Indonesia to attract investors with tax benefits

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Indonesia’s Minister of Finance, Agus Martowardojo, has announced that long-awaited regulations will be issued to introduce tax holidays, as well as revise the country’s tax allowances, for new direct investments in selected industries.

The introduction of a tax holiday is being looked at as providing support for the large-scale manufacturing and infrastructure projects contained within the government’s Masterplan for the Acceleration and Expansion of Economic Development of Indonesia, recently launched by President Susilo Bambang Yudhoyono.

Tax holidays will therefore be available, the Finance Minister pointed out, to substantial investments of at least IDR1 trillion (USD116.6m) in the base metal, petroleum and refining (or basic chemicals derived from petroleum and natural gas), industrial machinery, renewable resources and telecommunications equipment industries.

The tax holiday would remain for at least the first five years of a project’s commercial operations. It was reported that retroactive tax holidays would also be available for projects established up to a year before the announcement, provided that they are not yet profitable.

To obtain a tax holiday, the Coordinating Minister for Economic Affairs, Hatta Rajasa, disclosed that the investor should make a proposal to the Investment Coordinating Board (BKPM) and/or the Ministry of Industry, which will review its suitability under the established criteria.

The BKPM’s Head, Gita Wirjawan, said that there are already five companies that are waiting for tax holidays to be available before investing substantial funds in Indonesia – namely, the South Korean companies, Posco steel (an investment of some IDR60 trillion) and Hankook tyres (IDR5 trillion); Kuwait Petroleum Corporation (up to IDR70 trillion); and Caterpillar (IDR5 trillion), while the domestic textile company, Indorama, is also considered likely to begin a project of up to IDR5 trillion, and look for a tax holiday.

The government has also, Rajasa explained, increased to 128 the sectors eligible for tax allowances. However, he confirmed that, to obtain a tax allowance, a company must operate in a high priority industry on a national scale; and have a minimum investment value of IDR50bn with a workforce of at least 300 people, or a minimum investment of IDR100bn with a workforce of at least 100 people.

In addition, the industrial sector must meet one of the ten criteria already existing in the current tax allowance regulations, which, among other stipulations, require that: the investment is in a specified high priority industry; the project is located in a remote area; research, development and innovation is conducted; a partnership with micro businesses or small and medium-sized enterprises is set up; and a substantial number of jobs are provided for.

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Zug Switzerland a crowded tax haven

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Zug, Switzerland: Developed nations from Japan to America are desperate for growth, but this tiny lake-filled Swiss canton is wrestling with a different problem: too much of it according to Deborha Ball in Wall Street Journal.

Zug’s history of rock-bottom tax rates, for individuals and corporations alike, has brought it an A-list of multinational businesses. Luxury shops abound, government coffers are flush, and there are so many jobs that employers sometimes have a hard time finding people to fill them.

Before Zug became Switzerland’s premier spot for the wealthy and corporations it was known for its picturesque views along the lake of the same name.

ZUG2

ZUG2

Image: Bloomberg News

If  Switzerland is the world’s most famous tax haven, Zug amounts to a haven within a haven. It has the highest concentration of U.S.-dollar millionaires in Switzerland, a country where nearly 10% of households meet that standard, according to Boston Consulting Group. The highest personal income tax anyone in Zug has to pay is 22.9%, and companies pay an average of just 15.4%—rates lower than Switzerland’s average and far below top rates in the U.S.

Thanks in large part to such policies, Zug now boasts the headquarters of big companies ranging from construction firm Foster Wheeler Ltd. to commodities trader Glencore International PLC, and branches of many more. When Transocean Ltd., a drilling contractor known for its tax planning, decided two years ago to move its headquarters from the Cayman Islands and Houston, it picked Zug.

But lately, the place has become something of a victim of its own success. It is grappling with the consequences of the wealth it has attracted, now crowding out the non-rich and squeezing companies looking for space and talent. But when Stefan Hurschler, a man who works with the disabled, and his schoolteacher wife decided to expand their family and wanted a bigger house, they found nothing in Zug they could afford. They moved to Zürich, and Mr. Hurschler now commutes back to the town he grew up in.

“There are older people who still live [in Zug] because they bought their homes in the 1960s,” said his wife, Lilian. “Or there are the very rich. But there isn’t much of a middle class.”  Here is a link to the full story.

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American companies are living the United States because of high taxes

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The corporate tax rate in the United States is the second highest in the developed world.

American companies are finding new overseas tax havens to legally protect some of their profits from the U.S. tax rate of 35 percent, among the highest in the world. Lesley Stahl reports. Move your corporation or part of your corporation out of the United States while it still is possible. Do not wait as the current negative sentiment could result in restriction on US companies in the future.

See the video covering the story at: http://www.cbsnews.com/video/watch/?id=7376848n&tag=nl.e882#ixzz1VmZRlPaG

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Liechtenstein to weaken asset and tax protection

European Tax & Money Havens, , ,

Liechtenstein’s government has recently submitted a proposal for consultation, which aims to extend legal assistance in criminal tax matters by implementing changes to the Principality’s existing legal assistance law and by agreeing to the additional protocol to the European legal aid agreement.

Under current law, providing legal assistance in criminal tax matters is strictly prohibited. Liechtenstein’s government maintains in its release, however, that although there are three exceptions to this, the provisions are currently very limited both as regards their content and as regards the circle of countries with which such requests are accepted.

The government explains that with its declaration of March 12, 2009, Liechtenstein agreed with the states concerned to implement international standards pertaining to an exchange of information in tax matters. It notes that in the tax information and double taxation agreements that have so far been concluded, the Principality has pledged to provide comprehensive mutual assistance, including searches and seizures, some of which fall outside of its own criminal tax proceedings.

Consequently, the government argues that such restrictive legislation in the area of legal assistance in criminal tax matters is inconsistent with its newly adopted strategy and therefore carries a very real risk to the country’s reputation, which, it emphasizes, should not be underestimated.

Liechtenstein’s government has therefore proposed that the scope for providing legal assistance in criminal tax matters be widened. It has also underlined the need to agree to the additional protocol to the European agreement on legal assistance in criminal matters, and suggested that the general fiscal reservation provided for under article 51 of the country’s legal assistance law (RHG) should be removed and replaced by the introduction of a new article 51 paragraph 1 providing that limited legal assistance should also be permitted in the case of tax evasion.

The consultation period is due to last until July 29.

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Prague Russians new Zurich

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Today’s Czech Republic, firmly anchored in the NATO and European Union, the richest former Communist country in central Europe, and boasting low inflation and a stable currency. Mix in the country’s natural beauty, the Russian-Czech language proximity and the fact that it takes under three hours to fly from Moscow to Prague. It then becomes little surprising that the Czech Republic has attracted large numbers of Russian expatriates according to Wall Street Journal.

Prague Photos
This photo of Prague is courtesy of TripAdvisor

According to official statistics nearly 32,000 Russians with either temporary or long-term     residency permits live in the Czech Republic. This isn’t a lot in a country of 10 million but the official number is swelled by thousands more who commute between Moscow and Prague while taking with them some of their hard-earned money away from what they see as unstable Russia into the safety of Czech-based banks.

“Ordinary Russians move in the Czech Republic because they view the country as safe and because they want their children to live in a stable society,” Alexej Kelin of the Prague-based Russian Tradition expatriate organization was quoted as saying last night by the CT-24 Czech television news channel.

Russians are mostly concentrated in Prague and the western Czech spa town of Karlovy Vary. Most are professionals with incomes above the Czech average of about $1,500 a month. The wealthiest Russians in the Czech Republic have made several local banks offer private banking services by Russian-speaking staff.

One of them is Raiffeisen Bank International, an Austrian retail lender. It has recently begun offering its top private banking services under the Friedrich Wilhelm Raiffeisen moniker, or FWR, in Prague and Brno, the second-largest Czech city, some two hours by car south-east of the capital. FWR has branches in only a few other places, including Vienna and Budapest.

FWR opens accounts for clients with at least EUR 500,000 in assets. The bank doesn’t disclose details on its clients but people familiar with its services say that well-to-do Russians account for a large customer segment of its Prague branch. These Russians picked the Czech capital as one of several places outside Russia from where they can manage their wealth, having already stashed some money away in Switzerland, the U.K. and offshore tax-havens.

“Among the former Soviet-bloc countries, Prague is something like Zürich for well-off Russians,” says one person familiar with the Czech banking sector catering for Russian clients. See the full article in Wall Street Journal.

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