PwC Tax Panel · BOI Board resolution - 19 Aug and 3 Oct 2014 The BOI under the new chairmanship of...
Transcript of PwC Tax Panel · BOI Board resolution - 19 Aug and 3 Oct 2014 The BOI under the new chairmanship of...
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16 October 2014Shangri-La Hotel
16th Annual Conference
PwC Tax Panel
MaximiseShareholder Valuethrough EffectiveTax Planning 2015
PwC
Agenda
Section 1 - BOI – New Strategy and Investment Policy
Section 2 - Trends in Thai tax policy
2.1 Corporate income tax
2.2 Value added tax
Section 3 - Treasury centres
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BOI – New Strategy and InvestmentPolicy
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New BOI’s Structure
NPOC’s Announcement No. 100/2557: Transfer BOI be under thePrime Minister Office, as from 21 July 2014 (formerly under Ministry ofIndustry)
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BOI Board resolution - 19 Aug and 3 Oct 2014
The BOI under the newchairmanship of the PM wasto implement the NewInvestment PromotionStrategy/Policy as from1 Jan 2015.
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New Investment Strategy
- Promote investment to restructure Thai economy for
sustainable development and to overcome “Middle Income Trap”
- Promote competitiveness development and value creation ofindustrial sector
- Promote green industry or high technology driven to drive balancedand sustainable growth
- Promote new industrial clusters in the region to create newinvestment concentration
- Promote Thai overseas investment in order to increasecompetitiveness of Thai businesses
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Seven year plan – 2558-2564 (2015-2021)
- To respond to the 11th National Economic and Social DevelopmentPlan and Thailand’s Industrial Development Plan (2555-2559)
“To be more proactive with respect to the ASEAN EconomyCommunity (AEC) in 2015, Thailand needs to comply with itscommitments under various cooperation frameworks andstrengthen its resilience through development of its economic andsocial capital. In all aspects, the powerhouse of the country’s futuredevelopment will comprise knowledge, science, technology,innovation and creativity.”
- To cover the development to the 12th National Economic and SocialDevelopment Plan (2560-2564)
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Promoted Sectors
Sector
Agriculture
Minerals and Ceramics
Light Industry
Metal Products, Machinery andTransportation equipment
Electronics Industry andElectrical Appliances
Chemicals, Paper and Plastics
Services and Public Utilities
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Targeted Industries
Agriculture andfood processing
Automotive
Machinery
Moulds & Dies
Biotechnology
Alternative energy
Electronics
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Remove IndustriesExample
Tea coffee snacks chocolate candy
Plastic packaging/Plastic consumer products
Hand tools and measuring tools
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Reduce incentivesExample
Petrochemical
Pharmaceutical
Products
Tyres for vehicles
5 years CIT exemption
3 years CIT exemption
Engines forautomobiles
and motorcycles
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Reasons/Objectives
Remove/Reduce Target
low value added high value added
low technology high technology
low complexity ofproduction process
innovation
environmental problems use of alternative energyand green energy
non-skilled labour intensive skilled labour
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New Strategy
“Change”
Broad-based investment promotion
Focused and prioritised investment promotion
(e.g. biotechnology, nanotechnology, advanced materialtechnology)
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New Strategy
Focus based Incentives
Activities that are highlyimportant for country’s economicrestructuring in order to stimulateinvestment and to be able tocompete with other countries.
CIT exemption- 8 years with cap/without cap- 5 years with cap- 3 years with cap
Activities that still need to bepromoted but not necessary to begranted CIT exemption.
Import duty exemption onmachinery and raw materials butnot CIT.
A
B
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New Strategy
Activity - based incentives
Merit-based incentives
Merit-based incentives
Invest in R&D (whether in-house,cooperation with educational or researchinstitution or donation to Technology andHuman Resources Development Fund)
The number of additional years of CITexemption depends on the percentage of R&Dexpenditure to revenue, e.g.:•1 % of gross sales or not less than 200 millionbaht - one additional year of CIT exemption
Spread the prosperity to the region –located the factory in provinces that have lessper capita income three years - additional ofCIT exemption or 50% CIT reduction for 5years
Projects located within industrialestates/promoted industrial zones - oneadditional year of CIT exemption
Examples
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New Strategy
Standard CITgranted
Merit-based Incentive to begranted
5 years 1 % of gross sales ornot less than 200million baht - oneadditional year of CITexemption with cap ofthe investmentamount
6 years(5+1)
Example
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New Strategy
Zone-based investment promotion
New Regional Industrial Clusters
No base on zoning (1-3)
New Industrial Cluster ineach region or border area
- Food processing cluster
- Aerospace cluster
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New Strategy
Regulator
Facilitator
Facilitator
One-stop services
Support and facilitation
Reduce barriers
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New Strategy
- BOI will promote both inbound and outbound investment
Target countries
No. 1 Indonesia, Myanmar, Vietnam and Cambodia
No. 2 China, India and other ASEAN countries
No. 3 Middle East, South Asia and Africa
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Trends in Thai tax policy
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Agenda
Taxes to be reformed
Trends in Thai tax policy
• Corporate income tax
• Value added tax
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Taxes to be reformed
• Customs duty
• Excise tax
• Inheritance tax
• Property tax
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Trends in Thai tax policy - corporate income tax
Thailand . . . Overview
30.0%
23.5%
25.0%
35.0%
25.0%
30.0%
17.0%
25.0%
20.0% 20.0% 20.0%
25.0%24.0%
25.0% 25.0%
30.0%
17.0%
22.0%
15%
20%
25%
30%
35%
2010
2011
2012
2013
2014
2010 – 2014 ASEAN corporate income tax (CIT) rates
In 2013-2014, Thailand has the second lowest corporate tax rate in ASEAN whileSingapore is the first.
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Trends in Thai tax policy - corporate income tax
Withholding tax
CIT 30% WHT 1% for transportation, insurance
2% for commissions
3% for service fees
5% for rental
CIT 20% ?WHT
Example Service fee 100
Profit 10
Tax 30% 3
WHT 3
No refund 0
Service fee 100
Profit 10
Tax 20% 2
WHT 3
Refund 1
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Trends in Thai tax policy - value added tax
Value added tax rates in ASEAN (2014)
0
10 10 10
6
0
12
7 7
10
0
2
4
6
8
10
12
14
Percent
Country
Chart Title
Will be implemented on1 April 2015.
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Value added tax rates in Thailand and othercountries
8
5
7 7
5
7
0
1
2
3
4
5
6
7
8
9
Japan Nigeria Panama Singapore Taiwan Thailand
Percent
Country
Chart Title
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Value added tax rates in European Union
20 21
25 24
20 1922
2321
0
5
10
15
20
25
30
Percent
Country
Chart Title
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Almost all essential goods for living are exemptfrom VAT
Productionfactor (e.g.
fertiliser, fishmeal, animal
feed,pesticide) Animals, meat
(e.g. beef,pork, chicken,shrimp, fish)
Agriculturalproducts (e.g.
rice, corn,vegetablesand fruit)
Newspapers,magazines,textbooks
Governmentlottery, sale of
goods andprovision of
services by thegovernmentAll channels of
domestictransport
(land, sea, air)
Educationalservices ofgovernmentand private
entities
Healing andnursing
services bygovernmentand private
entities
Rental ofhouse/
immovableproperty
Businesseswith income
not exceedingTHB 1.8
million/year
The VAT burden falls moreheavily on middle classand the rich.
VAT VAT
VATThe poor
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Treasury centres
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Agenda
Section 3.1 : Treasury centres under Thailand roadmap
Section 3.2 : Treasury centres in Thailand
Section 3.3 : Top countries in Asia for setting up treasury centres
Section 3.4 : Development plan for treasury centres in Thailand
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Treasury centres under Thailandroadmap
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Treasury centres under Thailand roadmap
Priority area:
Treasury centre
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Why dowe need atreasurycentre?
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Costof funds
Financial
Efficiency
Why do we need a treasury centre?
In-house bank
Company A
Company B
Manage cash flows
Manage foreign exchange risk
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Treasury centres in Thailand
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Treasury centres in Thailand
Establishmentof corporate
treasury centres
Only 4 companieshave obtained atreasury centre
license
10 years !!!
2004
2014
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Obstacles
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Top countries in Asia for setting uptreasury centres
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Top countries in Asia for setting up treasury centres
Tax package (10% CIT for 5-10 years,
WHT exemption)
Strong banking network
Wide DTA network
No tax on outbound activities
Proximity to China
Strong banking network
Newly-launched tax package
(70% income exemption for 5 years,
WHT exemption)
Islamic financial hub
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Development plan for treasurycentres in Thailand
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Development plan for treasury centres in Thailand
Cash pooling
Netting
Hedging
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Should cash leakagebe solved with WHT
exemption?
Cash pooling
WHT refundable
SBT exemption
1% WHT on gross interest
Which rate shouldbe reasonable?
Interestrate
Should regulationson SBT exemption
be revised?
3
USD 300 loan
1
Company B
2
Company A
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ROH
Interest incomefrom relending is
subject to 10% CITunder ROH
Issue onmaintaining 50%
foreign service androyalty income
threshold
ROH
Disqualified!!!
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Netting
Company A
Export of goods USD 100
1
Company B
Company C
USD 100
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Hedging
• Revaluation of forward contract under Paw 68
• Allowing use of “mid rate”
Revaluation ofFX assets and
liabilities
• At the rate of 0.011%
SBT on
FX gains/
derivatives
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How to achieve goal?
CashPooling
Netting
Hedging
• Interest rate on relending
• WHT exemption
• SBT exemption on interest
• Netting / tax coupon
• Mid rate for FX translation
CITincentives
CITincentives
CITincentives
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Contact
Peerapat PoshyanondaPartnerTel. +66 (0) 2344 [email protected]
Siripong SupakijjanusornPartnerTel. +66 (0) 2344 [email protected]
Somboon WeerawutiwongPartnerTel: +66 (0) 2344 [email protected]
Orawan FongasiraAssociate PartnerTel. +66 (0) 2344 [email protected]
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Thank you
© 2014 PricewaterhouseCoopers Legal & Tax Consultants Ltd. All rights reserved.'PricewaterhouseCoopers' and/or 'PwC' refers to the individual members of thePricewaterhouseCoopers organisation in Thailand, each of which is a separate andindependent legal entity. Please see www.pwc.com/structure for further details.