The Thai government has recently implemented Royal Decree No. 289 (B.E. 2012) which grants a 5-year personal income tax exemption for foreign film actors who earn income from foreign movies shot in Thailand and approved by the National Committee for Movie and Video. This exemption is applicable to income derived from 1 January 2011 to 31 December 2015.

It can be recalled that a draft ministerial regulation related to this exemption has been already approved by the government earlier this year in a bid to attract foreign movie producers and promote tourism in Thailand. Hence, a foreign film actor which is considered as a foreign tax resident during the exemption period shall be exempted from personal income tax only if:

1. Such income was derived from performance in a foreign film produced by a company or partnership incorporated under a foreign law; and
2. A filming permit has been granted in accordance with the laws relating to film and video.

Need help in filing your Thai taxes? Contact MSNA, English speaking tax experts for professional advice.

Just recently, an extension of VAT reduction period has been approved by the Thai cabinet as a way to promote economic growth due to 2011 and 2012 floods. With this measure, VAT rates will be reduced according to the following:

1. The VAT rate will again be reduced to 6.3%, effective from 1 October 2012 to 30 September 2014. Thus, the collectible VAT rate after adding municipal tax at one-ninth of the 6.3% will be 7%.
2. After the above period, the VAT rate will then be returned to 9% and therefore, the collectible VAT rate after adding municipal tax at one-ninth of the 9% will total 10%.

However, one should note that this normal VAT rate of 10% has always been reduced to 7% (by way of Thai cabinet’s approval) from the time VAT was introduced into the Thai tax system decades ago as a way to boost the Thai economy.

Contact MSNA, Thailand English speaking accountants, for expert advice and guidance on Thailand accounting and taxation.

The Thai Revenue Department (TRD) has been implementing certain measures to promote investments and support to both local and foreign investors. In his recent statement, Director-General Dr. Sathit Rungkasiri has stated that the TRD has policies to support international investment by establishing a double tax agreement network, reducing corporate tax rates as well as implementing various tax policies to boost competitive capabilities for Thailand. However, TRD still ensures that the country’s benefits with regards to tax collection will be highly prioritized.

Once Thailand enters into ASEAN Economic Community (AEC) in 2015, the business operation from multinational enterprises will definitely increase. These business organizations will normally plan to reduce their tax burden to the least therefore, TRD is preparing to propose on international tax restructuring in order to strengthen Thai economy as well as to protect against improper tax avoidance such as a measurement on either of the following:

– Transfer pricing

– Thin Capitalization

– Controlled Foreign Company, and;

– General Anti Avoidance Rule

In spite of these measures, such policies must not cause too many obstacles in international investment.

Contact MSNA for your Thai accounting and tax 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.

When assets or spare parts were damaged in accidents, their salvage value can be treated as deductible expenses upon sale or disposal. If they are sold, the seller is responsible to collect VAT from the buyer based on the actual selling price, and include the VAT in the monthly VAT computation.

In the event that assets or spare parts are lost and such loss is not covered by insurance or a protection agreement, a company can claim the remaining book value of the lost assets or spare parts as an operational loss. The full amount of the claimed loss can be treated as deductible expenses only if the company is able to provide credible proof of the loss. However, any displacement of assets or spare parts is considered equivalent to a sale of such asset or spare parts, and therefore, VAT must be paid based on market value.

Contact MSNA, Thailand Accounting firm for your accounting and tax questions.

Today, we got a question from one of our accounting clients regarding the import duties in Thailand.

Question:

I have a question that needs your expertise. We are selling a product to a client in Thailand that needs to be imported from the United States from our supplier there, who will issue an invoice to us. We would therefore like to know if there are any import taxes and what they amount to. If there are no such taxes, then the supplier can send directly the invoice to our Thailand Company but if there are, we are considering making the financial transactions via Head Office in Hong Kong, who would then be issuing the invoice to Thailand. Do you have any advice you could give us on this matter?

Answer:

Most likely there will be import duties and VAT to be paid at Customs. You need to consult with the company that provides customs clearance service (the Thai people like call “shipping company”). Some goods may be import duty exempted or even VAT exempted. However, in general, most products are subject to import duties and VAT. Whether you import directly or use Head Office to do it and invoice your Thai company, if the products are subject to import duties and VAT, you cannot avoid it.

The customer can import it themselves too, which bypasses your Thai company on the import duties and VAT because they will have to pay for them at the Customs. If your Thai company does the import, you will have to pass on the import duties and VAT to customer anyway, won’t you?.

Contact MSNA for your questions on Thai accounting and tax.

In Thailand, the provision of services rendered within the country is generally subject to 7% VAT as Thai VAT rules are concerned. However, zero-rated VAT treatment can be applied if the provision of services is considered as “exported” under Section 80/1(2) of the Revenue Code in line with the procedures and conditions as specified under the following Notifications:

1. Notification of the Director-General on VAT (No. 105) dated 12 July 2000

Prior to 29 March 2011, the export of services must meet the following criteria:

1. The provision of services is performed in Thailand to the recipient of services overseas, and
2. The result of such services is delivered for use entirely outsideThailand.

2. Notification of the Director-General on VAT (No.181) dated 29 March 2011

According to the new Notification that has been effective since 29 March 2011, the service is partially used in Thailand, the VAT operator (i.e. the service provider) is eligible for zero-rated VAT treatment only for the part of service that is used overseas.

This new Notification introduces the concept of apportionment and allows for zero-rated VAT treatment for the portion of the services that is used outside Thailand.

Contact MSNA for tax and accounting questions and services.

When your Thailand company buys a passenger car of not more than 7 seats (cash or installments), the cost of the car allowed to be depreciated over 5 years is not more than Baht 1,000,000. This cost includes VAT, interest paid (in case of installments), registration fee and the car itself. So basically, when you acquire the car, it is booked as a fixed asset with the amount of all the costs previously mentioned combined. If your accountant calculates the depreciation expense of the car for the year using the straight-line method, the depreciation expense allowed by the Thai tax law is not to exceed Baht 200,000 a year (to be prorated to the exact number of days in the first and the last years). Whatever amount exceeding Baht 200,000 becomes non-tax deductible and will be added back to your bottom line profit when filling out the end of year corporate income tax return.

The expenses like a driver, car maintenance, gasoline and yearly vehicle tax can be tax deductible only if they are proven to be related to the business operation.

In case your company leases a passenger car of not more than 7 seats (including leasing with a driver), where the company will not own it at the end of the lease term, the lease expense allowed by law is not more than Baht 36,000 per month (or Baht 1,200 per day). For the expenses like insurance premium, car maintenance, gasoline and yearly vehicle tax can be tax deductible only if they are proven to be related to the business operation and it is advised that there should be an agreement with the lessor that the lessee is responsible to those items otherwise the Revenue Department may view it as the lessor’s responsibility and thus your company should not pay for them so they should become non-tax deductible for your company.

Contact MSNA for your Thailand tax and accounting questions.

In an effort to promote the shooting of foreign films in Thailand, the Thai cabinet has recently approved personal income tax exemption for such foreign actors. The draft ministerial regulation specifies that income derived by a film actor who is a foreign tax resident during the period from 1 January 2011 to 31 December 2015 shall be exempted from personal income tax only if:

1. Such income was derived from performance in a foreign film produced by a company or partnership incorporated under a foreign law; and
2. A filming permit has been granted in accordance with the laws relating to film and video.

However, since this is just a newly approved ministerial regulation, further details on the implementation of these measures and associated regulations have yet to be announced.

Contact MSNA for your Thai accounting and tax questions.

Question:

Can we as a Singapore Company conduct a two-day training course for the public or companies in Thailand? Will there be any Tax and Work Permit When Organizing Training Courses in Thailand?

Answer:

If a company in Thailand arranges the seminar/training and hires your company to conduct it, they will withhold taxes from the payment they make to you. So for sure you will have paid your tax in Thailand for the earnings. Even so, the Thai company should get a work permit for the persons who will conduct the seminar to comply with the Working of Alien Act.

However, if you conduct it yourself without anyone hiring you, you will be breaking the foreign business law. Foreign companies cannot just come into Thailand and do business.

Contact MSNA for your accounting, tax and work permit questions.