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Labor: Legal Consideration for Employment Termination

Disclaimer:

This article provides a general legal framework for employment termination in Thailand. It is important to note that specific industries, professions, or situations may be subject to additional or different regulations. If a matter in question is governed by specific legislations, those particular laws and regulations must be considered in addition to the general principles outlined here.

Introduction:

Employment termination is a critical aspect of workforce management that requires careful consideration of legal and ethical factors. In Thailand, the Labor Protection Act B.E. 2541 (1998) provides the primary framework for lawful employment termination, balancing the rights of employers and employees. This article explores the key aspects of employment termination under Thai labor law, focusing on contract types, compensation requirements, and legal protections for both parties.

Types of Employment Contracts and Termination Procedures:

The Labor Protection Act B.E. 2541 (1998) recognizes two primary types of employment agreements:

1. Fixed-Term Contracts

  • Termination occurs automatically upon contract expiration.
  • Early termination by the employer requires written notice.
  • Premature termination without cause may result in a breach of contract penalties.

2. Non-Fixed Term Contracts

  • Termination requires written notice prior to or on the wage payment date and will be effective on the following payment date.
  • Notice period should not exceed three months unless specified otherwise in the contract.

For both contract types, failure to provide proper notice obliges the employer to pay compensation in lieu of notice and salary until the effective termination date. Additional contractual obligations, such as repatriation expenses, must also be honored.

Compensation for Termination Without Cause:

When an employer terminates an employee without the employee committing any offense specified by law or contract, the Labor Protection Act B.E. 2541 (1998) mandates severance pay. The amount is calculated mainly on the employee’s length of service

In cases of contract breach before expiration without the employee’s fault, employers must pay damages. Failure to provide advance notice also requires compensation in lieu of notice.

upset faceless black businessman on street

Exceptions to Severance Pay Requirements:

The law provides exceptions where employers are not required to be responsible for severance pay, including:

  1. Employee dishonesty or intentional criminal offenses
  2. Intentional damage to the employer
  3. Gross negligence causing serious harm to the employer
  4. Violation of work regulations or orders
  5. Abandonment of duties for three consecutive days
  6. Imprisonment due to a court judgment

Even in these cases, employers must provide written termination notice and pay the salary up to the last working day.

Unfair Dismissal and Legal Recourse:

Employers should be cautious of unfair dismissal claims, even when severance pay is made. The Labor Court has the authority to:

  1. Order continued employment at the pre-termination wage rate
  2. Mandate compensation if continued employment is untenable

Unfair dismissal may be found in cases such as work-related accidents or discriminatory practices, even if the employee’s actions initially appeared to justify termination.

Employer Obligations and Best Practices:

To mitigate risks associated with employment termination, employers should:

  1. Adhere strictly to legal procedures for layoffs and terminations.
  2. Provide written notice of termination as required by law.
  3. Pay all required compensation, including severance pay if applicable.
  4. Obtain signed acknowledgment from the employee upon payment.
  5. Meet all payment deadlines to avoid additional penalties, surcharges and interest.
  6. Maintain comprehensive documentation of the termination process.
  7. Review and update employment contracts and work rules and regulations regularly.
  8. Conduct thorough investigations before terminating for cause.
  9. Consider alternatives to termination when appropriate.
  10. Seek legal counsel in complex cases or when unsure of obligations.

Conclusion:

Navigating employment termination in Thailand requires a thorough understanding of legal requirements and potential pitfalls. While this article provides an overview of the general legal framework, it is crucial to recognize that specific industries or situations may have additional requirements. By following the guidelines outlined in the Labor Protection Act B.E. 2541 (1998), considering any applicable specific legislation, and maintaining fair, transparent practices, employers can manage workforce changes effectively while minimizing legal risks and preserving their reputation as fair and responsible entities in the labor market.

For any specific termination cases, especially those in industries with specialized regulations, it is advisable to consult with legal experts to ensure full compliance with all applicable laws and regulations.

Key Takeaways:

  1. Legal Framework: The Labor Protection Act B.E. 2541 (1998) is the primary legislation governing employment termination in Thailand, but specific industries may have additional regulations.
  2. Contract Types: Thai law recognizes two main types of employment contracts – fixed-term and non-fixed term – each with distinct termination procedures.
  3. Notice Requirements: Proper notice must be given for termination, or payment in lieu of notice is required.
  4. Severance Pay: Employers must pay severance for termination without cause, with the amount based on the employee’s length of service.
  5. Exceptions to Severance Pay: Certain employee misconduct (e.g., dishonesty and intentional damage) may exempt employers from severance pay obligations, but proper documentation is crucial.
  6. Unfair Dismissal: Even when severance pay is made, employers should be wary of unfair dismissal claims, which can result in additional penalties or reinstatement orders.
  7. Documentation: Maintaining comprehensive records of the termination process is essential for legal compliance and protection against disputes.
  8. Specific Legislation: Some industries or professions may be subject to additional or different regulations beyond the general labor law.
  9. Best Practices: Employers should follow a clear termination process, including written notice, proper payment, and obtaining employee acknowledgment.

Author: Panisa Suwanmatajarn, Managing Partner.

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The Tale of a Fair Dismissal: Consent to Dismissal

In the bustling world of offshore technical work, a seasoned technician found himself at the center of a legal battle that would test the boundaries of labor law and contractual agreements. This is the story of how a seemingly straightforward dismissal turned into a landmark case, shedding light on the intricacies of employment law.

The Beginning:

In 1999, the technician, referred to as the plaintiff, was hired by the defendant company. Over the years, he rose to the position of a technical supervisor, working both onshore and offshore. His work schedule was rigorous: 28 days on duty followed by 14 days of rest, with wages paid on the 25th of each month.

The Dismissal:

In 2019, the company issued a termination letter to the plaintiff, effective 1 December 2019. The plaintiff, aware of the impending dismissal, signed the letter, acknowledging the termination and agreeing to accept the compensation offered by the company. He also waived any further claims against the company.

The Dispute:

Despite the agreement, the plaintiff later filed a lawsuit, claiming additional compensation. He argued that the offshore bonus, which he received for working at sea, should be included in the calculation of his severance pay and notice pay. The company, however, contended that the agreement was a fair settlement and that the plaintiff had no further claims.

The Court of First Instance’s Findings:

The labor court of Thailand found that the plaintiff had willingly signed the termination agreement, fully aware of his dismissal and the compensation offered. The court noted that the plaintiff, with his extensive experience and knowledge, was not coerced into signing the agreement. The company had faced financial difficulties, leading to the dismissal of over 100 employees in similar positions.

The court ruled that the offshore bonus was indeed part of the plaintiff’s wages and should be included in the severance and notice pay calculations. However, the agreement signed by the plaintiff was deemed a valid compromise, binding both parties. As a result, the plaintiff had no further claims against the company.

person wearing white dress shirt signing contract

The Appeal Court Decision:

The plaintiff appealed, arguing that the agreement was unfair and that the company had taken advantage of him. The specialized court of appeal upheld the lower court’s decision, stating that the agreement was a lawful compromise and did not violate public order or morality. The plaintiff’s appeal was dismissed.

The Supreme Court’s Decision:

The supreme court (3805/2566) was tasked with determining whether the termination agreement was enforceable regarding the severance and notice pay. The court concluded that the plaintiff had signed the agreement voluntarily, with full knowledge of his rights and the compensation offered. The agreement was a legitimate compromise, and the plaintiff was bound by its terms. Consequently, the plaintiff had no further claims for additional compensation.

Key Takeaways:

  1. Voluntary Agreements: Employees who voluntarily sign termination agreements, fully aware of their rights and the compensation offered, are generally bound by those agreements.
  2. Inclusion of Bonuses: Bonuses, such as offshore bonuses, are considered part of wages and should be included in severance and notice pay calculations.
  3. Legal Compromises: Compromise agreements between employers and employees are enforceable if they do not violate public order or morality.
  4. Financial Difficulties: Companies facing financial difficulties may lawfully reduce their workforce, provided the dismissals are not discriminatory or unfair.

This case highlights the importance of understanding one’s rights and the implications of signing legal agreements. It serves as a reminder that fair and transparent negotiations are crucial in resolving employment disputes.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand Prepares New Draft Cybersecurity Standards for Cloud Computing

Thailand is poised to enhance its cybersecurity framework with new draft standards for cloud computing security. The National Cybersecurity Committee has prepared these standards, which have already been approved by the committee and are now awaiting publication in the Royal Gazette.

This draft regulation, titled “Announcement of the National Cybersecurity Committee on Cloud Cybersecurity Standards B.E. ….”, marks a significant step in Thailand’s efforts to safeguard its digital infrastructure while promoting the adoption of cloud technologies across various sectors.

The proposed regulations, set to be implemented one year after their official publication, are primarily aimed at government agencies, regulatory bodies, and organizations managing critical information infrastructure. These standards are designed to mitigate cybersecurity risks associated with the use of public cloud services, a growing concern as more entities shift their operations to cloud-based systems.

The decision to establish these standards stems from alarming cybersecurity statistics revealed by the National Cybersecurity Agency of Thailand (NCSA) for the year 2023. Educational institutions were the most targeted, facing 632 attacks, followed by other government agencies with 145 attacks. The private sector, particularly Thai-owned commercial enterprises, also saw a significant number of incidents, with 148 recorded attacks.

photo of a wireless keyboard and mouse

Under the proposed standards, organizations using public cloud services must adhere to guidelines that take into account the impact level of the data or information systems they handle. These impact levels are defined in a separate announcement by the National Cybersecurity Committee regarding the standardization of cybersecurity characteristics for data and information systems.

Notably, the draft standards mandate that personal data stored in cloud systems must be classified at minimum as having a “medium” level of confidentiality. This requirement underscores the government’s commitment to protecting individual privacy in the digital sphere.

The drafting of these standards aligns with Thailand’s “Cloud First Policy,” which was approved in a meeting of the National Digital Economy and Society Committee in December 2023. This policy sets out a five-year roadmap for cloud service implementation across various sectors, demonstrating Thailand’s commitment to digital transformation.

Once the standards come into effect, organizations affected by these new regulations will be required to submit summary reports of their compliance to the NCSA within 30 days of completing the implementation. This reporting mechanism aims to ensure accountability and allow the government to monitor the effectiveness of the new measures.

The introduction of these draft standards reflects Thailand’s proactive approach to addressing the evolving landscape of cybersecurity threats. As cloud computing continues to play an increasingly crucial role in both public and private sectors, these measures aim to create a more secure digital environment, fostering trust and enabling the country to fully leverage the benefits of cloud technologies while mitigating associated risks.

As Thailand moves forward with its digital transformation agenda, these pending cybersecurity standards for cloud computing will play a pivotal role in shaping a resilient and secure digital infrastructure for the nation. The cybersecurity community and affected organizations are now eagerly awaiting the official publication of these standards in the Royal Gazette, which will set in motion the one-year countdown to their implementation.

Key Takeaways:

  • The draft standards are part of Thailand’s broader “Cloud First Policy” initiative.
  • Thailand’s National Cybersecurity Committee has drafted new standards for cloud cybersecurity.
  • The draft standards aim to reduce cybersecurity risks for government agencies and critical information infrastructure organizations using public cloud services.
  • The regulations will come into effect one year after their publication in the Royal Gazette, which is pending.
  • Personal data in cloud systems must be classified at least at the “medium” level of confidentiality.

Author: Panisa Suwanmatajarn, Managing Partner.

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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.

tax documents on the table

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.

Author: Panisa Suwanmatajarn, Managing Partner.

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New Regulation to Protect Consumers in COD Transactions

Thailand’s digital economy is set to see significant changes with the introduction of new regulations governing Cash on Delivery (COD) services. Following our previous article on the Thailand Implements Comprehensive Regulations for Cash-on-Delivery (COD) Services to Enhance Consumer Protection, the new regulation, titled “Designating Goods Delivery Services with Cash on Delivery as a Business with Controlled Receipt of Payment Items B.E. 2567 (2024),” will come into effect on 3 October 2024.

Under the new rules, logistics providers offering COD services will be required to include essential details on shipping documents. These include information about the sender, the logistics company, and the name and surname of the person receiving payment, along with a parcel tracking number. This increased transparency aims to enhance accountability in online transactions.

A key feature of the regulation is the mandatory 5-day holding period for payments. Logistics companies must retain the payment for five days before transferring it to the seller. This provision gives consumers a reasonable timeframe to report issues and request refunds if problems arise with their purchases.

The regulation also empowers consumers with the right to inspect goods before making payment. If upon inspection, the items are found to be different from what was ordered or have quality issues, consumers can refuse payment and reject the delivery on the spot.

Detailed Consumer Rights for Refunds and Returns

The new regulation provides specific scenarios where consumers are entitled to refunds:

  1. If the received goods do not match the order or are defective, the business operator must accept the return from the consumer, send it back to the sender, and refund the consumer.
  2. In cases where the consumer did not order the goods but received and paid for them if it can be proven that the consumer did not place the order, the business operator must accept the return and refund the consumer.
  3. When the business operator receives payment from the consumer, they must hold the funds for five days from the date of delivery and payment. If the consumer does not request a refund within this period, the business operator can then transfer the money to the sender. However, if the consumer reports issues within the five-day period (such as receiving unordered goods, mismatched orders, or defective items), and the business operator confirms these issues after inspection, they must refund the full amount to the consumer within 15 days of receiving the complaint. The goods are then returned to the sender.
  4. If the consumer receives and opens the package in the presence of the business operator, the process must be documented through photographs, video, or other evidence. If both parties find that the goods do not match the order or are defective, the consumer has the right to refuse acceptance of the goods.

It is important to note that these refund criteria do not apply to cases where consumers request refunds for reasons other than those specified above.

This comprehensive approach to regulating COD services reflects the government’s commitment to addressing the challenges in the rapidly growing e-commerce sector. By providing clearer guidelines and stronger consumer protections, the regulation aims to boost confidence in online shopping and promote a more trustworthy digital marketplace in Thailand.

Key Takeaways:

  1. New regulation for Cash on Delivery (COD) services effective October 3, 2024
  2. Aims to address issues in online shopping using COD
  3. Requires detailed information on shipping documents
  4. Implements a 5-day holding period for payments
  5. Allows consumers to inspect goods before payment
  6. Provides clear guidelines for refunds and returns

Author: Panisa Suwanmatajarn, Managing Partner.

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ETDA Guidelines for e-Transactions and e-Contracts: A Comprehensive Guide

Introduction

The Electronic Transactions Development Agency (ETDA) of Thailand has issued Guidelines for Conducting Electronic Transactions or Contracts under the Electronic Transactions law. These guidelines aim to facilitate the practical application of technology and electronic transaction laws in everyday dealings while establishing a standardized framework for e-transactions and e-contracts (collectively referred to as e-Contracts).

Key Phases of e-Contract Management

The Guidelines outline standards for three main phases of e-Contract management:

  1. Creation of the e-Contract
  2. Maintenance of the e-Contract
  3. Conversion between e-Contract and printout

Phase 1: Creation of the e-Contract

1.1 Drafting: e-Contracts can be created using any available means, provided they remain accessible and usable in the future without its meaning being altered. Common applications include Microsoft Word and Google Docs.

1.2 Electronic Signature: It must identify the signatory and indicate approval of information contained therein. Valid methods include trustworthy digital signatures and digital identification data (e.g., ThaiID application).

1.3 Electronic Seal: Similar to electronic signatures, it must identify the seal owner and indicate approval of information contained therein. Options include embedding a seal image or using identification certificates.

1.4 Finalization: To ensure admissibility as evidence, the e-Contract’s originality must be provable from creation to completion, often using digital signatures, electronic timestamps, or electronic seals.

1.5 Stamp Duty: For contracts requiring stamp duty, electronic payment through the Revenue Department is allowed, with the reference number and receipt annexed to the e-Contract.

Phase 2: Maintenance of e-Contract

2.1 The e-Contract must remain accessible and unaltered in content (changes to fonts or formatting are acceptable if they do not affect the content).

2.2 An event log must be maintained, recording the origin, recipient, date, and time of sending or receiving the e-Contract.

Phase 3: Conversion Between e-Contract and Printout

3.1 Printout to e-Contract: Content and format must remain unaltered, using ETDA-approved technologies. The converter’s identity must be recorded.

3.2 e-Contract to Printout: This must be printed from the original e-Contract and reviewed for complete accuracy.

Key Takeaways

  1. The ETDA Guidelines provide a comprehensive framework for creating, maintaining, and converting e-Contracts in Thailand.
  2. Electronic signatures and seals must be capable of identifying the signatory/sealer and indicating their approval of the information contained therein.
  3. The originality and integrity of e-Contracts must be maintained throughout their lifecycle to ensure legal admissibility.
  4. Stamp duty can be paid electronically and attached to the e-Contract.
  5. Conversion between electronic and physical formats must preserve the content and, in most cases, the formatting of the original document.
  6. These guidelines promote the use of technology in everyday transactions while ensuring the security and legal validity of e-Contracts.
  7. As technology evolves, adherence to these guidelines will become increasingly important for businesses and individuals engaging in electronic transactions.

Author: Panisa Suwanmatajarn, Managing Partner.

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New BOI Promotion: A New Opportunity for Investors

The Board of Investment (BOI) of Thailand has announced a series of significant updates to its investment promotion measures, targeting both the digital technology sector and other strategic industries. These changes, approved on 14 June 2024, represent a comprehensive approach to fostering innovation, sustainability, and economic growth across multiple sectors.

Digital Technology Sector Enhancements:

The BOI has revised its promotion categories for digital technology businesses, particularly focusing on software development, digital platforms, and digital content (Category 8.1). Projects in this category must have a minimum investment of 1.5 million baht per year in IT personnel salaries. Eligible companies can receive corporate income tax exemptions based on qualifying expenses, including salaries for new IT staff, training costs, and quality certification expenses.

For digital infrastructure, the Data Center category (8.2.1) has been updated with specific technical requirements, including a minimum IT load capacity of 2 MW and high-speed communication links. Data Centers meeting these criteria are eligible for Category A1 investment incentives.

traffic industry charging car

New Investment Categories:

  1. EV Battery Service Centers: A new category has been introduced to cover service centers for the repair, repack, and reuse of used electric vehicle (EV) batteries and energy storage systems. This addition complements the BOI’s existing EV supply chain policy and incentives, supporting the growing EV industry in Thailand.
  2. Data Hosting Business: To meet the rising demand for data hosting services and support the digital industry’s development, the BOI has approved a new category specifically for this business activity. This aligns with Thailand’s ambition to become a regional hub for digital services.
  3. Quarantine Facilities for Animals: A new promotion package has been approved for quarantine facilities for animals intended for export. This measure aims to enhance quarantine and certification services for the international trade of livestock, improving Thailand’s competitiveness in the agricultural sector.

Automotive Sector Incentives:

The BOI has approved new incentives for automotive parts manufacturers. These incentives are designed to encourage:

  1. Upgrading of technological capabilities
  2. Improvement of productivity
  3. Transition of operations to serve new industries, such as medical equipment or aviation sectors

This move aims to support the automotive industry’s evolution and diversification, ensuring its continued competitiveness in the global market.

These comprehensive updates to the BOI’s investment promotion measures reflect Thailand’s commitment to fostering innovation, environmental sustainability, and technological advancement across multiple sectors. By offering targeted investment incentives, Thailand aims to position itself as a hub for future-focused industries and a leader in Southeast Asia’s economic landscape.

The new measures are expected to attract both domestic and international investors, contributing to Thailand’s economic growth and sustainability. Investors and entrepreneurs are encouraged to capitalize on these opportunities to participate in Thailand’s dynamic and evolving economy.

Key Takeaways:

  1. New investment categories were introduced for EV battery service centers and data hosting businesses.
  2. Quarantine facilities for animal export are now eligible for promotion.
  3. Enhanced incentives for automotive parts makers to upgrade technology and diversify.
  4. Digital technology sector promotions updated, focusing on software development and data centers.
  5. These measures aim to boost Thailand’s competitiveness in key industries and support economic growth.

Author: Panisa Suwanmatajarn, Managing Partner.

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PDPC Issued First Administrative Sanction Under Thailand’s Personal Data Protection Act

The Personal Data Protection Committee (PDPC) of Thailand has taken a significant step in enforcing the Personal Data Protection Act B.E. 2562 (2019) (PDPA) by issuing its first administrative sanction. This action marks a turning point in the implementation of data protection regulations in the country, particularly in light of ongoing concerns about personal data breaches and their exploitation by criminal entities such as call center scam operations.

The PDPC, in a press conference held on 21 August 2024, announced that it had imposed administrative fines of 7,000,000 baht on a large private corporation following a personal data breach incident. The company, which handles the personal data of over 100,000 individuals, was found to violate several key provisions of the PDPA.

The violations cited by the PDPC include:

  1. Failure to appoint a Data Protection Officer (DPO), as required under Section 41 of the PDPA for organizations processing large volumes of personal data. This violation carries a potential administrative fine of 1 million baht.
  2. Inadequate implementation of security measures, contravening Section 37(1) of the PDPA, which mandates appropriate safeguards against unauthorized access, use, alteration, or disclosure of personal data. This violation is subject to a fine of 3 million baht.
  3. Failure to report a personal data breach to the PDPC within the stipulated 72-hour timeframe, as required by law. This violation also carries a potential fine of 3 million baht.

The PDPC stated that it had imposed the maximum administrative penalties due to the scale of the data breach and the company’s lack of response following an initial warning. Additionally, the company has been ordered to implement remedial measures for affected data subjects.

This case is particularly noteworthy as it represents the first instance of the PDPC taking strong enforcement action since the PDPA came into full effect in 2022. It serves as a clear signal to both private and public sector organizations that compliance with data protection regulations is now being strictly monitored and enforced.

security logo
Photo by Pixabay on Pexels.com

The PDPC also outlined its strategy for ongoing enforcement and compliance promotion. This includes the establishment of an offensive mechanism, termed “PDPA Eagle Eye,” which actively monitors for PDPA violations across both private and public sectors. Complementing this is a defensive mechanism, the PDPA Center, designed to provide advice, raise awareness, and receive complaints from affected individuals.

The Committee emphasized the importance of public participation in reporting suspected or known personal data breaches, underlining that data protection is a shared responsibility across society.

This landmark case may have further legal implications, as it opens the possibility for affected individuals to pursue class action lawsuits against the company in question. It also sets a precedent for future enforcement actions and underscores the PDPC’s commitment to safeguarding personal data in Thailand.

As organizations operating in Thailand process this development, it is clear that ensuring robust data protection measures and full compliance with the PDPA has become more critical than ever. The PDPC’s actions demonstrate that the era of strict enforcement of data protection laws in Thailand has begun in earnest.

Key Takeaways:

  1. The Personal Data Protection Committee (PDPC) has imposed its first serious administrative sanction under the Personal Data Protection Act B.E. 2562 (2019).
  2. The sanction was issued against a large private company for multiple violations, including failure to appoint a Data Protection Officer, inadequate security measures, and failure to report a data breach.
  3. Maximum administrative fines were imposed, totaling up to 7 million baht.
  4. The PDPC has implemented both offensive and defensive enforcement mechanisms to ensure compliance with the PDPA.
  5. This case sets a precedent for stricter enforcement of data protection regulations in Thailand.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand: Purposed Changes to Personal Income Tax Exemption on Severance Pay

The Ministry of Finance has put forward a draft ministerial regulation to revise the personal income tax exemption on severance pay. This proposal aims to update the existing threshold established in clause 2(51) of Ministerial Regulation No. 126 (B.E. 2509), as amended by Ministerial Regulation No. 217 (B.E. 2542).

Current Exemption

Under the current ministerial regulation, employees receiving severance pay in accordance with the Labor Protection Act B.E. 2541 and State Enterprise Relations Act B.E. 2543 are eligible for tax exemption. This exemption applies to the portion of severance pay not exceeding the salary for the last 300 working days, with a maximum limit of 300,000 baht. Notably, this exemption excludes severance pay received due to retirement or the expiration of fixed-term employment contracts.

The existing regulation aligns with Section 118 of the Labor Protection Act B.E. 2541 (No. 1), which mandates severance pay for employees with over 10 years of continuous service.

Legislative Changes

The Labor Protection Act B.E. 2562 (No. 7) amended Section 118, introducing a new severance pay rate for employees with over 20 years of continuous service. This amendment increased the severance pay to not less than the salary for the last 400 working days.

Proposed New Exemption

In response to these legislative changes, the Ministry of Finance has drafted a revised ministerial regulation. The key changes in the draft revised ministerial regulation are:

  1. Increasing the tax-exempt portion of severance pay to the amount not exceeding wages or salary for the last 400 working days.
  2. Raising the maximum exemption limit from 300,000 baht to 600,000 baht.
  3. Applying the new exemption to severance pay received from 1 January 2023 onwards.

Objectives

The proposed changes serve two main purposes:

  1. Aligning the tax exemption regulations with the amended Labor Protection Act B.E. 2541.
  2. Providing tax relief to employees facing termination, especially in light of economic challenges.

Implementation Status

The Cabinet has approved the draft revised ministerial regulation. It will come into effect upon publication in the Royal Gazette.

This revision aims to update the tax exemption on severance pay to reflect recent changes in labor law and to provide increased financial support to employees during employment transitions.

Source: International Business August 2024 (antea-int.com)

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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.

black and white pen on white printer paper

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:

  1. Imported goods valued between 0 and 1 baht will be exempt from VAT and other taxes and duties.
  2. 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.

Author: Panisa Suwanmatajarn, Managing Partner.

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