annual conference maximise …...pwc 1 tax rate update 1.1. sme corporate tax rate (royal decrees...
TRANSCRIPT
17th Annual Conference
Maximise Shareholder Value 2016
Update new tax laws and regulations
27 October 2015
www.pwc.com/th
PwC
AgendaPart I
1. Tax rate update – SME, VAT
2. Tax incentives
2.1. IHQ
2.2. ITC
2.3. Special Economic Development Zones
3. Deductions for domestic travelling/accommodation
4. Additional reasonable excuse for under-estimation of half year tax
5. VAT
5.1. E-book - Exempt from VAT
5.2. The position of director – Not treated as provision of service
5.3. Discount for re-insurance premiums – Not included in VAT base
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Agenda (Cont’d)
6. Stamp duty
7. Personal income tax
7.1. LTF/ RMF
7.2. Qualified pension life insurance premiums
7.3. Measuring duration of employment
7.4. Ordinary partnership/ Non-juristic body of persons
8. Inheritance tax / Gift tax
9. Other matters
Part II
Draft Act to amend the Revenue Code/ Draft regulations
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PART I
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1 Tax rate update
1.1. SME corporate tax rate (Royal Decrees Nos. 583 and 564)
Purpose: To relieve the tax burden and increase financial liquidity of SMEs as well as to increase their ability to compete in the country and attract investment
For accounting periods beginning on or after 1 January 2015:
Net profit (THB) CIT rates (%)
0 – 300,000 Nil
300,001 – 3,000,000 15%
Over 3,000,000 20%
To be eligible for the reduced rates of tax, the SME must meet the following criteria: 1.Paid-up capital on the last day of any accounting period must not exceed THB 5 million, and2. Income from the “sale of goods and provision of services” must not exceed THB 30 million in any accounting period.
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1. Tax rate update
1.2. 7% VAT rate extension (Royal Decree No. 592)
Purpose: To stimulate the economy by giving the people purchasing power and thus enable a continuous and stable expansion of economic growth.
The 7% VAT rate will continue to apply for one more year from1 October 2015 until 30 September 2016.
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2. Tax incentives
2.1. International Headquarters (IHQ) (Royal Decree No. 586,
Notification of the DG dated 29 May 2015)
Purpose:
To grant tax incentives to attract foreign firms to establish IHQ in Thailand
IHQ:
A company incorporated under the law of Thailand for the purpose of providing managerial, technical or supporting services or financial management to its associated enterprises or branches in Thailand and/or abroad. This includes carrying on business as an international trading company.
Effective:
2 May 2015
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2. Tax incentives 2.1. International Headquarters (IHQ) (Royal Decree No. 586,
Notification of the DG dated 29 May 2015) (Cont’d)
Activities of IHQ compared with ROH
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IHQ ROH 1 & 2
Treasury centre x
International trading centre x
Procurement of raw materials and parts Same
Technical assistance Same
Research and development Same
Marketing and sales promotion Same
Financial advisory services Same
Human resource management and training Same
General administration, business planning and co-ordination Same
Credit management and control Same
Analysing and researching economy and investment Same
Other services as prescribed by the DG of the RD Same
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2. Tax incentives
2.1. International Headquarters (IHQ) (Royal Decree No. 586,
Notification of the DG dated 29 May 2015) (Cont’d)
Activities of IHQ compared with ROH
Treasury centre
• FX & risk management
• Commitments and billing documents
• Management of liquidity
• Borrowing and lending
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2. Tax incentives 2.1. International Headquarters (IHQ) (Royal Decree No. 586,
Notification of the DG dated 29 May 2015) (Cont’d)
Criteria of IHQ compared with ROH
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IHQ ROH 1 ROH 2
> THB 10M paid-up capital Same Same
> THB 15M business spending per year
x > THB 15M business spending per year or > THB 30M investment spending per year
Qualified services provided to foreign qualified affiliates (number not specified)
Qualified services provided to qualified affiliates in > 3 countries other than Thailand in the first year
Qualified services provided to qualified affiliates in > 1 country in 1st and 2nd
accounting period, > 2 countries in 3rd and 4th
accounting period,> 3 countries from the 5th
accounting period onwards
Income from services provided to, or royalties received from, overseas affiliates - at least 50% of total income of ROH Co (reduced to 1/3 of the first three years)
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2. Tax incentives 2.1. International Headquarters (IHQ) (Royal Decree No. 586,
Notification of the DG dated 29 May 2015) (Cont’d)
Criteria of IHQ compared with ROH
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IHQ ROH 1 ROH 2
x X Maintain skilled staff of at least 75% of total employees by end of the 3rd
accounting period
x X Average compensation of THB 2.5M per person per annum for at least 5 employees by the end of the 3rd
accounting period
x x Foreign affiliate must have actualbusiness operation
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2. Tax incentives
2.1. International Headquarters (IHQ) (Royal Decree No. 586,
Notification of the DG dated 29 May 2015) (Cont’d)
Tax privileges of IHQ compared with ROH
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IHQ* ROH 1 ROH 2
Tax rate
Income from foreign sources 0% 10% (no limit) 0% (10 or 15 yrs)
Income from domestic sources 10%** 10% (no limit) 10% (10 or 15 yrs)
PIT on salary of foreign employees
15%*** 15% (4 yrs) 15% (8 yrs)
*Qualified IHQ will be granted tax privileges for 15 accounting periods.
*Revocation of benefits - year to year
**Total income subject to 10% must not exceed the amount of total income from qualified services and royalties which are both exempt from tax.
***From the date IHQ becomes qualified until the date it is no longer qualified or the employment is terminated.
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2. Tax incentives
2.2. International Trading Centre (ITC) (Royal Decree No. 587,
Notification of the DG No. 253)
Purpose:
To grant tax incentives to attract foreign firms to establish ITC in Thailand
ITC:
A company incorporated under the law of Thailand engaged in the business of buying and selling goods, raw materials and parts as well as providing services relating to international trade to foreign juristic entities
Effective:
2 May 2015
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Activities - ITC
Activities of ITC
• Procuring and sale of finished goods, raw materials and parts to foreign juristic entities (out-out transaction)
• Providing services relating to international trade:
Procuring, maintaining, packaging, transporting, providing insurance, advice and training relating to goods
ITC
Foreign juristic entities
Suppliers
Finished goods, raw materials, parts
Services re international trade
Deliver
Out–out transaction for buying and selling goods
Thailand
Overseas
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2. Tax incentives
2.2. International Trading Centre (ITC) (Royal Decree No. 587,
Notification of the DG No. 253) (Cont’d)
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Tax incentives and conditions - ITC
Tax incentives
• Corporate tax exemption for 15 accounting periods
• Personal income tax rate of 15% for expatriate employees
• WHT exemption on dividends paid from qualified income to foreign corporate shareholders
Conditions
• Paid-up capital of at least THB 10 million
• Operating expense of at least THB 15 million per accounting period
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ITC
Foreign juristic entities
Suppliers
Finished goods, raw materials, parts
Services re international trade
Out–out transaction for buying and selling goods
Thailand
Overseas
Deliver
2. Tax incentives
2.2. International Trading Centre (ITC) (Royal Decree No. 587,
Notification of the DG No. 253) (Cont’d)
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2. Tax incentives
2.3. Special Economic Development Zones (SEZ) (Royal Decree
No. 591)
Purpose:
To grant tax incentives to investors in SEZ (Tak, Mukdahan, Sa Kaeo, Trat, Songkhla, Kanchanaburi, Chiang Rai, Nong Khai, Nakhon Phanom, Narathiwat) so as attract foreign direct investment, generate employment in local communities, improve living conditions through income distribution, improve border area security and enhance Thailand's competitiveness
Effective:
10 September 2015
Entitlement:
• 10% reduced CIT rate granted to juristic entities for 10 years on income earned from manufacturing goods or services rendered and used in the SEZ, regardless of where their head office is situated If a juristic entity fails to comply with any conditions in any accounting period, the
right to tax privileges will cease as from that accounting period.
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2. Tax incentives
2.3. Special Economic Development Zones (SEZ) (Royal Decree
No. 591) (Cont’d)
Procedures and conditions:
• Inform the RD for using this tax incentive by 2017
• No use of CIT exemption, either wholly or partly, under the investment promotion law
• No use of CIT reduction as an SME juristic entity
• Separate accounts for activities in the SEZ subject to the tax privilege and not subject to the tax privilege
• Compliance with the terms and conditions under regulations to be issued
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3. Deduction for domestic travel and accommodation (Royal Decree No. 580 and Notification of DG No.
251, Ministerial Regulation No. 305 and Notification of DG No. 250)
Corporate Individuals
Benefits • Double deduction for expenses paid for seminar rooms, accommodation, transportation and other expenses relating to domestic seminars/training or expenses paid to tour operators for seminars/training
• Deduction for domestic travel and hotel expenses actually paid up to a maximum of THB 15,000
Eligible period
From 31 Dec 2014 to 31 Dec 2015
From 16 Dec 2014 to 31 Dec 2015
Purpose: To promote domestic tourism and enhance the economy of the country
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4. Additional reasonable excuse for under-estimation of half year tax (Instruction of the RD No. Paw
152/2558)
Purpose:
• To repeal the previous Instruction (No. Paw 50/2537) and include its provision in the new instruction
• To include an additional reasonable excuse in the new instruction
Effective:
For juristic companies and partnerships that have accounting periods beginning on or after 1 January 2012
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4. Additional reasonable excuse for under-estimation of half year tax (Instruction of the RD No. Paw
152/2558) (Cont’d)
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Reasonable excuse in the case where the estimated net profit for half year tax is lower than the actual net profit by more than 25%
Existing reasonable excuse Additional reasonable excuse
The amount of half-year tax paid was not less than one-half of the tax paid for the previous accounting period.
The estimated net taxable profit for half-year tax purposes is not less than the actual net taxable profit of the previous accounting period even though the amount of the half-year tax paid is less than one-half of the tax paid in the previous accounting period.
The half-year tax paid that is lower than one-half of the tax paid for the previous accounting period must result from tax exemption or a reduction in the tax rate.
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5. VAT
5.1. E-Book - Exempt from VAT (Royal Decree No. 585)
With effect from 2 May 2015, electronic newspapers, magazines and textbook services delivered via the internet are exempt from VAT.
5.2. The position of director - Not treated as a provision of service (Notification of the DG No. 205)
With effect from 5 February 2015, the position of director of a company is not considered to be a provision of service subject to VAT.
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5. VAT
5.3. Discount for re-insurance premiums – Not to be included in the VAT base (VAT Notification No. 207)
Effective: 30 April 2015
Amendment:
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Reinsurance premium 100.00
Discount 10.00
Net amount 90.00
VAT 7% 6.30
Total 96.30
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6. Stamp duty (SD) (Notification on Stamp Duty No. 54)
Effective: 5 April 2015
SD Amendment:
Type of Instrument
Value SD Amendment
SD - Previous treatment
Lease of land, buildings, other construction or floating rafts
> THB 1 million SD paid by cash SD affixed
Hire of work agreement
> THB 1 million SD paid by cash SD affixed
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7. Personal income tax (PIT)
7.1. Amendment of conditions for contributions to LTF/RMF (Notification of the DG No. 257-259)
Effective:
1 January 2015
Amendment for LTF:
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Type Old New
Contribution to LTF qualifying fordeduction in PIT computation
15% of “assessable income received”
15% of “assessable income received which is subject to income tax”
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7. Personal income tax (PIT)
7.1. Amendment of conditions for contributions to LTF/RMF (Notification of the DG No. 257-259) (Cont’d)
Amendments for RMF:
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Type Old New
Contribution to RMF qualifying fordeduction in PIT computation
3% - 15% of “assessable income received”
3% - 15% of “assessable income received which is subject to income tax”
Gain on sale of RMF which will be exemptfrom PIT
From portion not exceeding 15% of “assessable income received” with a maximum of THB 500,000 in each tax year
From portion not exceeding 15% of “assessable income received which is subject to income tax” with a maximum of THB 500,000 in each tax year
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7. Personal income tax (PIT)
7.2. Amendment of conditions for qualified pension life insurance premiums (Notification of the DG No. 261)
Effective: 1 January 2015 onwards
Qualified pension life insurance premiums are allowed as a deduction in the PIT computation according to the following new conditions:
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Old New
Not exceeding 15% of total assessable income with a
maximum of THB 200,000
Not exceeding 15% of “assessable income received which is subject to income tax” in each tax year with a
maximum of THB 200,000
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7. Personal income tax (PIT)
7.3. Measuring duration of employment so as to qualify for the special tax calculation under Section 48(5) (Notification of
the DG No. 252)
Purpose:
Law allows employees to plan for measuring the duration of their employment (5 years) so as to qualify for the special tax calculation under Section 48(5) for a provident fund when employees move to a new company.
Effective: Assessable income received from 1 January 2015 onwards
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7. Personal income tax (PIT) 7.4. Ordinary partnerships and non-juristic bodies of persons (Revenue Code Amendment Act No.39, Notification of DG No. 249, Instruction No. Paw 149/2558)
Purpose:
To reduce or eliminate the tax loopholes that existed in these kinds of tax entities
Effective: 1 January 2015
Amendments:
• Natural persons who are partners of an ordinary partnership or members of a non-juristic body of persons are no longer exempt from tax on the share of profit they receive from those entities
• An ordinary partnership or a non-juristic body of persons has to prepare a summary of its income and expenses to be filed together with the annual personal income tax returns
• The definition of “non-juristic body of persons” has also been added
Exception granted for share of certain profits, i.e. deposit interest from joint bank account, rental from co-owned immovable property (according to the Cabinet resolution dated 6 October 2015)
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8. Inheritance tax/ Gift tax
8.1. Inheritance tax (ITT) (Inheritance Tax Act B.E. 2558)
Purpose:
To make fairness to the country and to use the inheritance tax for the country’s development and make the poor have better life
Effective:
1 February 2016
Nature:
• The ITT will be levied when obtaining a legacy from a testator who has died and will be exempt from PIT under Section 42(10) of the Revenue Code.
• ITT does not apply to:
1. A legacy received from a testator who dies before the Act comes into force; and
2. A legacy received by the spouse of a testator.
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8. Inheritance tax/ Gift tax
8.1. Inheritance tax (ITT) (Inheritance Tax Act B.E. 2558) (Cont’d)
Persons subject to ITT
• Individuals or juristic persons with Thai nationality and individuals without Thai nationality, but resident of Thailand according to the immigration law, will be taxed on a legacy situated either in or outside Thailand
• Other non-Thai individuals and juristic persons will be taxed on a legacy situated in Thailand at the time of the death of the testator
Property subject to ITT
1. Immovable propertye
2. Securities according to the Securities and Exchange law
3. Bank deposit accounts or other money which the testators have the right to call back or claim
4. Registered vehicles
5. Financial assets to be prescribed in Royal Decrees (not yet announced)2prescribed
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8. Inheritance tax / Gift tax
8.1. Inheritance tax (ITT) (Inheritance Tax Act B.E. 2558) (Cont’d)
Threshold of legacy value subject to ITT
Legacy exceeding THB
100 million
Obtained from each testator together either once or on
several occasions
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8. Inheritance tax/ Gift tax
8.1. Inheritance tax (ITT) (Inheritance Tax Act B.E. 2558) (Cont’d)
Rate of ITT
5%
10%
Heirs who are ascendants or descendants
Other heirs
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8. Inheritance tax / Gift tax
8.2. Gift tax (Revenue Code amendment Act (No. 40))
Purpose:
Gifts exempt from PIT according to the Revenue Code are required to be amended so as to be in accordance with the inheritance tax law.
Effective:
1 February 2016
Gifts subject to PIT:
• Assets or amounts given to ascendants, descendants, spouse or others will be subject to PIT if the value of the gifts exceeds the prescribed threshold, which will depend on the type of gift and donor.
• PIT rate is 5%
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8. Inheritance tax / Gift tax
8.2. Gift tax (Revenue Code amendment Act (No. 40)) (Cont’d)
Gifts exempt from PIT
Type of giftThreshold/ throughout tax year
Donor RecipientOld - Sec.42
(10)
Income from transfer of immovable property without consideration
≤ THB 20 million
Parent Legitimate child, excluding an adopted child Maintenanceincome derived under moral obligation, corpus of a legacy or inheritance or gifts made in a ceremony or on occasions in accordance with established custom
Maintenance income or gifts
≤ THB 20 million
Ascendants, descendants
or spouse
Ascendants, descendants or spouse
Maintenance income derived under a moral obligation or gifts made in a ceremony or on occasions in accordance with established custom
≤ THB 10 million
Persons that are not
ascendants, descendants
or spouse
Persons that are not ascendants, descendants or spouse
Income from gifts Persons who receive the gifts will use them for religious, educational or public benefit purposes according to the intention of the donors
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9. Other matters
9.1. Amendment of due date for filing advance PIT returns (Notification of the Ministry of Finance dated 8 July 2015)
Compensation obtained in exchange for a long-term lease of immovable property which is apportioned as taxable income over the lease periods
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Due date for advance filing*
Old New
By 31 Dec of the year in which the compensationwas obtained
By 31 Mar of the yearfollowing that in which the compensation was obtained
Advance PIT returns allowed if filed late, but 1.5% monthly surcharge will be imposed
*The advance filing required to be included in annual PIT return filed each year
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9. Other matters
9.2. Tutorial type of school (Royal Decree Nos. 588 – 590, Ministerial Regulation No. 307)
Effective: 11 July 2015
9.3. Specific Development Zone (Royal Decree No. 584)
• Extension of the reduction of various tax rates (0.1% - 3%) for individuals and companies located in specific development zones (Narathiwat, Pattani, Yalaand part of Songkha) from 1 January 2015 to 31 December 2017.
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Income or net profit/ dividend or share of profit of business of tutorial type of school
No longer exempt from PIT, CIT
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PART II
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Draft Act to amend the Revenue Code/ Draft regulations
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Cabinetresolution
Subject
7 May 2015 Draft of transfer pricing law
8 Sep 2015 Tax measure to support SME corporates:- Net profit from THB 300,001 up - CIT rate reduced from 15%
and 20% to 10% for 2 accounting periods beginning on or after 1 January 2015 until 31 December 2016
- CIT exemption for 5 accounting periods for new start up SMEs incorporated between 1 October 2015 to 31 December 2016
13 Oct 2015 - Draft Act to amend the Revenue Code - 20% CIT rate will be permanent
- Tax measure to support venture capital- Reduction of CIT rate for SME (same as those on 8 Sep 2015)- Tax measure to encourage real estate business – reduction of
transfer fee and mortgage fee to 0.01%, payment for purchase of immovable property granted as an allowance in PIT computation
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Contact
Somsak AnakkaselaPartnerTel: +66 (0) 2344 [email protected]
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Thank you
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