31.10.2023 Newsletter
Newsletter October 2023
We are happy to inform you about the latest legal developments in Asia. The authors of the articles are at your disposal for further questions and information.
HONG KONG: Ravenscroft and Schmierer: Pioneering the first NFT service in Hong Kong
Ravenscroft and Schmierer: Pioneering the first NFT service in Hong Kong
The popularity of cryptocurrency has led to an increase in crypto scams, but with the anonymity provided by the crypto world, it can be difficult to identify the perpetrators. To combat this, courts are finding new ways to serve legal notices, including using crypto products against those who have caused harm. One such innovative method is the use of service NFTs. This was recently granted in Hong Kong for the first time in Wang Chichen v FeCommerce deals Co., Limited and 20 others to ADWA member Ravenscroft and Schmierer.
What is an alternative service, and how does an NFT service work?
When an individual is formally notified of legal proceedings, it is called service. Personal service, which involves leaving a copy of the document with the person to be served, is often not possible in cases where the defendant’s identity is unknown. In such cases, alternative service is usually permitted by the court. This can involve posting court documents to a last known address, sending emails to known email addresses, or any other form of service that does not involve direct interaction with the individual to be served.
An NFT, or non-fungible token, is a digital token that can represent ownership of tangible assets such as art or music. Ownership is recorded on a blockchain, which functions as a public digital ledger, recording transactions across various computers. Ownership over NFTs can be easily verified by checking transaction records. The English court approved alternative service by NFT in D’Aloia v (1) Persons Unknown (2) Binance Holdings Limited & Others [2022] EWHC 1723 (Ch) through airdropping an NFT into the crypto wallets to which the claimant had previously transferred cryptocurrency.
The Case
Ravenscroft and Schmierer secured the first grant for a service NFT in Hong Kong in Wang Chichen v FeCommerce deals Co., Limited and 20 others. The law firm successfully secured injunctions to freeze their client’s assets as well as self-identification orders against unknown defendants following a cryptocurrency investment scam. The court granted alternative service via an NFT containing a link to the court documents, which was airdropped into the unknown defendants’ crypto wallet addresses.
The impacts of NFT service
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While alternative service via NFTs is a novel and innovative method, its practical effects remain to be seen. Recovery of lost assets can be difficult if the defendant remains unidentified, and it is unlikely for a defendant to reveal themselves if they are truly anonymous. However, with technology advancing and courts becoming more familiar with the virtual world, more efficient and certain methods of serving court documents will likely be created.
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Your point of contact in Hong Kong: Stefan Schmierer
Ravenscroft & Schmierer
22nd Floor, Bupa Centre
141 Connaught Road West
Hong Kong, SAR
CELL +852 9229 6603
TEL +852 2388 3899
FAX +852 2385 2696
CHINA: High-Tech Enterprises in China - Current Incentives and Requirements
High-Tech Enterprises in China - Current Incentives and Requirements
In the current 14th Five-Year Plan, the People's Republic of China has set the goal of reducing its dependence on foreign high-tech components, establishing itself as a high-tech location and becoming a world leader in various high-tech fields.
To achieve this goal, China supports investments in research and development (R&D) through various industrial policies, including tax incentives for technology-based small and medium-sized enterprises (TSMEs), R&D enterprises or advanced technology service enterprises (ATSEs). Even if a company is not recognised as a high-tech enterprise, it still may take advantage of "super tax deductions", deducting up to 200 % of R&D expenses and thus significantly reducing its corporate in-come tax in China.
In addition to the above tax incentives, there are also tax incentives in China to promote the development of high and advanced technologies. The Chinese government has already announced in 2020 the goal of creating an open and trans-parent business environment, attracting foreign investment in high-tech industries and encouraging foreign companies to apply for high-tech enterprise certificates.
What is an HNTE?
High and New Technology Enterprises (HNTEs), hereinafter referred to as "HNTEs", are enterprises that are registered in the People's Republic of China and continuously engage in research, development and transformation of technologies to create core independent intellectual property rights for the enterprise and con-duct business activities on that basis. Basically, any enterprise can obtain HNTE status as long as it conducts the above R&D activities in one of the eight "high-tech sectors of national core promotion". These sectors include electronics and information technology, biotechnology and medicine, aerospace technology, new mate-rials, high-tech services, new energy and energy conservation, resources and environment, and advanced manufacturing and automation.
Since many companies are active in the above-mentioned sectors, the question arises as to whether it is "worthwhile" to apply for HNTE status and what requirements must be met. This article provides an overview of the benefits of HNTE status and the hurdles to be faced in applying for HNTE status.
What are the benefits of HNTE status?
One of the biggest advantages of HNTE status is the tax benefit. The income of HNTE companies is taxed at a corporate tax rate of 15% instead of the regular 25%. HNTEs can carry forward for tax purposes losses incurred in the five years prior to certification as an HNTE and not yet settled for up to 10 years (instead of the usual 5 years). In addition, under the regulations applicable for 2022, HNTEs may claim a one-time input tax deduction of up to 100% for equipment and instruments (and other fixed assets except buildings) newly acquired between 1 October 2022 and 31 December 2022.
Companies with HNTE status can claim these tax benefits from the year of certification as an HNTE company. However, the tax benefit must be applied for with the competent tax authorities. In addition, HNTEs may also claim the above-mentioned "super tax deductions" for R&D expenditure.
What requirements do companies have to fulfil to obtain HNTE status?
Recognition as an HNTE takes place through an application procedure before the competent accreditation authority. The recognition procedure can be applied for on-site or online and is free of charge. The duration of the procedure varies depending on the location. In Shanghai, for example, the procedure takes up to 60 working days. In addition to submitting the required application documents, companies must meet the following requirements:
- The company must have existed for more than one year, whereby the time between the establishment of the company and the application date is relevant.
- The company must acquire intellectual property for technologies that play a core supporting role for its main products or services, either through independent R&D, transfer, gift, merger, acquisition or otherwise.
- The technologies or services must be listed in the "Catalogue of High-Tech Sectors of National Core Promotion".
- The share of scientific and technological personnel must be at least 10% of the total number of employees of the company in the application year.
- The company's R&D expenditure in the last three financial years prior to the application must reach certain percentages of turnover.
- The share of revenue from high-tech products or services in the company's total sales revenue in the year before the application must be at least 60 %.
- The result of the regulatory assessment of the company's innovation capacity must score at least 70 out of 100 points. In the evaluation, the following criteria shall be considered: IP rights, ability to implement scientific and technological achievements, research and development management and business growth.
- There must not have been any serious safety or quality incidents or environmental violations in the company within one year prior to the application.
HNTE status is valid for three years from the date of certificate issuance. Companies with HNTE status must submit regular reports on IP rights, scientific and technological personnel, R&D expenditure and operating income to the competent authority.
Conclusion
Given the reporting requirements and the time and financial costs associated with the application process, companies should carefully consider whether to apply for HNTE certification before investing resources in the HNTE application process. The decision is complicated by local regulations on innovation support, as these contain additional specific conditions and deadlines. It is therefore recommended that companies considering claiming HNTE benefits first inquire with the competent authorities about local regulations.
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Your point of contact in China: Rainer Burkardt
Burkardt & Partner
Suite 2507, 25/F, Bund Center
222 Yanan Road (East)
Shanghai 200002, P.R. China
CELL +86 186 1687 7153
TEL +86 21 6321 0088
FAX +86 21 6321 1100
PHILIPPINES: The European Union and the Philippines deepen their relationship
The European Union and the Philippines deepen their relationship
The European Union and the Philippines have agreed to relaunch the talks on the free trade agreement after a four-year hiatus. The two sides announced this decision on July 31, 2023, during the visit of European Commission President Ursula von der Leyen to Manila. They are expected to begin the bilateral “scoping process” for the FTA in early September, which will cover various topics such as market access, investment liberalization, trade and sustainable development, government procurement, dispute settlement, etc. The formal negotiations are likely to start by 2024, and the goal is to finish them before the end of President Ferdinand Marcos Jr.'s term in 2028. The FTA is seen as having “huge potential” for both parties in terms of jobs, growth, diversification, and technology cooperation. Some of the sectors that could benefit from the FTA include garments and wearables, agriculture, minerals, digital trade, and energy. The FTA will also address issues related to human rights, labor rights, the environment, and good governance.
During the visit of the President of the EU Commission also other topics were discussed like the desire of the European Union to partner with the Philippines on the EU's investment plan for the world for sustainable infrastructure “Global Gateway”. This plan will provide financing, expertise and access to technologies to support in the transition to a circular economy, and the generation of green energy.
Furthermore, the European Union is planning to assist on turning the Philippines into a digital hub in the region. European companies shall be encouraged to come and invest in the Philippines in order to work together on fast and reliable connectivity with submarine cables, on cybersecurity training, and on deployment and development of 5G.
The European Union has also identified the Philippines as being able to supply critical raw materials. Those are needed for a common clean and digital future and the European Union expresses interest of wanting to work in a partnership with the Philippines.
All in all, both the European Union and the Philippines are on the way of enhancing their relationship, which also will be beneficial for enterprises doing business in both regions.
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Your point of contact in the Philippines: Lutz Kaiser
Villanueva Gabionza & Dy Law Offices
20th/F Corporate Center
139 Valero St., Salcedo Village
Makati City 1227, Philippines
CELL +63 995 985 4957
TEL +63 2 8813 3351
FAX +63 2 8816 6741
SINGAPORE: Important changes to the Child Development Co-Savings Act for employers
Important changes to the Child Development Co-Savings Act for employers
The Singapore government recently passed amendments to the Child Development Co-Savings Act 2001 (CDCSA; text: https://lnkd.in/e8EgT9GY) as part of efforts to support families with young children. Child Development Co-Savings (Amendment) Bill 27 of 2023 extended unpaid parental leave for young children from six to 12 days per year, effective January 1, 2024. In addition, under the bill, employers may provide male employees with an additional two weeks of paid paternity leave for one child, for children born on or after January 1, 2024. Employers who choose to provide this additional leave may seek reimbursement from the government.
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Your point of contact in Singapore: Dr. Andreas Respondek
Respondek & Fan Pte Ltd
1 North Bridge Road
#16-03 High Street Centre
Singapore 179094
CELL +65 9751 0757
TEL +65 6324 0060
FAX +65 6324 0223
THAILAND: New tax guideline of the Thai government regarding the taxation of income from abroad for Thai resident taxpayers
New tax guideline of the Thai government regarding the taxation of income from abroad for Thai resident taxpayers
On 15 September 2023, the Tax Revenue Department of Thailand (TRD) issued Directive No. Paw 161/2566 (2023) on income tax payments under Section 41, Paragraph 2 of the Thai Tax Act (TRC). This newly introduced directive is expected to have a significant impact on the tax rules for repatriation of income earned abroad to Thailand by individuals liable to pay tax in Thailand, which are scheduled to come into effect from 1 January 2024 and onwards.
Current practice
Prior to the issuance of this latest directive by the Ministry, a Thai resident taxpayer was only subject to income tax on income earned abroad if that income was transferred to Thailand within the same calendar year in which it was earned. In other words, income earned abroad was not taxable if it was brought to Thailand in the following calendar year.
Remark: A Thai tax resident is defined as a person who stays in Thailand for a total of 180 days or more within a tax year.
Practice from 1 January 2024
Under the Ministry's recent directive, Thai tax residents with income from abroad will be taxed in Thailand regardless of when that income is remitted into the country. It is important to note that this regulation only applies to Thai tax residents.
This new directive presents new challenges for Thai taxpayers who have income from both Thai and foreign sources.
There are still a number of issues to be resolved by the tax authority in implementing this new rule. These include, among others, the determination of the tax rates to be applied (whether a flat tax will be levied, whether different tax rates will be applied specifically to income from abroad or whether the standard progressive tax rate will be applied), the distinction between capital (funds from old investments, inheritances, original investment capital) and income (interest, dividends, remuneration) from mixed funds, as well as the determination of the foreign currency rates relevant for the tax assessment.
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Your point of contact in Thailand: Dr. Andreas Respondek
Respondek & Fan Ltd
United Center, 39th Floor, Suite 3904 B
323 Silom Road
Bangkok 10500, Thailand
CELL +66 89 896 4048
TEL +66 2 635 5498
FAX +66 2 635 5499
THAILAND: Extension of the reduced value added tax rate of 7%
Extension of the reduced value added tax rate of 7%
The standard rate of "Value Added Tax" under the Thai Revenue Code is 10%. However, a lower tax rate of 7% has now been set for a limited period of time for several years. The last extension was until 30 September 2023 and has now been extended again by the Thai cabinet until 30 September 2024 (https://lnkd.in/eRADMMNz).
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Your point of contact in Thailand: Dr. Andreas Respondek
Respondek & Fan Ltd
United Center, 39th Floor, Suite 3904 B
323 Silom Road
Bangkok 10500, Thailand
CELL +66 89 896 4048
TEL +66 2 635 5498
FAX +66 2 635 5499