HQs wooed with tax incentives

IHQs and ITCs in the Kingdom currently enjoy both tax and non-tax benefits, including complete income-tax exemption for out-out transactions, while in-out transactions will be eligible for an income-tax rate of 10 per cent instead of the normal 20 per cent.

The tax exemption will be granted for any fees derived from services rendered to foreign associate companies – offshore service fees – while a tax rate of 10 per cent will be applied to fees derived from services rendered to local associate companies – onshore service fees – with the condition that the total onshore service fees do not exceed the offshore service fees.

Other current tax benefits include withholding-tax exemption on dividend payments and royalties, and a 15-per-cent tax rate for expatriate income. 

Meanwhile, the Cabinet yesterday approved complete exemption from specific business taxes on all financial activities of IHQs and ITCs, which currently stands at around 3 per cent, to encourage the setting up of more IHQ and ITC treasury centres. 

“Finance Minister Apisak [Tantivorawong] has explained that the government will lose some tax revenue, but it will be minimal, since this is only the initial stage, while the tax collection has yet to be added into the revenue code and specific business taxes on IHQs and ITCs are rather small when compared with the amount of specific business taxes that are being collected from firms in the country,” Government Spokesman Sansern Kaewkamnerd said yesterday.

Meanwhile, the Cabinet made no resolution regarding the country’s intention to join the Trans-Pacific Partnership (TPP). The Commerce Ministry says the country has at least a year or two to discuss the pros and cons before deciding whether to join the world’s largest trade partnership, covering around 40 per cent of the global economy.

The deputy prime minister in charge of economic affairs, Somkid Jatusripitak, said last week that the government was interested in joining the TPP and that the matter would be discussed at the weekly Cabinet meeting yesterday. 

“The first and foremost effect from the TPP deal on Thailand is the psychological effect, where people will think there will be more trade activities among the 12 TPP members,” Commerce Minister Apiradi Tantraporn told reporters after the meeting.

“Nevertheless, Thailand already has free-trade agreements with nine of the 12 TPP members, excluding the United States, Canada and Mexico, and Thailand still has the GSP [Generalised System of Preferences] system with the US. We’re also in talks for the RCEP [Regional Comprehensive Economic Partnership] with Asean+6. So the effects [from the TPP] in terms of products should be minimal for now and we do have to contemplate the decision,” she explained. “TPP members will need one or two more years to ratify the deal, so it is not too late for us to discuss the deal and evaluate its effects on each [export] product.” 

Apiradi said the RCEP deal among Asean’s 10 members and six other nations (China, India, Japan, South Korea, Australia and New Zealand) might contribute less in terms of global gross domestic product. The TPP covers 38 per cent (US$28.3 trillion) of the world economy, but RECP’s market will be larger, since the combined population of RCEP nations will be around 3.5 billion and that of the TPP members will be around 800 million.