Tax Benefits for Regional Operating Headquarter
A myriad multinational companies are currently making direct investments in Thailand. At times, these companies provide various services and assistance to affiliates and branches in Thailand, or in other countries. Therefore, to make Thailand the investment center of the South East Asia Region, tax benefits are given to these companies, the foreign employees, and the shareholders by the Royal Decree Issued Under the Revenue Code on Reduction of and Exemption from Revenue Tax (No.405) B.E.2545 (2002).
A Company entitled to receive tax benefits under the Royal Decree must be incorporated, and operate in the form of a Regional Operating Headquarter. That means the company must be incorporated under the laws of Thailand, and engage in rendering managerial, technical, or supporting services to an affiliate or branch located in Thailand, or aboard.
The Royal Decree prescribes a wide scope of supporting service rendered by the Regional Operating Headquarter. For instance, the supporting service can be in general management, business planning, business coordination, materials and component parts procurement, product research and development, and technical support, etc.
The affiliate is defined by the Royal Decree, for which two aspects are considered; shareholding and control. The shareholding aspect is considered on the holding of shares of not less than 25% of the whole capital; while the control aspect is considered mainly on the business control and supervision, and the management, as per the details and criteria set by the Royal Decree.
A company incorporated, and engaging in business, in the form of the Regional Operating Headquarter, can receive an income tax rate reduction to 10% of the net profit of the following incomes; income from the services rendered to an affiliate or branch aboard; the interest received from an affiliate or branch located aboard, in case that such company has borrowed the money to lend to that affiliate or branch; and the royalty received from an affiliate or branch located aboard or the related company, in case that the royalty is derived from the technological research and development of such company conducted in Thailand
In addition, the Regional Operating Headquarter is entitled to a tax exemption on the dividend received from an affiliate incorporated under Thai or foreign laws.
To receive the tax reduction or exemption, the Regional Operating Headquarter must posses the qualifications as prescribed by the Royal Decree, and register as Regional Operating Headquarter with the Revenue Department.
The tax benefits for the shareholders and foreigners working for the Regional Operating Headquarter are prescribed such as : income tax exemption for the company incorporated under the foreign law, which does not operate business in Thailand, for the dividend received from the Regional Operating Headquarter, which is paid from the net profit derived by the aforesaid service fee, interest, or royalty. Certain tax reductions and exemptions are provided to foreigners working in Regional Operating Headquarters
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