07 Jul ASEAN Today – Regional Legal and Business News – June 2017
ASEAN Today – Regional Legal and Business News for May 2017Download PDF
ASEAN Economic Community News
Regional Economic Outlook
The ASEAN Secretariat reports that ASEAN in 2017 will continue to see strong economic growth that should match its 4.8% growth in 2016. The Secretariat attributes the growth to the strengthening of private consumption and private investment in the region. In 2018, they expect domestic demand growth to be driven by 1) consumption, backed by stable labor market conditions and wage growth, and 2) demand, backed by public spending on infrastructure projects and fiscal stimulus. Downside risks include potential disruptions due to global trade policy adjustments and changes in monetary policies.
ASEAN Power Grid
At the ASEAN Ministers of Energy meeting in September, Thailand, Laos, and Malaysia plan on signing a tripartite electricity-trading agreement which could initiate the start of the ASEAN Power Grid. The agreement covers the sale of 100 megawatts of electricity generated in Laos and transferred to Malaysia using Thailand’s transmission system. The planned ASEAN Power Grid will be a secure, reliable integrated electricity infrastructure that will help stimulate regional economic growth and development.
Online Payment Regulations
The National Bank of Cambodia (NBC) issued new regulations on the licensing of payment service providers (PSP). Now, anyone that provides online services to accept electronic payments must be licensed, have at least US$2 million in registered capital, and have 5% of their paid-up capital deposited with the NBC. The government believes that the licensing requirements will help strengthen the country’s fintech sector and consolidate the PSP segment.
Vietnam’s National Office of Intellectual Property reports that over the last 10 years there has been a 50% increase in the number of businesses registering their intellectual property. With the 10-15% yearly growth in trademark and patent registrations, the government believes that Vietnamese enterprises are becoming more aware of the benefits of intellectual property protection.
Banking Restrictions Eased
The Monetary Authority of Singapore plans to ease regulations and allow banks to invest in non-financial businesses (NFBs). Soon, banks will not need to receive regulatory approval before acquiring major stakes in NFBs, but investments will be limited to 10% of the bank’s capital funds. Certain businesses such as property development will be excluded. Regular stress tests and external audits have also been removed.
This month, the International Finance Corporation (IFC), the World Bank Group’s private sector investment arm, invested US$556 million into Myanmar’s agricultural sector. The IFC wants to enable private companies to be more involved with the country’s supply chain development process. Agriculture employs more than 69% of the workforce and makes up 38% of the GDP. The IFC believes that Myanmar’s agricultural sector is not realizing its full potential. The IFC is also promoting the use of the private public partnership (PPP) model for infrastructure development and believes that without PPPs, Myanmar will struggle to build quality infrastructure.
Return to Global Index
Thailand returned to a global management consulting firm’s Global Retail Development Index (GRDI) which ranks the top 30 developing countries for retail investment in the current year and also show potential in coming years. Thailand re-entered the GRDI at #30 as retail is expected to grow at 6% a year through 2020. The increase will be driven by rising consumer incomes and the rapid growth in the number of foreign tourists.
As the global e-commerce marketplace continues to expand, it increasingly allows buyers and seller to interact without any of the contacts traditionally associated with the sales of goods and services. To take advantage of this extremely valuable market, the Thai Revenue Department plans to levy a 5% withholding tax on all online purchase payments. Banks will collect the tax and then send it to the Revenue Department.
Land Transfer Tax
Under a recent amendment to the Revenue Code, the Land Office will be able to levy the land ownership transfer tax based on which ever has the highest value, the appraisal value or the market price. The Revenue Department says that property taxes should reflect actual prices, not the appraisal value which is usually lower than market price. The Revenue Department also warned people not to set up juristic entities as land transfer entities to avoid paying inheritance taxes.
With the new preferential excise tax rates for the promotion of electric vehicle market, an increase in the sales of electric vehicles (EVs) in Thailand is expected. Currently, sales numbers are low due to expensive retail pricing. At present, Thailand is one of the world’s leading automotive manufacturers and EVs are part of the government’s ten targeted industry clusters. However, the tax incentives are only for EV production in Thailand and will expire in 2025.
Bank of Thailand
The Bank of Thailand (BOT) has relaxed foreign exchange regulations and Thais are now allowed to directly invest up to US$1 million a year in foreign securities. The BOT wants to bolster capital inflows, curb the appreciating baht, and enhance Thailand’s competitiveness. Commercial banks are now allowed to lend to foreign residents for investment into Thailand, Cambodia, Laos, and Vietnam.
Over-the-top (OTT) platform providers have been given 30 days to register with the National Broadcast and Telecommunications Commission. If a provider fails to register, they will not have the right to do business in Thailand. However, the government does not plan to shut down any OTT services. OTT content refers to any type of media transmitted via the internet.
Rental Fees Cut
The Treasury Department is cutting rental fees and relaxing some conditions for the development of land in Special Economic Zones (SEZs) to attract more private investment. Some of the SEZ land is not attractive to investors as it lacks basic infrastructure, so the Treasury Department hopes the lower rental fees will help draw hesitant investors.
The Public Private Partnership (PPP) Committee approved two new motorways worth THB142 billion under the fast-track PPP scheme. These are the Highway Department’s first two joint investments in 20 years. The government will fund the civil work and private investors will invest in and operate the two motorways. The Thai government is also set to sign a THB170 billion agreement with China for a high-speed rail network. The first stage will be 252 kilometers from Bangkok to Nakhon Ratchasima and part of the planned 1260 kilometer line to Kunming, China.
Thailand Legal Review
Emergency Decree on Foreign Employment
On 23 June 2017, the Emergency Decree on Managing the Work of Foreigners B.E. 2560 (2017) came into effect. However, the effective date for the enforcement of the penalties has been postponed for 180 days, until January 1, 2018, in order to allow employers and employees enough time to comply with the new rules. The new Decree is aimed at migrant workers and will bring Thailand on par with international labor standards. Provisions of the previous laws, such as work permit requirements, that do not conflict with the new Decree are still valid, such as work permit requirements. However, there are significant changes in penalties. Some of these, such as an employer penalty for withholding or confiscating a foreign worker’s documents, are clearly aimed at employers of migrant workers. The Decree now groups all foreigners together, and indeed having one uniform law increases efficiency, but its primary purpose is to better regulate migrant labor to reduce human trafficking. Non-migrant workers are also subject to the provisions of this Decree, so it is highly recommended that companies and foreign workers abide by the new law. The significant changes in penalties consist of:
1) The foreigner has a work permit, but engages in any work in Prohibited Lists prescribed by the Ministerial Regulations:
Employee: Subject to a fine of Baht 20,000 but not exceeding Baht 100,000
Employer: Subject to fine of Baht 400,000 but not exceeding Baht 800,000 per 1 employee
2) The foreigner has a work permit, but engages in any work other than what permitted in the work permit booklet:
Employee: Subject to a fine not to exceed Baht 100,000
Employer: Subject to a fine not to exceed Baht 400,000 per 1 employee
3) Employers who hire foreigners or allow foreigners to work without valid work permits and foreign nationals who do not possess a valid Work Permit:
Employee: Foreign nationals who do not possess valid Work Permits will be liable for imprisonment for a term not exceeding 5 years and/or a fine from Baht 2,000 but not exceeding Baht 100,000 or both.
Employer: Subject to a fine of Baht 400,000 but not exceeding Baht 800,000 per 1 employee
Royal Decree on Tax Exemptions
The new Royal Decree (No 640) B.E. 2560 issued under the Revenue Code which became effective on May 7, 2017 follows the national strategic plan for infrastructure development of electronic payments. The Decree also covers the development of the services and infrastructure for the full-scale use of electronic cards and supports the use of electronic cards for payment in lieu of cash. Thus, an exemption from juristic person income tax has been made available for investments in electronic payment devices for both ordinary persons and companies or juristic partnership investors and those who receive payments and pay fees from receiving payment by debit card via electronic payment devices under the following conditions.
The Royal Decree exempts any company and juristic partnership that invested in electronic payment devices from juristic person income tax for 100% of the total expenses paid for the investment into electronic payment devices during the period of November 1, 2016 to December 31, 2018.
No rental charges derived from the said electronic payment devices and income tax exemption can be claimed within the same fiscal year the aforesaid expenses incurred. Also, the quality of said electronic payment devices shall conform to the prescribed standards in the Royal Decree.
For ordinary persons and companies or juristic partnerships with paid in capital not exceeding THB 5 million that receive payments and pay the fees from receiving such payments by debit cards via electronic payment devices (e-Payment, Debit Card, Credit Card), 100% of the paid fees are eligible for income tax exemption for the period of November, 2016 to December 31, 2021. However, this exemption income tax is for an ordinary person, company, or juristic partnership whose assessable income shall not exceed THB 30 million in each tax-year.
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.