How do general anti-avoidance rules work in Asia?
General Anti-Avoidance Rules function according to the “substance over form” principle. The rules give relevant tax authorities the right to withhold or to deny tax benefits that transactions might expect to enjoy, if it is clear that the involvement and intention of the entities in the transactions is solely for tax reduction.
In Malaysia, the tax authorities reserve the rights to deny or retain the tax benefits, which the transactions are structured solely for. Furthermore, Malaysia has implemented provisions aimed at shareholder continuity, living accommodations, and time periods of transactions.
In Singapore, the current regulations allow its tax authorities (IRAS) to disregard transactions or benefits that transactions are structured solely for. So if there is a sounds commercial ground for the structuring of the transactions, then the tax benefits will be provided. On transfer pricing, Singapore insists on the principle of "arm's length", which means the price paid in any transactions between any two related entities must be equivalent to the market price.
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