Monthly Archives: April 2014

The new corporate income tax rates in Thailand

After 2011 elections in Thailand there was little discussion about the new government’s plan to reduce the corporate income tax rates (“CITR”). Attention focused mostly on the potential negative impact of the minimum wage rate increase on businesses in Thailand being proposed by the new government . Meanwhile the new government went ahead and reduced the CITR significantly. Surprisingly — relatively few people seem to be aware of this. Accordingly, please find in the following a summary of the recently enacted revised CITR.

Pursuant to Title II, Chapter 3, Schedule 2(a) of the Revenue Code (“RC”) the CITR on profit for Thai companies is 30%. However, pursuant to Title I, Section 3(1) of the RC, this rate may be reduced for some or all such companies by way of the Cabinet issuing a “Royal Decree” (“RD”).

And, in fact, under RD 471 (2008) the CITR for “small to medium enterprises” (“SME”s) defined there as companies who’s total capitalization was THB 5,000,0000 or less on the last day of the tax year, was exempted for income not exceeding THB 150,000 and further reduced to 15% for taxable income between THB 150,001 to THB 1,000,0000 and to 25% for taxable income from THB 1,000,001 to THB 3,000,000. Also under RD 467 (2007) the CITR for companies listed on the Stock Exchange of Thailand (“SET”) on the “market for alternative investment” (“MAI”) was reduced to 20%, while the CITR for all other companies listed on the SET was reduced to 25%.

However, on 14 December 2011 the Cabinet issued RD 530 which repealed and replaced RD 471 and repealed and replaced Section 3(2) of RD 467. Accordingly, the CITR for SMEs, which are now defined as any company with a capitalization of not more than THB 5,000,000 on the final day of the tax year and which company does not have income exceeding THB 30,000,000 in that same tax year, is now as follows:

(1) exempted on net profit up to THB 150,000 for all of the following tax years which begin on or after 1 January 2012;

(2) 15% on net profit from THB 150,001 up to THB 1,000,000 for all of the following tax years which begin on or after 1 January 2012;

(3) 23% on net profit of THB 1,000,0001 or more for the tax year which begins on or after 1 January 2012; and

(4) 20% on net profit of THB 1,000,0001 or more for all of the following tax years which begin on or after 1 January 2013.

The CITR for all companies including those that are listed on the SET except for those which listed on the MAI on the SET is now for three consecutive accounting periods only as follows:

(1) 23% on net profit for the tax year which begins on or after 1 January 2012; and

(2) 20% on net profit for the following two tax years which begin on or after 1 January 2013.

The CITR for the companies that are listed on the MAI on the SET remains 20% on net profit under the portion of RD 467 which remains in effect.

In conclusion, these CITR reductions are clearly welcomed by those investing and doing business in Thailand. However, it should be noted that although as provided for under RD 530 the CITR reductions for SMEs are “permanent”, they are not so for all other (non-MAI listed) companies. It is unclear, if it is “planned” to extend or even increase these reductions after the expiration of the reductions in three years.

The perhaps most commonly stated rationales for the CITR reductions is to make Thailand’s business environment more competitive with its neighbors and further to “compensate” Thai companies for the coming minimum wage increases. But the reductions are not “permanent” for most “normal” companies under RD 530. Even if the “plan” is to extend or even increase them three years from now, it will take the political will of and action by the then current Cabinet. Thus, any such extension can only be seen as uncertain. Such can hardly be encouraging for those considering doing business and investing in Thailand beyond the next three years. Therefore, although the business community is welcoming the CITR reductions under RD 530, it is unfortunate that they were not made “permanent” for all Thai companies.

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Business Signs (part II): is Thai language required in yours?

In our last column we had a look at the common legal misnomer regarding businesses organized under a Thai limited company that asserts: “You must have ‘company, limited’ on your business sign.” In this column, we examine a second very common legal misnomer regarding business signs in Thailand. It goes something like: “All business signs must have Thai words that mean the same thing as any non-Thai words and above any such non-Thai words.” Once again, as a generalized proposition, this is incorrect (note, there are indeed cases where Thai language requirements may apply to your business’ sign). In our opinion, it is clear that this legal misnomer is based on an inadequate understanding of the Signboard Tax Act (1967) and as amended (the “STA“). Thus, once again, we turn to this, the relevant law.

Pursuant to Section 9 of the STA, the signboard tax is a local administrative tax collected by the relevant local administrative office (i.e. Testsabaan, Or. Bor. Tor or District Office, depending on where you are located in Thailand). The STA is as “self-assessing tax”. In general, with some specific exceptions and applicability rules, when you put up your business sign you are required to report to the competent local administrative office and pay the tax within fifteen days thereafter.

Section 12 of STA provides that the tax is payable annually in advance no later than 31 March for that year. However, pursuant to Section 7 of the STA, if this is the first year of your business sign is used, then the tax payable is a pro-rata proportion of the annual tax payable for that sign. Depending on which quarter of the first year the the tax becomes payable i.e. if the tax becomes payable in May (the second quarter of the calendar year) then you pay three quarters of the annual tax payable for such a sign.

Under Section 25 of the STA, a late payment of your annual sign tax is subject to a fine of 2% per month of your total payable sign tax. Failure to file the tax return by the due date is punishable by a fine of 10% of the tax payable, which will be reduced to 5% if the sign owner files before he given official notice of the failure to file. A fine of 10% of the arrears tax is applicable if the sign owner files an incorrect return, unless the sign owner requests to correct such before assessment. And, under Section 35 of the STA, a penalty of Thai baht five to fifty thousand is applicable for “intentionally” not filing the sign tax payment application.

Under Section 7bis of the STA, the tax payable (subject to a minimum tax payable of Thai baht two hundred) is calculated by the area of the sign multiplied by the applicable per area rate. Pursuant to Ministerial Regulation 5 (1992) under the STA, the tax rateper each five hundred square centimetres of sign used, is one of three following, currently reduced, amounts:

1) Thai baht three;

2) Thai baht twenty; or

3) Thai baht forty;

And here is the key point for our purposes; the rates are applicable as follows:

(1) is applied, if the sign is in the Thai language only;

(2) is applied, if the sign is in the Thai language and any other non-Thai language and/or has anypicture and/or has anylogo is also in the sign;

(3) is applied, if any part or all of the Thai language in the sign is under/lower down the sign than any non-Thai language in the sign.

And this is, in our opinion, the source of the confusion regarding a supposed legal requirement to include Thai in your business sign. True, if your sign contains only a non-Thai language or a non-Thai language and Thai but the Thai is not completely above the non-Thai language, you are liable to a higher a tax amount under the STA. However, two things should be carefully noted. First, once you calculate it, the payable tax amount for a sign that has Thai wording lower than non-Thai wording or even for a sign that contains only non-Thai wording is, indeed higher but the difference is relatively negligible. Second, you are generally not required to include any Thai language wording above any non-Thai language in your business sign. Indeed, you are generally not required to include any Thai language in your sign at all.

In closing and as noted above, however, there are some specific exceptions with regard to what business signs the signboard tax applies and also some cases where Thai language must be used in business signs. To clarify if and how your business sign is liable to this tax, and whether and how Thai language wording must be used in your case, you should to consult competent tax and legal counsel directly.

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Business Signs (part I): is it required to have “company, limited” in yours?

If you started a business here in Thailand, you probably did so by setting up a Thai company limited. All Thai limited companies are required to have and to report to the authorities a registered address, pursuant to Section 1148 of the Civil and Commercial Code (the “CCC”). And, pursuant to Section 14 of The Offences Relating to Registered Partnerships, Limited Partnerships, Limited Companies, Associations and Foundations Act (1956) and as amended (the “Juristic Persons Offences Act”) if a Thai limited company does not comply with Section 1148 of the CCC, such company will be subject to a fine of up to Thai baht twenty thousand. In addition, the director of such a company limited will be personally liable for another fine in an amount up to Thai baht fifty thousand, under Section 25 of the Juristic Persons Offences Act.

The requisite registered address need not be evident to all or anyone for that matter, it need only be an actual address and registered. However, if the business you limited company conducts requires its office location to facilitate its business activities and interactions with others, then chances are you put up a sign at your company’s registered address to market your business and let the public know where your place of business is located. When you did so, you may have been told, and thought that you must comply with, two very common misnomers. These misnomers, in our opinion, are based on misunderstandings of the relevant law. The first misnomer is that you must put “company, limited” or some abbreviation thereof on your sign. In this Part I of our two part article we have a closer look this first common misunderstanding. And in order to understand this legal misnomer we must, as always, turn to the actual relevant law.

So is the following assertion true?: “You must have ‘company, limited’ on your business sign.” Quite simply, it is not. But why do so many seem to think it is true? Most certainly it is due to Section 5 of the Juristic Persons Offences Act which states, in pertinent part, the following: “If a limited company, except one operating a bank, expresses its name in its commercial seal, sign, brochure, letter, notification, or any other document relating to its business…in a language other than Thai without words or phrases that mean ‘limited, company’… [such company] shall be liable to a fine not exceeding Thai baht twenty thousand and a fine of Thai baht five hundred per day until [such company] has complied with the requirements under this Act.”

Note well, however, that although the Juristic Persons Offences Act requires a Thai limited company to include words communicating that it is, indeed, a limited company when it expresses its company name in a business sign, it does not require that the company use its company name in any business sign it puts up. In other words, a business run by a Thai limited company would be just fine and legally compliant by putting a business sign with, for example, its mere logo, without its company name.

It should also be noted that the opposite holds true as well. Under Section 6 of the Juristic Persons Offences Act, if your enterprise is not a registered limited company and you proffer its name in wording that implies that it is a limited company, then you will be subject to a fine of Thai baht twenty thousand and a daily fine of Thai baht five hundred for each day until you cease doing so.

Therefore, if you put a sign at your office, it is not true that: “You must have ‘company, limited’ on your business sign”.

We will examine the second common legal misnomer regarding business signs in our next column.

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Are you the director of a Thai company? You should be aware of your significant legal liabilities

If you are a managing director of a private limited company in Thailand you may have decided to leave the task of dealing with your company’s legal, tax and accounting formalities to your firm’s in house lawyer and accountant or to outsource it to a law firm and an accounting office.

However, every director should be well aware that he personally has certain duties and liabilities to and on behalf of the company for which the law does not allow delegation. Note, a director is not the company’s owner—the owners are the shareholders. The director is merely the company’s agent who acts for and on behalf of the company. Therefore, the director has certain responsibilities to the company. Such responsibilities result in personal liability and the director may be held civilly liable if:

1) a director acts outside the scope of his authority granted from the company to the director. Company directors must only act for the company in the course of implementing and aiding the company’s objectives and must exercise due skill and care in doing so. The Civil and Commercial Code of Thailand (“CCC”) requires a company director to act as a reasonably and normally skilled businessperson would in acting for the company; and

2) the CCC also requires that a director may not put his interests ahead of the company’s. The interest of the company must always take precedence over the director’s other interests, including a director’s personal interests and other business interests (if any). Thus, for example, a director may not enter into an agreement such as a lease or a loan agreement on behalf of the company and himself personally without the consent from shareholders.

If the director violates any of these example duties, which result in damage to the company, then the director may be held civilly liable for such monetary damage by the company/shareholders.

However, it does not end there. In Thailand, unlike many other jurisdictions, a company director cannot only be held civilly liable for his actions as a director but also may be held criminally liable for such. At DUENSING KIPPEN’s most recent count, there are over 90 different laws providing for a director’s personal criminal liability for acts or omissions on behalf of the company. And many of these laws provide for multiple counts of such criminal liabilities.

For example, under the Determining Offenses Relating to the Registered Partnership, Limited Partnership, Limited Company, Association, and Foundation Act a director may face even higher fines than the company as well as time in prison for such acts. These acts include failures on the part of company to comply with the requirements of the CCC, for example:

1) the CCC requires a company to keep a register of shareholders at the company’s registered office. If the company does not have and properly maintain such a register, the company’s director is liable for a fine of up to THB 50,000; and

2) the director may also be liable for a fine of THB 50,000 if the company moves to a new address without giving proper notice to the Ministry of Commerce; and

3) the same liability is also applicable if the company did not hold its requisite annual general shareholders’ meeting; and

4) if the director failed to issue the legally required notice; and

5) if the company’s shares are not properly and actually paid up, its directors may be held liable for a fine of up to THB 50,000; it is therefore not enough to simply register the company as, for example, a THB 2 M company so that director can obtain a work permit and then leave the matter unattended; and

6) a director is obliged to:

a) submit a proper annual audit to the Ministry of Commerce; and

b) keep all minutes and resolutions of the director’s board and shareholders’ meetings in at the company’s registered office address; and

a director may be not only fined but also imprisoned for up to seven years if the director is found to have entered any false statement or made any material omission from in 6(a);(b) above.

In this article we have pointed out that a director of a Thai company has personal liability for his acts or omissions under several different relevant laws. Please note, the examples of this which we give above are only a very few of the most general legal liabilities applicable to all directors—there are a multitude of others. Furthermore, there are many other such liabilities, which may be applicable to a director depending on the type of activity in which the director’s company engages. Thus, it highly advisable that a director be aware on all of legal liabilities applicable to them so that he may exercise proper caution to avoid incurring any such personal liability.


DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and over 100 affiliated offices in more than 50 other countries. Visit them at:

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