ASIA REGULATORY ROUND UP – CHINA TIGHTENS MONEY LAUNDERING REPORTING REQUIREMENTS

BY KEITH NUTHALL and WANG FANGQING, in Shanghai

CHINA’S central bank, the People’s Bank of China (PBC), has issued a new anti-money laundering and terror finance reporting requirements for all financial institutions inside the country. The rules come into force July 1. They cover banks, brokers, foreign exchange, online and mobile payment systems and insurance companies, who will have to file reports to the central bank, via their headquarters or via representative institutions, if a client requires daily cash transactions exceeding Chinese Yuan Renminbi CNY50,000 (USD7,261) or a larger amount of USD10,000’s worth in foreign currency. For electronic account transfers by companies and other organisations, reports must be logged if they transact CNY2 million (USD290,478) and more or USD200,000 by value in foreign currency. The new policy also requires financial institutions to establish a monitoring system to collect comprehensive information on their clients’ identities and transactions for further analysis.

All these alert thresholds are more onerous than in the past. http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/3223812/index.html

*Devices, equipment and publications imported by government-approved Chinese technology-based companies, research institutions, medical schools and colleges will be exempted for VAT tax and sales tax, according to China’s state administration of taxation. The break will end on Dec 31, 2020. The approved organizations which wish to buy imported publications must commission six state-owned publishing houses – China National Publications Import & Export Corp, Sino Economic Books Import & Export Corp, China Educational Publications Import & Export Corp, China National Sci-Tech Information Imp & Exp Corp, Beijing Zhongke I/E Corp and China International Book Trading Corp – to make purchases. The move is designed to encourage innovation.

See http://www.chinatax.gov.cn/n810341/n810755/c2435701/content.html

*China is to push the construction of a country-wide IT platform to bring all local government functions online, including revenue collection, to improve efficiency, transparency and data sharing, according to China’s ministry of finance. Among the information it wants shared by local, provincial and central governments, are investment approvals, credit financing and taxes. The systems will employ big data management technology to help, for instance, in identifying and investigating tax violations, and checking applications for government allowances. The government will design policies to encourage companies to pay their taxes online through the system.

http://www.mof.gov.cn/zhengwuxinxi/caizhengxinwen/201701/t20170113_2519635.htm

*Malaysia’s central bank Bank Negara Malaysia has proposed regulations on credit risk management for licensed persons, prescribed development financial institutions and financial holding companies. The bank wants to clarify requirements on board-level governance, including risk management; it wants to introduce requirements to strengthen management of exceptional credits; lay down a minimum standard for credit loss estimation; and boost the management of concentration risk, country and transfer risk, and group-wide credit risk oversight. The bank seeks comments by March 31 – see http://www.bnm.gov.my/index.php?ch=57&pg=137&ac=557&bb=file%27

*The Securities Commission Malaysia has released a ‘blueprint’ of policies to establish the country as a regional centre for Shariah-compliant sustainable and responsible Islamic investment. Its goal driving the internationalisation of Islamic fund and wealth management through enhanced cross-border trading systems. Initial work includes formulating formal regulatory rules for Islamic funds, establishing a global centre for Islamic capital market and the introducing a digital investment services legal framework. https://www.sc.com.my/post_archive/sc-unveils-five-year-blueprint-to-further-strengthen-malaysia-as-a-leading-international-centre-for-islamic-fund-and-wealth-management/

*Securities Commission Malaysia has also released a new regulatory framework for listing mineral, oil and gas (MOG) corporations, helping such businesses enter the equity market. The rules take effect March 20, (2017). Their aim is to provide clarity on which businesses in this sector are considered eligible for listing on Bursa Malaysia, including how to demonstrate they hold adequate assets. See https://www.sc.com.my/wp-content/uploads/eng/html/resources/guidelines/equity/SummaryAmendments_equity_170119.pdf; https://www.sc.com.my/wp-content/uploads/eng/html/resources/guidelines/prospectus/summaryAmendments_prospectus_170119.pdf; and https://www.sc.com.my/wp-content/uploads/eng/html/resources/guidelines/ava/summaryAmedments_ava_170119.pdf

*The Malaysian Accounting Standards Board (MASB) has released amended Malaysian Financial Reporting Standards (MFRSs) including on applying MFRS9 Financial Instruments with MFRS4 Insurance Contracts; and MFRS140 on Transfers of Investment Property. See details http://www.masb.org.my/pdf.php?pdf=2724_MASB_ENG.pdf&file_path=pdf_file

*Financial institutions in Singapore, such as banks, insurance companies and investment bodies, have since January 1 had to establish the tax residency status of account holders. They have also had to report to the Inland Revenue Authority of Singapore (IRAS) financial data of account holders who are tax residents of jurisdictions with which Singapore has a Competent Authority Agreement (CAA) to exchange information – thus far Australia, Britain, Japan, South Korea, South Africa, Norway, Italy, Canada, Finland, the Netherlands, Iceland, Malta, Ireland, Latvia and New Zealand. See https://www.iras.gov.sg/IRASHome/Quick-Links/International-Tax/How-account-holders-of-FIs-will-be-affected/

*Singapore and India have agreed a revised avoidance of double taxation agreement, which preserves existing tax exemption on capital gains for shares acquired before April 1, 2017, but for shares acquired on or after April 1, there will be a two-year transition period, when capital gains from such shares will be taxed at 50% of India’s domestic tax rate on capital gains until March 31, 2019. See https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/News_and_Events/Newsroom/Media_Releases_and_Speeches/Media_Releases/2016/Annex%20-%20Summary%20of%20key%20changes%20in%20new%20Protocol%20to%20update%20the%20Singapore-India%20DTA.pdf

*Singapore’s central bank the Monetary Authority of Singapore (MAS) has announced that registered business trusts will adopt a new Singapore financial reporting framework identical to International Financial Reporting Standards (IFRS), while authorised collective investment schemes will continue to prepare financial statements using accounting practices recommended by the Institute of Singapore Chartered Accountants (ISCA). http://www.mas.gov.sg/News-and-Publications/Media-Releases/2017/Financial-Reporting-for-Business-Trusts-and-Collective-Investment-Schemes.aspx

*The Accounting Standards Council Singapore (ASC) has published its revised Singapore Financial Reporting Standard for Small Entities (SFRS for Small Entities), to be applied for annual periods from January 1, (2017). It is based on the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). See http://www.asc.gov.sg/SFRSEffective01Jan2017

*The ASC has published its Financial Reporting Standards (FRSs) including amendments made up to December 31 (2016), for annual periods beginning on January 1, (2017). http://www.asc.gov.sg/2017volume

*IRAS has released advice on mandatory record keeping requirements for businesses registered for the country’s Goods and Services Tax (GST) – see https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/e-Tax_Guides/etaxguide_Record%20Keeping%20Guide%20for%20GST-registered%20%20Businesses_Revised%20Jan17.pdf

*IRAS has also published guidance for income tax treatment for a real estate investment trust and approved related sub-trusts, targeted at REIT trustees, managers, unit holders or potential investors. See https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/e-Tax_Guides/etaxguide_Income%20Tax%20Treatment%20of%20Real%20Estate%20Investment%20Trusts%20and%20Approved%20Sub-Trusts.pdf

*Hong Kong has signed an avoidance of double taxation agreement with Belarus, clarifying the two jurisdictions’ taxation rights. Under its terms, any Belarusian tax paid by Hong Kong companies will be allowed as a credit against tax payable in Hong Kong on the same profits; and vice versa. There are also more detailed provisions in withholding taxes, airlines; international shipping transport; and the exchange of taxation information. See http://www.ird.gov.hk/eng/pdf/Agreement_Belarus_HongKong.pdf

*The Hong Kong Inland Revenue department has noted that the special administrative region (SAR) will implement country-by-country reporting for accounting periods commencing on or after January 1, 2018, with parent-surrogate filing allowed as a transitional measure for accounting periods commencing between January 1, 2016 and December 31, 2017. See http://www.ird.gov.hk/eng/tax/dta_cbc.htm#what

*The Hong Kong Stock Exchanges has said it is planning to offer Chinese Yuan Renminbi (CNY/RMB) currency options and roll out a US dollar/offshore RMB contract in the first quarter of this year, subject to market readiness. Such products offer trading and hedging flexibility; limited counterparty risk; and trading cost effectiveness on a margin basis, among other benefits, said the exchange. Details – http://www.hkex.com.hk/eng/market/partcir/hkfe/2017/Documents/MKD_FIC_001_17_e.pdf

*The Hong Kong Institute of Public Certified Accountants (HKICPA) has released a note stressing that new major HK financial reporting standards (HKFRS) will become effective in upcoming financial years: HKFRS 9 Financial Instruments for annual reporting periods from January 1, 2018; HKFRS 16 on revenue from contracts with customers from the same date; and HKFRS 16 on leases for reporting periods from January 1, 2019. See http://www.hkicpa.org.hk/en/standards-and-regulations/technical-resources/newmajor

*The Securities and Futures Commission (SFC) of Hong Kong has negotiated a memorandum of understanding (MoU) with the US Securities and Exchange Commission (SEC). Both sides have agreed to consult, cooperate and exchange information regarding the supervision and oversight of companies and other regulated bodies operating in both jurisdictions. The MoU covers exchanges, market intermediaries, investment funds, clearing agencies, credit rating agencies and more. http://www.sfc.hk/web/EN/about-the-sfc/collaboration/overseas/exchange-of-information.html