27 Dec ASEAN Today – Regional Legal and Business News – November 2018

ASEAN Today – Regional Legal and Business News for November 2018 including an overview of the new Land and Building Tax Act, exemptions from the Direct Sales and Marketing Act, and an update on Thailand’s SMART Visa Program.

ASEAN Economic Community News

ASEAN Investment Report
The ASEAN Investment Report 2018 – Foreign Direct Investment and the Digital Economy in ASEAN was released this month. The report states that foreign direct investment (FDI) flows to ASEAN rose to a record level in 2017 to US$137 billion, up from US$123 billion in 2016. Inflows to Indonesia increased five-fold in 2017 and tripled into Thailand. Intra-ASEAN investments were the biggest contributor to FDI flows into the region, 19% of the total. 95% of intra-ASEAN investment came from Singapore, Malaysia, and Thailand. Investment into the digital economy continues to markedly grow and includes e-commerce, fintech, venture capital, the development of data centers, and IT infrastructure. The report also notes that there were major changes in the industry pattern of investment. Wholesale and retail trade have now overtaken finance and manufacturing. FDI into wholesale and retail trade rose 75% in 2017 to US$39 billion. Investment into ASEAN is expected to stay strong due to advances in the investment environment, strong economic growth, a growing middle class, and progressing regional integration.

E-Commerce Agreement
ASEAN now has world’s first regional e-commerce agreement. The agreement was signed by the 10 member states at November’s ASEAN Summit in Singapore. It has three main goals: 1) facilitate cross-border e-commerce transactions between the member states; 2) create an environment of trust and confidence in the use of e-commerce, and 3) deepen cooperation between ASEAN countries so e-commerce will increase economic growth in the region. ASEAN’s internet economy is expected to reach US$200 billion by 2025.

Malaysia Update
Digital Tax
Malaysia has introduced a Digital Tax scheme that will apply to online services provided by local and international businesses. Foreign service providers will be required to register and remit related service taxes to Malaysian customs starting on January 1, 2020. The online services liable for the new tax include software, music, video, and digital advertising.

Vietnam News
Bond Market Roadmap
Vietnam’s government released its roadmap for the country’s bond market development under which the ratio of outstanding bonds to GDP is expected to rise to 45% in 2020 and to 65% by 2030. The government wants to synchronize the development of its bond market and other markets, including the money and capital markets, and integrate Vietnam’s bond market into the world’s markets.

Myanmar Bulletin
New Ministry
Myanmar’s Parliament has established the new Ministry of Investment and Foreign Economic Relations. The mandate of the new ministry is to drive local and foreign investments and help create opportunities for entrepreneurs. The ministry will accomplish this through reforms and better coordination between related ministries and organizations on local and foreign investments and development projects implemented with foreign aid or loans.

Indonesia News
Palm Oil Levy
Due to low palm oil prices, Indonesia, the world’s top exporter of palm oil, lowered the levy on crude palm oil exports to zero in order to make the country’s palm oil more competitive. The levy will now only be collected when palm oil prices reach certain price ranges.

THAILAND LEGAL REVIEW

Tax News
Land and Building Tax Act
On November 16, 2018, the National Legislative Assembly approved the Draft of the Land and Building Tax Act which will become effective on January 1, 2020. This Draft will replace the current Building and Land Tax Act B.E. 2475 (1932) and the Local Development Tax B.E. 2508 (1965).

A taxpayer under the Draft means an ordinary person or juristic person who owns land or buildings, or who occupies or utilizes land or buildings owned by the government, including the ordinary/juristic person accountable for paying tax on behalf of the taxpayer.

There are 4 tax rate categories based on land or building utilization:

Remark: An ordinary person who owns agricultural land and buildings with an appraisal value not exceeding 50 million Baht shall be exempt from the tax base.

Remark: For the ownership of the first house, an owner whose name appears in both the house and land registration with the appraisal value not exceeding 50 million Baht or with only the house registration with the appraisal value of not exceeding 10 million Baht, shall be exempted from the tax base.

Remark: The rate will increase at the rate 0.3% every three years for any remaining unused land or buildings, but the total tax rate shall not exceed 3%.

The tax payment must be paid by the end of April of every taxable year. Any person failing to comply within the time given shall be subject to pay a fine of 40% of the tax debt plus an additional 1% for each month the tax debt has not been paid.

Corporate Law News
Exemptions from Direct Sales and Marketing Act
Under the Ministerial Regulation dated November 2, 2018, the following four types of operators are not required to comply with the Direct Sales and Direct Marketing Act:

1. An individual, without registering as direct marketing, who earns income from the sale of goods or services through e-commerce of not more than 1.8 million Baht per year.

2. A small or medium-sized enterprise (SME) registered under the laws concerning small and medium enterprises promotion. A small-sized business is defined as:
Manufacturing or services with no more than 50 employees or value of permanent assets not over 50 million Baht;
Wholesale with no more than 25 employees or value of permanent assets not over 50 million Baht; or
Retail with no more than 15 employees or value of permanent assets not over 30 million Baht.

A medium-sized business is defined as:
Manufacturing or services with 51-200 employees or value of permanent assets from 50-200 million Baht;
Wholesale with 26-50 employees or value of permanent assets from 50-100 million Baht; or
Retail with 16-30 employees, or value of permanent assets from 30-60 million Baht.

3. A community enterprise and community enterprise network registered under the laws concerning community enterprise promotion.

A community enterprise is defined as a community’s business with regard to product manufacturing, services, or other business undertaken by a group of persons with mutual and common ways of life, whether it is a juristic person in any form or a non-juristic person, for conducting such business in order to earn income and self-reliance for the family, community, and among communities. A community enterprise is also defined as a group of persons carrying out any activity for the benefit of such operations for the community enterprise network.

4. Cooperative and farmer group registered under laws concerning cooperatives.

Guarantee for Direct Sales and Direct Marketing Businesses
Guarantee amounts must now be paid according to the Ministerial Regulation on Guarantee for Direct Sale and Direct Marketing B.E. 2561.

For a direct sales business, new applicants must pay a 25,000 Baht guarantee. If a direct sales business is already registered, the guarantee amount is divided into 4 levels based on the registrant’s revenue: (a) 25,000 Baht per year for revenue of 25 million Baht, (b) 50,000 Baht per year for revenue for over 25-50 million Baht, (c) 100,000 Baht per year for revenue over 50-100 million Baht, and (d) 200,000 Baht per year for revenue over 100 million Baht.

For a direct marketing business, new applicants as a natural person shall pay a 5,000 Baht guarantee while a juristic person will pay 25,000 Baht. If a direct marketing business is already registered, the guarantee amount is divided into 4 levels based on the registrant’s revenue: (a) 5,000 Baht per year for a natural person or 25,000 baht per year for a juristic person for revenue of 25 million Baht, (b) 50,000 Baht per year for revenue over 25-50 million Baht, (c) 100,000 Baht per year for revenue over 50-100 million Baht, or (d) 200,000 Baht per year for revenue over 100 million Baht.

Immigration Update
Smart Visa
On February 1, 2018, the Cabinet approved the “Smart Visa” program for foreign experts, executives, entrepreneurs, and investors who will work in any one of the 10 S-Curve industries. To date, there have been a large number of applications filed through the Board of Investment; however, less than 20 Smart Visas have been approved. The reasons for the poor approval rate include the unspecific set criteria for each type of Smart Visa and what exactly qualifies a company under the 10 S-Curve industries by the designated government agencies. On November 6, 2018, the Cabinet approved three additional targeted industries eligible for a Smart Visa: Alternative Dispute Resolution, Human Resource Development in Science and Technology, and Environmental Management and Renewable Energy. In addition to the current privileges for Smart Visa holders, foreigners holding a Smart Visa are now eligible to use the Fast Track Lane at the Suvarnabhumi Airport. The official announcement from the government on these changes is expected in early 2019.

Disclaimer
The material contained herein is only provided for information purposes. No part thereof may be deemed to constitute legal advice or the opinions of this law firm or any of its attorneys. Whilst every effort has been made to verify the contents of the material contained herein, we do not represent, warrant, undertake, or guarantee that the information contained in this newsletter is correct, accurate, or complete. Legal advice must be sought before acting on any information contained herein.