Taxation

Individual Investors

• Interest income is subject to withholding tax of 15%.
• Capital gain is subject to withholding tax of 15%.
• Return on the bond discount is subject to withholding tax of 15%.

 
Juristic Entities

• Interest income is subject to withholding tax of 1% and will be included in the calculation of net profit for the purpose of company income tax.
• Return on the discount is exempt from withholding tax but must be included in the calculation of net profit for the purpose of company income tax.
• Capital gain is exempt from withholding tax but must be included in the calculation of net profit for the purpose of company income tax.

Investment Risks

The main risks arising from investing in secondary market debt instruments include:

 

• Credit/Default Risk
  The issuer of the debt instrument may not be able to pay interest or repay the principal amount. This may lead to financial loss, or investors may not receive the full repayment of the investment.
   
• Liquidity Risk
  This occurs when investors are unable to sell their debt instrument before maturity at a desired time or price due to unfavorable liquidity conditions in the market.
   
• Interest Rate Risk
  The price of debt instruments will decline due to changes in interest rates. Rising interest rates generally lead to a decrease in the value of debt instruments.
   
• Reinvestment Risk
  This arises when investors receive cash flows, such as principal or interest payments, and are unable to reinvest at the same rate of return as the initial investment.
   
• Event Risk
  Unforeseen events can affect the issuer or the market such as company mergers whereby legal changes impact operations, etc. These risks are rare but can have a significant impact on the company. Investors may reduce this risk by diversifying their investments to reduce the impact of unexpected events.