| The long awaited legislation regarding the revised conditions and benefits for Regional Operating Headquarters (ROH) was finally published in the Royal Gazette n November 8, 2010 and is now law.
A ROH is a company established under Thai law to provide management, technical or support services toits associated enterprises or branches located within or outside Thailand. To qualify as a ROH the company must have fully paid-up registered capital of at least Baht 10,000,000 and must provide services to at least three affiliated companies located in different countries. Under the new regulations the ROH must provide services to an affiliate in one country in the first year, two countries within three years and three countries within five years.
An "affiliated" company is one in which the ROH holds 25% of the equity or which holds 25% of the equity of the ROH or if the ROG and the company have a common shareholder which holds at least 25% of their equity. A company will also be deemed an affiliate of the ROH is it is under the voting control of the ROH or if it controls the ROH or if a third party controls the voting of both the ROH and the company.
The new regulations have abolished the previous requirement that 50% of the income of the ROH be generated from services rendered to affiliated companies to be eligible for the reduced corporate income tax rate. Under the new regulations qualified services rendered to an affiliateoutside of Thailand are subject to 0% corporate income tax and 10% if rendered to affiliates inside Thailand. Other income of the ROH will be taxed at the normal rate of 30%.
The ROH will be eligible for these reduced corporate income tax rates for ten years provided that it fulfills the following conditions:
- minimum expenditures of15,000,000 THB per fiscal yearor capital expenditurewithin Thailand of at least 30,000,000 THB in a fiscalyear (excluding investment in securities)
- maintains a physical presence and operates a real business in Thailand;
- services affiliates in three counties within five years and meets the requirements for employment of experts and employees as notified by the Revenue Department;
- applies to the Revenue Department for registration as a ROH within 5 years from November 15, 2010; and
- at the end of the third year at least 75% of the employees have graduated at least secondary school or primary vocational institute or equivalent and at least 5 people have an average annual salary of Baht 2,500,000.
If in addition to meeting the requirements above, if the ROH generates more than 50% of its income from qualifying servicescharged to foreign entities it will also be entitled to the following benefits:
- corporate income tax and withholding tax exemption on dividends received from and paid to foreign affiliates for 10 years;
- a reduction of corporate income tax on the interest on loans from 30% to 10% for 10 years;
- reduction of corporate income tax on royalties from 30% to 10% for 10 years;
- a reduction of personal income tax for high level management expatriate employees working in Thailand from a progressive tax rate to a flat rate of 15% for 8 years; and
- anexemption of personal income tax for high level management expatriate employees working overseas.
It should also be noted that companies can choose whether to register under the previous regime for ROH's or the new regime described above.
Few companies will be eligible to register as an ROH but for those who are these are substantial incentives. |
