Tax incentive provisions for the ROH will soon become effective following the cabinet's approval in December. Tax benefits under this incentive scheme include reduction/exemption of the corporate income tax, special depreciation allowance rate, and special treatment concerning the personal income tax of expatriates working for the ROH.
1. THE ROH CONCEPT
1.1 The term 'Regional Operating Headquarters' (ROHs) refers to as a locally incorporated company which carries on business in Thailand and provides qualifying services to its associated companies or branches.
1.2 The qualifying services provided by the ROH are as follows:
(a) management and administrative services;
(b) technical services;
(c ) other supporting services in respect of;
* general administration, business planning and coordination,
* procurement of raw materials and components,
* research and development,
* technical support,
* marketing control and sales promotion planning,
* training and personnel management,
* corporate financial advisory services,
* economic or investment research and analysis,
* credit control and administration,
* any other activities prescribed by the Director General.
1.3 'Associated companies' mean two or more companies related to one another in any of the following manners :
(a) Shareholding basis | | i) | ROH holds at least 25 percent of that company's issued capital; or | | ii) | The company holds at least 25 percent of ROH's issued capital; or | | iii) | The company holds at least 25 percent of ROH and other company's issued capital. In this case, ROH and the other company are regarded as associated companies. |
(b) Control basis | | i) | ROH has control over that company; or | | ii) | The company has control over ROH; or | | iii) | The company has control over ROH and the other company. In this case, ROH and the other company are regarded as associated companies. |
'Control' in this context is in accordance with Accounting Standard.
2. INCENTIVES FOR ROH
2.1 Reduced/exempt corporate income tax
2.1.1 Business income
ROH will be taxed at the reduced corporate rate of 10% on income derived from the provision of qualifying services to the ROH's associated companies or branches.
2.1.2 Royalties
Royalties received from associated companies or branches arising from R&D work carried out in Thailand will be subject to tax at a reduced corporate rate of 10%. Such royalties received from non-related company can also enjoy the benefits.
2.1.3 Interest
Interest income derived from associated companies or branches on loans made by ROH and extended to its associated companies or branches will be subject to tax at a reduced corporate rate of 10%
2.1.4 Dividend
Dividend received by ROH from associated companies will be exempt from tax.
Dividend paid to companies incorporated outside Thailand which do not carry on business in Thailand will be exempt from tax.
2.2 Accelerated depreciation allowances
25% of asset value is allowed as initial allowances and the remaining can be deducted for over 20 years for the purchase or acquisition of building used in carrying out the operation of ROH.
2.3 Expatriates
2.3.1 An ROH expatriate who is assigned by ROH to work outside Thailand, the income from provision of such services is exempted from personal income tax in Thailand. However, the said income must not borne by the ROH or its associated company in Thailand.
2.3.2 An expatriate may choose to be subject to withholding tax at the rate of 15%. By doing so, the expatriate is allowed not to include such income in the calculation of his annual personal income tax liability.
The term 'expatriate' refers to a foreigner exercises an employment in ROH for a period not exceeding two years starting from the first day of assignment. The 2-year period does not need to be consecutive. However, the foreigner is required to leave Thailand for more than 365 days after his 2-year employment.
3. QUALIFYING CRITERIA
In order for an ROH to be eligible for the tax benefits, it must fulfil the following conditions:
3.1 an ROH must be a juristic company or partnership incorporated under the law of Thailand;
3.2 the paid up capital of the company on the last day of accounting period should be a minimum of 10 million Baht;
3.3 the company should serve associated company or branches situated in at least 3 other countries excluding Thailand;
3.4 income received from rendering services to its associated companies or branches outside Thailand must not be less that 50% of total income (except during the first 3 years, 1/3 of total income is allowed as the minimum income received from its associated companies or branches outside Thailand);
3.5 the company must submit the notification to the Revenue Department; and
3.6 other criteria as prescribed by the Revenue Department.
For more information, please contact : Khun Hasakarn Senawat. Tel. 0 2272 9214
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