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Legal Update

New Tax Incentive to Boost Listing in Thailand

3 July 2009
Mayer Brown JSM Legal Update
Summary

Listing will now mean general corporate income tax exemption for companies with an investment promotion from the Thai Board of Investment ("BOI").

A new BOI measure, approved on 10 June 2009 and effective until 31 December 2012, aims to increase activity in the Thai capital markets. Under the measure, BOI promoted companies which will list on the Stock Exchange of Thailand ("SET") or the Market for Alternative Investment ("MAI") may enjoy up to eight years of corporate income tax holiday.

Full Update

Tax cap on BOI promoted companies

BOI promoted companies in Thailand are able to enjoy a number of privileges such as foreign holding relief, foreign ownership of land, import duty and tax privileges.

One of these privileges is exemption from paying corporate income tax. Depending on the location and the type of business it operates, a BOI promoted company may be granted a corporate income tax break ranging from three to eight years (the "Exemption Period"). The exempted amount for the tax imposed on net profits is capped at the total investment capital of the BOI promoted company (the "Capped Amount").

A BOI promoted company, for example, with a THB 100 million total investment capital and a three-year corporate income tax break, has three years to enjoy a THB 100 million corporate income tax exemption. If the corporate income tax payable in its first year of operation is THB 40 million, it will have THB 60 million corporate income tax exemption for the remaining two years of its Exemption Period.

BOI Measure

The measure removes the cap on the corporate income tax exemption. Thus, BOI promoted companies which will list on the SET or the MAI will be entitled to a corporate income tax break with no cap during their Exemption Periods. The current standard corporate income tax rate in Thailand is 30%.

BOI promoted companies will still have to comply with listing requirements of the SET and the MAI, such as the minimum paid up capital, share allocation, financial status, and operation result.

The measure does not, however, extend the original Exemption Period. It does not apply to BOI promoted companies which have already reached their Capped Amount.

Given the criteria above, the beneficiaries under this measure seem to be limited only to:

(i) new BOI promoted companies intending to list on either the SET or the MAI which would benefit from a corporate income tax break with no cap during their Exemption Period; and

(ii) current BOI promoted companies intending to list on either the SET or the MAI which would benefit from a corporate income tax break with no cap during their existing Exemption Period, provided that their accumulated corporate income tax exempted amounts have not reached their Capped Amount.

Conclusion

Further details of this measure will be set out in a BOI Notification which is expected to be released in early July 2009.

This listing-oriented measure is part of the second stimulus package which the Thai government has launched to improve the Thai economy.

However, the benefits of the measure would be more far-reaching if it also covers BOI promoted companies which have already reached their Capped Amount.

For inquiries related to this Client Alert, please contact:

Chitanong Poomipark ( )

Sirirat Kongkiattiwong ( )

Learn more about our Bangkok office, Corporate & Securities and Tax practices.

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