Post by lairezippert on Mar 7, 2019 22:16:00 GMT 4
Under the Foreign Business Act ("FBA"), foreigners are legally restricted in doing certain businesses in Thailand as prescribed in the lists Annexed to the FBA.
Fortunately, there are various possibilities to obtain official permissions. And there are also government schemes available which provide for tax exemptions and tax reductions. Until now the Thai government authorities offered investment promotions for international headquarters (IHQ) and international trading centers (ITC). These have been replaced by the international business center (IBC). The differences between IHQ/ITC and IBC are as follows:
BOI Promotion for International Business Center
On 11th December 2018, the BOI has published BOI Announcement No. Ngor. 1/2561 to suspend the investment promotion for 7.5 International Headquarters: IHQ and 7.6 International Trading Center: ITC. This suspension is active since the date of the announcement.
At the same time, the BOI published Announcement No. Sor. 6/2561 to facilitate 7.34 International Business Center: IBC as a newly promoted activity. Any company wishing to apply for the new BOI promotion for IBC must comply with the conditions as follows:
The company must have a business plan to provide at least one of the services enlisted in 1.1.- 1.11, to associated enterprises:
Organizational administration and management and business planning
Procurement of raw materials and parts
Research and development
Technical support
Marketing and sales promotion
Human resources and training and development
Financial management advisory service
Credit management and control
Treasury center
International trade
Other services as approved by the Board
The companies paid-up registered capital must not be less than 10 million THB.
The Applicant must employ at least 10 full-time employees who have knowledge and skill which are necessary for an IBC. Exception: If the IBC hast the scope of a treasury center, only 5 full-time employees are required.
In comparison: There is no minimum amount of employees required for IHQ/ITC.
For international trade: The applicant must have at least one scope of business from no. 1.1 – 1.10 included.
The company may not be eligible for the exemption of import duties on raw or essential materials used in production for export.
The corporation may not be eligible for merit-based incentives.
The IBC shall receive B1 incentives which include all Non-Tax Incentives and exemption of import duties on machinery. The new promoted activity is valid since 11th December 2018.
Revenue Department Promotion for IBC
Regardless of whether a company operates the IBC business with BOI promotion or conducts a business exempted from FBA requirements, the company may also be eligible to apply for certain IBC tax privileges directly at the Thai Revenue Department.
An IBC is a company incorporated under Thai law and approved by the Thailand Revenue Department to provide administrative and technical support service, treasury service and/or international trading service.
To obtain the tax privileges from Royal Decree (No 674) for IBC, a company has to fulfill much stricter requirements than under the ITC/IHQ schemes. Applicants must have paid up a minimum capital of 10 million THB, which is similar to the IHQ and ITC, but annual expenses for operation in Thailand must be at least 60 million THB, while it was 15 million THB in the former schemes. Further, the applicant is required to employ a minimum of 10 employees (if the applicant will only provide treasury services; only 5 employees). Such a rule does not exist in the IHQ/ ITC.
There is also a possibility to switch from an old IHQ/ITC scheme to the new IBC scheme. Applicants switching from an old plan are only required to have at least 15 million THB of annual local spending.
Because of the Royal Decree No. 674, from December the 28th 2018, there are several tax incentives for the IBC, these privileges are guaranteed for 15 years. These privileges are shown and compared to the old ITC/IHQ schemes as follows:
Corporate Income tax
The net income from support services, treasury services and royalty income from affiliates is reduced by:
8% for companies with an annual operating expenditure between 60 – 300 million THB,
5% for companies with an annual operating expenditure between 300 – 600 million THB,
3% for companies with an annual operating expenditure of over 600 million THB.
There is an exemption from co-operating income tax on behalf of dividend income (local and overseas). In IHQ and ITC, there is only an exemption from dividend income derived from affiliates in Thailand.
Capital gains and trading income are not mentioned in the IBC, but there is an explicit exemption in IHQ and ITC.
There is an exemption from withholding tax for dividend distribution to overseas and interest payment to overseas, no difference to ITC and IHQ.
There is no specific business tax for financial management service income derived from affiliated companies.
Personal income tax for expatriate employees for the IBC is based on a 15% flat tax rate.
Fortunately, there are various possibilities to obtain official permissions. And there are also government schemes available which provide for tax exemptions and tax reductions. Until now the Thai government authorities offered investment promotions for international headquarters (IHQ) and international trading centers (ITC). These have been replaced by the international business center (IBC). The differences between IHQ/ITC and IBC are as follows:
BOI Promotion for International Business Center
On 11th December 2018, the BOI has published BOI Announcement No. Ngor. 1/2561 to suspend the investment promotion for 7.5 International Headquarters: IHQ and 7.6 International Trading Center: ITC. This suspension is active since the date of the announcement.
At the same time, the BOI published Announcement No. Sor. 6/2561 to facilitate 7.34 International Business Center: IBC as a newly promoted activity. Any company wishing to apply for the new BOI promotion for IBC must comply with the conditions as follows:
The company must have a business plan to provide at least one of the services enlisted in 1.1.- 1.11, to associated enterprises:
Organizational administration and management and business planning
Procurement of raw materials and parts
Research and development
Technical support
Marketing and sales promotion
Human resources and training and development
Financial management advisory service
Credit management and control
Treasury center
International trade
Other services as approved by the Board
The companies paid-up registered capital must not be less than 10 million THB.
The Applicant must employ at least 10 full-time employees who have knowledge and skill which are necessary for an IBC. Exception: If the IBC hast the scope of a treasury center, only 5 full-time employees are required.
In comparison: There is no minimum amount of employees required for IHQ/ITC.
For international trade: The applicant must have at least one scope of business from no. 1.1 – 1.10 included.
The company may not be eligible for the exemption of import duties on raw or essential materials used in production for export.
The corporation may not be eligible for merit-based incentives.
The IBC shall receive B1 incentives which include all Non-Tax Incentives and exemption of import duties on machinery. The new promoted activity is valid since 11th December 2018.
Revenue Department Promotion for IBC
Regardless of whether a company operates the IBC business with BOI promotion or conducts a business exempted from FBA requirements, the company may also be eligible to apply for certain IBC tax privileges directly at the Thai Revenue Department.
An IBC is a company incorporated under Thai law and approved by the Thailand Revenue Department to provide administrative and technical support service, treasury service and/or international trading service.
To obtain the tax privileges from Royal Decree (No 674) for IBC, a company has to fulfill much stricter requirements than under the ITC/IHQ schemes. Applicants must have paid up a minimum capital of 10 million THB, which is similar to the IHQ and ITC, but annual expenses for operation in Thailand must be at least 60 million THB, while it was 15 million THB in the former schemes. Further, the applicant is required to employ a minimum of 10 employees (if the applicant will only provide treasury services; only 5 employees). Such a rule does not exist in the IHQ/ ITC.
There is also a possibility to switch from an old IHQ/ITC scheme to the new IBC scheme. Applicants switching from an old plan are only required to have at least 15 million THB of annual local spending.
Because of the Royal Decree No. 674, from December the 28th 2018, there are several tax incentives for the IBC, these privileges are guaranteed for 15 years. These privileges are shown and compared to the old ITC/IHQ schemes as follows:
Corporate Income tax
The net income from support services, treasury services and royalty income from affiliates is reduced by:
8% for companies with an annual operating expenditure between 60 – 300 million THB,
5% for companies with an annual operating expenditure between 300 – 600 million THB,
3% for companies with an annual operating expenditure of over 600 million THB.
There is an exemption from co-operating income tax on behalf of dividend income (local and overseas). In IHQ and ITC, there is only an exemption from dividend income derived from affiliates in Thailand.
Capital gains and trading income are not mentioned in the IBC, but there is an explicit exemption in IHQ and ITC.
There is an exemption from withholding tax for dividend distribution to overseas and interest payment to overseas, no difference to ITC and IHQ.
There is no specific business tax for financial management service income derived from affiliated companies.
Personal income tax for expatriate employees for the IBC is based on a 15% flat tax rate.