PROSPECTUS THAI BEVERAGE PUBLIC COMPANY LIMITED ...

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Part 2 Issuing CompanyThai Beverage Public Company Limited3.3 Regulation3.3.1 Regulation by the Excise Department, the Ministry of FinanceGeneralThe Thai Government has regulated the alcoholic beverage or liquor industry due to its natureas a stable revenue generating source and also due to health concerns. In the past, the Governmentissued several laws and regulations to control all processes of the liquor industry including productionand import, spirits tax, reproduction, transportation and sale. The Liquor Act B.E. 2493 (1950), asamended (the “Liquor Act”), has been the main legislation for controlling all liquor-related activitiesin Thailand. The Minister of Finance is authorized under the Liquor Act to issue ministerialregulations covering: (1) the types of liquor, the tax rate imposed on liquor, and the characteristics ofstamp duty and other fees not exceeding the designated maximum rate; (2) the discount or exemptionof fees on the issuance of licenses for the production and sale of liquor or liquor enhancers; (3) thediscount or exemption from excise tax for specific types of liquor; and (4) the prescription of rules,conditions and requirement for implementations under the Liquor Act. The Excise Department hasbeen authorized, under the supervision of the Ministry of Finance, as the official entity to regulate andsupervise the liquor industry.LicensingThe Liquor Act classifies liquor as follows:• “fermented liquor” means liquor not made by distillation, including fermented liquormixed with distilled liquor of alcohol content not exceeding 15 degrees; and• “distilled liquor” means liquor made by distillation, including distilled liquor mixedwith fermented liquor of alcohol content exceeding 15 degrees. Sub-classifications ofdistilled liquor pursuant to the Ministerial Regulation No. 46 (B.E. 2513 (1970)) issuedunder the Liquor Act categorizes distilled liquor as follows:• Ethyl Alcohol (Sura Samthap) means distilled liquor of alcohol content more than 80%;• White spirits (Sura Khao) means distilled liquors without any mixture or color withalcohol content less than 80%;• Compounded spirits (Sura Pasom) means distilled liquors made from blended ethylalcohol or white spirits with alcohol content less than 80%;• Blended spirits (Sura Prung Piset) means distilled liquors made from blended ethylalcohol with alcohol content less than 80%; and• Special spirits (Sura Piset) means distilled liquors produced by a special process withalcohol content less than 80%, including (i) whisky, brandy, rum, gin or other foreignspirits; and (ii) Gao-Liang, Chiang-Chun or other Chinese herb spirits.Under the Liquor Act, liquor production, or possession of a liquor distiller, is prohibitedunless licensed by the Director-General of the Excise Department (the “Director-General”). Theliberalization of the Thai liquor industry in 1999 allowed qualified persons to apply for a license forthe production and sale of liquor, subject to the requirements provided by the relevant regulations.The Ministry of Finance, pursuant to the Notifications of the Ministry of Finance Re: LiquorAdministration Methods B.E. 2543 (2000) (No. 1-No. 4) (the “Notifications”), prescribes conditionsfor the license application for the production and sale of each type of liquor, including (i) distilledliquor, (ii) fermented liquor (beer) and fruit spirits, (iii) ethyl alcohol (Sura Samthap), (iv) foreignPart 2 Page 71
Part 2 Issuing CompanyThai Beverage Public Company Limitedliquor, (v) liquor to be used in the production of other goods, (vi) liquor enhancer, (vii) localfermented liquor and fermented liquor other than beer and fruit spirits, (viii) products fromagricultural produce with alcohol content not more than 15% and (ix) community spirits. TheNotifications also specify the qualifications of an applicant and requirements relating to productionand quality of liquor; for example, nationality and legal status of the applicant, production capacity,location of the facility, the area of the facility, machinery capacity, number of workers and alcoholcontent for liquor.Licensed producers are subject to a number of procedures and conditions with respect to theproduction and sale of liquor prescribed by the Director-General. In particular, for the production andsale of (i) distilled liquor, (ii) fermented liquor (beer and fruit spirits) and local fermented liquor and(iii) fermented liquor other than beer and fruit spirits, the licensed producers generally are required toenter into an agreement to produce and sell liquor with the Excise Department, submit details of theproduction process and raw materials to be used in production for approval, submit a sample of liquorbefore delivery from the facility, maintain the quality of the liquor, submit samples of labels, marksand containers for approval, report the ex-factory price of liquor, submit the liquor inventory accountand purchase of raw materials and pay the annual license fee and excise tax.The licensed producers of distilled liquor and fermented liquor are allowed to fix thewholesale and retail sales prices, provided that they report prices to the Excise Department. TheExcise Department official is authorized to investigate the liquor facility or wholesaler’s storagefacility during working hours.The Excise Department also supervises the import, sale or display for the purpose of sale andtransportation of liquor. The sale or display for the purpose of sale of liquor must be licensed by anExcise Department official. An importer of liquor with volume greater than one liter or a seller ofliquor must obtain a license from Excise Department officials. Transportation of liquor from thefacility for which proper tax payment has not been made is prohibited unless approved by theDirector-General. Transportation of liquor from the facility exceeding 10 liters is prohibited unless atransportation permit is obtained from the Excise Department officials.Excise Tax and PaymentThe Excise Department collects excise tax (spirits tax) for locally produced liquor while theCustoms Department collects excise tax, on behalf of the Excise Department, for imported liquors.Licensed liquor producers must pay excise tax for liquor produced before packing. Excise tax paidwill be identified by the spirits tax stamps affixed on the liquor containers under the supervision of theExcise Department officials or in another manner as specified by the ministerial notification.Importers of liquor, except for importers of liquor not exceeding one liter with an open container,must pay excise tax by affixing excise tax stamps on the containers before customs clearance. TheDirector-General, however, may allow payments to be made elsewhere.The Liquor Act provides for the calculation of the excise tax based on both ad valorem andthe quantity. The applicable rate will be the one that yields the greater tax revenue to the Government.For ad valorem tax payment, the value of the liquor base is as follows:(1) for locally produced liquor, the ex-factory price; if there is no ex-factory price or ifthere are several ex-factory prices, the price announced by the Director-General applies;and(2) for imported spirits, the sum of the CIF value, import duty, special fee under the lawgoverning investment promotion and tax and other fees, if any, prescribed by a RoyalDecree, but excluding value added tax.Part 2 Page 72
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