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Archives for November 2011

Business Transfer – Tax Refund Question

THAI ACCOUNTANT answers a question about corporate tax refund in case of an entire
business transfer by one company to another company.

Our company in Thailand transferred its entire business to another Thailand based
company. The transfer includes all assets, liabilities, rights and obligations.
However, in the appendix of the business transfer agreement, it says that we,
the transferor, shall have the rights to a corporate tax refund that we were
waiting to get from the Thai Revenue Department prior to the business transfer.
Moreover, we informed the Revenue Department of the business transfer and that we
retained the right to the tax refund. Now, our company, the transferor, has
completed the liquidation process and they said that we cannot get the tax
refund. What is your opinion?


First you have to understand that upon the completion of the liquidation process, the
transferor’s status as a juristic person and the liquidator’s authority are
terminated. Therefore, claimable rights arising out of the business transfer including
the rights to a tax refund, will belong to the transferee.

Contact MSNA for your accounting and tax questions. We can also help you on company registration or dissolution matters.


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Withholding Tax on Payment to a Bank for Service Fee and Stamp Duty

In Thailand, there are many rates of withholding taxes to be considered when making a
payment. It is the duty of every company or other business entities to withhold
taxes when paying for salaries, transportation, advertising, rent or most other
kinds of services and remit the tax to the Revenue Department. Even when you
make payment to overseas vendors, you have to submit withholding taxes if the
transactions meet the criteria.

Today, THAI ACCOUNTANT discusses the withholding tax when paying for the service fee of a bank.

For instance, when a company requested a bank to issue a check to its supplier to
settle a service fee on its behalf, the bank would then charge the company for
both service fee for the issuance of the check and stamp duty for which the
bank is liable (whether the bank charged it separately or as part of their
service fee). In this situation, the Revenue Department requires the party
making the payment to deduct withholding tax of 3 % on the sum of the service
fee and the stamp duty, regardless of whether they are paid separately or

Another example is when a bank issued a bank guarantee for a company, and in return
charged the company a service fee and the stamp duty for which the bank is
liable (either charged separately or as part of the service fee) the company is
also required to deduct 3% withholding tax on the sum of the service fee and
the stamp duty, regardless of whether they are paid separately or together.

Contact MSNA for your questions on Withholding Tax and Thai taxation.



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Relief Measures for the Flood Affected BOI-Promoted Companies

The Board of Investment (BOI) of Thailand has been actively supportive to all of BOI promoted companies in the country particularly to those affected by the flooding. Here is the summary of the recently approved flood relief measures by the BOI of Thailand.

The Thailand BOI approved the following relief measures for flood affected
BOI-promoted companies:

  1. Raw materials imported for export production that were completely damaged by the floods can be recognized as losses and are not dutiable.
  2. BOI-promoted companies are allowed to subcontract all production by providing imported raw materials for subcontractors to process, on a temporary basis.
  3. The measure exempting import duty on machinery acquired to replace machinery
    damaged by flooding (The Board of Investment Announcement No 4/2554, dated 17 January 2011) will be extended for another six months, and so applications to
    import replacement machinery should be submitted to the BOI by 30 June 2012.

These relief measures are subject to conditions and regulations to be announced by
the BOI.

The above mentioned flood relief measures are in addition to the previously
approved relief measures as listed below:

  1. Machinery or raw materials are allowed to be relocated from factories in emergency cases.
  2. Raw materials imported for export production that were damaged by flooding can be treated as losses, adjusted in the raw materials account and are not dutiable. BOI-promoted companies may use raw materials that are still in good condition in other projects and still be entitled to the import duty exemption.
  3. BOI-promoted companies can outsource certain production processes, on a temporary basis to maintain business continuity.
  4. The BOI has launched a measure to expedite the visa and work permit process for
    experts brought in to restore projects affected by flooding.

Meanwhile, BOI operators are invited to directly contact the Investment Promotion Bureau that looks after their projects for BOI-assistance, at the following telephone

– Investment Promotion Bureau 1 (agricultural and light industries)

02 553 8298 (Khun Sithee Tanboonteck)

– Investment Promotion Bureau 2 (metal, machinery and automotive industries)

02 553 8366 (Khun Anin Meksuksai)

– Investment Promotion Bureau 3 (electronics and electrical appliances industries)

02 533 8167 (Khun Tanavadee Khuvasanont)

– Investment Promotion Bureau 4 (chemicals, papers, plastics, and high value added services)

02 553 8294 (Khun Wuttichai Pisatphen)

The BOI’s operations have been temporarily moved to the One-Start One-Stop
Investment Center (OSOS), 18th Floor, Chamachuri Square, from 4 November 2011
until further notice. Tel 02 553 8111, 02 209 1100.

Contact MSNA for any questions regarding BOI Thailand.


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Social Security VS Provident Fund

One of MSNA’s payroll service clients has asked us a question regarding Social Security
Fund and provident fund.

My salary gets deducted for Provident Fund and Social Security. Could you please
clarify the difference between Social Security and Provident Fund in Thailand?
Are we required to pay for both funds?


Under the Social Security Act as imposed by the Thai labour law, it is compulsory to pay for the social security. The employees have to contribute 5% of their salary, but not exceeding Baht 750 per person into the social security fund (The employers are required to withhold the social security contributions from each employee’s monthly salary). The
employer must also contribute the same amount and submit the total amount to
the Social Security Office within 29th day of the following month.

As for provident fund, the Thai labour law does not make it compulsory. It always
depends on each employer’s policy. In your case, your company has the policy of
having the employees pay 5% from their salary into the fund and the company
pays 7.5%.

Read more on Thailand provident fund here.


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Thailand Provident Fund

In Thailand Provident fund is the fund voluntarily established by agreement of
the employees and employer and registered under the Provident Fund Act B.E.
2530 to encourage savings and serve as security for employees and their
respective families in the event of employees’ termination of employment, resignation
from the company or from the provident fund, retirement, disabilities and death.
A fund may be set and registered as a single fund for employees with sole
employer or a pooled fund for employees with more than one employer and/or multiple
investment policies. Thus, as required by law, the investment policy of the
provident fund to be registered must comply with the Security and Exchange
Commission’s (SEC) rules and regulation.

Once the provident fund has been registered with the Ministry of Finance, it is
considered as a juristic person, a legal entity separated from both the
employer and the fund manager. None of them has the right to claim on the fund
because it is the Registrar appointed by the Ministry of Finance who has the
authority and duties to supervise the management of the fund and has the power
to order the fund manager to give statement and provide reports on the
management of the fund. In the case of the fund manager or the company having
financial problems or has to end its operation, it is guaranteed that the
employees will still receive their money from the fund upon their resignation
or retirement in accordance to their entitlement and the fund regulations.

As specified in the Provident Act B.E. 2530, the provident fund must consist of
percentage of both employees’ and employers’ contributions. The contribution
rate starts from 2% – 15% of the employee’s salary. Normally, it depends on the
company’s policy on how much rate to be used as long as the employee’s
contribution rate will not exceed the employer’s contribution rate and the
employer’s contribution rate must be more than or equal to the employee’s
contribution but not more than 15% of the salary.

Benefits of Provident Fund to Employees

– Tax deductible on employee’s contribution

– Tax exemption on earnings of the fund

– Deferred tax payment until resignation

– Receive higher welfare benefits upon resignation or retirement

– Secure more savings for oneself and family

– Future security for family in the event of disability or death

– Tax exemption on the lump sum received in the event of retirement, death or

Benefits of Provident Fund to Employer/Company

– Tax benefits. Company’s contribution to the provident fund can be used as company’s
expenditures of not more than 15% of the company’s annual salary expenses of
that year

– Reduce the burden of company administrative works

– Maximize the company’s cash flow

– Another means of employee fringe benefit; employees will feel more loyal to the company which can result to more efficiency and productivity of the workforce

Read the law here, Provident Fund Act.

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Thailand Income Tax exemption to promote energy efficiency

One of the measures to boost energy efficiency in Thailand has just been approved by
the Thai Cabinet which is income tax exemptions of up to 25 % on acquisition of
certain assets. Such measures are summarized as follows:-

– Qualified persons are natural persons, limited companies, public limited companies and juristic partnerships.

– The tax exemption applies to expenditures on purchase of assets such as materials,
equipment or machinery which results in energy saving.

– The measures applies on the acquisition of assets made between 1 January 2011 and
31 December 2012 in accordance with rules, procedures and conditions to be
prescribed by the Director-General of the Revenue Department.

– Expenditures for vehicles and materials, equipment or machineries which are to be used with vehicles are not applicable for income tax exemption.

In addition to these measures, the assets must have the following criteria:-

– The assets must be unused.

– The assets must be purchased in a ready for use condition between 1 January 2011
and 31 December 2012.

– The assets must be certified as materials, equipment or machinery which results in
energy saving by the Department of Alternative Energy Development and
Efficiency within 31 December 2012.

– The assets must not be the types disqualified under this prescribed Decree. (Such
details have yet to be made known).

Moreover, deduction of depreciation of the assets must be made over a period of not less
than 5 years from the date that the assets are ready for use.

Thailand tax and accounting questions? Contact MSNA.


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Loan to company’s director or another company – tax implication

If your company in Thailand gives a loan to the director(s) of the company, or to another company or individuals, it is considered as regularly conducting lending activities in a way that is similar to commercial banks. Your company is subject to Specific Business Tax (SBT) on interest income received on the loan. If you use a cash basis in computing SBT, the SBT amount will be computed based on the actual interest income received. In the
event that a borrower failed to pay the loan, the lender is not responsible to
pay SBT on the accrued interest income of the defaulted loan amount. Read more
on Thailand specific business tax.

What if you do not charge interest on the loan? The Revenue Department upon auditing your accounts will assess the interest income for you using the market rate, or at least the rate that you should have got from a fixed deposit account at a commercial bank had you not loaned the money to the people. However, if your company has a loan from someone else or a bank, the interest to be assessed will be at least the rate you have to pay your creditor for the loan you got from them.

Interest income, recognized by you or assessed by the Revenue Department is part of operating income and it makes your net profit (if any) higher and thus your corporate income tax higher.

Contact MSNA for your questions on Specific Business Tax and Thai taxation.


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Specific Business Tax (SBT) on interest income received from guarantee deposits

Specific Business Tax (SBT) – a kind of tax you need to know in case your company has an interest income.

Today, THAI ACCOUNTANT discusses a case of Thailand Specific Business Tax (SBT) on interest income received from guarantee deposits.

A company providing commercial, industrial, marketing and management
consultancy services was required to put cash with its client as a guarantee for
possible damages and liabilities that may arise in the course of providing the
services to the client. In return, the client will pay an interest on the
amount and in the event of damages, the client has the right to make deduction
from the guarantee deposit and related interest. Under this circumstance, such
interest income received by the company is considered as revenue subject to
Specific Business Tax. When the company gets paid for the interest, it has to
submit 3% of the interest received as SBT using Specific Tax Return (form SBT
40) within the 15th of the following month. In doing so, another 10%
on top on the SBT has to be included in the SBT return as a municipal tax. In short,
the company has to submit 3.3% of the interest receipt.

Contact MSNA for your accounting and tax questions.


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BOI Thailand

Board of Investment (BOI) of Thailand is the principal government agency which operates under the Ministry of Industry to encourage investors and facilitate their investments in the country. The BOI is very active in assisting investors in numerous ways such as follows:

1. Enhancing competitiveness and facilitating investment

– Offers an attractive and competitive package of tax incentives.

– Imposes no foreign equity restrictions on manufacturing activities or on some service.

– Provides assistance in the provision of visas and work permits to facilitate entry and subsequent operation for a foreign-owned business.

– Waives restrictions on land ownership by foreign entities.

2. Business support services

– Provides comprehensive information and advice on establishing operations in Thailand.

– Arranges site visits.

– Identifies potential suppliers, subcontractors, joint-venture partners.

– Provides useful contacts with key public and private organizations.

– Coordinates between the foreign business community and other public agencies.

The BOI also acts as Thailand’s marketing arm and actively promotes the country worldwide as one of the best investment locations in Asia. It is tasked
with devising and implementing strategies under which promotional activities
are organized around the globe throughout the year.

The BOI’s seven overseas offices (Tokyo, Osaka, Shanghai, Frankfurt, Paris, Los Angeles and New York) serve as Thailand’s front desks in liaising with potential investors.

Thailand BOI Promotion page gives you information about BOI in Thailand.

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Thailand Flood – other relief measures for those affected by flooding and for industrial sector rehabilitation

Aside from flood relief loans and tax incentives, the Thai Government has approved
other relief measures for those individuals and industrial sectors that were
really affected by the recent flooding such as follows:

1. Visa and work permit assistance will be provided to foreign skilled workers or
technicians involved in the repair and restoration of damaged machinery,
equipment and infrastructure of BOI promoted companies affected by the

2. Exemption of machine import tariff or import duty on all machinery and equipment imported to replace or repair flood-damaged machinery.

3. Appropriate exemptions or reductions of import duty on imported automobiles and auto parts for assembly for domestic sale.

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