ROH

On the 10^th of August 2005, representatives from government agencies consist of Board of Investment, Immigration Bureau, Department of Employment, Bank of Thailand and Revenue Department met with members from Board of Trade and Joint Foreign Chamber of Commerce to identify obstacles that hamper the development of the Regional Operating Headquarters (ROHs).

The objective of the meeting is to update some changes in the ROH’s benefits and also to exchange views and comments in order to make the ROH scheme more attractive to investors.

Since the government launched the ROH scheme 3 years ago, there have been problems which hamper the development of the ROH scheme. Four major problems are :

Board of Investment raised the issues of time - frame of BOI approval and one window service for visa and work permit. ROH which filed for non-tax benefits with BOI will normally take 60 working days for project approval. An On-line application is being set up which will definitely lessen the processing time. The visa and work permit can now be done by one window. BOI and RD agreed to work together to allow BOI application and RD notification to be submitted at the same time.

The Immigration Bureau announced that there were at least 7 companies and 130 individuals requested for visa extension at their one - stop service. They agree with the floor’s comment that process of visa renewal should be improved.

The issuance of ROH work permits will be revised. The Department of Employment has set up new criteria which allows up to 5 expatriates per one ROH. However, if the income is greater than 3 million baht, such condition will not be applied.

Bank of Thailand has clarified that profit and dividend can be repatriated without BOT’s permission. Foreign currency can be allowed to be kept for up to 6 months. If companies need to hold currency longer than 6 months, they should submit the request to BOT for permission.

Problems raised by Joint Foreign Chamber of Commerce have been mainly classified to unclassified of ROH’s procedure, inapplicable of ROH’s regulations, insufficient of ROH’s privilege and the need of one stop service.

The meeting were broadly discussed in various issues and several suggestions have been raised from participants. Mr. van Haren, Chairman of JFCCT, and Mr. Satit, Deputy Director of the RD, agreed to work together as a small working group to resolve problems under current rules and regulations concerning foreign exchange control, insufficient non-fiscal incentives, ROH approval by RD and bureaucratic red tape.

1. The RD should publish a complete handbook consisting of all relevant information required for setting up ROH in Thailand.

1. Corporate income tax at the rate of 10 percent of net profits for income derived from services provided to ROH's foreign branches or associated enterprises;

2. Corporate income tax at the rate of 10 percent of net profits for royalties derived from ROH's foreign branches or associated enterprises for the use of Research and Development (R&D) done in Thailand by ROH. This benefit is also extended to royalties received from a third party providing services to ROH's branches or associated enterprises using ROH's R&D;

3. Corporate income tax at the rate of 10 percent of net profits on interest received from ROH's foreign branches or associated enterprises for loans granted, provided that such loans are made from other sources and extended to ROH's branches or associated enterprises;

4. Tax exemption for dividends received from ROH's associated enterprises;

5. Tax exemption for dividends paid out of ROH's concessionary profits to its shareholders not carrying on business in Thailand;

6. Accelerated depreciation for buildings at the rate of 25 percent on the date of acquisition. The residual value can be depreciated within 20 years.

ROH shall meet the following criteria to qualify for the privileges:

1. An ROH must be a juristic company or partnership incorporated in Thailand

2. Its paid-up capital must be of not less than 10 Million Baht at the end of each accounting period;

4. That half of its total income is derived from administrative, technical and other supporting services provided to its branches or associated enterprises in other countries and royalties received from outside of Thailand for the use of ROH's R&D. This criteria can be mitigated to one-third of the total income in the first three accounting periods of its operation as ROH. In the case of Force Majeure, the Director-General of the Revenue Department may lower the income threshold for one accounting period; and

5. To notify the Revenue Department about the incorporation of the ROH. The benefits will be given starting from the notified accounting period onwards.

By Royal Command of His Most Excellent Majesty King Bhumibol Adulyadej, it is hereby proclaimed that :-

Whereas it is deemed proper to reduce and exempt Income Tax in certain cases.

Be it, therefore, enacted a Royal Decree by the King's Most Excellent Majesty, in exercise of the power under Section 221 of the Constitution of the Kingdom of Thailand, and Section 3(1) of the Revenue Code as amended by the Revenue Code Amendment Act (No.10) B.E. 2496, as follows:

Section 1 This Royal Decree is called the "Royal Decree Issued Under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No.405) B.E. 2545.

Section 2 This Royal Decree shall come into force on and from the date following the date of its publication in the Government Gazette.

"Foreigner" means an individual who does not possess Thai nationality.

"Regional Operating Headquarters" means a company incorporated under Thai law in order to provide managerial, technical or supporting services to its associated enterprise or its domestic or foreign branches.

"Supporting services" means the supporting services in the following cases:

(1) General management, business planning and business co-ordination
(2) Procurement of raw materials and parts

(10) Any other services as stipulated by the Director-General of the Revenue Department

"Associated enterprise" means a juristic company or partnership which is related to the Regional Operating Headquarters in the following manners;

(1) A juristic company or partnership holding shares in the Regional Operating Headquarters not less than 25 percent of total capital.

(2) A juristic company or partnership in which the Regional Operating Headquarters holds shares or is a partner not less than 25 percent of total capital.

(3) A juristic company or partnership in which a juristic company or partnership under (1) holds shares or is a partner not less than 25 percent of total capital.

(4) A juristic company or partnership which has the power to control or supervise the operation and management of the Regional Operating Headquarters.

(5) A juristic company or partnership which the Regional Operating Headquarters has the power to control or supervise the operation and management.

(6) A juristic company or partnership which a juristic company or partnership in (4) has the power to control or supervise the operation and management.

Section 4 There shall be reduced the withholding of Personal Income Tax rate and shall withhold at the rate of 15.0 percent of income, for assessable income, which a foreigner receives from his employment in Regional Operating Headquarters, which after computation in accordance with Section 50(1) of the Revenue Code, is subject to withholding tax at the rate specified in the table under Chapter 3 of the Revenue Code in excess of 15.0 percent of income.

In the case where assessable income in Paragraph 1 which after computation in accordance with Section 50(1) of the Revenue Code, is subject to withholding tax at the rate less than 15.0 percent of income, the foreigner shall be exempted from bringing such income into computation under Section 5 if such foreigner agrees to allow the payer to withhold Personal Income Tax at the rate of 15.0 per cent of such income.

Section 5 A foreigner whose income has been withheld at the rate of 15.0 per cent of income under Section 4, shall upon filing a tax return be exempted from bringing such assessable income into computation of income tax only if such foreigner does not claim any refund or credit for the taxes withheld whether in full or in part.

In case where a foreigner derives assessable income under Sections 40(4) and (8) of the Revenue Code and has the right to pay tax under Sections 48(3) and (4) of the Revenue Code, such foreigner shall be entitled to exemption in Paragraph 1 only if, at the time of filing, such foreigner does not bring assessable income under Sections 40(4) and (8) and assessable income under Section 4 into computation of his Personal Income Tax liability and does not claim any refund or credit whether in full or in part.

In order to be granted exemption under Paragraphs 1 and 2, the foreigner shall also file and declare items of assessable income which have been exempted from Personal Income Tax.

Section 6 There shall be exempted from Income tax, under Division 2 Chapter 3, Title 2 of the Revenue Code for a foreigner working permanently for Regional Operating Headquarters on assessable income derived from employment arising from his secondment abroad. Only if such payment is not claimed as deductions for expense, directly or indirectly, in the computation of profits of Regional Operating Headquarters or associated enterprise carrying on business in Thailand.

Section 7 A foreigner shall be granted exemptions under Section 4, Section 5 and Section 6 if he is employed by Regional Operating Headquarters qualified under Section 10. The exemption shall be granted during his employment in Thailand for two consecutive years, whether or not there is a temporary absence from Thailand during such period.

A foreigner who returns to work in Regional Operating Headquarters within one year after the expiration of his previous employment shall not be entitled to exemption in Paragraph 1 for his successive employment.

Section 8 The income tax rate under (a) of (2) for juristic companies or partnerships of the Income Tax table to Division 3, Title 2 of the Revenue Code shall be reduced to 10 percent of net profits of Regional Operating Headquarters for the following revenue:

(1) Revenue from the provision of services by the Regional Operating Headquarters to associated enterprise or foreign branch of Regional Operating Headquarters.

(2) Interest received from associated enterprise or foreign branch of Regional Operating Headquarters, however, only on interest arising from loan which Regional Operating Headquarters has borrowed to re-lend.

(3) Royalty received from associated enterprise or foreign branch of Regional Operating Headquarters or from related juristic company or partnership, however, only on royalty arising from the result of technological research and development carried out in Thailand by Regional Operating Headquarters.

Related juristic company or partnership in (3) means a juristic company or partnership which brings the result of technological research and development carried out by Regional Operating Headquarters to produce goods or provide services to Regional Operating Headquarters, associated enterprise or foreign branch of Regional Operating Headquarters.

Section 9 There shall be exempted from income tax under Division 3, Chapter 3 of Title 2 of the Revenue Code for Regional Operating Headquarters on assessable income which is dividend received from associated enterprises incorporated under Thai or foreign laws.

Section 10 Regional Operating Headquarters shall be exempted under Section 8 and Section 9 if possesses the following qualifications;

(1) Has paid-up capital on the last day of an accounting period at least 10 million Baht.

(2) Provides services to associated enterprises in foreign countries or its foreign branches in at least 3 countries.

(3) Has revenue under Section 8(1) and (3) which is paid from or in foreign country aggregating at least 50 percent of total revenue. Except during the first 3 accounting periods, starting from an accounting period which Regional Operating Headquarters notifies the Revenue Department under (4), the revenue may be less than 50 percent but not less than one-third of total revenue. In case of force majeure which the Regional Operating Headquarters cannot be blamed or in case of necessity, the Director General of the Revenue Department shall have the power to lower the rate mentioned for one accounting period.

(4) Has notified the operation of Regional Operating Headquarter under rules, procedures and conditions stipulated by the Director General of the Revenue Department.

(5) Follows any other rules, procedures and conditions stipulated by the Director General of the Revenue Department.

Section 11 There shall be exempted from Income tax, under Division 3, Chapter 3 of Title 2 of the Revenue Code for a juristic company or partnership incorporated under foreign laws and not carrying on business in Thailand, for assessable income which is dividend received from Regional Operating Headquarters under Section 10, only if paid out of net profits arising from revenue under Section 8.

Section 12 The Minister of Finance shall have the care and charge of this Royal Decree.

By Royal Command of His Most Excellent Majesty King Bhumibol Adulyadej, it is hereby proclaimed that :-

Whereas it is deemed proper to prescribe rules, methods, conditions and rates for deduction of wear and tear and depreciation of assets

Be it, therefore, enacted a Royal Decree by the King's Most Excellent Majesty, in exercise of the power under Section 221 Of the Constitution of the Kingdom of Thailand, and Section 65 bis (2) of the Revenue Code as amended by the Revenue Code Amendment Act (No.25) B.E. 2525, as follows:

Section 1 This Royal Decree is called the "Royal Decree Issued Under the RevenueCode Regarding Deduction of Wear and Tear (No.406) B.E. 2545.

Section 2 This Royal Decree shall come into force on and from the date following the date of its publication in the Government Gazette.

Section 3 There shall be added the following provision to become Section 4 Septem of Royal Decree Issued under the Revenue Code Regarding Deduction of Wear and Tear (No.145) B.E. 2527

Section 4 Septem Deduction of wear and tear and depreciation in respect of an asset in the category of permanent building that a company, which is a Regional Operating Headquarters, purchased or acquired for the purpose of carrying on its business shall be allowed on the date of purchase or acquisition at the rate of 25 percent of cost value, and the residual cost value shall be depreciated in accordance with the conditions and at the rate prescribed in Section 4. The afore-said rule shall be applied to assets purchased or acquired from 1 January B.E.2545.

For the purpose of this Section, there shall be applied the definitions of "Regional Operating Headquarters" and "Supporting services" under the Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No.405) B.E. 2545."

In exercise of the power under Section 10(4) and (5) of Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No. 405) B.E. 2545, the Director- General of the Revenue Department stipulates rules, procedures and conditions for the reduction and exemption of Income Tax for a company, which is a Regional Operating Headquarters as follows:

"Regional Operating Headquarters business" means a business of providing managerial, technical or the following supporting services to its associated enterprise or its domestic and foreign branches;

Department

"Control" means control in accordance with the rules of generally accepted accounting standard.

"Related juristic company or partnership" means a juristic company or partnership which brings the result of technological research and development carried out by Regional Operating Headquarters to produce goods or provide services to Regional Operating Headquarters, associated enterprise or foreign branch of Regional Operating Headquarters.

"Revenue from operation of Regional Operating Headquarters business" means income that a Regional Operating Headquarter receives from its associated enterprise, its branch and associated enterprises which have controlling interest, which is reduced the Corporate Income Tax rate to 10 percent of net profits under the Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No. 405) B.E. 2545 as follows:

(3) Royalty received from associated enterprise or foreign branch of Regional Operating Headquarters or from related juristic company or partnership only on royalty arising from the result of technological research and development carried out in Thailand by Regional Operating Headquarters.

Clause 2 A company that carries on Regional Operating Headquarters business and wishes to be granted benefits in accordance with the Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No. 405) B.E. 2545 shall notify the setting up of Regional Operating Headquarters business to the Director-General of the Revenue Department using the form notifying the setting up of Regional Operating Headquarters business which shall contain at least items specified in the form attached to this Notification. The submission shall be made at Bureau of Audit Operations (Large Business Tax Administration Office), or at Area Revenue Office, Provincial Revenue Office, or Provincial Revenue Office (Branch). In the case where a company that carries on Regional Operating Headquarters business has several places of business, the submission shall be made at Area Revenue Office, Provincial Revenue Office, or Provincial Revenue Office (Branch) in which the headquarters of the company is situated.

Clause 3 The computation of revenues and expenses of a company that carries on Regional Operating Headquarters business shall follow the rules and conditions stipulated in Sections 65 and 65 Bis of the Revenue Code.

In the case where a company carries on both Regional Operating Headquarters business and other businesses, the company shall compute the net profits and net loss for each business separately. Any expenses which cannot be clearly identified the business to which they belonged to, the company shall apportion such expenses in accordance with the ratio between revenue from the operation of Regional Operating Headquarters business and revenue from other business.

Clause 4 In the case where a company carries on both Regional Operating Headquarters business and other businesses, if the Regional Operating Headquarters business incurs loss, such loss shall be remained with the Regional Operating Headquarters business.

Clause 5 A company that carries on Regional Operating Headquarters business shall file a Corporate Income Tax return together with a balance sheet, working and profit and loss accounts within 150 days from the last day of an accounting period in the form stipulated by the Director-General and shall pay taxes in accordance with Sections 68 and 69 of the Revenue Code, and shall file a Corporate Income Tax return within 2 months from the last day of the first six months of an accounting period in the form stipulated by the Director-General and shall pay taxes in accordance with Section 67 Bis of the Revenue Code.

In the case where a company carries on both Regional Operating Headquarters business and other businesses, the company shall file the Corporate Income Tax returns for each business separately together with a working and profit and loss accounts. The balance sheet shall be filed with either business. In filing Corporate Income Tax return, one Tax Identification Number (TIN) shall be applied.

Clause 6 A company that carries on Regional Operating Headquarters business and that has notified the setting up of a Regional Operating Headquarter business in any accounting period, shall be entitled to reduction and exemption of Corporate Income Tax under the Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No. 405) B.E. 2545 from that accounting period.

Clause 7 In case where there is a problem in practice, the Director-General of the Revenue Department shall have the power to make decisions, and his decisions shall be treated as rules, procedures and conditions prescribed under this Notification.

Clause 8 This Notification shall be effective on and from the 16th day of August B.E. 2545.

In accordance with Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No.405) B.E. 2545 and Royal Decree Issued under the Revenue Code Regarding Deduction of Wear and Tear (No.406) B.E. 2545, granting tax reduction and exemption to the Regional Operating Headquarters (ROH) and foreigners working therein in order to promote foreign investment in Thailand by setting up Regional Operating Headquarters (ROH), the Revenue Department therefore would like to explain the followings:

1. Taxpayers who will be entitled to benefits granted under the Royal

Decrees.

1.1 ROH, which is a company incorporated in Thailand and carries on providing management or technical services to an associated company or juristic partnership or its branch, whether in Thailand or abroad and must fulfill the following conditions;

(1) Has paid-up capital on the last day of an accounting period at least 10 million Baht.

(2) Provide services to associated enterprises in foreign countries or its foreign branches in at least 3 countries.

(3) Has revenue, which is paid from or in foreign country aggregating at least 50 percent of total revenue. Except during the first 3 accounting periods, starting from an accounting period which ROH notifies the Revenue Department under (4), the revenue may be less than 50 percent but not less than one-third of total revenue. In case of force majeure which the ROH cannot be blamed or in case of necessity, the Director-General of the Revenue Department shall have the power to lower the rate mentioned for one accounting period.

(4) Has notified the operation of ROH under rules, procedures and conditions stipulated by the Director-General of the Revenue Department.

1.2 Individuals who work for the ROH mentioned in 1.1

2. The supporting services which ROH provides to its associated enterprise in 1 are the following services:

2.1 General management, business planning and business co-ordination, for example;

ROH provides support on management of a hotel of associated enterprise, for example, giving advice and saving problems arising from the management or improvement of the hotel, the service to customer, the maintenance of standard of the hotel, budgeting and accounting of the hotel, control of the hotel's income and expenses, training of employees, sales and marketing promotion.

2.2 Procurement of raw materials and parts, for example;

ROH finds a market to purchase agricultural products in Thailand and for associated enterprise in Japan, which has a canned food factory in Thailand for export.

2.3 Research and development of products, for example;

(1) ROH researches and develops prawns farming process in order to improve the quality and quantity of products for associated enterprise in Vietnam, which carries on prawns farm and export of frozen food products.

(2) ROH researches and develops a car suspension and stability control of four-wheeled drive car for a production and assembling plant of associated enterprise which operates in foreign country.

2.4 Supporting technical assistance, for instance;

(1) ROH sends experts to check and test the operation of a machinery in a factory of its associated enterprise in China. This includes giving advises to employees of its associated enterprise of how the machinery should be maintained and operated to maximize its production capacity.

(2) ROH provides technical assistance to its associated enterprise in India by advising and supporting technical data on the production of glasses and bullet proof jackets.

2.5 2.5 Marketing strategy planning and sales promotion, for instance;

(1) ROH provides advisory on marketing strategy and public relations services to its associated enterprise in Indonesia which carries on department store business. This includes coordinating with investors.

(2) ROH advertises through various media in order to promote new products of associated enterprise in Thailand and Asia and also plans strategy for European and U.S. markets

2.6 Human resource management and training in the region, for instance;

ROH is a centre in ASEAN for training Air-hostess about duty, language, costume and including recruitment of new hostesses for associated enterprise which carries on international air transportation business.

2.7 Financial advisory services, for example;

ROH provides financial advisory services to associated enterprise. This includes procurement of loan and risk hedging, revising contract documents, procedures and conditions in order to secure loans, revising and updating data on financial agreement, advising on financial structure under various risk hedging tools and taking part in negotiations with lenders.

2.8 Analyze and research on economics and investment, for example;

ROH provides data on investment trends in retail business and convenient stores in Thailand and ASEAN by producing summary and analysis on growth rate, returns, size of investment and future trend of the business to present to its associated enterprises which may be interested in investing in this region.

2.9 Control and management of credit, for example;

ROH lends money and arrange for source of funds in foreign country to associated enterprise which was granted concession for a project in Laos to construct underground train project. ROH would manage and control the disbursement of money and is a guarantor for the loan.

3.1.1 ROH's Corporate Income Tax's liability will be reduced from 30% to 10% of net profits on revenue arising from services provided to its associated enterprise or foreign branch of ROH .

3.1.2 ROH's Corporate Income Tax's liability will be reduced from 30% to 10% of net profits on royalty received from its foreign branch or an associated juristic company or partnership or royalty received from another juristic company or partnership which used the result of the research and development to provide service to ROH's foreign branch or an associated juristic company or partnership only if the research and development is wholly carried out in Thailand.

3.1.3 ROH's Corporate Income Tax's liability will be reduced from 30% to 10% of net profits on interest received from associated enterprise or foreign branch only on interest from loan which ROH has borrowed to re-lend to associated enterprise or foreign branch.

3.1.4 ROH will be granted an exemption from Corporate Income Tax on dividends received from an associated juristic company or partnership.

3.1.5 An associated enterprise, which is a company incorporated under foreign laws and does not carry on business in Thailand, will be granted an exemption from Corporate Income Tax on dividends, from the operation which is granted tax reduction, received from ROH.

3.1.6 ROH will be granted an accelerated rate of depreciation and wear and tear of assets on permanent building acquired on the date of acquisition at the rate of 25% of cost value and the residual value will be depreciated within 20 years.

3.2 3.2 Personal Income Tax. Apart from the aforesaid tax measures to promote ROH business, there are also other incentives granted to foreigners working in ROH. A foreigner means an individual who does not possess Thai nationality. Tax benefits granted to foreigners are as follows:

3.2.1 A foreigner employed by ROH will be reduced Personal Income Tax liability to 15 percent of assessable income received from ROH

3.2.2 A foreigner shall be exempted from Personal Income Tax for income derived from employment exercised abroad temporarily. Such income shall not be claimed directly or indirectly as expenses in the computation of profits of ROH or an associated juristic company or partnership, which carries on business in Thailand.

3.2.3 A foreigner who resumes his employment in any ROH within 1 year after his previous employment in any ROH, shall not be entitled to the above said benefits for his later employment.

4 A company that carries on ROH business shall comply with the rules, procedures and conditions stipulated in Notification of the Director-General of the Revenue Department On Income Tax (No. 109) Subject: Rules, procedures and conditions for reduction and exemption from Income Tax for company which is a Regional Operating Headquarters dated 16 August B.E. 2545, which can be summarized as follows:

4.1 A company that carries on ROH business and wishes to be granted benefits in accordance with the Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No. 405) B.E. 2545 shall notify the setting up of ROH business to the Director-General of the Revenue Department using the form notifying the setting up of ROH business which shall contain at least items specified in the form attached to the Notification. The submission shall be made at Bureau of Audit Operations (Large Business Tax Administration Office), or at Area Revenue Office, Provincial Revenue Office, or Provincial Revenue Office (Branch). In the case where a company that carries on ROH business has several places of business, the submission shall be made at Area Revenue Office, Provincial Revenue Office, or Provincial Revenue Office (Branch) in which the headquarters of the company is situated.

4.2 The computation of revenues and expenses of a company that carries on ROH business shall follow the rules and conditions stipulated in Sections 65 and 65 Bis of the Revenue Code.

In the case where a company carries on both ROH business and other businesses, the company shall compute the net profits and net loss for each business separately. Any expenses which cannot be clearly identified to which the business they belonged to, the company shall apportion such expenses in accordance with the ratio between revenue from the operation of ROH business and revenue from other business.

4.3 In the case where a company carries on both ROH business and other businesses, if the ROH business incurs loss, such loss shall be remained with the ROH business.

4.4 A company that carries on ROH business shall file a Corporate Income Tax return together with a balance sheet, working and profit and loss accounts within 150 days from the last day of an accounting period in the form stipulated by the Director-General and shall pay taxes in accordance with Sections 68 and 69 of the Revenue Code, and shall file a Corporate Income Tax return within 2 months from the last day of the first six months of an accounting period in the form stipulated by the Director-General and shall pay taxes in accordance with Section 67 Bis of the Revenue Code.

In the case where a company carries on both ROH business and other businesses, the company shall file the Corporate Income Tax returns for each business separately together with a working and profit and loss accounts. The balance sheet shall be filed with either business. In filing Corporate Income Tax return, one Tax Identification Number (TIN) shall be used.

4.5 ROH that has notified the setting up of a ROH business in any accounting period, shall be entitled to reduction and exemption of Corporate Income Tax under the Royal Decree Issued under the Revenue Code Regarding Reduction and Exemption from Revenue Taxes (No. 405) B.E. 2545 from that accounting period but not before 16 August B.E. 2545.

By Royal Command of His Most Excellent Majesty King Bhumibol Adulyadej, it is hereby proclaimed that :-

Whereas it is deemed proper to prescribe rules, methods, conditions and rates for deduction of wear and tear and depreciation of assets

Section 1 This Royal Decree is called the "Royal Decree Issued Under the Revenue Code Regarding Deduction of Wear and Tear (No.406) B.E. 2545.

Section 2 This Royal Decree shall come into force on and from the date following the date of its publication in the Government Gazette.

Section 3 There shall be added the following provision to become Section 4 Septem of Royal Decree Issued under the Revenue Code Regarding Deduction of Wear and Tear (No.145) B.E. 2527

1. Taxpayers who will be entitled to benefits granted under the Royal Decrees.

1.1 ROH, which is a company incorporated in Thailand and carries on providing management or technical services to an associated company or juristic partnership or its branch, whether in Thailand or abroad and must fulfill the following conditions;

(1) Has paid-up capital on the last day of an accounting period at least 10 million Baht.

(2) Provide services to associated enterprises in foreign countries or its foreign branches in at least 3 countries.

2.1 General management, business planning and business co-ordination, for example;

(2) ROH provides technical assistance to its associated enterprise in India by advising and supporting technical data on the production of glasses and bullet proof jackets.

(2) ROH advertises through various media in order to promote new products of associated enterprise in Thailand and Asia and also plans strategy for European and U.S. markets

3.1.1 ROH's Corporate Income Tax's liability will be reduced from 30% to 10% of net profits on revenue arising from services provided to its associated enterprise or foreign branch of ROH .

3.2.1 A foreigner employed by ROH will be reduced Personal Income Tax liability to 15 percent of assessable income received from ROH.

4.2 The computation of revenues and expenses of a company that carries on ROH business shall follow the rules and conditions stipulated in Sections 65 and 65 Bis of the Revenue Code.

4.3 In the case where a company carries on both ROH business and other businesses, if the ROH business incurs loss, such loss shall be remained with the ROH business.

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.

1.1 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;

1.3 'Associated companies' mean two or more companies related to one another in any of the following manners:

'Control' in this context is in accordance with Accounting Standard.

2. INCENTIVES FOR ROH

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.

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%

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.

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.

2.3.1 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 fulfill 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.

Withholding Tax Rates for Royalties
under Thailand's DTAs
if the recipient of royalties does not have a P.E. or fixed base in the source country
Country	Tax Rate not exceeding	Types of Royalties


1. Germany	5	use of or the right to use any copyright of literary, artistic or scientific work
	15	other royalties
		Note : also apply to the gains from the alienation of any right or property
		giving rise to such royalties if such right or property is alienated by a
		resident of a Contracting State for exclusive use in the other Contracting
		State and the payment of such right or property is borne by an enterprise
		of that other State or a permanent establishment situated therein
2. France	5	alienation or use of or the right to use any copyright of literary, artistic or
		scientific work
	15	other royalties
	Exempt	royalties or other like payments payable to a Contracting State or a
		State owned company in respect of films or tapes
	10	as long as the tax rate provided by the French law on the royalties
		received by a French resident as consideration for the alienation of,
		or the exclusive right to use any patent, process or information
		concerning industrial experience does not exceed 10 per cent,
		the tax charged in the Contracting State in which such royalties arise
		shall not exceed 10 per cent.
3. Singapore	15	all royalties
4. Netherlands	5	use of or the right to use any copyright of literary, artistic or scientific work
	15	other royalties
5. Korea	15	all royalties (the term "royalties" does not include any royalties, rentals
		or other amounts paid in respect of the operation of mines, quarries
		or other natural resources)
6. Italy	5	use of or the right to use any copyright of literary, artistic or scientific work
	15	other royalties
7. Belgium	5	use of or the right to use any copyright of literary, artistic or scientific work
	15	other royalties
8. Pakistan	10	alienation or use or the right to use any copyright of literary, artistic
		or scientific work
	20	other royalties (Note: For royalties arising in Thailand, apply 15% in
		accordance with the Revenue Code)
	Exempt	State owned company in respect of films or tapes
9. United Kingdomom	5	use of or the right to use any copyright of literary, artistic or scientific work
	15	other royalties
10. Malaysia	15	all royalties except any royalty or other amount paid in respect of
		motion picture films or of tapes for radio or television broadcasting, or
		of the operation of a mine, oil well, quarry or any other place of
		extraction of natural resources or of timber or other forest produce
	Exempt	approved industrial royalties derived from Malaysia by a resident of
	in Malaysia	Thailand
11. Philippines	15	if the royalties are paid
		(1) by an enterprise registe#7B0421 with the Philippine Board of
		Investments and engaged in prefer#7B0421 areas of activities; or
		(2) by an enterprise under the promotion of the Board of Investment
		of Thailand; or
		(3) in respect of cinematographic films or tapes for television or
		broadcasting
	25	other royalties (Note: For royalties arising in Thailand, apply 15% in
		accordance with the Revenue Code)
12. Poland	5	alienation, use of or the right to use any copyright of literary, artistic or
		scientific work excluding cinematographic films or tapes for television
		or broadcasting
	15	other royalties
	Exempt	royalties or other like payments payable to a Contracting State or a
		State owned company in respect of films or tapes
13. Canada	5	copyright royalties and other like payments in respect of the production
		or reproduction of any literary, dramatic, musical or artistic work (but not
		including royalties in respect of motion picture films and works on film
		or videotape for use in connection with television)
		(alienation, the use of, or the right to use)
	15	all royalties
14. Finland	15	all royalties
15. India	15	all royalties
16. Austria	15	all royalties
17. China	15	all royalties
18. Sweden	15	all royalties
19. Hungary	15	all royalties
20. Australia	15	all royalties
21. Sri Lanka	15	all royalties
22. Japan	15	all royalties
23. Vietnam	15	all royalties
24. Czech Replubicublic	5	alienation or use of or the right to use any copyright of literary, artistic or
		scientific work, excluding cinematograph films or films or tapes used for
		radio or television broadcasting
	10	alienation of any patent, trademark, design or model, plan, secret
		formula or process
	15	other royalties
25. Switzerlandd	5	alienation or use of, or the right to use any copyright, artistic or scientific
		work, excluding cinematograph films or films or tapes used for radio or
		television broadcasting
	10	alienation of any patent, trade mark, design or model, plan, secret
		formula or process
	15	other royalties (However, Thailand shall tax at the rate not exceeding 10
		percent if Switzerland does not, according to its internal law, levy a tax
		at source on royalties paid to non-residents and for tax credit purposes,
		allows as a deductible expense 50 per cent of the gross amount of
		royalties
26. Israel	5	use of or the right to use any copyright of literary, artistic or scientific work
		excluding cinematograph films or films or tapes used for radio or
		television broadcasting
	15	other royalties
27. South Africaa	15	all royalties
28. Romania	15	all royalties
29. United States of Americaes	5	use of or the right to use any copyright of literary, artistic or scientific work
		including software, and motion pictures and works on film, tapes or
		other means of reproduction for use in connection with radio or
		television broadcasting
	8	use of or the right to use industrial, commercial or industrial equipment
	15	other royalties
30. Laos	15	all royalties
31. Mauritius	5	use of or the right to use any copyright of literary, artistic or scientific work
		excluding cinematograph films and films, tapes or discs used for radio
		or television broadcasting
	15	other royalties

32. Luxembourgg	15	all royalties
33. Bangladesh	15	all royalties
34. Nepal	15	all royalties
35. Spain	5	use of, or the right to use, any copyrights of literary, dramatic, musical
		artistic or scientific work, excluding cinematograph films or films or
		tapes used for radio or television broadcasting
	8	financial leasing for the use of, or the right to use, industrial, commercial
		or scientific equipment
	15	other royalties
36. New Zealandnd	10	use of or the right to use any copyright, any industrial, commercial or
		scientific equipment, any motion picure film or film or videotape or any
		other recording for use in connection with television, or tape or any other
		recording in connection with radio broadcasting; the reception of, or the
		right to receive, visual images or sounds or both & the use in connection
		with television or radio broadcasting, visual images or sounds, or both,
		transmitted by satellite or cable, optic fibre or similar technology
	15	other royalties
37. Denmark	5	use or the right to use any copyright of literary, artistic or scientific work
	15	other royalties
38. Uzbekistan	15	all royalties
39. Cyprus	5	use of or the right to use any copyright of literary, dramatic, musical,
		artistic or scientific work, including software, cinematograph films or
		or tapes used for radio or television broadcasting
	10	use of, or the right to use, industrial, commercial or scientific equipment
		or for information concerning industrial, commercial or scientific
		experience
	15	other royalties
40. United Arab Emratesb Emirates	15	all royalties
41. Bulgaria	5	use or the right to use any copyright of literary, artistic or scientific work
		excluding cinematography films and films, tapes or discs for radio or
		television broadcasting
	15	other royalties
42. Armenia	15	all royalties
43. Indonesia	15	all royalties
44. Norway	5	use or the right to use any copyright of literary, artistic or scientific work
	10	use or the right to use industrial, commercial or scientific equipment
	15	other royalties
45. Bahrain	15	all royalties
46. Oman	15	all royalties
47. Slovenia	10	use of or the right to use any copyright of literary, artistic or scientific work
		including motion pictures, live broadcasting, film, tape or other means
		of the use or reproduction in connection with radio and television
		broadcasting, and for the use of, or the right to use industrial,
		commercial or scientific equipment
	15	other royalties
48. Ukraine	15	all royalties
49. Turkey	15	all royalties
50. Hong Kong	5	use of, or the right to use, any copyright of literary, artistic or scientific
		work
	10	use of, or the right to use, any patent, trademark, design or model, plan,
		secret formula or process
	15	other royalties
51. Seychelles	15	all royalties
52. Kuwait	20	all royalties ( Note: For royalties arising in Thailand, apply 15% in accordance
		with the Revenue Code )

Withholding Tax Rates for Interest
under Thailand's DTAs
if the recipient of interest does not have a P.E. or fixed base in the source country
Country	Recipient of interest	Tax rate not exceeding	Notes
Country	Recipient of interest	Tax rate not exceeding	Notes
1. Germany	financial institution incl.	10	if the enterprise paying the interest
	insurance companies		engages in an industrial undertaking
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government and financial	exempt
	institution wholly owned
	by the government
	other persons	exempt	interest on bonds issued by the
			government
2. France	other persons	3	interest paid on loans or credits
			granted for four years or more with the
			participation of a financing public
			institution to a statutory body or to an
			enterprise in relation to the sale of
			any equipment or to the survey, the
			installation or the supply of industrial,
			commercial or scientific premises and
			public works
			"Financing public institution" means in
			the case of France, COFACE and
			Natexis Bank and in the case of Thai-
			land means EXIM Bank, Government
			Savings Bank, Government Housing
			Bank, Bank for Agriculture & Agricultu-
			ral Cooperatives, Krung Thai Bank,
			Rattanasin Bank, Industrial Finance
			Corporation of Thailand
	any financial institution	10
	government	exempt
3. Singapore	any financial institution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government	exempt
4. Netherlands	any financial institution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
5. Korea	any financial institution	10	interest paid on debentures or on
	incl. insurance company		loans
	government, central	exempt
	bank, or any agency or
	insrumentality wholly
	owned by that
	government or that
	central bank or both
6. Italy	any financial institution	10	if the enterprise paying the interest
	incl. insurance company		engages in an industrial undertaking
	government and financial	exempt
	wholly owned by the
	the State
	other persons	exempt	interest on bonds issued by the
			government
7. Belgium	any financial institution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government	exempt
8. Pakistan	any financial institution	10
	incl. insurance company
	other persons	25
	government	exempt
9. United Kingdom	bank or financial institu-	10
	tion incl. insurance
	company
	other persons	25
	government, central	exempt
	bank or any agency
	(other than agency with
	share capital) wholly
	owned by the govern-
	ment
10. Malaysia	Malaysian financial insti-	10	interest arising in Thailand
	tution incl. insurance
	company
	other Malaysian persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	Thai residents	15	interest arising in Malaysia
	government	exempt
11. Philippines	Philippines financial in-	10	interest arising in Thailand
	stitution incl. insurance
	company
	other Philippines persons	25	interest arising in Thailand
			Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	Thai residents	10	interest arising in the Philippines in
			respect of public issues of bonds,
			debentures or similar obligations
	Thai residents	15	interest arising in the Philippines
	government	exempt
12. Poland	any financial institution	10
	incl. insurance company
	government	exempt
			Note: for other persons, apply
			domestic tax rate (Thailand = 15%)
13. Canada	Canadian financial insti-	10	interest arising in Thailand
	tution incl. insurance
	company
	other Canadian persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	Thai residents	15	interest arising in Canada
	government	exempt
14. Finland	any financial institution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government	exempt
15. India	any financial institution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government, local au-	exempt
	throity or central bank
16. Austria	any financial insitution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government	exempt
17. China	any financial institution	10
	incl. insurance company
	government	exempt
			Note: for other persons, apply
			domestic tax rate (Thailand = 15%)
18. Sweden	any financial institution	10
	incl. insurance company
	any other company	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government or central	exempt
	bank
			Note: for other persons, apply
			doemstic tax rate (Thailand = 15%)
19. Hungary	any financial insitution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government	exempt
20. Australia	any financial institution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government or central	exempt	Interest derived from the investment
	bank		of official reserves by the government
			or by a bank performing central
			banking functions
21. Sri Lanka	any financial institution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government	exempt
22. Japan	any financial institution	10
	incl. insurance company
	other persons	25	Note: for interest arising in Thailand,
			apply 15% tax rate in accordance with
			the Revenue Code
	government, central	exempt
	bank or financial insti-
	tution wholly owned by
	the government
23. Vietnam	any financial institution	10
	incl. insurance company
	other persons	15
	government	exempt
24. Czech Republic	any financial institution	10
	incl. insurance company
	government	exempt
			Note: for other persons, apply
			domestic tax rate (Thailand = 15%)
25. Switzerland	any financial institution	10
	incl. insurance company
	other persons	15
	other persons	exempt	if interest is paid in respect of a loan
			made or guaranteed or insured by
			the Bank of Thailand and EXIM Bank
			or under the Swiss provisions
			regulating the Export or Investment
			Guarantee
26. Israel	any financial institution	10
	incl. insurance company
	other persons	15
	government	exempt
27. South Africa	any financial institution	10
	incl. insurance company
	other companies	15
	government	exempt
			Note: for other persons, apply
			domestic tax rate (Thailand = 15%)
28. Romania	any financial institution	10
	incl. insurance company
	other companies	20	in the case of interest on credit sale
	other companies	25
	government	exempt
			Note: for other persons, apply
			domestic tax rate (Thailand = 15%)
29. United States of	any financial institution	10
America	incl. insurance company
	other persons	10	interest paid with respect to
			indebtedness arising as a
			consequence of a sale on credit of
			any equipment, merchandise or
			services
	other persons	15
	other persons	exempt	interest paid in respect of debt
			obligations guaranteed or insured by
			the government
	government	exempt
30. Laos	any financial institution	10
	incl. insurance company
	other persons	15
	government	exempt
31. Mauritius	any financial institution	10
	incl. insurance company
	other persons	15
	government, institution	exempt
	body or board wholly
	owned by the
	government
32. Luxembourg	any financial institution	10
	incl. insurance company
	other persons	15
	government	exempt
33. Bangladesh	any financial institution	10
	incl. insurance company
	other persons	15
	government	exempt
34. Nepal	any financial institution	10
	incl. insurance company
	other companies	15
	government	exempt
			Note: for other persons, apply
			domestic tax rate (Thailand = 15%)
35. Spain	any financial institution	10
	incl. insurance company
	other persons	15
	government	exempt
36. New Zealand	any financial institution	10
	incl. insurance company
	other persons	10	interest is paid with respect to
			indebtedness arising as a
			consequence of a sale on credit of
			any equipment, merchandise or services
	other persons	15
	government	exempt	interest derived from the investment
			of official reserves by the government,
			a bank performing central banking
			functions or EXIM Bank of Thailand
37. Denmark	financial institution incl.	10
	insurance companies
	other persons	15
	government	exempt
	other persons	exempt	interest paid in respect of a loan made
			by or guaranteed or insured by the
			government, the central bank, or any
			agency or instrumentality which is
			wholly owned or controlled by that
			government
38. Uzbekistan	any financial institution	10
	incl. insurance company
	other persons	15
	other persons	exempt	if the interest is paid in respect of
			loan made or guaranteed or insured1, or
			in respect of any debt-claim or credit
			guranteed or insured on behalf of the
			the State by its authorised organ
	government	exempt
39. Cyprus	any financial institution	10
	incl. insurance company
	other persons	10	interest is paid in connection with the
			sale on credit of any industrial,
			commercial or scientific equipment,
			or of any merchandise
	other persons	15
	government	exempt
40. United Arab Emiratesrates	any financial institution	10
	incl. insurance company
	other persons	15
	other persons	exempt	if the interest is paid in respect of
			loans guaranteed or insured by the
			government
	government	exempt
41. Bulgaria	any financial insitution	10
	incl. insurance company
	other persons	15
	government	exempt
42. Armenia	Thai financial institution	10
	incl. insurance company
	Armenian institution	10
	having a license to carry
	on banking operations
	government, authority	exempt
	created therein, the
	Central Bank or the
	EXIM Bank of Thailand
			Note: for other persons, apply
			domestic tax rate (Thailand = 15%)
43. Indonesia	Thai residents	15	interest arising in Indonesia
	Indonesian financial in-	10	interest arising in Thailand
	stitution incl. insurance
	other Indonesian	25	Note: for interest arising in Thailand,
	residents		apply 15% tax rate in accordance with
			the Revenue Code
	government	exempt
44. Norway	financial institution incl.	10
	insurance companies
	other persons	15
	government	exempt
	other persons	exempt	interest paid in respect of a loan made
			by or guaranteed or insured by the
			government
45. Bahrain	any financial institution	10
	incl. insurance company
	other persons	15
	government	exempt
46. Oman	any financial institution	10
	incl. insurance company
	other persons	10	if the loan or debt-claim giving rise to
			the interest is guranteed by the
			government
	other persons	15
	government	exempt
47. Slovenia	any financial institution	10
	incl. insurance company
	other persons	15
	other persons	exempt	interest paid in respect of loan made
			or guaranteed by the government
	government	exempt
48. Ukraine	a bank or any other	10
	financial institution incl.
	investment banks and
	savings banks and
	insurance companies
	other persons	15
	other persons	exempt	interest with respect to debt-claims
			guaranteed, insured by the government
			the central bank or any other financial
			institution established and owned by
			the government to promote trade and
			investment
	government, the central	exempt
	bank or any other
	financial institution
	established and owned
	by the government to
	promote trade and
	investment
49. Turkey	any financial institution	10
	incl. insurance company
	other persons	15
	government	exempt

50. Hong Kong	any financial institution	10
	or insurance company
	other persons	10	interest paid with respect to
			indebtedness arising as a
			consequence of a sale on credit of
			any equipment, merchandise or
			services
	other persons	15
	government	exempt
51. Seychelles	any financial institution	10
	other persons	15
	government	exempt
52. Kuwait	any financial institution	10
	other persons	15
	other persons	exempt	loans guaranteed or insured
			by the government
	government	exempt

Last modified: 11/11/08