The tax market in Thailand has continued to evolve with various reforms in light of recent global tax trends. The international interest prompted an increased focus by the Thai government on tax. More changes and developments to the tax system are expected in the coming years.
"The National Council for Peace and Order has set reforming the tax system as one of its top priorities," said Benjamas Kullakattimas, head of tax at KPMG. "The reform is aimed at creating fairness, reducing disparity and increasing the state's revenue in the long term. At the same time, [the reform] is expected to enhance Thailand's long-term competitiveness and ensure sustainable development."
In the past 12 months, parliament passed an amendment to reduce corporate income tax to 20% which is significant considering that as recently as 2011 the rate was 30%. Corporate tax decreased to 23% in 2012, before being cut again 20% in 2013, initially as a temporary measure. In mid-2015, the rate was fixed at 20% permanently.
Also, the VAT rate – which had been set at 10% for many years before being temporarily reduced to 7% during the financial crisis – will remain at 7% for at least one more year. The decision must be renewed in October 2016 but since Thailand's economy has been in recovery since the military takeover in 2014, the government may feel pressure to keep its rate on par with nearby Singapore, where the rate is 7%.
To compensate for reductions in several tax rates, the government increased the tax base through measures including a tax amnesty.
At the beginning of 2016, the government issued an Emergency Decree stating that the taxpayers at the lower end of the spectrum (up to THB 500 million ($14.4 million)) are to be waived from any tax examination, inquiry, assessment, payment demands or criminal prosecution on income generated prior to January 1 2016 if they register with the revenue office and commit to becoming fully tax compliant post-registration. A customs amnesty has also been announced.
A further incentive for companies eligible for the tax amnesty to note is that the amount of tax audits has also increased, with a clear trend of aggressive audit activities.
"Tax litigation and dispute was very active due to aggressive tax authorities' attitudes. Their education and knowledge level has been improved and has become far more sophisticated than before, with support from the use of technology in assessing audits, which also pushed the number of audits to increase dramatically," said Piphob Veraphong of LawAlliance.
In addition, the tax authorities have formed a team to concentrate on digital trading and e-commerce which indicates the interest of the tax authorities is expected to extend to cross-border businesses.
Aside from measures implemented and amended to increase revenue collection within the existing tax regime, the government has introduced an array of new tax laws which will establish new sources of tax collection. New taxes will be applied on inheritance, and property. Transfer pricing regulations have also been updated.
"One of the biggest efforts that Thai government is putting on, is to attract other types of foreign investment into the country other than in the typical manufacturing and services industries," said Jack Sheehan of DFDL.
The government issued a new amendment in relation to international headquarters (IHQ) in May 2016 to encourage multinational companies to consider Thailand as headquarter locations rather than other ASEAN countries. In addition to the IHQ scheme there is a new personal income tax rate and there are new corporate income tax incentives.
EY Corporate Services Limited
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|Corporate Income Tax||20%|
|Capital Gains Tax||20%|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||15%|
|Branch Remittance Tax||10%|
Kitipong Urapeepatanapong manages the tax practice at Baker & McKenzie, which boasts four partners and 11 other professionals. Urapeepatanapong is a partner and the chairman of the Bangkok office of the firm. He has been a lawyer for around 30 years and his experience includes tax advisory, tax planning, M&A, capital markets and securitisation, restructuring, corporate governance and tax dispute resolution. He has special knowledge in banking and finance.
The professionals at the practice have extensive experience and ability in providing comprehensive advice on all manners of Thai taxation as well as cross-border matters including transactions and structuring of investment. The practice includes specialised tax dispute resolution lawyers who also focuses on transfer pricing matters and defend clients before courts.
The tax team represented NMB-Minebea, an electronics manufacturer, in a litigation case with the revenue department regarding tax loss and deduction benefit under investment promotion law. The tax dispute involved controversial legal and tax issues and interpretation of the law. Two government authorities, the board of investment (BOI) and the revenue department, had different interpretations and practices, and that impacted a number of promoted companies with more than one BOI project.
A client said: "Baker McKenzie's services have been extraordinary and in top class dealing. Baker McKenzie, Bangkok has been dealing with a highly complicated tax/BOI case on our behalf and has been doing so very successfully as a win-win case."
Blumenthal Richter & Sumet is a full-service international law firm and its tax group provides practical and sound tax solutions across a full suite of tax issues including business tax, corporate tax, transfer pricing, property and land tax, IP structuring, VAT, strategic tax planning, international tax and double taxation treaties.
Sumet Mingmongkolmitr heads the tax practice and he is strong in advising high net worth individuals and multinational corporations on corporate tax, VAT, transfer pricing, joint ventures and international tax treaties.
During the past year, the team provided advice on tax planning for transactional structures among multinational group companies. The planning relates to concerns about corporate income tax in light of double tax treaties between Thailand and relevant countries.
Deloitte's tax practice provides complete services on all aspects of tax matters including business tax, international tax, transfer pricing, tax management consulting, M&A, government incentives, private company services, indirect tax, global employer services and business process solutions.
Anthony Loh is the tax and legal country leader of the firm and has more than 17 years of experience advising multinationals as well as local companies on taxation. He has a special focus on restructuring and business model optimisation planning and has been part of significant engagements with tax systems in countries as diverse as the US, China, Japan, Korea, Singapore, Vietnam and Malaysia.
The team has rich experience serving various industries including consumer and industrial products, energy and resources, financial services, life science and healthcare, the public sector, and technology, media and telecommunications (TMT).
Jack Sheehan oversees DFDL's tax and transfer pricing practices and leads the regional tax practice of the firm. He specialises in providing advice on international tax planning across multiple jurisdictions, M&A, due diligence, transfer pricing and cross-border transactions. The firm's tax practice comprises 14 partners and 150 professionals including Emvalee Chirapurk, who was hired as a tax manager during the past year.
The tax team offers a combination of specialised lawyers and accountants focusing on tax and customs services, including tax litigation, strategic day-to-day planning, free trade agreement (FTA) and customs advisory. Specifically, the team provides tax structuring, advisory and dispute management services by supporting clients through a broad spectrum of tax regimes, including income tax, international tax, tax consolidation, capital gains tax and transfer pricing.
The firm provided tax advisory services to a leading telecom company listed on the Stock Exchange of Thailand in relation to a multi-million dollar web service project. The scope of the work, which was completed in August 2015, included advising on tax planning for cloud computing activities in three different jurisdictions.
EY, as one of the largest accounting firms in the world, offers a full suite of tax services including tax advisory for domestic and cross-border matters, global trade, global compliance and reporting, private client services, tax accounting, tax performance advisory, tax policy and controversy, transaction taxes, VAT and other sales taxes, transfer pricing and more.
Benjamas Kullakattimas is the head of the tax and legal department at KPMG. He has been specialising in taxation for 20 years and has experience in tax advisory and compliance, global compliance management and transfer pricing.
The tax practice of KPMG consists of eight partners and a mix of 140 professionals, including accountants, lawyers and economists. The practice assists clients with a broad range of tax issues including compliance, financing, restructuring and value chain management. The latter practice area in particular is helped greatly by KPMG's global network.
In June 2015, the team worked with a client on its acquisition of a substantial working interest in two petroleum blocks in Thailand. The team conducted tax and financial due diligence and provided tax-efficient acquisition structuring and tax modelling advisory assistance throughout all stages of the deal. Key focuses were the value and use of tax losses, Thai petroleum income tax, the specific remuneratory benefits tax and VAT. The team also conducted a review of the sale and purchase agreement for the transaction.
LawAlliance is a dedicated tax law firm specialising in the areas of tax-driven transaction, tax planning and tax dispute. The firm often participates in the tax reform activities as well as in educational sectors especially the Master tax programme of some major universities.
Piphob Veraphong is one of the best-recognised tax lawyers in Thailand. He has more than 30 years of extensive professional experience advising international and local clients in the areas of litigation, finance and securities transactions, capital gains tax, corporate tax, international tax planning, foreign investment, transfer pricing, M&A and joint ventures.
The tax team represented a major petroleum company on tax appeal cases with the revenue department in relation to the home office expense allocation and the use of domestic sale credit. The advice involved a complicated study of a petroleum income tax regime and the preparation of documents to support expense allocation.
Lorenz & Partners is a boutique tax advisory firm focusing on medium to large-sized European corporate investors in Southeast Asia. Its tax department, led by Till Morstadt, has three partners and three other professionals focusing on all manner of tax disciplines including indirect taxes, corporate tax, tax disputes, tax compliance and tax accounting.
PwC's tax services line is led by Somboon Weerawutiwong and covers all aspects of taxation including M&A, tax structuring, tax reporting and strategy, indirect taxes, business process outsourcing, transfer pricing, tax dispute resolution, financial services and international assignment services (IAS).
The team is experienced in different industries and also competent in providing international and local firms with sound tax solutions and effective strategies to manage risks.
The tax team at Tilleke & Gibbins is led by Sriwan Puapondh, who has 30 years of tax experience including 10 years with Thailand's revenue department. The dedicated tax team of the firm helps clients to maximise tax benefits and minimise tax risks in line with their business objectives.
The practice provides an array of tax services such as customs duties, excise tax, specific business tax, transfer pricing, petroleum income tax, corporate income tax, property and land tax, tax planning, double taxation treaties, personal income tax, stamp duties, signboard tax and VAT.
Some of the tax practice's key clients are Azbil, General Motors Group, IKEA Holdings Services, Summit Capital Leasing, Hutchinson Technology Operations and Boots Retail.
The firm advised the Central Bank of Norway in respect of synthetic stock-lending transactions concerning shares in Thai-listed companies. Its advice focused on securities regulatory matters and tax, specifically corporate income tax, withholding taxes (including capital gains tax), VAT and stamp duty. The advice involved considerations of permanent establishment risk, benefits granted under the applicable tax treaty, anti-avoidance provisions and tax disclosure in Thailand. The matter was particularly interesting given the Norwegian party's status under the Thai-Norwegian tax treaty.