Thailand

KEY COUNTRY FACTS
System of government:	constitutional monarchy
Population:	68.0 million
Currency:	baht (THB)
FX regime:	floating
GDP:	US$374bn (2014 est)
IGTA member:	no
FATF member:	Associate member via the Asia Pacific Group
Other professional financial/banking associations:	Association of International Banks (AIB) Thai Bankers’ Association (TBA)

Financial regulatory framework

Banking supervision

The Bank of Thailand (BoT), Thailand’s central bank, is responsible for banking supervision.

Exchange controls

Thailand applies exchange controls, which are administered by the Bank of Thailand on behalf of the Ministry of Finance. Resident entities must repatriate all proceeds from exports, invisible transactions or current transfers, in excess of USD 50,000 within 360 days of the date of export and immediately after receipt of payment.

Taxation framework

Corporate taxation

The corporate tax rate is 20% for 2014/2015. Certain small and medium-size limited companies are subject to lower progressive rates up to a certain amount of net taxable profits. A bank deriving profits from an International Banking Facility pays a 10% rate for ‘out-out’ deposits. Foreign companies that carry on the business of international transportation and that have an office in Thailand can be taxed at a rate of 3% of gross proceeds rather than at the normal corporate income tax rate (and are exempt from the tax on profit remittances). Branches are liable to a 10% tax on profits remitted to foreign head offices. There are special rates of CIT for certain listed companies and qualified Regional Operating Headquarters (ROH) that meet certain requirements.

Withholding tax on dividends and interest

A withholding tax exemption is available for resident companies in respect of dividends paid to other resident companies if the recipient entity owns 25% or more of the voting shares in the entity paying the dividend, and the entity paying the dividend does not own any shares directly or indirectly in the recipient company, or if the recipient company is a listed company. Interest paid on loans from a bank, financial institution or insurance agency is taxed at a 10% rate if the lender is resident in a country that has concluded a tax treaty with Thailand, but interest is exempt if it is paid by the government or a Thai financial institution on loans granted under a law intended to promote agriculture, industry or commerce.

Value-added tax (VAT)

VAT applies at a rate of 7% to all retailers, wholesalers, manufacturers, importers, producers and others providing direct services, unless exempt under the revenue code. Companies with a turnover not exceeding THB1.8m a year are exempt, as are other business activities, including the import and sale of raw agricultural products and related goods, newspapers, magazines and textbooks, and basic services such as health and educational services, domestic transport, international transport by way of land, and the leasing of immovable property. Goods exempt from import duty and destined for export-processing zones (zero-rate VAT) are included in this category, along with research and technical services, labour contracts, auditing and legal services. For financial services, certain business activities (including, but not limited to, services related to credit cards, hire purchase contracts, security brokers, underwriters, etc) are subject to VAT if the amount of assessable income of the entity is more than THB1.8m. The Thai Revenue Department has issued a regulation that allows taxpayers to prepare, submit and maintain tax invoices and receipts in electronic form. The Thai revenue code provides that business related to banking, finance, life insurance etc is subject to specific business tax (SBT). The effective SBT rate for a banking business is typically 3.3% of gross receipts (SBT at a rate of 3% and additional municipal tax at a rate of 10%), or based on a specific transaction. However, there are certain transactions in respect of banking business (or businesses similar to banking) for which the SBT rate is reduced from 3.3% to 0.11% of gross receipts (e.g. interest or discount on debt instruments or gain before expense on debt instrument trading, currency exchange gain before expense, etc). For life insurance and pawnshop brokerage, the tax rate on interest fees and service fees is 2.75% (including municipal tax). The effective SBT rate for the sale of immovable property is 3.3% (including municipal tax of 10%). Furthermore, an advanced withholding tax of 1% applies to companies that have sold immovable property, and the transfer fee for immovable property normally applies at 2%. Insurance premiums on non-life insurance business are subject to 7% VAT and withholding tax at the rate of 1% of gross payments.

Transfer pricing

The 2002 transfer pricing guidance issued by the Thai revenue department (Departmental Instruction No Paw. 113/2545) requires that related-party transactions are at arm’s-length terms (broadly interpreted in line with the OECD transfer pricing guidelines). Transfer pricing methods such as the comparable uncontrolled price, resale price minus, cost plus or other internationally accepted methods are acceptable.

Thin capitalisation

There are no specific tax rules in relation to thin capitalisation. There is no requirement governing the debt-to-equity ratio for a company registered in Thailand, unless it is required under specific circumstances (e.g. Thailand Board of Investment, terms with lender, Foreign Business Licence etc).

Capital gains tax

There is no separate capital gain tax. Capital gains (sale proceeds minus original cost) derived by resident companies are treated as assessable income for CIT purposes. A capital gain arising from or in Thailand to a non-resident company is subject to withholding tax at the rate of 15%, except where more beneficial treatment is provided for under a tax treaty.

Payroll taxes

Thai employers are obliged to report and withhold tax at progressive rates on the compensation elements (eg salary and any other benefits) that are paid to an employee in or outside Thailand under certain requirements and conditions.

Stamp duty

Normally, the transfer of shares, debentures, bonds and certificates of indebtedness are subject to stamp duty at the rate of 0.1% on the greater of the value of the paid-up registered shares or the value as defined in the instrument, unless an exemption is applicable. The transferor is liable to pay the stamp duty. The execution of a loan agreement or a bank overdraft is subject to stamp duty at a rate of 0.05%, capped at THB10,000.

All tax information supplied by Deloitte Touche Tohmatsu and Deloitte Highlight 2015 (http://www.deloitte.com).

Clearing and payment systems

Clearing systems

Thailand has three main payment clearing systems:

• BAHTNET – the Bank of Thailand’s real-time gross settlement system processes high-value electronic payments for same-day settlement.
• The bulk payment system – a low-value electronic payments clearing system with two sub-systems: the Direct Credit Service and the SMART Credit service. It is operated by National ITMX Co Ltd, a private-sector company owned by the large commercial banks.
• The Imaged Cheque Clearing and Archive System (ICAS) – Thailand’s paper-based clearing system. It truncates all cheques into electronic items. It was launched in the Bangkok area in 2012 and was rolled out to the rest of the country during 2013. It has now replaced the provincial cheque clearing system and the bill for collection clearing system. ITMX also provides a common payments platform for ATM, mobile and internet banking payments. It currently links Thailand’s ATMs to ASEANPay.

Payment instruments

Cash remains the dominant payment method in Thailand. About half of all transactions are made in cash, which means companies need to adopt strategies for collecting cash and also managing payroll. Despite a decrease in transactions in the past few years, the cheque remains the most important cashless payment method in Thailand in terms of value. Electronic credit transfers are the main form of payment used by larger companies in Thailand, whether to make supplier, tax or salary payments or for treasury operations. Credit and debit cards are increasingly used for retail payments.

Credit transfers

The credit transfer is the main form of payment used by large companies in Thailand, whether to make supplier, tax or salary payments or for treasury operations. The majority of credit transfers are effected electronically and the popularity of electronic transfers is growing as the clearing systems are developed.

Direct debits

Direct debits are mainly used by utility, insurance and communications companies to collect regular payments from companies and consumers. High-value direct debits are also available. All direct debits must be pre-authorised.

Electronic money

The use of electronic money (e-money) systems in Thailand is growing rapidly, with 27.5 million cards in circulation as of April 2015. Stored value cards are available for low-value payments.

Payment cards

Card payments are increasing in popularity in Thailand. The vast majority of credit card payments are retail related, whereas debit cards are predominantly used for cash withdrawal. Debit card use in particular is expanding rapidly, primarily due to the lack of restrictions on obtaining a card. This has resulted in a fall in the use of ATM cards. In May 2015 debit card circulation reached 45.5 million cards, up from 44.8 million cards in six months. Debit cards currently constitute approximately 56.5 % of all cards in circulation in Thailand. There were also around 20.3 million credit cards and 14.2 million ATM cards in circulation by May 2015.

Cross-border

Cross-border transactions are settled via correspondent bank networks. The major banks have direct SWIFT connections. Supporting documentation is usually required.

Cheques

Cheques are still a popular form of cashless payment in Thailand in terms of value. They are used by companies and consumers to make a wide range of payments, including supplier payments. Post-dated cheques and the use of float are common sources of short-term credit. With the roll-out of the ICAS system, cheques are now cleared for same-day settlement.

Cash and bank account management

Account availability

Residents can open and maintain foreign currency accounts domestically and abroad. Domestic currency resident accounts are convertible into foreign currency for certain payments including for payments aboard. Resident domestic currency accounts may be held abroad with approval from the Bank of Thailand. Non-residents are also able to open and maintain domestic and foreign currency accounts in Thailand. Domestic currency non-resident accounts are not convertible into foreign currency. Non-resident entities may hold no more than THB300m daily in all their domestic currency accounts. Non-resident domestic currency accounts are divided into two types: non-resident domestic accounts for investment in securities and other financial instruments (NRBS), and non- resident domestic accounts for general purposes (NRBA). THB transfers can only be made within the same type of accounts. THB transfers between NRBS and NRBA are not allowed.

Money laundering

Thailand has implemented anti-money laundering legislation (the Anti-Money Laundering Act B.E. 2542 [of 1999] as amended, most recently in 2013, the Anti-Money Laundering Ministerial Regulations of 2000 and the Counter-Terrorism Financing 2013). Thailand is a member of the Asia/Pacific Group on Money Laundering (APG). Thailand has a financial intelligence unit (FIU), the Anti- Money Laundering Office (AMLO), which is a member of the Egmont Group. The AMLO is an independent agency within the Department of Justice.

Information supplied by BCL Burton Copeland (www.bcl.com). Data as at January 2015.

Cash concentration/ZBA sweeping

Cash concentration is a liquidity management capability whereby account balances are physically transferred to/ from a single account (known as a master, header or concentration account) for liquidity management purposes. Cash concentration can take these forms:

• Zero balancing (ZBA) – sometimes referred to as sweeping, zero balancing is a cash concentration capability whereby the total of all account balances is physically transferred into a nominated account.
• Target balancing – also known as sweeping, target balancing is a cash concentration capability similar to ZBA, whereby all account balances are physically transferred into a nominated account leaving a predetermined amount in the sub-accounts.
• Threshold balancing – a cash concentration capability similar to ZBA, whereby the balances of the sub-accounts are physically transferred in their totality into a nominated account each time the sub-account balances reach a predetermined threshold.

For residents, cash concentration – and zero balancing in particular – is offered by a number of cash management banks in Thailand. For non-residents, because of exchange controls, it is difficult for non-resident accounts to participate in a cash concentration structure which includes resident accounts.

Cross-border sweeping

Because of exchange controls, cross-border sweeping is not commonly available in Thailand, although it is possible if an entity has been issued with a treasury centre licence by the Bank of Thailand.

Notional pooling

Notional pooling is available in Thailand, but regulations are unclear. Cross-border notional pooling is not available.

Electronic banking

Electronic banking is becoming more widely used in Thailand. Both domestic and foreign banks offer electronic banking services to their corporate clients. There is no bank- independent standard. A number of banks offer some form of internet banking, although this is not yet widely used because of the low internet penetration in Thailand. Usage by companies – electronic banking services are offered to companies by foreign and domestic banks via proprietary systems provided by each bank. Usage of electronic banking by companies is growing and is common among the larger companies. Generally, electronic banking systems offer balance and transaction reporting, as well as some ability to initiate payments. Some systems also offer real-time account statements.

Internet banking

There is a relatively low adoption rate of the internet in Thailand, but its usage is growing. Internet banking use, although not widespread, is rapidly increasing alongside expanding internet availability. Currently, about 20 million people have access to the internet. Of these, approximately 8.7 million were internet banking users in 2014. Approximately 184,501 million internet banking transactions (excluding enquiries) were carried out during 2014, worth a total value of THB 20.4 trillion.

Liquidity management

Investment instruments include:

• bank deposits;
• corporate bills of exchange/commercial paper;
• Treasury bills; and
• government bonds (eg bonds issued by BOT).

Websites

Government

• http://www.thaigov.go.th

Bank of Thailand

• http://www.bot.or.th

Board of Investment

• http://www.boi.go.th

ASEAN Supporting Industry Database

• http://www.asidnet.org

Department of Export Promotion

• http://www.thaitrade.com

Ministry of Finance

• http://www.mof.go.th

Ministry of Industry

• http://www.industry.go.th

Joint Foreign Chambers of Commerce in Thailand

• http://www.jfcct.org/