JANUARY – FEBRUARY 2026
China
New law bolsters VAT regime
China’s State Council enacted the Value-Added Tax (VAT) Law, along with the VAT Law Implementation Rules, on 1 January 2026, to update key aspects of its VAT regime.
Baker McKenzie said the new rules adopted “the place of consumption” as the main criterion for VAT on services and intangibles, treating a transaction as occurring in China if it was consumed in China, or if the seller was domestic. The rules also set out scenarios for cross-border transactions, including foreign supplies to domestic customers, excluding overseas on-site consumption, and supplies directly connected to domestic goods, real estate or natural resources.
The rules redefine the VAT sales amount to include all monetary and non-monetary economic benefits and introduce a general anti-avoidance rule allowing tax authorities to adjust arrangements lacking a reasonable commercial purpose that reduce, defer or exempt VAT, or increase refunds.
Baker McKenzie added that, despite the VAT framework remaining largely unchanged, new sourcing rules for services and intangibles, mixed sales provisions, and VAT withholding for natural persons had an impact on taxpayers’ compliance and VAT obligations.
HONG KONG
New cybersecurity obligations enforced
The Protection of Critical Infrastructures (Computer Systems) Ordinance (Cap 653) (PCICSO) came into operation in Hong Kong on 1 January 2026 and imposes statutory cybersecurity obligations on designated critical infrastructure (CI) operators.
Tanner De Witt reported that the law aims to prevent service disruptions through three pillars: organisational governance; preventive technical safeguards; and incident reporting.
The ordinance covers essential sectors including energy, IT, banking, transport (land, air and maritime), healthcare, communications, and infrastructure operators hosting social or economic activities such as major sports and performance venues. While the PCICSO focuses on system security rather than personal data protection, which falls under the Office of the Privacy Commissioner for Personal Data, increased oversight by the Security Bureau is expected to drive higher regulatory activity in data privacy governance.
In the next three to five years, the emergence of new online gambling problems brought about by new technologies and new business models may necessitate the formulation of new judicial interpretations
Li Tianhang
Senior Partner
Hui Ye Law Firm
Shanghai
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INDIA
Proposal to raise FDI cap in insurance sector
含羞草社区 Department for Promotion of Industry and Internal Trade issued a note on 11 February 2026 to propose amendments to the Consolidated FDI (foreign direct investment) Policy, 2020, in relation to foreign direct investment in the insurance sector.
JSA reported that the note covered higher foreign investment and related conditions. It also allows up to 100% foreign investment in the paid-up equity of an Indian insurance company under the automatic route, subject to approval by the Insurance Regulatory and Development Authority of India.
The note reiterates governance requirements, including that at least one person holding the title of chair, managing director or CEO must be a resident Indian citizen. Foreign portfolio investment in an Indian insurance company will also need to comply with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations. Increases in foreign investment must follow the Reserve Bank of India pricing guidelines under the Foreign Exchange Management Act.
FDI in the Life Insurance Corporation of India is allowed up to 20%. The 100% FDI cap for insurance intermediaries is also reaffirmed, alongside conditions for majority foreign-owned intermediaries.
INDONESIA
Corporate compliance gets clearer roadmap
The Criminal Procedure Code (KUHAP), passed by the House of Representatives on 18 November 2025, was promulgated on 2 January 2026 to reshape criminal enforcement for corporations.
ATD Law, in association with Mori Hamada, reported that the new KUHAP law introduced a court-approved Deferred Prosecution Agreement framework as an alternative route for resolving corporate criminal cases. Eligible companies can seek to suspend prosecution if the court approves the agreement and the company meets the prescribed conditions. The law also clarifies how an individual’s conduct can be attributed to a company and how corporate fault is established. It broadens and strengthens corporate sanctions, including fines that can be increased based on annual profit. It recognises successor liability, meaning mergers and restructurings may not eliminate potential criminal exposure.
ATD Law in association with Mori Hamada reported that corporations should treat this reform as a wake-up call to reassess governance structures, compliance controls, investigation readiness and transaction risk allocation in Indonesia.
Japan
Tax reform eases PE exemption rules for foreign LPs
The Liberal Democratic Party and the Japan Innovation Party agreed on the outline of Japan’s 2026 Tax Reform Plan on 24 December 2025 setting out changes affecting foreign business. According to Anderson Mori & Tomotsune’s report, the reform plan eases permanent establishment (PE) exemption rules for foreign limited partners in certain investment limited partnerships (LPs).
Where an LP forms a specified committee of limited partners, the ownership threshold would rise to “less than 50%” from “less than 25%”. It would also broaden exclusions from “business execution” to cover approvals of conflict-of-interest transactions, and abolish the requirement that the investor have no income attributable to other PEs.
Under the plan, a wind-up of a foreign corporation will be subject to controlled foreign company rules only on its passive income if certain requirements are met, effective on or after 1 April 2026. The income threshold for amounts not subject to progressive tax rates will decrease to about JPY330 million (USD2.1 million), and the minimum national tax rate will rise to 30%, effective from 2027.
SINGAPORE
Infocomm media approvals tightened
Singapore’s Ministry of Digital Development and Information and the Infocomm Media Development Authority (IMDA) jointly announced proposed amendments to the Info-Communications Media Development Authority Act on 6 January 2026 to introduce a stricter approval regime for M&A and ownership changes in the information and communications media sector.
According to Hogan Lovells, the proposed amendments expand merger controls by requiring IMDA approval for any person, licensed or not, acquiring 30% or more of a media entity. They also remove prior approval for pro forma transactions, replacing it with a notification requirement. A two-tier appeal route would also allow IMDA reconsideration and ministerial appeal.
Hogan Lovells reported that while the IMDA’s 2022 Code of Practice for Competition in the Provision of Telecommunication and Media Services has already achieved harmonisation within the limits of the legislation in force at the time, the proposed bill seeks to further strengthen and align the regulatory enforcement of competition issues across the telecoms and infocomm media sectors.
TAIWAN
AI Basic Act takes effect
The AI Basic Act, passed by Taiwan’s cabinet on 23 December 2025, came into effect on 14 January 2026. The act aims to build a smart nation, promote human-centric AI R&D and industry growth, and safeguard rights, digital equality and sustainable development.
According to Lee and Li, the National Science and Technology Council will be the central competent authority, with local governments as local authorities and sector regulators retaining jurisdiction.
Taiwan’s cabinet will form a National AI Strategy Special Committee to co-ordinate policy and create a National AI Development Programme.
The act also defines AI by its autonomous capabilities and sets out seven principles, including privacy, safety, transparency, fairness and accountability. It mandates risk mitigation, special protection for minors, warnings for designated high-risk AI and frameworks for liability, remedies, compensation and insurance.
After promulgation, relevant authorities are expected to review existing laws, issue interpretive guidance, and develop implementing regulations including definitions of high-risk AI and related labelling requirements.
IN NUMBERS
USD 10.9bn
The deal value of KKR and Singtel’s acquisition of ST Telemedia Global Data Centres
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MALAYSIA
Sectors brace for carbon tax
The Malaysian government has reaffirmed plans to introduce a carbon tax in 2026, primarily targeting the iron, steel and energy sectors.
KPMG reported that while the specific mechanism remained undefined, the tax was expected to increase industry costs, which might result in higher prices for consumers and SMEs.
To mitigate this impact, the Green Technology Financing Scheme (GTFS) and other green incentives are intended to fund the adoption of sustainable alternatives and ease the transition to a low-carbon economy.
Wong & Partners added that, for efficient implementation, the carbon tax framework would align with the upcoming National Carbon Market Policy and National Climate Change Bill.
MYANMAR
New export rules aim to boost trade
The Ministry of Finance and Revenue in Myanmar issued new procedures, on 23 December 2025, allowing companies to temporarily export raw materials and semi-finished goods for overseas processing before reimporting the finished products for domestic sale. The procedures will come into effect on 1 February 2026.
According to Tilleke & Gibbins, the new procedures govern the temporary export of goods for foreign repair or manufacturing and their subsequent reimportation. Under this framework, duties and taxes are levied only on the value added abroad, provided the goods remain identifiable, rather than on the item’s total value.
It also exempts the initial export from advance income tax, ensuring costs are focused solely on foreign improvements.
Tilleke & Gibbins reported that these new procedures were a major reinvigoration of Myanmar’s customs regime, and introduced a uniform and transparent approval system.
PHILIPPINES
Filing rules enhance corporate transparency
In December 2025, the Securities and Exchange Commission (SEC) of the Philippines issued the Beneficial Ownership Disclosure Rules of 2026 to strengthen corporate transparency and improve the accuracy and timeliness of beneficial ownership disclosures.
The SEC reported that the updated regulation, which came into effect on 1 January 2026, introduced a more detailed approach to identifying beneficial owners, categorising them from “A” to “I” based on ownership interests, voting rights and levels of control.
Category A covers individuals who hold at least 20% of a corporation’s outstanding voting rights or capital. The rules apply not only to traditional corporations but also to partnerships, one-person corporations and foreign entities registered to operate in the Philippines.
The new framework also provides clearer compliance timelines. Newly registered corporations must disclose beneficial ownership details at the time of incorporation, while existing entities must update this information when filing their next general information sheet. To reinforce compliance, the SEC has implemented stricter penalties for non-compliance and misreporting.
SOUTH KOREA
Amendment grants attorney-client privilege
The National Assembly of the Republic of Korea passed an amendment to the Attorney-at-Law Act on 29 January 2026 to introduce the concept of attorney-client privilege, which grants attorneys and clients the right to protect confidential legal communications and related materials.
Kim & Chang reported that this amendment, expected to take effect in early 2027, formally granted attorneys and their clients, including prospective clients, the right not to disclose confidential communications made for the purpose of providing or receiving assistance. It also allows attorneys and clients to refuse disclosure of documents or materials prepared in connection with litigation, investigations or regulatory examinations in matters for which the attorney has been retained.
The firm said more guidelines and related litigation were likely to follow to further define the scope and applicability of the additional protections. The amendment will be promulgated after a one-year grace period. However, its protections will apply retroactively to attorney-client communications and related work produced.
Thailand
BOI tightens residential land ownership
The Royal Thai Government Gazette published the Thailand Board of Investment’s (BOI) amended criteria for BOI-promoted companies to own land for residential use on 6 January 2026. The changes introduce new procedures for land ownership applications.
Tilleke & Gibbins reported that the BOI had tightened the rules and established the e-Land system to process land applications for offices and worker housing. Applications are reviewed virtually and any requested amendments or supplementary documents must be submitted within seven business days. Otherwise, the application is automatically rejected and removed from the system.
Additional eligibility limits apply to operational-worker residences, which cannot be in housing estates, condominium units, or classified as houses or commercial buildings. Tilleke & Gibbins noted that the amended criteria build on the BOI’s 2024 land-ownership rules for foreign companies by adding further eligibility conditions for residences for operational-level or unskilled workers.
Vietnam
New construction law removes red tape
The National Assembly of Vietnam passed the Law on Construction on 10 December 2025 to streamline administrative procedures, decentralise management, promote digital transformation and adopt international contractual practices in the construction sector.
Nishimura & Asahi reported that under the new framework, which would take effect on 1 July 2026, projects would be categorised by investment type, and local People’s Committees would have enhanced authority and responsibility for managing construction quality and urban order.
The Law on Construction also introduces international practices previously absent from the old framework, including International Federation of Consulting Engineers-style Dispute Adjudication Boards and Dispute Avoidance/Adjudication Boards. It reinforces the role of arbitration by prioritising domestic arbitration for public and public-private partnership projects, while international mechanisms are permitted only when compliant with treaties, officially approved and agreed on contractually.
Nishimura & Asahi said the Law on Construction reflected Vietnam’s efforts to modernise the legal structure of the construction sector by tackling existing legislative and practical issues. Although these reforms are promising, further government direction is necessary for effective implementation.
