Businessasiapacrim

DOING BUSINESS IN THE ASIA/PACIFIC RIM REGION
State Capital Group 1747 Pennsylvania Avenue, N.W. Suite 1200 Washington, D.C. 20006 (202) 659-6601 PHONE (202) 659-6641 FAX info@statecapitalgroup.org www.statecapitalgroup.org
2009 State Capital Group Member law firms practice independently and not in a relationship for the joint practice of law.
STATE CAPITAL GROUP ASIA/PACIFIC RIM MEMBER FIRMS

AUSTRALIA (MELBOURNE)
Hall & Wilcox
AUSTRALIA (SYDNEY)
Holman Webb
Level 30 Bourke Place 600 Bourke Street Melbourne, Victoria 3000 Australia +(61-3) 9603-3555 PHONE +(61-3) 9670-9632 FAX www.hallandwilcox.com.au Contact Attorney: Mark Dunphy mark.dunphy@hallandwilcox.com.au CHINA (HONG KONG)
Level 17 Angel Place 123 Pitt Street, GPO Box 119 Sydney, New South Wales DX 233 Australia +(61-2) 9390-8000 PHONE +(61-2) 9390-8390 FAX www.holmanwebb.com.au Contact Attorney: DArcy Kelly dak@holmanwebb.com.au CHINA (SHANGHAI)
Lily Fenn & Partners
Martin Hun & Partners

19/F, Yongda International Tower 2277 Longyang Road Shanghai 201204, P. R. China +86 21 5010-1666 PHONE +86 21 5010-1222 FAX www.mhplawyer.com Contact Attorney: Martin Hu martin.hu@mhplawyer.com NEW ZEALAND
Room D, 32/F. Lippo Centre, Tower 1 Queensway 89, Hong Kong China +852-2522-9882 PHONE +852-2522-3367 FAX www.lilyfennlawyers.com Contact Attorney: Lily K.B. Fenn lilyfenn@lilyfennlawyers.com INDIA
J. Sagar & Associates (JSA)

84 E, C-6 Lane, Sainik Farms New Delhi 110 062 India +91-11-2955-2714 PHONE +91-11-2955-2717 FAX www.jsalaw.com Contact Attorneys: Jyoti Sagar jyoti@jsalaw.com Sajai Singh sajai@jsalaw.com
Wynn Williams & Co.

Level 7 BNZ House 129 Hereford Street Christchurch 8011 New Zealand +(643) 3797622 PHONE +(643) 792467 FAX www.wynnwilliams.co.nz Contact Attorney: Jonathan Gillard jonathan.gillard@wynnwilliams.co.nz
Doing Business in the Asia/Pacific Rim Region 2009 State Capital Group Member law firms practice independently and not in a relationship for the joint practice of law.
Wee, Ramayah & Partners

22 Malacca Street #15-00 Royal Brothers Building Singapore 048980 Singapore +(65) 6534-5155 PHONE +(65) 6534-2622 FAX www.wrp.com.sg Contact Attorney: Rajaram Ramiah rr@wrp.com.sg SRI LANKA
SINGAPORE
Yoon Yang Kim Shin & Yu

19th Floor, ASEM Tower 159-1 Samsung-Dong, Gangnam-Gu Seoul 135-798 Korea +(82-2) 6003-7000 PHONE +(82-2) 6003-7804 FAX www.hwawoo.com Contact Attorney: Jay K. Lee jklee@hwawoo.com THAILAND
SOUTH KOREA
Nithya Partners
No. 51, Gregorys Road Colombo 7 Sri Lanka +94-11-4712-625 PHONE +94-11-2695-223 FAX www.nithyapartners.com Contact Attorney: Chanaka de Silva cdes@wow.lk
Tilleke & Gibbins International Ltd.

Supalai Grand Tower, 26th Floor 1011 Rama 3 Road Chongnonsi, Yannawa Bangkok 10120 Thailand +(662) 653-5555 PHONE +(662) 653-5678 FAX www.tillekeandgibbins.com Contact Attorneys: Santhapat Periera santhapat.p@tillekeandgibbins.com Tiziana Sucharitkul tiziana.s@tillekeandgibbins.com
CONTENTS
AUSTRALIA .................................................................................................................................................. Tab 1 CHINA (HONG KONG) ............................................................................................................................... Tab 2 CHINA (SHANGHAI) .................................................................................................................................... Tab 3 INDIA ........................................................................................................................................................... Tab 4 NEW ZEALAND ........................................................................................................................................... Tab 5 SINGAPORE ................................................................................................................................................ Tab 6 SOUTH KOREA ............................................................................................................................................ Tab 7 SRI LANKA ................................................................................................................................................... Tab 8 THAILAND ................................................................................................................................................... Tab 9
This publication is intended to provide general information for those interested in learning more about conducting business in various jurisdictions throughout the Asia/Pacific Rim region. The contents are intended to provide general information and not to apply to specific problems. Because the facts in each situation vary, the legal authorities discussed may not be applicable to specific circumstances. Readers of this publication are urged to consult their own attorneys concerning specific legal questions. No one should rely on the materials discussed without first determining whether the pertinent provisions have been amended, repealed or overruled. This article is intended for general informational purposes only and subject to updates from time to time. Any person should not rely upon the contents of this article as legal or professional advice. Further professional advices should be sought for any particular issues or cases.
TAB 1 Doing Business in the Asia/Pacific Rim Region 2009 State Capital Group Member law firms practice independently and not in a relationship for the joint practice of law.
AUSTRALIA
Hall & Wilcox Level 30 Bourke Place 600 Bourke Street Melbourne, Victoria 3000 Australia +(61-3) 9603-3555 PHONE +(61-3) 9670-9632 FAX www.hallandwilcox.com.au Contact Attorney: Mark Dunphy mark.dunphy@hallandwilcox.com.au Holman Webb Level 17 Angel Place 123 Pitt Street, GPO Box 119 Sydney, New South Wales DX 233 Australia +(61-2) 9390-8000 PHONE +(61-2) 9390-8390 FAX www.holmanwebb.com.au Contact Attorney: DArcy Kelly dak@holmanwebb.com.au
1. 1 Doing Business in the Asia/Pacific Rim Region 2009 State Capital Group Member law firms practice independently and not in a relationship for the joint practice of law.
I. INTRODUCTION TO AUSTRALIA
The Land
In the Asia/Pacific Rim Region, Australia occupies an entire continent of approximately 7.7 million square kilometers. The climate ranges from temperate in the South to tropical in the North. Average temperatures range from 4 to 28 Celsius.
The People
Australia has a population of approximately 21.64 million (as at December 31, 2008) that is mostly located in cities on the Eastern Seaboard, including Sydney (capital of the state of New South Wales- population: 6.98 million) and Melbourne (capital of the state of Victoria- population: 5.3 million). The nations capital is Canberra. With 11.25 million people in the workforce, Australia is ranked seventh in the world for overall competitiveness, (World Competitiveness Yearbook 2009). Australia is home to citizens from some 200 countries, making it the most multilingual workforce in the Asia Pacific region. More than 4.1 million Australians speak a second language (including 3 million who speak a language other than English at home).
The Language
Australias national language is English.
Time Zone
Greenwich Mean Time (GMT) +8 to +11 hours. Australias time zone offers a distinct advantage for global business, spanning the close of business in the United States and the opening of Europes trading day.
II. GOVERNMENT STRUCTURE AND ECONOMIC CLIMATE
Government Structure
Australia is a federation of six States and two Territories and offers a stable democratic system of government at three levels. The Federal Government consists of a Senate (Upper House) and the House of Representatives (Lower House) and members are elected by popular vote. Its powers are set out in the Australian Constitution. The State and Territory Governments are responsible for providing education, health care and law enforcement. Local Government is the lower tier responsible for planning and development and works more closely with communities to provide local services.
Financial System
Australias banks provide a wide range of financial services to all sectors of the economy, including funds management and insurance services. Foreign banks authorized to operate as branches in Australia are required to confine their deposit-taking activities to wholesale markets. There are 51 separate banks in Australia.
Currency
Australias currency is the Australian dollar. A$1.0 = US$0.8101 A$1.0 = Euro$0.5697 As of June 2, 2009, the exchange rate was:
Foreign Exchange Control

There are no foreign exchange controls in Australia.
Leading Industries
Agribusiness, Manufacturing, Energy, Mining, Financial Services, Tourism, Research & Development.
Australian Workplace Relations

Australian corporations fall within the scope of the Fair Work Act of 2009, which comes into effect in stages throughout 2009 and 2010. The Fair Work Act establishes Fair Work Australia - a one-stop shop with broad jurisdiction to exercise functions and powers including agreement making, award setting / modernization and employment related disputes. Occupational health and safety laws are governed at the State and Federal level. Employers have a strict duty to ensure the safety, health and welfare of employees and others present at the workplace. Employers and individuals face monetary fines and potential jail terms for individuals. Workers compensation laws govern at the State level. Anti-discrimination laws at both State and Federal level prohibit discrimination in the workplace.
III. INVESTMENT CLIMATE AND FOREIGN TRADE Australia maintains strong trade and investment links in the Asia-Pacific region. Unlike many countries in the region, there are no foreign exchange controls in Australia and the currency is fully internationalized. Capital flows, profit remittances, capital repatriation, transfer of royalties and trade related payments remain largely free from regulation. With regulatory procedures taking just two days, Australia has been assessed as one of the easiest place in the world to start a business. (World Bank 2007)
Foreign Investment Policy

The Government encourages foreign investment consistent with national and community interests. In the majority of industry sectors, smaller proposals are exempt from notification and larger proposals are approved unless judged contrary to the national interest. The screening process undertaken by the Foreign Investment Review Board (FIRB) enables comments to be obtained from relevant parties and other Government agencies in considering whether larger or more sensitive foreign investment proposals are contrary to the national interest.
Foreign Investment Framework

Australias foreign investment legislation applies to investment proposals by foreign interests. A foreign interest is an individual who is not ordinarily a resident in Australia and any corporation or trust in which there is a substantial (15% or more) foreign interest (even if it is not actually foreign controlled) or where several foreigners have a 40% or more interest in aggregate.
Acquisitions and Establishment of New Businesses

The types of proposals by foreign interests to invest in Australia that require prior approval include: Acquisitions of substantial interests in existing Australian businesses, the value of whose gross assets exceed A$100 million, or where the proposal values the business at over A$100 million. For US investors a notification threshold of A$953 million instead applies, except for investments in prescribed sensitive sectors, or by an entity controlled by a US government, which are subject to a A$110 million threshold. The Foreign Acquisitions and Takeover Act (FATA) does not apply to investments by US investors in those financial sector entities which are subject to the operation of the Financial Sector (Shareholdings) Act 1998; Proposals to establish new businesses involving a total investment of A$10 million or more. Proposals by US investors, except an entity controlled by a US government, do not require notification but remain subject to other relevant policy requirements; Portfolio investments in the media of 5% or more and all non portfolio investments irrespective of size; Takeovers of offshore companies whose Australian subsidiaries or gross assets exceed A$200 million and represent less than 50% of global assets, the applicable US investor threshold of either A$953 million or A$110 million, and for entities controlled by a US government a A$219 million threshold applies; Direct investments by foreign governments and their agencies irrespective of size; Acquisitions of interests in urban land (including interests that arise via leases, financing and profit sharing arrangements and the acquisition of interests in urban land corporations and trusts) that involve: - developed non residential commercial real estate, where the property is subject to heritage listing, valued at A$5 million or more and the acquirer is not a US investor; - developed non-residential commercial real estate, where the property is not subject to heritage listing, valued at A$50 million or more, or A$953 million for US investors; - accommodation facilities irrespective of value; - vacant real estate irrespective of value;
residential real estate irrespective of value; or proposals where any doubt exists as to whether they are notifiable (funding arrangements that include debt instruments having quasi equity characteristics will be treated as direct foreign investment).
Economic Policies & Incentives for Foreign Investment

The Australian Government is keen to promote and develop investment in Australia. The Federal Governments national investment agency, Invest Australia, assists in the growth of foreign investment in Australia. Some of Invest Australias services include: Identifying potential investment opportunities in Australia; Providing industry information and advice on establishment costs; Collecting information on key operating costs overseas for comparison; Arranging site visits and locating suitable commercial partners for joint venture project; Providing information on foreign investment regulations in Australia; Assisting with grants for feasibility studies for major investments and Assisting qualifying large investors to efficiently pass their application through the government approval channels The Australian Trade Commission (commonly known as Austrade), the Federal Governments export and investment facilitation agency, provides incentives on a case-by-case basis to encourage foreign investment. In broad terms, the Government will seek to give incentives to projects that are: Not contrary to Australias national interest Able to provide significant net economic benefits and employment to Australia in the future Able to encourage sustainable investment Likely to significantly boost Australias research and development capacity Unlikely to proceed without some form of investment incentive Viable in the long-term without subsidy Complementary to Australias areas of competitive advantage Consistent with Australias international obligations. Incentives can be in the form of taxable grants, tax relief, tax deduction or the provision of infrastructure services at discounted rates. Through Invest Australias Regional Headquarters (RHQ) program the Federal Government also offers special incentives to encourage foreign organizations to use Australia as their headquarters in the Asia-Pacific Region. Special incentives have also been created for projects that: Will boost Australian industry innovation Provide significant economic benefits to regional Australia Have estimated expenditure of at least A$50 million The RHQ incentives include: Immigration agreements granted by the Minister for Industry, Science and Resources whereby key expatriate employees of companies who are essential to the establishment and management of Australian-based regional operations, have permanent and long stay visas The deductibility of business expenses including expenditure of a revenue or capital nature, incurred directly by the RHQ company within a two year period, commencing one year prior to the RHQ first deriving assessable income and finishing one year after this date. State Governments have also developed their own programs to generate growth of foreign investment in line with
their Federal counterparts. merits.
However, there is no specific criterion, rather each case is determined on its own
Relevant Regulatory Bodies

The Australian Competition and Consumer Commission (ACCC) www.accc.gov.au The Australian Prudential Regulatory Authority (APRA) www.apra.gov.au Australian Securities and Investment Commission (ASIC) www.asic.gov.au Australian Stock Exchange Limited (ASX) www.asx.com.au Australian Taxation Office (ATO) www.ato.gov.au Foreign Investment Review Board (FIRB) www.firb.gov.au Reserve Bank of Australia (RBA) www.rba.gov.au IP Australia www.ipaustralia.gov.au .au Domain Administration (auDA) www.auda.org.au
State-Level Incentives
Victoria Invest Victoria is a specialized branch of the Department of Innovation, Industry and Regional Development, which acts to smooth the path for investment projects, promote export culture and readiness and oversee State investments crucial to creating the infrastructure and lifestyle that make Victoria an easy place to do business. Invest Victoria offers a number of services to businesses including a variety of programs to help Victorian companies develop and implement world-class management practices and quality production techniques. They also assist businesses aiming to develop an export culture, seek new markets or expand existing overseas markets through a series of export related assistance programs. Invest Victoria also facilitates major investment projects in Victoria by coordinating all government and public utility negotiations within an agreed time frame. They can help with: site selection; natural gas supply; transport; waste disposal; electricity supply; environmental approvals; sewage; water supply; permits and approvals; and other regulatory controls. These services are made available to new projects and on an ongoing basis to existing clients making a major commitment to doing business in Victoria. New South Wales The New South Wales Department of State and Regional Development (DSRD) is the first point of contact within government for companies wishing to do business in Sydney and regional New South Wales (NSW.) The DSRD works with businesses to save them time and money when establishing or expanding in NSW by: offering tailored assistance to help them set up and grow in NSW providing a wide range of business and investment information for international and local companies assisting business to find new markets for their products and services attracting and sustaining investment projects organizing trade missions for NSW business to help them establish themselves in the international economy delivering enterprise improvement programs that enhance international competitiveness driving policy change to improve the business climate in NSW.
Regional Trade Agreements and Associations

Singapore-Australia Free Trade Agreement (SAFTA) Thailand-Australia Free Trade Agreement (TAFTA) Australia-New Zealand Closer Economic Relations Australia-United States Free Trade Agreement (AUSFTA)
Free Trade Agreements Under Consideration / Negotiation

Australia-ASEAN-New Zealand FTA Negotiations Australia-China Free Trade Agreement Negotiations Australia-Malaysia FTA Negotiations Australia-UAE FTA Negotiations Australia-Japan FTA Feasibility Study
Major Trading Partners and Leading Imports and Exports

The level of foreign investment in Australia: $1.7 trillion (2008) Major Trading Partners: Australias main export destinations (2008 figures; $AUD) were: Japan (22.7%), China (14.6%), Republic of Korea (8.3%), India (6.1%) and the United States (5.5%). Major Investors: Australia's leading investors (2008 figures; $AUD) were: United Kingdom ($427.1 billion or 25%), United States of America ($418.4 billion or 24%), Japan ($89.5 billion or 5%), Hong Kong (SAR of China) ($56.3 billion or 3%), Singapore ($43.1 billion or 2%), Switzerland ($38.1 billion or 2%). Imports: (merchandise trade): AUD $225.8 billion (2008) Exports: (merchandise trade): AUD $222.5 billion (2008) The Current Account Deficit (CAD) has traditionally been a benchmark for foreign investors. account deficit in the March quarter 2009, seasonally adjusted, was at AUD $4.6 billion. Australias current
IV. CORPORATE AND BUSINESS STRUCTURES A person may carry on business in Australia as a sole trader, a partnership, a joint venture, a trust, or a company. A foreign company may carry on business in Australia either as an Australian branch or through an Australian subsidiary company. To carry on business in Australia as a branch, the foreign company must register with the Australian Securities and Investment Commission (ASIC). A foreign company wishing to apply for registration should reserve the companys name to ensure that it is available in Australia and must lodge with ASIC the application form, together with a certified copy of its certificate of registration and constituent documents. The foreign company must also have a registered office in Australia and appoint a local agent to represent the company in Australia. Once registered, the foreign company is required to lodge copies of its financial statements and comply with various notification obligations under the Corporations Act. A foreign company can establish a new Australian subsidiary by registering the company, or more commonly, acquiring an existing shelf company (a recently registered company which has not traded). If an entity carries on business in an Australian state (other than under its own individual or company name), the entity is required to register that business name with the relevant Australian State Government department.
V. TAXATION The 30% company tax rate in Australia is competitive compared to other major economies. Non-resident companies and resident companies are taxed on their Australian-sourced income at the same rate. It is likely the withholding tax applying to dividends, interest and royalties will be reduced under one of Australias double taxation agreements that also deals with taxation of business profits, real property income and certain wages. Non-residents only incur withholding tax on unfranked dividends paid by Australian companies. Under double taxation agreements, which Australia has entered into with most major countries, the maximum rate of withholding tax payable on unfranked dividends is 15%, compared with 30% normally. Under a protocol with the United States relating to double taxation, which came into effect on 1 July 2003, certain US companies (generally only listed companies) with at least 80% ownership of an Australian company are exempt from withholding tax. For other US companies, with at least 10% ownership in the Australian company, the rate is 5%. This new protocol, along with the relaxation of foreign investment restrictions under the Australia- United States Free Trade Agreement, makes Australia an even more attractive proposition for United States investors. Similar concessions now apply to UK investors. The rate of withholding interest is generally 10%. The rate for royalties is generally 30%; however, it drops to 10% under most of Australias double tax agreements, and 5% under the US agreement. The Australian Government will consider the provision of investment incentives to strategic investment projects in limited and special circumstances where the project would generate significant net economic and employment benefits for Australia.
Tax Incentives
Incentives could include grants, tax relief or the provision of infrastructure services. Incentives are considered on a case-by-case basis, taking into account a published set of eligibility criteria. The criteria include a requirement that the investment would not be likely to occur in Australia without the incentive, is viable without subsidy, and provides significant net economic benefits for Australia.
Other Significant Taxes

Different forms of direct and indirect taxes are levied by both the Federal and State Governments, including: Australian Federal Government Income tax, Fringe benefits tax Indirect taxes (on petrol, oil, tobacco and alcohol) Goods and Services Tax Capital Gains tax Customs duty State Governments Employers payroll tax Land tax Stamp duties Gaming taxes Motor vehicle taxes
VI. VISA AND REGISTRATION REQUIREMENTS Non-Australian citizens travelling to Australia may only do so with a visa. People applying for Australian temporary or permanent residence or work visas must undergo health and character checks, as well as fulfilling a number of other criteria. There are numerous visa options for people who wish to live/work temporarily or permanently in Australia. The two general types of business visas addressing the labor needs of Australian employers are: i. ii. A short-term visa for people who wish to come to Australia for genuine business purposes for periods of up to three months at any one time; and A long-term stay visa generally used when companies wish to sponsor foreign executives, technical or specialist personnel for a specified period of employment in Australia, for periods of up to four years.
VII. OTHER Useful Australian Websites Australian Industry Group www.aigroup.asn.au Austrade www.austrade.gov.au Australian Bureau of Statistics www.abs.gov.au Australian Department of Immigration & Multicultural Affairs www.immi.gov.au Australian Financial Review www.afr.com.au Australian Newspaper www.theaustralian.com.au Australian Open for Business www.fed.gov.au Australian Tourist Commission www.atc.net.au CSIRO (Commonwealth Scientific Industrial Research Organization) www.csiro.au Export Finance & Insurance Corporation www.efic.gov.au Invest Australia www.investaustralia.gov.au New South Wales Department of State & Regional Development NSW Government www.nsw.gov.au Victoria Business Victoria www.business.vic.gov.au Victorian Government www.vic.gov.au Tasmanian State Government www.tas.gov.au Queensland State Government www.qld.gov.au Western Australian State Government www.wa.gov.au South Australia State Government www.sa.gov.au Northern Territory Government www.nt.gov.au Australian Capital Territory Government www.act.gov.au
www.business.nsw.gov.au
TAB 2
CHINA (HONG KONG)

Lily Fenn & Partners Room D, 32/F. Lippo Centre, Tower 1 Queensway 89, Hong Kong China +852-2522-9882 PHONE +852-2522-3367 FAX www.lilyfennlawyers.com Contact Attorney: Lily K.B. Fenn lilyfenn@lilyfennlawyers.com
I. INTRODUCTION TO HONG KONG, CHINA
The Land
Hong Kong is a Special Administrative Region of the People's Republic of China, which has enjoyed a high degree of autonomy since July 1, 1997. Hong Kong was a British colony up to June 30, 1997. Situated at the southeastern tip of China, it is ideally positioned at the center of rapidly developing East Asia.
The People
Hong Kong's population is about 7 million with a large foreign population of about half a million people.
The Language
Chinese and English are the official languages. English is widely used in the Government and by the legal, professional and business sectors; however, there are many well-educated professionals who speak fluent English, Cantonese and Putonghua (Mandarin Chinese).
Time Zone
Hong Kongs time zone is GMT + 8 hours.
Hong Kong is a Special Administrative Region of the People's Republic of China, which has enjoyed a high degree of autonomy since July 1, 1997. Hong Kong was a British colony up to June 30, 1997. Hong Kong exercises executive, legislative and independent judicial powers, including the authority of final adjudication of disputes. The Chief Executive is the head of Hong Kong, which has a two-tier system of representative government. At the central level is the Legislative Council, which legislates, controls public expenditure and monitors the performance of the Administration. At the district level, 18 District Councils advise on the implementation of policies in their respective districts.
Economic Aspects
Hong Kong is one of the most open and externally oriented economies in the world. The city prospers as a trading, logistics and aviation hub and a service centre, where an understanding of international markets as well as the Mainland gives Hong Kong a unique and versatile economic role as the Mainland opens up. The economy is robust enough to have weathered the economic shockwaves, recovered and reached new heights. Over the past two decades, the economy of Hong Kong has more than doubled in size with Gross Domestic Product growing at an average annual rate of 5% in real terms. Hong Kong is the world's 11th largest trading economy, the world's sixth largest foreign exchange market, the world's 15th largest banking centre, and Asia's second biggest stock market. Hong Kong is one of the world's top exporters of garments, watches and clocks, toys, games, electronic products and certain light industrial products. Travel and tourism, trade-related services, transportation services, financial, banking and professional services are the main components of trade in services of different kinds. About 3,900 international corporations have established regional headquarters or offices in Hong Kong. The major types of business include wholesale/retail and import/export trades, other business services (e.g., accounting, advertising and legal services), finance and banking, manufacturing, transport and related services. Hong Kong advocates and practices free trade a free and liberal investment regime, the absence of trade barriers, no discrimination against overseas investors, freedom of capital movement, well-established rule of law based on the British legal system, transparent regulations, low and predictable taxation.
Monetary Policy
The objective of Hong Kong's monetary policy is to maintain currency stability. Given the highly externally oriented nature of the economy, this objective is further defined as a stable external value for the Hong Kong dollar in terms of a linked exchange rate against the U.S. dollar at the rate of HK$7.80 to US$1. This objective is achieved through the Linked Exchange Rate System introduced in October 1983.
The Financial System and Culture

Hong Kong prides itself in the "little government, big market" approach, where the comparatively light hand of regulatory bodies ensures Hong Kong maintains its world-class standard while providing the pro-business framework and environment that create a just, fair and level playing field. The government lives by the mantra market leads, government facilitates."
The primary economic sector is negligible in terms of contribution to Gross Domestic Product (GDP) and employment. In the last 20 odd years, GDP constituents have changed from 69% services and 30% manufacturing to 90% services and around 10% manufacturing. Hong Kong and its inhabitants are widely renowned for their ability to adapt and re-invent. Now that manufacturing has largely moved over the border to the Mainland, Hong Kong is embracing the roles of the manager, financier, marketer, logistics organizer and trader. Coupled with tourism and other key industries, the same now comprise the majority of GDP and employment. Since the economic reforms introduced by the Mainland in 1978, business between Hong Kong and the Mainland has increased significantly, with Hong Kong handling more than 20% of the Mainland's foreign trade.
III. INVESTMENT CLIMATE AND FOREIGN TRADE According to the World Investment Report 2008 released by the United Nations Conference on Trade and Development, Hong Kong was the second largest Foreign Direct Investment (FDI) recipient in Asia after the mainland of China. Hong Kong was the world's seventh and Asia's second largest FDI recipient, attracting US$54.4 billion inward investment in 2007. Hong Kong was also ranked Number 1 globally in the report's Inward FDI Performance Index, which measures the amount of FDI relative to the size of the economy. Like trade and development, Hong Kong and Mainland China are the key to each other's success. Hong Kong is the largest investor on Mainland China, and Mainland investment in Hong Kong amounts to some 2,000 enterprises and over 25% of the total stock.
Foreign Investment Incentives

Hong Kongs free-port status, low tax rates, good infrastructure, freedom from government interference and substantial available capital make her attractive to potential investors and thus competitive with other countries in the region and do offer specific incentives. The simplicity of procedures for investing, expanding and establishing a local company is a major attraction for foreign investment in Hong Kong. It is easy to start a company: ready-made companies, also known as shelf companies, are widely available and enable a businessperson to walk off a plane in the morning and start operating a company in the afternoon. The government's special industrial-land policies are a lot less demanding than the policies of many other Asian investment centers. Controls on new investments are minimal and there is no exchange control. However, new building construction requires permits, and polluting industries face increasingly strict controls. Moreover, pharmaceutical operations face strict rules on importation, manufacture, sale and distribution; the Department of Health oversees compliance. There is no investment-approval procedure directed specifically towards foreign investors. All businesses must comply with the registration requirements of the Business Registration Ordinance, Companies Ordinance and their respective subsequent amendments. Save for state-owned activities, there are almost no limits on foreign investors. An exception is broadcasting and cable operation: foreign ownership of local broadcasting stations or cable operators may not exceed 49% of shareholding. The handover of sovereignty in 1997 did not affect the free movement of foreign equity. The Basic Law safeguards "free movement of goods, intangible assets and capital", it is the mini constitution of Hong Kong. Hong Kong imposes no controls on foreign exchange, and no restrictions on entry and repatriation of capital or on conversion and remittance of profits and dividends derived from direct or indirect investments. Investors bring their capital into Hong Kong through the open exchange market and remit it the same way. Hong Kong has also signed investor-protection agreements with trading partners to guarantee free transfer of funds.
Foreign Trade
Hong Kong is a member of the World Trade Organization (WTO) and the Asia-Pacific Economic Co-operation (APEC) forum, which is moving to liberalize the region's import restrictions by 2020. Using competitive manufacturing bases in China, Hong Kong has become the world's leading re-exporter of garments, imitation jewelry, travel goods, handbags, umbrellas, artificial flowers, toys, watches and clocks. In recent years, however, there has been increasing use of direct shipments or trans-shipments of goods
manufactured in Mainland China to overseas markets at the expense of re-exports through Hong Kong. trend should increase in the future, given that China is now a member of the WTO.
This
Apart from re-exports, Hong Kong's domestic exports consist mostly of the following: (1) textiles; (2) clothing apparel; (3) machinery, equipment, apparatus, parts and components; and (4) consumer electrical and electronic products. Its main imports include raw materials, consumer goods, capital goods, foodstuffs and fuels. Hong Kong's major export markets are Mainland China, the United States of America, Japan and the European Union. Its main sources of imports are Mainland China, Japan, Taiwan, the United States of America and the European Union. Hong Kong also had a clear interest in China's WTO entry, which occurred in December 2001. Whilst obliging China to respect multilateral rules and disciplines, membership curtails other countries' freedom to take unilateral trade sanctions against it and ensure that trade disputes are settled through binding international arbitration. Since more than half of Mainland China's exports pass through Hong Kong, liberalized trading rules for China will significantly benefit Hong Kong. In general, any person who imports or exports any goods must lodge an import/export declaration with the Customs and Excise Department within 14 days after the importation or exportation of goods. The declaration can be made on a prescribed form or via Electronic Data Interchange Service. At the time of lodging declarations, importers and exporters must pay a declaration charge and/or export clothing training levy.
IV.
CORPORATE AND BUSINESS STRUCTURES
Representative Offices
Representative offices are useful if a business wishes to explore the Hong Kong market before making a larger investment. However, a representative office can only fulfill limited functions, for example, promotion and liaison work, such as collecting information and contacts. Should a business wish to enter into any transaction that creates a legal obligation, the business will need to change the status of its business structure (see options below). For the following corporate structures, it is necessary to: i. incorporate the company at the Companies Registry; and ii. register the company with the Inland Revenue Department through the application for a Business Registration Certificate.
Branch Offices of Parent Companies

Where a company incorporated outside Hong Kong establishes a branch office in Hong Kong as an extension of the investing company; it is referred to as an overseas company. Unlike a subsidiary, a branch can leverage off the credit rating of the overseas owner. The key differences between a branch and a representative office are the operating scope and tax treatment.
Limited Companies
A Hong Kong Limited Company allows its shareholders to take advantage of all the tax benefits and concessions available to a fully incorporated business. Most notably, Hong Kong-based companies can benefit from the free trade agreement with Mainland China known as the Closer Economic Partnership Arrangement (CEPA), which provides preferential trading terms. In addition, CEPA-qualified companies are eligible for preferential access to Mainland China markets across a wide range of sectors.
V. TAXATION Hong Kong taxes are among the lowest in the world, and the tax regime is simple and predictable. Profits Tax rate is the same for foreign and local companies - a low 16.5% for the Financial Year 2009/2010. The actual tax bill is often even less after various tax deductions and depreciation allowances. There is no capital gains tax in Hong Kong, no withholding tax on dividends and interest, or collection of social security benefits. Salaries Tax rate is at a maximum standard rate of 15%, imposed only on all salary income of individuals derived in or from Hong Kong. The Salaries Tax is demanded on a yearly basis and can be paid in two installments, usually between December and March. Property Tax applies to owners of land or buildings situated in Hong Kong. It is low by international standards: 15% for the Financial Year 2009/2010 of the rental income from land or buildings with an allowance of 20% on cost of repairs and maintenance. If a company is subject to Profits Tax, it is exempted from Property Tax. There is no Sales Tax or Value Added Tax in Hong Kong. The limited tax base, combined with exceptionally low tax rates, makes Hong Kong's tax incidence much lower than virtually all other developed economies. There is no estate duty imposed on the Hong Kong assets of any individuals who pass away. Hong Kong is considered a paradise for individuals with high personal net worth to pass on their wealth and fortunes to their next generation, and beyond.
VI. VISA AND REGSITRATION REQUIREMENTS Hong Kong is a Special Administrative Region and thus a separate travel area from Mainland China. People from more than 170 countries and territories may come to Hong Kong visa-free for visits ranging from seven (7) to 180 days. In broad terms, short-term visitors may conduct business negotiations and sign contracts while entering Hong Kong on a visitor visa or entry permit. Generally, foreign nationals must obtain a visa before coming to Hong Kong to live, work or invest. three main ways you may obtain a long-term visa and entitlement to stay in Hong Kong: Obtain a work visa as employee; Obtain a visa through investment in the Capital Investment Entrant Scheme; or Obtain a dependent visa. There are
Work Visas/Permits for Employees

If a company has established operations in Hong Kong and wishes to employ people from overseas, the company must demonstrate that the proposed employee has special skills, knowledge or experience that are not readily available in Hong Kong. The proposed employee will need a sponsor (the person or enterprise offering employment) and must complete a visa application form (available from the Immigration Department website). This form can then be sent directly to the Immigration Department in Hong Kong, or to the nearest Chinese Embassy or Consul-General in the applicants home country.
Capital Investment Entrant Scheme (CIES)

The CIES visa is designed for people who can make a capital investment of not less than HK$ 6.5 million (approximately US$833,000) in a legitimate and approved asset class in Hong Kong. Applicants must also demonstrate that they can support themselves and their dependents without public assistance. While CIES visas are designed for those who do not intend to work in Hong Kong, holders of this visa can work or take up directorate positions in companies subject to certain criteria.
Dependent Visas
Persons who are successful in receiving either an employment visa or a CIES visa may also bring their spouse and dependent children to Hong Kong, provided there are sufficient funds and suitable accommodation for them. The limit on their stay is the same as that of the applicant. A spouse may apply for a dependent visa, which allows the holder to undertake almost any type of lawful employment in Hong Kong. Effectively, dependent visas are issued as a matter of course as long as the requisite relationship exists, (a couple must be legally married) and suitable proof of: i) actual dependency; and ii) evidence of the sponsors ability and willingness to support the dependant.
CHINA (SHANGHAI)
Martin Hu & Partners 19/F, Yongda International Tower 2277 Longyang Road Shanghai 201204, P. R. China +86 21 5010-1666 PHONE +86 21 5010-1222 FAX www.mhplawyer.com Contact Attorney: Martin Hu martin.hu@mhplawyer.com
I. INTRODUCTION TO CHINA
The Land
China is situated in the eastern part of Asia on the west coast of the Pacific Ocean. It is the third largest country in the world, only after Canada and Russia. The distance from east to west measures over 5,200 kilometers and from north to south over 5,500 kilometers. Besides a vast land area, there are also extensive neighboring seas and numerous islands. The coastline extends more than 14,500 kilometers. More than 5,000 islands are scattered over China's vast territorial seas the largest being Taiwan and the second largest, Hainan.
The People
China has a dense population of more than 1.3 billion excluding that of Hong Kong, Macau and Taiwan, accounting for 21% of the whole worlds population. There are 95 cities with a population over 1 million, including Shanghai, Beijing, Wuhan, Guangzhou, Chongqing, Nanjing and Chengdu. Chongqing is the largest with a population over 31 million. China is a melting pot with 55 ethno-linguistic groups or minority groups, differing in language, habit, religion, etc.
The Language
Chinese is the official language yet orally diversified in a variety of dialects.
Time Zone
Greenwich Mean Time (GMT) +8 hours. Unlike other large countries, China, including Hong Kong, uses only one time zone that is Time Zone 8 hours ahead of Greenwich Mean Time. That is Beijing time.
II. CHINAS GOVERNMENT STRUCTURE AND ECONOMIC CLIMATE
The state administrative organs of China include the central and local administrative organs. The central administrative organ is the Central People's Government, better known as the State Council. Local administrative organs are local people's governments at four levels: the provinces (including autonomous regions and centrally administered municipalities), cities and prefectures, counties and townships. At present, China is divided into 23 provinces, 5 autonomous regions (for minority groups), 4 municipalities directly under the Central Government (namely Beijing, Shanghai, Tianjin and Chongqing) and 2 special administrative regions (Hong Kong and Macau).
Financial System
The present banking system includes state policy banks, state-owned commercial banks, joint stock commercial banks, private commercial banks and a range of provincial level financial institutions and leasing companies. People's Bank of China and China Banking Regulatory Commission As China's central bank, the People's Bank of China (PBC) has the power to adopt monetary policies and safeguard financial stability by regulating currency circulation and credit activities and managing state treasury. China Banking Regulatory Commission, which was established in 2003, plays the role of nation's banking watchdog. Commercial banks Chinese commercial bank system consists of three parts, namely exclusively state-owned commercial banks, commercial banks and foreign-funded commercial banks, among which the exclusively state-owned banks constitute the main body of Chinese commercial bank system. Policy banks Since 1994, China has established three policy banks directly under the State Council, namely China Development Bank, Agricultural Development Bank of China and Export-Import Bank of China. The government is reorganizing policy banks and China Development Bank (CDB) has been ratified to transfer into a commercial lender. Non-bank financial organizations Chinese non-bank financial organizations mainly include Trust & Investment Corporation, Securities Company, Insurance Company, Finance Company, Leasing Company and Credit Union.
Currency
Chinas currency is the RMB. As of June 5, 2009, the exchange rate was US$1.0=RMB 6.8334.The RMB is not yet freely convertible to foreign currency (see below).
Foreign Exchange Control

The State Administration of Foreign Exchange (SAFE) plays a key role in the financial system in charge of foreign exchange control. Upon approval by the SAFE, foreign-invested enterprises (FIEs) may open foreign exchange special account and foreign exchange settlement account with the bank, located in the registration place and designated by the SAFE. The Chinese currency RMB is not yet freely convertible to foreign currency. However, it is convertible for ordinary international trading accounts settlement, post-tax net profit of the FIEs and post-tax legitimate income of foreign staff, upon application to the foreign exchange deposit bank. Foreign-invested enterprises (FIEs) may also settle
and sell the foreign exchange to the designated bank for ordinary business expenses.
Industries
Infrastructure China has invested heavily in building infrastructure, covering railway, expressway, harbor and airway, and a comprehensive national transportation network has already been formed and is in progressive evolution. Leading Industries China has built up an independent, complete and technology-oriented industrial system with leading sectors in steel, machinery, energy, space & air, textile and light industry, well deserving the credit of global manufacturing factory.
Market Economy Status

Chinese economists point out that China acquired full market economy status in 2004, either by the economic principles of the Western countries or from national economic development conditions. So far, 97 WTO members have recognized China as a full market economy but the country's major trade partners including the USA, the EU and Japan - have yet to do so.
Reform of State-Owned Enterprises (SOE)

The state-owned sector plays a leading role in national economy despite the rapid development of private and overseas-funded economic entities since 1978 when China began to reform and open to the outside world. SOEs have transformed into companies with a formal legal business structure and many have been able to list on stock exchanges. Since 1998, a policy of release the small and grasp the big has been successfully executed with over half of SOEs closed down in the following five years. The consequent redundancy of some 14 million employees has been properly handled with unemployment and welfare programs, which shift the burden of compensation from enterprises to the government. The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) were created in 2003 to exercise rights of ownership and supervise the operation of state assets. Restructuring of SOEs and property right transactions provide good opportunities for transnational companies to develop in China.
Private Sector
The private sector has been responsible for a considerable part of the value-added produced by the non-farm business sector and a major part of all export for the past few years. In addition to high productivity and profitability, the changes in government policies are accountable for the rapid growth of the private sector. First, the state export monopoly was removed and the small and medium sized enterprises were granted export license. Then fundamental changes were made as amendment to the Constitution in 2004, to re-identify the status of private entrepreneurs, encouraged the development of non-state sector and particularly protect private property from arbitrary seizure. In 2005, regulations that prevented privately owned companies from entry into a number of sectors of the economy such as infrastructure, public utilities and financial services were abolished. Finally, the revised Company Law, effective as of January 1, 2006, also provides more flexibilities and autonomy for individuals to run business.
III. INVESTMENT CLIMATE AND FOREIGN TRADE
Scale of Foreign Investment

As of 2007, China had 632,348 foreign invested enterprises, with total actual use of foreign investment of US$ 790.75 billion. There are over 190 countries and regions investing in China and 480 transnational companies among top Fortune 500 Companies investing in China. The economy is expected to do relatively well in trying times and remain sustainable for the next decade due to a profound evolution of economic policies, particularly in the areas of allocation of capital, labor mobility, urbanization, reform of SOEs and creation of an upgraded framework for development of the private sector of the economy.
Types of Foreign Investment

There are two types of foreign investment: direct investment and indirect investment. Direct investment refers to the establishment of equity joint ventures (EJV), contractual joint ventures (CJV) or wholly foreign-owned enterprises (WFOE) and joint exploitation (for maritime and overland oil joint exploitation). Indirect foreign investment includes overseas loans and commodity credit. Overseas loans mainly consist of three forms: loans from foreign governments and international financial institutions; export credit of foreign countries or commercial loans; bonds or stocks issued abroad. Commodity credit includes compensation trade, processing of imported materials, assembling of imported parts and components as well as leasing trade. Some common investment vehicles include: Equity Joint Ventures (EJV) EJV has been the most common of the foreign investment vehicles in China. It is a limited liability legal entity and conforms substantially to international custom and practice. However, its utilization is declining due to the minority shareholders veto power over certain issues. Cooperative Joint Ventures (CJV) CJV takes two forms: a non-legal person CJV that defines the rights and obligations of each party in compliance with the contract entered into by the parties, and a legal person CJV that limits the liability of each party to their respective capital contribution, similar to EJV to certain extent. In general, CJV is more flexible than EJV. Wholly Foreign-Owned Enterprises (WFOE) WFOE used to have more restrictions in terms of the business fields where foreign investment can be made. After Chinas entry into WTO, however, such restrictions have been gradually phased out and as such, WFOE is becoming popular among foreign investors. Qualified Foreign Institutional Investor (QFII) Scheme Since the enactment of certain rules and regulations in late 2002, China opened its US$ 460 billion of domestic stock market to selected overseas investors. The RMB-denominated A Shares, which are not tradable in foreign currency in contrast with B Shares, which are tradable in either US dollars or Hong Kong dollars, account for 99 percent of the stock traded on Chinas two exchanges in Shanghai and Shenzhen. A Shares are now available for foreign investment without having to establish a PRC business vehicle, subject to certain restrictions on repatriating profits and principal. M&A Conversion of Domestic Enterprises Foreign investors may also acquire existing domestic enterprises in order to enter the Chinese market. Cross-border M&A is becoming more popular these days and can take forms of either share acquisition or asset acquisition.

China currently classifies foreign investment fields into four categories: encouraged, permitted, restricted and prohibited categories. The government publishes foreign investment guidelines including a detailed list of encouraged, restricted and prohibited foreign investment categories. Those not listed in the published guidelines fall into permitted fields. Industries classified as encouraged categories enjoy certain import duty and tax preferential treatment, such as energy-saving technology and high-technology development. Industries classified as restricted category usually requires joint venture with Chinese partner or majority control by Chinese partner, such as the development and production of grains (including potatoes), cotton, and oil-seed (the Chinese party will be the controlling party), processing and export of the logs of precious varieties of trees (EJV and CJV only).
IV. CORPORATE AND BUSINESS STRUCTURES
Legal Framework
The deepening of reform of SOEs and growing importance of the private sector in the economy, together with relevant economic and social factors, necessitate further modernization of the present legal framework for business. At present China is to an unprecedented extent endeavoring to prepare or has already enacted a series of laws including revised Company Law, Securities Law, revised Bankruptcy Law, Budget Law and Propertys Right Law together with relevant detailed measures.
Company Law
The Company Law is the primary piece of legislation governing companies established in China. The revised Company Law came into effect on January 1, 2006 and it gives primacy to corporate autonomy rather than government control. The revised Company Law represents a substantial move by the Chinese government towards inuring the corporate governance under regulation of the inherent rules of market economy and rising up to the standards of western counterparts. Foreign investors looking to incorporate in China should note that, although they are required to comply with the Chinese laws and regulations specific to foreign-invested companies, they will also be subject to the Company Law to the extent that there is no clear stipulation in the regulations specific to foreign-invested companies.
Foreign Investment Laws and Regulations

In addition to the Company Law, some other Chinese laws and regulations specifically apply to foreign-invested enterprises in China. These specific foreign investment laws and regulations mainly include equity joint venture law, co-operative joint venture law, wholly foreign-owned enterprise law and their detailed implementation regulations as well as M&A regulations and foreign investment tax law.
Dispute Resolution
Chinese court system has four levels, namely the Supreme Court, the High Court, the Intermediate Court and the Grassroots Court. Litigation is initiated at different levels of court according to certain criteria such as the amount of money of the subject matter and the nature of the case. Cases are usually adjudicated at two levels of court, which means cases can be appealed to only one higher level of court. A party in dispute may submit the dispute to an arbitration institution for resolution pursuant to a valid pre-existing arbitration agreement or arbitration clause contained in a contract. The China International Economic and Trade Arbitration Commission (CIETAC) is the most prestigious arbitration institution in China, which is headquartered in Beijing and has branches in Shanghai and Shenzhen. Parties to contracts related to foreign investment and trading shall have the right to choose the arbitration place and applicable arbitration rules. China signed the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) in 1986. Therefore, as a general principle, the arbitral award made by a foreign arbitral tribunal the country of which is a Contracting State to the Convention will be recognized and enforced by Chinese courts.
V. TAXATION
Income Tax
Income tax on enterprises with foreign investment and on foreign enterprises is levied on the income from production, business operations and other sources by EJVs, CJVs, and WFOEs and by foreign enterprises within the territory of the PRC. The Enterprise Income Tax Law (EIT Law) and Implementation Rules (Rules) were introduced in 2007. The unified tax rate levied by the EIT Law on all domestic and foreign enterprises is 25%. Meanwhile, the law provides tax exemptions and reductions. For example, income tax is levied on enterprises at a reduced rate on investment in state-appointed and state-fostered projects.
Value-added Tax (VAT)

Value-added tax is a type of circulation tax imposed on organizations and individuals engaging in sale of goods or provision of processing and repair labor services or importation of goods in China. The rate pattern of VAT is a basic rate (17%), with a lower rate (13%) applying to agricultural produce, energy products and etc., and a zero rate (0%)for export commodities.
Business Tax
All foreign invested enterprises shall pay business tax according to the Provisional Regulations of the Peoples Republic of China on Business Tax. Business tax is a tax levied on the amount of sales revenue gained from sales, within the territory of China, of taxable services, real estate or transferred intangible assets. Business tax is applied to differently operated industries according to different tax categories and different rates of tax.
Tax Audit
Under current legislation, all foreign-invested enterprises and representative offices must be audited on an annual basis. This statutory requirement has to be met prior to business license renewal every year.
VI. VISA AND REGISTRATION REQUIREMENTS
Application
The tourist should present his/her passport, a completed visa application form (The People's Republic of China Visa Application Form) and one recent passport photo (black and white or color) to the local Chinese embassy. The tourist should apply for his/her visa about one month in advance before departure, although it should only take a week for the visa to be processed. Visas may be obtained more quickly but additional fees may be charged. The cost of the visa will depend on each country and the valid period and type of visa for which the tourist is applying. Contact the local Chinese Embassy/Consulate for details.
Types of Visas
The most common types of visas include L for travel/family visit visa, F for business, D for resident, G for transit, X/F for student and Z for working.
Extension of Visa
The tourist can obtain an extension by applying to the Public Security Office in any Chinese town. Chinese visa officers usually demand evidence to support the application, including air ticket, or a letter from a Chinese company or relative or friend. Please note that a tourist visa is only extendable up to a maximum of 90 days, after which the tourist must leave the country. Other types of visa may also be extended with different requirements.
INDIA
J. Sagar Associates 84 E, C-6 Lane, Sainik Farms New Delhi 110 062 India +91-11-2955-2714 PHONE +91-11-2955-2717 FAX www.jsalaw.com Contacts: Jyoti Sagar jyoti@jsalaw.com Sajai Singh sajai@jsalaw.com
I. INTRODUCTION TO INDIA
The Land
India is regarded as one of the most diverse countries in the world in terms of its topography. It is surrounded by the Himalayas in the north, the great Indian Plains in the central parts and the Deccan Plateau in the southern parts of the country. In terms of its size, India is the seventh largest country in the world, occupying 3.29 million square kilometers. The Indian peninsula is surrounded by the Arabian Sea, the Bay of Bengal and the Indian Ocean on the west, east and south, respectively. The national capital is situated in New Delhi. The climate of the country is primarily sub-tropical, although temperate climate is observed in some of the northern parts of the country.
The People
With a population of over 1 billion people, India is the second most populated country in the world after China, and is likely to become the most populated country in the world by 2030. The country has a high population density of 324 persons/square kilometer and a literacy rate of 64.84%. Agriculture remains as the single largest occupation of the people of India. Nearly 70% of the people depend on agriculture for their livelihood. Nevertheless, Indians have made great strides in the Information Technology sector and have obtained global recognition in this field. With increasing education levels, the number of people in the services and manufacturing sectors is increasing rapidly.
The Language
India is a multilingual society with 18 national languages spoken, each with a different script. Hindi is the language of the majority of people (38%). English is the preferred business language, as well as the language of the courts and for inter-State Government communication. The wide usage of the English language has been a boon for India in attracting offshore outsourcing.
Time Zone
Greenwich Mean Time (GMT) +5-1/2 hours. India has not adopted daylight saving time. uses standard time countrywide throughout the year. Despite its size, India
The tumultuous political times in South Asia have rattled the political systems of many countries of the region in the recent past. However, the strong political and administrative structure in India has helped the country in remaining stable even in difficult times. In accordance with its Constitution, India is a sovereign, socialist, secular, democratic republic, having a federal form of government divided into three distinct but interrelated branches: Legislature, Executive and Judiciary. Article 50 of the Constitution stipulates the separation of the Judiciary from the Executive. India has a fairly strong federal government that exercises national sovereignty defense, foreign affairs, currency and communications while State governments manage law and order, education and public health. The head of the Republic is the President, elected for a 5- year term by an electoral college consisting of lawmakers at the national and State levels. Each State is headed by a Governor appointed by the President on the advice of the Prime Minister. In addition to the 29 States, there are seven directly ruled Union Territories. The Executive backbone of the country is the Indian Administrative Service. As required by the Constitution, elections to Central and States legislatures are held regularly. The leader of the largest group in the legislature is invited by the Republics President or the States Governor to form the government, which is then required to secure the legislatures vote of confidence. The head of a State government is the Chief Minister; that of the Federal government is the Prime Minister. The Legislature comprises the bicameral Federal Parliament (Sansad), which consists of a directly elected Peoples Assembly (Lok Sabha) and the Council of States (Rajya Sabha) whose members are elected by State Legislative Assemblies. In the 543-member Lok Sabha, a typical deputy represents a constituency of over a million voters, a reflection of Indias overpopulation. India has an independent judicial system, with the Supreme Court being the apex judicial authority, having wide discretionary powers to hear special appeals on any matter from any court (other than those of the armed services) and discharges the function of a court of record and supervises every High Court. The High Court is the highest court in the State judicial system, and serves as a court of record exercising original and appellate jurisdiction and has original jurisdiction on revenue matters. Lower Courts include judicial districts, district courts, courts of civil jurisdiction, sub-district (munsif) courts, courts of subordinate judges and peoples courts (lok adalats).
Financial System
Indias financial system comprises banks (public, private and foreign) and financial institutions that have kept pace with the growing needs of corporate and other customers. The Reserve Bank of India (the RBI,) Indias Central Bank, essentially regulates and supervises the Indian financial system. In addition, it formulates, implements and monitors the Monetary Policy of India and prescribes Exchange Control norms to facilitate external trade and payment and promote orderly development and maintenance of the foreign exchange market in India. Commercial banks, co-operative banks and regional rural banks broadly make up the banking system in India. The financial capital of India, Mumbai, compliments other major financial centers of the region like Singapore and Hong Kong. The strong fundamentals and regulatory framework of the Indian banking industry have been instrumental in protecting the Indian banks from major financial disasters as have been seen in many western countries in the recent past.
Type of Economy
India stands as a vibrant and diverse country whose economy is rapidly integrating with the world economy. The business environment in India is considered conducive for achieving high levels of sustainable growth. A transition can be seen from an agrarian economy to one based on industry and commerce. General Economic Trends: GDP at current prices (2007-2008): Rs. US$ 1.16 trillion GDP growth rate (2007-2008): 9% Inflation rate measured by WPI: 4.5% (average during financial year 2007-2008) Forex Reserves: US$ 251.9 billion (March 2009) The Market The Indian economy is expected to continue growing at the rate of 5% or more until 2050, when it will become the worlds fourth largest economy as per a study conducted by Golman Sachs. The size and growth potential of the Indian market has attracted foreign investors to India. India is experiencing rapid urbanization, explosion of the electronic media, advancement in education, increasing domestic and foreign travel and changing nature and composition of expenditures. An increase in the number of households headed by salary earners, professionals and businesspersons and the emergence of a thriving consumer finance business are expected to continue the consumerism boom. Rural areas, where about 72% of Indians live, have witnessed rapid market growth in recent times, driven largely by enhanced agricultural productivity, income redistribution and the inroads made by the audio-visual media.
Currency
The Rupee is Indias monetary unit. RBI authorizes a person to deal in foreign exchange or foreign securities in the capacity of an authorized dealer (AD), moneychanger or offshore banking unit. A person purchasing foreign exchange from an AD is required to provide a declaration of intended use; if not used for the purpose specified or used for restricted activities, it would violate the Foreign Exchange Management Act, 1999 (FEMA). FEMA provides for full convertibility on capital and current account transactions for non-residents, while it subjects residents to non-convertibility on capital account transactions only. The objective of the Government is to promote an orderly development and maintenance of the foreign exchange market in India.
Leading Industries
Power The Government of India undertakes both generation and distribution activities. Involvement of State governments in the power industry is through state electricity boards (SEBs), originally established as integrated monopolies to carry out generation and interstate transmission and distribution. While most of the industry is under Government ownership, private sectors participation is increasing in generation, distribution and transmission. The main sources of power generation in India are thermal power, hydroelectric power and power generated by renewable sources of energy. Nuclear power is presently the fourth largest source of power in India, and is likely to receive a great impetus in the near future after the recent signing of the Indo-U.S. civilian nuclear agreement. Mining The Governments Department of Mines, Ministry of Mines and Minerals regulates and promotes the mining sector, other than coal, lignite, petroleum and natural gas and atomic minerals. The latter minerals come under the purview of independent government departments.
Information Technology The information technology (IT) industry in India comprises software services, manufacture and trading of computers and computer peripherals and IT enabled services (ITES). The Indian ITES sector has captive back office operations of large multinational companies, third party vendors and joint ventures. Telecommunications Telecommunications is one of the fastest growing industries in India and includes telecom services and equipment including fixed line telephony, mobile telephony, national long-distance services, international long distance services, Internet and broadband services, Very Small Apparatus terminal (VSAT) services and other value-added services such as radio paging. India has the third largest network of telephone lines in the world, after China and U.S.A. The phenomenal growth rate of the telecommunications industry in India (at 45%) makes it the highest growth rate in the world. Entertainment The entertainment industry is broadly categorized into films, television, television software, music, radio and live entertainment and event management. The Indian film industry is the largest in the world, even larger than Hollywood! Financial Services This industry can be broadly divided into banking, capital markets (asset management/mutual funds and portfolio investors), insurance companies and non-banking financial intermediaries/institutions. Health Care & Life Sciences Drugs and Pharmaceuticals, Biotechnology, Healthcare institutions and Medical Equipment suppliers constitute this industry. Infrastructure Roads, Ports and Airports constitute the highest growth areas in this sector. both passenger and cargo traffic.
India is a fast-growing market in
Industrial Policy
The Industrial Policy Resolution of 1956 and the Statement on the Industrial Policy of 1991 provide the basic framework for the overall industrial policy of the government. The requirement of obtaining an industrial license for manufacturing activity is now generally limited only to industries reserved for Government control, 6 industries of strategic, social or environmental concern and manufacture of items reserved for the Small Scale Sector.

Indias economic policies, including its foreign investment policy, are designed to attract capital inflows on a sustained basis and to encourage technology collaborations between Indian and the foreign entities. Virtually every business, except in the gambling and betting business, lottery business, chit funds, nidhi companies, atomic energy, agricultural or plantation activities or sectors of strategic concern such as defense and railway transport, welcome Foreign direct investment (FDI). In certain areas, Sector investment caps and ceilings have been prescribed for FDI, including for real estate investments and for retail trading business. Most laws that govern foreign investment are Federal laws and the relevant authorities/regulators are the Foreign Investment Promotion Board (the FIPB), the Reserve Bank of India and the Securities and Exchange Board of India (the SEBI). The Government of India and the FIPB consider restricted proposals for foreign investment for both approval and for expediting the approval process. Decisions on foreign investment proposals are usually made within 30 days of application. Free repatriation of capital investment, dividend and any other profits is permitted. Use of foreign brand names/trade marks for the sale of goods in India is permitted. Indian capital markets are open to foreign institutional investors (FIIS). Indian companies are permitted to raise funds from international capital markets. Single window clearance facilities and investor escort services have been provided in various states to simplify the approval process for new ventures. Issues of ADRs/GDRs/Foreign Currency Convertible Bonds (FCCBs) are permitted to qualifying Indian companies for raising equity capital overseas. External Commercial Borrowings (ECB) related to any overseas borrowings/debts raised in foreign currency are permitted under specific RBI guidelines. The Ministry of Finance has prescribed guidelines for ECBs, including commercial bank loans, buyers credit, suppliers credit, securitized instruments such as Floating Rate Notes and Fixed Rate Bonds, etc. credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial institutions.
Foreign Trade Policy

Indias foreign trade is governed by the Export and Import policy (EXIM), which progressively seeks to complete the process of Indias integration with the global economy by removal of quantitative restrictions and providing fresh direction to exports. Most goods are freely importable on payment of a specified customs duty. No quantitative restrictions on the import of capital goods and intermediates, including second hand-capital goods. Export of goods is allowed freely, except for few restricted items. Import duties on equipment are lower for projects in specific sectors. Tariff structure is favorable for companies wanting to import equipment to set up projects in the infrastructure sector.

India is a member of the South Asian Association for Regional Co-operation (SAARC) group of countries, which includes Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. The South Asian Preferential Trade Agreement (SAPTA) has led to substantial trade liberalization and exchange of tariff preferences in the region. India is expected to enter into a free trade agreement with the Association of South East Asian Nations (ASEAN) in the near future, as well as with other countries in the region (like South Korea). This will greatly enhance trade and commerce between India and the ASEAN member nations.
Special Economic Zones (SEZs)

SEZs have been established under the Foreign Trade Policy with a view to provide an internationally competitive environment for exports. Units may be set up in an SEZ for manufacture, trading, re-conditioning and repair or for services activity. Incentives such as duty-free import of capital goods (including second-hand capital goods), raw materials, consumables and spares are provided. Other incentives are exemption from payment of central sales tax on interstate purchases from the domestic market and service tax for services provided to a unit (including a unit under construction) of the SEZ.
100% Export Oriented Units (EOUs)

Incentives available for EOUs include exemption from customs duty on industrial inputs and capital goods including second-hand capital goods (without age limit), exemption from payment of excise duty on local procurement of inputs and capital goods (including secondhand capital goods), reimbursements of central sales tax paid on interstate purchase, etc.
Major Trading Partners

Some of Indias key trading partners include China, U.S.A, Germany and U.K. Following the liberalization of the Indian economy in the 1990s and the signing of various regional and international trade agreements, India has become a major destination for foreign investors.
Business Organizations in India

Companies, partnerships and sole proprietorships are the main forms of business organizations that are prevalent in India. The Companies Act, 1956, governs companies and the Indian Partnership Act, 1932, governs partnerships. As there is no law specifically governing the manner in which sole proprietorships operate, they are the easiest organizations to set up and require minimal legal documentation. However, since the risk of a sole proprietorship lies solely with the founding person, such form is not usually favored. Although Companies are the preferred mode of conducting business in India, yet the trends may soon see a change with the enactment of the Limited Liability Partnership Act, 2008 (the LLP Act) which seeks to limit the liability of Partners of an LLP firm. Companies in India are of two types public and private. These companies can have limited or unlimited liability for their members. Further, liability of members can be limited by shares (where the liability of members is limited to the unpaid value on the shares held by them) or by guarantee (where the liability of members is a pre-determined amount). There are two types of shares under Indian Company Law equity shares (common stock) that have voting rights and preference shares (preferred stock) that carry a preferential right as regards the dividend payable to their holders as well as a preferential right in regard to payment of capital on winding up or liquidation. Foreign corporations incorporated outside India may have a presence in India in the form of liaison offices, which cannot conduct any business activity; project offices, which are established for a particular project, for the duration of that project; and branch offices, which may undertake business. The tax rate of any profits made is generally taxed at a rate 10% higher than the applicable tax rate for a company incorporated in India. The Companies Act, 1956 governs such entities operating in India. Such companies are required to register themselves with the Registrar of Companies, New Delhi within 30 days of establishing a place of business in India.
Arbitration
India has adopted the UNCTRAL Model laws and drafted its Arbitration and Conciliation Act, 1996. This law relates to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and conciliation and allows the contracting parties to decide upon the venue/place and procedure of the arbitration proceeding. In a recent development signaling the growth of commercial arbitration in India, the London Court of International Arbitration (the LCIA) has become the first institution to open an international arbitration forum in India.
V. TAXATION The Federal government levies Income Tax, Customs duties, Central Excise, Sales Tax and Service Tax, while the State governments levy Value Added Tax, Stamp Duty, State Excise, Land Revenue and Tax on Professions. Local municipal bodies are empowered to levy tax on properties, octroi and for utilities. India offers a number of tax incentives to promote exports, business reorganizations, and the development of infrastructure. These incentives can be in the form of tax holidays for corporate profits, accelerated depreciation allowances and deductibility of certain expenses subject to the fulfillment of prescribed conditions. India has entered into Double Taxation Avoidance Agreements with more than 75 countries, to avoid the incidence of double taxation. If the foreign income source of a resident is taxed in a country with which no double taxation avoidance agreement exists and such income is also taxed in India, then resident taxpayers may claim a tax credit in respect to such double-taxed incomes to the extent of the taxes paid in the source country or the rate of tax in India (whichever is lower). Taxpayers have the option to choose between the provisions of the tax treaty or the Act, whichever is beneficial to them. Proceeds in excess of cost from disposition of capital assets are generally taxed as capital gains. Capital assets include all kinds of property except stock-in-trade, raw materials and consumables used in business or profession, personal effects (except jewelry), agricultural land and notified gold bonds.
VI. VISA AND REGISTRATION REQUIREMENTS Generally, foreign nationals holding a valid Indian visa (other than a tourist visa), valid for more than 180 days, are required to register with the Foreign Regional Registration Office (FRRO) within 15 days from the date of arrival in India. Foreign nationals can secure visas to enter India in the applicable categories listed below: Employment Visa for persons intending to take up employment Business Visa for persons visiting India on business Tourist Visa for tourists visiting India Student Visa for students pursuing studies or academic courses Entry Visa for other purposes not covered elsewhere including accompanying families of foreign nationals Long-term Visa for persons of India origin who have obtained foreign nationality Yoga Visa for persons interested in learning meditation or members of missionary organizations Research Visa for persons in pursuit of research in any field Transit Visa for persons who travel passing through the country Missionary Visa for persons who are missionaries of registered charitable trusts Journalist Visa for persons who are media representatives Conference Visa for persons who come as event organizers and visitors
NEW ZEALAND
Wynn Williams & Co Level 7 BNZ House 129 Hereford Street Christchurch 8011 New Zealand +(643) 3797622 PHONE +(643) 792467 FAX www.wynnwilliams.co.nz Contact Attorney: Jonathan Gillard jonathan.gillard@wynnwilliams.co.nz
I. INTRODUCTION TO NEW ZEALAND
The Land
New Zealand is in the South Pacific region and lies approximately 1500 kilometers east of Australia. New Zealand consists of two main islands called the North Island and the South Island and a number of smaller outlying islands. New Zealand comprises 270,000 square kilometers, which is similar to the British Isles or Colorado.
The People
The population of New Zealand is approximately 4,300,000. Approximately two thirds live in the North Island and one third live in the South Island. Eighty percent of the population is of European ancestry and 15% is of Maori ancestry. Maori are the indigenous people of New Zealand. The population is well educated and New Zealanders enjoy a high standard of living with excellent housing, health, transport, and communication systems.
The Language
The official languages are English and Maori. English is spoken throughout the country.
Time Zone
Greenwich Mean Time (GMT) +12 hours.
New Zealand is a stable parliamentary democracy with one chamber, the House of Representatives, comprising 121 members. Its members are elected by popular vote usually every three years under a mixed member proportional representation system. There are 62 electorate (constituency) members, seven of whom are elected by Mori and who have chosen to vote in special Mori seats. The remaining 52 members are elected from political party lists.
Financial System
New Zealand has a modern and full service financial system. The system is regulated by the Reserve Bank, which manages monetary policy and has complete operational autonomy. There are currently 18 banks registered in New Zealand; all banks need to be registered.
Type of Economy
New Zealand has a prosperous, modern, free-market economy and in 2008 was ranked third in the annual Economic Freedom of the World survey. Inflation for the year ending March 2009 was 3%.
Currency
The New Zealand dollar is the currency of New Zealand and is divided into 100 cents. The Economist forecasts that the New Zealand dollar will fall to NZ$2.03: US$1 in 2009 and NZ$2.19: US$1 in 2010 from an average of NZ$1.42: US$1 in 2008.
Leading Industries
Agriculture, Horticulture, Fishing, Forestry, Tourism, Manufactured Goods and Engineering Products.
Foreign Investment Policy & Framework

An Overseas Person who wishes to acquire land or invest in New Zealand must obtain the consent of the Overseas Investment Office (OIO) in certain cases. Consent is required if an Overseas Person wishes: i. To invest more that NZ$100m in an asset; or ii. Acquire sensitive land. OVERSEAS PERSONS An Overseas Person is a person who is: i. Not a New Zealand citizen; or ii. Not a person who is ordinarily resident in New Zealand. An Overseas Person may be an individual or other entity such as a company. A person is treated as being ordinarily resident in New Zealand if: They have a permanent residence permit from the NZIS; and i. They are domiciled in New Zealand; or ii. They are residing in New Zealand with the intention of remaining permanently and have done so for the last 12 months. A New Zealand company is treated as an Overseas Person if it is 25% or more owned or controlled by another Overseas Person. APPLICATIONS An Overseas Person investing in sensitive land must meet all of the following criteria: The person must have business experience and acumen relevant to the investment. The person must demonstrate financial commitment to the investment. The person must be of good character. If an Overseas Person does not intend to reside in New Zealand permanently, they must also show that the investment is likely to benefit New Zealand. The factors the OIO consider in assessing the benefit of an investment to New Zealand include: Creation or retention of jobs. Introduction of new technology or business skills. Introduction of additional investment for development purposes. Protection of the environment. If the investment is in sensitive land over five hectares, the Overseas Person must also show that the benefit to New Zealand is likely to be substantial and identifiable. SENSITIVE LAND The acquisition by Overseas Persons of certain types of land in New Zealand is controlled under the Overseas Investment Act. In broad terms sensitive land is: Non-urban land exceeding 5 hectares. Land exceeding 0.4 hectares on certain specified islands. Land comprising foreshore or seabed. Land exceeding 0.2 hectares adjoining a foreshore.
Land exceeding 0.4 hectares comprising a bed of a lake. Land exceeding 0.4 hectares adjoining a bed of a lake. Certain conservation, recreation, or historic land exceeding 0.4 hectares. Land exceeding 0.4 hectares adjoining certain conservation, recreation, or historic land.
Regional Trade Agreements & Associations

New Zealand-China Free Trade Agreement New Zealand-Malaysia Free Trade Agreement New Zealand and Thailand Closer Economic Partnership New Zealand and Singapore Closer Economic Partnership AustraliaNew Zealand Closer Economic Relations Trans-Pacific Strategic Economic Partnership (incorporating Brunei, Chile & Singapore)
Major Trading Partners

Major Suppliers - Australia, U.S.A & China. Major Customers - Australia, U.S.A & Japan.
Leading Imports/Exports
Leading Imports - Machinery & Electrical Equipment, Mineral Fuels & Oils & Transport equipment. Leading Exports - Dairy Products, Meat & Forestry Products.
IV. CORPORATE AND BUSINESS STRUCTURES A person may carry on business in New Zealand as a sole trader, a partnership, a joint venture, a trust, or a company. SOLE TRADER An individual person may carry on business on his or her own account as a sole trader. liable for all liabilities incurred in carrying on the business.
A sole trader is personally
PARTNERSHIP Two or more individual persons or companies may carry on business as a partnership. A partnership is not a separate legal entity. The partners share profits and are personally liable for the liabilities of the partnership. However, they may establish a limited partnership under which some, but not all, of the partners have limited liability. The limited liability partners must take no part in the management of the partnership. Limited liability partnerships are known as special partnerships in New Zealand and are registered under the Partnership Act 1908. JOINT VENTURE Two or more individual persons or companies may carry on business as a joint venture. Joint ventures are usually formed to carry out a particular project. The rights and liabilities of the parties depend on the terms of the joint venture agreement. TRUST The trustee of a trust may carry on business. Under a business trust, the trustee owns the trust property and carries on the business on behalf of the beneficiaries of the trust. The trustee is liable for the liabilities arising from the trust business. The trustee has rights of recourse against the trust property to meet those liabilities. The entitlements of the beneficiaries depend on the terms of the trust. Those entitlements may be in a fixed proportion or may be variable. NEW ZEALAND COMPANY A New Zealand company may be formed under the Companies Act 1993 to carry on business. A New Zealand company must have at least one shareholder and one director. Non-resident shareholders and directors are allowed. In broad terms, any entity may be a shareholder; however only individual persons may be directors. New Zealand companies do not have a par value attached to their shares. Instead, shares are issued to shareholders at an agreed price. The value of the shares is then dependent on the value of the companys assets and undertaking. New Zealand companies must file an annual return with the New Zealand Companies Office. If a New Zealand company is owned by overseas persons or ultimately owned by an overseas company then there are extra reporting requirements that must be met. In broad terms, this means that the foreign owned New Zealand company must file audited financial statements relating to its New Zealand business. OVERSEAS COMPANY An overseas company may carry on business in New Zealand by registering as a branch. An overseas company must register as a branch within 10 working days after it begins to carry on business in New Zealand. If an overseas person registers as a branch rather than forming a New Zealand company as a subsidiary, there are different consequences. The reporting and filing requirements are different; for example, an overseas company
registering a branch must report on its worldwide operations rather than just its New Zealand business. Liabilities for damages are different; for example, an overseas person registering as a branch will be directly liable to its contracting parties. Tax consequences may be different; an overseas company registering as a branch may be treated as a non resident for tax purposes whereas if an overseas person forms a New Zealand company as a subsidiary, the subsidiary will be a New Zealand tax resident.
V. TAXATION
Tax Incentives
No capital gains tax There is no capital gains tax in New Zealand. However in certain circumstances, gains derived on the resale of assets (such as land or shares), or distributions from trusts or companies may be treated as income and therefore subject to income tax. No stamp duty or land transfer tax There is no stamp duty or land transfer tax in New Zealand. No death or estate duty There is no death or estate duty in New Zealand. Tax losses Generally, tax losses can be carried forward indefinitely and offset against other future taxable income, subject in the case of companies to a certain degree of shareholder continuity being maintained (broadly at least 49%).
Other Significant Taxes

Income tax The New Zealand tax system comprises income tax, goods and services tax (GST), gift duty, and import tariffs and excise duties. These taxes are levied by the Crown. Local Government also levies taxes by way of rates against owners of land. New Zealand income tax is imposed on New Zealand residents (including individual persons and companies) on their worldwide income. New Zealand income tax is also imposed on non-residents on the income they derive from New Zealand. As at 2009, the current marginal tax rate for individuals varies between 12.5% and 38%. The tax rate for companies is a flat 30%. The tax rates for trusts vary depending on whether the trustee or a beneficiary is taxed, the tax status of the trust, and the residence of the beneficiary. Where the trustee rate applies the tax rate is a flat 33%. Income earned by a trust from a New Zealand source is always taxed in New Zealand either to the trustee or to the beneficiary of the trust. Income earned by a trust from an overseas source is taxed in New Zealand if it is distributed to a beneficiary who is resident in New Zealand. It is not taxed if the beneficiary is not resident in New Zealand. Income earned by a trust from an overseas source is also taxed in New Zealand if a settlor of the trust is resident in New Zealand or died whilst resident in New Zealand. A Settlor is a person who directly or indirectly transfers property to a trust at less than market value. Income from an overseas source is also taxed in New Zealand if the trust is a testamentary trust (created under a will) and the trustee is resident in New Zealand. Therefore, in broad terms, trusts with New Zealand resident trustees are not subject to New Zealand income tax if they have solely overseas income, settlors, and beneficiaries. GST (also known as VAT in other jurisdictions) Goods and Services Tax (GST) is a value added tax imposed on supplies of goods and services in New Zealand by a GST registered person. The GST rate is 12.5% on the value of the supply. GST is charged by a
GST registered person on the goods and services they supply. GST registered tax payers obtain a credit for the GST charged on goods and services they acquire. At the end of each GST period, the registered person pays the difference to or claims a refund from the Inland Revenue Department. Where certain supplies are made to overseas persons, the GST rate is reduced to 0% or may be exempt from GST. Gift Duty Gift duty varies between 5% and 25% of the amount of dutiable gifts made in New Zealand. $27,000.00 (in total) in a twelve-month period are exempt from gift duty.
Gifts of up to
International Tax New Zealand has entered into double tax agreements with a number of other countries to reduce the instances of double taxation. These agreements are intended to provide that only one country will tax a persons affairs or if taxes levied in both countries, the person will obtain a credit so they recover tax paid twice. Payments of dividends, interest, and royalties to individual persons or companies who are not resident in New Zealand are generally subject to nonresident withholding tax. The rate of nonresident withholding tax depends on the type of payment and whether a double tax agreement may apply. It can vary between 10% and 30%.
VI. VISA AND REGISTRATION REQUIREMENTS Individuals (other than Australian citizens) wishing to immigrate into New Zealand must obtain permanent residency. A significant number of applicants obtain residency under the New Zealand Immigration Service (NZIS) business policy categories. Wynn Williams & Co assists applicants under those business policy categories.
Long Term Business Visa Category

Under this category, the applicant receives a form of a work permit that may be converted to a permanent residence permit later. Applicants must submit a business plan describing a business they will undertake in New Zealand. If the business plan is approved by the NZIS, the applicant (and family) may then move to New Zealand and establish that business. If after 3 years the business has been successfully established, the applicant may apply to the NZIS to convert their work permit into a permanent residence permit. Applicants under this category are required to obtain Overseas Investment Office consent if they wish to acquire sensitive land or invest more than NZ$100 million before they are granted permanent residency.
Active Investor Migrant Category

This category is designed to attract investors who are creating goods and services in New Zealand and employing New Zealanders. The Active Investor Category is divided into three sub-categories: 1. Global investors 2. Professional investors 3. General (Active) investors. The government makes 1,000 places available under the Active Investor Migrant Category (around 300 applications). Priority is given to Global Investors and Professional Investors with places remaining being made available under General (Active) Investor Category. Under the General (Active) Investor Migrant Category, applicants must first make an expression of interest application. To be eligible for residency 1. Global Investor under the current policy and each of the sub-categories of the new Active Investor Category the following criteria must be met: Investment capital $20M for 4 years. At least $5M actively invested. Min. business experience 4 years Max. age None Min. English language None requirement Min. additional settlement None funds Min. time in NZ 20% every year 2. Professional Investor 3. General (Active) Investor - points system
$10M for 4 years. At least $2M actively invested. 4 years Up to 64 IELTS 4 None 30% every year
$2.5M for 4 years. Must be at least semi-active. 4 years Up to 54 IELTS 5 $1M 40% every year
To be eligible for residency applicants must meet the following criteria: 1. Global Investor An investor under the Global Investor Category must have investment capital of at least NZ$20million to be invested for at least 4 years. At least NZ$5million of that sum must be actively invested. The applicant must have minimum business experience of four years and spend at least 20% of each of the four years in New Zealand. There is no age, English language or additional settlement fund criteria to be met. 2. Professional Investor An investor under the Global Investor Category must have investment capital of at least NZ$10million to be invested for at least 4 years. At least NZ$2million of that sum must be actively invested. The applicant must have minimum business experience of four years and spend at least 30% of each of the four years in New Zealand. Applicants must be aged 64 or under and meet English language requirements. No additional settlement funds are required. 3. General (Active) Investor An investor under the General (Active) Investor Category must have investment capital of at least NZ $2.5million, which must be at least semi-actively invested. The applicant must have minimum business experience of four years and spend at least 40% of every year in New Zealand. Applicants must be aged 54 or under, meet English language speaking requirements and have additional settlement funds of NZ$1million. In order to be invited to apply under this category applicants must first make an expression of interest application. Such applications are then judged on a points system. Points are awarded depending on your age, the amount of your investment funds, your business experience and the extent to which your investment funds are actively invested. If you meet the minimum requirements, you will gain 95 points (5 points for being aged between 45-54 plus 40 points for 4 years business experience plus 50 points for having $2.5million to invest). Invitations to apply for residence are issued to those applicants who have the most points. The more points you have the better the chances of you being invited to apply for residence.
SINGAPORE Wee, Ramayah & Partners

22 Malacca Street #15-00 Royal Brothers Building Singapore 048980 Singapore +(65) 6534-5155 PHONE +(65) 6534-2622 FAX www.wrp.com.sg Contact Attorney: Rajaram Ramiah rr@wrp.com.sg
I. INTRODUCTION TO SINGAPORE
The Land
Singapore is located in Southeastern Asia at the tip of the Malaysian Peninsula, an island between Malaysia and Indonesia. The country occupies a total area of 692.7 square kilometers.
The People
Singapores population is 4.8 million (estimated as of May 2009). The following primary ethnic groups are represented: Chinese 76.8%; Malay 13.9%; Indian 7.9%; and other 1.4%. The predominant religion is Buddhist 42.5%; Muslim 14.9%; Taoist 8.5%; Hindu 4%; Catholic 4.8%; other Christian 9.8%; other religion 0.7% and none 14.8%.
Language
Singapore has four official languages: English, Malay, Mandarin and Tamil, representative of the various races living in Singapore. There is also a requirement that all students in school acquire a second language other than English, normally the mother tongue. Notwithstanding the above, the working language in Singapore is English. All institutions and governmental bodies use English as the working language. In the courts, the working language is English and judgments are given in English. Evidence (whether oral or written) must be adduced in English or if the form of any other language, then the same must be translated into the English language.
Time Zone
Singapore is a republic with a parliamentary system of Government based on the Westminster Model. The President Prior to 1991, the President was appointed by Parliament and had a largely ceremonial role. In January 1991, the Constitution was amended to allow for the election of a President by the citizens of Singapore. The elected President will hold office for a fixed term of six years. Under the revision, the President is empowered to veto government budgets and appointments to public office. He can also examine the Government's exercise of its powers under the Internal Security Act and religious harmony laws, and in investigations into cases of corruption. The President must consult the Council of Presidential Advisers before he takes a decision on some of these matters. Parliament The Singapore Parliament has a single House (unicameral) and, together with the President of Singapore, is known as the Legislature. The Singapore Parliament is modeled after the Westminster system of parliamentary democracy where Members of Parliament are voted in at regular General Elections; the leader of the political party that secures the majority of seats in Parliament is asked by the President to become the Prime Minister (PM). The PM will then select his Ministers from elected MPs to form the Cabinet. The "life" of each Parliament is 5 years from the date of its first sitting after a General Election. must be held within 3 months of the dissolution of Parliament. General Elections
Members of Parliament (MPs) consist of either elected, non-constituency or nominated Members. The majority of MPs are elected into Parliament at a General Election on a first-past-the-post basis and represents either Single Member or Group Representation Constituencies (GRCs). MPs act as a bridge between the community and the Government by ensuring that the concerns of their constituents are heard in Parliament. The present Eleventh Parliament has 94 MPs consisting of 84 elected MPs, one NCMP and nine NMPs. The Judiciary The Judiciary is one of the three constitutional pillars of government along with the Legislature and the Executive. As an Organ of State, the Judiciary's function is to administer justice independently. The Judiciary is safeguarded by the Constitution. The Chief Justice is the head of the Judiciary. The Supreme Court comprises the Court of Appeal and the High Court, and hears both civil and criminal matters. The Supreme Court Bench consists of the Chief Justice, the Judges of Appeal, Judges and the Judicial Commissioners of the Supreme Court. The Chief Justice, Judges of Appeal, Judges and Judicial Commissioners are appointed by the President on the advice of the Prime Minister. The Prime Minister is required to consult the Chief Justice before tendering his advice on the appointment of a Judge or Judicial Commissioner. There are currently 14 Judges on the Supreme Court Bench. Appeals from the High Court are heard by the Court of Appeal. The right of appeal to the Privy Council in London was abolished effective April 1994.
Financial System
Monetary Authority of Singapore (MAS) In 1970, Parliament passed the Monetary Authority of Singapore Act, which created the MAS and granted it authority to regulate all elements of monetary, banking and financial aspects of Singapore. The MAS enjoys considerable operational autonomy. Under the MAS Act, the Board of Directors of MAS is appointed by the President. The Chairman of the Board is appointed by the President on the recommendation of the Cabinet. The Board of Directors is responsible for the policy and general administration of the affairs and business of MAS and informs the Government of the banking and credit policy of MAS. The Board is ultimately accountable to the Parliament of Singapore through the Minister in charge of MAS. The MAS now administers the various statutes pertaining to money, banking, insurance, securities and the financial sector in general. Following its merger with the Board of Commissioners of Currency on October 1, 2002, the MAS assumed the function of currency issuance. Financial Institutions There is a large and diversified group of local and foreign financial institutions, numbering about 500, located in Singapore and offering a wide range of financial products and services. These include trade-financing, foreign exchange, derivatives products, capital market activities, loan syndication, underwriting, mergers and acquisitions, asset management, securities trading, financial advisory services, and specialized insurance services. In 2008-2009, the World Economic Forum Global Competitiveness Report ranked Singapore fifth in the most sophisticated financial markets in the world. Foreign Banks may operate in Singapore as Restricted Banks, Qualifying Offshore Banks or Qualifying Full Banks.
Type of Economy and General Economic Trends

The global economic and financial crisis in 2008 and 2009 has not spared Singapore. Its GDP is expected to shrink by 6-9 % by end of 2009.The long term growth of the Singapore economy will naturally be dependent on the recovery of the major economic including US, UK, China and Europe.
Currency
The Singapore dollar is a freely convertible currency that is allowed to float according to supply and demand on the foreign exchange market, but would be monitored by the Monetary Authority if Singapore against a trade-weighted basket of currencies. The currencies involved are not publicized to protect the currency against speculative attacks and other unusual pressures on the currency's value.
Leading Industries
Manufacturing and services are the twin engines of the Singapore economy however, given the current global financial crisis the economy has contracted by 14.6% on a quarter on quarter basis for the first quarter of 2009. Except for constructions and financial services, all sectors of the economy experienced further quarter decline. Tourists arrivals have also slumped affecting tourism related segments of the services sector To maintain its competitive position despite rising wages, the government seeks to promote higher value-added activities in the manufacturing and services sectors. In addition, it has opened (or is in the process of opening) the financial services, telecommunications and power generation and retailing sectors to Foreign Service providers and greater competition.
The government also has pursued cost-cutting measures, including tax cuts and wage and rent reductions, to lower the cost of doing business in Singapore. In addition, the government is actively negotiating free trade agreements with key trading partners. It concluded one such agreement with the United States that came into force on January 1, 2004.
Foreign Investment Framework and Policy

Foreign investments, combined with investments through government-linked companies (GLCs), underpin Singapore's open, heavily trade-dependent economy. With the exception of restrictions in the financial services, professional services and media sectors, Singapore maintains an open investment regime. The World Banks report, Doing Business in 2009, ranked Singapore as the worlds easiest economy in which to do business. The U.S.-Singapore Free Trade Agreement, which came into force January 1, 2004, expanded U.S. market access in goods, services, investment, government procurement and intellectual property, and provides for cooperation in promoting labor rights and the environment. Singapore has completed, or is in the process of negotiating, several free trade agreements with other countries around the world. The Government is presently pursuing a strategy to upgrade Singapore into what it terms a technology and innovation-driven knowledge-based economy (KBE), in response to stiffer competition from lower cost countries for exports and investment, and increased economic globalization. Singapore aspires to become a world-class leader in the electronics, chemicals, life sciences, engineering, communications and media, logistics, education, and healthcare industries, and wants to make Singapore a key Asia-Pacific financial centre and an "infocomm" hub.
Economic Policies and Incentives for Foreign Investment

Attracting foreign investment into the country initially to spearhead industrialization and subsequently to climb the technological and value-added ladders has constituted a key economic strategy of the government. Through this strategy, Singapore has evolved into a base for multinational companies (MNCs) to engage in high value-added manufacturing and product development, and coordinate regional procurement, production, marketing and distribution operations. Singapore continues to have a sophisticated investment promotion strategy designed to attract major investment in high value-added manufacturing and service activities. Singapore's legal framework and public policies are generally friendly to foreign investors. Foreign investors are not required to enter into joint ventures or cede management control to local interests, and local and foreign investors are subject to the same basic laws. Apart from regulatory requirements in some sectors (such as media and financial), the government screens investment proposals only to determine eligibility for various incentive regimes. Singapore places no restrictions on reinvestment or repatriation of earnings or capital. The judicial system upholds the sanctity of contracts, and decisions are effectively enforced.
Foreign Exchange Controls

There are no significant exchange controls, and funds may be freely remitted into and out of Singapore. There is also no restriction on the repatriation of profits. Subject only to tax liabilities, a company incorporated in Singapore may pay dividends to foreigners not resident in Singapore. Similarly, profits arising from the operations of a branch may, subject only to tax liabilities, be freely remitted to the head office. MAS participated in the Bank for International Settlements (BIS) Triennial Central Bank Survey of Foreign Exchange and Derivatives Activity 2007. More than 50 central banks and monetary authorities were involved in this globally coordinated foreign exchange survey. Singapore maintained its ranking as the fourth largest forex centre in the world. The survey results in Singapore showed that domestic average daily foreign exchange turnover, based on a new survey methodology of using data from sales desks, was US$125 billion for April 2004. Based on trading desk reporting, MAS estimates that
the average daily forex turnover in Singapore reached US$153 billion in April 2004.
Economic Laws and Regulations

Singapore's legal system, based on UK law, offers effective means for enforcing property rights. Common law protects and facilitates the acquisition and disposition of all property. Secured interests in property are recognized and enforced. Singapore has one of the strongest IP regimes internationally and a robust IP Infrastructure. Singapores commitment to the protection of IP Rights has received a vote of confidence in the form of the decision by George Lucas to set up Lucasfilm Animation (SG) in Singapore.
Special Investment Considerations

Industrial Estates Industrial Estates in Singapore are modern, well developed and offer fully serviced sites for the establishment of industries. The Jurong Town Council manages the Estates and designs and builds standard factory buildings of varying sizes. These are available for rental or sale on short notice and at a reasonable price. Free Trade Zones Free Trade Zones have been established in Singapore since 1969. They provide a comprehensive range of services and facilities for the storage and re-export of dutiable and controlled goods. There are free trade zones for both seaborne and airborne cargo. Among the principal features of the zones are: They are free of Customs Duty and Customs documentation while the goods remain in the zones Goods may be exhibited or sampled Sales may be effected at the zones Goods may be stored, bulk-broken, graded, re-packed or remarked for the local or export markets
Assistance and Incentive Schemes

Economic Development Board Pioneer Status Development & Expansion Incentive Investment Allowance Incentive Approved Foreign Loan Scheme Approved Royalties Incentive Entrepreneurship Investment Incentive MNC HQ Program Double Deduction for Research and Development (R&D) Expenses Exemption of foreign sourced interest and royalty income for R&D purposes Innovation Development Scheme Initiatives in New Technology Integrated Industrial Capital Allowance Special Goods & Services Tax scheme for 3rd Party Logistics Service Providers (3PLSPs) The Enterprise Challenge (TEC) Scheme International Enterprise Singapore Double Tax Deduction (DTD) Scheme Global Trader Program (GTP) International Marketing Activities Program (IMAP) International Partners Program Manpower for Internationalization Program Regionalization Finance Scheme iFinance Consulting Program
Media
Design for Internationalization Program Branding for Internationalization Program Development Authority Singapore Market Development Scheme (MDS) TV Content Industry Development Scheme Digital Content Development Scheme Digital Technology Development Scheme
Infocomm Development Authority Singapore Pilot And Trial Hotspots (PATH) RFID Development Plan Digital Exchange Wired With Wireless Program WEAVE (Web Services) SAFE (Securing Assets for End-Users) Program iLIUP (infocomm Local Industry Upgrading Program)

Free Trade Agreements (FTAs) The three basic components in Singapores FTAs are the trade in goods, trade in services, and investment chapters. There may be additional chapters covering government procurement, intellectual property protection, competition policy and other cooperation measures. To date, Singapore has concluded ten FTAs: A regional one with ASEAN (AFTA) and eight other bilateral ones with New Zealand (ANZSCEP), the European Free Trade Association (ESFTA), Japan (JSEPA), Australia (SAFTA), the United States (USSFTA), India (CECA), Jordan (SJFTA) and South Korea (KSFTA). Singapore has also concluded the Trans-Pacific Strategic Economic Partnership Agreement (Trans-Pacific SEP), an FTA between Singapore, Brunei, Chile and New Zealand. The ASEAN-China Trade in Goods Agreement has been concluded and in force since July 2005. ASEAN Free Trade Area (AFTA) The ASEAN Free Trade Area (AFTA) was initiated in 1992. The Common Effective Preferential Tariff (CEPT) Scheme is the main mechanism through which tariffs are reduced in ASEAN. The timetable for tariff reduction accelerated over the years. The original timeframe of 15 years (2008) was reduced to 10 years (2003) in 1995 and to 9 years (2002) in 1998 for the ASEAN-6, i.e., Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand.
Major Trading Partners and Leading Imports and Exports

Major Trading Partners: France, Germany, United Kingdom, Indonesia, Malaysia, Thailand, Japan, Hong Kong, Korea, Taiwan, China, Saudi Arabia, United States and Australia. Imports Exports: aircraft, crude oil and petroleum products, electronic components, radio and television receivers/parts, motor vehicles, chemicals, food/beverages, iron/steel, textile yarns/fabrics. petroleum products, food/beverages, chemicals, textile/garments, electronic components, telecommunication apparatus, transport equipment
Forms of Enterprise in Singapore

Sole Proprietorship: an individual operating as a sole trader regulated under the Business Registration Act with a manager who can be a Singapore Citizen or foreigner with right of residence in Singapore (e.g., Employment Pass holder or Singapore Permanent resident). Partnership: Two to 20 persons, regulated under the Business Registration Act. Limited liability partnership regulated by the Limited Liability Partnership Act commenced on 11 April 2005 under the LLP Act of 2005.
Locally Incorporated Company: a private or public company limited by shares or guarantee, or as an unlimited company regulated by the provisions of the Companies Act. Branch of Foreign Company: registered as a branch of the parent company under the Companies Act but not incorporated as a Singapore company. Representative Office: offices of foreign corporations that undertake promotional and liaison activities on their parent company's behalf. They must not engage in business, conclude contracts, provide fee-based consultancy, undertake transshipment of goods, or open or negotiate any letters of credit directly or on behalf of their parent companies.
Corporate Governance
Singapore authorities have placed an increasing emphasis on corporate governance, generally benchmarking local standards to international best practices. The Code of Corporate Governance, released in April 2001, came into full effect on January 1, 2003. The Code recommends corporate governance principles and practices in areas like board composition, board performance, directors' remuneration, accountability and communication with shareholders. The private sector-led Council on Corporate Disclosure and Governance (CCDG) is responsible for regularly updating the Code to ensure it remains relevant and consistent with international practices. The Securities and Futures Act (SFA) was fully implemented on October 1, 2002. The SFA introduced a host of policy reforms in Singapore's capital markets, moving them to a disclosure-based regime. The SFA requires corporations listed on the Singapore Exchange (SGX) to disclose material information on a continuous basis (previously this was only a quasi-regulatory requirement under the SGX Listing Manual). Failure to disclose will either constitute a criminal offence or give rise to civil liability, and not just a breach of the listing rules. Since January 1, 2003, listed companies with more than S$75 million market capitalization have been required to do quarterly financial reporting. The SFA requires persons acquiring shareholdings of 5% or more of the voting shares of a listed company to disclose such acquisitions as well as any subsequent changes in their holdings directly to the Exchange within two business days. The SFA also contains enhanced market misconduct provisions.
Mergers and Acquisitions

The primary regulations governing M&A activity in Singapore include: Code on Takeovers and Mergers (Takeover Code) applies to takeovers of listed public companies and certain non-listed public companies, and is administered/enforced by the Securities Industry Council (SIC);
Listing Manual deals with the disclosure obligations of companies listed on the Singapore Exchange (SGX) and incorporates procedures with respect to their M&A activities; Companies Act regulates certain aspects of M&A activities such as disclosure requirements, schemes of arrangements and compulsory acquisition of shares; Securities and Futures Act (SFA) establishes the regulatory framework for public fundraising, and regulates securities trading offences such as market manipulation and insider trading; and the Competition Act, when applicable, will prohibit certain M&A activities that substantially lessen competition.
Disclosure requirements The Companies Act and the SFA require a person acquiring an interest in 5% or more of an SGX-listed company (a substantial shareholder) to disclose, within two business days, their interest. Once the 5% threshold is crossed, a substantial shareholder is obliged to disclose every change that results in their shareholding interest reaching every 1% discrete threshold (for example, if the shareholding changes from 5.9% to 6.01%). The Takeover Code requires all parties to a takeover to make full and prompt disclosure of all relevant information and use every endeavor to prevent the creation of a false market in the shares of the offeror or the target. The Takeover Code imposes certain disclosure obligations if the target company is the subject of rumor or speculation about an offer or if there is undue movement in the share price or a big increase in the volume of trading. In addition, any information given to one offeror or potential offeror must, on request, be furnished equally and promptly to any other bona fide offeror or potential offeror, who should specify the questions to which it requires answers. The amendment to the Companies Act in 2005 allows Companies to buy back shares out of capital or profits and allows companies to reduce their share capital without a court order. Any resulting percentage increase in the voting rights held by a shareholder and persons acting in concert with him will lead to the transaction(s) effectively be considered an acquisition for the purpose of Rule 14 of the Takeover Code and the provisions regard to the making of an offer to other shareholders will kick in.
V. TAXATION
Basis of Taxation
Singapore taxes on a territorial basis. Only income derived in Singapore, or income derived overseas but received in Singapore, is subject to tax. Group relief provisions were introduced in the 2003 assessment year. Inter-company transactions must be concluded at an arms' length basis. Since June 1, 2003, foreign-sourced dividends, branch profits and service income received in Singapore have been tax-exempt, provided: the income was remitted from countries with a headline tax rate of at least 15%. the income was subject to some form of tax in the foreign country. (This condition is deemed to be met if the income was not subject to tax due to a tax incentive being awarded in the foreign country for the conduct of substantial business activities.) The tax year runs from January 1 to December 31. Tax is imposed on a preceding year basis (i.e., profits for the 2008 financial year are taxed in the 2009 year of assessment).
Tax Incentives
No Capital Gains Tax There is no capital gains tax in Singapore. The only exception is short-term gains from the sale of real property, which are treated as taxable income under laws enacted to curb real estate speculation in 1996. Because Singapore does not tax capital gains, accounting depreciation (regarded as a capital expense) is prohibited, however, capital allowances are allowed on: Industrial Buildings and certain other types of buildings; Plant and machinery; Acquired Intellectual Property; and Approved R&D cost sharing payments. Holidays and Reduced Rates for Investment in 'Targeted Areas' The Singapore government has a publicly announced policy of developing Singapore into a complete international business center, transportation hub and regional operational headquarters for international corporations. Corporations manufacturing approved hi-tech products can receive tax exemptions for profits related to manufacture of five through ten years as well as reduced tax rates. MNC Regional Headquarters The income earned by an approved regional operational headquarters of a multi-national corporation in providing management, technical, financial and other supporting services to affiliates outside Singapore and its earnings from qualified investment and financial activities are taxed at a concessionary rate of 10%. Corporate Taxation The flat tax rate of 17% on a companys chargeable income is in effect from the year of assessment 2010. It applies to both Singapore-incorporated subsidiaries as well as branches of foreign companies. It applies equally to resident and non-resident companies. Withholding taxes at the corporate income tax rate also apply to certain other payments to non-residents, such as technical assistance fees and management fees. A one-tier corporate taxation system took effect on January 1, 2003. It replaced the imputation system of taxing dividends, where taxes paid by a company can be imputed or passed on to shareholders. In Budget 2003, the DPM/Minister for Finance announced that foreign-sourced dividends, branch profits and service income (collectively "specified foreign income") derived by any person resident in Singapore will be exempted from tax if the following conditions are met: the specified foreign income has been subjected to tax in the foreign jurisdiction from which the income
is received; and the headline tax rate of the foreign jurisdiction from which the specified foreign income is received is at least 15%.
Tax Incentives for the Financial Sector To encourage the development of Singapores financial sector, various incentives have been introduced to encourage targeted financial activities. MAS is the administering agency for most of the financial-sector incentives.
VI. VISA AND REGISTRATION REQUIREMENTS Foreigners holding travel documents issued by the following countries will require a visa to enter Singapore: Afghanistan; Algeria; Bangladesh (Except Diplomatic/Official passport holders); Commonwealth of Independent States* (Except Diplomatic/Official/Service passport holders for a stay of up to 30 days ); Armenia; Azerbaijan; Belarus; Georgia; Kazakhstan; Kyrgyzstan; Moldova; Russia; Tajikistan; Turkmenistan; Ukraine; Uzbekistan; Egypt; India (Except Diplomatic/Official passport holders); Iran; Iraq; Jordan (Except Diplomatic/Official passport holders); Lebanon; Libya; Morocco; Myanmar (Except Diplomatic/Official passport holders); People's Republic of China (Except Diplomatic/Service/Public Affairs passport holders for a stay of up to 30 days); Pakistan; Saudi Arabia; Somalia; Sudan; Syria; Tunisia (Except Diplomatic/Official passport holders); and Yemen. In addition, visitors holding Hong Kong Document of Identity, Macao Special Administrative Region (MSAR) Travel Permit, Palestinian Authority Passport, Refugee Travel Document issued by the Middle-East countries and Temporary Passport issued by United Arab Emirates will also require a visa to enter Singapore. Nationals of the Commonwealth Independent States may be granted entry into Singapore without visas if they are on transit to a third country. However, they are required to fulfill certain conditions.
SOUTH KOREA
Yoon Yang Kim Shin & Yu 19th Floor, ASEM Tower 159-1 Samsung-Dong, Gangnam-Gu Seoul 135-798 Korea +(82-2) 6003-7000 PHONE +(82-2) 6003-7804 FAX www.hwawoo.com Contact Attorney: Jay K. Lee jklee@hwawoo.com
I. INTRODUCTION TO THE REPUBLIC OF KOREA
The Land
Korea is a peninsula situated in the upper corner of the Asian Continent, encompassing 221,336 square kilometers. Korea is divided into two countries The Republic of Korea (ROK), commonly known as South Korea, and The Peoples Republic of Korea (PRK), commonly known as North Korea. South Korea and North Korea have maintained a hostile relationship in the past several decades. However, with a collapse of the cold war regime, South Korea and North Korea have improved their relationship, both politically and economically. The tension between two countries is at a level that could be controlled, managed, and expected to be further alleviated in the future. This presentation will deal with South Korea.
The People
South Korea has approximately 49 million ethnically homogeneous people. About 1/3 of the population lives in the metro area of Seoul, the capital of South Korea. South Korea has a high literacy rate of 98.5%. Approximately 25% of the population graduates from University.
The Language
South Koreans national language is Korean.
Time Zone
II. GOVERNMENT STRUCTURE AND ECONOMIC CLIMATE There is a central government and more than ten provincial governments in South Korea. The primary authority to govern still belongs to the central government, and delegation of authorities to provincial governments is in progress gradually. Central government consists of three branches administrative, legislative and judiciary and powers are divided among the three branches in order to maintain a system of checks and balances. Nevertheless, the president has quite extensive power and authority. South Korea used to regulate foreign exchange heavily. However, the government has gradually removed such regulations and any form of legitimate foreign exchange transactions are permitted in Korea.
Leading Industries and Future Growth Areas

Electronics, Automobiles, Chemicals, Shipbuilding, Steel, Textile, IT & Telecom, Biotechnology, Logistics & Distribution
Foreign Investment Policy and Framework

There is strong public sector support and incentives for foreign investors in South Korea. The government actively encourages foreign direct investment and the laws relating to foreign direct investment come under a single legal framework, the Foreign Investment Promotion Act 1999. The vast majority of industries are open to foreign investment. Korea fully recognizes rights of private ownership and has a well-developed body of laws governing the establishment of corporate and other business enterprises. Private entities may freely acquire and dispose of assets; however, the Fair Trade Act may limit cross-ownership of shares in two or more firms if the effect is to restrict competition in a particular industry. In a significant step, Korea liberalized its property ownership law in 1998. The Alien Land Acquisition Act (as amended) grants even non-resident foreigners and foreign corporations the same rights as Koreans in purchasing and using land. In addition, portfolio investment in real estate is now permitted. In fact, since the liberalization of real estate regulations in June 1998 through the end of February 2003, foreign entities had cumulatively purchased 2.52 million square meters of land in the Seoul area. Almost no restrictions remain on foreign ownership of local shares. As of 2000, Korean law permits foreign direct investment through mergers and acquisitions with existing domestic firms, including hostile takeovers. Nonetheless, no hostile takeovers have occurred because of a lack of implementing regulations for the new law. The prohibition on cross-ownership between companies was repealed on April 1, 1998. The Korean publics formerly negative attitude toward foreign investment has improved considerably in recent years and senior levels of the ROKG continually stress the importance of foreign investment for Koreas future. The January 2000 sale of Korea First Bank which had been Koreas largest commercial bank to U.S.-based Newbridge Capital, was a watershed event. Korea First Bank is the first and so far only Korean bank majority-owned by foreign investors. No significant NGOs oppose foreign investment. In fact, public opinion grew steadily more favorable during the 1990s, though vested interests and pockets of protectionist sentiment remain.
Free Trade Zones

South Koreas three free trade zones are Masan, near the southern port of Pusan; Iksan on the west coast; and the port city of Kunsan.
Free Investment Zones

Foreign investors are allowed to establish foreign investment zones (FIZs) to foster development outside the main cities. Approval is dependent on the proposed amount of investment, the number of jobs to be created, and the contribution to technological development. In addition to the other benefits, FIZ businesses are exempt from national tax for 10 years and from regional taxes for eight to 15 years.
Trade Regulations
Korea's export and import controls are gradually being liberalized. Import licensing was eliminated in 2000 and a simple import declaration can be made to the Korea customs service through Electronic Data Interchange (EDI). Prohibited goods are generally those items considered harmful to public health and morals. Export licenses are generally no longer required.
Acquisitions of New Businesses

Monetary Threshold The Fair Trade Act prescribes that, where any merger and/or acquisition (M&A) involves a corporation whose total amount of assets or turnover (including those of its affiliates) is at least KRW 100 Billion, a report with the Fair Trade Commission of Korea (the FTC) in accordance with Article 12 of the Act (the M&A Report) must be filed. In case of acquisition or take-over merger, only the buyer has the obligation under the Act to file the M&A Report and the corporation being acquired does not have such obligation, whereas both parties in a consolidated merger must file the M&A Report.
1
In case of M&A whereby one party meets the above monetary threshold and the other does not, the buyer files the M&A Report in the acquisition or take-over merger, irrespective of whether the buyer is the party meeting the monetary threshold or not (Article 12, Paragraph 1 of the Act; Article 18, Paragraph 1 of the Enforcement Decree of the Act). Pre-Merger Report and Post-Merger Report Corporations subject to reporting under the Act are divided into two categories: to file the M&A Report 1) prior to and 2) after consummation of M&A.
corporations that are required
A corporation whose total assets or turnover exceeds KRW 2 Trillion must file the M&A Report within thirty (30) days of the parties agreement to effect M&A, but prior to its actual consummation procedures, such as registration of the newly merged corporation on the corporate registry (the Pre-M&A Report) (Listed Exception to Article 12, Paragraph 5 of the Act). However, there is a 30-day waiting period, extendable to 60 days, during which no consummation procedure may take place (Article 12, Paragraph 6 of the Act). Any M&A that is not subject to the Pre-M&A Report are subject to filing after the actual M&A transactions (the Post-M&A Report). If their assets do not exceed the prescribed amount, the parties are permitted to resort to the Post-M&A Report and the said report need only be filed with the FTC within 30 days of the consummation of the contemplated M&A deal. In addition, a corporation engaged in M&A may choose, but not required, to apply for a preliminary review of the FTC regarding whether the business combination contemplated by the M&A would have an effect of substantially restraining competition (the Preliminary Review). Where a corporation files the Preliminary Review, the FTC must render a legally binding decision ad notify the parties within 30 days of filing the application for such review, subject to extension of up to 60 days (Article 12, Paragraph 7 of the Act).
Pre M&A Report A Pre-M&A Report is only applicable to M&A by way of 1) merger, 2) business acquisition and 3) share subscription of a newly formed company. The M&A requiring Pre M&A Report (in case of M&A by a corporation with the total assets or turnover generated by itself and its affiliates exceeding KRW 2 Trillion) requires that the report be filed within thirty (30) days of the following dates1) the date of execution of merger agreement; 2) the date of execution of business acquisition agreement; 3) the date of resolution by the shareholders approving subscription to shares in a new company, respectively (hereinafter collectively referred to as the Commencement Dates), but prior to the actual consummation of M&A which is also subject to a 30-day waiting period during which no consummation procedure may take place (Article 12, Paragraph 5 of the Fair Trade Act). Post M&A Report Where a Post M&A Report is required, the report must be filed within 30 days of the effective date of the proposed merger/acquisition (the Effective Date). The Fair Trade Act defines the Effective Date differently depending on the form of a merger/acquisition envisaged. In any event, it is important to note that the reporting requirement described herein is applicable only to the merger of subsidiaries in Korea and the execution date of merger agreement between the parent corporations is not relevant. In other words, the 30-day period starts to run from the relevant Commencement Date affecting the Korean subsidiaries and not their parent corporations.
IV. CORPORATE AND BUSINESS STRUCTURES The two primary business forms in South Korea are chusik hoesa (a stock corporation recognized under Korean law) and yuhan hoesa (a limited liability company recognized under Korean law.) A Chusik Hoesa is the most common business form in Korea and a shareholders liability to the corporate creditors is limited to the amount of their investment in the company (i.e., shares) and do not bear any direct obligations towards the creditors of the company. Similar to that of the Chusik Hoesas shareholders, Yuhan Hoesas members are not liable for any corporate obligations. It is important to recognize that both Yuhan Hoesa and Chusik Hoesa are subject to corporate tax and capital gain tax in Korea and, therefore, there is no difference between Yuhan Hoesa and Chusik Hoesa regarding tax implications under the applicable Korean tax laws. More detailed information on Chusik Hoesa and Yuhan Hoesa is discussed below.
Minimum Amount of Capital

The minimum paid-in capital required for Yuhan Hoesa is KRW10,000,000 at the time of establishment. Yuhan Hoesa cannot increase the paid-in capital at the time of establishment without amending the articles of incorporation. For Chusik Hoesa, the minimum paid-in capital of KRW50,000,000 is required at the time of establishment. A Chusik Hoesa may increase the paid-in capital without amending the articles of incorporation, if an increase is within the authorized capital.
The Directors and Officers

Although a Yuhan Hoesa need not have a board of directors, it nevertheless is required to have at least one for more directors. Both Chusik Hoesa and Yuhan Hoesa are not legally required to have a statutory auditor, who is one of the officers of a company whose primary function is to act as a watchdog on the directors of the company.
Pros and Cons

The legal requirements for a Yuhan Hoesa are relatively more simplistic than those of Chusik Hoesa. It has a more flexible and simple corporate structure and procedures, and has a lower minimum for its paid-in capital when compared to a Chusik Hoesa. A Chusik Hoesa may be more advantageous than Yuhan Hoesa because of the followings(i) it is not difficult to increase capital; (ii) share transfer is relatively free of restrictions; (iii) issuance of debentures is permitted; and (iv) public offering of shares is permitted.
V. TAXATION The principal taxes affecting business enterprises in South Korea include the corporation tax, the individual income tax, the value added tax, customs duties and the inhabitant and education tax surcharges levied on the corporation tax, income tax and certain other taxes. Tax collections constitute the South Korean governments largest source of revenue. Among these, the taxes on goods and services produce the most revenue, followed by the taxes on income. Set forth below is an outline of national and local taxes
National Taxes (levied by the central government)

Direct Taxes Individual income tax, corporation tax, inheritance and gift tax, assets revaluation tax, excess profits tax. Indirect Taxes Value added tax, special excise tax, liquor tax, telephone tax, stamp tax, securities transaction tax, customs duties, transportation tax, education tax, special tax for rural development.
Local Taxes (levied by local government)

City and Country Taxes Ordinary taxes: inhabitant tax, property tax, automobile tax, farmland tax etc. Earmarked taxes: city planning tax, workshop tax Provincial Taxes Ordinary taxes: acquisition tax, registration tax, license tax etc Earmarked taxes: community facility tax, regional development tax
Summary of Corporate Tax

The corporate tax rates are applied by utilizing the profits of the subject corporation as the tax basis (Article 55 of Corporate Tax Act). Corporate profit not exceeding KRW 100,000,000 is taxed at the rate of 13 per cent (14.3 per cent if resident tax included), and the portion of the corporate profits in excess of KRW 100,000,000 is taxed at the rate of 25 per cent (27.5 per cent if resident tax included). In calculating the corporate tax liability for any given business year, any losses that have previously occurred in any business year falling within not more than five-year period immediately preceding the first date of the given business year may be deducted from the income earned during the given business year (Article 13(1) of the Corporate Tax Act). Same corporate tax rates apply to both chusik hoesa (a stock corporation recognized under Korean law) and yuhan hoesa (a limited liability company recognized under Korean law) and there is no differential treatment in tax laws between chusik hoesa and yuhan hoesa.
Double Tax Relief and Tax Treaties

Korea has entered into Tax Treaties with major industrial countries, where under foreign investment in Korea is protected and prevention of double taxation is implemented.
Visa and Registration Requirements

Short-term visas are routinely issued. However, long-term residency visas could be issued only under limited circumstances such as marriage to a South Korean, work permit, study in South Korea or foreign investment. Foreign residents in South Korea are required to obtain residence registration certificates from the municipality.
SRI LANKA
Nithya Partners 17 Pedris Road Colombo 03 Sri Lanka +(94-11) 2564-112 PHONE +(94-11) 2573-941 FAX www.nithyapartners.com Contact Attorney: Chanaka de Silva cdes@wow.lk
I. INTRODUCTION TO SRI LANKA
The Land
The Democratic Socialist Republic of Sri Lanka is situated in the Indian Ocean approximately 28 kilometers off the southeast coast of India.
The People
The population of Sri Lanka is 19 million, comprising mainly Sinhalese (about 75%), Tamils (some 18%), smaller groups of Muslim Moors, Burghers (descendants of Dutch and Portuguese colonists) and Eurasians (descended from British colonists). The countrys literacy rate is 90.2% one of the highest literacy rates in South Asia.
The Language
Sri Lankas official languages are Sinhala and Tamil.
Time Zone
The Government
The Parliament is a 225-member legislature, elected for a six-year term. The President is directly elected for a six-year term and serves as Head of State, Head of Government and Commander in Chief of the armed forces. The islands Executive Presidency, introduced by the 1978 constitution, gave the President wide powers, including the power to appoint a Cabinet of Ministers that is responsible to Parliament and the power to summon, suspend, or end a legislative session and dissolve Parliament any time after it has served for one year. Parliament, however, reserves the power to make all laws. The judiciary comprises a Supreme Court, Court of Appeal, High Court, and a number of subordinate courts. Sri Lanka's legal system reflects diverse cultural influences; Criminal law and commercial law is fundamentally based on English legal principles while the law pertaining to marriage, divorce and property is mainly Roman-Dutch Law.
Banking and Finance

The banking sector, which is regulated by the Central Bank of Sri Lanka, is one of the most dynamic and vibrant sectors of the economy, with rapid progress being made with the introduction of different types of institutions, instruments and services. The following types of financial institutions are available in Sri Lanka: Commercial Banks, Development financial institutions, Merchant/ Investment banks, Finance companies, Leasing Companies, Mortgage banks, Venture Capital Companies, Savings Bank, Pension funds.
Currency
The Sri Lankan Rupee (LKR) (1US $ = Rs. 110 approx.)
Economy
Sri Lanka follows an Open and Liberalized Economic policy that encourages private foreign investments and provides appropriate guarantees and attractive concessions through domestic legislation, bi-lateral investment protection agreements and international trade agreements such as SAPTA, GAAT, and SAFTA etc. Historically, the island has been famous for its abundance of precious stones, production of cinnamon and, more recently, tea, which was introduced by the British in the 19th century. Since 1977, the government has pursued privatization, market-oriented policies and export-oriented trade. Today, the apparel sector is Sri Lankas most dynamic sector accounting to up to 63% of exports, making it the highest export earner. The service sector is the largest component of GDP (54%) with its continued expansion into the telecom, tourism, and financial services. Repatriated earnings of Sri Lankans working abroad also continue to be strong. There also is a small but growing information technology sector, especially information technology training and software development and export. The ceasefire signed by the government and the LTTE in 2002 has resulted in a surge in the economy with the Colombo Stock Exchange reporting the highest growth in Asia for 2003. Currently, Sri Lanka enjoys the highest per capita income in South Asia. III. INVESTMENT CLIMATE AND FOREIGN TRADE Sri Lanka enjoys one of the most liberal environments for investment in Asia. Foreign ownership in all areas of the economy, bilateral investment protection agreements with over 20 countries and double tax relief agreements with 25 countries further facilitate foreign investment.
Investment Incentives
The Board of Investment (BoI) is the principal foreign investment-approving agency in Sri Lanka and offers a wide range of incentives for both foreign and domestic investors. These incentives fall under two classes: Incentives under Section 17 of the BOI Law and general incentives under the prevailing laws of the country. Regulations framed under Section 17 of the BOI Law grant specific incentives such as exemptions from income tax, customs duty and foreign exchange controls, to new and existing enterprises that satisfy specific eligibility criteria via the signing of an Agreement with the BOI. However, Value Added Tax (VAT) and provisions of the Excise (Special Provisions) Act would remain applicable to these companies. Companies that do not qualify for the above concessions under Section 17 of the BOI Law can obtain incentives available under the Inland Revenue Act, Value Added Tax (VAT), Excise (Special Provisions) Act and the Customs Ordinance by virtue of section 16 of the BOI Law. This section enables such companies to repatriate profits and dividends attributable to foreign shareholders. The BoI is responsible for the approval of all foreign direct investment. Foreign citizens need to invest at least US$250,000 in the equity of the enterprise in order to qualify for approval under sections 16 or 17 of the BOI Law and to be eligible for a resident visa.

Foreign exchange controls have been greatly liberalized by the Government and there are no restrictions on repatriation of earnings, fees and investment capital, and on foreign exchange transactions relating to current account payments.

Labor Laws There is no national minimum wage level in Sri Lanka. However, wages in certain sectors are regulated by the Wages Board Ordinance. Employers are also required to contribute 12% and 3% of an employee's monthly salary to the Employee's Provident Fund and Employee's Trust Fund, respectively. Medicare and unemployment insurance costs are paid for by the government. Privatization agreements allow new owners to offer existing employees voluntary retirement packages to streamline operations, but outright dismissal of workers is often prohibited. An employer can terminate the services of an employee on disciplinary grounds (e.g., misconduct, fraud, refusal to carry out lawful orders) provided the normal disciplinary procedure has been followed. In the case of workers who have been in employment for more than one year, lay-off, retrenchment or termination of services for reasons other than on disciplinary grounds can be effected only with either the prior written consent of the worker or the prior written approval of the Commissioner of Labor. Contract Law The legal system comprises a mixture of English Law and Roman Dutch Law. English Law is followed on matters pertaining to commercial transactions, whereas the Roman Dutch Law prevails for matters such as capacity and justa causa. Intellectual Property The new Intellectual Property Act No 36 of 2003 brings the Sri Lankan law on Intellectual Property in line with the TRIPs agreement. The significant legal changes are aimed at preventing the import and export of counterfeit trademark goods, thus, providing both local and global companies with more security.
Land & Property Ownership The Finance Act prescribes a 100% transfer tax to non-citizens of Sri Lanka. The tax will also be applicable to a company, which is incorporated under the Companies Act of Sri Lanka, if more than 25% of its issued shares are owned by a non-citizen. Exemptions have been granted by the Extraordinary Gazette No. 1386/18 dated 30/03/2005 to BOI Enterprises (where the business activity satisfies certain investment criteria); lending institutions such as Bank, finance leasing institution, which are incorporated under Banking Act and Finance Leasing Act etc. Competition and Fair Trading Sri Lanka's competition policy is designed to create competitive market structures and discourage monopolistic practices. In January 2003, the Parliament approved the Consumer Affairs Authority Act (CAA Act No. 9 of 2003) to regulate competition policy in Sri Lanka. The Act created the Consumer Affairs Authority (CAA) to control and eliminate any restrictive trade agreement among enterprises with regard to prices, abuse of dominant position, or any restraint on competition, and to investigate anti-competitive practices. Arbitration Arbitration is a popular method of alternative dispute resolution in Sri Lanka. The Arbitration Act No. 11 of 1995 was enacted based on the UNCITRAL Model Law. In terms of the Act, parties are free to choose the Arbitration Rules by which the arbitration is governed and the UNCITRAL, ICC, SIAC and the LCIA Rules of Arbitration are the international arbitration rules commonly used. There are also several Arbitration Centers that provide adequate facilities for dispute resolution. The Arbitration Act gives recognition to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, thus ensuring that arbitration awards made abroad are now enforceable in Sri Lanka and vice versa.
Investment Protection and Guarantees

Foreign investments in Sri Lanka are safeguarded by bilateral investment protection agreements and a constitutional guarantee. Under Sri Lanka's constitution, foreign investments are protected against nationalization or expropriation. Sri Lanka has entered into bilateral investment agreements with a number of countries, including Canada, China, Denmark, France, Germany, India, Indonesia, Japan, Malaysia, Netherlands, Norway, Pakistan, Romania, Singapore, South Korea, Sweden, Switzerland, Thailand, UK and the United States.
Export Processing Zones

The BOI has established eight Export Processing Zones (EPZ) and three Industrial Parks into which raw materials and essential plant, machinery and equipment can be imported duty free.
International Trade Policy

Sri Lanka's trade policy is to promote the development of a well-diversified export economy, competitive domestic production using local resources to reduce imports and mutually beneficial bilateral trade and investment treaties to promote trade and investment. Sri Lanka is a member of the South Asian Association for Regional Cooperation (SAARC). SAARC encourages cooperation in agriculture, rural development, science and technology, narcotics control and anti-terrorism. SAARC countries have signed the South Asia Free Trade Agreement, which created a framework for the establishment of a free trade zone covering 1.4 billion people. This agreement went into force on January 1, 2006. The Indo Lanka Free Trade Agreement between Sri Lanka and India seeks to create a free trade area through the complete or phased elimination of tariffs, which will occur over defined phases. Sri Lanka has also signed a Free Trade Agreement with Pakistan that enables it to enjoy duty free benefits on its exports, including natural rubber, coconut products, spices, natural graphite, paper and paper products etc. to Pakistan.
IV. CORPORATE AND BUSINESS STRUCTURES The Companies Act (No. 17 of 1982) contains the rules, procedures, accounting and reporting requirements for companies incorporated or registered in Sri Lanka. The capital of a company cannot be reduced except as permitted by the Act so that persons dealing with the company would be protected, by establishing a fund available for satisfying their claims (which will not be diminished except by ordinary business risks) and an assurance that the reduction is equitable as between the shareholders of the Company. Section 67 of the Act enacts that the company may reduce its capital if the companys articles of association authorize, a special resolution is passed and confirmation of court is obtained. Section 55 enacts that a company may not give any financial assistance for the purchase or subscription of the companys shares to any person, either directly or indirectly, as a loan or guarantee or by provision of security, except, where the company is normally engaged in the lending of money and it is in the ordinary course of business; the loan is for the purchase of fully paid up shares by employees in accordance with a scheme currently in force or the loan is to enable employees, other than directors, to purchase fully paid up shares. A holding company having subsidiaries must present at the annual general meeting group accounts setting out the state of affairs and the profit and loss of the company and its subsidiaries. Arrangements or compromises may arise between the company and members or any class of them, or between the company and creditors or any class of them and may be in connection with a reconstruction or an amalgamation. The most common way of doing business in Sri Lanka is through companies and branches of foreign companies. Private Companies A private company must consist of at least two and not more than fifty members. director. A private company cannot invite public subscription for its shares.
It must have at least one
Public Companies At least seven members are required to form a public company (there is no upper limit). It must have at least two directors. Public companies may invite public subscriptions for their shares or debentures and other securities, and can be listed on the stock exchange. They cannot commence business without a business commencement certificate. Offshore Companies A company registered within or outside Sri Lanka may register itself in Sri Lanka as an offshore company to carry on any business outside the shores of Sri Lanka. If a company registered outside Sri Lanka registers itself as an offshore company, it is deemed to have been incorporated in Sri Lanka but cannot conduct any business in Sri Lanka. Subsidiaries To establish a business in Sri Lanka foreign companies can incorporate as a local subsidiary company. Following its incorporation, the subsidiary must comply with all statutory requirements imposed on domestic companies. Branches A company incorporated outside Sri Lanka may establish a place of business in Sri Lanka by registering a branch office with the Registrar of Companies after obtaining approval from relevant ministry. The liability of a branch extends to its foreign assets.
Liaison/Representative Offices A company incorporated outside Sri Lanka may maintain its presence in Sri Lanka through a representative office, and is of similar status to that of a branch office. It is however, prohibited from engaging in any trading or investment activity or accruing any turnover in Sri Lanka. No tax incident arises since it is not permitted to trade. Therefore, the question of permanent establishment is not relevant. Joint Venture Company A joint venture can be with other Sri Lankan companies or foreign entities. A joint venture business may be incorporated or carried on as an unincorporated business similar to that of a partnership. Joint ventures have become popular in recent years; particularly in export oriented projects.
V. TAXATION Sri Lanka has a transparent, low-tax regime, and has signed double taxation relief agreements with 26 countries. These agreements provide for reduced tax rates on dividends, interest and royalties. All Sri Lankan businesses, except for BOI companies (enterprises that qualify for BoI incentives under Sec. 17 of the BOI Act) and enterprises that qualify for special concessions under the Inland Revenue Law, are liable to taxation.
Corporate Tax
Resident and Non-Resident companies are liable to a corporate income tax of 35%. Non-resident companies (companies whose head offices are located overseas, or are controlled from abroad) pay an additional tax of one-third of remittances abroad or one-ninth of taxable profits whichever is less. Remittances exclude dividends for this purpose. BOI companies that meet specific criteria i.e. size of total investment, type of investment and location of investment, qualify for tax holidays ranging from 5-12 years. In addition, a concessionary rate of income tax of 15% up to a maximum period of 20 years is also extended to these companies. Dividends declared out of tax-exempt profits during the tax holiday period and one year thereafter, is tax-free. withholding tax of 15% on dividends applies to all companies other than quoted public companies. A
Individual Tax
Resident individuals pay personal income tax on a sliding rate scale up to a maximum of 35% of their income. The first Rs.300,000 per annum is exempt from income tax. Non-citizens of Sri Lanka who are employed in qualifying BOI companies pay a concessionary tax of 15% of their Sri Lankan source income. This benefit, with the exception of BOI approved "flagship" projects, is restricted to the expatriate's first five years of employment.
Other Taxes
Since January 2004, Value Added Tax (VAT), on goods and services supplied in Sri Lanka or imported into Sri Lanka, has been set at a uniform 15% rate. Excise duties are levied on alcohol and tobacco products, while imports are subject to a surcharge of 10% on top of the applicable tariff rate. A 10% withholding tax is levied on any annuity or royalty paid by any person or partnership in excess of SLRs 50,000 in any month or SLRs500,000 in any year and 5% withholding tax on any management fee or similar payments.
Tax Treaties
Double Tax Relief Agreements signed between Sri Lanka and other countries provide for reduced tax rates on dividends, interest and royalties. Recently completed agreements include special provisions to ensure that foreign investors receive the benefits arising from the various tax incentives. The countries having tax treaties with Sri Lanka are: Australia, Bangladesh, Belgium, Canada, China, Denmark, Egypt, France, Finland, Germany, Hong Kong, India, Italy, Indonesia, Iran, Japan, Jordan, The Republic of Korea, Kuwait, Malaysia, Mauritius, Nepal, The Netherlands, Norway, Oman, Pakistan, Poland, The Philippines, Romania, Russia, Saudi Arabia, Singapore, Sweden, Switzerland, Thailand, The United Kingdom, The United Arab, The United States of America, Emirates, Yugoslavia.
VI. VISA AND REGISTRATION REQUIREMENTS A passport and onward/return ticket and proof of sufficient funds are required. A no-cost visitor visa, valid for 30 days, will be granted to tourists at the time of entry into Sri Lanka. Business travelers are required to have a visa prior to arrival. Visitors staying more than 30 days for any purpose must pay residency visa fees.
THAILAND
Tilleke & Gibbins International Supalai Grand Tower, 26th Floor 1011 Rama 3 Road Chongnonsi, Yannawa Bangkok 10120 Thailand +(662) 653-5555 PHONE +(662) 653-5678 FAX www.tillekeandgibbins.com Contact Attorneys: Santhapat Periera santhapat.p@tillekeandgibbins.com Tiziana Sucharitkul tiziana.s@tillekeandgibbins.com
I. INTRODUCTION TO THAILAND
The Land
Thailand occupies 514,000 square kilometers (about the size of France). Thailand has four geographic regions the mountainous and forested North, the fertile Central plan, the arid Northeast and the hilly South. Located in the middle of Southeast Asia, Thailands immediate neighbors are Laos, Myanmar, Cambodia and Malaysia. Nearby are China, Vietnam, Singapore and Indonesia. The climate generally is sunny, tropical and very humid, with a rainy season from June to October.
The People
The population of Thailand is 63.4 million people with a density of 123 inhabitants per square kilometer. current annual growth rate is 1.5%. The
The population is homogeneous and historically free of racial or religious strife, although recent years have seen a separatist insurgency in the countrys three southernmost provinces bordering Malaysia. Of the 25% non Thais, the majority are ethnic Chinese. About 94% of the Thais are Buddhists, 4% are Muslim, and 2% are Christian, Hindu, Sikh and others. The Thai culture exercises significant influence on business dealings. Although the Thai people are tolerant of different behaviors, the optimal approach is one of politeness and respect without losing ones temper or raising ones voice. Avoidance of conflict and respect for established hierarchy are common character traits. Personal ties and trust are also important to the Thai people. Increasingly, the urban middle class is beginning to challenge established norms of a paternalistic society by questioning and arguing for openness, transparency and accountability.
The Language
Thailands official language is Thai. In business, Thai, English, Japanese and several Chinese dialects are used.
Time Zone
Greenwich Mean Time (GMT) +7 hours
Thailand has been a democratic constitutional monarchy since 1932. The King the worlds longest-reigning monarch is the head of state. Extremely respected and revered, he quietly exerts much moral authority, and his guidance provides stability in times of political uncertainty. Thai citizens freely elect the government in a parliamentary system. Executive power is vested in the Council of Ministers (the Cabinet), comprised of the Prime Minister and not more than 35 other ministers appointed by the King. Usually, the Prime Minister is the leader of the political party that can successfully organize a majority coalition government. The legislative body, called the National Assembly, is comprised of a Senate and House of Representatives. Under the new Constitution of 2007, its 150 senators are to be elected from each province, one member being elected from each province, and to be selected in the number equivalent to the total number hitherto stated deducted by the number of elected senators for six-year terms. Of the 480 representatives, 400 are elected directly by the people and 80 are appointed seats from party slates in proportion to the outcome of the popular vote. General elections are held every four years. Proposed statutes become law after adoption by both the House and the Senate, and become effective when signed by H.M. the King. The current government, under the leadership of Prime Minister Abhisit Vejjajiva, is a coalition consisting of the Democrat Party, Chart Thai Pattana Party, Bhumjaithai Party, Thais United National Development Party, Puea Pandin Party, and Social Action Party. This government came to power on December 17, 2008, after the dissolution of the People Power Party, which had previously been in power.
Financial System
The Commercial Banking Act 1962 regulates commercial banking and establishes the types of businesses in which a bank may participate. The financial industry is controlled and regulated by the Ministry of Finance (MOF) and the Bank of Thailand (BOT). Ministry of Finance (MOF) The MOF formulates fiscal policy and oversees the nations finances, including development of taxation plans, printing of money, oversight of the banking industry, supervision of state enterprises and government monopolies, and control of foreign currency reserves. Bank of Thailand (BOT) The BOT is Thailands central bank responsible for implementation of the MOF plans, including issuing bank notes, advising the government on monetary policies, supervising financial institutions, and maintaining monetary stability. Generally, the BOT is treated as an independent body. In addition to commercial banking, the financial sector in Thailand comprises many other types of financial institutions that are regulated by the MOF (Ex: domestic/foreign commercial banks, international banking facilities, government banks, securities companies, insurance and finance companies, etc.).
Type of Economy
General Economic Trends Traditionally an agrarian economy, since the Second World War, Thailand has developed as a market driven economy with sizeable industrial and services bases. Since the mid 1970s, industrialization has increased and investment has been directed towards exportoriented activities and the services industries . Between 1984 and
1994, Thailand had the most rapid economic expansion of any country in the world. Severely impacted by the Asian economic crises in 199799, the country rebounded well and experienced 5% to 6% growth in 200507. Economic Figures Gross Domestic Product: USD 266 billion (2008). External Debt: 24.9% of GDP (as of March 2009). Inflation: 4.0% (as of June 2009). Unemployment: 2.1% (as of April 2009). Exports: USD 178 billion (2008). Imports: USD 179 billion (2008). Main customers: USA, European Union, Japan, China, Singapore. Main suppliers: USA, Japan, China, ASEAN, European Union.
Currency
Thailands currency is the Baht (THB). The current exchange rate is: US$1 = Baht 34.17 Euro 1 = Baht 48.37
The Stock Exchange

The Bangkok Stock Exchange, established in 1962, was expropriated by the government and replaced by the Stock Exchange of Thailand in 1975. It is an active and substantial exchange under the supervision of the Ministry of Finance and regulation by the SET itself and the Securities and Exchange Commission established under the 1992 SEC Act. As of June 30, 2009, there are 475 members and 581 listed securities.
Leading Industries
Thailand is the leading rice exporter in the world. Other top exported products include: Computers and accessories Vehicles, parts and accessories (Thailand aspires to The Detroit of Southeast Asia, with General Motors, Ford and most of the major Japanese automobile manufacturers having full facilities to produce automobiles, trucks and vans for export and the local market.) Electrical circuits Plastic Rubber Electronic consumer products Garments Steel and steel products Chemicals Gems and jewelry Agricultural products rice, sugarcane, fruits and vegetables, maize, cassava, palm oil, coffee, coconut products, tobacco Telecommunications Thailands telecommunications industry has evolved rapidly in the last fifteen years. However, apart from the ubiquitous mobile phone, Thailands teledensity is low, even for a developing country. Presently, telecommunications services are provided exclusively through two former state enterprises the TOT Corporation Public Company Ltd. and the CAT Telecom Public Company Limited and the Post and Telegraph Department (PTD) of the Ministry of Transport and Communications. To conform to the World Trade Organization, the Thai government approved in 1997 the Master Plan for Telecommunications Development, which provided for the privatization of the two state enterprises and the opening of the telecommunications market for competition through a systematic liberalization approach. By liberalizing the telecommunications industry, Thailand is to allow the local and foreign private sector to apply for licenses to operate telecommunications services. Prior to
2006, foreign companies could do so only by entering into joint ventures with Thai companies with a limitation on foreign shareholding to not more than 25%. After 2006, the limitation on foreign shareholding was amended according to the law governing alien business operations, i.e. not exceeding 49%. Infrastructure Thailands rapid expansion and political conflicts have resulted in problems in coping with recent demands on its infrastructure. Improvement efforts have been slowed by indecision, delays, political issues, contract irregularities, corruption, and cost overruns. Airports: Thailand has 39 civilian airports. The new Suvarnabhumi international airport, which opened on September 28, 2006, is located 25 kilometers away from central Bangkok. It is built to accommodate 45 million passengers a year, with a high level of competence. Railroad Systems: Many people as well as goods in Thailand are transported by trains. International trains only run to Malaysia and Singapore. There are three classes available, and the trains are clean and run on time. Ports: An estimated 85% of Thailands trade goes through Klong Toey Port on the Chao Phraya River. There are also deep seaports on the eastern seaboard and in the south that are playing increasing roles in international and coastal trade. Public Transportation: Bangkoks road system is inadequate to deal with the large number of vehicles in the city. An overhead electric mass transit system has been in operation since December 1999, while an underground train has been in operation since July 2004. In 2006, the Cabinet approved in principle four expansion projects of the mass transit system to five routes (Red Line, Dark Green Line, Light Green Line, Purple Line, and Blue Line), involving a total distance of 118 kilometers. In 2007, the Cabinet approved the Purple Line project (Bang Yai to Bang Sue route) involving a distance of 23 kilometers. Expected completion for all lines is 2015. Road System: Thailand has had an active road building program since the early 1960s and now boasts a vast network of all weather highways linking all parts of the nation . Thousands of trucks and buses transport goods and passengers among and within provinces.
Current Foreign Investment Opportunity

With strong economic development and strong support industries, the countrys industrial production has grown and diversified rapidly in both long-established and newly emerging industries. The government has placed an emphasis on attracting investment in six key sectors that have been identified as key to the countrys developmental objectives. These six target industries include agriculture and agro-industry, alternative energy, automobiles and automotive parts, machinery, biotechnology, and ship/yacht building. From January 2008 to May 2009, 1,590 projects for a total value of approximately Baht 572.7 billion were approved by the Board of Investment.
Foreign Investment Policy and Framework

The Thai government has long supported an open, laissez faire economy. Foreign investment is welcome, and various incentives are granted to attract foreign investment through the Board of Investment (BOI) and the Industrial Estate Authority of Thailand (IEAT). Under current BOI policy, priority is given to projects engaged in agriculture and agricultural products, projects related to technological and human resource development, projects that develop public utilities and basic infrastructure, conserve natural resources and reduce environmental problems, and specific targeted industries. The IEAT carries out the governments industrial development policy, which includes allocating land for further expansion, improving land conditions, and providing accommodations and facilities to assist entrepreneurs. However, the Foreign Business Act of 1999 (FBA) restricts many business activities of foreign investors. Under the FBA, a company is considered foreign if half or more of its shares are held by nonThai natural or juristic persons. The Act provides three categories prescribing permitted and prohibited business activities that can be engaged by foreigners. Usually, any foreigner wishing to engage a business activity from Category two or three of the FBA will first have to obtain an alien business license. Business activity in Category 1 of the FBA is closed to foreigners

Principally, foreign exchange transactions in Thailand are administered by the Bank of Thailand under the supervision of the Ministry of Finance. Generally, there is no restriction on the remittance of Thai or foreign currency into Thailand as offshore loans or investment funds. Foreign currency can also be remitted/repatriated abroad freely upon submission of all proper documentary evidence in respect thereof.

Thailand is a civil law country. There are four principal fundamental codes Civil and Commercial Code, Civil Procedure Code, Penal Code and Criminal Procedure Code and also specific regulations such as the Labor Relations Act and the Labor Protection Act, the Consumer Protection Act, the Alternative Dispute Resolution Act, etc. Thailand also has laws providing protection to owners of intellectual property rights including trademarks (Trademark Act), copyrights (Copyright Act and the Berne Convention) and patents (Patent Act). Any person who violates other persons intellectual property rights under such laws is subject to civil and criminal penalties.

Thailand is a member of the World Trade Organization. Signed trade agreements include: GATT/Agreement on TradeRelated Aspects of Intellectual Property Rights (TRIPS) The Framework Agreement on Enhancing ASEAN Economic Cooperation (AFTA) in 1992 Free Trade Agreements Thailand has been working with other ASEAN members to establish a free trade area with other countries such as India, China, Japan, Korea, and the CER or Australia and New Zealand. The negotiations between ASEAN and each of these countries are expected to be concluded within two years in order to become full fledged FTAs by 2015 or at the latest 2020. Thailand concluded FTA negotiations with Australia at the end of 2004 and the Agreement was implemented in January 2005. Thailand also signed an FTA Agreement with New Zealand in April 2005. The first phase of FTAs with China and India (the so-called Early Harvest Agreements) started in October 2003 and September 2004, respectively. Thailand also signed the Agreement on Comprehensive Economic Co-operation between the Association of South East Asian Nations and the Peoples Republic of China in November 2002 and the Japan-Thailand Economic Partnership Agreement in November 2007.
Forms of Enterprise
The formation of a public company is governed by the Public Limited Company Act, while the formation of a private company is governed by the Civil and Commercial Code. A private limited company requires a minimum of three individual promoters to form a company, and a minimum of three shareholders, natural and/or juristic persons must be maintained throughout the companys existence. The first step is to reserve the company name; second, file a Memorandum of Association with the Registrar; and third, convene a statutory meeting. During the statutory meeting, among other things, the Articles of Association must be adopted, auditors appointed and directors elected, any pre-incorporation contracts entered into by promoters ratified, expenses incurred by promoters paid, preference shares (if any) established, and the number of ordinary shares or preference shares to be allotted and their prices fixed. The fourth step is to register the company. If necessary documents are complete and duly signed by all promoters, directors, and shareholders, all four steps could be done in one day. The company registration fee is Baht 5,500 per Baht 1 million registered capital, with a maximum fee of Baht 275,000. The company is managed by a Board of Directors, with the directors appointed by the shareholders. A public limited company is a company established for the purpose of offering the sale of shares to the public. A private limited company cannot do so. The regulatory distinctions between closely and publicly held companies involve the number of promoters and the number of shareholders (private companies have a minimum of three shareholders, while public companies have a minimum of 15 shareholders). The Board of Directors of a public limited company must consist of at least five directors, the majority of whom must reside in Thailand, whereas a private limited company may have as few as one director. Thai law does not recognize the unlimited liability company, although the Articles of Association may provide for the unlimited liability of directors.
Structures Typically Used by Foreign Investors

Limited companies Joint ventures Representative Office Foreign company or other foreign entity (only limited activities permitted) Partnerships (infrequent)
Restrictions on Group Investments

All restrictive trade practices of business operators that create or may create monopoly and/or reduce competition in trade of goods and services will generally be prohibited under the Trade Competition Act 1999.
V. TAXATION
Direct Taxes
Personal Income Tax: Individual investors residing in Thailand who derive assessable income from business in Thailand or have assets located in Thailand are subject to personal income tax. Personal income tax and tax returns must be filed and tax must be paid prior to the end of March of the following year. Personal income is taxed at a progressive rate, with an exemption on the first Baht 150,000 of net assessable income. The highest tax bracket is 37% for individuals on net assessable income in excess of Baht four million. Corporate Income Tax: Corporations are taxed on net profits at a flat rate of 30%. Presently, Small and MediumSized Enterprises (SMEs) with a registered capital of less than Baht five million enjoy discounted corporate income tax at different rates depending on their net profit. Petroleum income tax
Indirect taxes
Value Added Tax (VAT) is collected upon consumption of goods and services and is levied on imported goods. The current rate is 7 %. Excise Tax Customs duties Stamp duties Specific business tax
Dividends distributed by a company or profits remitted by a partnership to individual investors are subject to 10% withholding tax. Nonresident foreign investors, whether an individual or a juristic person, are subject to income tax in the form of a withholding tax at the rate of 10% or 15% depending on the category of income received.
Social Security Tax

This is a very low rate at present.
Double Tax Relief and Tax Treaties

Thailand has signed many treaties on the avoidance of double taxation. In most cases, these tax treaties cover only taxes on income. They do not cover indirect taxes such as value added tax and customs duties. Most of the treaties follow the OECD model with the exception of a few changes for certain countries.
VI. VISA AND REGISTRATION REQUIREMENTS Visas, entry permits or border passes are required of all nonThai nationals entering the Kingdom. A residence permit is only required for a foreigner who wants to become a permanent resident of Thailand. A residence permit can be obtained after staying in Thailand for at least three consecutive years on nonimmigrant oneyear visas. Foreign nationals who intend to remain in Thailand to work or conduct business must comply with visa requirements in addition to obtaining a work permit. Foreigners entering the country to work must obtain a Non-Immigrant B (Business) Visa from a Thai Embassy or Consulate abroad. A multiple-entry visa is recommended if the applicant is a frequent traveler. A one-year visa can be applied for within the Kingdom, renewable each year prior to the expiration date. In addition, foreigners residing in Thailand for more than 90 consecutive days are required to notify the Immigration Bureau every 90 days. Foreigners can apply for a Non-Immigrant B visa from a Thai Embassy or Consulate in person with the required documents, i.e. passport, photographs, application form, a confirmation letter of employment from the prospective employer in Thailand, and copies of corporate documents of the employer and visa fee. Each Embassy or Consulate may require different supporting documents; therefore, it is recommended that an applicant contact the particular Embassy or Consulate where he/she will apply for a visa. It generally takes 2 3 days to receive a visa. The processing time depends on each Thai Embassy or Consulate. Foreigners wishing to work in Thailand are subject to the Alien Employment Act. Under the Act, a foreigner cannot perform any act of work or service unless he/she has a work permit or the work he/she performs falls within the exceptions of the Act. The term work is broadly defined as working by exerting ones physical energy or employing ones knowledge, whether or not for wages or other benefits Theoretically, even volunteer or charity work requires a work permit.

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DOING BUSINESS IN THE ASIA/PACIFIC RIM REGION

STATE CAPITAL GROUP ASIA/PACIFIC RIM MEMBER FIRMS

Hall & Wilcox

Lily Fenn & Partners

Martin Hun & Partners

J. Sagar & Associates (JSA)

Wynn Williams & Co.

Wee, Ramayah & Partners

Yoon Yang Kim Shin & Yu

Tilleke & Gibbins International Ltd.

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Foreign Exchange Control

Australian Workplace Relations

Foreign Investment Policy

Foreign Investment Framework

Acquisitions and Establishment of New Businesses

Economic Policies & Incentives for Foreign Investment

their Federal counterparts. merits.

Relevant Regulatory Bodies

Regional Trade Agreements and Associations

Free Trade Agreements Under Consideration / Negotiation

Major Trading Partners and Leading Imports and Exports

Other Significant Taxes

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The Financial System and Culture

Foreign Investment Incentives

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Branch Offices of Parent Companies

Work Visas/Permits for Employees

Capital Investment Entrant Scheme (CIES)

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Foreign Exchange Control

Market Economy Status

Reform of State-Owned Enterprises (SOE)

III. INVESTMENT CLIMATE AND FOREIGN TRADE

Scale of Foreign Investment

Types of Foreign Investment

Foreign Investment Policy

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Foreign Investment Laws and Regulations

Value-added Tax (VAT)

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India is a fast-growing market in

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Foreign Investment Policy

Foreign Trade Policy

Regional Trade Agreements and Associations

Special Economic Zones (SEZs)

100% Export Oriented Units (EOUs)

Major Trading Partners

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II. GOVERNMENT STRUCTURE AND ECONOMIC CLIMATE

III. INVESTMENT CLIMATE AND FOREIGN TRADE

Foreign Investment Policy & Framework

Regional Trade Agreements & Associations

Major Trading Partners

A sole trader is personally

Other Significant Taxes