In view of the increase in the minimum daily wage which took effect on January 1, 2013 nationwide, the Thai government has recently approved tax relief measures for the affected small-and-medium enterprises (SMEs). These measures are expected to help SMEs with annual income not exceeding Baht 50 million a year.

Under these measures, the income tax exemption limit for SMEs will be raised from Baht 150,000 to Baht 300,000 a year. SMEs declaring income between Baht 300,000 and Baht 1 million will be taxed at 15% and those with over Baht 1 million profit will pay tax at 20% on the difference.

The withholding tax rates for SMEs will also be cut from 3% to 2% and they will be allowed to claim 100% depreciation on machinery for the first year of purchase until the end of 2013, an extension of one year from the year end of 2012.

Contact MSNA for your accounting, tax and other business needs.

Opening a bank account may not be easy for some foreigners who want to open an account with a local bank in Thailand. Most of the time, foreigners are required to present their passport with valid Thai visa and work permit before they can open a personal bank account. The same condition applies to those foreigners who are authorized directors, branch managers or representative office managers of their entities in Thailand whereas copies of company registration papers and other additional supporting documents are also needed before they can open a business bank account.

However, regardless of any type of business entity, foreign business owners or managers can open a business bank account since there are no restrictions on foreign firms opening a business bank account in Thailand.

Aside from major local banks, international banks such as Citibank, HSBC, Standard Chartered and UOB provide business banking services in Thailand. All of these banks are able to provide full online banking facilities and support as well. Both local and foreign currency accounts are available under similar terms and conditions.

In opening a Thailand business bank account, there is a minimum initial deposit required but usually, it is a relatively low amount. Normally, the international banks require Baht 50,000 or more (or the equivalent in foreign currency) as the initial deposit. For major Thai banks such as Bangkok Bank, Kasikorn Bank, Siam Commercial Bank, etc, the minimum initial deposit for a Thai Baht account is usually Baht 10,000 for a current bank account and Baht 500 for a savings account. However, it is advisable to know the terms and conditions of these banks before deciding to open a bank account.

MSNA can assist you in opening a business bank account in Thailand. We can help you coordinate with the respective bank officers and prepare the necessary requirements. Consult now for further information.

The Thai BOI has decided to extend a flood relief measure on machinery replacement until 31 December 2012 allowing more than 150 companies in Pathum Thani and Ayutthaya to have access to this incentive and to help entrepreneurs who need assistance to renovate their facilities.

The Board considered that many BOI-promoted companies that had been seriously affected by the massive flood were preparing to make or were making decisions to apply for the investment incentives both for replacement of damaged equipment or as new investments.

As of 30 June 2012, the Board has found that the total number of projects receiving approval for import duty exemption for machinery replacement is 490 projects with the total imported machinery value of Baht 108.65 billion.

Further details of this extended flood relief measure have yet to be announced. Contact MSNA for expert advice on BOI promotion and Thai taxation.

As a move to prepare Thailand for ASEAN Community (AC), which is set to be formed in 2015, the Thai Ministry of Labour proposes Office of the National Economic and Social Development Board (NESB) 10 projects, hoping that the country will have labour protection standard that is recognized at international level, and will be prototype of human resource development for other countries.

The Thai government has resolved to have the NESDB, the Secretariat of the Cabinet, and concerned agencies mapped out a master plan to help prepare Thailand for the AC and to have these agencies work together to help push the AC into existence by 2015.

The Ministry of Labour has been tasked to arrange a three-year government operational plan (2013-2015) as well as other plans and projects to help Thailand prepare for the AC. They must be in line with the building of the AC, which consists of three main pillars namely ASEAN Security Community, ASEAN Economic Community (AEC), and ASEAN Socio-Cultural Community. The Ministry has also instructed concerned agencies to map out 10 projects to help Thailand prepare for the AC and rank them in order of importance, from the least important project to the flagship project.

So far, three projects were designed by Department of Employment such as:

– Information system development project to support free flow of labour,

– Laws/rules/regulation improvement project, and

– Awareness building project on decent work.

The Department of Skill Development has designed two projects:

– Skill development project for the preparation of the AEC, and;

– Occupational skill development projects for women, youth, old-age people, people with disability, and informal workers.

Meanwhile, the Department of Labour Protection and Welfare has designed two projects: a project to create workplace prototype and a project to improve labour management.

The Office of Social Security has also designed 2 projects, which are:

– A project to transform the workers rehabilitation center into the South East Asian workers rehabilitation training center with comprehensive training curriculum for workers with disability, and

– A project for the protection of ASEAN social security rights.

Moreover, Office of the Permanent Secretary has also designed one project, which is a study of capability of Thai workers in trade, service, and investment sectors.

Implementation of these projects has yet to be announced.

Contact MSNA for your inquiries and business needs.

Thai Business Expert got a interesting question from a foreigner who wants to set up a Thai limited company, but cannot come to Thailand at the moment.

Question:

Hi, I am busy with my business outside Thailand and cannot come to sign the application form to register my Thai company any time soon. However, i need to set up this new Thai limited company very quickly, what should I do?

Answer:

We can send the forms to register a Thai limited company to you where you are. However if the forms to register a Thai limited company are signed outside Thailand, the registrar only accepts the signed forms that were certified by the Thai embassy or consul in the country where the documents were signed. And the Thai embassy will only certify the documents that have been notarized by the notary public of that country.

Here is the Ministerial Regulations regarding Establishing the Partnership and Company Register Office, Appointing the Registrars and Prescribing Rules and Procedures for Partnership and Limited Company Registration B.E. 2549 (2006). Clause 6 specifies clearly how the forms to register a Thai company should be signed as follows:

Clause 6. In signing an application for registration, the registrant shall sign in person before the Registrar.

Where it is not possible to sign before the Registrar for any reason, the signature on an application for registration shall be deemed proper when the registrant signs in person before any of the following persons:

(1) In case of signing within the Kingdom:

(a) Administrative official or senior police officer stationed in the locality of the registrant’s domicile;

(b) Ordinary member or extraordinary member of the Thai Bar Association; or

(c) Other persons as prescribed and announced by the Central Registrar.

(2) In case of signing abroad:

(a) Authorized officer of the Thai embassy or Thai consul or chief of an office attached to the Ministry of Commerce who is in charge in that country, or an official authorized to act on behalf of that person;

(b) A person who can provide valid certification in the form of the laws of that country; or

(c) Two reliable persons who sign as certification before the Registrar that it is the true signature of that person.

Note that in practice the only way that is acceptable to the registrar is the forms that were certified by the Thai embassy or consul in the country where the documents were signed. And the Thai embassy will only certify the documents that have been notarized by the notary public of that country.

Contact MSNA for Thai company registration services.

Nominee shareholders for Thai limited companies is an issue that clients ask MSNA very often.

If a foreigner wants to set up a Thai limited company with 100% shares held by foreigners, he needs to consider Thailand foreign business law. Most likely, he will need to apply for a foreign business license, which is very difficult to get. Some foreigners may opt to have a Thai partner hold the majority of the shares for them. Many of such cases are that the Thai shareholders are nominee shareholders, who just hold the shares on behalf of the real investors – the foreigners.

Whether your Thai shareholders are nominee shareholders or not, they have to show that they have the money to invest in the company. Since August 2006, the Central Registrar specified the rules and procedures for registration of a limited partnership and a limited company in the case of registration to establish a limited partnership or a limited company as follows:

1. where the number of shares held by foreign partners or shareholders in a limited partnership or a limited company are at least 40% but less than 50% of the registered capital, or
2. where a foreigner who holds less than 40% of the registered capital in a limited partnership or a limited company is a person authorized to act on behalf of the limited partnership or limited company

the Thai partner or shareholder must submit the evidence below showing the source of capital as an attachment to the application form to register the company, and those documents must show the amount of money corresponding to the amount of money put in their shares or shareholding:

1. Copy of bank deposit book or bank statements for the last 6 months, or

2. Document issued by a bank to certify or to show the financial status of the partner or the shareholder, or

3. Copy of the evidence showing the source of the money put in the shares or shareholding.

In short, the Thai shareholders need to present the evidence that they really have the money to invest in the new Thai limited company during the registration process.

ThaiLawyers.com provides consultation on the matter of nominee shareholders for Thai limited companies.

Question:

In order to set up my Thai limited company, I am thinking of getting some loans from my friends in Europe. I will make my friends shareholders in the Thai company that I would like to set up. So, I think I will personally sell shares to them and they transfer the money to my personal bank account in Thailand. It is a normal practice in Europe especially because there is no added value yet, that there is no taxation on selling shares. I assume this is the same in Thailand?

In the articles of association should be written that the capital of the company cannot be increased without my explicit permission. The shares can be paid in one go and that they are received immediately if they are paid on a monthly basis the shares will be received after the last payment has been executed. If this sounds as a workable idea, I only have to make up a transaction agreement and we are ready to go. They can bring it in as a cost, investment, and I have, hopefully, no tax to pay on this transaction so everybody is happy.

Also my idea is to start repaying the loan after my new Thai company has started to have income.

What are your thoughts?

Answer:

You cannot write in the articles of association that way. At least 25% of the registered shares have to be paid up on the day we register the company. And because you are a foreigner, you will need a work permit, so 100% has to be paid up.

I think the best way to do is to have a loan agreement between yourself and the lender saying that the loan will be given to you in installments (if they don’t want to give you the whole lump sum amount at one time) and that the repayment will be done after what condition, for example:

1. The loan will be repaid in installments of $ xxx, after your new Thai company has shown a gross profit (which is gross income minus cost of sales, but before office and other expenses) of $xxxx. – This is because you said you wanted to pay back the loan when the new company has started to sell the products, or to make money.
2. The loan will be repaid with the share of the company (your shares). You will not pay them with the shares held by the Thai partner because you need to maintain 51% Thai majority for the type of business you are planning to do.

When you sell your share or repay the loan with your shares, if the value of repayment is the same as the par value of the shares, then you don’t have to pay tax. For example you will pay them with 10,000 shares, Baht 100 par value (total value is Baht 1 M) to repay the loan of Baht 1M, then you have no capital gain so you have no tax to pay. But if you give them Baht 1M worth of shares to repay the loan of Baht 2M, then you have a capital gain of Baht 1M, which will be subject to tax.

Contact MSNA for your Thai company registration questions.

Recently, some changes were made to the conditions and tax incentives of Regional Operating Headquarters (ROH). The changes are applicable to all ROH’s registered in accordance to Royal Decree No. 508, dated November 2010.

ROH’s need to always meet all of the following conditions otherwise their rights to corporate income tax reduction and exemption will be revoked retroactively, starting from the first accounting period:

1. They have to have a paid up capital of THB 10 million or more at the end of each accounting period.
2. They must provide qualifying services to their overseas associated enterprises or foreign branches.
3. Their associated enterprises must have real business operations, with a physical presence and staff, as notified to the Thai Revenue Department
4. They have to notify their ROH status in accordance with the rules, procedures, conditions and timeline prescribed by the Director-General of the Revenue Department.
5. They must pay their staff the compensation at the required level from the third accounting period onwards.

The ROH’s that fail to meet any one of the following conditions in any accounting period will lose their rights to corporate income tax reduction and exemption for that particular accounting period:

1. They must pay to recipients in Thailand operating expenses related to the ROH operations of at least THB 15 million or capital expenditures of at least THB 30 million in the accounting year.
2. Their employees must have the skills prescribed by the Director-General of the Revenue Department.
3. They must employ the required number of staff by the end of the third accounting period.

The ROH’s that are dissolved within 5 accounting periods from the date of registration as ROH will lose their rights to the corporate income tax reduction and exemption retroactively from the first accounting period.

Contact MSNA for accounting and tax consulting.

The National Anti Corruption Commission (NACC) of Thailand has recently issued a notification that directly affects businesses in Thailand that are contractors of Thai government agencies.

Effective from 1 April, 2012, individuals and companies that have projects with Thai government agencies are required to prepare and submit the “Revenue and Expense Accounts” to the Thai Revenue Department according to the Notification of National Anti-Corruption Commission Concerning Principles and Methods of Preparing Revenue and Expense Accounts of Project between Individual/company and Government Agencies B.E.2554 (A.D. 2011).

ThaiLawyers.com has summarized the essence of this notification as follows:

Value of project to be affected by this notification

1 April 2012 – 31 March 2013 => Any projects worth Baht 2 M or more.

From 1 April 2013 => Any projects worth Baht 500,000 or more.

In this notification:

“Contractors” means natural or juristic persons who have projects with government agencies.

“Government agencies” means a ministry, bureau, department, regional administration, local administration, state enterprise, public organization, administrative office of constitutional organization, or other state agency or any office where operates public business by law and funded or financial or asset invested by the government.

“Project” means

1. Contract for procurement of goods and services
2. Concession agreements,
3. Agreements of government agencies for funding of researches
4. Agreements of government agencies for funding of any activities.

It includes all memorandums of understanding or annexes or revisions to the essence of the contracts after the Notification becomes effective.

Exceptions of the Notification

1. This notification does not affect the projects signed before 1 April 2012 unless there is an amendment on the essence of the contract.
2. It does not affect the contracts made between 2 government agencies, except the ones that have to file corporate income tax returns.
3. It does not affect the contracts with overseas contractors who are juristic persons established under foreign law with no branch, agents or representative in Thailand and whom the contracting Thai government agency makes payment directly to abroad and the goods or services are delivered in Thailand.

Method of Payment:

Contractors have to receive or make payments via current bank accounts (except payments under Baht 30,000).

How and When to File

Contractors are required to electronically submit the Revenue and Expense Accounts to the Revenue Department within below timeline.

(1) Individual contractors:

(a) In the case where all receipts and payments of the projects are completed in the same tax year, the contractors have to submit the accounts together with Personal Income Tax Return of that year.

(b) In the case where all receipts and payments of the projects are not completed in the same tax year, the contractors have to submit the accounts of each tax year together with Personal Income Tax Return of the year.

(2) Company contractors:

(a) In the case where all receipts and payments of the projects are completed in the same fiscal year, the contractors have to submit the accounts together with Corporate Income Tax Return at the end of that fiscal year.

(b) In the case where all receipts and payments of the projects are not completed in the same fiscal year, the contractors have to submit the accounts of each fiscal year together with Corporate Income Tax Return at the end of the fiscal year.

However, if the contractors have not been approved by the Revenue Department to file taxes online yet, they can submit the Revenue and Expense Accounts together with the paper tax returns.

Contractors are required to submit the Revenue and Expense Accounts to the Revenue Department as per (1) and (2) until the ends of obligations under the projects.

Audit of Revenue and Expense Accounts by the Revenue department

If the Revenue Department finds that the contractors do not submit the accounts, it shall report to the NACC for further appropriate action.

The Revenue Department may audit the accounts of projects during the audit of companies’ annual financial statements or audit of personal income tax or corporate income tax, and if it finds that a contractor may engage in corrupt activities of state officials or does not present the accounts properly or completely, it shall report to the NACC for further appropriate action.

Penalty

The contractors who fail to submit the Revenue and Expense Accounts nor fail to present proper and complete accounts under this Notification will be considered lacking qualifications to be contractors with government agencies. Government agencies are prohibited to enter into any contract or have a project with the contractors who are on the blacklist.

Measures for Government Agencies

1. Government agencies that process their procurement via e-Government Procurement (e-GP) are required to record data of their contractors (who are required to submit the Revenue and Expense Accounts) in that electronic system as well.
2. Other government agencies that do not process their procurement via e-GP need to report data of their contractors (who are required to submit the Revenue and Expense Accounts) to the NACC and Revenue Department.

Government agencies shall define conditions and qualifications of individuals or companies that wish to engage in their projects as follows:

(1) Individual or company contractors neither fail to submit the Revenue and Expense Accounts nor fail to present proper and complete accounts under this Notification;

(2) Individual or company contractors who engage in e-Government Procurement (e-GP) need to register themselves for e-GP at Thai Government Procurement website; and

(3) Contractors have to receive or make payments via current bank accounts (except payments under Baht 30,000).

What contractors have to do

1. Prepare and submit the Revenue and Expense Accounts together with Corporate Income Tax Return at the end of the fiscal year in format annexed to the Notification (Form Bor Chor 1).
2. Record the receipts and payments of each project separately (no need to submit).
3. Keep the records and supporting documents at the place of business for at least 5 years or until after the audit by the NACC has been completed (in case of getting audited before the 5 year period).
4. Receive or make payments via current bank accounts (except payments under Baht 30,000).
5. Register in e-Government Procurement (e-GP) at Thai Government Procurement website.
6. Register with the Revenue Department to file taxes online (optional).

Contact MSNA for any questions you have concerning your doing business in Thailand.

The Thai government has recently acknowledged the implemented and proposed policies and support provided to the industrial sector as follows:

1. Support provided to the public affected by heightened cost of living

2. Remedial measures for 7 industrial estates in Ayudhaya and Pathumthani that were affected by flood

3. Renovation of large factories and SMEs outside industrial estates that were affected by flood

4. Project to support flood affected industrial sector:

4.1 Industrial shelter center

4.2 Safety, environment and industrial waste management project in flood affected area

4.3 Water quality, soil quality and contamination testing both inside and outside industrial estates

4.4 Vocational training center for flood victims

4.5 Repair center for units under the Ministry of Industry that are affected by flood

4.6 Environment quality management in flood affected area project

4.7 Restoring Thailand’s image project

4.8 Industrial clinic to restore flood affected SMEs

Contact MSNA for any questions regarding the implemented business measures by the Thai government.