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What the new tax cuts mean for companies based in Thailand

The standard company tax rate in Thailand has long been 30%. Several recent changes to the company tax rate will mean that many companies will now pay tax as low as 10% or 20% on their profits. We summarise the recent changes as follows: 

Regional operating headquarters:
In December, the cabinet approved a number of new tax measures for Regional Operating Headquarters (ROH) based in Thailand.

Net profits from ROH Operations including interest and royalties are now subject to 10% Corporate Income Tax. The laws implementing the new tax measures have not yet been issued.

The new tax measures, coupled with improvements to the existing ROH privileges, will make Thailand more competitive with traditional regional head-quarters locations such as Singapore, Malaysia and Hong Kong.

SME company tax rates:

Reduced company tax rates for small and medium enterprises (SME's) became effective on Jan 31 this year. The rates for accounting periods commencing on or after Jan 1, 2002 onward are 20% on net profits up to one million baht, 25% on net profits of one to three million baht, and 30% on net profits above three million baht.

To be eligible for these rates, a company must not have more than five million baht in paid-up capital at the end of the accounting period. The Finance Ministry expects more than 85% of companies liable to Corporate Income Tax will be eligible for the reduced rates.

Listed companies:

Royal Decree No. 387 issued under the Revenue Code grants reduced tax rates for companies listed on the Stock Exchange of Thailand (SET), including the Market for AIternative Investment (MAl).

The reduced tax rates for listed companies are as follows:
25% for listed companies on the SET prior to Sept. 6 2001 on net profits not exceeding 300 million Baht.

20% for companies listed on the MAl within three years from Sept 6, 2001

25% for companies listed on the SET other than the MAI within three years from Sept 6, 2001.

Five-year limitation:

The reduced rates will apply for five consecutive accounting periods only. For companies listed prior to Sept 6, 2001, the reduced rates will first apply for the accounting period beginning on or after Sept 6, 2001. For newly listed companies, the reduced rate will first apply for the accounting period beginning on or after the listing date.

Conditions apply to prevent companies listed prior to Dept. 6, 2001 from taking advantage of the lower tax rates granted to newly listed companies.

The reduced rates will not be conferred on companies that delist and then relist or on newly listed companies that carry on the business of a company listed prior to Sept. 6, 2001 due to a business transfer or amalgamation.

Venture capital companies investing in SME’s:

The Royal Decree No. 396 issued under the Revenue Code, effective from Jan. 31, 2002, grants corporate tax exemptions to venture capital companies that invest in SME’s.  Dividends received from SME’s and gains arising from the transfer of shares in SME’s are granted exemption from corporate tax.

A number of rules, procedures and conditions are prescribed in the Royal Decree. Corporate shareholders in a venture capital company that receives an exemption from corporate income tax are also granted exemption from income tax on:

Dividends received from the company; and

Gains arising from the transfer of shares in the company.

Bangkok Post, April 17, 2002

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