Thailand’s Interim Measures for VAT Collection and Import Duty Exemptions on Goods Valued Up to 1,500 Baht
The Ministry of Finance is addressing the disparity in VAT collection between overseas and domestic sellers through targeted interim measures. The key issue involves implementing VAT collection for goods valued at no more than 1,500 baht sold through foreign-operated platforms, with monthly remittance to the Revenue Department. Recognizing that amending the Revenue Code takes time, the Ministry of Finance has introduced temporary VAT collection measures through the Customs Department to support domestic businesses impacted by e-commerce growth.
On 26 December 2024, the Ministry of Finance issued Notification No. 2, replacing the expired Notification No. 1 and extending import duty exemptions for goods valued at no more than 1,500 baht until 31 December 2025. The Customs Department subsequently issued Notification No. 233/2567 to provide clear guidelines and procedures for claiming these exemptions.
Key details of the announcement include:
Customs Duty Exemption: Importers (sellers) can claim exemption of import duty for consignments with a CIF value up to 1,500 baht by indicating “LVG” as the special code on the commercial invoice.
VAT Payment Options: Recipients (buyers) can pay VAT through two methods:
QR code payment
Bank payment by presenting the payment order
VAT Assessment Dispute: Recipients (buyers) can contest tax assessments via the designated website or by mail to the Customs Department.
The government’s interim measures aim to equalize tax treatment between domestic and foreign e-commerce businesses for goods valued at no more than 1,500 baht. While the Revenue Department works on a permanent solution for direct VAT collection from online platforms, these new regulations provide clarity and streamline the process for businesses and the public until 31 December 2025.
Updated : Thailand Unveils Draft Entertainment Complex Bill: A Path to Casino Legalization
Following our previous article on “Thailand Unveils Draft Entertainment Complex Bill: A Path to Casino Legalization”, Thailand’s Cabinet has approved the Draft Entertainment Complex Act (“Draft Bill”), marking a significant milestone in the country’s efforts to boost its tourism sector and diversify its entertainment offerings. The Draft Bill, which aims to regulate and promote investment in entertainment complexes—including casinos—is now set to be submitted to the Parliament for further deliberation. This development comes as Thailand seeks to strengthen its position as a leading global tourist destination, with tourism playing a crucial role in the country’s economy.
The approval of the Draft Bill follows a public hearing where the majority of participants expressed support for the initiative. However, the Draft Bill has also sparked debates and concerns, particularly from the Office of the Council of State, which has raised questions about its alignment with government policies and its effectiveness in addressing illegal gambling.
Key Features of the Draft Bill:
The Draft Bill introduces a comprehensive framework for the establishment and operation of entertainment complexes, which are defined as integrated venues that include a casino alongside at least four other types of businesses. Below are the key aspects of the Draft Bill:
1. Definition and Scope of Entertainment Complexes
Under Sections 3 and 41 of the Draft Bill, an entertainment complex must include a casino and at least four additional businesses, such as shopping malls, hotels, restaurants, nightclubs, pubs or bars, sports and entertainment facilities, yacht and cruising clubs, gaming establishments, swimming pools, amusement parks, OTOP centers (promoting local Thai products) and/or other businesses as prescribed by the Policy Committee.
Each business within the complex must comply with its respective laws and regulations. However, operational details such as hours of operation, alcohol sales, and designated smoking areas will be determined by the Policy Committee.
2. Casino Regulations
The Draft Bill defines a casino as a facility designated for gambling activities within a specific location. Key regulations include:
Designated Areas: Casinos will operate only in zones approved by the Policy Committee.
Debt Enforcement: Debts arising from casino activities without any formal agreement will be legally enforceable.
Online Gambling: License holders are prohibited from facilitating online gambling beyond the physical premises of the complex.
Advertising Restrictions: License holders cannot advertise or promote casino activities unless explicitly permitted by the Policy Committee.
Loans to Gamblers: License holders may extend loans to gamblers, subject to the Policy Committee’s regulations.
3. Licensing Framework
Licenses for operating entertainment complexes will be valid for 30 years, with an initial fee of 5 billion THB and an annual fee of 1 billion THB. License holders must undergo performance evaluations to ensure compliance with approved plans. Renewals will be considered in 10-year increments, subject to additional fees.
4. Eligibility Criteria
Applicants must meet the following criteria:
Be a limited or public limited company registered under Thai law.
Have a minimum paid-up capital of THB 10 billion.
Public limited companies holding licenses will be exempted from the restriction of the Foreign Business Act (FBA) and will not require a Foreign Business License (FBL). However, limited companies with more than 50% foreign ownership must comply with the FBA unless further exemptions are announced.
5. Operational Obligations
License holders must adhere to the operational plans submitted during the application process. Any deviations require prior approval from the Policy Committee. Failure to comply may result in license revocation.
6. Designated Locations
The locations for entertainment complexes will be specified in a forthcoming Royal Decree. Unofficial reports suggest potential sites in major tourist destinations such as Bangkok, Pattaya, and etc.
Concerns from the Office of the Council of State:
Despite the Cabinet’s approval, the Office of the Council of State (“Office”) has raised several concerns about the Draft Bill:
Alignment with Government Policies: The government’s seventh policy emphasizes creating man-made tourist attractions, such as amusement parks and shopping malls. The Office questions whether enacting a specific law for entertainment complexes aligns with this broader vision.
Redundancy and Legal Conflicts: The Draft Bill’s inclusion of businesses already regulated by specific laws (e.g., hotels and restaurants) may lead to redundancy and interpretative conflicts.
Unclear Intentions: The Draft Bill’s objectives remain ambiguous. While it claims to address illegal gambling, the Office argues that existing laws, such as the Gambling Act B.E. 2478 (1935), could suffice. Alternatively, if the goal is to promote tourism, the bill should focus on creating integrated tourist destinations rather than solely regulating casinos.
Public Perception and Communication: The Office emphasizes the need for clear communication with the public to avoid confusion and ensure transparency.
Minister of Interior’s Stance on Gambling:
Adding another layer to the discussion, the Minister of Interior, who oversees gambling laws, has indicated that certain forms of gambling may be permitted without waiting for the Draft Bill to pass. This statement suggests a potential shift in the government’s approach to gambling regulation, possibly allowing limited gambling activities under existing laws while the Draft Bill undergoes further review.
Next Steps:
With the Cabinet’s approval, the Draft Bill will now be submitted to the Parliament for further deliberation. During this process, amendments may be made based on feedback from relevant authorities. Additionally, the Policy Committee will issue further announcements to clarify operational details, such as hours of operation, alcohol sales, and other regulatory aspects.
Conclusion:
The approval of the Draft Bill by the Cabinet marks a significant step toward diversifying the country’s tourism offerings and addressing the issue of illegal gambling. However, concerns raised by the Office of the Council of State highlight the need for clarity, alignment with government policies, and effective communication with the public. As the Draft Bill moves through the legislative process, stakeholders must remain vigilant and prepare for potential changes. In the meantime, the Minister of Interior’s remarks suggest that the government may explore interim measures to regulate gambling activities, signaling a dynamic and evolving landscape for Thailand’s tourism and entertainment sectors.
Liquor Law Reform: A Step Towards Revitalizing the Industry
Introduction:
The Liquor Act B.E. 2493 (1950) (“the Act”) was enacted in Thailand to regulate liquor production, requiring producers to obtain government licenses. However, the Act imposes stringent requirements that have created significant barriers for small and medium-sized enterprises (SMEs) to participate in the industry. These restrictions have allowed large corporations to monopolize the market, thereby stifling competition and innovation.
In response to these challenges, Thailand introduced the Ministerial Regulation on the Production of Liquor B.E. 2565 (2022)(“the Regulation”). This Regulation seeks to address some of the difficulties posed by the Act by introducing measures to support SMEs and community-based liquor production. Key provisions of the Regulation include:
Defining Small to Medium-Scale Industrial Breweries:
Small producers are permitted to use machinery not exceeding 5 horsepower and employ fewer than 7 workers.
Medium-sized producers may utilize machinery up to 50 horsepower and employ a maximum of 50 workers.
Requirements for Commercial Liquor Production:
Production requirements are tailored to the type of liquor (e.g., fermented or distilled).
Conditions include shareholder composition, machinery specifications, and adherence to environmental and public health regulations.
Requirements for Non-Commercial Liquor Production:
Producers must specify production locations and processes.
Annual production is capped at 200 liters and must not create nuisances or violate safety and environmental standards.
While the Regulation provides some relief by enabling the growth of community-based breweries, numerous limitations remain. To address these issues, three draft legal instruments have been proposed to the House of Representatives.
Proposed Draft Laws
The Draft Progressive Liquor Law
Proposed by the People’s Party, this draft sought to eliminate minimum requirements for commercial liquor production, such as factory size, horsepower, employee count, and registered capital. It also allowed home brewing without regulatory conditions. However, the House of Representatives did not approve the draft’s principles.
The Draft United Thai Liquor Law
Proposed by the United Thai Nation Party, this draft obtained the principle’s approval from the House of Representatives. It emphasizes supportive and less burdensome conditions for SMEs seeking liquor production permits.
The Draft Community Liquor Law
Proposed by the Pheu Thai Party, this draft also gained the principle’s approval. It encourages the use of agricultural products in liquor production to create distinctive flavors and styles. Additionally, it removes minimum daily production requirements, making it easier for SMEs to enter the market.
Current Developments:
On December 26, 2024, the Draft United Thai Liquor Law and the Draft Community Liquor Law successfully passed the second draft consideration stage in the House of Representatives. Both drafts are scheduled to proceed to the third and final consideration stage on January 22, 2025. If enacted, these drafts represent significant progress toward revitalizing and diversifying Thailand’s liquor industry.
Conclusion:
The Liquor Act B.E. 2493 (1950) imposed substantial obstacles for SMEs in the liquor industry, contributing to a monopolized market. The introduction of the Ministerial Regulation B.E. 2565 (2022) provided initial reforms, but additional measures are necessary to address lingering challenges.
The proposed Draft Progressive Liquor Law, Draft United Thai Liquor Law, and Draft Community Liquor Law aim to reduce barriers for SMEs, foster competition, and promote innovation through the integration of domestic agricultural products. Although the Draft Progressive Liquor Law was rejected, the remaining drafts hold promise for a more inclusive and diverse industry.
However, these reforms must be implemented with careful planning to mitigate potential risks and maximize benefits for producers, consumers, and society at large.
Land and Building Tax: Thailand Introduces Legal Instruments for Tax Reduction and Exemption to Support Waterworks, Green Spaces, and Electric Railway Transportation
Introduction
The Land and Building Tax Act B.E. 2562 (2019) (the “Act”) has been enforced since January 1, 2020, serving as the legal instrument for collecting land and building tax, replacing the Land and Building Tax Act B.E. 2475 (1932) and the Local Maintenance Tax Act B.E. 2508 (1965). The Act provides for land tax exemptions and reductions in certain cases and circumstances. On December 17, 2024, the Cabinet approved three draft legal instruments aimed at expanding the scope of land tax exemptions and reductions as follows:
The Draft Royal Decree on the Reduction of Land and Building Tax (No. ..) B.E. …. (Water Treatment Plant), proposed by the Ministry of Finance.
Previously, the Royal Decree on Land and Building Tax Reduction B.E. 2563 (2020) was enacted to reduce the land and building tax for 13 types of land and buildings. The new draft Royal Decree expands the tax reduction to include land and buildings used for developing water treatment plants or producing consumable water by offering a 50% reduction for these specific types of land and buildings. The amendment aims to alleviate the tax burden on water production and waterworks businesses. This support is particularly significant as water is essential and indispensable for the Thai population.
The Draft Ministerial Regulation on Assets Exempted from Land and Building Tax Collection (No. ..) B.E. …. (Green Space), proposed by the Ministry of Finance.
Previously, the Ministerial Regulation on Assets Exempted from Land and Building Tax Collection B.E. 2562 (2019) and B.E. 2566 (2023) issued by virtue of the Act (the “Ministerial Regulation 2023”) established tax exemptions for certain categories of assets. The new draft Ministerial Regulation seeks to enhance the importance of reducing the greenhouse gas emissions, increasing green areas and mitigating coastal erosion by granting land and building tax exemption to lands covered with greenery that provide environmental benefits or enhance the quality of life for humans. These lands must meet one of the following characteristics:
Land registered with the Thailand Voluntary Emission Reduction Program (“T-VER”) under the projects categorized for reduction, absorption and storage of greenhouse gases from the forestry and agriculture sectors standardized by Thailand Greenhouse Gas Management Organization (“TGO”), specifically those projects that align with voluntary greenhouse gas reduction methodologies for reforestation and forest restoration; or
Land defined as mangroves by the rules and regulations announced by the Director-General of the Department of Marine and Coastal Resources.
The Draft Ministerial Regulation on Assets Exempted from Land and Building Tax Collection (No. ..) B.E. …. (Electrical Railway), proposed by the Ministry of Finance.
Additionally, another new draft Ministerial Regulation will amend the provision regarding railways specified in the Ministerial Regulation issued in 2023 by expanding the definition of “Electrical Railway.” This change aims to standardize tax exemptions for railway and electrical railway operators. The revised definition will include “Communication Equipment Room,” “signaling Equipment Room,” and “Platform Area for Passengers Waiting to Board the Train” in order to relieve the tax burden on the three main railway operators in Thailand: Bangkok Metropolitan, the State Railway of Thailand and the Mass Rapid Transit Authority of Thailand. This amendment also aligns with the tax burden relief for other types of rail transport businesses.
In conclusion, the recent draft Royal Decree and Ministerial Regulations reflect the Thai government’s efforts to promote sustainable development and reduce the tax burden on key sectors. The proposed changes focus on expanding tax reductions for land used in water treatment plants as well as providing tax exemptions for green spaces and electrical railway infrastructure. By offering these tax benefits, the government aims to support water production and environmental conservation efforts, while also fostering the growth of the transportation sector. All of these draft legal instruments are set to take effect on January 1, 2025.
Tax System Reform: Thailand Adopts Pillar 2 in New Draft Emergency Decrees
Introduction
Thailand is actively pursuing membership in the Organisation for Economic Co-Operation and Development (“OECD”) to foster economic and social development and enhance its global standing. As part of this effort, Thailand is aligning its tax system with OECD standards by adopting Pillar 2. Pillar 2 comprises tax rules implemented by the OECD to prevent Multinational Enterprises (“MNEs”) from avoiding higher tax rates by shifting profits to low-tax jurisdictions.
Pillar 2 applies to MNEs whose consolidated financial statements show annual profits of €750 million (approximately THB 28 billion) or more. It imposes a 15% global minimum tax rate on MNEs’ profits, known as the “Top-up Tax.”
Two New Drafts for the Implementation of Pillar 2
To implement these rules, Thailand must enact domestic legislation to create a concrete legal framework for public compliance. Due to time constraints, Thailand is expediting the implementation process through emergency decrees rather than regular legislative acts. On 11 December 2024, the Cabinet approved two draft emergency decrees which are:
The Draft Emergency Decree on Top-up Tax B.E. …. proposed by the Ministry of Finance: This draft outlines the rules and procedures for collecting top-up tax from legal entities within MNE groups whose consolidated financial statements show total revenue of at least €750 million (approximately THB 28 billion).
The Draft Emergency Decree Amending the National Competitiveness Enhancement for Targeted Industries Act (No. ..) B.E. …. proposed by the Board of Investment: This draft amends existing law to address Pillar 2 by introducing measures to regulate the utilization of both tax and non-tax benefits.
Both drafts will be submitted to the Office of the Council of State for detailed review. Upon approval, they will be proposed to the Cabinet again and then to the House of Representatives. The public will be notified of the final versions before they become effective, with enforcement projected for 2025. These changes are expected to generate additional government revenue, ensure fair competition, and provide clearer guidelines for investors regarding their tax responsibilities.
Conclusion
Thailand is taking a significant step toward aligning its tax system with global standards. By adopting the OECD’s Pillar 2, Thailand aims to create a more equitable tax environment. The implementation through draft royal decrees introduces top-up tax and measures to regulate tax and non-tax incentives for targeted industries. These changes will contribute to a more level playing field for businesses, attract foreign investment, and ensure MNEs pay their fair share of taxes. The implementation is expected to strengthen Thailand’s economic competitiveness and sustainable development. Stakeholders should closely monitor the draft emergency decrees to prepare for the new laws taking effect in 2025.
Key Takeaways
Thailand is implementing the OECD’s Pillar 2 through 2 emergency decrees as part of its accession for OECD membership.
The new tax framework applies to MNEs with annual consolidated revenues of €750 million or more.
Key measures include:
Introduction of a 15% global minimum tax rate
New regulations for tax and non-tax benefits of Board of Investment’s targeted industries
Enhanced monitoring of tax compliance for large MNEs
Timeline for Implementation:
Cabinet’s approval was obtained on 11 December 2024
Currently under review by the Office of the Council of State
Expected enforcement to begin in 2025
Business Impact:
Affected companies will need to reassess their tax planning strategies
Increased tax transparency requirements
Potential adjustments to investment structures and corporate operations
For companies operating in Thailand, it is crucial to:
Monitor regulatory updates
Review current tax structures and benefits
Prepare internal systems for compliance with the new requirements
Consider seeking professional advice for tax planning under the new regime
Ministry of Finance: Update on Excise Tax in the Fields of Public Health, Environmental and Economic
On November 5, 2024, the Deputy Minister of Finance presented key policies to the Excise Department, emphasizing its crucial role in driving the transformation of the country’s economic structure, environmental sustainability, and public health. This will involve in studying new tax collection mechanisms, continuing the existing mechanisms, and adjusting the tax collection system to achieve such goals. The policy primarily focused on 3 key areas – health-related tax, environmental-related tax, and economic-related tax. The details are as follow:
1.Heath-Related Tax
Fat Tax Consideration: The Excise Department was advised to consider taxation mechanism for the fat tax to combat rising rates of fat consumption which are linked to increase a burden healthcare cost. The fat tax will be collected based on the type of fat in foods and products.
Expanding the Scope of Sodium Tax: Thailand’s current sodium tax will mainly target at four main product groups (i.e., instant noodles, frozen foods, snacks, and sauces). The policy is suggested to impose a sodium tax on products outside the current controlled lists, and prioritizing items with high sodium levels while considering the accessibility of essential goods for low-income individuals which will be calculated based on the level of saltiness.
Approving of the 4th Phase on the Sugar Tax: The sugar tax was implemented to encourage beverage manufacturers to reduce sugar content in 2017, in order to provide businesses and consumers time for adapting to the potential increases of the price, the sugar tax will be implemented into 4 phases which step-up system with rates increasing every 2 years. The implementation of sugar tax is currently in the 3rd phase, and the sugar tax has been approved for the 4th phase, commencing on April 1, 2025. This progressive approach aims to achieve the goal of reducing sugar content in packaged beverages.
Tobacco Tax System Development: Thailand’s tobacco tax structure consists of 2 main types: (1) a blended tax which considering both value and quantity, and (2) a single-rate tax which specific rate taxes, The policy requires the implementation of a blended tax system for tobacco product while stipulating the development of a single-rate tax system that aims to reduce price distortions, boost market competition, support local tobacco farmers, and increase government revenue.
Track & Trace system for Tobacco Products: Previously, Thailand’s tobacco verification system relied solely on stamps to confirm tax payment, with information accessible only to the Excise Department and manufacturers. To enhance transparency and traceability, a QR code tracking system has been implemented and enforced. This new system facilitates the process of verification, including allows the public to independently monitor product authenticity.
2. Environmental-Related Tax
Establishment of Carbon Pricing Mechanism: The Excise Department was advised to establish a carbon pricing mechanism in the excise tax on 6 different types of oil products to reduce the emission of Carbon dioxide gas from both the public and business operators. The initial carbon price is set at 200 baht per ton of carbon.
Reconsideration of Tax Rate for Battery Products: Currently, the tax rate for battery products is set to be at the rate of 8% for all types of batteries according to Ministerial Regulation regarding the Excise Tax Tariff Rates B.E.2560 (2017). However, the tax rate will be changed into a tiered tax system considering the characteristics of the batteries such as life cycle, weight, types, and energy used.
3. Economic-Related Tax
Investment Incentive for Automobile Industry: The policy using tax incentives to attract investment in the domestic automotive industry, particularly for Plug-in Hybrid Electric Vehicle (PHEV), Battery Electric Vehicle (BEV), Fuel Cell Vehicle (FCEV) vehicles, and Hybrid Electric Vehicle (HEV) while maintaining the production base for Internal Combustion Engine (ICE). However, to support long-term restructuring, the policy will be exposed to short-term revenue losses.
Strategic Objectives:
Promote preventive healthcare
Modify consumer behavior
Support environmental sustainability
Drive economic transformation
Ensure balanced revenue collection
Implementation Considerations:
The phased approach to allow business adaptation
Targeted reduction of sodium consumption by 30% by 2025
Collaborative approach with relevant government agencies
Conclusion
The November 2024 excise tax policy update represents a sophisticated, multi-dimensional approach to addressing national challenges through strategic tax mechanisms, balancing public health, environmental sustainability, and economic development.
Thailand’s Digital Economy Promotion Agency (DEPA) is spearheading efforts to revolutionize the country’s gaming industry through a comprehensive draft bill. The proposed legislation, aimed at supervising and promoting the gaming sector, is expected to play a pivotal role in establishing Thailand as a regional gaming hub.
DEPA, along with other government authorities, such as the Ministry of Commerce, Revenue Department, Cybercrime Investigation Bureau, and Bank of Thailand, announced that the agency is in the process of drafting the bill, which is aimed to come into effect by 2025. The legislation is designed to address the rapid changes in the digital landscape, acknowledging that gaming has evolved beyond internet cafes to encompass various online platforms.
A key component of the draft bill is the registration of game entrepreneurs, developers, and platform providers operating in Thailand. This measure is intended to create a structured framework for the industry while offering benefits to registered entities. These benefits include tax deductions and other fiscal privileges aimed at fostering the development of the gaming sector and promoting employment opportunities.
Content regulation forms another crucial aspect of the proposed bill. DEPA plans to implement a game rating system and measures to prevent issues such as online gambling and excessive violence in games. To ensure effective supervision, the agency will collaborate with relevant authorities, including cybercrime units and digital payment agencies.
The draft bill also focuses on enhancing the competitiveness of Thai entrepreneurs in the global market. It aims to promote various aspects of game development, including storytelling, character design, animation production, and esports tournaments. This comprehensive approach is designed to attract foreign game developers and solidify Thailand’s position as a regional gaming hub.
To gather input from stakeholders, DEPA has scheduled public hearings on the draft bill for September 2024. Following these consultations, the bill will be presented to the Cabinet, the Office of the Council of State, and the House of Representatives for consideration and approval.
The proposed legislation represents a significant step towards creating a well-regulated gaming ecosystem in Thailand. By balancing supervision with promotion, the bill aims to foster a thriving gaming industry that adheres to local laws and societal standards while attracting investment and driving economic growth in the digital sector.
As the gaming landscape continues to evolve, this forward-thinking approach positions Thailand to capitalize on the opportunities presented by the global gaming market while ensuring a safe and regulated environment for consumers and industry players alike.
Key Takeaways:
The Digital Economy Promotion Agency (DEPA) is drafting a bill to supervise and promote Thailand’s gaming industry.
The bill aims to establish Thailand as a regional gaming hub and is expected to come into effect by 2025.
Public hearings on the draft bill are scheduled for September 2024.
Key features include registration requirements, tax incentives, and content regulation measures.
Collaboration between various government agencies is planned to ensure comprehensive oversight.
Thailand’s Progress Towards Adopting the Subject to Tax Rule
In September 2023, the Organization for Economic Co-operation and Development (“OECD“) concluded a Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (“STTR MLI“). This convention aims to help Inclusive Framework members swiftly implement the Subject to Tax Rule (“STTR“). The STTR MLI enables the implementation of STTR in existing bilateral tax treaties without the need for bilateral negotiations. Most members of the Inclusive Framework, including Thailand, have shown interest in the STTR MLI.
On August 27, 2024, Thailand signaled its intent to join the STTR MLI through a letter of intent. However, recognizing the profound implications of STTR for Thailand, the Thai Cabinet authorized the Thai Revenue Department to conduct research on its effects, including drafting and revising the letter of intent. The purpose of this research and draft is to maximize the benefits for Thailand when implementing STTR into its tax ecosystem.
STTR is an integral part of Pillar Two, which is designed to prevent tax erosion by Multinational Enterprises (“MNEs“) and ensure a global minimum tax rate. Within Pillar Two, the Global Anti-Base Erosion Rules (“GloBE Rules“) were implemented as a foundation for states to adopt the practice of taxing back to the agreed minimum rate.
STTR complements the GloBE Rules by covering specific scenarios. It addresses certain cross-border transactions (e.g., interest, royalties and payments for services) that can be taxed at exceptionally low rates in some jurisdictions. These cross-border transactions are known as “Covered Incomes” under STTR. The rule applies when Covered Incomes are generated within connected entities (“Intra-Group“), where both entities are linked by a controlling interest of more than 50%, either directly or indirectly. STTR allows the source jurisdiction to tax back on Covered Incomes when the recipient jurisdiction imposes a nominal corporate income tax of less than 9%. The source jurisdiction can apply an additional tax of up to 9% on the gross amount of Covered Incomes. However, this additional tax must be reduced by the existing taxing rights of the source jurisdiction (such as withholding tax) and the nominal tax rate of the recipient jurisdiction. Thus, STTR protects the tax base of the source jurisdiction by allowing it to gain additional tax from cross-border Covered Incomes generated by Intra-Group transactions.
The letter of intent executed by Thailand is expected to be finalized before the scheduled date for signing the STTR MLI, which is 19 September 2024.
Temporary measure to collect VAT on low-value goods through Thai Customs
Pursuant to the cabinet meeting on 2 April 2024, the Revenue Department, which is responsible for collecting Value-Added Tax (VAT), has been directed by the former prime minister to issue a new measure to address the unfairness between foreign importers who are exempt from VAT and domestic importers who must register for VAT. This is in accordance with the Thai Revenue Code, which states that imported goods classified as duty-exempt under the law on customs tariffs shall be exempt from VAT.
Previously, the Notification of the Customs Department No. 191/2561 regarding the criteria for imported goods classified into the duty exemption category (category 12 part 4), by virtue of the Customs Tariffs Decree B.E. 2530 (1987), exempted duty for imports valued at less than 1,500 baht, which also resulted in a VAT exemption for those imports.
The Customs Department later issued Notification No. 116/2567 regarding the criteria for imported goods classified into the duty exemption category (category 12 part 4), by virtue of the Customs Tariffs Decree B.E. 2530 (1987). This new notification will exempt duty for imported goods with a value not exceeding 1 baht, resulting in VAT exemption for these items, meanwhile, the Revenue Department is in the process of preparing regulations to reduce the aforementioned unfairness.
Additionally, the Ministry of Finance has released a notification regarding the exemption of import duty for imported goods valued at less than 1,500 baht. This exempts import duties for goods valued between 1 baht and 1,500 baht to maintain the De Minimis Threshold, which allows low-valued imported goods to remain exempt from other taxes and import duties.
As a result of these two notifications:
Imported goods valued between 0 and 1 baht will be exempt from VAT and other taxes and duties.
Imported goods valued between 1 and 1,500 baht will remain subject to VAT but will be exempt from other taxes and duties.
These temporary measures outlined in both notifications will be effective until 31 December 2024.
The Tax Court’s Expanding Authority: Overstepping into Criminal Jurisdiction
The Cabinet has recently approved the draft Act for the Establishment of the Tax Court and the Procedures for Tax Cases (Amendment No. ..) B.E. …. (Criminal Tax Case Adjudication). The key aspect of the draft is to grant the Tax Court the authority to adjudicate criminal tax cases. The Criminal Procedure Code or the Act on the Establishment of and Procedure for District Courts will be applied mutatis mutandis to these cases. The draft also amends the notification of court schedules in tax cases, excluding criminal tax cases, and revises the criteria for appeals and petitions in tax cases. This change aims to allow parties to handle their cases in one court, reducing the burden of time and costs for litigants, the court, and judicial personnel. It also enhances the efficiency of tax law enforcement, ensuring the state’s revenue collection and providing more accurate and fair criminal tax case adjudication.
Currently, tax cases are handled by the Central Tax Court, which specializes in tax law, tax accounting, and double taxation agreements. While tax law covers both civil and criminal cases, the specialized court only has jurisdiction over civil cases according to Article 7 of the Act on the Establishment of and Procedure for Tax Court B.E. 2528 (1985). Criminal tax cases are handled by criminal courts, which are not ideally suited for these cases due to the differences in intent and nature of tax-related offenses compared to standard criminal cases. Many pieces of evidence relevant to civil cases are also applicable to criminal cases, making it inconvenient for litigants to present such evidence in separate proceedings. Additionally, penalties may vary across different criminal courts due to their differing authorities.
This proposal has been agreed upon by a cabinet resolution. The next steps will involve consideration by the House of Representatives and the Senate and then require publishing in the Gazette.
The effect of this proposed bill is expected to benefit both juristic persons and individuals, as it would allow tax cases to be addressed in a single proceeding for both civil and criminal aspects. This consolidation is anticipated to make it easier for the accused to handle their cases and for the examination of witnesses to be more convenient, given that the evidence is often similar for both civil and criminal cases. This amendment is expected to be advantageous for investors.
Key Takeaways:
The Thai Cabinet has approved the proposed bill to expand the Tax Court’s authority to include criminal tax cases. The bill will now proceed to the House of Representatives and the Senate for consideration.
The consolidation of civil and criminal tax cases in one court is expected to benefit both individuals and businesses, making the legal process more efficient and investor-friendly.
The new law aims to streamline the legal process, reduce costs, and ensure fairer outcomes in tax-related criminal cases.
