The paper discusses the significant features of the income tax structure among ASEAN member countries. Among the 10 ASEAN countries, Brunei is the only one which does not impose an individual income tax. The income tax structures of the nine members of the ASEAN are schedular. Myanmar has the most number of income tax brackets at 13 while majority have 5 income tax brackets (Thailand, Indonesia, Cambodia, Vietnam and Malaysia). Both the Philippines and Singapore have 7 while Lao PDR has 9.
All the nine members of the ASEAN which impose an income tax provide for a distinction between employment and business income. In the case of Vietnam, tax on business income is dealt with under the Business Income Tax (BIT) rules which also pertain to the corporate income tax. Also, of the 9 countries which distinguish between employment and business income, only Cambodia, Myanmar and Lao PDR provide for a separate schedule of tax rates for employment income and business income.
As regards the tax base of employment income, the modified annual gross income (i.e., gross income less deductions) of the Philippines is similar to the assessable income (gross employment income less personal reliefs and standard/itemized deductions) tax base of Thailand and Singapore and to the taxable income (chargeable income/employment income less exemptions and deductions) of Indonesia, Myanmar and Malaysia. The only apparent difference is that while other countries allow for more itemized deductions from gross income, the Philippines only allows premiums on health insurance equivalent to $51 annually to be deducted from gross income in addition to the personal exemptions.
In the case of Cambodia, Lao PDR and Vietnam, the tax base is the monthly cash salary or income of the individual less small amounts of monthly deductions.
Common exemptions and deductions from the employment income of taxpayers in the ASEAN include the following: 1) Basic Allowance/Exemption for the Taxpayer; 2) Spouse Allowance/Relief; 3) Allowance for dependents or child relief; 4) Premiums paid on health insurance or medical benefit; 5) Contributions to approved provident fund; 6) Contributions to retirement mutual fund/retirement scheme/old age security savings; 7) Premiums paid on life insurance; and 8) Approved course fees for acquiring certain educational qualification.
It is worth mentioning that of the 9 ASEAN members that impose individual income tax, Thailand, Singapore and Malaysia are the ones that provide for an extensive list of personal allowances and itemized deductions for their taxpayers. These countries give special consideration to parents, grandparents, and handicapped/disabled spouse, sibling or children as expenses for the maintenance of their health (medical, supporting equipment or for their care) and education may also be deducted from the taxpayer’s gross income. In Malaysia, even amounts paid for the purchase of books, journals, magazines and other similar publications (except newspapers) as well as the purchase of computer every three (3) years are deductible from gross income.
Individuals who are engaged in business and/or the practice of a profession in the Philippines are allowed to deduct from their gross income not only itemized business expenses or the 10% optional standard deduction (OSD) but also personal and additional exemption allowances unlike in other ASEAN countries where only business related expenses are allowed to be deducted from business or professional income. In Thailand, Singapore and Myanmar, it is clearly expressed that no personal allowances may be deducted from business income.
As regards tax administration, the Philippines , Thailand, Malaysia and Singapore practice the self-assessment system.
In the case of Indonesia, Cambodia, Lao PDR, Myanmar and the Philippines, the employer is the one responsible for the deduction of taxes from its employees’ earnings and for the remittance of these taxes to the tax authorities. In Vietnam, on the other hand, tax liabilities can either be paid personally by the employee each month or the employer can withhold tax on a monthly basis and pay it to authorities on behalf of the employees by the 25th day of the following month . The monthly payments are reconciled to the total tax liability at year-end and any outstanding amounts are settled by way of an annual return. Excess payments are credited against future tax liabilities.
There is no employee’s annual return in Cambodia and Lao PDR.
