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04 | SWISS THAI CHAMBER OF COMMERCE | FEBRUARY 2011 Regional Operating Headquarters THAILAND’S NEW MODEL ROHs On 5 November 2010, the Royal Decree tax law prescribing the new Model 1 and Model 2 ROH regime was published in the Government Gazette, and on 15 November 2010, the rules, procedures and conditions of the Thai Revenue Department under the new law were issued. These new laws enhance the ROH regime that was introduced in Thailand in 2002. The 2002 ROH regime still exists and continues, and the new laws insert new provisions in relation to an additional new Model ROH regime. The Thailand ROH regime is now a two-tiered regime – the original ROH introduced in 2002 and new ROH introduced in 2010 – which we understand the Thailand Revenue Department officials are referring to as ROH Model 1 and ROH Model 2. RSM Advantage should like to make it clear up front that whilst many foreigners may find them-selves attracted to the tax concessions offered under the ROH regime, the ROH models are really only for international and multinational companies that have operating businesses in a number of South East Asian countries. A Thailand Regional Operating Headquarters company falls under the supervision activities of the Revenue Department’s Large Business Taxpayers Administration Office (LTO), which investigates ROH companies quite rigorously, and should the LTO audit officers discover any prescribed rule, procedure or condition has not been fully complied with by the ROH company, the ROH company will lose its entitlement to all the tax concessions that are prescribed under the law retrospective to the 1st year, and the ROH company will be required to pay the shortfall in tax between the normal rates of tax applying to the income and the reduced rates of tax that has been paid under the regime, plus penalty and surcharge. Model 1 The Model 1 ROH (or the old or original ROH regime) remains largely as it was with no significant changes being made to either the tax concessions offered for that regime or the rules, procedures and conditions required to be met under that regime. Virtually, the only new condition that has been added to the old Model 1 ROH regime is that a company claiming the tax concessions under the 2002 regime shall not be entitled to the tax concessions under the new 2010 Model 2 ROH regime. The tax concessions offered under the Model 1 ROH remain and continue to exist alongside the new ROH Model 2, and thus, a company that finds it difficult to meet the conditions for the tax concessions under the new ROH Model 2, can choose the ROH Model 1 regime if they wish. Model 2 The new Model 2 ROH regime offers enhanced tax concessions, but at the same time, because the tax concessions are enhanced, a company wishing to apply for the Model 2 concessions is required to
FEBRUARY 2011 | SWISS THAI CHAMBER OF COMMERCE | 05 meet conditions that are a bit more onerous or stringent. Basically, in order for an ROH company to be entitled to the enhanced tax concessions under the Model 2 regime, an ROH company is going to have to put a higher level of commitment into its ROH operations in Thailand. It should also be noted that companies wishing to claim the tax concessions under the Model 2 ROH regime, must do so within 5 years of the issue date of the Revenue Department’s rules, i.e. within 15 November 2015. Summary of the Concessions and Conditions A summary of the more important of the tax concessions and conditions under the two ROH models on offer is as follows. Tax Concessions CONDITIONS Model 1 ROH Model 2 ROH Corporate tax concessions Corporate income tax on services income received from associated companies 10% 0% and branches outside Thailand Corporate income tax on services income received from associated companies 10% 10% and branches inside Thailand Corporate income tax on dividend income received from associated companies 0% 0% and branches whether inside Thailand or outside Thailand Corporate withholding tax on dividends paid to the ROH company’s foreign 0% 0% company shareholder Personal tax concessions Personal withholding tax rate on salaries paid for hire of labor outside Thailand 0% 0% Personal withholding tax rate on salaries paid for hire of labor in Thailand 15% 15% for a max for a max of 4 years of 8 years CONDITIONS Minimum paid-up capital requirement Bt 10m Bt 10m Minimum number of associated companies or branches outside Thailand In the 1st and 2nd years 3 1 In the 3rd and 4th years 3 2 In the 5th and subsequent years 3 3 Minimum income requirements for income earned and received from associated companies and branches outside Thailand For the 1st, 2nd and 3rd years 33,33% 50% For the 4th and subsequent years 50% 50% Minimum expenditure requirements Minimum annual operating expenditure paid to recipients in Thailand (not including – Bt 15m depreciation, expenses paid to recipients outside Thailand, raw materials, packaging, and royalties); or Minimum annual capital investment expenditure paid to recipients in Thailand – Bt 30m (not including investment in shares on the stock exchange) Minimum requirements in relation to employees Minimum number of employees possessing high school education and diploma or – From the 3rd year: equivalent professional qualifications 75% of all employees Minimum amount of remuneration – At least 5 shall have income of Bt 2.5m each per year
Page 1: ISSUE 20 | FEBRUARY 2011 | SWISS-TH
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