Category Archive: Legal Blog

• Applying for Thailand’s Long-Term Resident Visa (LTR): Requirements and Qualifications

  June 22, 2022 3:45 pm Comments Off on Applying for Thailand’s Long-Term Resident Visa (LTR): Requirements and Qualifications

  The Thai government recently announced that they are making some changes to the Long-Term Resident Visa (“LTR”) requirements intending to attract more foreign residents to come to Thailand.

  Kindly note that although the Thai cabinet and the Board of Investment (BOI) approve of this new LTR visa, there still has not been any official announcement from the Immigration Department as yet. Therefore we are still awaiting final confirmation for the time being.

  This article will detail some of the currently discussed criteria and requirements for different application categories to live, work, and do business in the country. There are four categories of eligible persons:

  

  1. Wealthy global citizen

  The following is required to be eligible as a “Wealthy global citizen”:
  
  a. Personal Income of no less than $80,000 USD per year in the two years before applying for the visa.

  b. Directly invest in Thailand as an individual investor no less than $500,000 in at least one of the below items before applying for the visa:
  

  • Thai government bond issued by the Ministry of Finance with over five years of remaining maturity at the time of application.
  • Investment in a limited company or public company registered under Thai law, and investment in a venture capital company registered with the Securities and Exchange Commission (SEC), Thailand, excluding investment in the Stock Exchange of Thailand (SET).
  • Investment in real estate (condominiums)

  c. The net asset value should be no less than $1,000,000 at the time of application (excluding assets without proof of applicant’s ownership and assets without reliable market appraisal evidence such as artworks, amulets, cryptocurrencies, or memberships).

  d. Health insurance with coverage not less than $50,000 with a remaining maturity of no less than ten months at the time of application or valid social security benefits which insures for hospitalization and treatment in Thailand or a deposit not less than $100,000 in a bank account at least 12 months before completing the application.

  2. Wealthy Pensioner

  The following is required to be eligible as a “Wealthy pensioner”:

  a. 50 Years of age or older and receives a regular pension income of no less than $80,000 per year.

  b. In case personal income is less than $80,000 but no less than $40,000 per year, applicants must have an investment not less than $250,000 in any of the following categories:
  

  • Thai government bond issued by the Ministry of Finance with over five years of remaining maturity at the time of application
  • Investment in a limited company or public company registered under Thai law, and investment in a venture capital company registered with the Securities and Exchange Commission (SEC), Thailand, excluding investment in the Stock Exchange of Thailand (SET)
  • Investment in real estate (condominiums)

  c. Health insurance with no less than $50,000 coverage through the entire period of stay in Thailand or social security healthcare, which insurers hospitalization treatment in Thailand.

  3. Work-from-Thailand Professional

  The following is required to be eligible as “work from Thailand professional”:

  a. Before applying for the visa, personal income should be no less than $80,000 per year in the past two years leading up to the application. In case annual personal income is less than $80,000 but not less than $40,000 in the past two years, applicants must have a master’s degree (or above) and own intellectual property.

  b. Health insurance policy with no less than $50,000 coverage through the entire period of stay in Thailand or social security healthcare, which insures for hospitalization treatment in Thailand

  c. At least five years of working experience in the relevant field to the current employment

  d. The current employer must have one of the following types:

  • a public company listed on the stock exchange in any country, or
  • a private company that has been in operation for at least three years and has a total combined revenue of more than $150 million in the last three years.

  4. Highly-Skilled professional

  The following is required to be eligible as a “highly skilled professional”:

  a. Highly skilled professionals working in business in targeted industries in Thailand.

  b. Experts in targeted industries, working for a Thai government agency or a higher education institution, or a specialized training institution in Thailand

  c. Personal income of no less than $80,000 per year in the past two years

  d. In case annual personal income is below $80,000 but no less than $40,000 in the past two years, applicants must have a science and technology master’s degree or above or have particular highly-skilled expertise relevant to the job assignment in Thailand

  e. No minimum personal income for experts working for a Thai government agency or a state-owned higher education institution, or a state-owned specialized training institution in Thailand

  f. Heath insurance policy of no less than $50,000 coverage through the entire period of stay in Thailand or social security healthcare, which insures for hospitalization treatment in Thailand

  g. At least five years of working experience in the targeted industries except for applicants working for a Thai government agency or a state-owned higher education institution or a state-owned specialized training institution in Thailand or applicants with a doctorate

  For more information about our immigration or work permit services in Thailand, please visit www.franklegaltax.com/services/immigration-work-permits or contact us at [email protected]

• Thailand’s long-term resident visa (LTR) fee to be reduced by 50%

  May 19, 2022 3:33 pm Comments Off on Thailand’s long-term resident visa (LTR) fee to be reduced by 50%

  Thailand’s cabinet has decided to halve the long-term resident (LTR) visa fee, bringing it down to 50,000 baht. The visa is designed for foreigners who have “high capability or potential” and would like to live in Thailand for up to ten years. This means that eligible highly skilled foreigners can now apply for the visa and pay a one-time fee of 50,000 THB in order to stay in Thailand for up to 10 years.

  For full details about the long-term visa offering, please read our article here: www.franklegaltax.com/thailand-to-offer-10-year-visas-targeting-wealthy-foreigners/

  

  The visa targets four groups of foreigners, their partners, and at most four children who are 20 years old or younger. Included in the scheme are high-income individuals, foreign pensioners, people who wish to conduct their work in Thailand, and experts from specialist fields.

  Based on the revised guidelines, groups included in the scheme, such as pensioners and wealthy foreigners, are required to hold insurance coverage that is at least US$50,000, which will cover medical fees, and is valid for at least ten months, or they may show a social security certificate that covers the individual’s medical expenses while residing in Thailand. Alternatively, the applicant may use a cash deposit of at least US$100,000 that has been held in a domestic or a foreign bank account for 12 months prior to applying for the visa.

  Those in the high-income earner bracket must have an average annual income of US$80,000 for two years before applying for the visa.

  In order to apply under the foreign specialist’s category, the applicant is required to produce an employment contract from a company in Thailand or abroad. They must also provide evidence that they have worked in the “targeted industries” for a minimum of five of the ten years before applying for the long-term visa.

  There are for those who plan to work in Thai state universities, government research institutes, specified state training institutes, or applicants who hold a Ph.D.

  If you have any questions related to relocating to Thailand or related matters, please get in touch with us at [email protected]

• What is a Share Pledge, and What Does it Involve?

  April 22, 2022 10:10 am Comments Off on What is a Share Pledge, and What Does it Involve?

  The pledge provides security in terms of performance by transferring a movable property from pledger to pledgee. Therefore, anything considered movable property can be pledged, even an instrument. An instrument is a document in which the issuer promises payment or right to a specific person, such as a bill of lading, a bill of exchange, or a share certificate.

  In the case of a share pledge, the share certificate is not pledged property but what is pledged is the right to that share. A share certificate is only a certificate that certifies the right over that share to the owner.

  

  There are specific requirements for the share pledge as prescribed under the Civil and Commercial Code (“CCC”), including: 

  • The share certificate must deliver to the pledgee, and the shareholder must notify the company in writing. Otherwise, the pledge is void (Section 750 of CCC).

  • The creation of the pledge must be registered in the company’s share registration. Otherwise, such a pledge cannot be set up against the company or other third-party persons (Section 753 of CCC). In other words, the pledgee cannot request for dividend payment, or if a third party has legally processed such shares, the pledgee cannot claim its right against him.

  In practice, the share pledge is used as security for collateral. The Pledger gets the money, and the Pledgee gets the right over such pledged share. While the shares are pledged, the dividend is still paid to the shareholders.

  Please do not hesitate to contact us if you have any questions at [email protected]

   

• Thailand Launches New Flexible Plus Programme to Attract Wealthy Foreigners

  April 12, 2022 9:46 am Comments Off on Thailand Launches New Flexible Plus Programme to Attract Wealthy Foreigners

  The Tourism Authority of Thailand (TAT) recently released the new “Flexible Plus Programme” under the Thailand Privilege Card scheme. This programme is designed to attract high-income foreigners to stay and invest in Thailand by giving them a work permit and other privileges.

  The initiative offers valid cardmember privileges for at least ten years, and the minimum fee is one million baht. Under the programme, they offer three types of cards which are:

  1. Elite Ultimate Privilege (EUP)
  2. Elite Superiority Extension (ESE)
  3. Elite Privilege Access (EPA)

  

  Members of this program must invest at least USD one million within a year of the approval of their membership. It should be noted that the investment options must be from one of the following categories:

  1. Real estate
  2. Stock in the Stock Exchange of Thailand (SET)
  3. A Public Limited Company or Limited Company

  Moreover, this program also gives privileges to the cardholder by changing the type of visa from Privilege Entry (PE) to a Non-Immigrant (B). Including their spouse and children, the member can change their visa type to Non-Immigrant (B). The benefit of this is that a Non-Immigrant (B) visa allows cardholders to apply for a work permit lawfully.

  It should be noted that the program does not provide any benefits related to property ownership by foreigners.

  Any member who wishes to extend their “Flexible Plus Programme” must show evidence of investments made every year to the TAT. Otherwise, the status will only be valid for five years.

  Please let us know if you have any questions by contacting us at [email protected]

   

• Digital Asset Taxes for Cryptocurrency and Digital Tokens

  March 31, 2022 10:31 am Comments Off on Digital Asset Taxes for Cryptocurrency and Digital Tokens

  The revenue department’s announcement regarding taxing cryptocurrency has been in effect on 13 May 2018; however, investors continue to face confusion, controversy, and other difficulties.

  In January, the department held a public hearing with representatives from the public and private sectors. To explore digital asset tax guidelines, representatives from the Bank of Thailand, the Securities and Exchange Commission (SEC), the Thai Digital Asset Association, the Fiscal Policy Office and investor groups met to arrive at a digital asset tax collection approach appropriate for the current situation.

  The guidelines are under the Revenue Code Amendment Act (No. 19) B.E. 2561 (2018). The taxable transactions must be conducted through the digital asset exchange platform under the SEC only. These are as follows:

  1. Assessable income tax (net profit/capital gain) can be calculated so that the loss is the offsetting of losses against gains within the same tax year. If losses arise from any cryptocurrencies/digital tokens incurred in the same tax year, these can be offset against the profits. However, only transactions involving digital assets that are regulated by the Office of the Stock Exchange of Thailand and the Stock Exchange of Thailand are permitted.
  2. Withholding tax: if the payee cannot be identified and is unaware of the amount of income to be withheld, there is no requirement to withhold tax.
  3. The value-added tax (VAT) shall be an exemption for the transactions conducted through business operators or exchanges regulated by the SEC and on digital assets issued by the BOT.

  

  The Revenue Department has classified cryptocurrency and digital token income earners who are expected to file personal income tax by submitting a personal income tax return (PND 90/91) by 31 March 2023 into five categories:

  1.Exchange or disposal of cryptocurrencies or digital tokens

  The income derived from trading, exchanging, selling, transferring, or disposal of cryptocurrency/digital tokens is regarded as assessable income under Section 40 (4) (g) of the Revenue Code Amendment Act (No. 19).

  The income and profit from the sale, payment, transfer, or trading of the cryptocurrency and digital token shall be calculated as follows:

  • The First In, First Out (FIFO) method assumes that cryptocurrencies or digital tokens purchased first are sold first.
  • The moving average cost is the cost calculation for each type of cryptocurrency/ or digital tokens is determined by the average cost of the same type of cryptocurrencies/ or digital tokens at the beginning of the year as the cost of cryptocurrencies/ or digital tokens purchased during the year. This is calculated every time you buy cryptocurrencies/ or digital tokens.

  Once a costing method is selected, it must be followed throughout the tax year. And the cost must include the necessary expense such as transfer fees and other expenses.

  2.Cryptocurrency mining

  As of the date of receipt of mining cryptocurrencies, they are not considered assessable income.

  When the mined cryptocurrencies are sold, paid, transferred, or traded, they are considered assessable income under Thai Revenue Code Section 40(8) by deducting expenses incurred as necessary and reasonable. However, the miners must keep relevant documentation and prepare the cost accounting such as computer maintenance costs, employee wages, electricity bill and internet fees that occurred in the tax year, including expenses that are in the nature of investments in assets such as computers, which are gradually deducted from the property’s depreciation as required by law.

  3.Getting paid in cryptocurrencies as salary or wages

  The employees are paid a salary in cryptocurrencies as income, as employment is considered under Section 40 (1) assessable income.

  The employees who received remuneration in cryptocurrencies are deemed as income whether from the job, or the position employees are employed. Whether a full-time or a part-time job, it is considered the recipient of the assessable income under Section 40(2).

  If the employees are receiving a salary that is assessable income under Section 40 (1) and receiving wage which is assessable income under Section 40 (2) from the same employer, the recipient of the income must collectively present it under Section 40 (1).

  4.Receiving cryptocurrencies as a gift, award, prize

  Receiving cryptocurrency/digital tokens from giving or receiving as a gift is considered income under section 40 (8), for example, as a giveaway when participating in an event or receiving promotional rewards. 

  A digital cryptocurrency valuation can be made by calculating cost and revenue using its value at the time of acquisition or its average price on the date of purchase.

  When receiving cryptocurrency/digital tokens and the value has been taxed, they can be used as a cost in calculating tax when sold.

  5.Return on Investment from holding a digital token or cryptocurrencies such as Yield Farming or Staking.

  Under Section 40 (4)(h), it is considered income: profit-sharing or similar benefits derived from holding digital tokens.

  Both cost and revenue measurements for digital tokens are based on the value at the time of acquisition or the average price on the date of purchase.

  In the case of receiving digital tokens and the value has been taxed, they can be used as a cost in calculating tax when sold.

  If you have any questions, please contact us at [email protected] or +66 02 117 9131.

• Government Regulations for Rental Business

  March 4, 2022 11:26 am Comments Off on Government Regulations for Rental Business

  Due to the increasing popularity of condominiums and apartments in the city, which comes with several issues related to rental and utility bills; as a result, the Contract Committee of the Consumer Protection Board has issued a new notification, the Stipulation of Residential Property Leasing as a Contract-Controlled Business B.E. 2562 (2019) (the “Notification”), published on 31 October, 2019, this new Notification has canceled the earlier Notification the Stipulation of Residential Property Leasing as a Contract-Controlled Business Contract-Controlled Business B.E. 2561 (2018).

  

  Some of the key requirements under the new Notification are detailed as follows:

  • Residential property leasing business means a business that leases (or subleases) five units of property or more to individual lessees, for residential purposes, for a fee charged by the business operator, regardless of whether the units are in the same building or not. This includes all types of residential property that are leased for residential purposes, except for dormitories and hotels, which are regulated with different regulations.

  • Residential lease agreements must include a Thai version and certain information mandated by the Notification.

  • The business operator’s right to terminate the agreement must be written in red or black letters, or in bold or italics, and underlined, or emphasized in other ways that make such terms more pronounced than the other content of the agreement.

  • Invoices for the rental fee, public utility fee rates and service fee rates must be sent to the lessee at least three days prior to their due dates, and the lessee will have the opportunity to inspect the information on the invoices relating to the payments.
  • Details of the physical condition of the property and its contents, inspected and acknowledged by the lessee, must be attached to the lease agreement.
  • Show a calculation method of utility rates such as electricity bills, water bills, telephone bills.
  • The security deposit must be immediately returned to the lessee at the end of the agreement unless the business operator must investigate any damage to ascertain whether or not it is the responsibility of the lessee. If the lessee is found not to have caused such damage, the security deposit must be returned within seven days from the end of the agreement and the business operator retaking possession of the property. The business operator is also responsible for any expenses incurred in returning the security deposit to the lessee. 
  • In case the agreement has a fixed duration, the lessee has the right to terminate the agreement before expiration, provided the lessee has leased the property for no less than half of the period specified in the agreement by providing at least 30 days advance written notice to the business operator, and must not be in default in respect to paying the rental fee or other expenses.
  • The business operator can only terminate the agreement if the written notice has been given to the lessee to rectify the breach within 30 days of receipt and the lessee fails to do so. However, only 7 days advance notice is required if the cause of termination results from actions of the lessee that affect the livelihood of other lessees. No advance notice is required if the lessee does not comply with the law and the regulations relating to public order and good morals.

  Under the new Notification, clauses that have the following effects shall be invalid.

  • Waiving or restricting the liability of a business operator for breach of contract or wrongful acts.
  • Requiring advance rental fees equivalent to more than 3 months of the monthly rent and security deposit combined.
  • Entitling the business operator to change the rental fees, public utility fees, service fees, or any other expenses before the end of the agreement.
  • Any provision that allows the business operator to seize the security deposit or advance rental payment without any fault on the part of the lessee
  • Any term that allows the business operator, or its representative, to inspect the building or property without prior notice, unless an emergency situation exists that could cause damage or have an impact on the business operator or other lessees if the business operator does not conduct such an emergency inspection
  • Any provision for electricity and water supply fees is higher than the rates set by the appropriate authorities.
  • Any term allowing the business operator to prohibit or obstruct the lessee’s access to the property in order to take or remove the lessee’s possessions without exercising the right to legally terminate the agreement.
  • Any term that allows the business operator to request any charge or expense in exchange for renewing the lease.
  • Any term permitting the business operator to terminate the lease agreement without the lessee causing a material breach of the lease agreement;
  • Any provision that holds the lessee accountable for losses resulting from normal wear and tear of the property’s contents and equipment.
  • Any term that holds the lessee liable for damage to the property, contents, and equipment that occurred due to circumstances beyond the lessee’s control, such as force majeure.
  • Any term that holds the lessee responsible for problems in the property, contents, and equipment that occurred as a result of normal wear and tear.

  Conclusion:

  The rental company has grown exponentially in recent years, and the consumer protection council has noticed a growing problem. As a result, a new notification has been issued to bring the legislation up to date. The major difference between this new notification and the previous version is the right of the lessee to terminate the contract and specifics related to the advance rental payment.

  Feel free to contact us at [email protected] if you have any questions about the above information.

• VAT on Foreign e-Service

  February 9, 2022 8:56 am Comments Off on VAT on Foreign e-Service

  On February 10, 2021, the Royal Thai Government Gazette publicized the Revenue Code Amendment Act (No.53), which mainly stipulates that non-resident electronic service providers and electronic platforms are required to register for VAT under certain conditions and allows tax documents and evidence to be provided electronically.

  What is an e-Service?

  Section 77/1 (10/1) of the Revenue Code defines an e-Service as “services including incorporeal property which are delivered over the Internet or any other electronic network and the nature of which renders their service essentially automated and impossible to ensure in the absence of information technology.”

  Here are some examples of electronic services:

  • Software programs;
  • Digital images, videos, and financial data;
  • Digital music, films, and games;
  • Distance teaching via a pre-recorded medium such as online courses;
  • Electronic data management such as website supply, web-hosting, automated and digital maintenance of programmed;
  • Providing or supporting a business or personal presence on an electronic network;
  • Support services performed, via electronic means, for arranging and facilitating the completion of transactions, which may not be digital in nature, such as commission fees to intermediaries’ service fees to consumers and merchants for the sale of products through the electronic marketplace.

  

  The authorities gave a non-exhaustive list of e-Services excluded from this new e-Service VAT rule:

  • Telecommunication services;
  • Payment channel or money transfer services;
  • Electronic voucher delivered to the customer by e-mail or SMS to be redeemed for a meal, a hotel stays, or a theme park entrance;
  • Live teaching services, where the course content is delivered by a teacher over the Internet or an electronic network;
  • Professional services involving human intervention and the nature of which is not essentially automated, such as consulting services where advice from the consultant is communicated via e-mail or video call.

  Criteria for VAT registration

  Foreign electronic service providers and foreign electronic platforms providing e-Services from abroad and used in Thailand will now be required to register for VAT and will be liable to pay VAT when the following criteria are met:

  • The services are used in Thailand by a customer that is not registered for VAT in Thailand, and
  • Incomes from the services are above 1.8 M THB in a calendar year.

  VAT registration

  Non-resident electronic service providers and electronic platforms that provide electronic services to non-VAT registrants in Thailand must apply for VAT registration within 30 days of the day that income from such services exceeds THB 1.8 million. It will be possible to register for VAT with the Revenue Department by September 1, 2021.

  The required documents for VAT registration vary, depending on whether the provider is a Juristic Person or Individual.

  I. Juristic Person

  • Certificate of incorporation, officially translated in English and containing entity name, date of incorporation, and country of incorporation. The document must be notarised by the Ministry of Foreign Affairs, notary public, or other agencies authorised to notarise documents based on the country’s law where the businessperson is incorporated.
  • Certificate of tax residency in the country of incorporation (optional).

  II. Individual

  • A copy of the individual’s valid passport or a copy of the individual’s valid national ID card;
  • Certificate of tax residency in the country where the individual is a tax resident (optional).

  All documents must be submitted to the Revenue Department by uploading to the SVE on the Revenue Department’s website. When the VAT registration is complete, the VAT registrant will be notified of the VAT registration via SVE, and the list of VAT registrants on SVE will be announced on the Revenue Department’s website.

  Please feel free to contact us if you have any questions at [email protected]

• New Rules for BOI Promotion of Digital Activities

  February 3, 2022 1:35 pm Comments Off on New Rules for BOI Promotion of Digital Activities

  Thailand’s Board of Investment (BOI) announced the merging of its list of promoted digital activities into a single new category for software development, digital services platforms, or digital content (5.10) to support software development platform, digital services, digital content, and development of Thailand personnel in information technology.

  Promotion terms and conditions

  According to the BOI announcement, category 5.10 Development of Software, Digital Platform, or Digital Content has the following conditions:

  1. To be eligible for investment promotion, projects must involve activities to develop whole new software, digital platforms, or digital content in Thailand

  2. Where a project has a developed product before applying for promotion, further developments or improvements in Thailand of the product are required and must not be on the list appended to this explanatory note. In these cases, the applicant must provide comparison information between the developed product before applying for promotion and the further developments or improvements after applying for promotion.

  The comparison information must contain the following details at a minimum:

  • Product name
  • Feature or function of the software or digital platform
  • Structure of software, digital platform, or digital content
  • Tools and computer language used in the development

  3. The minimum investment capital of each project must not be less than Baht 1,500,000 per year calculated based on the expenditure on salaries for Thai information technology personnel additionally employed after applying for investment promotion.

  4. Projects must have software, digital platform, or digital content development process in Thailand as stipulated by the Office.

  5. Projects are allowed to utilize the existing or used machinery.

  6. The investment promotion of this activity does not include the retail and wholesale of all types of products.

  7. The revenue eligible for corporate income tax exemption must be derived from sales or services directly related to the promoted development of software, digital platform, or digital content as stipulated by the Office.

  

  8. The corporate income tax exemption cap is set based on the actual expenditure in the year of application for the incentives as follows:

  • The corporate income tax exemption cap accounts for 100 percent of the expenditure on salaries for Thai information technology personnel additionally employed in comparison with Thai information technology personnel employed before the submission date of application for investment promotion.
  • The corporate income tax exemption cap accounts for 200 percent of the expenditure on the information technology development-related training courses to develop Thai personnel’s skills and the expenditure on human resource development under the cooperation project with educational institutions under the specified models. These models could include Work-integrated Learning (WiL), Cooperative Education, Dual Vocational Education, or the cooperation to develop Thai information technology personnel as approved by the Office.   

  •  The corporate income tax exemption cap accounts for 100 percent of the expenditure on the operation to acquire the standard quality system certificate ISO 29110 or CMMI from Level 2 or other equivalent international standards

  9. The projects cannot apply for additional incentives for competitiveness enhancement and the incentives according to Investment Promotion Measure for Small and Medium Enterprises (SMEs).

  10. Should the projects want to apply for the incentives according to the Investment Promotion Measure in the Eastern Economic Corridor (EEC) for human resource development, they must inform about their request when applying for investment promotion. They are not allowed to change their request after investment promotion approval.

  The rights and benefits of corporate income exemption

  The revenue applicable to corporate income tax exemption must come from selling and providing services directly related to software development, digital platform, or digital content in the promoted activities. The types of the prescribed incomes are:

  • The revenue earned from developing, installing, testing, improving, and maintaining software, digital platform, or digital content in the projects
  • The revenue derived from selling software, digital platform, or digital content developed in the project
  • The revenue earned from royalties (license fees) for the uses of software developed in the project
  • The revenue from subscription fees for services of the software or digital platform developed in the projects
  • The revenue from additional sales of feature/function on the application (In-App Purchase)
  • The revenue from advertisements appearing in the software, digital platform, or digital content developed in the projects
  • In the case of investment projects for further development of existing software, digital platform, or digital content, the first date of earning revenues shall be the date on which the projects sell or service software, digital platform, or digital content that has been further developed as specified in the projects

  However, the revenues applicable to a request for exercising rights and benefits of corporate income tax exemption do not include revenue earned in the form of commission, expenses, and other services fees which are not directly related to the software or digital platform of the promoted projects and earnings from data distribution or data analysis reports without software development in the project, or any other incomes that the Office considers not relevant to the specified criteria. The Office will primarily consider the revenue types or intents acquired.

  Conclusion

  Because of the high volume of applications related to the digital industry, The Board of Investment (BOI) decided to combine the above categories into one category, 5.10 (Development of Software, Digital Platform, or Digital Content), including adding new conditions to attract investors. Furthermore, it should be highlighted that the development process in the project is a key element for BOI promotion under new category 5.10.

  Feel free to contact us if you have any questions at [email protected]

• Share Deal or Asset Deal?

  January 26, 2022 10:40 am Comments Off on Share Deal or Asset Deal?

  This article will compare the legal and tax implications of a share deal with those of an asset deal. It will discuss the relevant taxes and transaction costs that will be incurred for an asset deal compared to a share deal from a Thai tax perspective.

   The acquisition of a Thai business can generally be structured as an asset deal acquiring the specific assets that together make up the business to be acquired, or as a share deal by acquiring shares in a legal entity and thus such legal entity’s entire business.

  In order to decide whether to pursue an acquisition of a business via an asset deal or a share deal, various aspects, advantages, and disadvantages from different perspectives should be taken into consideration.

  1. Taxation of an asset deal

  If the transaction is structured as an asset deal, the taxes to be considered are in particular the following:

  If the transaction is structured as an asset deal, the taxes to be considered are in particular the following:

  a. Corporate income tax (“CIT”)

  Corporate Income Tax at the rate of 20% of the net taxable profits generated from the sale of land or real estate or/and any company asset (moveable properties) will be subject to CIT tax at a rate of 20% and subsequent years.

  b. Value-added tax (“VAT”)

  VAT 7% applied for sale of the company asset according to Section 77/2 TRC (exception: in the case of an Entire Business Transfer)

  c. Taxes related to the sale of immovable property

  If the assets include immovable property, the following transfer fees and taxes need to be considered:

  • Withholding tax (“WHT”)
    Thai Withholding Tax at the rate of 1% of the actual selling price or the official appraisal price of Land Department, whichever is greater at the time of registration of ownership transfer at the Land Department in accordance with the Section 69 Ter of the Thai Revenue Code.
  • Specific business tax (“SBT”)
    Special Business Tax at the rate of 3.3% of the actual selling price or the official appraisal price of the Land Department, whichever is greater at the time of the ownership transfer registration at the Land Department in accordance with Section 91/6 (3) of the Thai Revenue Code.
  • Transfer fee
    Transfer Registration Fee of 2% of the official appraisal price of Land Department regardless of whether the actual sale price is higher or lower than the appraised value by the Land Department in which    Seller and the Purchaser each pay 1% unless otherwise agreed by both parties.

  d. Conclusion for an asset deal

  If the company has only moveable property and no immovable property, the assets sold by the company will be subject to VAT 7% and CIT 20% of the net profit. It should be noted that assets must not be sold for less than the market value (such as a car, motorcycle, or laptop). If the market value of an asset is not available, such asset should not be sold for less than the book value.

  2. Taxation of a share deal

   If the transaction is structured as a share deal, the taxes to be considered are in particular the following (note that the following applies only to the sale of shares of a company limited that is not listed on the Stock Exchange of Thailand):

  a. income tax

  • Personal income tax (“PIT”) (if the shareholder is an individual)
    

    Personal income tax on the capital gains in case the shares are sold/transferred with profit over the par value according to Section 40(4)(g) TRC. The personal income tax is levied at a progressive rate of 5-35%.

  • Corporate income tax (“CIT”) (if the shareholder is a company)
    

    If a company holds the shares and receives profit from the sale of these shares, then CIT at a rate of 20% on the net profit applies. If the company distributes dividends, the company’s shareholders will be subject to an additional WHT of 10% on the dividend.

  b. Witholding tax (WHT)
  

  Thai Withholding Tax at a rate of 15% applies on capital gains if the seller sells his shares with profit and the seller stays in Thailand less than 180 days, Sections 40 (4)(g), 50(2) TRC. If the seller remains in Thailand over 180 days and the seller has the duty to pay PIT, but and the buyer deducted WHT at the rate of 5-35%   applies on capital gains, Sections 40 (4)(g), TRC, the seller can use the WHT paid as a tax credit. WHT will be applied in any case if the buyer is a Thai company.

  c. Stamp duty

  Stamp duty should be affixed to the original sale-purchase agreement (“SPA”) / share transfer agreement/share transfer instrument for the transfer of shares. The amount of tax is calculated as follows:    For every 1,000 THB or fraction thereof of the paid-up value of shares, or of the nominal value of the instrument (whichever is greater), a stamp duty of 1 THB (0.1%) applies. The stamp duty is calculated according to the price of the shares stipulated. If the SPA/share transfer agreement/share transfer instrument is made in duplicate, stamp duty in the amount of 5 THB must be affixed according to Section 103 TRC.

  If the company has a high profit, the shares must be sold with profit, and the stamp duty is calculated based on the value of the share transferred as shown in SPA. If the company has losses, and the purchase price of the shares is lower than the par value, the stamp duty is calculated from the par value of the shares.

  It is the transferor’s duty to pay stamp duty unless agreed otherwise. If the transferee pays it, the purchase of stamp duty value must be treated as income or other benefits received by the transferor and must be included in the income tax calculation.

  d. Conclusion for a share deal

  If an individual sells the shares at par value and does not generate any profit/capital gain, such sale is not subject to personal income tax. If the company’s shares are sold with profit, such profit is subject to it is subject to PIT at the rate of 5-35%. As the transfer of shares is not regarded as sale of goods or provision of service, it is not subject to SBT at a rate of 3.3% and VAT at a rate of 7%. The transfer of shares is subject to stamp duty at the rate of 0.1% of the transfer price or the paid-up share value, whichever is higher.

  

  3. Comparison of asset and share purchases

  In comparison, the asset and share purchases have very different consequences from a legal and tax perspective:

  a. Advantages of asset purchases

  Asset purchases have the following advantages:

  • The liabilities and business risks of the seller company are not transferred to the buyer. For a share transfer, the buyer will have to take on liabilities such as tax since the seller has operated the company, which could be risky with tax inspectors.
  • For the transfer of shares concerning employee liabilities, the buyer has to take care of all pending contracts.  If the buyer fires any employees, the buyer has to pay severance pay based on the number of years they have worked with the company.
  • It is possible to acquire only some parts of the business.

  • Interest to fund the acquisition of assets should be tax-deductible.
  • The purchase price of the relevant assets, including goodwill, may be depreciated for tax purposes.
  • The buyer does not inherit historical tax liabilities and exposures from the seller.
  • The buyer can cherry-pick employees’ assets, or contracts, leaving unwanted ones for the seller to handle.
  • A more limited scope of legal and financial due diligence means lower transaction costs.
  • The buyer is less likely to assume any contingent liability.

  b. Disadvantages of asset purchase

  On the other hand, asset purchases have the following disadvantages:

  •  Possibility of taxable gains derived from the assets for the seller, such as land/immovable properties.
  • Possibility of significant transfer taxes on the sale of the property.
  • The buyer cannot get the trademark, branding name, or customer base and expert staff if the buyer runs the same business as the seller and continues their business. If the transferred shares belong to the company, the buyer can continue the business and only change the company shareholders.
  • Transfer of each contract requires the contractual party’s consent and execution of a novation agreement, which is a time-consuming and lengthy process.
  • No losses carried forward can be transferred to the buyer for future use.
  • Certain governmental licenses/ permits can be transferred to the buyer, while others are nontransferable.

  c. Conclusion: comparing the tax burden of the “Sale of Shares” and “Sale of Assets.”

   In a Sale of Business, sellers and buyers in Thailand can agree to buy a business as “Buy Shares” and “Buy Assets”, the following table shows the main fees and taxes that apply:

  

  Please feel free to contact us if you have any inquiries regarding the information in this article at [email protected]

• Social Enterprises

  January 19, 2022 11:13 am Comments Off on Social Enterprises

  The Emerging Trend of Social Enterprises in Thailand

  What is a social enterprise?
  A social enterprise (SE) is a hybrid company with specified social goals as its primary objective, challenging the traditional model of charities and businesses. Profits are primarily utilized to fund social activities, and social enterprises attempt to maximize profits while maximizing benefits to society and the environment.

  

  Core characteristics of social enterprises in Thailand

  • A financially sustainable business model, socially and environmentally friendly.
  • Operate with transparency and good morals.
  • Earn at least 50% of the income from the sale of products or services unless a business that does not wish to share profits with partners or shareholders may earn less than 50% from the sale of goods or services.
  • Use at least 70% of profits for social purposes and share profits with business owners or shareholders of not more than 30% of total profits.
  • No partner, director or person with power of management on behalf of a juristic person or shareholders holding 25% or more who used to be partners, directors, or managers on behalf of juristic persons or shareholders 25% or more in social enterprise that have been revoked the licenses within the past two years.

  The key advantages of social enterprises

  • A person who invests in shares in the qualified social enterprise will be exempted for an income tax as paid up to a maximum of 100,000 Baht per year.
  • A company who invests in shares in the qualified social enterprise will be exempted for an expense amount equal to shares investment.
  • A qualified non-profit sharing social enterprise shall be exempted from corporate income tax on net profits from business operations as prescribed conditions by the Director General of the Revenue Department.

  Conclusion

  A social enterprise is a business that aims to give back to society in the form of an enterprise that will focus on distributing income to the production units in the social group, taking into account social responsibility, fairness, sharing, and disseminating information. Furthermore, because of tax exemption, operating as a social enterprise might be advantageous for a person or firm that wants to help society while also running a business at the same time.

  Feel free to contact us if you have any questions related to this topic at [email protected]

   

© 2020 FRANK Legal & Tax - All Rights Reserved | Privacy Statement |