M&A Monthly Report : December 2017

BOI

New promotion privilege for investment in EEC

The BOI has approved an extension of corporate income tax exemption for investment projects in the Eastern Economic Corridor (EEC).  The new privileges will extend a corporate tax exemption period for an additional 2 years (from 8 years to 10 years) and a 50% reduction of corporate income tax for additional 5 years.  The investment projects are required to cooperate with educational institutes, research centers, or other excellence centers of human resource development and training.  The privileges are provided in 3 levels:

1) Investment in 3 special zones: 1)  Aviation promotion zone, 2) Eastern Economic Corridor of Innovation, and 3) Digital Park Thailand, shall receive privileges of 10 years corporate income tax exemption and 50% reduction for 5 years after the tax exemption period expires.

2) Investment in industrial estates for target industries shall receive 50% reduction in corporate income tax for additional 5 years after the tax exemption period expires.

3) Investment in industrial estates or industrial zones in EEC shall receive 50% reduction in corporate income tax for additional 3 years after the tax exemption period expires.

 

The above privileges are effective for application submit during January 1, 2018-December 30, 2019.

Foreign Business

Notification to DBD is required to operate the business that is not required to obtain the Foreign Business License

Q: A foreign company registered outside of Thailand has already obtained the Foreign Business License for its current business and will enter into a service contract to design, procure material, and construct natural gas pipeline project for PTT Public Company Ltd., a state enterprise agency in Thailand.  According to the Ministerial Regulation of Ministry of Commerce, services provided to state enterprise agency can be operated without having to obtain the Foreign Business License is correct or not?

A: 1) A foreign Company who enters into a service contract with the state enterprise as a contractual party, can operate the service business to design, procure material and construct gas pipeline without having to acquire the Foreign Business License according to the Ministerial Regulation: Prescription of Service Businesses Not Subject to Application for Permission in Foreign Business Operations (No.3) B.E. 2560 clause 2 (11).

2) In case that the foreign Company who has obtained the Foreign Business License for other business and has already obtained the registration number from the Department of Business Development (DBD), to operate the business that is not required to obtain the Foreign Business License, the foreign company must submit the documents to DBD to notify the place storing the accounts and the supporting documents needed for making accounting entries according to the Notification of the Department of Business Development on Directions Pursuing Accounting Law to be Applied with a Juristic Person Established under Foreign Law but Operating Business in Thailand Prescribed as the Person Charged with the Accounting Duty B.E. 2559 as follows:

      (1) Copy of the Company’s Certificate specified name, capital, objective, address, director and authorized director of the company.

      (2) Power of Attorney appointing the Representative in Thailand

      (3) Copy of passport or Identification card of Representative in Thailand

      (4) Power of Attorney from the Representative in Thailand appointing other person to submit the documents at Department of Business Development

Unappropriated retained earnings cannot be used as minimum capital to operate a business that is not required to obtain Foreign Business License

Q: A foreign company registered in Thailand has received BOI promotion to manufacture automotive parts for cars, motorcycles and engines. Currently, the company has more than 100 million Baht of unappropriated retained earnings and would like to apply this unappropriated retained earnings as minimum capital for wholesale business without having to obtain the Foreign Business License, is possible or not?

A: According to Section 14 of the Foreign Business Act, the company may be permitted to use money or asset which was derived from existing business in Thailand, to be used as the minimum capital of other business; however, it shall be applied to the business that must obtain the Foreign Business License only.  So in this case, using unappropriated retained earning of 100 million baht to operate wholesale business is not permitted.