Trends in IP Taxation in Thailand Roundtable discussion Tuesday 10 October 2017 IBA Annual Conference 2017 Sydney

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1 Trends in IP Taxation in Thailand Roundtable discussion Tuesday 10 October 2017 IBA Annual Conference 2017 Sydney presented by Picharn Sukparangsee BANGKOK GLOBAL LAW OFFICES LIMITED 540, Unit 1705, 17th Floor, Mercury Tower, Ploenchit Road, Lumpini Sub-district, Pathumwan District, Bangkok Thailand Tel: +66 (0) Fax: +66 (0)

2 IP scope in domestic law Patent (invention and product design) Patent Act B.E (A.D. 1979) Copyright Copyright Act B.E (A.D. 1994) Trade mark, include service mark Trade Mark Act B.E (A.D. 1991)

3 Domestic WHT on royalties, other similar payments WHT of 3% on payment of royalties from one Thai company to another Thai company DTA s with major trading partners on royalties, other similar payments DTA Between the People s Republic of China and Thailand WHT of 15% on payment for use of copyright, trade mark DTA Between Germany and Thailand WHT tax of 5% on payment for use of software WHT tax of 15% on payment for use of trade mark or patent

4 DTA Between Japan and Thailand WHT of 15% on payment for use of copyright, trade mark and patent DTA Between the U.S.A. and Thailand WHT tax of 5% on payment for use of software WHT tax of 15% on payment for use of trade mark or patent IPs under Trade Mark Act, Copyright Act and Patent Act of Thailand are slightly different from royalties under the DTAs between Thailand and its counterparties. Know-how is legally and strictly not regarded as IP under IP laws of Thailand.

5 Payments for IP are generally payments for the use or the right to use any copyright, any patent or any trademark. Payment for royalties means Payment for use of any copyright; and Payment for use or the right to use any patent, trademark, design or model, plan. Secret formula or process, or for information concerning industrial, commercial or scientific experience. Royalty may under some DTAs mean payment for the use or the right to use industrial, commercial or scientific equipment.; Payment for technical assistance may be either business profit or royalty which depends upon nature and details of technical assistance.

6 Transfer Pricing Treatment of IP specially when difference from OECD Guidelines. No law on transfer pricing treatment of IP. Only guidelines of transfer pricing in general of Thailand which follows OECD Guidelines are available. Domestic special legislation to limit income tax deductions of excessive royalties /service payments not applicable

7 GAAR and SAAR are not available in Thailand. However aggressive tax avoidance transactions in Thailand have been prevented by the Revenue Department and brought to tax courts in Thailand. WHT is an important tool for collection of tax in Thailand, prevents tax avoidance and may lead to investigation of some aggressive tax avoidance transactions. Disguise of royalties as advertising costs by the franchisee to media agencies fees for the purpose the increase in the royalty payable by the franchisee has been successfully challenged by the Revenue Department of Thailand and the court of Thailand.

8 Domestic special legislation to tax income/payment to international digital content providers Not applicable Resident country considerations R&D Credit No R&D super deduction super deduction of 200 % Qualifying R&D expenses IP Box No

9 Regular CIT rate Companies in general 20% on net profit SME Not more than Baht 300,000 net profits exemption Not more than Baht 3,000,000 net profits 15% More than Baht 3,000,000 net profits 20% IP Box CIT rate No Anti-avoidance measures preventing from shifting IP out of the country No.

10 Trends in IP and tax on e-commerce The Revenue Department of Thailand published a draft e-commerce tax on its website that a foreign company which carries on trade or business through electronic means shall be deemed to carry on its business in Thailand if it falls within one of the following categories: 1. Having a Thai internet domain; 2. Having a payment system in Thai Baht or money is required to be transferred from Thailand; or 3. Any other cases as prescribed by the Director-General of the Revenue Department. Thank you very much for your kind attention