09 Oct ASEAN Today – Regional Legal and Business News – September 2018
ASEAN Today – Regional Legal and Business News for September 2018 including the Employment Department’s enforcement of termination of employment notification, work permit exemptions for branch and representative offices, the Ministry of Finance’s new Tax Single Sign On system, and tax news.Download PDF
ASEAN Economic Community News
Regional Aviation Growth
At a recent conference in Bangkok, the head of the United Nation’s International Civil Aviation Organization (ICAO) forecast that air traffic volumes in the ASEAN member states would triple to over 20,000 flights daily by 2033. The ICAO says that while the continued growth will allow for great opportunities, the network expansion and flight traffic increases may cause serious challenges for the member state governments. These will include aviation safety and security oversight operations and keeping up with a rapidly evolving sectoral environment in terms of technologies, operations, and business models. The ICAO noted that many of the regional governments currently struggle to comply with international aviation safety standards.
ASEAN Disclosure Index
A global business advisory firm released its ASEAN Disclosure Index 2018 which tracks corporate disclosure practices in 180 publicly listed corporations in ASEAN. The Index shows that ASEAN corporations scored well on corporate disclosure with an average score of 7.8 out of 10 and the average Board of Directors Quality score was 3 out of 4. However, the study found that all 180 companies could improve their risk disclosure standards.
The Intellectual Property (IP) offices of Indonesia, Brunei Darussalam, and Laos announced that they will integrate their trademark and design data into the global trademark and design search databases developed by the European Union Intellectual Property Office. Their trademark database contains 51 million marks from 67 different IP offices and the design database contains 14 million marks from 67 IP offices.
Single-Use Plastic Ban
Malaysia announced that it plans to eliminate single-use plastic products by 2030. The government will launch the roadmap for its zero-waste plan next month which will include a nationwide charge on plastic bags and plastic straws provided only on request. Malaysia is considered to be the world’s eighth biggest plastic polluter and will be the first Southeast Asian country to ban single-use plastic.
According to a new United Nation World Tourism Organization report, Vietnam is one of the 10 fastest growing tourist destinations in the world and an increasingly important market for international hotel groups. Overall tourist numbers rose by 19% to 86 million in 2017 with international arrivals rising 29% to 12.9 million.
Improved Permit Procedures
The government of Laos announced that over the next year it plans to reduce the number of procedures, time spent, costs, and documents needed to obtain an import or export license. The government wants to improve Laos’ international competitive rankings and Ease of Doing Business rankings, especially the Trading across Borders indicator.
Cambodia’s micro-finance institutions are continuing to attract the interest of international investors and foreign banks. Market competition and tougher requirements by the National Bank of Cambodia, including larger minimum capital requirements, have led to an increase in consolidations and acquisitions within the sector, especially to large foreign banks.
THAILAND LEGAL REVIEW
Corporate Law News
Tax Single Sign On
The Ministry of Finance (MOF) promulgated the Notification of the prescription and procedure for the Tax Single Sign On (Tax SSO) which became effective on July 16, 2018. Taxpayers are now allowed to access the systems which divide tax services amongst the Revenue Department, the Excise Department, and the Customs Department using only one username and password in order to file applications, requests, or any other operations concerning tax in the form of electronic files through the Tax SSO service system. To use the system, the taxpayer, whether an ordinary person, juristic person, partnership or group of persons, is required to register as a user via the Ministry of Finance website and then schedule an appearance before MOF officers together with supporting documents within thirty (30) days from the registration filing date.
ID Copy Requirement Repealed
The Revenue Department Notification dated August 31, 2018 repeals the use of copies of identity cards and household registration books for any acts prescribed by the Revenue Code and any laws and regulations under the Revenue Department’s control including any official contacts with the Revenue Department. This is part of the national strategy to reduce paper usage and further Thailand 4.0 and the digital economy. If Revenue Department official does need copies of IDs or household registration books, they will not charge for copying.
Termination of Employment Notification
The Emergency Decree on Managing the Work of Foreigners B.E. 2561 (2018) (Chapter 2) came into effect on March 28, 2018, but the enforcement of the penalties for employers and employees not complying with work authorization regulations under Chapter 2 was delayed until July 1, 2018. One of the most serious compliance issues for the employer is the notification of termination of employment. The employer (ONLY) must notify the Registrar of Employment Department within 15 calendar days from the date of termination of employment. For an employer who fails to submit the termination notification, a fine payment of not more than Baht 20,000 will be imposed. However, there had been no official announcement on when the Employment Department would enforce compliance for termination notification or set any guidelines for fine payment. At this time, the Employment Department has begun to penalize employers for failure to file work permit cancellations after July 1, 2018. The fine payments for the employer who fails to inform the registrar of Employment Department within fifteen (15) calendar days from the date of termination of employment are as follows:
1st failure to report the registrar – 4,000 Baht
2nd failure to report the registrar – 8,000 Baht
3rd failure to report the registrar and onward – 20,000 Baht
Work Permit Exemption
One of significant changes in the Emergency Decree on Managing the Work of Foreigners B.E. 2561 (2018) (Chapter 2) is that a representative of a foreign juristic person who receives a Foreign Business Operation License according to Foreign Business Act or one of the following three entities with the Ministry of Commerce is now exempt from obtaining and renewing a work permit with the Employment Department. The three entities are A) Branch Office, B) Representative Office, and C) Regional Office. However, the above person is still obligated to comply with all Immigration laws such as applying for and renewing a long-term visa as well as the 90-day reporting with the Immigration Bureau.
Revised Basis for Calculating Revenue and Expenses of Companies and Partnerships
The Revenue Department Order dated September 11, 2018 is a remarkable revision of the method of selection for calculating revenue and expenses for companies and juristic partnerships conducting business in relation to property rental or as a hirer to be continued in the same manner in order to calculate net profit for income tax. For property rental, all revenue whether derived from rentals, installments, and any related expenses occurring in the accounting period whether such amount gets paid or not, shall be included in the calculation of revenue or expenses of each accounting period by means of either calculating in proportion to the rental period or any other suitable methods in accordance with general accounting as acknowledged. And as a hirer, all expenses due to rentals, installments, and any related expenses occurring in the accounting period whether such amount gets paid or not, shall be included in the calculation of expenses of each accounting period in similar methods as mentioned for property rental. This Order comes into force for income tax calculation from the accounting period starting on or after 1 January 2018 onward.
Tax Exemption from Investing in Shares, Establishment or Capital Increase of Companies or Juristic Partnerships
Notification (No. 330) on income tax, dated 17 September 2018, has been issued to grant tax exemption to any taxpayers who invest in shares, the establishment, or capital increase of companies or juristic partnerships of not more than 100,000 Baht from January 1, 2018 to December 31, 2019. Eligible companies or juristic partnerships must have been established under Thai laws between October 1, 2015 and December 31, 2019 with paid-in capital on the last day of the accounting period not exceeding 5 million Baht together with income from sales and services of not more than 30 million Baht of the accounting period invested by the tax payers. Moreover, such companies or juristic partnerships shall conduct and earn income of not less than 80% of all revenue in such accounting periods from the following target industries: (i) food and agriculture (ii) energy saving, renewable energy and clean energy (iii) bio-based industry (iv) medical and public health (v) tourism, services, creative industry (vi) advanced materials (vii) textiles, apparel, jewelry trade (viii) automotive and parts (ix) electronics, computers, software and information services, and (x) research and development and innovation or new industries.
For investments as mentioned above, after such assessable income has also been excluded from computing income tax due to the Clause 2 of the Ministerial Regulation No.337 (2018), the entitlement for tax exemption shall be disqualified in the case of no longer holding shares for the companies or juristic partnerships for two (2) years in a row from the payment date of investing in shares, establishment, or capital increase as the case may be.
Claim VAT for Outbound Travelers
On September 5, 2018, the Revenue Department Notification on VAT (No.224) became effective until March 31, 2019. Under the Notification, outbound travelers who purchase goods from VAT registrants to be taken out of Thailand at Suvarnabhumi Airport or Don Muang Airport may appoint qualified representatives from 1 October 2018 to 31 March 2019 to claim for VAT not exceeding 12,000 Baht.
Eligible travelers cannot be Thai nationals or have a domicile within the Kingdom, or be a pilot or crew of any airlines departing Thailand. A qualified representative must either be a company or juristic partnership under Thai law located in the Bangkok Metropolitan Region with the stated objective to conduct business as a representative for outbound travelers to claim for VAT; however, the paid-up capital for this type of business starts at 25 million Baht.
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.