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Comparison of “Current” and “New” ROH Criteria & Benefits

  • March 4, 2011
  • Comments Off on Comparison of “Current” and “New” ROH Criteria & Benefits

"New" ROH incentives for Regional Operating Headquarters (ROH) were officially enacted by Royal Decree at the end of 2010. The "current" ROH incentives remain in place, however, and an ROH company now may choose to operate under the "new" incentives or "current" incentives. A summary of the difference between the two schemes is as follows:

 

"Current" ROH incentives

"New" ROH incentives
  1. Criteria
  • Paid-up capital of at least 10 million baht
  • Provide services to at least three overseas associated enterprises or branches in three different countries within the first year of operation
  • At least 50% of total service income and royalties is generated from overseas associated enterprises or branches
  • Paid-up capital of at least 10 million baht
  • Provide services to overseas associated enterprises or branches as follows:
  • to at least one country within the first and second accounting periods;
  • to at least two countries within the third and fourth accounting periods;
  • to at least three countries within the fifth accounting period and thereafter
  • Average operating expenses of at least 15 million baht per accounting period or average investment spending of at least 30 million baht per accounting period for the first 10 accounting periods
  • From the third accounting period, at least 75% of employees must be skilled staff, and at least five employees must each receive total remuneration of at least 2.5 million baht per annum.
  1. Corporate taxation of ROH entity on qualifying services2
  • 10% tax on service income generated from overseas operations for an unlimited period
  • 10% tax on service income generated from local Thai operations for an unlimited period
  • Tax exemption on service income generated from overseas operations for 10 accounting periods3
  • 10% tax on service income generated from local Thai operations for 10 accounting periods3
  1. Personal Income Tax for expatriate employees
  • 15% tax for up to four consecutive accounting periods (which may be renewed for an additional four accounting periods after a one year break)
  • No requirement to first notify Revenue Department of name of expatriate employees
  • 15% tax for up to eight consecutive accounting periods for experts or senior management (which cannot not be renewed)4
  • Requirement to first notify Revenue Department of name of expatriate employees
  1. Royalty Income

10% tax for an unlimited period

10% tax for 10 accounting periods for royalty income derived from R&D products developed in Thailand3 4
  1. Dividend Income

Exempt from taxation

Exempt from taxation for 10 accounting periods3 4
  1. Dividend Payments

No provision for withholding tax on dividend payments

No withholding tax on certain dividends paid to overseas corporate shareholders4
  1. Interest Income

10% tax for an unlimited period

10% tax for 10 accounting periods for interest income with respect to loans made to and then relent by the ROH3 4
  1. Accelerated Depreciation of Assets

Accelerated Ratio (25% of asset value in 20 years)

Accelerated Ratio (25% of asset value in 20 years)
  1. Notification Period for applying for ROH incentives

No time limit

By 15 November 2015
  1. Penalties for failing to qualify under the criteria (item 1 above) in any accounting period

Corporate tax deductions and exceptions will not be available for the particular accounting period in which the ROH fails to qualify

All corporate tax deductions and exceptions will be retroactively revoked starting with the ROH's first accounting period

1 Such expenses or investments must be paid to payees in Thailand.

2 Qualifying services under the "current" and "new" incentives include: general management, business planning and co-ordination, procurement of raw materials and components, research and development of products, technical support, marketing and sales promotion planning, personnel management and regional human resources training, business advisory, economic and investment research and analysis, credit management and control, and other services approved by the Revenue Department on a case-by-case basis.

3 The 10 accounting period limit may be extended by an additional five accounting periods if the ROH entity meets all criteria under item 1 "Criteria" and has incurred cumulative operating expenses of over 150 million baht by the 10th accounting period paid to payees in Thailand.

4 Total income generated from servicing overseas associated enterprises or branches or in the form of royalties from such entities must represent at least 50% of total company income for this incentive to apply.