Offshore Remittances – New RulesMay 29, 2023
As a regulatory measure, the Ministry of Planning and Finance (the “MOPF”) issued a new Standard Operating Procedure (“SOP”) on 1 May 2023 regarding offshore remittances and required tax documentation. According to the SOP, the entrepreneurs, companies, organizations, and individuals are now required to provide certain tax documentation, such as tax payment receipts or tax exemption letters issued by the Internal Revenue Department (“IRD”) or tax clearance certificates, to the Authorized Dealer Banks (“AD Banks”) when remitting offshore payments exceeding US$10,000 per transaction.
Below is the summary of required tax documentation for each type of offshore remittance:
|Type of offshore remittance
|Required tax documentation
|Required action taken by the IRD and AD Banks
|Interest, royalty (license, trademark or copyright), and service fee payment
|Dividend payment and offshore remittance for the goods purchased
As per the SOP, taxpayers are now requested to make WHT or PIT payment first before offshore remittances can be made, which in fact conflicts with requirements under the Income Tax Regulation (“ITR”) and WHT Notification 47/2018. Under the ITR or the WHT Notification 47/2018, taxpayers are required to make WHT or PIT payment within 15 days from the date of payment. In other words, taxpayers can still pay WHT or PIT to the respective IRD office after having made payments to their vendors or employees. The introduction of SOP may lead to a delay in the payment process between a taxpayer and its vendors or employees.
In respect of offshore remittances for the goods purchased, tax clearance certificate may not be relevant tax documentation that should be requested from the taxpayers. In practice, taxpayers may not receive tax clearance certificates from the IRD yet for recent financial years. Please also be informed that it is still required to seek approval from the Foreign Exchange Supervisory Committee for offshore remittances.