Thailand’s New Tax Rules: Reporting Foreign Income for Residents
Comments Off on Thailand’s New Tax Rules: Reporting Foreign Income for ResidentsThe Revenue Department of Thailand has issued Order No. 16/2023, which means a significant shift in tax obligations for residents earning income abroad or possessing overseas assets. This directive, signed by the Director-General of the Revenue Department, mandates that specific criteria must be met by individuals living in Thailand who must now report and pay income tax on their foreign earnings.
The primary focus of Revenue Department Order No. 16/2023 is the taxation of assessable income earned abroad by individuals residing in Thailand. This directive pertains to Section 41, paragraph 2, of the revenue code, which stipulates that individuals must declare income acquired abroad if their work duties, business activities, or assets are based outside of Thailand, and this income was brought into the country in a given tax year.
Key Provisions of the Order
Clause 1: The order applies to individuals falling under Section 41, paragraph 3, of the Revenue Code, who have assessable income due to work duties, business activities, or assets located abroad, as defined in Section 41, paragraph 2, in the tax year and bring this assessable income into Thailand in any tax year. These individuals are required to report this assessable income and include it in their income tax calculations under Section 48 of the Revenue Code. The tax assessment should coincide with the tax year in which the income was brought into Thailand.
Article 2: In line with the issuance of this order, all existing rules, regulations, orders, responses to inquiries, or any practices that contradict or oppose the provisions laid out in Order No. 16/2023 shall be void.
Article 3: The order will be effective for assessable income imported into Thailand from January 1, 2024, onwards.
Conclusion
This directive represents a significant change in the tax obligations of residents in Thailand who earn income abroad or possess overseas assets. Affected individuals are now required to ensure that their foreign earnings are accurately reported and appropriately taxed in accordance with Thai tax laws. The order aims to enhance transparency and compliance with tax regulations among residents in Thailand who engage in international economic activities.
Please don’t hesitate to contact us if you have any questions regarding Thai and international taxation at [email protected]
Sireetorn Keeratiwetchakul
Sireetorn is a Thai attorney with nine years of experience. She specializes in taxation law. Her expertise encompasses a wide array of transactions, including share purchases, asset acquisitions, and various combinations thereof.
Thailand’s International Tax Landscape
Comments Off on Thailand’s International Tax LandscapeA Closer Look at Double Taxation Agreements and Global Tax Initiatives
Thailand has a comprehensive network of Double Taxation Agreements (“DTAs”), with agreements in place with over 60 countries to prevent double taxation and promote international trade and investment.
Double Taxation Agreements are bilateral agreements established between two countries to eliminate or reduce the tax obstacles that arise when a taxpayer’s income is taxable in both countries. The agreements typically cover various types of taxes, including income tax, capital gains tax, and corporate tax.
Based on our experience, the key provisions commonly found in a DTA may include:
- Resident and Non-Resident Status: A DTA outlines criteria to determine an individual or company’s residency status for tax purposes. It helps determine the country that has the primary right to tax specific types of income.
- Permanent Establishment: A DTA establishes guidelines for determining whether a permanent establishment exists in one country, which can subject a business to taxation in that country.
- Income from Employment: The agreement usually provides rules to allocate taxing rights on employment income, considering factors such as the place of employment, duration of stay, and citizenship.
- Dividends, Interest, and Royalties: A DTA typically sets the maximum withholding tax rates on dividends, interest, and royalties paid between the two contracting countries.
5. Capital Gains: A double taxation agreement may specify how capital gains are treated, including whether they are taxed in the country of residence or the source country.
6. Avoidance of Double Taxation: The DTA establishes mechanisms to avoid double taxation. This may include allowing taxpayers to claim a tax credit or exemption in one country for taxes paid in the other country.
7. Exchange of Information: The agreement includes provisions for the exchange of tax-related information between the tax authorities of both countries to combat tax evasion and promote transparency.
Thailand as a country is actively involved in the global tax community. It has been working on aligning its tax system with international standards and best practices. It is a member of various international organizations, such as the Organization for Economic Co-operation and Development (OECD) and the United Nations (UN), which play important roles in shaping international tax policies.
Thailand has also been implementing measures to combat base erosion and profit shifting (BEPS) and enhance tax transparency. It has adopted BEPS Action Plans and is a participant in the Automatic Exchange of Financial Account Information (AEOI) under the Common Reporting Standard (CRS).
Please don’t hesitate to contact us if you have any questions regarding Thai and international taxation at [email protected]
Fabian Doppler
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Fabian, a founding partner of FRANK Legal & Tax, is a German-trained lawyer with expertise in corporate/commercial, real estate law, and litigation, and has been practicing law in Thailand since 2005.
Thailand’s Strategic Location: Why It’s the Ideal Gateway to ASEAN and Beyond
Comments Off on Thailand’s Strategic Location: Why It’s the Ideal Gateway to ASEAN and BeyondThailand is an ideal location for international expansion, as it provides quick access to both local and international markets in the ASEAN region. The nation offers enterprises numerous benefits for trade and investment, as a gateway to ASEAN and beyond.
Thailand’s Geographic Location
Thailand enjoys an excellent geographic position right in the center of Southeast Asia. Its boundaries touch Malaysia, Myanmar, Laos, and Cambodia. Due to its close proximity to important markets like China and India, the nation has become a popular destination for international investors hoping to profit from the region’s expanding marketplaces.
Cities like Hong Kong and Singapore are only a short flight away.
Thailand’s growth as a regional commerce hub has also been significantly influenced by its location at the intersection of important sea routes.
Access to a Large and Growing Consumer Market
Thailand provides easy access to a sizable and expanding consumer base. With a population of over 70 million, the nation is one of the largest in the area, and its proximity to other important countries like China and India makes it a prime location for companies looking to expand their market share.
Excellent Infrastructure and Connectivity
Thailand has a well-developed transportation infrastructure, including modern highways, ports, and airports. This makes it easy for businesses to transport goods and services both domestically and internationally.
Thai ports like Laem Chabang and Map Ta Phut, which rank among the busiest in Southeast Asia, have played a crucial role in the development of the nation’s export-focused economy.
Bangkok offers a top-class airport and the city welcomes more visitors than any other city in the world.
In terms of telecommunications, Thailand has a highly advanced and reliable network, with 4G and 5G coverage available in most areas. This makes it easier for businesses to communicate and stay connected with their partners and customers both domestically and internationally.
And Thailand certainly offers a good quality of life for expat managers who are sent to work there.
Strong Economic Growth
Thailand’s economy is robust and stable. Thailand has grown into a desirable market for companies wanting to distribute their goods and services due to the country’s rising middle class and rising purchasing power.
Government Support (in particular through the BOI)
The Thai government is committed to bringing in foreign investment and has set up a variety of initiatives and incentives to help companies wishing to set up shop there. To assist companies in setting up operations in the country, the Board of Investment of Thailand (“BOI”) provides a variety of advantages, such as tax holidays, import duty exemptions, rights to own property and simplified visa and work permit procedures.
Thailand is becoming a highly desirable location for foreign investment and a center for multinational corporations looking to grow their operations thanks to these advantages.
Thailand’s Geopolitical Significance and Role in ASEAN Trade
The Association of Southeast Asian Nations (ASEAN) is a group of ten nations with a combined population of more than 600 million and a gross domestic product (GDP) of more than $3 trillion.
Since ASEAN’s founding in 1967, Thailand served as a member and has been a major proponent of regional cooperation and integration. Thailand has actively participated in the negotiation of free trade agreements with significant trading partners and has been a steadfast supporter of the ASEAN Free Trade Area (AFTA).
Free Trade Agreements
Thailand has also signed a number of free trade agreements with nations both inside and outside of the ASEAN bloc, including:
- ASEAN Free Trade Area (AFTA)
- ASEAN Economic Community (AEC)
- ASEAN-China
- ASEAN-India
- ASEAN-Japan
- ASEAN-South Korea
- ASEAN-Australia-New Zealand
- ASEAN-Hong Kong
- Thailand-Australia
- Thailand-New Zealand
- Thailand-Japan
- Thailand-Peru
- Thailand-Chile
- Thailand-India
- The Regional Comprehensive Economic Partnership (RCEP is the FTA between the ASEAN and Australia, China, Japan, New Zealand, and South Korea)
(Source: https://www.trade.gov/country-commercial-guides/thailand-trade-agreements)
These agreements offer preferential tariffs and duty-free access to markets in the region, making Thailand a prime location for businesses looking to establish a regional presence.
Thailand’s Work Force
Thailand offers a highly skilled and educated workforce and an increasing number of graduates in science and technology fields. This makes it an ideal location for companies looking to establish research and development centers or high-tech manufacturing facilities.
A Smart Choice for Businesses Looking to Expand
Thailand should definitely be taken into consideration if you are contemplating expanding your business to Asia, in particular to the ASEAN region. It is a valid alternative to mainland China, thanks to its advantageous location, pro-business legislation, and alluring investment incentives.
If you would like any legal or tax support with setting up in Thailand or have any questions, do not hesitate to contact us at [email protected]
Fabian Doppler
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Fabian, a founding partner of FRANK Legal & Tax, is a German-trained lawyer with expertise in corporate/commercial, real estate law, and litigation, and has been practicing law in Thailand since 2005.
The Role of Earn-Outs in M&A Transactions: A Strategic Pricing Mechanism
Comments Off on The Role of Earn-Outs in M&A Transactions: A Strategic Pricing MechanismIn the dynamic landscape of mergers and acquisitions (M&A), earn-outs have emerged as a strategic pricing mechanism that can greatly impact the success of a transaction. Earn-outs introduce a contingent element to the final purchase price, allowing buyers and sellers to align their interests and bridge valuation gaps, particularly in deals involving privately-held companies or transactions with values below $250 million.
At its core, an earn-out is a pricing mechanism that links a portion of the purchase price to the target company’s post-sale performance. This approach is commonly employed when the buyer faces challenges in effectively valuing the business or when disagreements on valuation arise between the parties. By tying a portion of the purchase price to future performance, buyers can mitigate risks and sellers can be incentivized to maximize the business’s potential.
In our experience, earn-outs typically involve the identification of specific achievement criteria that need to be met for the contingent portion of the purchase price to be paid out. These criteria may be based on financial targets, such as revenue or earnings, or operational milestones, such as market penetration or product development.
One of the primary advantages of using earn-outs is that they allow buyers to overcome limitations in available cash at the time of closing. Instead of paying the full purchase price upfront, buyers can structure the payments to be made over time based on the achievement of specified milestones. This flexibility can be particularly valuable in situations where the buyer wants to conserve cash for other purposes or needs to allocate resources strategically post-acquisition.
However, it is important for both buyers and sellers to approach earn-outs with careful consideration. The terms of the earn-out, including the achievement criteria and the payout structure, should be negotiated and clearly defined in the transaction agreement. Additionally, mechanisms for dispute resolution and potential contingencies should be addressed to ensure a fair and transparent process.
In conclusion, earn-outs have become an increasingly common element in M&A transactions, providing a valuable tool for buyers and sellers to navigate complex valuation challenges and align their interests. By effectively utilizing earn-outs, parties can unlock opportunities for mutually beneficial outcomes and facilitate smoother transitions in the ever-evolving business landscape.
If you have any questions, Please feel free to contact us at [email protected]
Fabian Doppler
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Fabian, a founding partner of FRANK Legal & Tax, is a German-trained lawyer with expertise in corporate/commercial, real estate law, and litigation, and has been practicing law in Thailand since 2005.
FRANK Legal & Tax’s New Address: A Modern Office in the Heart of Bangkok
Comments Off on FRANK Legal & Tax’s New Address: A Modern Office in the Heart of BangkokWe are moving! We will be relocating to a new address on the 22nd of July, 2023. Our new office is located in the Sindhorn Building, a prestigious and modern office complex in the heart of the city.
New Address: Sindhorn Building 2, 10th Floor, 130 Wireless Road, Lumpini, Pathumwan, Bangkok 10330
At FRANK Legal & Tax, our commitment to delivering exceptional legal and tax services remains as we expand our operations. With the team growing, our new space will enable us to continue providing the high standard of service you have come to expect from us.
Our phone numbers and email addresses will remain unchanged. Please update your records with our new address to avoid any inconvenience.
We look forward to welcoming you to our new office and thank you for your continued support.
Feel free to contact us should you have any questions at [email protected]
FRANK Legal & Tax Named “Best Commercial Law Firm in Thailand” by South East Asia Business Awards
Comments Off on FRANK Legal & Tax Named “Best Commercial Law Firm in Thailand” by South East Asia Business Awards
It is our pleasure to announce that FRANK Legal & Tax has won the prestigious award for “Best Commercial Law Firm 2023 in Thailand”, presented by the South East Asia Business Awards 2023.
The South East Asia Business Awards is a distinguished program that celebrates the achievements of companies and executives who are driving growth and development in this dynamic region.
Winning this award is a testament to our team’s unwavering dedication to excellence in providing legal and tax solutions to our clients in Thailand. We are proud to be recognized as an innovator and leader in the South East Asian business landscape, and we remain committed to providing high-quality services that exceed our client’s expectations.
Fabian Doppler, Managing Partner at FRANK Legal & Tax, said “This award is a true reflection of our team’s unwavering dedication to our clients and their businesses. We are delighted to receive this honor and look forward to continuing to provide the highest quality legal and tax advice”.
Thank you to APAC Insider and the judges for this tremendous honor. We are proud to be recognized as the “Best Commercial Law Firm 2023 in Thailand” and we will continue to push ourselves to achieve greater heights and to provide unparalleled legal and tax solutions to our clients in Thailand and beyond.
FRANK Legal & Tax Advises on Apave Group M&A Deal
Comments Off on FRANK Legal & Tax Advises on Apave Group M&A Deal
Our firm has recently been working on a major M&A transaction, joining as Thai advisers in an international legal team led by UK based law firm Addleshaw & Goddard. The legal team represented France based Apave Group in the acquisition of the technical inspection activities of the American Bureau of Shipping (ABS) Group. As advisors in Thailand, we provided specialist legal support by conducting due diligence on the Thai subsidiary of the target company. With our expertise in corporate law, we navigated complex legal analyses and contributed to the successful overall transaction.
If you are looking for any commercial legal support, contact our team at [email protected]
“HIGH” Standards in Thailand; Regulations to Unlock Cannabis Industry
Comments Off on “HIGH” Standards in Thailand; Regulations to Unlock Cannabis IndustryIn the wake of shared global challenges, tourism and green growth is the way forward for Thailand’s sustainable economy. Specifically, a relevant government panel has set up a plan to develop the country as an international hub and targeted Thailand as the world’s foremost destination for the medical industry and wellness tourism. Still, a dream without a plan is just a wish. In response, the legal scheme to transform Thailand into a comprehensive medical hub was initially implemented. Cannabis liberalization will further strengthen Thailand’s position as a global medical hub with affordable healthcare.
In driving Thai economic sustainable development forwards, the Ministry of Public Health of Thailand (MOPH) has refined re-emerging health aid. On 14 December 2020, MOPH announced the notification on the specification of controlled narcotic drugs under category 5, B.E.2563 (2020), to remove some parts of cannabis and hemp from category 5 under Narcotics Act B.E.2522 (1979). The following components of cannabis and hemp, as well as a substance derived from those parts, do not constitute narcotics under such regulation:
- Bark, Stalk, Fiber, Branches, and Roots;
- Leaves (excluding cannabis flower and bud);
- Extracts that have tetrahydrocannabinol (THC) not exceeding the capped amount, i.e., 0.2 percent by weight.
- Residue from cannabis extract, which THC is not over 0.2 percent by weight.
- Hemp seed, hemp seed oil, or hemp seed extract.
9 June 2022 marks a thoughtful day of observance of the cannabis industry in Thailand; the government of Thailand has delisted “all” parts of cannabis and hemp from banned narcotic lists under the notification of specification of controlled narcotic drugs under category 5, B.E.2665 (2022). Under this “Standard”, all cannabis and hemp “extracts” remain considered narcotics, except for the following:
- Extracts that have THC not exceeding the capped amount, i.e., 0.2 percent by weight, for which permission to extract from cannabis or hemp plants grown in Thailand has been obtained; and
- Extracts from seeds of cannabis or hemp plants grown in Thailand.
Following the recent official decriminalization of cannabis and hemp, this transformation would enable the widespread of herbal medicinal cannabis treatments and marijuana-infused food. Specifically, traditional cannabis cuisine will officially be back on the menu. For educational purposes, this would allow more laboratories to grow cannabis and hemp without an overwhelming loss its resources for approval from relevant authorities. Importantly, using parts of cannabis and hemp plants would not constitute a violation of this legal standard. Although Thailand legalized growing cannabis and eased such consumption rules, smoking cannabis in public may be considered a public nuisance and remains unauthorized. Moreover, the importation, exportation, and distribution of cannabis and hemp parts, as well as its derived products containing THC over 0.2 percent by weight, remain stringently controlled by relevant specific laws, including the Plant Quarantine Act B.E.2507 (1964) and Plants Act B.E.2518 (1975).
In the light of laws and economic junctions, it is worth noting that although such continuing steps for unlocking the cannabis industry have been done, many relevant activities pertaining to the usage of cannabis and hemp will be monitored by newly enacted legislation thereafter, i.e., the Cannabis and Hemp Act. The law will then act as the detailed regulation framework and seal off remaining legal loopholes for the following activities relating to cannabis and hemp;
- Manufacture, including Cultivation, Modification, and Packaging for Commercial Purposes;
- Import and Export; and
- Sale and Possess.
Specifically, under this upcoming regulation, any person who wishes to pursue the above-mentioned activities shall obtain the required license from relevant authorities. The forthcoming legislation will also impose legal limitations for avoiding the abuse of cannabis and hemp in children (under age 20) and pregnant or lactating women.
Amid a shifting legal landscape and future outlook of cannabis and hemp markets, we would be happy to guide you through successfully accessing this developing market with safety compliance with regulations. Please do not hesitate to contact us if you have any questions at [email protected]
Nathathai Pichaisawad
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Nathathai is a senior Thai attorney specializing in corporate and commercial law, with expertise in contract negotiations, cross-border transactions, compliance, and regulatory matters.
Short-term rental businesses via online platforms in Thailand
Comments Off on Short-term rental businesses via online platforms in ThailandAs the economy recovers from the COVID-19 crisis, Thailand is again attracting more and more tourists to the country. Visitor numbers are increasing, and short-term rental businesses through platforms such as Airbnb, including daily rentals via other online platforms, are gradually becoming more popular, encouraging villa and apartment owners to set up short-term rentals to allow tourists to stay in their properties.
Problematically, however, properties in Thailand are generally not allowed to be rented out for less than 30 days unless you have a hotel license, while condominium units are restricted to being used for short-term rentals under Thai Condominium laws.
In our experience, acting contrary to these requirements may constitute a criminal offense under Thai law.
Online rental platform – what is it?
An online rental platform is an online marketplace for travelers looking for accommodation, for example, Airbnb, Agoda, or Booking.com. The groundbreaking model allowing private landlords to host vacationers and business travelers has effectively transformed the digital platform into the “world’s largest hotel”.
Online rental platform’s legal status is still uncertain
Online rental platforms continue to face massive criticism for being major competitors to regular hotel and accommodation businesses. Hotel owners are not pleased about declining revenues while continuing to pay the overhead costs for their properties. As a result, they view online rental platforms such as the Airbnb model as an unacceptable hardship. As a result, like other countries, Thailand has imposed restrictions against Airbnb and its operations.
For condominiums
We have to be focused on two Acts, the Condominium Act B.E. 2522 (1979) (the “Condominium Act”) and the Hotel Act B.E. 2547 (2004) (the “Hotel Act”).
The Condominium Act, section 17/1 paragraph 2 states that no person shall be permitted to operate their business in the condominium except for the provided specific area of the condominium building. This regulation applies to short-term rentals via an online platform.
Another concern is the Hotel Act. Under the Hotel Act, the definition of “hotel” is a lodging premise established for commercial purposes to provide temporary accommodation to a traveler or any person for consideration. Therefore, a monthly rental or more is exempt from the definition of temporary accommodation of the Hotel Act.
Section 1336 of the Thai Civil and Commercial Code (“CCC”) states that the unit owner can enjoy his rights over his property if it does not disturb others. However, the Condominium Act, which governs the usage of the condominium unit, prohibits the condominium owner from using his condominium unit for short-term rental.
For house
Regarding landed property, the related piece of legislation is the Hotel Act which is, in principle, the same as for the condominium unit, which restricts the usage to short-term rental, except if such house owners have a hotel license. If the house owner has more than 4 rooms and is entitled to hold more than 20 occupants at a time, the property owner is entitled to apply for a hotel license to operate a short-term rental legally.
On the other hand, the house owner is entitled to apply for the non-hotel license if the property has fewer than 4 rooms and cannot hold more than 20 tourists at a time but still wants to operate a short-term rental. The owner has to apply for a non-hotel license. This will allow a short-term rental of a house to be valid and legal.
There are some specific requirements for each type of license. For example, for a non-hotel license, the owner must be a Thai national. Foreigners or juristic persons may not apply for this type of license. The reasoning behind this rule is to increase local people’s income, who could use their houses as accommodation for tourists as their additional main income source. The hotel license has stricter requirements than non-hotel licenses, such as hotels may not be located near historical sites, and entrance to the hotel must not cause traffic problems. Moreover, before applying for a hotel license, the building must also comply with the Building Control Act B.E. 2522. The regulation stipulates many more obligations for the applicant to comply with.
Conclusion
The legality of online short-term rental platforms in Thailand is still up in the air. The condominium is not allowed to rent on a daily or weekly basis. However, this is not a general rule, and it depends on whether each condominium regulation allows it.
In order to legally operate a short-term rental business, the house owner requires a hotel or a non-hotel license, as the case may be, subject to the Hotel Act. A house with fewer than 4 rooms and 20 occupants maximum shall obtain a non-hotel license; however, a house with more than 4 rooms and more than 20 occupants in the building must obtain a hotel license.
Thus, the legal status of online short-term rental platforms is still unknown as there is no clear answer by government authorities whether it is possible to do or not.
If you have any questions related to property in Thailand, please do not hesitate to contact us at [email protected]
Fabian Doppler
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Fabian, a founding partner of FRANK Legal & Tax, is a German-trained lawyer with expertise in corporate/commercial, real estate law, and litigation, and has been practicing law in Thailand since 2005.
Briefing on Long-Term Resident (LTR) Visa with Swiss Thai Chamber of Commerce (STCC)
Comments Off on Briefing on Long-Term Resident (LTR) Visa with Swiss Thai Chamber of Commerce (STCC)Our legal team recently shared our insights on Thailand introducing a new 10-year Long-Term Resident Visa at a special SwissThai Chamber of Commerce (STCC) ‘Briefing on Long-Term Resident (LTR) Visa’. See our guide on the Long-Term Resident Visa (LTR).
The event provided an opportunity to explore LTR visas related to the multiple benefits for holders, including the extendable 10 years option, and answer questions from the audience. Our team also explored who can apply and how to submit the application.
The audience asked several questions based on their own experiences of planning or trying to pursue a visa in Thailand. The event was a success, drawing attention to the importance of the rule of regulation in LTR visas in Thailand.
FRANK Legal & Tax will continue to hold events for the business community related to important legal issues, and we welcome any questions you may have about Long-Term Resident (LTR) visas in Thailand by contacting us at [email protected]
