AMC – Tools for solving NPLs

Asset Management Company (AMC) does business through purchasing or auctioning NPLs (non-performance loans) from commercial banks or financial institutions and manages such NPLs through restructuring of NPLs. The AMC business is governed by the Bank of Thailand (BOT), where the selective NPLs from the banks will be sold to the AMCs through auction. The banks will notify the debtors and creditors before and after the auctions of debt. AMCs that win such auctions have the duty to inform the debtors of their rights to claim the debt in place of the banks. Still, the original right to claim the capital, interest, and other relatives’ rights and obligations agreed with the banks are still enforceable. The debtors just have to perform their obligations with the AMCs.

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Under this current situation, a joint venture agreement between AMCs and commercial banks is to be entered into giving the banks more flexibility in managing bad debts and also helping AMC in playing a key role in the country’s bad asset management as some have capital limitations in terms of buying distressed debt.

According to the published news in May 2022, All Inspire Development Plc. is one of the companies operating AMC businesses. The company aims to buy the NPLs for about 500-1000 million baht with an estimated return of around 4 – 4.5 billion baht. 

Based on Bangkok Commercial Asset Management or BAM’s forecast, the value of NPLs from the banks will be around 200-300 billion baht, and other financial institutions will be around 9 billion baht.

Under the BOT rules and regulations, a limited company or public limited company with a registered capital not less than 25 million baht and having a purpose of business to be transferred of NPLs from the banks or financial institutions to manage the NPLs are able to apply for operating of AMCs business with the BOT. The AMC that did not comply with the regulations and rules set by the BOT will result in revocation of registration. 

The joint venture entities will be operated for not more than 15 years from the date of approval for their operation, and after that, those will need to be liquidated or changed of shares proportion held to be in accordance with the relevant laws and regulations governed their business. 

The booming of AMC business is the gravely additional tool or assistance for the banks to manage the NPLs during this downhill of economic due to the pandemic. However, this AMC tool is not a long-term resolution in which the government is needed to launch and implement the economic policy to solve this problem on a long-term basis.

Author: Panisa Suwanmatajarn – Managing Partner, The Legal Co., Ltd.

Tax Relief Measures for Digital Asset Trading

The Cabinet, on 8 March 2022, has approved in principle drafts Royal Decree under the Revenue Code regarding VAT exemption (No. ..) B.E. …. (“Royal Decree”) and Ministerial Regulation (No. ..) B.E. …. (“Ministerial Regulation”) issued under the Revenue Code regarding VAT and income tax exemption as proposed by the Ministry of Finance.

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These drafts Royal Decree and Ministerial Regulations are measures to relieve the tax burden for people in trading digital assets by exempting VAT for transferring of cryptocurrencies or digital tokens in digital asset exchanges and transferring of digital currencies issued by the Bank of Thailand (“BOT”) as well as exempting personal income tax from the benefit of transferring of cryptocurrencies or digital tokens from the profits earned.

The main points of these Royal Decrees and Ministerial Regulation are as follows:

  • The drafts Royal Decree is applied for VAT exemption for transferring of cryptocurrencies or digital tokens in digital asset exchanges approved by the Minister of Finance and VAT exemption for transferring of digital currencies under the development and trial program for public sector usage issued by the BOT, starting from the 1st date of the next month that the Cabinet has granted its approval until 31 December 2023.
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  • The draft Ministerial Regulation is applied for personal income tax exemption on profits obtained from transferring of cryptocurrencies or digital tokens in digital asset exchanges approved by the Minister of Finance in the amount equal to losses in the same fiscal year (the other words, profits – losses = amount of income for tax calculation), starting  from 14 May 2018 onwards, in which rules, procedures and conditions announced by the Director-General of the Revenue Department will be applied.

Draft Royal Decree issued by virtue of the Revenue Code Regarding Tax Exemption (No. ..) B.E. …. [Tax Measures to Promote Fundraising in Startup Enterprises]

The Cabinet, on 8 March 2022, has approved in principle of drafting Royal Decree issued by virtue of the Revenue Code regarding Tax Exemption (No. ..) B.E. …. (“Royal Decree”) as proposed by the Ministry of Finance which improves tax incentives measures to promote fundraising in startup enterprises according to previous Royal Decree regarding Tax Exemption (No. 597) B.E. 2559 and Royal Decree regarding Tax Exemption (No. 636) B.E. 2560.

This Royal Decree exempts personal income tax and corporate income tax on profits from transferring of shares and unit trusts in enterprise investment and investment in startup enterprises through venture capital. This tax exemption shall be effective from the date following the date of its publication in the Government Gazette until 30 June 2032 in order to enable Thai startup enterprises to raise more fund from the investors which will result in further expanding of the country’s economic system. The main points of this Royal Decree regarding the tax incentives are as follows:

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Investment TypesTax Benefits
1. Direct investment of an individual or a juristic partnership or a company registered in Thailand and a juristic partnership or a company registered overseas (previously not mentioned)An individual or a juristic partnership or a company both registered in Thailand and overseas will receive exemption on personal income tax or corporate income tax for income (only profit) from transferring of shares of startup enterprises. However, such startup enterprises shall operate on the targeted industries as supported by the government.
2. Investment through Venture Capital (VC)Corporate Venture Capital (“CVC”) will receive exemption on corporate income tax on income (only profit) from transferring of shares of startup enterprises only on transferring of shares of startup enterprise. However, such startup enterprises shall operate on the targeted industries as supported by the government. · Private Equity Trust (PE Trust) is not subject to corporate income tax. · Investors in CVC will receive exemption on personal income tax or corporate income tax on income (only profit) from transferring of CVC shares. · Investors in PE Trust will receive exemption on personal income tax or corporate income tax on income (only profits) from transferring of unit trusts on PE Trust.

The Cabinet approved a Draft Credit Information Business Operation Act (No. ..) B.E. …. (the “Draft Act”) as proposed by the Ministry of Finance (the “MOF”) on 22 December 2020 in order to revise the Credit Information Business Operation Act B.E. 2524.

Summary of the Draft Act are as follows:

  • The main purpose of this Draft Act is to allow entrepreneurs who operate as intermediate entity in providing credit facility in forms of new transactions or financial innovations (Final Technology) which are rapidly expanding in Thailand (the “Entrepreneurs”) to be members of a credit information company in which such Entrepreneurs are able to send credit information of their SMEs and start-up businesses to the credit information company enabling the said Entrepreneurs to have their financial history information in its system. This will allow such Entrepreneurs having more opportunities to access to legal sources of fund, gain financial support or loans from other registered financial institutions in the future. This will also, in the meantime, reduce numbers of illegal loan debt.
  • The Draft Act will revise procedures for disclosing information of credit information or credit score (“Information”). In regard to the said revised procedures, the credit information company will need to notify in writing to its customers (owners of the Information) within 30 days from the date of disclosing or providing such Information, except for collective Information of financial institutions or Entrepreneurs that the credit information company has admitted as its members.
  • The credit information company, information controllers, information processors, members, customers, persons who know Information from working or performing a duty at the credit information company or persons who know Information from the above-mentioned entities/persons shall be basically prohibited to disclose the Information.
  • A service user shall not disclosure or disseminate the Information to the others who do not have the right to be informed and that it shall use the Information for specified purposes only, such as using the Information for the purposes of credit analysis and credit card issuance.
  • Entrepreneurs will be able to disclose or provide Information to its members for the purpose of credit analysis on behalf of the credit facility provider only.
  • Entrepreneurs will be able to use its customers’ Information obtained from the credit information company in order to create a credit model. If such Entrepreneurs use the Information other than for the purpose of credit analysis on behalf of the credit facility provider and other than for the purpose of risk management for the credit facility provider, such Entrepreneurs will be penalized by the provision under this Draft Act.   
  • Entrepreneurs will be required to explain the reasons for refusal of the services or for increasing of service charges, including sources of customers’ Information to such customers in writing.
  • Financial institutions, members or service users, who do not explain the reasons for refusal of the services or for increasing of service charges, including sources of customers’ Information to such customers in writing, will be penalized by the provision under this Draft Act.

This Draft Act will be submitted to the Parliament for its consideration and approval before publishing in the Royal Gazette and then become enforced.