Relaxed rules spur interest in treasury centre

Speaking at an HSBC seminar on “Thailand: IHQ and TC Initiatives”, Chantavarn Sucharitakul, BOT assistant governor for the Financial Markets Operations Group, said the central bank hoped the number of TCs this year would rise from the current 14, as many companies have made inquiries.
She said the 14 companies holding TC licences were managing foreign currency for almost 150 companies, both inside and outside Thailand. Six of the 14 are Thai companies and the rest multinationals. Five of these licences were granted within the past four months, and two more are awaiting approval from the Finance Ministry.
Nutt Lumbikananda, director of the BOT’s Foreign Exchange Administration and Policy Department, said one of the two companies awaiting approval was a Thai firm and the other Japanese.
Chantavarn said more Thai companies and multinationals became interested in applying for a licence after the central bank relaxed the regulations on TCs. Corporates now can use their TCs in Thailand as springboards to support their services and operations in the CLMV region (Cambodia, Laos, Myanmar and Vietnam).
She said a TC could help a company reduce costs by netting off transactions within the group and centralising liquidity management through cash pooling. Before the amendments, however, not many companies were interested in setting up a TC as the only incentive then was the expediency with which they could undertake foreign-exchange transactions.
Over the years, Thailand has grown to become a manufacturing hub for many industries supplying Asean and beyond. Like any companies that operate in multiple jurisdictions, those with manufacturing centres in Thailand saw the need for a treasury centre to manage their group liquidity, foreign-exchange risk, and funding activities.
To qualify for a TC licence, a group must have three companies located in Thailand, Vietnam or [other?] neighbouring countries or second the companies located in Thailand, and two affiliated companies located in other countries.
 The treasury-centre concept became more interesting last year with the granting of tax incentive under the initiative to promote the setting-up of international headquarters (IHQs) in Thailand.
Companies that have a TC licence and have established an IHQ are now eligible for tax incentives, such as reduction or exemption of corporate income tax, and personal income tax for expatriates.
At the seminar, Joerg Ayrle, chief financial officer of Thai Union Group, a Thai company that has a TC and an IHQ, said the treasury centre allowed TU to save direct funding costs of at least 4 per cent. Moreover, it can be more flexible in lending to companies in the group.
He urged the Revenue Department, which is in charge of the licences for IHQs, to connect with other state agencies to increase the efficiency of the tax incentives.
Akkaraj Boonyasiri, a tax economist at the Revenue Department, said more than 100 companies had obtained IHQ licences from the department, and it expects that number to grow strongly because of the attractive tax incentives compared with what Singapore offers.
“Thailand will waive personal income tax for expatriates on 15 per cent of gross income and all benefits derived from employment, but Singapore does not have this incentive,” he said.