Tag: Property and Real Estate

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Reforming Industrial Licensing: New Approach to Factory Regulation and Environmental Compliance

Introduction:

The Department of Industrial Works (DIW), Ministry of Industry in Thailand has initiated a comprehensive reform of industrial licensing and factory management processes, signaling a significant shift towards more stringent environmental and operational standards. This strategic approach aims to enhance industrial governance, protect environmental interests, and promote responsible business practices.

Key Regulatory Reforms:

Licensing Mechanism Transformation

The DIW has implemented a multi-faceted approach to industrial licensing that focuses on:

  1. Streamlined Approval Processes
    • Simplifying factory operation permit issuance
    • Reducing administrative procedures
    • Accelerating permit processing times
  2. Merit-Based Support System
    • Prioritizing and supporting responsible industrial operators
    • Providing expedited consultations and services
    • Creating preferential pathways for compliant businesses

Blacklist Mechanism for Non-Compliant Operators:

The DIW will establish a comprehensive blacklist targeting industrial operators with problematic histories, including:

  • Companies with previous legal violations
  • Entities with environmental pollution records
  • Operators exceeding standard emission levels
  • Businesses with improper industrial waste management
  • Entities previously ordered to implement corrective measures
man walking on roof top

Rigorous Evaluation Criteria:

Blacklisted operators will undergo extensive scrutiny, including:

  • Historical operational performance assessment
  • Facility location analysis
  • Machinery installation review
  • Production safety protocols
  • Pollution treatment system standards
  • Waste management efficiency
  • Legal compliance verification

Focus on High-Risk Industrial Sectors:

Special attention will be directed towards high-risk industrial categories, particularly those involved in waste treatment and processing, such as:

  • Slag melting facilities
  • Industrial waste management plants (Categories 101, 105, 106)
  • Hazardous and non-hazardous waste processing facilities
  • Electronic waste recycling units
  • Chemical waste treatment centers

Regulatory Objectives:

The reforms aim to achieve the following strategic goals:

  1. Ensure clean and transparent industrial establishment processes
  2. Promote environmentally friendly industrial growth
  3. Balance economic development with social and environmental considerations
  4. Create a sustainable industrial ecosystem

Implementation Strategy:

The DIW will:

  • Reduce administrative bottlenecks
  • Implement strict review protocols
  • Provide clear guidelines for industrial operators
  • Maintain transparent monitoring mechanisms
  • Enforce rigorous compliance standards

Key Takeaways:

  1. Proactive Regulatory Approach: Thailand is transitioning from reactive to proactive industrial regulation.
  2. Environmental Priority: Protecting ecological systems and community health is paramount.
  3. Operator Accountability: Businesses must demonstrate responsible practices to maintain operational licenses.
  4. Transparent Governance: All processes will be open to public scrutiny and systematic review.

Conclusion:

These reforms represent a significant milestone in Thailand’s industrial policy, demonstrating a commitment to sustainable development, environmental protection, and responsible business practices.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thai Government Slashes Property Transfer and Mortgage Fees

In a move aimed at supporting Thai citizens and stimulating the real estate market, the Thai government has announced significant reductions in fees for property transfers and mortgage registrations through the end of 2024.

Driven by a Cabinet resolution on April 9, 2024, the Ministry of Interior is set to issue two announcements lowering the government fees and expenses related to real estate transactions under existing laws and regulations.

Reduced Fees for Houses, Land, and Commercial Properties: The first announcement, issued under Article 2(7)(Dor) of Ministerial Regulation No. 47 based on the Land Code B.E. 2497 (1954), reduces fees for registering transfers and mortgages on residential properties, commercial buildings, and land with buildings such as single houses, semi-detached houses, and townhouses.

Specifically, the transfer registration fee has been cut from 2% to just 0.01%, while the mortgage registration fee has been lowered from 1% to 0.01%. However, this reduced fee structure only applies to properties with a purchase price, appraised value and mortgage amount not exceeding 7 million baht. Additionally, the provision is limited to real estate purchases by natural persons of Thai nationality.

high angle shot of suburban neighborhood

Condominiums Also Get Fee Reductions: The second announcement from the Ministry of Interior targets reductions in government fees for condominium unit transactions. Issued under Article 1(77)(Chor) of the Ministerial Regulation related to the Condominiums Act B.E. 2553 (2010), it slashes the fees for condominium units transfer registration from 2% to 0.01% and mortgage registration from 1% to 0.01%.

As with the reductions for houses and lands, the lower fees for condominium units only apply to a purchase price, appraised value, and mortgage amount below 7 million baht threshold. The reducing of condominium unit fees are also exclusively for Thai national buyers.

Temporary Relief Until End of 2024: The Ministry of Interior’s fee reduction announcements for both property types will go into effect once published in the Royal Gazette, with the lower rates remaining valid until December 31, 2024.

This temporary reprieve on transfer and mortgage fees exhibits the Thai government’s commitment to easing financial burdens around property ownership and uplifting the real estate sector during the current economic climate.

Industry analysts expect the fee cuts to provide a substantial boost for prospective homebuyers and real estate investors over the next 8 months. Developers and brokers are gearing up for heightened housing market activity in response to these government incentives.

Author: Panisa Suwanmatajarn, Managing Partner.

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Leveraging the Treaty of Amity: A Gateway for American Real Estate and Entertainment Businesses in Thailand

In the ever-evolving landscape of international business, the Treaty of Amity and Economic Relations between the Kingdom of Thailand and the United States of America (Treaty of Amity), signed in 1966, stands as a testament to the enduring partnership between the two nations. This groundbreaking agreement grants significant benefits to American citizens and companies with American ownership, particularly those operating in the realms of real estate development and live entertainment organization, offering a streamlined pathway to navigate the complexities of doing business in Thailand.

The Treaty of Amity provides a comprehensive framework that ensures a level playing field for American enterprises in Thailand. At its core, the treaty grants national treatment to American citizens and businesses, entitling them to the same rights and privileges as Thai nationals in various economic activities, such as establishing businesses and engaging in professions.

Furthermore, the treaty offers robust protection for American investments in Thailand, ensuring fair and equitable treatment, safeguards against expropriation without prompt and effective compensation, and the right to transfer funds related to investments. This provision instills confidence in American investors, fostering an environment conducive to long-term growth and stability.

Significantly, the Treaty of Amity facilitates American companies’ access to the Thai market by allowing them to operate businesses in Thailand on a non-discriminatory basis. This provision opens up a wealth of opportunities for American businesses to expand their operations and tap into the vibrant Thai market, leveraging their expertise and resources to cater to the evolving demands of Thai consumers.

people sitting on gang chairs

To initiate the process of benefiting from the Treaty of Amity, businesses must submit an application to the United States Embassy in Thailand for verification, followed by a submission to the Department of Business Development (DBD) to obtain a Foreign Business Certificate (FBC). This certificate serves as a gateway, enabling American businesses to engage in various economic activities, including real estate development and live entertainment organization, provided they meet the requisite criteria.

Notably, to benefit from the Treaty of Amity, businesses must demonstrate American ownership and adhere to specific eligibility criteria. Companies must have at least 51% American shareholding, and a majority of their directors must be either American citizens or Thai nationals with specific authority. This stringent requirement ensures compliance with Thai regulations while supporting the expansion of American ventures in Thailand.

Upon obtaining the FBC, businesses gain access to a range of benefits that facilitate their operations in Thailand. In the realm of real estate development, the Treaty of Amity enables smoother acquisitions and development projects, fostering growth in this critical sector. Simultaneously, live entertainment organizers can navigate licensing and regulatory hurdles more efficiently, tapping into Thailand’s rich cultural tapestry and thriving entertainment industry.

In conclusion, leveraging the Treaty of Amity presents a strategic advantage for American businesses operating at the intersection of real estate development and live entertainment organizations in Thailand. By adhering to the prescribed process and procedures, companies can unlock a host of benefits that enhance their operational capabilities and market presence. As global markets continue to evolve, harnessing such bilateral agreements is crucial for sustainable growth and expansion strategies. The Treaty of Amity stands as a testament to the enduring commitment of both nations to promote trade, investment, and economic cooperation, fostering mutual prosperity and strengthening bilateral ties.

Author: Panisa Suwanmatajarn, Managing Partner.

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Thailand’s BOI Incentives: Driving Business Competitiveness

Thailand’s Board of Investment (BOI) has introduced targeted incentives aimed at boosting the competitiveness of eligible businesses across various sectors in the local market. Here is a breakdown of the key programs and their benefits:

  • Upgrading Automotive Industry (BOI’s Notification No. 2/2566)

Existing BOI-promoted automotive projects can reapply for a 3-year corporate tax exemption if their previous benefits have expired. They must invest at least 1 million THB in automation and robotics manufacturers (excluding land and working capital). The new investment project must support the domestic industry by 30% of the total automation system and robotics value to qualify for a 3-year corporate income tax exemption.

  • Community and Social Development (BOI’s Notification No. 1/2567)

Active projects and new investment projects must have a minimum capital investment of 5 million THB (excluding land and working capital costs). Additionally, they must invest a minimum of 500,000 THB in supporting local organizations, such as social enterprises and unions, to qualify for a 3-year corporate income tax exemption.

  • Retention and Expansion Program (BOI’s Notification No. 2/2567)

Businesses with a long-standing presence of not less than 15 years and a significant investment history of not less than 10,000 million THB from at least 3 projects can get benefit from this program. Expansion projects with an investment value of at least 500 million THB (excluding land and working capital costs), will receive corporate income tax exemptions of 3 up to 13 years depending on the business’s category. The range of tax exemptions varies depending on the businesses categorized by the BOI office.

person in welding mask while welding a metal bar
  • Comprehensive Relocation Program  (BOI’s Notification No. 3/2567)

To encourage foreign investors in relocating integrated businesses, including manufacturing facilities, regional headquarters, and research and development centers, new investments that are eligible to receive BOI incentives of 3 up to 8 years of corporate income tax exemption under this promotion must submit manufacturing projects applications for investment promotion of the International Business Center (IBC) and an applicant must undertake the substantial functions of regional headquarters and/or R&D centers as indicated.

  • Economic Recovery  (BOI’s Notification No. 4/2567)

The activities categorized in group A such as businesses related to public utilities or the automotive industry are entitled to receive corporate income tax exemption not exceeding 8 years with the additional rights and benefits of 50% reduction from the standard corporate income tax rate applies to net profits derived from the investment for a duration of 5 years after the expiration of the corporate income tax exemption.  

Author: Panisa Suwanmatajarn, Managing Partner.

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Accommodating Foreigners Coming to Thailand: Proposed Amendments to the Immigration Act

The current Immigration Act B.E. 2522 (1979) is considered outdated and in need of revision to better accommodate the needs of foreigners seeking to enter the country. The proposed draft of the Immigration Act (No…) B.E. …. (“Draft”) aims to address these concerns by streamlining procedures and reducing bureaucratic obstacles for foreigners and relevant individuals.

Proposed Amendments

1. Notification Requirements for Foreigners Staying in Thailand

The Draft proposes the elimination of certain notification requirements for foreigners staying in Thailand. Specifically, the requirement for foreigners permitted to temporary stay in Thailand, but not engaged in occupation or employment, to notify the competent officer of their residing address leaving only for foreigners wishing to extend their stay beyond 90 days to notify the competent official at the Immigration Bureau of their residence. additionally, the Chief of the National Police will be granted the authority to specify the procedure, method, and duration for this notification.

2. Residing Notification Duties

Under the Draft, the duties for notifying the address of temporary residents will shift from the owner, possessor of dwelling, or hotel manager to notify a competent official in-person at the local Immigration Bureau or local police station to be by an online mean as an option. This is to facilitate the notification process and reducing the need for in-person visits to immigration offices or local police stations.

low angle photography of high rise building

3. Quota for Annual Residence in Thailand

The Draft includes provisions for amending the quota of foreigners eligible for annual residence in Thailand. The Cabinet will have the authority to specify the number of foreigners permitted to have annual residence in Thailand, not exceeding 100 people per country per year, and 50 people per year for stateless individuals. The determination of the number of foreigners eligible for annual residence will be made in consideration of mutual support principles and the necessity and security of the state.

4. Changes in Liabilities for Non-Compliance

The Draft also include changes to the liabilities for non-compliance with notification requirements. Rather than criminal fines, the draft introduces disciplinary fines for any foreigner, owner, or possessor of a dwelling, or hotel manager who fails to notify the competent officer.

The Draft proposed amendments to the Immigration Act B.E. 2522 (1979) was passed the process of public hearing and will need to be passing the process of consideration by the parliament before becoming into force.  

The proposed amendments to the Immigration Act B.E. 2522 (1979) in Thailand seek to modernize and streamline the immigration process, while also addressing the needs and concerns of foreigners seeking to stay in the country. It is an important step towards ensuring a more efficient and transparent immigration system that aligns with the current realities and requirements of all parties involved.

Author: Panisa Suwanmatajarn, Managing Partner.

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Modernizing Hospitality: An In-Depth Look at the Proposed Amendments to the Hotel Act

Introduction:

The proposed amendments to the current Hotel Act (B.E.2547, 2004) aim to revolutionize the hospitality industry by streamlining and modernizing the responsibilities of hotel managers. These changes primarily focus on the documentation and reporting processes related to guest information, as well as the electronic submission of the lodger registration card. Additionally, the bill includes provisions to establish guidelines for the development of electronic systems. This article delves into the key points of the proposed amendments, shedding light on their potential impact.

Amendment of the Duties of Hotel Managers:

One of the main aspects of the bill involves amending the duties of hotel managers regarding the recording of guest information, as stipulated in Section 35 of the current Hotel Act (B.E.2547, 2004). Specifically, the proposed amendments advocate for the adoption of electronic methods to record guest details, with a primary focus on the “Lodger Registration” (Form Ror. Ror.4). This shift aims to minimize unnecessary burdens on both guests and hotel managers. Additionally, the bill seeks to eliminate the requirement for guests to fill out the “Lodger Registration Card” (Form Ror. Ror.3), which will relieve hotels from completing the lodging registration card within 24 hours and retaining it for at least one year.

man covering face with frame

Electronic Submission of Guest Information to the Registrar:

The bill proposes significant alterations to the responsibilities of hotel managers outlined in Section 36 of the current Hotel Act (B.E.2547, 2004). These changes primarily pertain to the submission of guest information to the Department of Provincial Administration, known as the Registrar. The proposed amendments advocate for the adoption of electronic means to transmit guest data within a 24-hour period. Moreover, the Registrar will be entrusted with forwarding information related to foreign guests to the Immigration Bureau, aiming to simplify legal compliance and promote inter-agency data sharing. This amendment seeks to relieve hotel managers from the direct obligation of sending information regarding foreign guests to the Immigration Bureau. Furthermore, the bill proposes expanding the legal provisions that outline the roles of the Registrar in collecting, aggregating, and disclosing guest information received from hotels. This expansion aims to ensure that the government can effectively utilize the data for security and research purposes related to tourism and the development of the hotel industry, in line with relevant laws and principles set forth by the Digital Government Development Agency (Public Organization) (DGA).

Change of Administrative Fines to Disciplinary Fines:

To streamline the legal framework, the bill also proposes amending the administrative fines associated with Sections 35 and 36 of the Hotel Act (B.E.2547, 2004), replacing them with disciplinary fines.

Conclusion:

In conclusion, the proposed amendments to the Hotel Act (B.E.2547, 2004) place a strong emphasis on leveraging electronic systems, reducing administrative burdens, and promoting efficient data sharing among government agencies. The objective is to enhance the overall effectiveness of the law while aligning it with contemporary technological advancements and administrative practices in the hospitality industry. Furthermore, the bill updates its penalty provisions to include the adoption of disciplinary fines, streamlining the legal process of imposing penalties. As of now, the bill is undergoing a public hearing process until January 31, 2024. These amendments have the potential to shape the future of the hospitality industry, fostering efficiency and innovation while ensuring compliance with relevant laws and regulations.

Author: Panisa Suwanmatajarn, Managing Partner.

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Proposed 4th Revision of the Bangkok Unitary Town Plan and its implications

Introduction

Town planning, a crucial aspect of urban and rural development, plays a significant role in shaping cities and communities. In Thailand, the Town Planning Act B.E. 2562 (2019) (“Town Planning Act”) defines the process of town planning as the formulation and implementation of development plans that align with national, regional, provincial, and local economic and social goals. Its objective is to enhance living conditions, infrastructure, safety, and welfare in both urban and rural areas while preserving cultural and natural assets for sustainable community development. This article explores the implications of the Town Planning Act on the changing landscape of urban planning in Thailand, with a particular focus on the proposed revisions to the Bangkok Unitary Town Plan.

Understanding of Unitary Town Planning

According to the Town Planning Act, unitary town planning encompasses a comprehensive framework for urban development. It involves the formulation of a territorial map that details topography, altitude, and geographic coordinates, along with specific plans categorized by land use, open spaces, communication and transport projects, public utilities, and environmental considerations. Additionally, the unitary town planning provides guidelines for the floor area ratio (FAR) bonus rate. The FAR bonus rate is a zoning incentive that increases the size of individual construction projects by allocating a higher floor area ratio, which reflects the total square footage of the building divided by the area of the lot. The plan also incorporates supplementary particulars and stipulations related to land use, ensuring compliance with the objectives of the Town Planning Act.

aerial shot of road and buildings

The Proposed 4th Revision of the Bangkok Unitary Town Plan

Currently, the 3rd revision of the Bangkok Unitary Town Plan, enforced since 2013 by the virtue of the Ministerial Regulation to Enforce the Unitary Town Plan of the Bangkok Metropolitan Area B.E. 2556 (2013), is being scrutinized for proposed updates. The Bangkok Metropolitan Administration (BMA) has put the 4th revision of the Bangkok Unitary Town Plan, as the existing plan has been in force for over 10 years without necessary updates in many areas. The proposed revision aims to address this issue and adapt to changing urban dynamics.

Notable Changes in the 4th Revision

The 4th revision of the Unitary Town Plan introduces several significant changes. Notably, the Rattanakosin Island area, which encompasses most of the Phra Nakhon District, will be reclassified from a Thai art and cultural conservation zone to a high-density residential zone, commercial zone, and government agency zone. Additionally, the FAR bonus rate is expected to increase by up to 20%. Several areas, such as the Ratchayothin area in the Chatuchak Sub-district/District, where the red, green, and yellow train lines pass through, will transition from a medium-density residential zone to a high-density residential zone.

Status of the Proposed 4th Revision

As of now, the 4th revision of the Bangkok Unitary Town Plan is undergoing a public hearing process until February 29, 2024. The BMA anticipates that the new plan will be enforced by 2025.

Conclusion

In conclusion, town planning in Thailand, guided by the Town Planning Act, is a vital process that involves the formulation and implementation of development plans. The proposed revisions to the Bangkok Unitary Town Plan reflect a proactive approach to adapt to changing of urban dynamics and optimize town planning strategies. By reclassifying areas and modifying density regulations, the plan aims to address the evolving needs of the city. With the proposed 4th revision currently in the public hearing stage, the landscape of urban planning in Thailand is set to undergo significant transformation in the near future.

Author: Panisa Suwanmatajarn, Managing Partner.

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Proposed Rehabilitation Processes for Small and Medium Enterprises (SMEs)

In 2016, the regulation concerning small and medium enterprises (“SMEs”) was initially introduced to aid SME owners in managing their debts through rehabilitation processes that safeguard the interests of both debtors and creditors.

However, as of 2023, there are over 3 million SMEs in Thailand, playing a critical role in driving the country’s economy. Recognizing this, the Legal Execution Department has expressed a keen interest in ensuring the well-being of SMEs. To this end, they have conducted a public hearing on the draft amendment of the Bankruptcy Act B.E. 2483 (1940), specifically focusing on the business rehabilitation processes for SMEs. Consequently, active efforts are underway to formulate regulations.

In the past, debtors seeking to manage their debts through rehabilitation processes were required to adhere to the provisions outlined in the Bankruptcy Act B.E. 2483 (1940). These requirements included being insolvent and indebted to one or multiple creditors. However, the recent introduction of business rehabilitation proceedings for SMEs has brought about a new rule by eliminating the requirement of being an insolvent person. This means that anyone, regardless of their solvency status, can now initiate the rehabilitation processes.

The recent amendment to the Bankruptcy Act B.E. 2483 (1940) aims to simplify the business rehabilitation processes, making it more accessible for small debtors. This simplification is driven by the current economic and social conditions, and it offers several benefits for debtors. Notably, it introduces a new section that includes an accelerated business rehabilitation processes.

The key summary of the amendments is as follows:

  1. Broadening the definition of debtors in Section 90/91: Previously, the term “debtor” was limited to those specifically prescribed by the Office of SMEs Promotion (OSMEP). The amendment expands the definition to include any juristic person, regardless of the legal classification of SMEs. This change provides SMEs business owners with the opportunity to participate in business rehabilitation, enabling them to restructure their debts and maintain the continuity of their businesses.
  • Revision of the debt threshold in Section 90/92: When a debtor is unable to pay one or several creditors in aggregate, they may file a petition with the court for business reorganization. For individual debtors, the debt threshold has been lowered from 2 million baht to 1 million baht. For juristic persons, the threshold has been revised from not less than 3 million baht to not less than 2 million baht, with an upper limit of 50 million baht. These changes apply regardless of the debtor’s financial status or the number of creditors involved. However, both types of debtors must demonstrate a reasonable cause and prospects for the reorganization of their businesses.
  • Extension of the Business Reorganization Plan (“Plan“) period in Section 90/96(9): Recognizing that a 3-year plan may be insufficient, the amendment extends the Plan period from 3 years to 5 years. This extension aims to enhance efficiency and provide debtors with more opportunities to effectively proceed with their reorganization efforts while ensuring that creditors receive full payment of their debts.
  • Removal of certain rehabilitation processes in Section 90/95: Prior to the draft amendment, individuals seeking business reorganization has to wait for a court order granting absolute control over their property and approval of the Plan before filing a petition for reorganization. This process involved strict legal requirements, such as providing reasons for business reorganization, detailed asset information, and principles and methods, as per Section 90/96 of the Bankruptcy Act B.E. 2483 (1940). These requirements often proved time-consuming and costly. The draft amendment has eliminated some of these processes, allowing debtors or legally authorized individuals to initiate the plan. This change allows both debtors and one or several creditors of the debts arising from a business operation to take the necessary steps toward rehabilitation.
low angle photography of glass buildings

However, the recent amendment to the Bankruptcy Law B.E. 2483 (1940) is currently pending approval from the Council of Ministers. After this, the next stage will involve the draft amendment proceedings to the Members of the Parliament for consideration and approval before proceedings to the King’s endorsement and publish in the Royal Gazette.

Author: Panisa Suwanmatajarn, Managing Partner.

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Q&A Statement Issued by Revenue Department Clarifying Taxation Applied on Foreign-Sourced Income

The Revenue Department recently issued an Order no. Por.161/2566 on September 15, 2023, with an official announcement published in the Royal Gazette on October 6, 2023 (“Order”). This Order provides important clarifications regarding the taxation of foreign-sourced income, specifically in relation to Section 41 paragraph 2 of the Revenue Code.

To make these clarifications more accessible, the Revenue Department has also released a Q&A infographic statements, accompanied by practical examples addressing various scenarios that taxpayers may encounter, where the key points are summarized as follows for your reference:

(1) Resident Status Rule: The Order interprets Section 41 paragraph 2 of the Revenue Code, which mandates that a resident of Thailand who earns assessable income from sources outside Thailand or from properties located outside the Thailand must pay personal income tax upon bringing such income into Thailand. A resident of Thailand, in this context, is defined as an individual who spends a total of 180 days or more in Thailand within a given year, regardless of whether such individual resides in Thailand continuously throughout the year, if they accumulate a total of 180 days or more in Thailand, they are still considered a resident for tax purposes. For instance, if Mr. A resides in Thailand only during odd-numbered months, totalling 184 days in Thailand, he is still considered a resident.

calculator and pen on table

(2) Non-Resident Income: The Order explains that if a person is not a resident of Thailand during the year in which they earn income, they do not need to include that income in their tax calculations, even if they bring that income into Thailand in a subsequent year when they are a resident. For example, Mr. B earns income from a rental property abroad in a year when he is not considered a resident of Thailand. Then He brings this income into Thailand in a following year when he is a resident, he is not required to calculate such income as assessable income and shall not be subjected to taxation in the year that those money brought into Thailand.

Interest on Bonds and Debentures: The Order also addresses the taxation of income from buying bonds and debentures from outside Thailand. For example, if Miss C purchases bonds from foreign sources in a year when she is a resident of Thailand and subsequently brings the income into Thailand, she is only required to calculate assessable income from the interest on these bonds, not the principal.

Both conditions must be met for the foreign-sourced income to be taxed in Thailand. However, if such income has already been taxed in the source country and the person later brought the said income into Thailand. Thailand and the source country’s double taxation treaties (if any) will govern and determine whether such paid tax in the source country will be used as tax credits or tax exemptions.

It is important to note that this order applies to all taxpayers living in Thailand or planning to reside in the country. Non-compliance with the Revenue Code may lead to criminal penalties, including fines and imprisonment.

This summary provides an overview of the key points covered in the Q&A infographic issued by the Revenue Department regarding the taxation of foreign-sourced income. As these criteria will become enforced on the 1st July 2024, it is essential for the resident taxpayers to understand and adhere to these regulations to avoid penalty consequences.

Author: Panisa Suwanmatajarn, Managing Partner.

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Royal Decree on VAT Reduction under the Revenue Code

Previously, there was a proposed measure to subsidize elderly people by increasing VAT to 10% back to what specified in the Revenue Code and using 3% of the said VAT to assist elderly citizens in coping with their retirement lives. However, there has been no development on this matter since the Royal Decree regarding VAT reduction in accordance with Revenue Code no. 724/2564 (2021) (“Royal Decree”) is still in effect to extend the period of VAT reduction.

Currently, the Ministry of Finance believes that the Thai economy’s development in 2023 and the following year is vulnerable to risk factors such as volatility and economic slowdown, as the Thai economy is still recovering from the epidemic.  Furthermore, the Office of the National Economic and Social Development Council (“NESDC”) discovered that the Thai economy expanded by 1.8 percent in the second quarter, down from 2.6 percent in the first quarter of 2023. There are also the reduction of product exports and increasing of government spending. The business and household sectors are still struggling with rising expenses due to increasing interest rates and living expenses, as well as the implementation of the annual budget for the fiscal year 2024 is taking longer than usual.

money cash euro pay
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Thus, it is essential to ensure the country’s economic stability, support the recovery of domestic consumer expenditure, allowing the Thai economy to develop as expected, reduce the burden of living costs for the people, and promote trust in the business sector. As a result, the cabinet agreed to prolong the Royal Decree’s timeframe for keeping the VAT rate at 7% (including municipal tax) for another year, from 1 October 2023 to 30 September 2024.  

Author: Panisa Suwanmatajarn, Managing Partner.

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