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CONNECTSTHAILANDInheritance tax is coming to town!
(pg 02)
]
Five special economic zones set up to boost border trade
(pg 03)
]
Regional pact for capital market development
(pg 03)
]
FATCA, effective since July 2014!(pg 04)
]
Infrastructure plans to turn Thailand into AEC logistics hub
(pg 04)
]
New rules for foreign IPOs (pg 06)
In This Issue
ZICOlaw Connects Thailand is a bimonthly publication aimed at keeping you abreast of the latest happenings in and around Thailand. ZICOlaw (Thailand) Ltd. provides this publication to keep you informed of the latest happenings affecting Thailand’s legal, regulatory and business spheres. For further information on any of the issues raised in this publication, or any issues affecting the ASEAN region in general, please feel free to contact us (see last page).
ZICOlaw’s Senior Advisor for the CLMV region, Chulapong Yukate, spoke at a conference organized by the Board of Investment of Thailand, on the legal environment for investment in Laos and Myanmar.
The conference was held in Bangkok on 30 August 2014 for the benefit of Thai investors looking to invest overseas, with a focus on the CLMV region, in particular, Laos and Myanmar.
ZICOlaw Connects Thailand to CLMV
A U S T R A L I A | C A M B O D I A | I N D O N E S I A | L A O S | M A L A Y S I A | M Y A N M A R | S I N G A P O R E | T H A I L A N D | V I E T N A M
ISSUE NO: 1 SEPTEMBER 2014
Issue No 1 | ZICOlaw Connects Thailand | 2
Our new lawmakers
Of the 200 National Legislative Assembly (NLA) members, 105 are military officers, 66 of whom are active and 10 members hail from the police force. The remaining 85 members are former senators, university rectors and businesspeople.
General Prayuth Chan-ocha said he was aware of the criticism that the NLA was not democratically set up and that different groups in society were not equally represented. However, he said the focus should be more on the end result of achieving national reform. “In addition to the factors of knowledge, ability, confidence and trust, it is necessary to focus on effectiveness, unity and the ability to respond to the NLA’s main mission, which is achieving national reform within the short-term period of one year,” Prayuth said. Speaking on his weekly “Returning Happiness to People in the Country” TV show, he added that with the formation of a new government, there would be a “temporary Thai-styled democracy”. His weekly programme is broadcast every Friday night.
Source: The Nation; Original Title: Junta Chief defends make-up of National Legislative Assembly;Date: 02/08/2014.
Inheritance tax is coming to town!
Thais who are bequeathed fortunes by their wealthy relatives would have to start paying an inheritance tax under the Finance Ministry proposal that has already been blessed by the ruling National Council of Peace and Order (NCPO). The Ministry also has floated two taxes on real estate and beverages. Permanent Secretary Rungson Sriworasat said the Ministry had briefed the NCPO about the inheritance tax plan last month. The Junta has agreed with this initiative and will send it to the Council of State for legal review. When the NCPO finalizes the draft tax bill, the Finance Ministry will table it before the National Legislative Assembly when it comes into existence this year.
The inheritance and real estate tax ideas are not new. The Finance Ministry has bounced them off all governments over the past 10 years because both taxes will ensure fairness for all tax payers, he said. The inheritance tax would be levied on all domestic assets passed down to descendants such as residences, land, cars, stocks and bonds. But it would not be collected from assets overseas. The Ministry declined to disclose details such as progressive tax rates.
Thailand would become the third country in ASEAN to adopt an inheritance tax, behind Singapore and the Philippines, and join other Asian countries – India, Japan, South Korea, China and Taiwan.
The real estate tax would be assessed on land and improvements at a rate ranging from 0.05 – 2%. This means vacant land appraised at Bt10 million would incur a tax bill of Bt5,000 at the tax rate of 0.05% for the first year. As the idle land is held longer, the liability would rise to Bt200,000 a year at a rate of 2%.
Source: Phuket Gazette; Original Title: NCPO approves inheritance tax;Date: 01/08/2014.
Legal News
Issue No 1 | ZICOlaw Connects Thailand | 3
Five special economic zones set up to boost border trade
Five border areas will be developed as special economic development zones at the initial stage to boost Thailand’s border trade and prepare for the arrival of the ASEAN Economic Community (AEC) in 2015.
The five pilot areas include Mae Sot district in Tak, Aranyaprathet district in Sa Kaeo, Khlong Yai district in Trat, Mueang district in Mukdahan, and Sadao district in Songkhla.
Emphasis will be placed on economic development and national stability as well as efforts to enhance Thailand’s competitiveness, generate employment, and improve the people’s living conditions. Moreover, the formation of the special economic development zones will ease congestion at border checkpoints and help tackle the smuggling of migrant workers and goods from neighboring countries.
To support the establishment of these zones, development will include investment promotional privileges, one-stop services, measures to support the use of migrant workers, and infrastructure development for regional connectivity.
General Prayuth pointed out that there is great demand among neighboring countries for Thai goods and that Thailand is advantaged due to distance from other markets, transport routes, and prices. The concern he said was the bottlenecks that remain at border customs checkpoints. Thus the Customs Department has been assigned to improve entry and exit routes to facilitate travel.
Skills development centers will be set up in these provinces and after the five, it is expected that seven more economic zones will be developed in the next stage.
Source: Pattaya Mail; Date: 18/07/2014.
Regional pact for capital market development
A Memorandum of Understanding was signed by representatives from Cambodia, Laos, Vietnam and Thailand to boost regional cooperation on capital market development.
Once Myanmar establishes its regulatory body, it too may join the pact.
The Mekong Capital Markets Cooperation (MCMC) will convene every 2 years with the next taking place in Cambodia, hosted by its Securities and Exchange Commission.
At the recent meeting in Pattaya, the MCMC discussed pillars for sustainable success and touched on the need to upgrade rules and regulations, develop mutual funds, and improve good governance.
Source: The Nation; Date 22/07/2014.
Way back into “Democracy”
Following the 2014 Thai coup d’état, the National Council for Peace and Order (NCPO) has the road map of country reformation which shall be completed in 2015. Gen Prayuth Chan-ocha, the NCPO chief explained it with 3 phases; foremost, the significance is on establishing and maintaining peace and order, phase 2 involves the drafting of an interim constitution while a government is set up afterwards with the reform council, the final phase involves a general election which has more justice and equity for the strong base of perfect democracy and a return to a “democratic form of government with the King as head of state”. Some Thais and organizations wonder how the country will be administered during the interim constitution and how both the reform and national legislative assemblies will function in a few months.
Source: Thai Post Post; Original Title: NCPO is preparing to submit the draft of a temporary constitution;Date: 29/06/2014.
Issue No 1 | ZICOlaw Connects Thailand | 4
Crackdown on “illegal immigrants”
In last June, about 200,000 Cambodian workers in Thailand returned back home because of the fear for their safety by the Junta crackdown rumour. The impact of the Cambodian illegal immigrants exodus and the downgrade of human trafficking in Thailand ranking to Tier 3, the lowest grade possible, serves as a reminder to the NCPO that action must be taken to bring foreign migrants back into the legal workforce because once all foreign workers are registered legally, it will be much easier for Thai officials to enforce laws and protect them from corrupt officials and human traffickers.
Avoiding these problems, NCPO not only plans to establish more one-stop service centres around the country for migrants from Myanmar, Laos and Cambodia, but also discusses with the boundary countries, namely Cambodia, Myanmar, Laos, to help all labour immigrants lawfully. The first success is in Cambodia, the government discounts the work permit and visa fee to the affordable price and cut down its approval period to one day.
Source: The Nation; Original Title: Push to lure foreign workers; Date: 07/07/2014.
From 1 July 2014 onward, FATCA becomes effective!
Foreign Account Tax Compliance Act (FATCA) is a US federal law requiring Americans including ones living abroad to report their financial accounts held outside the country, and a non-US or Foreign Financial Institution (FFI) is required to identify accounts held directly or indirectly by US persons and to report on their American customers to the US Internal Revenue Service (US IRS). Thailand has agreed on a Reciprocal Version of the Model Agreement (Model 1A) which requires the Thai Revenue Department and US Treasury to share the financial information of customers of both nationalities at financial institutions including banks, securities companies, mutual funds and insurance firms to combat tax avoidance in offshore markets. In order to ascertain customers’ US or non-US tax status, FATCA requires FFIs to collect additional information or documentation from customers. Where customers fail to provide the requested information, FFIs are required to apply a 30% US withholding tax on certain types of US source income paid to such customers. Even though some countries including Thailand have privacy or secrecy laws that prohibit sharing customer information, FATCA rules require US customers to waive their rights under the privacy or secrecy rules so that the FFIs can report their information to the US IRS. If the customers refuse to provide this waiver then such FFI may decline account opening applications or terminate services to such customers.
However, there are a number of US expats frustrated with tax collection under FATCA as Bloomberg revealed that in the second quarter of 2013, Americans who gave up their citizenship increased by six times, compared to same quarter in 2012. Nevertheless, it seems that American’s may not be the only expats to suffer from government tax collection. Many countries are now apparently following in the USA’s footsteps and are drawing up their own versions of FATCA. Thailand has also planned to adopt a similar regime in the long-term. However, in the meantime, it has been classified as a priority for government to revise some related laws and regulations e.g. Financial Institution Business Act B.E.2551 (2008), Securities and Exchange Act B.E.2535 (1992), Civil and Commercial Codes in order to comply with the law regarding personal data protection.
Source: Bangkok Post; Original title: US citizens take note: Fatca has landed, Date 13/07/2014.
Infrastructure plans to turn Thailand into AEC logistics hub
The goal of the strategy is to develop a logistics system and integrate all transportation platforms – rail, air, road and water – stretching beyond Thailand’s borders, as some of the projects form part of a plan to link the country’s transportation system with those of neighboring countries.
The first priority is to develop 10 rail routes in Bangkok and its suburbs.
The next stage is to develop the country’s wider transportation system and link Thailand and neighboring countries by rail, using a double-track system.
Investment in these crucial lines will commence in fiscal year 2015, which runs from this coming October with completion targeted for 2021.
Source: The Nation; Date: 29/8/2014
Issue No 1 | ZICOlaw Connects Thailand | 5
Thailand aims to liberalize gas pipeline business by mid-2015
The military government plans to liberalize Thailand’s gas pipeline business by the middle of 2015, currently monopolized by energy giant PTT Pcl.
State-controlled PTT will transfer the pipeline and related assets to a new entity – giving other companies access to the country’s gas pipelines and links to the LNG (liquefied natural gas) receiving terminal run by PTT.
PTT will initially own 100% of the new entity but the Finance Ministry may take a stake too.
Source: Reuters; Date: 15/8/2014.
Thailand to help launch investment bank for Asia
Thailand has been invited to become one of the founding fathers of the Asian Infrastructure Investment Bank (AIIB).
As an AIIB member, Thailand would be entitled to benefits in terms of financial assistance, particularly for the infrastructure mega projects that the country plans to invest in.
The AIIB will have the same role and working model as the World Bank and Asian Development Bank (ADB).
The AIIB should help increase competition in the world. AIIB loans would typically come with high financial cost suitable for countries with low credit ratings. Thailand is rated at a higher level, so it can tap global liquidity at a cheaper interest rate.
Source: The Nation; Date 17/07/2014.
CIMB Thai, AIS collaborate on next generation Mobile Phone Banking solution suite
CIMB Bank (CIMB Thai) and Advance Info Service (AIS) today signed a Memorandum of Understanding to formalize Thailand’s first business alliance between a bank and a mobile service operator.
Under the Memorandum, CIMB Thai and AIS would collaborate to develop a suite of new banking solutions on mobile phones named Beat Banking. Beat Banking is targeted at the new consumers and would be developed to fit with modern lifestyles where mobile phones were an integral part of daily lives.The first product to be launched under this initiative would be an electronic deposit account where customers could deposit, withdraw or transfer money easily anywhere and anytime.
Source: Bernama; Date: 21/8/2014.
Thailand’s intellectual property regime
Thailand is now undertaking a vast programme of reforms of major IP laws, in particular the Trademark Act and the Copyright Act. An IP database will soon be established to keep track of the status of infringement cases, court decisions, and repeat offences which should improve the overall level of IP enforcement in Thailand.
The EU and Thailand have also now launched negotiations for a comprehensive Free Trade Agreement which looks to strengthen the economic ties between Thailand and Europe significantly.
Source: ASEAN Briefing.com; Date: 21/8/2014.
Issue No 1 | ZICOlaw Connects Thailand | 6
New rules for foreign IPOs
The Securities and Exchange Commission (SEC) will let foreign companies launch initial public offerings and simultaneous dual listings locally as part of an effort to make the Thai bourse a hub for the Greater Mekong Subregion.
Rules were approved for primary listings, in which foreign firms launch IPOs and become listed on the Stock Exchange of Thailand, and for dual offerings, which involve foreign IPOs launched in Thailand and another country at once or in a proximate period.
The regulations are expected to enhance the competitiveness of the Thai capital market and increase investment choices under the ASEAN Capital Markets Forum framework.
Foreign firms launching equity offerings under the proposed rules must comply with the same approval criteria, disclosure standards, and other relevant rules as Thai companies including shareholder protections, conflict of interest and information disclosure.
The equity offerings must comply with laws in their home jurisdictions, and regulators in those countries will have the authority to work with the SEC on enforcement and exchange of information about violations.
At least two Thai residents must serve on the board of directors, of which at least one is an independent director and audit committee member.
Financial statements must be prepared in accordance with Thai and international accounting standards, and auditors and financial advisers must be on the SEC approved list.
Thai-based holding companies with major foreign shareholders and international core businesses will be considered direct foreign equity offerings if they list on the Stock Exchange of Thailand.
Holding companies with mostly Thai shareholders or controlled by Thai shareholders will be subject to the rules applicable to Thai companies.
Source: Bangkok Post; Date: 22/07/2014.
Constitution of the Kingdom of Thailand (Interim), B.E. 2557 (2014)
Constitution of the Kingdom of Thailand (Interim), B.E. 2557 (2014) deemed to be effectively in operation on the 22 July 2014 and which will simultaneously repeal the old Constitution (Constitution of the Kingdom of Thailand, B.E. 2550 (2007)) except the provision under chapter 2, The King.
Announcement of the National Council for Peace and Order No. 74/2557 Subject: Teleconference through Electronic Devices
Announcement of the National Council for Peace and Order No. 74/2557 Subject: Teleconference through Electronic Devices (“Annoucement”) deemed to be effectively in operation on the 27 June 2014. The Annoucement enables meeting participants, both in the public and private sector, to conveniently communicate through electronic devices regardless of their different locations.
Legislation Updates
Issue No 1 | ZICOlaw Connects Thailand | 7
Case In Brief
The business operator must provide subcontracted employees, who perform work in the same manner as its own employees, fair benefits and welfare without discrimination.
By Supreme Court Judgment No. 22326-22404/2555 between 79 Sub-contracted workers, as Plaintiffs, and FCC (Thailand) Company Limited as the 1st Defendant, Thitaram Outsourcing Service Co., Ltd. as the 2nd Defendant, A-team-one International Services Pte., Ltd. as the 3rd Defendant, and HR. Digest Co., Ltd. as the 4th Defendant.
Facts
The 1st Defendant had assigned the 2nd-4th Defendants to supply workers for the 1st Defendant, the 2nd-4th Defendants later supplied its employees totalling 79 subcontracted workers to work with the 1st Defendant. The sub-contracted employees had performed the same type of work as the employees directly employed by the 1st Defendant which is manufacturing clutch kits for motorcycles. However, the Plaintiffs did not receive the same benefits and welfare as the 1st Defendant’s employees who performed the same work.
The 1st Defendant argued that the 1st Defendant agreed to enter into the contract with the 2nd Defendant to supply workers for the production of goods. According to the contract, all 79 plaintiffs should receive welfare and other benefits as requested in the complaints. Therefore, the 1st Defendant did not discriminate between the Plaintiffs and its own employees.
The 2nd Defendant argued that the 2nd Defendant had paid salary and bonuses to the Plaintiffs. However, the payments are less than those paid by the 1st Defendant to its employees who performed the same work.
The Supreme Court considered the second paragraph of section 1/11 under Labour Protection Act B.E. 2541 (1998) which states that “The business operator shall provide the sub-contracted employees, who perform work in the same manner as employees under the employment contract, to enjoy fair benefits and welfare without discrimination.”
Decision
The Supreme Court judged that the 1st Defendant as the business operator shall solely provide all 79 Plaintiffs with the same benefits and welfare as its employees and shall pay the difference between the amount which the 2nd-4th Defendants provided and the amount enjoyed by the 1st Defendant’s employees using the same criteria which the 1st Defendant specified for its employees.
Furthermore, since the section 11/1 only mentioned the business operator, the 2nd-4th Defendants shall not be jointly liable with the 1st Defendant and the case against them shall be dismissed.
Clash between two judgments, “Riot” or “Terrorism”
Facts
On 13–19 May 2010, the Thai military cracked down on the National United Front of Democracy Against Dictatorship (UDD) protests in central Bangkok, the capital of Thailand. The crackdown was the culmination of months of protests that called for the Democrat Party-led government of Abhisit Vejjajiva to dissolve parliament and hold elections. More than 85 were killed. More than 2,000 were injured, Thai media dubbed the crackdowns “Savage May”. After the protest leaders surrendered at the conclusion of 19 May, dozens of arson attacks occurred nationwide, including at Central World.
Issue No 1 | ZICOlaw Connects Thailand | 8
Decision
Resulting from the 2010 clashes between security forces and red-shirt protesters in the Ratchaprasong area, the victims have brought many cases to the court of first instance to claim against their insurers. However, the two civil courts interpreted the 2010 red-shirt rallies differently, the Ratchadapisek Civil Court ruled that the riots and arson attacks on 19 May 2010 at Central World and Zen Department Stores were not acts of terrorism while ordering Deves Insurance to pay more than Baht 3.7 billion in compensation for damage and business disruption to Central group (Black Case No. PorBor.4326/2554). While the cases against other insurers, e.g. Southeast Insurance, which have also been filed at Southern Bangkok Civil Court by people whose houses were burnt down in arson attacks. The court ruled in August 2011 that the attack was terrorism as it was aimed less at damaging assets but with a motive to oust the government. So, Southeast Insurance did not have to pay compensation as terrorism was not covered by the plaintiff’s policies (Black Case No. PorBor.1007/2554).
It’s possible that the two courts would have different opinions on the same matter, as testimonies given during the trials could be different. The different judges further could have different perspectives on the same issue based on their attitude and experiences. That’s why the former believes the crisis was not terrorism, while the latter thinks it was. Nevertheless, it is important to note that both cases are pending appeal and they are yet to settle. What remains to be is how the civil court ruling will impact the criminal case against the red-shirt leaders. Even though, according to the law of evidence, a ruling by one court is not binding on other courts and the arson attack on Central World in criminal cases was just one of several acts allegedly committed by the reds, the public will have to wait and see how it will be settled.
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