricity transmission;Airports;Seaports;Water pipeline distribution and sewerage;Tollways and expressways;and Public utility vehicles.This means that there will be no restriction
298、 on foreign ownership for industrial undertakings not classified as public utilities.Critical infrastructureHowever,to protect national security,SB 2094 contains safeguards that limit foreign ownership in public services classified as critical infrastructure.Critical infrastructure is defined as sys
299、tems and assets that are so vital,they would have a debilitating impact on national security if they were destroyed or incapacitated.The following public services are considered as critical infrastructure:Telecommunications;Airlines;Domestic shipping;Railways;Railways;and Subways.Foreign businesses
300、can own up to 40 percent of critical infrastructure only if the country of the foreign national offers reciprocity to Philippine nationals under a treaty.Entities managing or operating critical infrastructure are now mandated to act on complaints or service interruptions within one day from receivin
301、g the complaint.They are also required 54AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023to submit a monthly report detailing the interruptions that occurred and the actions to have them resolved.Amendments to the Retail Trade Liberalization ActOn December 10,2021,the President of the Philippines app
302、roved the final amendments to the Retail Trade Liberalization Act(RTLA),or Republic Act No.11595.The bill reduces the minimum paid-up capital requirements for foreign retail enterprises,removes the requirement for a certificate of pre-qualification to the Philippine Board of Investments(BOI),and low
303、ers the investment requirements for each store owned by a foreign enterprise.These measures are aimed at attracting greater foreign investment in the retail sector,which before the pandemic,accounted for 23 percent of the total services industry with a total gross value added of PHP 1 trillion(US$20
304、 billion).Full recovery of the Philippines consumer and retail sector is expected to occur in 2022,with growth predicted in 2023.Reduction in the minimum paid-up capital requirementsThe Philippines retail industry was exclusively limited to Filipino citizens until 2000 when the RTLA was first introd
305、uced.The RTLA allowed foreign investors to engage in the local retail industry but imposed high minimum paid-up capital requirements.Under Republic Act No.11595,a foreign-owned enterprise engaged in the Philippines retail trade now only requires PHP 25 million(US$500,000)as the minimum paid-up capit
306、al.Previously,foreign retailers were classified into four categories,each with its own minimum paid-capital requirements.These were:Category A reserved for Filipinos and must have a minimum paid-up capital of US$2.5 million;Category B foreign enterprises must have a minimum paid-up capital of at lea
307、st US$2.5 million but below US$7 million;Category C foreign enterprises must have a minimum paid-up capital of at least US$7 million or more;and Category D foreign enterprises specializing in high-end luxury items must have a paid-up capital of at least US$250,000 per store.The minimum paid-up capit
308、al is subject to review every three years by the National Economic and Development Authority(NEDA),the Securities and Exchange Commission(SEC),and the Department of Trade and Industry(DTI).55AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023Certification of pre-qualification is no longer requiredThere
309、are also no pre-qualification requirements,such as providing proof of the companys track record in retailing,which obligated the foreign business to obtain a certification of pre-qualification from the BOI.Republic Act No.11595 has removed such requirements for foreign enterprises.They only need to
310、have the minimum paid-up capital of PHP 25 million(US$500,000).Reduction in the minimum investment required for each storeForeign retailers that want to open more than one physical store must invest a minimum of PHP 10 million(US$200,000)per store.This is a reduction from the previous requirement of
311、 US$830,000 per store.This minimum investment covers tangible and intangible assets,such as buildings,furniture,and storage facilities,among others.Removal of the requirement of the public offering of sharesRetail enterprises that are foreign-owned were required to offer a minimum of 30 percent equi
312、ty through any stock exchange in the Philippines,within eight years from the start of their operations.This has now been removed under Republic Act No.11595,meaning newly established foreign retail enterprises can remain privately owned.Preferential use of Filipino laborRepublic Act No.11595 mandate
313、s that foreign retail enterprises must hire Filipino workers before engaging the services of a foreign national.Promotion of locally manufactured productsThe act encourages foreign retailers to keep a stock inventory of locally manufactured products.Business entitiesThere are a range of entry modes
314、to choose from when investing in the Philippines.Each one is governed by different rules and,as such,each is suitable for different functions and business models.There are three main methods of entry:Corporation;Branch office;and Representative office(RO).56AN INTRODUCTION TO DOING BUSINESS IN ASEAN
315、 2023CorporationOne option to enter the Philippines is establishing a corporation.This means registering a new legal entity with the Securities and Exchange Commission(SEC).The structure of a corporation is such that the individual assets of the owners are legally separate from those of the company.
316、Corporations come in two forms:Filipino corporation minimum of 60 percent Filipino equity ownership;or Foreign-owned domestic corporation greater than 40 percent foreign equity ownership.Most sectors are open to foreign ownership although foreign investors are advised to check the countrys Negative
317、Investment List.On June 27,2022,then-president Rodrigo Duterte signed an executive order promulgating the Philippines Twelfth Regular Foreign Investment Negative List(RFINL).The negative list provides an update to regulations and specifications governing foreign investment in the Philippines.The pub
318、lishing and updating of the RFINL are mandated under the Foreign Investment Act of 1991.Specifically,the list is mandated to cover investment areas that are open to foreign investors and/or reserved for Filipino nationals.The RFINL is split into two areas List A and List B.List A enumerates the area
319、s of activities that are subject to foreign equity restrictions under the Philippine Constitution and specific laws.Meanwhile,List B contains areas of activity that are restricted for reasons of security,defense,the risk to health and morals,as well as for the protection of small-and medium-scale en
320、terprises.The document highlights areas of the economy whereby there shall be a)no foreign equity,b)up to 25 percent foreign equity,c)up to 30 percent foreign equity,and d)up to 40 percent foreign equity.List B only includes areas of economic activity that allow up to 40 percent foreign equity.The i
321、ndustries and sectors not listed are not subjected to restrictions.Economic activities whereby no foreign equity is permitted include mass media,the organization and operation of private detectives,watchmen or security agencies,and small-scale mining.Ownership,operations,and management of cockpits a
322、s well as any activities related to nuclear weapons are also prohibited under the RFINL.Updated sectorsA number of changes were made from the previous list issued by former president,Duterte,in 2021.One major update includes changes to rules regarding investment in the manufacture and distribution o
323、f products requiring clearance from the Defense department.57AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023The RFINL no longer includes the manufacture and distribution of products requiring clearance from the Defense department.Previously,products including guns and ammunition for warfare,military
324、 ordnance,guided missiles,tactical aircraft,space vehicles,and military communication equipment were limited to 40 percent foreign equity.The June amendment also permits foreign ownership in private recruitment up to 25 percent,regardless of whether it is for local or overseas employment.The culture
325、,production,milling,processing,and trading except retailing of rice and corn is limited to 30 percent foreign equity,which is down from 40 percent in 2021.List A updates include:Amendment to the foreign equity restriction on the operation of public utilities reflecting changes of the definition unde
326、r Commonwealth Act No.146,as amended by Republic Act 11659(“Amended PSA”).Under the Amended PSA,only the following services are considered public utilities and subject to the 40 percent foreign ownership limitation under the constitution:(a)distribution and transmission of electricity;(b)petroleum a
327、nd petroleum products pipeline transmission systems;(c)water pipeline distribution systems;(d)wastewater and sewerage pipeline systems;(e)seaports;and(f)public utility vehicles.Corporations engaged in activities that were previously considered public utilities,such as telecommunications,are no longe
328、r considered public utilities.The foreign equity restriction on retail trade in the Philippines will apply only to enterprises with paid-up capital of PHP 25 million(US$430,000).Previously,the paid-up capital requirements stood at US$2.5 million(approximately PHP 135 million)the update represents a
329、considerable change.58AN INTRODUCTION TO DOING BUSINESS IN ASEAN 2023List B updates include:As noted,the foreign equity restriction concerning the manufacture,repair,storage,and/or distribution of products requiring Department of National Defense clearance has been removed.The foreign equity restric
330、tion on domestic market enterprises applies to micro or small domestic market enterprises with paid-in equity of less than the equivalent of US$200,000.Corporations engaged in activities that were previously considered public utilities,such as telecommunications,are no longer considered public utili
331、ties.As an exception to the US$200,000 paid-in equity requirement for domestic market enterprises,the foreign equity restriction on micro or small domestic market enterprises that(i)involve advanced technology;(ii)are endorsed as start-ups or start-up enablers by the Department of Trade and Industry
332、,Department of Information and Communications Technology,and Department of Science and Technology;or(iii)have Filipinos as the majority of their direct employees(but not less than 15 Filipino employees)will apply only if such enterprises have paid-in equity of less than the equivalent of US$100,000.
333、Setup requirementsThe applicant will need to adhere to the following steps in their registration process:Submit the company name;Submit the companys articles of association;Submit bank certificate showing paid-up capital;Register with the Bureau of Internal Revenue;Procure business permits and licenses;and Register with employee-related government agencies.As part of the corporate structure,corpor