Legal Update: Implementation of Withholding Tax Incentive for Securities Investors

The Ministry of Economy and Finance “MEF” has issued Prakas No. 471 on tax incentive for corporate bond investors, dated 05 May 2020. This Prakas is applicable to real regime system taxpayers which is a company/enterprise issuing corporate bond in public and to public investor investing in such corporate bond.

Pursuant to the Prakas, public investor shall receive 50% of withholding tax reduction on interest earning and dividend receiving from the holding and/or trading of government bond, equity securities, and corporate bond for 3 (three) years period, commencing from 01 January 20119 to 31 December 2021.

Pursuant to the Prakas, the incentive is 50% reduction of withholding tax on interest and dividends received with respect to the holding, buying, and selling of government bonds, stock securities, and debt securities for 03 (three) years commencing from 01 January 2019 to 31 December 2021. The rate of withholding tax on interest paid from debt securities is determined as below:

  • 6% for interest payments to resident taxpayers;
  • 14% for interest payments to non-resident taxpayers.

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