Timor-Leste – New Private Investment Law
In order to boost foreign investment and in line with the Development Strategic Plan for the period 2011-2030, the Parliament approved the new Private Investment Law (PIL) through Law no. 15/2017 of 23 August. The PIL follows the guidelines set by the Global Investment Agreement of Nations Association of South East Asia (ASEAN).
Scope
Unlikely the regime currently in force, the PIL covers all economic sectors, including the petroleum sector. This notwithstanding, investments made by the Government or State-run companies and entities are excluded from the scope of PIL. Also, any investment made by companies held in 50% or more by the State or other State-run entities are not covered by any tax and customs incentives.
Types of investment
PIL broadens the types of investment/reinvestment that may benefit from the regime and includes the following new categories:
- Acquisition or import of capital equipment allocated to the investment, including the hiring of insurance and freight;
- Acquisition or import of feedstock or semi processed goods to supply the investment/reinvestment;
- Free transmission of trade secrets, copyright, industrial rights, trade signs or other rights of intellectual property;
- All the rights recognized by law or contract and all emitted licenses and authorizations; and
- Other values in cash or equivalent, exclusively for investment/reinvestment purposes.
Special benefits
The current investor certificate is eliminated and replaced by a statement of benefits which allows the investor to automatically accede to the following incentives:
- Attribution of five work visas to foreign workers hired as supervisors, directors or technical functions required for the investment project (work visas for other foreign workers may be requested);
- Right of rental of real estate owned by the State for an initial period that may be set up to 50 years, and renewed for additional 25 years periods, up to maximum length of 100 years;
In alternative, investors may exceptionally enter into a special investment contract with the Government, underwhich other benefits and incentives not specifically referred in PIL may be granted to the investor.
Tax benefits
Tax and customs benefits provided by PIL are basically unaltered comparing to the current regime. PIL provide special tax and customs benefits to all investors in the business areas referred in its Annex (i.e. agriculture, livestock, forest, fishing, aquaculture, transforming industries, housing and tourism activities) who comply with the legal requirements. Among the PIL tax benefits, we highlight the following:
- 100% exemption from Income tax for the Investor assigned to the investment/reinvestment project;
- 100% exemption from Service Tax related with a property used for hotel and restaurant and bar services;
- 100% exemption from Sales Tax and custom duties on all capital goods and equipment used in the construction or management of the investment/reinvestment project.
Tax benefits are granted for a period of (i) five years if the project is located within Dili’s urban area, ii) eight years if the project is located outside Dili’s urban area, and iii) ten years if the project is located in peripheral areas.
PIL will enter into force in 1 January 2018 and will be subject to complementary regulation, notably to define the minimum values of investment/reinvestment to benefit from the special regime.
All information contained herein are of general nature and for informational purposes only. It does not therefore intend to be nor shall be construed as legal advice on any of the matters addressed.
