Today THAI ACCOUNTANT wants to explain more about Regional Operating Headquarters or ROH and its tax privileges. This is Part 2 of 3. In part 1, THAI ACCOUNTANT talked about the old scheme ROH. In this Part, we will look at the new scheme ROH which was officially enacted on 6 November 2010. The new scheme is in addition to the old ROH incentives scheme. An ROH company has to choose only one from the two schemes in order to get the tax benefits from the selected tax incentive scheme.
New Scheme Regional Operating Headquarters
- Exemption of corporate income tax on qualifying income earned from the services provided to associated enterprises outside Thailand
- 10% corporate income tax on qualifying income earned from the services provided to associated enterprises in Thailand
- 10% corporate income tax on interest income and royalty income for the use of R&D products developed by the ROH in Thailand received by the ROH from Thai and/or overseas associated enterprises
- Corporate income tax exemption on dividends received from Thai and/or overseas associated enterprises
- Withholding tax exemption on certain dividends of the qualified ROH company distributed to overseas corporate shareholders
The tax privileges under items 1, 2, 3 and 4 will be granted for 10 consecutive accounting years and extendible to 15 consecutive accounting years if the qualified ROH is continuously entitled to corporate income tax exemption/reduction for 10 accounting years and at the end of the tenth accounting year, it has accumulated operating expenses paid in Thailand of more than THB 150 million.
- Only 15% personal income tax imposition for 8 consecutive years for qualified expatriates registered with the Revenue Department as top executives or specialized professionals
- Personal income tax exemption for qualified expatriates assigned to work overseas
To qualify for the above tax privileges, ROH must meet the following criteria:
- ROH must have a paid-up capital of at least THB 10 million.
- Services must be provided to its associated enterprises in at least 3 foreign countries whereby ROH must provide services to at least one foreign country in the first and second accounting years, at least two foreign countries in the third and fourth accounting years, and at least three foreign countries from the fifth accounting year onwards.
- ROH must incur operating expenses or have capital expenditure paid to Thai nationals of at least THB 15 million or THB 30 million per accounting year, respectively.
- All associated enterprises must have real operations with physical presence and staff.
- ROH must have skilled staff with minimum knowledge as prescribed by the Director-General of the Revenue Department.
- Starting from the third accounting year onwards, the ROH must have at least 75% skilled staff and pay annual staff benefits of at least THB 2.5 million per person to at least 5 staff
- To be eligible for the corporate income tax benefits under items 3, 4, and 5 and the personal income tax benefits, at least 50% of the total income of the ROH company must be generated from qualifying service income or qualifying royalty income from overseas.
- ROH must register with the Revenue Department within 5 years from the date to be announced by the Director-General of the Revenue Department.
If the ROH cannot meet one of the above conditions in any accounting year, it will be disqualified for tax incentives retroactively starting from the first accounting year.
In Part 3, THAI ACCOUNTANT will talk about the definition of associated enterprises and the definition of qualifying services by Regional Operating Headquarters.