12 February 2009
In an attempt to soften the effect of the global economic crisis, the Thai Cabinet has approved in principle tax incentives for business restructuring and partial business transfers to minimise the emergence of non-performing loans and to encourage business activity. These measures also aim to sway companies to improve their structures and to cut down on unnecessary costs and expenses.
The tax incentives include exemption from income, value added, and special business taxes and stamp duty for restructuring and partial business transfers completed before 31 December 2009.
The incentives also include a reduction in government transfer fees for the transfer of immovable property.
A draft of the regulations is currently under consideration by the Office of the Council of State.
The Thai Cabinet's approval in principle on 20 January 2009 for tax incentives for business restructuring and for partial business transfers is intended to (i) assist companies to restructure their loans before they become non-performing; and (ii) encourage improvements in business operations so that companies experiencing financial problems survive these tough economic times.
The tax incentives include:
1. In relation to restructuring:
1.1 exemption from income tax for debtors who benefit from an agreed reduction/cancellation of debt;
1.2 exemption from income, value added, and special business taxes and stamp duty on income received from property transfers, sale of goods, provision of services, and restructuring instruments (e.g. share transfer deed); and
1.3 exemption from income and special business taxes and stamp duty for income received from transfer of mortgaged property to a third party, provided that the exempted portion must not exceed the debt amount owed to the mortgagee.
The restructuring and transfer must be completed by 31 December 2009 and must comply with the Bank of Thailand's regulations.
2. In relation to partial business transfers:
2.1 exemption from value added and special business taxes and stamp duty for income received from and for partial-business transfer related instruments; and
2.2 a reduction of the government transfer fee for the transfer of immovable property.
The partial business transfer must be completed by 31 December 2009.
The tax incentives for restructuring are similar to those issued during the 1997 Asian financial crisis. Details of these incentives are to pass into legislation once approved by the Office of the Council of State.
The government is optimistic that these incentives will help Thai companies survive the global business and economic downturn.
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