10 May Dej-Udom & Associates Newsletter – April 2016Download PDF
The Dej-Udom & Associates Thailand-ASEAN Newsletter for April 2016
ASEAN Economic Community News
ASEAN+3 Financial Safety Net
Finance ministers and central bank bosses from the ASEAN member states and Japan, China, and South Korea agreed to enhance a regional financial safety net to prevent any crises and to help promote economic growth. To support regional economic and financial stability, the group plans to closely monitor capital flows and risks stemming from capital flow volatility and respond appropriately to the changing economic environment and financial market volatility. They also agreed to enhance the 2010 Chiang Mai Initiative Multilateralization scheme which provides credit liquidity in financial markets at times of unusual volatility.
ASEAN Military Medicine Center
The ASEAN Center for Military Medicine (ACMM) opened in Bangkok and will now help coordinate military medical operations and support disaster relief in the region. The ACMM will conduct regular meetings, workshops, and proper joint training courses and exercises to enhance regional military medical service capabilities. For disaster relief in the ASEAN region, the ASMM will provide liaison officers and assessment teams, generate and disseminate medical information and needed data, and facilitate and coordinate military medical assets deployed to the disaster area.
Tax Regime Abandoned
The Cambodian government abandoned its estimated tax regime that primarily applied to small and medium-sized enterprises (SMEs) as it was poorly enforced and implemented. Certain businesses were allowed to negotiate their annual tax upfront; however, through manipulating the system, businesses could then arrange to only pay absurdly low amounts of taxes.
Open Sky Policy
With the recent implementation of Presidential Regulation No.12/2016, Indonesia is now actively participating in the ASEAN Open Sky policy under which the ASEAN countries agreed to unite their skies into a single aviation market. However, only five Indonesian airports are covered under the policy. ASEAN airlines can now fly into and out of these airports without the need for intergovernmental agreements.
The Indonesian government is pushing to implement a tax amnesty bill that could bring US$38-72 billion in offshore assets back into the country which could increase tax revenue by US$8 billion. The government plans to create financial instruments to fund infrastructure projects to take advantage of the large inflows from the tax amnesty.
New Investment Rules
To meet its goal of turning the country into a startup tech hub, the Vietnamese government is drafting a new set of rules to encourage local and foreign venture capital funds to operate in Vietnam. Under the new rules, funds will be able to obtain licenses in three days and have no capital size limits. Currently, investment funds must have a minimum capital of US$2.2 million.
In its latest regional outlook report, the International Monetary Fund (IMF) says that economic growth in the Philippines will remain robust on the back of resilient domestic demand. The IMF pegged Philippine GDP growth at 6% for 2016 and 6.2% for 2017.
Singapore beat out Hong Kong in a recent survey by a UK-based think tank and consultancy to become the number 3 financial center in the world. The survey was based on the responses of 2500 financial services professionals.
US Import Exemption
The US has raised its de minimis exemption level on imports from US$200 to US$800, a move that will benefit small and online Thai exporters. Now, goods imported into the US will only be liable for taxes or duties if the shipment value exceeds US$800. The new law will benefit Thai retail exporters, especially auto part manufacturers and jewelry dealers.
Thai-Iran Trade Growth
Thailand’s Export-Import Bank is the first Thai bank to finance trade with Iran after the lifting of UN sanctions. The government plans to drive tenfold growth in bilateral trade with Iran in the next five years. Total trade between the countries was US$300 million in 2015.
New Personal Income Tax
The Cabinet approved a new personal income tax structure that will take effect in 2017. Under the new structure, the general deduction was doubled to THB 60,000 and the general expenses deduction has gone up to THB100,000. The top two taxable brackets have also shifted. Now, income of THB2-5 million will be taxed at 30% and income over THB5 million at 35%.
Big Brother Project
The Thai Finance Ministry is taking a proposal to the Cabinet that will allow a 200% tax deduction for big corporations on costs incurred when they support small and medium-sized enterprises (SMEs) under the Big Brother project. The big corporations will need to assist with marketing, technology, and financial guarantees in order to be eligible for the deduction.
The CMLV countries (Cambodia, Laos, Myanmar and Vietnam) have no coinage and only circulate banknotes. The Treasury Department will travel to the CMLV countries later this year as part of a plan to encourage the countries to start issuing coins again and will offer to mint the coins in Thailand.
The Health Operations Act
The Act which takes effect on September 31, 2016 sets out new requirements for health-related business operators including spa services and beauty clinics. Businesses will need to obtain licenses for their operations and follow the rules and measures proposed by the related committee. The Act will help improve industry standards in relation to the hygiene and security of renowned traditional Thai services like massage and spa treatments. The new law also aims to eliminate illegal disguised services.
The Beggary Act
At the end of July 2016, begging throughout Thailand will be prohibited and violations could include imprisonment. The Act bars any activities which involve begging or asking for charity from people to give money or property. However, the Act does not forbid any performance of one’s skill or talent. Performers will need to seek permission from the authority before any performance. Beggars will be delivered to the Development and Protection of Life Standard Institute when found.
To reduce unnecessary regulatory control that hinders national development, the Thai government plans to review over 5000 rules and regulations during the next year. There are an estimated 100,000 decrees, announcements, and regulations in effect at this time. These can be hurdles for business and investment. For businesses that want to invest in regulated areas, there are 1544 licenses that need to be applied for. A real-estate developer needs to obtain 17 licenses in order to develop a project.
New Venture Fund
By launching a THB20 billion venture fund for startups, the Thai government hopes to kick start the growth of the country’s startup ecosystem. The plan is to establish “startup districts” across Thailand where companies can establish themselves and then expand their customer base. Thailand’s venture capital sector is currently underdeveloped.