The year in review: so many changes, so little time

We started 2012 with a reduction of the corporate income tax rate from 30 to 23 per cent. This reduction was just one symbol of the overarching impact of the looming formation of the Asean Economic Community (AEC) slated for January 1, 2015. This year saw a real change in focus with renewed energy and vigour around mobilising the Thai business community’s preparedness for the AEC and the many opportunities and competitive challenges it will bring. The government has done a fantastic job getting the word out about the AEC and really pushed hard the message that Thai businesses must prepare for the opening up of the community. It seems as though this message has been heard loud and clear.

In addition to all the constructive developments around the AEC, quite possibly the second most talked about issue of the year has been the US’s forward movement on the Foreign Account Tax Compliance Act (FATCA). While proposed regulations were published early in the year, there was initially a bit of a wait-and-see attitude given the uncertainties of what the final regulations might look like in light of the pending US elections. However, those hoping that a new US administration might “go easy” on the FACTA implementation process found themselves seriously considering planning around FATCA once Obama was re-elected and the IRS issued a revised, and what now appears to be final, timetable for FATCA implementation. 

In addition to these two major stories, the AEC and FATCA, other developments caught the attention of the Thai business community this year. 

First, there was Thailand’s unflattering inclusion on the Financial Action Task Force’s money laundering grey-list. While inclusion on such a list was unwelcome news, it has prompted action on the implementation of long awaited money laundering rules. While it took two rounds of rule drafting, the final implementation of new client due-diligence rules in the latter part of the year has many in the regulatory community believing that these newly enacted provisions will be enough to satisfy the FATF committee and result in Thailand being moved off the watch list when the annual review rolls around early next year.

Additionally, the announcement that the Thai Revenue Department would be considering the implementation of four major tax reforms in the near future including Controlled Foreign Corporation, Thin-Capitalisation, General Anti-Avoidance and formal Transfer-Pricing legislation, has Thai businesses seeking to staff-up their tax functions and step up the tax technical skill sets within their organisations, and none too soon, as 2013 will also see compulsory reporting of deferred tax accounting for many Thai companies. 

Not to be left out, mid-year saw the Supreme Court weighing in on a tax issue, and choosing to rule on Value Added Tax (VAT). While the initial reading of the ruling appeared to close off the possibility of any activity ever qualifying for zero-per-cent VAT as an export service, a closer reading of the ruling seems to leave some room for export services treatment for certain activities, albeit fairly limited.

This year also saw the extension of the reduced, 7-per-cent VAT rate with an announcement in September that the rate would be extended for two more years until October 1, 2014. As October 1, 2012 came and went without the issuance of a formal royal decree to formalise the reduction extension, the final issuance of the decree by mid-October provided everyone comfort that the rate would not actually revert back to the statutory 10 per cent.

All in all, it’s been an incredible year of fast-moving developments that are sure to make their effects felt on the Thai nation for years to come. It has been a joy and a great pleasure to cover such events and provide The Nation’s many readers with fact and opinion via this column. We here at KPMG would like to thank the readers, our clients and The Nation newspaper for providing us with this monthly forum for reaching out to the community and hopefully providing useful guidance, advice and timely information. 

I would personally like to thank the many team members here at KPMG who work so hard to make this article as informative and technically accurate as possible and who provide me with much appreciated guidance and support as I write this article each month. Without them, this would not be possible.

Here’s to an incredible and productive 2013!

 

This information is intended as a general guide only. Tax law is complex and professional advice should be taken before acting on the information provided.

 

Jonathan Blaine is associate principal at KPMG Thailand.