Today THAI ACCOUNTANT wants to explain about Regional Operating Headquarters or ROH and its tax privileges. This is Part 1 of 3.
Regional Operating Headquarters or ROH is a company registered in Thailand providing managerial, administrative and technical services as well as other supporting services to ROH’s foreign branches or its associated enterprises.
Regional Operating Headquarters or ROH incorporated in Thailand will enjoy certain tax privileges. Currently Thailand has 2 schemes of ROH tax privileges. An ROH company has to choose between the old scheme (which was granted on 16 August 2002) and the new one (enacted on 6 November 2010).
Old Scheme Regional Operating Headquarters
1. Corporate income tax at the rate of 10 percent on net profits for income derived from services provided to ROH’s foreign branches or associated enterprises;
2. Corporate income tax at the rate of 10 percent on net profits for royalties derived from ROH’s foreign branches or associated enterprises for the use of Research and Development (R&D) done by ROH in Thailand. This benefit is also extended to royalties received from a third party providing services to ROH’s branches or associated enterprises using ROH’s R&D;
3. Corporate income tax at the rate of 10 percent on net profits and interest received from ROH’s foreign branches or associated enterprises for loans granted, provided that such loans are made from other sources and extended to ROH’s branches or associated enterprises;
4. Tax exemption for dividends received by ROHs from associated enterprises;
5. Tax exemption for dividends paid out of ROH’s concessionary profits to its shareholders not carrying out business in Thailand;
6. Accelerated depreciation for buildings at the rate of 25 percent on the date of acquisition. The residual value can be depreciated within 20 years.
Expatriates working for ROH
- Expatriate may opt to be taxed at 15 percent of gross income. By doing so, the income received must not be calculated together with other income and cannot claim for refunds. This privilege is available only to expatriates employed by ROH and are limited to their first four years of employment in Thailand. It does not matter how extensively the beneficiaries have to travel abroad during the employment period. To be entitled for the benefits once again, expatriates have to discontinue employment with any ROH in Thailand for more than 365 days.
- Expatriates who are sent to work in another country by ROH will receive a tax exemption in Thailand on their income paid by the foreign company for services rendered abroad, provided that such income is not directly or indirectly deducted as ROH’s nor its associated enterprise’s expenses in Thailand.
To qualify for the above tax privileges, ROH must meet the following criteria:
1. Its paid-up capital must not be less than 10 Million Baht at the end of each accounting period;
2. Provide services to its branches or associated enterprises in at least 3 countries;
3. Half of its total income is derived from administrative, technical and other supporting services provided to its branches or associated enterprises in other countries and royalties received outside Thailand for the use of ROH’s R&D. This criterion can be mitigated to one-third of the total income in the first three accounting periods of its operation as ROH. In the case of force majeure, the Director-General of the Revenue Department may lower the income threshold for one accounting period; and
4. It must notify the Revenue Department about the incorporation as ROH. Benefits will be given once the accounting period has been notified.
In Part 2, THAI ACCOUNTANT will talk about the new scheme ROH.