This news service has published a series of articles from law firm Baker McKenzie examining new developments in tax, compliance and matters affecting private clients in the Asia-Pacific region. The latest is about Thailand.

This is the latest in a series of briefings by international law firm Baker McKenzie about private client and associated matters affecting high net worth individuals and business owners in the Asia-Pacific region. This article covers Thailand, and is written by Panya Sittisakonsin, Partner, Nitikan Ramanat, Associate, and Chanisara Thaisanguanvorakul, Associate, Baker McKenzie, Bangkok.

The editors are pleased to share this content and invite readers who are interested to respond. The usual disclaimers apply to contributions from outside sources. Email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

1.  Exchange Control Law relaxed to stimulate capital outflows
Thai exchange control regulations were relaxed to stimulate capital outflows to support capital flow balance and lessen pressure on the Thai baht. The relaxations came into effect on 8 November 2019.

Such relaxations include, among others, allowing Thai residents to keep a certain amount of foreign currency proceeds offshore, allowing multilateral netting for payment of goods and services, allowing retail investors to directly invest in foreign securities and derivatives without involvement of a local licensed intermediary, and allowing more freedom with respect to outward remittances of foreign currency such that most outward remittance transactions will not require approval from the Bank of Thailand ("BOT").

A summary of the relaxations relating to individual investors is as follows.

a.  Repatriation requirement of foreign currency
The requirement to repatriate any foreign currency received offshore back to Thailand is exempt if the value of the transaction is less than $1 million (or equivalent) (since 2 March 2020).

b.  Outward remittance of foreign currency
The new regulations allow more freedom of outward remittance of foreign currency by prescribing a list of specific transactions that require prior approval from the BOT (a negative list), e.g. a transfer to a remitter's offshore account and investment in non-permissible financial instruments. Most outward remittance transactions are not prescribed on the negative list and therefore no longer require approval from the BOT. These transactions only require approval from a commercial bank in Thailand.

The commercial banks in Thailand are not required (but are still entitled) to request supporting documents from the remitter for an outward remittance of foreign currency of less than $200,000 (or equivalent). The threshold was raised from the previous amount of $50,000 (or equivalent).

Additional permitted purposes for outward remittances of foreign currency have been introduced with limits, e.g. a gift to a non-resident.

c.  Offshore investment in foreign securities and derivatives
Retail investors are now permitted to directly invest in permissible foreign securities and derivatives (including OTC derivatives) up to $200,000 (or equivalent) per investor, per year, without the involvement of a local licensed intermediary. Any excess amount can still be invested through a local licensed intermediary.

Permissible foreign investment for institutional investors, qualified investors and retail investors are now in the same asset class which includes:

•    securities;
•    exchange-traded and OTC derivatives;
•    repos;
•    securities lending and borrowing;
•    deposit pending investment in permissible investment above.

There is no longer a limitation on jurisdictions of issuance or counterparty.

In addition, qualified investors and retail investors are now permitted to invest in foreign endowment insurance, unit-linked life policy and universal life insurance.

The aggregated investment limit that the BOT allocated to investors regulated by the SEC is now increased to $150 billion (or equivalent) in order to facilitate the increasing demand for foreign investment and enhance efficiency in long-term investment planning and management.

2.  International exchange of information
On 21 January 2020, the Cabinet approved in principle the Draft Act to Amend the Revenue Code regarding the Exchange of Information under International Requests and Automatic Exchange of Information ("Draft Act"), following the second round of public hearings conducted by the Revenue Department during October 2019.

Furthermore, on 3 June 2020, Thailand signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters ("MAC"), becoming the 137th jurisdiction to join the convention.

Under the Draft Act, the director-general of the Revenue Department will be given the authority to exchange tax information with tax authorities in the countries that have a tax treaty with Thailand and the jurisdictions that participate in the MAC. The information exchanged will cover only information acquired under the Revenue Code, e.g. information from tax filings and tax audits, which will exclude financial account information possessed by financial institutions in Thailand. As such, the Draft Act will not result in the implementation of the common reporting standard ("CRS").

With regard to CRS, on 12 November 2019, the Cabinet passed a resolution committing to undertake the exchange of CRS information by 2023. As of now, the CRS Act is in the early stage of research and draft preparation by the Revenue Department.

It is expected that Thailand will be fully prepared to undertake the first information exchanges within one to three years.

3.  Property tax: postponement of tax collection and special reduction
a.    Postponement of property tax collection

The Land and Building Tax Act became effective on 1 January 2020. The collection of land and building tax (property tax) was postponed from the initial schedule of April 2020 to August 2020 to give taxpayers and local authorities more time to prepare.

b.  Recent approval on tax reduction for this year

To alleviate fallout from the pandemic this year, many tax measures have been introduced, including a tax filing deadline extension, deductions for certain expenses and investments, and reductions in withholding tax rates.

As for property tax, on 10 June 2020, the Royal Decree Reducing Tax for Certain Types of Land and Buildings, B.E. 2563 (2020) was published in the Government Gazette and became effective on 11 June 2020. This Royal Decree allows a reduction on the land and building tax of 90 per cent of the total tax due for all four categories of land and buildings, namely residential use, agricultural use, commercial use, and vacant properties or those that are not properly being used. However, this reduction is applicable only for this year as a response to the COVID-19 outbreak.