Additional incentives for foreign investment in the region include the repeal of the value-added tax for purchased equipment in selected key manufacturing sectors, historical debt forgiveness for state-owned companies that are to be acquired by foreign investors, and the opening of the logistics sector to foreign investors.

• Vietnam is continuing to implement tax and custom procedure reforms to improve its business environment and comply with international standards. It is hoping to fulfil World Trade Organisation membership requirements by the end of the year. Value-added tax is expected to be applied at the same level to all companies operating in the country by 2008. To further liberalise FDI in the finance sector, the foreign ownership ceiling of 30% in companies listed on the stock exchange has been increased to 49%.

• Cambodia has introduced incentives to attract foreign investors in agriculture, communication, infrastructure development, power generation, heavy industries and human resource development. The duration of tax holidays for foreign investors will be three and nine years. Goods and materials imported by foreign investors for domestic production are exempt from import tariffs.

• Oman has begun to liberalise its investment regime in an effort to diversify its economy away from petroleum and bring it in line with its commitments to the World Trade Organisation. It is making moves to open up its service sectors, especially tourism, to investors. To increase financial transparency, the kingdom has mandated the use of international accounting standards for its companies.

• Iraqi Kurdistan’s regional government has drafted an investment law applying to domestic and foreign investors. The law, currently before the regional parliament, would exempt companies from income and property taxes for up to five years, up to a specified amount. Expenditures on fixed assets and imported raw material would also be exempt from tax. The law aims to ensure the transferability of profits and to protect investors from nationalisation. It also advocates no restrictions on the share of foreign investors entering a partnership with a domestic company.

• Russia is reviewing its legislation governing the participation of foreign investors in strategic domestic entities. It is also drafting new rules under the Law on Natural Resources for the development of strategically important mineral resources. The planned legislation would create a framework to include a list of sectors that would either be closed to foreign investors or in which the government would retain the right to impose limits on foreign investment participation. In the case of natural resources, foreign investment would be determined on a case-by-case basis, which would permit the government to designate a natural resource deposit “strategic” at some point in the future.

• Slovakia is planning to introduce rules governing the granting of incentives for attracting foreign investors.
  The regulations aim to increase transparency, ensure that public funds are spent according to a set of pre-defined rules and to impose limits on the time allotted to institutions offering such incentives to assess their size.

• Indonesia has allowed foreign investors involved in local shipping to acquire stakes of up to 49% in domestic shipping firms via joint ventures.

• Mongolia is amending its mining laws with the aim of boosting gross domestic product in the country and benefiting local residents.

• Qatar has issued a decree for the establishment of a new free investment zone. Companies that set up a facility there would be exempt from income and other taxes for 20 years.

•  The US Supreme Court is examining the constitutionality of tax incentives that individual states award businesses. The case involves tax incentives the state of Ohio gave DaimlerChrysler. The outcome could affect tax credits that many states give businesses to foster local economic development.

• New bilateral investment treaties (BIT), double taxation-avoidance treaties (DTT), trade and investment framework agreements (TIFA) and free trade agreements (FTA):
  
  
  • Oman and South Korea (DTT)
  • Nepal and Qatar (DTT finalised, not yet signed)
  • Lithuania and Israel (DTT)
  • The US and Saudi Arabia (FTA)
  • Turkey and United Arab Emirates (BIT)
    
    

• The South Asian Association for Regional Co-operation has drafted the Limited Multilateral Tax Treaty for the avoidance of double taxation among member countries. The treaty, the first of its kind, is in being formally ratified by the members before becoming effective.

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