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| In accordance with Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No.405) B.E. 2545 and Royal Decree Issued under the Revenue Code Regarding Deduction of Wear and Tear (No.406) B.E. 2545, granting tax reduction and exemption to the Regional Operating Headquarters (ROH) and foreigners working therein in order to promote foreign investment in Thailand by setting up Regional Operating Headquarters (ROH), the Revenue Department therefore would like to explain the followings: 1. Taxpayers who will be entitled to benefits granted under the Royal Decrees. 1.1 ROH, which is a company incorporated in Thailand and carries on providing management or technical services to an associated company or juristic partnership or its branch, whether in Thailand or abroad and must fulfill the following conditions; (1) Has paid-up capital on the last day of an accounting period at least 10 million Baht. (2) Provide services to associated enterprises in foreign countries or its foreign branches in at least 3 countries. (3) Has revenue, which is paid from or in foreign country aggregating at least 50 percent of total revenue. Except during the first 3 accounting periods, starting from an accounting period which ROH notifies the Revenue Department under (4), the revenue may be less than 50 percent but not less than one-third of total revenue. In case of force majeure which the ROH cannot be blamed or in case of necessity, the Director-General of the Revenue Department shall have the power to lower the rate mentioned for one accounting period. (4) Has notified the operation of ROH under rules, procedures and conditions stipulated by the Director-General of the Revenue Department. 1.2 Individuals who work for the ROH mentioned in 1.1 2. The supporting services which ROH provides to its associated enterprise in 1 are the following services: 2.1 General management, business planning and business co-ordination, for example; ROH provides support on management of a hotel of associated enterprise, for example, giving advice and saving problems arising from the management or improvement of the hotel, the service to customer, the maintenance of standard of the hotel, budgeting and accounting of the hotel, control of the hotel's income and expenses, training of employees, sales and marketing promotion. 2.2 Procurement of raw materials and parts, for example; ROH finds a market to purchase agricultural products in Thailand and for associated enterprise in Japan, which has a canned food factory in Thailand for export. 2.3 Research and development of products, for example; (1) ROH researches and develops prawns farming process in order to improve the quality and quantity of products for associated enterprise in Vietnam, which carries on prawns farm and export of frozen food products. (2) ROH researches and develops a car suspension and stability control of four-wheeled drive car for a production and assembling plant of associated enterprise which operates in foreign country. 2.4 Supporting technical assistance, for instance; (1) ROH sends experts to check and test the operation of a machinery in a factory of its associated enterprise in China. This includes giving advises to employees of its associated enterprise of how the machinery should be maintained and operated to maximise its production capacity. (2) ROH provides technical assistance to its associated enterprise in India by advising and supporting technical data on the production of glasses and bullet proof jackets. 2.5 2.5 Marketing strategy planning and sales promotion, for instance; (1) ROH provides advisory on marketing strategy and public relations services to its associated enterprise in Indonesia which carries on department store business. This includes co-ordinating with investors. (2) ROH advertises through various media in order to promote new products of associated enterprise in Thailand and Asia and also plans strategy for European and U.S. markets 2.6 Human resource management and training in the region, for instance; ROH is a centre in ASEAN for training Air-hostess about duty, language, costume and including recruitment of new hostesses for associated enterprise which carries on international air transportation business. 2.7 Financial advisory services, for example; ROH provides financial advisory services to associated enterprise. This includes procurement of loan and risk hedging, revising contract documents, procedures and conditions in order to secure loans, revising and updating data on financial agreement, advising on financial structure under various risk hedging tools and taking part in negotiations with lenders. 2.8 Analyse and research on economics and investment, for example; ROH provides data on investment trends in retail business and convenient stores in Thailand and ASEAN by producing summary and analysis on growth rate, returns, size of investment and future trend of the business to present to its associated enterprises which may be interested in investing in this region. 2.9 Control and management of credit, for example; ROH lends money and arrange for source of funds in foreign country to associated enterprise which was granted concession for a project in Laos to construct underground train project. ROH would manage and control the disbursement of money and is a guarantor for the loan. 3 Tax benefits granted 3.1 Corporate Income Tax: 3.1.1 ROH's Corporate Income Tax's liability will be reduced from 30% to 10% of net profits on revenue arising from services provided to its associated enterprise or foreign branch of ROH . 3.1.2 ROH's Corporate Income Tax's liability will be reduced from 30% to 10% of net profits on royalty received from its foreign branch or an associated juristic company or partnership or royalty received from another juristic company or partnership which used the result of the research and development to provide service to ROH's foreign branch or an associated juristic company or partnership only if the research and development is wholly carried out in Thailand. 3.1.3 ROH's Corporate Income Tax's liability will be reduced from 30% to 10% of net profits on interest received from associated enterprise or foreign branch only on interest from loan which ROH has borrowed to re-lend to associated enterprise or foreign branch. 3.1.4 ROH will be granted an exemption from Corporate Income Tax on dividends received from an associated juristic company or partnership. 3.1.5 An associated enterprise, which is a company incorporated under foreign laws and does not carry on business in Thailand, will be granted an exemption from Corporate Income Tax on dividends, from the operation which is granted tax reduction, received from ROH. 3.1.6 ROH will be granted an accelerated rate of depreciation and wear and tear of assets on permanent building acquired on the date of acquisition at the rate of 25% of cost value and the residual value will be depreciated within 20 years. 3.2 3.2 Personal Income Tax. Apart from the aforesaid tax measures to promote ROH business, there are also other incentives granted to foreigners working in ROH. A foreigner means an individual who does not possess Thai nationality. Tax benefits granted to foreigners are as follows: 3.2.1 A foreigner employed by ROH will be reduced Personal Income Tax liability to 15 percent of assessable income recieved from ROH 3.2.2 A foreigner shall be exempted from Personal Income Tax for income derived from employment exercised abroad temporarily. Such income shall not be claimed directly or indirectly as expenses in the computation of profits of ROH or an associated juristic company or partnership, which carries on business in Thailand. 3.2.3 A foreigner who resumes his employment in any ROH within 1 year after his previous employment in any ROH, shall not be entitled to the above said benefits for his later employment. 4 A company that carries on ROH business shall comply with the rules, procedures and conditions stipulated in Notification of the Director-General of the Revenue Department On Income Tax (No. 109) Subject: Rules, procedures and conditions for reduction and exemption from Income Tax for company which is a Regional Operating Headquarters dated 16 August B.E. 2545, which can be summarised as follows: 4.1 A company that carries on ROH business and wishes to be granted benefits in accordance with the Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No. 405) B.E. 2545 shall notify the setting up of ROH business to the Director-General of the Revenue Department using the form notifying the setting up of ROH business which shall contain at least items specified in the form attached to the Notification. The submission shall be made at Bureau of Audit Operations (Large Business Tax Administration Office), or at Area Revenue Office, Provincial Revenue Office, or Provincial Revenue Office (Branch). In the case where a company that carries on ROH business has several places of business, the submission shall be made at Area Revenue Office, Provincial Revenue Office, or Provincial Revenue Office (Branch) in which the headquarters of the company is situated. 4.2 The computation of revenues and expenses of a company that carries on ROH business shall follow the rules and conditions stipulated in Sections 65 and 65 Bis of the Revenue Code. In the case where a company carries on both ROH business and other businesses, the company shall compute the net profits and net loss for each business separately. Any expenses which cannot be clearly identified to which the business they belonged to, the company shall apportion such expenses in accordance with the ratio between revenue from the operation of ROH business and revenue from other business. 4.3 In the case where a company carries on both ROH business and other businesses, if the ROH business incurs loss, such loss shall be remained with the ROH business. 4.4 A company that carries on ROH business shall file a Corporate Income Tax return together with a balance sheet, working and profit and loss accounts within 150 days from the last day of an accounting period in the form stipulated by the Director-General and shall pay taxes in accordance with Sections 68 and 69 of the Revenue Code, and shall file a Corporate Income Tax return within 2 months from the last day of the first six months of an accounting period in the form stipulated by the Director-General and shall pay taxes in accordance with Section 67 Bis of the Revenue Code. In the case where a company carries on both ROH business and other businesses, the company shall file the Corporate Income Tax returns for each business separately together with a working and profit and loss accounts. The balance sheet shall be filed with either business. In filing Corporate Income Tax return, one Tax Identification Number (TIN) shall be used. 4.5 ROH that has notified the setting up of a ROH business in any accounting period, shall be entitied to reduction and exemption of Corporate Income Tax under the Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No. 405) B.E. 2545 from that accounting period but not before 16 August B.E. 2545 | ||||||
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