|Thailand Update | November 1, 2018
Authors: Ella Duangkaew, Monica Chritton
|THE COUNCIL'S TAKE|
Cabinet Proposes Repeal of Existing International and Regional Headquarters Schemes, Introduces International Business Center (IBC) Scheme
The Cabinet, on October 9, introduced the single International Business Center (IBC) scheme to replace the Regional OperatingHeadquarters (ROH) I and II, International Headquarters (IHQ) and Treasury Center (TC), and International Trading Center (ITC) regimes. A summary from EY reports that entities that have already been granted tax, customs and employment incentives under the existing regimes will remain eligible until the expiration of any current status, but ROH I status, will end at the end of accounting year 2020. ROH and IHQ/TC entities can convert to IBC. The new IBC scheme will have new conditions, with details expected to be released shortly, following its consideration by the Council of State and National Legislative Assembly.
An analysis from Baker Mackenzie found that the new IBC scheme may not be as beneficial overall in comparison to the existing IHQ scheme, but has several new tax incentives, including, but not limited to, reduced corporate income tax (CIT) rates and exemption on CIT for dividend received from affiliates. New applicants for the IBC scheme will also be subject to meeting a new criteria, which includes minimum expenditure of at least 60 million Baht in each accounting period, which existing ROHs and IHQs would be exempt from should they wish to covert to IBCs.
The proposed IBC scheme regime is part of Thailand’s 2017 commitment to the G20/Organisation for Economic Cooperation and Development’s (OECD) Inclusive Framework of Base Erosion and Profit Shifting (BEPS) standards. Reviewing harmful tax practices is part of Thailand’s commitment to the four minimum standards of the G20/OECD Inclusive Framework of BEPS (Action 5). The three other actions Thailand has committed to are a review of treaty abuse (Action 6), enacting Country-by-Country reporting (Action 13) and enhancing the efficacy of dispute resolution (Action 4). The overall principle of the BEPs standards is to reduce reliance on CIT, increase transparency and efficiency and place countries on equal tax footing. Thailand’s efforts to comply with the BEPS framework complement the country’s overall efforts to increase transparency and alignment with international practices, as evidenced by their efforts to establish data protection standards and stronger intellectual property rights enforcement. These efforts are timely as Thailand prepares to assume the ASEAN chairmanship year, where it will be important for them to set an example of compliance with international best practices for the region.
Tourism Stimulus Package to go Before Cabinet
A tourism stimulus package is set to go before the Cabinet to mitigate the sharp decline in tourists felt during the most recent tourism peak season. The stimulus package, which is likely to be enforced from November 15 through December, is intended to attract more foreign tourists and is expected to include visa fee exemptions, flight package deals to second-tier destinations, tax measures for jewelry purchases and a focus on tourism safety.
The Bangkok Post reports that the Tourism Authority of Thailand, Finance Ministry, and Thai Airways International are combining efforts to support the tourism stimulus package. The report notes that the drop in tourists arriving from China has been particularly notable following a boating accident in Phuket that claimed the lives of 47 Chinese tourists in July. Following the accident, Thailand has worked to restore confidence in tourism safety.
The report pointed out that the stimulus package is meant to draw tourists from all over the world, not just from China, and that the government must ensure sustainable tourism growth while the spillover effects of tariffs enacted in recent global trade actions are still uncertain.
Government and tourism industry concern over recent peak season numbers is reasonable, given that tourism is a key economic driver. In a June 2018 report, the International Monetary Fund found that tourism, especially the large portion of tourist arrivals from China, is a key driver of growth in Thailand and of the “current large account surplus, which stood at 10.6 percent of GDP in 2017.” However, the report also noted that the benefits of tourism were concentrated to specific parts of the country. The report also recommended scaling up public investment to drive more inclusive growth through domestic demand.
Although the IMF predicts growth momentum to continue through 2019 thanks largely to the tourism and manufacturing industries, Deputy Prime Minister Somkid Jatuspripitak has already cautioned the Ministry of Finance to prepare plans to anticipate any potential economic slowdown caused by global tariffs, according to the Bangkok Post. The Deputy Prime Minister emphasized the importance of bolstering infrastructure megaprojects and passing several tax bills, including a Revenue Code on e-business tax and the land and buildings tax to bolster the domestic economy. Stimulating the domestic economy is a high priority for the current administration as elections near, and the tourism stimulus package may be the first of many such initiatives to demonstrate the administration’s efforts to bolster domestic growth.
Thailand’s Draft Cybersecurity Bill Continues to Draw Industry Outcry, PM Orders Review
Thailand’s Draft Cybersecurity Bill has drawn criticism from several stakeholders, including state agencies, domestic business and foreign businesses operating in Thailand, who share concerns about the Bill’s potential to create opportunities for abuse of power and data privacy breaches. The Bill will proceed to the National Legislative Assembly following its expected approval by the Cabinet this month. In response to widespread outcry, Prime Minister Prayut Chan-o-cha has called for review of the Bill this week, according to the Bangkok Post.
Criticism of the Cybersecurity Bill includes questions of its potential to silence public opinion ahead of the upcoming elections, risks to confidential information and concerns that the Cyber Security Agency (CSA) created by the Cybersecurity Bill would have far-reaching powers. General Bunjerd Tientongdee, a member of the National Cybersecurity Committee, said that the Prime Minister and National Legislative Assembly must be informed that the current version of the Bill has serious flaws and that must be amended.
Notably, the CSA would be granted broad powers to seize and hold computers without due process and access an organization’s information and facilities in the event of an anticipated or actual cyber threat. The Cybersecurity Bill also introduced obligations for public and private organizations operating Critical Information Infrastructure in its current version. The Cybersecurity Bill would also allow the CSA to form a joint venture, which would allow it act as both a regulator and an operator, “which can create joint ventures and request financial loans for its operations,” according to the Bangkok Post (for more information, see our previous Update here).
As Thailand works to address emerging cybersecurity threats and bolster its technological capacity and infrastructure, it will be critical for these efforts to achieve the important goal of protecting citizens’ data without stifling innovation or jeopardizing data privacy and confidential information, such as trade secrets. The Cybersecurity Bill’s current punitive measures also impose heavy consequences to firms that cannot comply, which are prescribed in broad language. With concerns coming from various stakeholders, it may be likely that the Cybersecurity Bill’s more vague and heavy-handed language may be revised to strike an effective balance.
Technical Workshop on PDPB Implementation
On October 30, the Council, in partnership with AsiaDPO, hosted a technical workshop with the Ministry of Digital Economy and Society (MDES) and the Electronic Transactions Development Agency (ETDA) within MDES, to discuss the implementation of the recently revised Personal Data Protection Bill (PDPB). Workshop participants were primarily data protection officers or privacy experts that provided practical examples on how provisions of the PDPB would impact Thai citizens and consumers. The workshop directly follows a public hearing period for the PDPB, for which the Council submitted joint industry comments for on October 2. For more information on the workshop, or for a copy of the Council's joint submission on the PDPB, please contact Ella Duangkaew (firstname.lastname@example.org).
Thailand's Innovation List
The Council has collected feedback and recommendations from members on how Thailand’s Innovation List affects U.S. healthcare companies. Introduced in 2015, the Innovation List includes products deemed to have been developed or improved through research and development by Thai majority-owned companies. Companies with healthcare products on the Innovation List are granted special government procurement privileges. For example, Thai public hospitals are mandated to spend at least 30 percent of their budget on Innovation List products without undergoing a public procurement process. Members’ input will be used to update the Office of the U.S. Trade Representative and other stakeholders, and in our engagements with the Thai Government. If you have any questions, please contact Lucius Lee at email@example.com.
|IN THIS UPDATE|
Thailand: Insurance institute to pave the way for business in neighbouring markets Asia Insurance Review 26th Oct 2018
Bilateral relations, security and Asean issues to take centrestage in Dr M's official visit to Bangkok Yahoo! News 23rd Oct 2018
Prayut says ban on political activity to be lifted by December Bangkok Post 30th Oct 2018
Police general to lead Thailand's main opposition party Al Jazeera News 28th Oct 2018
Slim majority say Prayut should not pursue politics: Nida Poll Bangkok Post 28th Oct 2018
Democrat contenders face off Bangkok Post 27th Oct 2018
Judges vote to oust member of the Judicial Commission Bangkok Post 26th Oct 2018
PM says World Economic Forum improves Thailand's standing in competitiveness index National News Bureau of Thailand 22nd Oct 2018
Phalang Pracharat and Democrat parties continue activity as Thai Citizen Power Party announces National News Bureau of Thailand 22nd Oct 2018
Senate selection committee not yet formed National News Bureau of Thailand 21st Oct 2018
BOT to consider suggestions from developers, banks for home loan policy The Nation 23rd Oct 2018
Banks ride on robust export growth The Nation 22nd Oct 2018
Malaysia, Thailand cross-border trading to be round-the-clock, says Dr M Malay Mail 24th Oct 2018
Private use of military items to expand Bangkok Post 26th Oct 2018
FPO holds GDP growth at 4.5% on consumption uptick Bangkok Post 30th Oct 2018
Somkid unfazed by export snag Bangkok Post 23rd Oct 2018
Specialist argues for LTF deductions Bangkok Post 20th Oct 2018
Thailand falls on energy slump, Singapore recovers Reuters 24th Oct 2018
LED Expo Thailand Expands Its Panorama in the Year 2019 Led Inside 23rd Oct 2018
Switched on: Top electric power conference heads to Thailand AEC News 19th Oct 2018
Food & Agriculture
Wildlife set to suffer from tourist road Bangkok Post 27th Oct 2018
Plan to link crops with foreign clients Bangkok Post 27th Oct 2018
Drought to extend in upper regions Bangkok Post 26th Oct 2018
Thailand aims to tap new export markets The Nation 24th Oct 2018
Three palm oil proposals to target slump Bangkok Post 23rd Oct 2018
Officials get orders to wean farmers off rice The Nation 22nd Oct 2018
Huge meth bust in Chiang Rai Bangkok Post 30th Oct 2018
Health activists demand govt halt all changes to ThaiHealth bill by Nov 18 The Nation 30th Oct 2018
Thai Government declares a three month "War on Drugs" in Thailand The Pattaya News 26th Oct 2018
HSRI grants ฿10mn to CU anti-cancer drug research team National News Bureau of Thailand 23rd Oct 2018
‘Vaccine denial’ behind measles deaths in south Thailand The Star Online 19th Oct 2018
900MHz licence purchased by DTAC Bangkok Post 29th Oct 2018
Blockchain tech seen as a tool to curb corruption The Nation 28th Oct 2018
SEC issues warning on renegade ICOs Bangkok Post 27th Oct 2018
AI, big data technology used in pilot project to ease Bangkok’s traffic congestion Thai PBS World 23rd Oct 2018
GSB platform to pool small shop purchasing Bangkok Post 23rd Oct 2018
The cybersecurity balancing act Bangkok Post 22nd Oct 2018
4 EEC projects worth B470bn get nod Bangkok Post 31st Oct 2018
PM mulls canal plan but army brooks no delay Bangkok Post 30th Oct 2018
Small investors own half of B45bn Thailand Future Fund Bangkok Post 22nd Oct 2018
SCG reports nine-month revenue uptick Bangkok Post 25th Oct 2018
TFFIF largest IPO since 2015 on strong demand Bangkok Post 23rd Oct 2018
Stimulus package en route to cabinet Bangkok Post 26th Oct 2018
Tourism operators press for policy salve Bangkok Post 22nd Oct 2018
Thailand's Phuket smartens up to bring tourists back Nikkei Asian Review 20th Oct 2018