The International Headquarters (IHQ) Regime. May 2015

Transcription

1 The International Headquarters (IHQ) Regime May 2015

2 Overview of incentive regimes in Thailand Old regimes Regional Operating Headquarters (ROH) Regime The first ROH regime was introduced by the Thai Government in 2002 to encourage Thai and foreign MNCs to use Thailand as a regional hub to serve their group operations in other countries The ROH regime was amended in 2010 to provide more incentives and relaxes certain criteria required by the 2002 ROH scheme The incentives provided under the current ROH regime are only available to the eligible ROH that has notified its ROH status to the Thai tax authority within 15 November 2015 (i.e., 5 years from the date of the law enactment) International Procurement Centre (IPC) regime The Thai Government later introduced the IPC regime in 2011 to complement the ROH regime by providing incentives for international trading activities Nonetheless, IPCs were not widely adopted due to stringent requirements imposed and less attractive package compared to the neighboring countries and the IPC regime has expired in For information, contact Deloitte Touche Tohmatsu Limited. 2

3 Overview of Incentive Regime in Thailand Newly enacted regime International Headquarters (IHQ) In the hopes to boost Thailand's competitiveness and to make Thailand the economic hub of Asia, the Thai government has recently introduced the IHQ regime as a way to achieve the objectives the ROH and IPC regimes were unable to accomplish The IHQ regime was enacted as laws under Royal Decree No. 586 on 1 May The Notification of the Director-General of the Thai Revenue Department outlining the relevant application of the laws is expected to come out in a few weeks thereafter For information, contact Deloitte Touche Tohmatsu Limited. 3

4 Requirements for the IHQ regime General Requirements for the IHQ regime Must be a Thai incorporated entity with a paid-up capital of at least THB 10 million in each accounting period Must provide qualifying services to an overseas associated enterprise Must have annual operating expenses of at least THB 15 million which are paid to recipients in Thailand Must submit application and obtain the IHQ status from the Director-General of the Thai Revenue Department in accordance with the rules, procedures and conditions as prescribed by the Director-General of the Thai Revenue Department Must comply with other rules, procedures and conditions as prescribed by the Director- General of the Thai Revenue Department 2015 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 4

5 IHQ Regime the all-in-one package Headquarters Function Corporate income tax exemption on qualifying services 1 and royalty income derived from its overseas associated enterprises 10% corporate income tax on qualifying services 1 and royalty income derived from its associated enterprises in Thailand 2 Treasury Center Function Corporate income tax exemption on treasury support 1 income derived from its overseas associated enterprises 10% corporate income tax on treasury support 1 income derived from its associated enterprises in Thailand 2 Interest withholding tax exemption for overseas entities relating to a loan provided to the IHQ for re-lending as a treasury center Specific business tax exemption on income derived by the IHQ from provision of a loan to associated enterprises as a treasury center 15% personal income tax for management level expatriates (non-thai nationals) Dividend withholding tax exemption if made from profits that are entitled to 0% corporate income tax Trading Function Corporate income tax exemption on income derived from trading of goods and tradingrelated services 1 with overseas entities, whereby goods are not imported into Thailand (out-out transaction) Holding Company Function Corporate income tax exemption on dividend received from overseas associated enterprises Corporate income tax exemption on capital gains derived from the transfer of shares in overseas associated enterprises 1 Please refer to the definitions of qualifying services, treasury support and trading-related services in the Appendix 2 To be entitled to this incentive, revenue from qualifying services and royalty received from Thai associated enterprises must be less than the same types of revenue received from overseas associated enterprises For information, contact Deloitte Touche Tohmatsu Limited. 5

6 Major Enhancements Enhancements Old Regime (2010 ROH regime) New Regime (IHQ) Tax incentives for holding company function Tax incentives for treasury center function Period of corporate income tax incentives Period of personal income tax incentives for expatriates Minimum number of associated enterprises outside of Thailand that services must be provided to Claw back rules None None 10 years but extendible to 15 years if certain conditions are met Corporate income tax exemption on capital gains derived from the transfer of shares in overseas associated enterprises Specific business tax exemption for interest income derived from providing a loan to associated enterprises 15 years 8 years 15 years 3 countries within the 5th accounting year Disqualification of tax incentives since the first accounting year 1 country Disqualification of tax incentives only in the accounting year prescribed conditions are not met For information, contact Deloitte Touche Tohmatsu Limited. 6

7 Appendix 2015 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 7

8 Definitions Qualifying Services General administration, business planning and coordination Procurement of raw materials and components Research and development of products Technical support Marketing and sales promotion planning Personnel management and regional training Financial advisory services Economics or investment research and analysis Credit control and administration Other managerial services Treasury Support Services of a Treasury Centre as permitted under the Exchange Control Act Borrowing and lending in Thai currency, as follows: - Borrowing in Thai currency from a Thai financial institution or associated enterprises in Thailand Re-lending in Thai currency the amount received from the above permitted activities to associated enterprises in Thailand 2014 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 8

9 Definitions Trading-related Services Procurement of goods Maintenance of goods in transit Packaging of goods Delivery of goods Insurance of goods Advisory and technical support services and training on goods Other related services 2014 Deloitte Touche Tohmatsu Jaiyos Co., Ltd. 9

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