On 28 December 2018, the Thai Revenue Department (“TRD”) announced a new program of tax incentives through the issuing of Royal Decree No.674 (“RD 674”).
Key points of RD 674
Section 3: Definition of IBCs
The concept of an IBC is a company established under Thai law engaging in the following activities with its associated enterprises located in either Thailand or overseas:
“Associated Enterprises” definition:
“Companies are considered related if one company participates directly or indirectly in the management and control of another, or holds at least 25% of the capital/shareholding of the other company”
Section 4, 5 and 6: Tax privileges for foreign nationals and qualifying criteria
The PIT tax rate for foreign nationals is reduced to 15%.
To be eligible for this flat 15% PIT rate, foreign nationals must meet the following qualifications:
|Tax incentives under the New IBC scheme|
Section 7: Corporate Income Tax (“CIT”) rates:
1) 8% if expenditure in Thailand is THB 60 million (USD 1.82 million)
2) 5% if expenditure in Thailand is THB 300 million (USD 9.09 million)
3) 3% if expenditure in Thailand is THB 600 million (USD 18.18 million)
|Section 8: CIT exemption on dividends received from Thai and foreign associated enterprises|
|Section 9: SBT exemption on income derived from treasury management services|
|Section 4-5: PIT of 15% for foreign nationals working for an IBC|
Section 14(1)(a-d): Exemption from withholding taxes on dividends paid by an IBC to foreign companies
– Dividends must be paid within 1 year after approval from the TRD to be an IBC
Section 14 (2): Exemption from withholding taxes on interest paid by IBCs to foreign companies
Interest received from IBCs, only if derived from loans taken out by IBCs to re-lend to associated enterprises for treasury management services
|Conditions||Section 11(1): Minimum THB 10 million (USD 303,030) of paid-up capital|
|Section 13(2): Minimum THB 60 million (USD 1.82 million) of expenditure paid in Thailand|
|Section 11(2): Must have at least 10 employees, or at least 5 employees in the case of IBCs providing treasury management services|
|***Section 15: In the event that IBCs cannot comply with the conditions specified in Section 11(1)-(2) and Section 13(2) for more than one accounting period, the TRD will reverse IBC Company status back to the first accounting period when approval was granted|
|Section 16-18: Existing IHQs, ITCs and ROHs can be converted into IBCs|
Section 10: A Company must submit its business plan together with the IBC application and the list of its associated enterprises to the TRD
Section 12: The Tax Holiday
IBCs can enjoy a tax holiday from CIT for 15 years from the date of approval from the TRD:
– The accounting period during which an IBC application is filed or approval to become an IBC is secured will be counted as the first accounting period.
Partner and Head of Regional Tax Practice
The information provided here is for information purposes only and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations.