Important aspects of International Turnkey Projects in ASEAN

published on 14 March 2022 | reading time approx. 2 minutes

The number of Turnkey Projects or Engineering, Procurement and Construction Operations (EPC) in Southeast Asia has strongly increased in the last two decades, benefiting from the ongoing liberalization of numerous economic and infrastructure sectors, particularly in the field of electricity generation. Due to their complexity, EPC-projects do not only require a diligent tax planning, but also a thorough consideration of local investment and licensing requirements as well as manpower/immigration regulations.

Turnkey Projects are commonly understood in international business as arrangements in which a company contracts with another to build complete, ready-to-operate facilities, which commonly includes the supply, erection and commissioning of plants. The major share of these engineering, procurement and construction operations (EPC) are conducted in the field of industrial equipment manufacturing and construction, and require specific expertise to assemble and run a complex technological process. Thanks to the ongoing liberalization of certain economies, the number of EPC-projects in Southeast Asia has strongly increased in the past 20 years. This in particular affects the electricity sector where deregulation in many countries has enabled independent power producers to enter the market.

The scope of EPC services usually includes the design, delivery, construction, installation, commissioning and start-up of equipment on the project owner’s site. Most contractors are generally aware of the necessity to consider local as well as international tax implications which, depending on the project duration, tend to trigger a permanent establishment with its specific tax risks. But besides the aspects of tax planning, many countries have imposed further requirements in local investment or manpower/immigration regulations which deserve careful consideration as well, like e.g. the obligation to obtain business licenses or permits, restrictions as to the opening of bank accounts and admissible transactions, visa and work permits as well as social security contributions for temporary foreign staff on site.

With many years of experience on turnkey projects in numerous industries, we provide legal, tax and financial guidance in all project phases from planning to operational support, and will be happy to discuss your specific needs in the region.

Given the unabated topicality and high complexity of international turnkey projects in ASEAN, we shared our experience and insight with you in a panel discussion on 22 March 2022.