Renewable Energy in Thailand

Renewable Energy

 

in Thailand

 

 

April 2016

 

 

 

Although Lorenz & Partners always pays great attention on updating information provided in newsletters and brochures we cannot take responsibility for the completeness, correctness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation with a qualified lawyer. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

 

 

 

Abstract

 

The following newsletter shall give an over-view of the current situation on Thailand’s energy sector (I.), in particular the recently published Energy Plan 2036 (II.). The main focus of this plan – and accordingly of this newsletter – is on renewable energies. Be-sides the general importance of renewable energies for Thailand, the investment promotions provided by the Thai government shall be outlined in detail (III.). Furthermore, the restrictions applying to foreign investors and available exemptions are dis-cussed under IV. Finally, the newsletter will give a brief outlook on future developments (V.).

 

  1. Introduction

 

Thailand’s total energy consumption is expected to rise 30% by 2021, and the current energy consumption is mainly covered by fossil fuels, in particular gas and coal. Gas is produced in vast quantities within the country, and coal and oil are mostly imported. Due to the dependency on imports, Thailand’s energy supply is highly subjected to regional political developments.

 

Apart from climate protection, renewable energy produced in Thailand is also interesting for political reasons and has thus gained the government’s attention.

 

 

  1. Energy Plan 2036

 

The Thai government’s goal is to increase

 

the ratio of renewable energies to the total consumption of 30% by 2036. Furthermore, the Thai prime minister has recently announced that the emission of greenhouse gases shall be reduced by 25% by 2036.

 

  1. Political Plans

 

To achieve these goals, the Thai government

 

has developed the Thailand Integrated Energy

 

Blueprint (“TIEB”), a comprehensive framework for the development of the energy sector by 2036. The TIEB has the following objectives:

 

  • Renewable energies shall become a major part of the national energy supply in order to replace fossil fuels and oil imports
  • Strengthening of the national energy security

 

  • Establishing facilities for alternate energy production on the communal level
  • Nationwide support for the produc-tion of renewable energy
  • Promotion of competitiveness through research and development

 

The TIEB includes the following independ-ent plans:

 

  • the Alternative Energy Development Plan 2015 – 2036 (“AEDP”)
  • the Power Development Plan 2015 2036 (“PDP”)
  • the Energy Efficiency Plan 2015 2036

 

(“EEP”)

 

  • the Gas Plan 2015 2036 and
  • the Oil Plan 2015 2036

 

The AEDP was adopted by the National Energy Policy Council on 17 September 2015 and defines goals for the increase of renewable energy from the current 7,300 MW to almost 20,000 MW by 2036. The following capacities are envisaged for the respective sectors:

 

  • Waste-to-energy: 550 MW (currently approx. 65 MW)

 

  • Biomass: 5,570 MW (currently approx. 2,500 MW)

 

  • Biogas from waste /wastewater:

600 MW (currently approx. 300 MW)

 

  • Biogas from plants: 680 MW

 

  • Wind energy: 3,002 MW (currently approx. 225 MW)

 

  • Solar energy: 6,000 MW (currently 1,300 MW)

 

  • Hydropower (small): 376 MW (cur-rently 142 MW)

 

  • Hydropower (large): unchanged (currently approx. 3,000 MW)

 

The  PDP  outlines  the  strategic  goals  for

 

Thailand’s energy sector, namely

 

  • security of supply
  • profitability and

 

  • eco-friendliness.

 

The EEP’s aim is to reduce the energy in-

 

tensity (consumption divided by GDP) by 30% by 2036.

 

 

 

  1. Authorities

 

The Ministry of Energy and the prime minister are in charge of decisions on energy policy and oversee the following authorities on the planning and implementation:

 

  • Energy Policy and Planning Office (“EPPO”) of the Ministry of Energy

The EPPO is responsible for the development of the energy sector’s basic strategies.

 

  • Department of Alternative Energy Devel-opment and Efficiency (“DEDE”) of the Ministry of Energy

 

The DEDE is responsible for the promotion of renewable energies and investigates possibilities to use untapped potential.

 

  • Electricity Generating Authority of Thai-land (“EGAT”)

The EGAT is a state enterprise run by the Ministry of Energy and operates most of the power plants and energy infrastructure.

 

  • Energy Regulation Commission (“ERC”) The ERC serves as the regulatory and supervisory body for the Thai energy market.

 

  • Metropolitan Energy Authority (“MEA”) and Provincial Energy Au-thorities (“PEA”)

The MEA and PEA purchase energy from the EGAT. The MEA pro-vides energy to the Bangkok metro-politan area, and the PEAs to the rest of the country.

 

III. Promotions

 

There are currently two promotion schemes available for producers of renewable energy:

 

Firstly, the so-called Feed-in-Tariff (“FiT”) provides that energy producers receive a fixed price for energy they sell to the MEA or PEA.1 The MEA or PEA conclude a so-called Power Purchase Agreement (“PPA”) with the energy producer which guarantees the FiT for a fixed period of time. This way, the investment in renewable energies can be se-cured.

 

 

 

Secondly, the Board of Investment (“BOI”) offers various investment promotions, e.g. the exemption of corporate income tax2 for up to 8 years, exemption from import duties on machines and raw materials, as well as the possibility for foreigners to own land and to facilitate the employment of foreign experts.

 

The following table gives an overview of selected incentives:

 

 

Promotion Exemption from Exemption from import duties on
corporate Raw materials Non-tax incentives*
category Machines
for the production of ex-
income tax
port goods
A1 8 years (no cap)
A2 8 years (cap)** P P P
A3 5 years (cap)

 

* These include, amongst others, the possibility for foreigners to own land and easier employment of foreign experts.

 

** The amount of granted corporate income tax exemption is capped at the amount of total initial investment excluding cost of land and working capital.

 

1 The FiT-Scheme replaces the previous Adder-Scheme where a bonus on top of the regular price per kWh was paid.

2 The corporate income tax rate in Thailand is currently 20%.

 

Listed below are the respective promotion categories for the various kinds of renewable energies.

 

  1. Solar Energy

 

Solar power is a resource abundantly avail-able in Thailand but its potential is so far mostly untapped.

 

Currently, approx. 1,300 MW of solar energy is being produced. According to the AEDP, this amount shall be increased to 6,000 MW by 2036.

 

  1. a) Feed-in-Tariff for Solar Energy

 

In 2013, the EPPO decided to promote rooftop photovoltaic facilities with a total capacity of up to 200 MW, whereof 100 MW were reserved for industrial production and 100 MW for private buildings. A FiT of THB 6.85 per kWh is available for private rooftop photovoltaic facilities with a capac-ity of up to 10 MW peak performance (kilo-watt peak or “kWp”), THB 6.40 for industrial facilities with a peak performance of 10 to 250 kWp, and THB 6.01 for industrial fa-cilities with a peak performance between 250 and 1,000 kWp. Facilities in the South-ern border provinces3 receive an additional bonus of THB 0.50 per kWh.

 

On 22 October 2014, the Ministry of Industry adopted a guideline whereby rooftop photo-voltaic facilities no longer require a Factory Permit in order to reduce administrative re-strictions especially for private investors.

 

 

 

 

3 Yala, Pattani, Narathiwat, as well as 4 districts in Song-kla province.

 

 

  1. b) BOI Promotion

Manufacturers of solar cells and/or related raw materials receive 8 years of corporate income tax exemption (capped at the amount of total investment), as well as exemption from import duties on machines and raw materials.4

 

The production of electricity from solar energy receives the same promotion.5

 

The manufacture of parts and/or equipment of solar-powered products receives corporate income tax exemption for 5 years, as well as exemption from import duties on machines and raw materials.6

 

  1. c) Public Private Partnerships

 

Apart from the above mentioned rooftop photovoltaic facilities, special provisions ap-ply to large-scale photovoltaic facilities, so called solar farms. These regulations were approved in 2014 but not announced by the ERC until 17 September 2015, and shall replace the previous promotion for solar farms (FiT and Adder Tariff). According to this Governmental Agency and Agricultural Cooperatives Programme („Agro-Solar“), solar farms with a capacity of up to 5 MW each and a total capacity of 800 MW shall be built. These projects shall be carried out in cooperation between the private and public sec-tor, so-called Public Private Partnerships

 

(“PPP”).

 

 

 

  • Promotion category A3 according to Section 5.4.8.


 

In order to receive the FiT of THB 5.66 per kWh, a PPA shall be concluded with the MEA or PEA which guarantees the power purchase and the FiT for 25 years.

 

The parties to the PPA are the MEA/PEA and the government authority or municipal-ity who also acts as the project owner, whereas each authority or municipality shall only own maximum one project per district. Private investors can participate in the pro-ject through a PPP. Private investors must be companies registered in Thailand and can participate in more than one project (with a total capacity of 50 MW).

 

During the term of the PPA, a transfer of the project is only possible in limited cases and only with the approval of the ERC. In practice, this means that the PPP is commit-ted for a period of 25 years, after which the project may be transferred to one of the partners, as is commonly the case with BOT projects (Build-Operate-Transfer).

 

  1. Wind Energy

 

The total installed capacity of wind energy in Thailand was 225 MW in 2013. The AEDP envisages 3,002 MW by 2036.

 

  1. a) Feed-in-Tariff

 

The FiT for small-scale producers of wind energy (capacity of up to 200 kW) is THB 6.06 per kWh, guaranteed for up to 20 years. Facilities in the Southern border provinces receive an additional bonus of THB 0.50 per kWh.

 

 

 

  1. b) BOI Promotion

 

The production of electricity from wind power receives 8 years of corporate income tax exemption (capped at the amount of to-tal investment), as well as exemption from import duties on machines and raw materi-als.7

 

  1. Hydropower

 

In 2014, facilities for the production of energy from hydropower with a total capacity of approx. 3,050 MW were installed in Thailand (including large power plants operated by the EGAT with a capacity of approx. 2,900 MW).

 

The AEDP foresees a capacity increase of small-scale hydropower plants from the current 150 MW to 376 MW by 2036. An in-crease of the existing large power plants is not planned.

 

  1. a) Feed-in-Tariff

 

The FiT for small-scale producers of energy from hydropower (capacity of up to 200 kW) is THB 4.90 per kWh, guaranteed for up to 20 years. Facilities in the Southern border provinces receive an additional bo-nus of THB 0.50 per kWh.

 

  1. b) BOI Promotion

 

The production of electricity from hydro-power receives 8 years of corporate income tax exemption (capped at the amount of to-tal investment), as well as exemption from import duties on machines and raw materials.8

 

  1. Promotion category A2 according to Section 7.1.1.2.

 

  1. Promotion category A2 according to Section 7.1.1.2.


 

 

  1. Waste-to-Energy

 

Currently, 65 MW of energy are produced by waste-to-energy projects. This capacity shall be increased to 550 MW by 2036 according to the AEDP.

 

  1. a) Feed-in-Tariff

 

The FiT for small-scale producers of waste-to-energy (capacity of up to 200 kW) con-sists of a fixed amount between THB 2.39 and 3.13 (depending on capacity) per kWh, guaranteed for up to 20 years, as well as a variable part that is fixed at THB 2.69 to 3.21 (depending on capacity) per kWh until 2017 and shall be adjusted in accordance with inflation thereafter. Facilities in the Southern border provinces receive an addi-tional bonus of THB 0.50 per kWh.

 

  1. b) BOI Promotion

 

Waste-to-energy projects receive 8 years of corporate income tax exemption (without being capped at the amount of total investment), as well as exemption from import duties on machines and raw materials.9

 

The production of fuel from agricultural waste receives 8 years of corporate income tax exemption (capped at the amount of total investment), as well as exemption from import duties on machines and raw materials.10

 

  1. Biomass

 

Currently, approx. 2,500 MW of energy is produced from biomass. This capacity shall be increased to 5,570 MW by 2036 according to the AEDP.

 

  1. a) Feed-in-Tariff

 

The FiT for small-scale producers of energy from biomass (capacity of up to 200 kW) consists of a fixed amount between THB 2.39 and 3.13 (depending on capacity) per kWh, guaranteed for up to 20 years, as well as a variable part that is fixed at THB 1.85 to 2.21 (depending on capacity) per kWh until 2017 and shall be adjusted in accordance with inflation thereafter. Facilities in the Southern border provinces receive an additional bonus of THB 0.50 per kWh.

 

  1. b) BOI Promotion

 

The production of electricity or fuel from biomass receives 8 years of corporate income tax exemption (capped at the amount of total investment), as well as exemption from import duties on machines and raw materials.11

 

The production of biomass briquettes and pellets receives 5 years of corporate income tax exemption (capped at the amount of total investment), as well as exemption from import duties on machines and raw materials.12

 

  1. Biogas

 

Currently, approx. 310 MW of energy is produced from biogas. This capacity shall be increased to 1,280 MW by 2036 according to the AEDP.

 

 

  • Promotion category A2 according to Section 7.1.1.2. and

 

  • Promotion category A3 according to Section 1.16.3.


 

  1. a) Feed-in-Tariff

 

The FiT for producers of biogas from waste and wastewater is THB 3.76 per kWh, guar-anteed for up to 20 years. Facilities in the Southern border provinces receive an addi-tional bonus of THB 0.50 per kWh.

 

The FiT for producers of biogas from plants consists of a fixed amount of THB 2.79 per kWh, guaranteed for up to 20 years, as well as a variable part that is fixed at THB 2.55 per kWh until 2017 and shall be adjusted in accordance with inflation thereafter. Facili-ties in the Southern border provinces receive an additional bonus of THB 0.50 per kWh.

 

 

 

  1. b) BOI Promotion

 

The production of electricity from biogas and the production of biogas from wastewa-ter receive 8 years of corporate income tax exemption (capped at the amount of total investment), as well as exemption from im-port duties on machines and raw materials.13


 

 

 

Project Category Promotion
Category
Production of solar cells and/or required raw materials A2
Solar
Production of electricity from solar power A2
Production of parts or equipment for solar-powered products A3
Wind Production of electricity from wind power A2
Hydro Production of electricity from hydropower A2
Waste-to- Production of electricity from waste-to-energy A1
Energy Production of fuel from agricultural waste A2
Biomass Production of electricity from biomass A2
Production of biomass briquettes and pellets A3
Biogas Production of electricity from biogas A2
Production of biogas from wastewater A2

 

 

  1. Foreign Investment Law

 

Foreigners doing business in Thailand are subject to the restrictions of the Foreign Busi-ness Act B.E. 2542 (1999) (“FBA”). Accord-ing to the FBA, foreigners are all natural persons not having Thai citizenship, juristic persons not registered in Thailand, and juris-tic persons registered in Thailand but having 50% or more of their shares held by the two aforementioned kinds of persons.

 

BOI-promoted companies can be exempted from most of the FBA’s restrictions and foreigners can hold 100% of the shares. In addition, foreigners can buy and own land (as far as required for the project). Apart from the BOI promotion, foreign compa-nies only have this possibility if they are situated in designated Industrial Estates.

 

Furthermore, the employment of foreign experts (as far as required for the project) is facilitated and work permits will be granted hassle-free. Non-BOI-promoted companies must fulfil certain capital requirements in order to employ foreigners, i.e. having a reg-istered and fully paid-up capital of THB 2 million for each work permit.

 

One possibility to operate without BOI promotion is entering into a joint venture with a Thai partner who holds the majority of the company’s shares. In such case, the restrictions of the FBA do not apply because the company will not be regarded as “foreigner”. If this is not an option, a Foreign Business License (“FBL”) for certain business activities can be applied for with the Ministry of Commerce.

 

 

  1. Outlook

Renewable energy is currently an important topic in Thai politics due to its contribution to global climate protection on the one hand, and due to the goal to reduce depend-encies from fossil fuels (and the import thereof) on the other hand.

 

The last years has seen rapid developments in the legal framework, which is particularly true for the AEDP that – originally drafted in early 2015 – was fundamentally revised and extended within half a year.

 

Besides the promotion of investments in re-newable energies, the expansion of the power grid capacity will be crucial for the success of the current energy policy, for which the EGAT has allocated a budget of THB 300 billion for the next 5 years.

 

Against this backdrop, it remains to be seen if the ambitious goals of the Thai government can be realised. However, it is already obvious today that due to the extensive in-vestment promotions and incentives, Thailand offers attractive possibilities, in particular for foreign investors. The BOI promotion remarkably reduces the usual obstacles of the foreign investment law which also opens the market to medium-sized enterprises.

 

 

 

 

Newsletter Nr. 211    (DE)

 

 

 

 

 

Die WFOE und ihre wichtigsten Organe

 

 

April 2016

 

 

 

Obwohl Lorenz & Partners große Sorgfalt darauf verwenden, die in diesen Newslettern bereitgestellten Infor-mationen auf aktuellem Stand für Sie zur Verfügung zu stellen, möchten wir Sie darauf hinweisen, dass diese ei-ne individuelle Beratung nicht ersetzen können. Lorenz & Partners übernimmt keinerlei Gewähr für die Aktuali-tät, Korrektheit oder Vollständigkeit der bereitgestellten Informationen. Haftungsansprüche gegen Lorenz & Partners, welche sich auf Schäden materieller oder ideeller Art beziehen, die durch die Nutzung oder Nichtnut-zung der dargebotenen Informationen bzw. durch die Nutzung fehlerhafter und unvollständiger Informationen verursacht wurden, sind grundsätzlich ausgeschlossen, sofern seitens Lorenz & Partners kein vorsätzliches oder grob fahrlässiges Verschulden vorliegt.

 

 

 

Der nachfolgende Beitrag soll einen Über-blick über die Wholly Foreign Owned Enterprise

 

(„WFOE“) in der Volksrepublik China („VRC“) geben.

 

  1. Überblick

 

Die WFOE ist ein Investment Vehikel für Ausländer, die in der VRC wirtschaftlich tä-tig werden wollen. Es handelt sich um eine eigenständige Rechtsform mit Haftungs-begrenzung. Im Unterschied zu einem Joint Venture („JV“) müssen die Gesellschafter ei-ner WFOE ausländische natürliche oder ju-ristische Personen sein. Für die Zwecke der WFOE zählen Personen aus Hongkong, Macau und Taiwan als Ausländer. Festland-Chinesen können nicht Gesellschafter einer WFOE sein. Sie können allerdings eine Ge-sellschaft außerhalb Festland-Chinas aufset-zen (beispielsweise in Hongkong, den Cayman Islands oder den British Virgin Is-lands); diese Gesellschaft kann dann als aus-ländische juristische Person Anteilseigner ei-ner WFOE werden.

 

  1. Wesentliche Organe der WFOE

 

  1. a) Gesellschafter und Gesellschafter-versammlung

 

Die WFOE muss mindestens einen Gesell-schafter haben, dessen Informationen bei

 

 

der State Administration for Industry and Com-merce („SAIC“) registriert werden müssen.

 

Wird eine juristische Person Gesellschafter der WFOE, muss sie ihren Sitz außerhalb Festland Chinas haben.

 

Die Gesellschafterversammlung ist das wichtigste Organ der WFOE und muss mindestens einmal im Jahr abgehalten wer-den.

 

Die Gesellschafter haben die folgenden Aufgaben:

 

  • Einzahlung des Stammkapitals;

 

  • Wahl des Board of Directors;

 

  • Wahl des Chairman of the Board;

 

  • Ernennung des Legal Representative;

 

  • Ernennung des Supervisor;

 

  • Ernennung des General Manager;

 

  • Festlegung der langfristigen Unter-nehmensstrategie;
  • Änderungen der Satzung.

 

 

Die Gesellschaftssatzung kann das Board zum höchsten Gremium der WFOE erklä-ren, ähnlich wie bei einem JV (dort ist das Board per Gesetz die wichtigste Institution).

 

 

  1. b) Board of Directors

 

Eine WFOE muss mindestens einen (1) und darf höchstens dreizehn (13) Direktoren ha-ben. Die Daten der Direktoren sind bei der SAIC zu registrieren. Wird nur ein Direktor benannt, so ist dieser automatisch executive director bzw. managing director (etwa: geschäfts-führender Direktor). Eine juristische Person kann nicht Direktor werden.

 

Das Verfahren zur Wahl von Direktoren und die Dauer ihrer Amtszeit werden in der Gesellschaftssatzung bestimmt. Ein Direk-tor kann maximal auf drei (3) Jahre gewählt werden, wobei eine Wiederwahl möglich ist.

 

Die Direktoren sind für alle Angelegenhei-ten der Geschäftsführung den Gesellschaf-tern gegenüber verantwortlich:

 

  • Berichterstattung über die Geschäf-te;

 

  • Durchführung von Gesellschafter-beschlüssen;

 

  • Überprüfung der Geschäfts- und In-vestitionspläne;


 

  1. c) Chairman of the Board

 

Der Chairman of the Board wird durch die Ge-sellschafterversammlung ernannt und steht in der Verantwortung, die Treffen des Boards vorzubereiten, einzuberufen und ab-zuhalten. Er sitzt den Treffen des Boards vor und hat ein ordnungsgemäßes Protokoll zu gewährleisten. Das Protokoll ist von allen anwesenden Direktoren zu unterzeichnen.

 

Für den Fall, dass der Chairman ausfällt, kann ein Vize bestimmt werden. Dieser nimmt dann die Aufgaben des Chairman wahr.

 

  1. d) Legal Representative

 

Die Gesellschafter ernennen einen Legal Representative. Der Representative muss aus dem leitenden Personal der Gesellschaft re-krutiert werden, etwa der Chairman oder der General Manager. Der Representative muss alle wichtigen Dokumente im Namen der Gesellschaft abzeichnen und ist verantwort-lich für die Umsetzung der Gesellschafter-beschlüsse.

 

 

  • Entscheidungen bzgl. der Binnen-struktur der WFOE;

 

  • Ernennung und Abberufung des Führungspersonals, sowie die Fest-legung der Vergütung des Füh-rungspersonals.

 

 

Der Gesellschafterversammlung und dem Board können per Änderung der Gesell-schaftssatzung weitere Aufgaben übertragen werden.

 

  1. e) Supervisor

 

Die Gesellschafter haben einen Supervisor zu ernennen. Der Supervisor muss eine unab-hängige Person sein und darf weder Chair-man, Managing Director, General Manager oder ein anderes Führungsmitglied der Ge-sellschaft sein. Gesellschafter hingegen kön-nen grundsätzlich zum Supervisor ernannt werden.

 

Die zuständigen Behörden können verlan-gen, dass, abhängig von der Größe der Gesellschaft, ein Board of Supervisors eingerichtet wird, bestehend aus drei (3) Supervisors. Mindestens einer der Supervisor muss An-gestellter der Gesellschaft sein.

 

Supervisor werden für drei (3) Jahre berufen. Eine erneute Berufung ist möglich. Die Sat-zung kann den Supervisors die Teilnahme an den Treffen des Board of Directors gestat-ten. Sie sind für folgende Bereiche verant-wortlich:

 

  • Begutachtung der finanziellen Ange-legenheiten der WFOE;

 

  • Beaufsichtigung der Tätigkeiten der Direktoren und des General Mana-gers;

 

  • Einbringen von Vorschlägen zur Abberufung von Führungspersonal;

 

  • Verlangen von Berichtigungen, so-weit beaufsichtigtes Personal gegen die Interessen der Gesellschaft ver-stoßen hat;

 

  • Unterbreiten von Vorschlägen an die Gesellschafter;

 

  • Einreichen von Klagen gegen Direk-toren oder anderes leitendes Perso-nal, soweit dazu rechtlich verpflich-tet nach Artikel 152 der „Company Laws of the P.R.C.


 

Der General Manager organisiert das Tages-geschäft. Als Unterstützung kann ihm ein Deputy Manager zur Seite gestellt werden.

 

Jedes Board-Mitglied kann zum General Manager ernannt werden. Der General Ma-nager kann zugleich der Legal Representative sein.

 

Die Gesellschaftssatzung legt den Verant-wortungsbereich des General Mangers fest. Die folgenden Aufgaben können übertragen werden:

 

  • Umsetzung von Gesellschafter-beschlüssen;

 

  • Organisieren und Durchführen des täglichen Geschäftsbetriebes der Ge-sellschaft;

 

  • Vertretung der Gesellschaft nach außen, sowie Ernennung und Abbe-rufung von Verwaltungsmitarbeitern (mit Zustimmung des Boards);

 

  • Behandlung sonstiger übertragener Aufgaben.

 

 

  • Zusammenfassung

 

Die wesentlichen Positionen und Organe ei-ner WFOE sind neben der Gesellschafter-versammlung und dem Board:

 

Ø  Chairman of the Board;

 

 

  1. f) General Manager

 

Der General Manager der WFOE wird von den Gesellschaftern ernannt, ist jedoch di-rekt dem Board verantwortlich und handelt gemäß dessen Anweisungen.

 

  • Legal Representative;

 

  • Supervisor;

 

  • General Manager.

 

 

Vor der Gründung der WFOE ist es not-wendig, in der Gesellschaftssatzung eine ge-naue Aufgabenverteilung vorzunehmen. Für alle Positionen muss die Satzung Folgendes bestimmen:

  • Amtszeit;

 

  • Prozess zur Abberufung;

 

  • Vergütung;

 

  • Aufgaben, Pflichten und Verantwor-tungsbereiche.


 

Bitte beachten Sie, dass die Regeln durch lokale Rechtsetzung modifiziert werden können. Eine WFOE in Schanghai mag an-deren Anforderungen unterliegen, als eine WFOE in Peking. Daher ist es ratsam, vor einem Setup einen lokalen Rechtsanwalt zu beauftragen. Gemachte Fehler lassen sich später nur mühsam korrigieren.

 

 

 

Newsletter No. 211 (EN)

 

 

 

 

The WFOE and its most important positions

 

 

April 2016

 

 

Although Lorenz & Partners always pays great attention on updating information provided in newsletters and brochures we cannot take responsibility for the completeness, correctness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation with a qualified lawyer. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

 

 

 

 

In the following summary, we would like to provide an introduction about the most im-portant positions of a Wholly Foreign Owned Enterprise (“WFOE”) in the People’s Republic of China (“PRC”).

 

  1. Overview

 

A WFOE is an investment vehicle for for-eigners who want to establish a company in China. A WFOE has a separate legal status with limited liability of the shareholders (limited by the amount of registered capital to be injected into the WFOE). Contrary to a Joint Venture (“JV”), the shareholders of a WFOE must be foreign nationals (including legal persons), which also includes Hong Kong, Macau and Taiwan nationals. Chinese nationals are not permitted to become shareholders of a WFOE.

 

However, if a Chinese national sets up a company outside of Mainland China (e.g. Hong Kong, Cayman Islands or BVI), then this entity will be considered a foreign com-pany. Therefore, it may become a share-holder in a WFOE.

 

  1. Key Positions in a WFOE

 

  • Shareholders and Shareholders’ Meet-ing

 

A minimum of one (1) shareholder is required whose details are filed with the local

 

 

 

State Administration for Industry and Commerce (“SAIC”).

 

Corporate shareholders are permitted, however, such shareholders cannot be companies incorporated in Mainland China. The shareholders can be of any nationality except Mainland China and can reside anywhere in the world except for Mainland China.

 

The shareholders’ meeting of the WFOE is the main corporate institution of the company and should be held at least once a year. However, the Articles of Association (“Articles”) of the company can decide how many meetings shall be held each year and about the required quorum.

 

The shareholders are responsible for the following tasks:

 

  • Contributing the registered capital to the WFOE;

 

  • Establishing a Board of Directors;

 

  • Appointing a Chairman of the Board of Directors;

 

  • Appointing a Legal Representative of the company;

 

  • Appointing a Supervisor;

 

  • Deciding on the long-term strategy of the WFOE; and

 

  • Changing and/or amending the Ar-ticles of the WFOE.

 

 

As mentioned, the shareholders’ meeting is the main corporate institution of a WFOE. However, the shareholders can stipulate in the Articles that the Board of Directors (“Board”) shall be the main institution. Thus, the structure would be similar to the organisation of a Joint Venture in China, in which the Board is the highest organ of the JV by law.

 

  1. b) Board of Directors

 

A WFOE requires at least one (1) director, whose details must be filed with the SAIC. In the case of a sole director, this director shall be the executive director or managing director. Directors can be of any nationality and be resident anywhere, however, corporate directors are not permitted. In case there is more than one (1) director, the minimum number of directors is three (3), and the maximum number of directors is 13 (thirteen).

 

The method of appointing directors shall be prescribed in the WFOE’s Articles, which shall also state the directors’ term of office. The maximum length for which directors can be appointed is three (3) years, after which the directors must be reappointed.

 

The directors shall decide all major issues concerning the company and they are responsible to the shareholders regarding:

 

  • Reporting on the operation of the company to the shareholders;

 

  • Carrying out the resolutions made by the shareholders;

 

  • Examining the operation plans and investment plans;


  • Making decisions on the establish-ment of the company’s internal management departments; and

 

  • Appointing and dismissing the gen-eral manager and other senior staff of the company and determining their salaries.

 

 

However, the shareholders are free to allocate other tasks to the directors or the shareholders’ meeting in the Articles of the company. Furthermore, the discussion methods and voting procedures of the Board meeting shall be prescribed by the Articles, unless it is otherwise provided for by the relevant Chinese laws and regulations.

 

  1. c) Chairman

 

The chairman of the Board is appointed by the shareholders and shall then preside over the meetings of the Board. The chairman is further responsible to convene and organize the Board meetings in accordance with the Articles of the company. In case the chair-man is unable or does not perform his du-ties, the Board meeting may be convened or presided over by the vice chairman. The chairman is also responsible that proper re-cords of the Board meetings are filed and all directors that attended the Board meeting shall affix their signatures to the records.

 

  1. d) Legal Representative

 

The shareholders are required to appoint a legal representative (“Representative”) of the company, who is responsible for the implementation of the resolutions made by the shareholders and report to the share-holders. The Representative must be a person from the senior management of the company, and usually, the chairman of the Board or the general manager is appointed as Representative. The Representative signs all relevant documents on behalf of the company.

 

  1. e) Supervisor

 

Under the law, the shareholders of the WFOE are required to appoint a supervisor (who does not need to reside in Mainland China). The supervisor must be an independent person and cannot be the chairman, the managing director, the general manager or any other senior staff of the WFOE. Shareholders of the WFOE may be appointed as supervisors.

 

The authorities can also require, depending on the size of the WFOE (only when reach-ing a certain size, otherwise we recommend to appoint one or two supervisors) that not only one supervisor is required, but that a board of supervisors being established, comprising of three (3) persons. In such case, at least one-third of the supervisors must be employees of the company, comparable to the employee’s committee in Euro-pean companies.

 

The term of office of such supervisor(s) is statutorily three (3) years and is renewable by the shareholders. If stated in the Articles, the supervisor can have the right to attend Board meetings. The supervisor is re-sponsible for:

 

  • Inspecting and examining the financial affairs of the WFOE;

 

  • Supervising the duty-related acts of the directors and senior managers, and bringing forward proposals for


 

 

the removal of directors or senior management who violate the law, any administrative regulation, the Articles and the decision made by the shareholders;

 

  • Demanding the directors or senior management to make rectifications if their acts have injured the interests of the company;

 

  • To make proposals to the sharehold-ers; and

 

  • According to Article  152  of  the

 

“Company Laws of the P.R.C.” to file a lawsuit against the board members and senior managers of the company, if legally required.

 

 

  • General Manager

 

The general manager of the WFOE is appointed by the shareholders, but is directly responsible to the Board and exercises its duties under the leadership of the Board. The general manager organises the daily management and operation of the company, and can be assisted by a deputy general manager. The chairman of the Board or any other Board member can be appointed as general manager; the general manager can also be appointed as Representative. The Articles can assign certain tasks and duties to the general manager, such as:

 

  • Carrying out the resolutions of the Board;

 

  • Organising and conducting the daily production, operation, and management of the company;

 

  • Representing the company to handle the daily business and production, appointing and removing administrative staff under the authorization of the Board; and

 

  • Any other powers as authorized by the Board.

 

 

  1. Summary

 

The key positions of a WFOE beside the shareholders’ meeting and the Board are:

 

  • Chairman of the Board

 

  • Supervisor

 

  • General Manager

 

Before setting up the WFOE, it is necessary that the Articles of the WFOE clearly state who has the right to fill which position.

 

 

 

Furthermore, the Articles need to clarify other points, such as:

 

  1. Term of office of each position;

 

  1. Procedure for removal from office for each position;

 

  1. Remuneration for each position; and

 

  1. Tasks, responsibilities and duties of each position.

 

Please note, that the above said can be subject to local regulations depending on where the WFOE is to be set up. For example, if the WFOE is to be set up in Shanghai, then local Shanghai regulations might stipulate more detailed requirements.

 

 

 

Legal News Update Thailand Nr. 001 (EN)

 

 

 

 

 

 

Legal/Tax Update Thailand

 

June 2015

 

 

Although Lorenz & Partners always pays greatest attention on updating the information provided in this newsletter we cannot take responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

 

 

Welcome to our first edition of our Legal News Update (Thailand) for 2015. We aim to bring our clients interesting updates on legal and tax-related issues on a regular basis.

 

  • New BOI Policy for 2015:

 

The Board of Investment (“BOI”) recently issued their new promotion policy (effective 1 January 2015) cancelling the previous zone-based incentives. Under the new incentives, the eligible activities are entitled to either of the following packages:

 

  • A1: 8 years (unlimited amount) corporate income tax exemption and the import duty exemption on machineries and raw materials;

 

  • A2: 8 years (limited amount) corporate income tax exemption and the import duty exemption on machineries and raw materials;

 

  • A3: 5 years (limited amount) corporate income tax exemption and the import duty exemption on machineries and raw materials;

 

  • A4: 3 years (limited amount) corporate income tax exemption and the import duty exemption on machineries and raw materials;

 

  • B1: only import duty exemption on import of machineries and raw mate-rial, including other non-tax incentives (e. g. work permit, approval on land ownership and foreign wholly-owned companies);

 

  • B2: only non-tax incentives (e. g. work permit, approval on land ownership and foreign wholly-owned companies);

 

The category of the operators shall be determined by the type and complexity of the technology, used in each of the operations of the business. The higher and more complex technology the company uses or develops, the more incentives will be given to the company.

 

Beside the aforementioned revision of the BOI categories, the major change on the investment promotion is that the BOI allow the use of second-hand machines which is not older than 5 years from its manufacturing date. Any machine which is older than 5 years can be used but will not be calculated as an investment for the purpose of calculation of tax exemption amount.

 

  • Company Affidavit in English language:

 

Starting 16 January 2015, the Department of Business Development (“DBD”) can issue the certified Company Affidavit in English lan-guage. The maximum fee is THB 1,200 per affidavit. The process for the issuance of such affidavit will take 2 days.

 

  • Domestic travel tax deduction:

 

The Thai government issued a new regulation related to the personal income tax (PIT) deduction for domestic travel expenses, up to THB 15,000 that incurred between 16 December, 2014 and 31 December, 2015. These expenses include payments for tour guides, travel agents and hotels.

 

For the documentation for the tax return process, the tax payer must collect the receipts or tax invoices, issued by tourism offices registered with the Bureau of Tourism Business and Guide Registration or issued by the authorised hotels which are registered and officially empowered to issue such receipt. The list of the authorised/registered hotels and tourism offices are available on the Revenue Department website: www.rd.go.th. Such receipt or tax invoice has to specify the name of the tax payer who will use it for further tax deduction.

 

The hotel expenses which are eligible for PIT deduction must be expenses paid directly to the hotel or travelling office as accepted. The hotel receipt is required to support the tax refund. The payment to an online hotel booking website cannot be used for tax reduction, as the hotel cannot issue the tax invoice.

 

We further note that the travelling expense such as airplane, train or bus ticket purchase directly with the operators cannot be used as a tax deduction, under this scheme. Therefore, it is advisable to purchase the tour package from a registered travel agent which includes the transportation. By doing so, the total payment for such tour package, inclusive airplane, train or bus ticket, can be used for tax deduction.

 

  1. Online 90 days report:

 

Foreigners who stayed in Thailand over a period of 90 days have to make their 90 days report, normally at the immigration office.

 

From 1 April 2015, the 90 days report can be conducted online. To utilise this online service, the applicants can submit his/her application within 15 days but not less than 7 days prior to the actual 90 days report due date at www.immigration.go.th.

 

After submitting the online application, the applicant can check his/her status on the same website. The application should normally be approved within 7 working days. Once the ap-plication has been approved, the applicant will receive the online notification stating the due date for the next 90 days report. We note that the applicant should print this letter out and keep it in his/her passport book.

 

In case the application is not approved, the applicant has to submit the application again at the nearest Immigration Office and has to bring his original passport, departure card

 

 

(TM.6) and completed the 90 days report form (TM.47) for the submission.

 

  • Work Permits:

 

In order to support the Regional Operating Headquarters (ROH) scheme, and to pro-mote the newly approved International Headquarters (IHQ) and International Trad-ing Centers (ITC), the Department of Employment has, on 6 March 2015, announced the 7 activities which are not considered as working under the Working of Alien Act B.E. 2551.

 

As these activities are not considered “work”, the requirement of a work permit does not apply. The exempted activities are as follows:

 

  • Attending meetings and seminars;

 

  • Attending exhibitions and trade shows;

 

  • Visiting a client or business negotiations;

 

  • Attending lectures on academic matters;

 

  • Attending lectures on technical trainings;

 

  • Buying products/goods from exhibitions;

 

  • Attending Board of Directors’ meeting of the own company;

 

Please note however that giving lectures or conducting exhibitions/trade show still require the work permit.

 

  1. Bill on Debt Collection:

 

The Debt Collection Act B.E. 2558 (DCA), has been officially declared on 3 March 2015 and shall become effective in September 2015.

 

The DCA requires the entity who normally conducts debt collection to register with the registrar to conduct the business as a debt collector.

 

The law provides several prohibitions on the creditors and protections for the debtors. The major conditions are:

 

Prohibitions on the creditors:

 

  • not to demand for the payment from any third party who is not a debtor or a guarantor;

 

  • not to use strong language or defame the debtor;

 

  • not to disturb or annoy the debtor (eg. Make several telephone calls in a day);

 

  • not to use the unsealed document which can be obviously seen as a demand for debt (postcard, fax, etc.);

 

  • not to mark or indicate the debt collector on the envelope;

 

 

  1. not to mislead the debtor to understand that the demand is issued by any authorities;

 

  1. not to charge any collection fee or persuade the debtor to issue predated cheques (knowingly that the debtor cannot honour the cheques);

 

Requirement for contacting the debtors:

 

  • only contact the debtor’s given ad-dress. If the debtor cannot be reached at such address, the creditor has to contact the other reasonable address (domicile, work place);

 

  • if contacting via telephone, fax or in person, only during 8 am – 8 pm on a working day and 8 am – 6 pm on a holiday;

 

Violation of the law shall be subject to criminal penalties (depending on the viola-tion) of imprisonment for not over 5 year or a fine for not more than 500,000 THB, or both. As an administrative punishment, the registered debt collector can be delisted in case of violation.

 

 

 

 

Legal/Tax News Update Thailand Nr. 002

 

 

 

 

Legal/Tax Update Thailand

 

 

 

August 2015

 

 

 

Although Lorenz & Partners always pays greatest attention on updating the information provided in this newsletter we cannot take responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

 

 

Welcome back to the second issue of our Legal News Update (Thailand) in 2015.

 

  • Stamp Duty:

 

The Revenue Department (RD) has released the Announcement of the Director General Notification on Stamp Duty No. 54, which became effective and enforceable since 5 April 2015. This new regulation requires taxpayers to pay stamp duty with cash, in-stead of affixing the stamp duty, for the fol-lowing documents:

 

  • Rental (lease) agreements for land, buildings, other constructions, or floating houses with a contract value of not less than THB 1 million;

 

  • For service agreements (hire of work) with a service fee of not less than THB 1 million.

 

In the past, it was a common practice to affix the stamp duty only when a contract should be used as evidence in the court of law or to be presented to any public authorities.

 

This is no longer possible for the aforementioned types of agreements because the stamp duty now needs to be paid within 15 days after the date of the contract. Since the stamp duty needs to be paid by cash, the taxpayer has to go to the RD to pay it, so the RD can monitor the compliance with the required timeline.

 

Previously, it was only required for lease and service agreements with the government or other public authorities as the lessee or hirer to pay the stamp duty by cash but this new Director General Notification extends the

 

scope to cover high value private contracts as well.

 

  • Wages for Daily Employees:

 

Many business operators, employers and even lawyers are still confused about the calculation of wages and overtime payments for daily workers.

 

To avoid misunderstandings, here are some basic rules:

 

  • Daily workers are entitled to wages during leaves under the law (i.e. sick leave, vacation leave);

 

  • Daily workers are entitled to wages during public/national holidays;

 

  • Daily workers are not entitled to weekly holidays or weekend (usually Saturday and Sunday or only Sunday depending on the working regulation).

 

  • Passport Issuance:

 

The Department of Consular Affairs now offers an express service to issue Thai passports. There are 2 types of services:

 

  • Passport issuance within the next work-ing day (service charge THB 2,000).

 

The offices offering this service are: Bangna-Srinakarin, Pinklao, the Government Complex Building at Cheang-wattana and the 14 provincial Passport offices.

 

  • Passport issuance within the same day (service charge THB 3,000).

 

For this type of service, the applicant must submit the application and pay the fee before 12 pm. The passport will be ready during 3.30 pm. to 4.30 pm. on the same day. This type of service is only available at the Department of Consular Affairs.

 

Remark: The two types of service are limited to only 400 passports per day.

 

  1. CIT Rate for small and medium-sized enterprises (SME):

 

The new corporate income tax rate for small and medium-sized enterprises (“ SME ”), i.e. companies registered in Thailand with a paid up share capital of not more than THB 5 million and revenue of not more THB 30 million, effective from 1 January 2015 onwards, are:

 

Taxable Profit Rate
0 – 300,000 0%
300,001 – 3,000,000 15%
> 3,000,000 20%

 

  • IHQ and ITC:

 

The Revenue Department has announced the Royal Decree number 586 and 587 regarding tax incentives for International Headquarters (IHQ) and International Trad-ing Centers (ITC), respectively.

 

The qualifications and criteria to be met by IHQ and ITC are:

 

  • A company registered in Thailand;

 

  • More than THB 10 Mio paid up capital;

 

  • At least THB 15 Mio operating expenses per fiscal year;

 

  • IHQ: provide administration or technical service, supporting service or financial management for its affiliates;

 

  • ITC: carry out business of purchasing and selling goods, materials, and parts or providing services in international trades to its affiliates.

 

 

The incentives for IHQ:

 

  1. 15% personal income flat tax rate for expats working full-time for the IHQ;

 

  1. 10% tax rate for specific domestic incomes (e.g. service, royalty);

 

  1. Tax exemption for specific foreign incomes (e.g. service, royalty, dividend, share transfer, sale of goods);

 

  1. Withholding tax exemption for dividends paid by IHQ to foreign affiliates;

 

  1. Withholding tax exemption for loan interest, borrowed by IHQ from its foreign affiliate, to be used for financial management for its other affiliate;

 

  1. Special business tax exemption for loan made to its affiliates for financial management.

 

The incentives for ITC:

 

  • 15% personal income flat tax rate for expats working full-time for the ITC;

 

  • Tax exemption for incomes related to foreign sales and purchasing of goods;

 

  • Withholding tax exemption for dividends paid by ITC to foreign affili-ates.

 

Basically, the tax incentives under the new regulations are applicable for 15 years, which are longer than the previous Regional Oper-ating Headquarter scheme (ROH).

 

  1. Inheritance Tax:

 

On 22 May 2015, the National Legislation Assembly (NLA) has approved the draft In-heritance Tax Act.

 

This legislation will impose a 10% tax rate on the part of inheritances exceeding THB 100 million. In case the inheritance is received by the parents or descendants, the tax rate is reduced to 5%.

 

Inheritances which fall under the scope of this law are:

  1. Immovable properties;

 

  1. Securities under the Securities and Exchange law;

 

  1. Deposits or other monies which can be withdrawn from any financial institute;

 

  1. Vehicles with registration;

 

  1. Other assets to be announced by the Royal Decree.

 

The payable tax can be paid in instalments for a maximum period of 5 years.

 

There are penalties, imposed under the law, for:

 

  1. Default of tax filing, fine up to THB 500,000;

 

  1. Destruction, removal or hiding of the inheritance, imprisonment up to 2 years and/or fine up to THB 400,000;

 

  1. Giving falsify statement or tax avoidance, imprisonment up to 1 year and/or fine up to THB 200,000.

 

This law will be enacted and published in the Royal Gazette at the later stage. Then it will be effective within 180 days thereafter, expectedly within the beginning of the next year. We will keep you updated.

 

VII.    Amendment   of    the    Civil   and

 

Commercial  Code  on  Guarantee

and Mortgage:

 

In the attempt to help individual guarantors and mortgagers, especially the person who guarantees or mortgages his/her asset against the debt of others, the Cabinet proposed the amendment of the guarantee and mortgage law in the Civil and Commercial Code (CCC). Despite many concerns and suggestions from the banks and private sector regarding the major effects on bank

 

 

guarantees and applications for credit by ju-ristic persons which may cause more harm than benefits, the National Legislative Assembly (NLA) enacted and announced the amendment of the CCC (no. 20) on 13 No-vember 2014 which took effect on 12 Feb-ruary 2015.

 

Thereafter, the Cabinet and the NLA were trying to close such loopholes of the newly enacted law to avoid any major effect on guarantee and mortgage issues for the banks and juristic persons. This amendment of the CCC (no. 21) has been approved by the Cabinet and sent to the NLA in February 2015, almost immediately after the former Amendment (no. 20) became effective.

 

The NLA passed the proposed new amendment in May 2015 and later the Amendment of the CCC (no. 21) has been announced in the Royal Gazette on 14 July 2015.

 

The main point of the new amendment (no. 21) is to lessen the impacts on the bank guarantor by allowing the guarantors who are juristic person to be able to agree to be liable as a codebtor and allows the banks to agree in advance for all extension of time for the debt payment, which otherwise release other guarantors from the guarantee duty.

 

Moreover, the amendment also permits the director of the company who mortgages his/her asset against the company’s debt, so that they can agree to be liable for more than the mortgaged asset value if such person enters into a separate guarantee agreement. It is a common practice of the bank in Thailand to ask the director of the company to give a guarantee, on top of the mortgage, against the debt of his/her company.

 

 

 

Legal/Tax News Update Thailand Nr. 003

 

 

 

 

 

Legal/Tax Update Thailand

 

 

 

October 2015

 

 

Although Lorenz & Partners always pays greatest attention on updating the information provided in this newsletter we cannot take responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

 

 

Welcome back to the third issue of our Legal/Tax News Update (Thailand) in 2015.

 

  • Amendment of the Civil Procedure Code on class action

 

On 8 April 2015, the amendment of the Civil Procedure Code (CPC) has been en-acted and proclaimed in the Royal Gazette.

 

The new chapter, named “Class Action Case” has been added to the CPC, with 49 new sections (Section 222/1-222/49).

 

This amendment is a product of the consultation of the Security Exchange Commission of Thailand (SEC) submitted to the Office of the Council of State 14 years ago, trying to enact the right to file legal cases on behalf of injured stakeholders.

 

The amended CPC allows the group of persons (called “Group Members”) who have the same interests or rights, originated from the same facts or same legal principle, to file a class action to the Court of First Instance, but not to the sub-district Court (Kwaeng Court).

 

The type of cases which can be filed as a class action case have to be related to:

 

choose to opt-out (and no longer be a Group Member) and file an individual case.

 

The judgment is binding to all Group Members. The case can be appealed and, if approved, “dika” appealed to the Supreme

 

Court, regardless of the claim amount, but in general the case cannot be appealed by only one individual Group Member.

 

The Court may order the Defendant to pay for the Plaintiff’s attorney fees, but not exceeding 30% of the judgement amount payable to the Plaintiff, subject to the complexity of the case, attorney expenses and discretion of the Court itself.

 

The law will be effective from December 2015 onwards. This will open a new era of class action cases in Thailand.

 

  • New Social Security Act (No. 4) B.E. 2558 (2015)

 

The 4th amendment of the Social Security Act was announced in the Royal Gazette on 22 June 2015. The law will take effect within 120 days after the publication, or on 20 Oc-tober 2015 to be exact.

 

 

  • Tort case;

 

  • Breach of contract case; or

 

  • Claim for any right under other laws, e.g. Environment, Consumer Protec-tion, Labour, Security Exchange, Trade Competition (Anti-trust).

 

After the case is filed by the Plaintiff (the first group of plaintiffs who initiate the case) the case will be notified to the Group Members. An individual Group Member can

 

This amendment adds more benefits, increases compensations and expands the scope of eligible persons, compared to the previous scheme.

 

Please find below the summary of the major changes:

 

Social Security 1990 Amendment 2015
Accident or illness
Compensation for Additional compen-
diagnosis, treatment, sation   for health
food, medicine, promotion and  dis-
medical equipment, ease prevention pro-

 

medical transporta- grammes; initial
tion compensation for
medical malpractice
Childbirth
Up  to  2  times  of Unlimited
child delivery
Only married cou- Including unmar-
ples ried couples (subject
to  additional regula-
tion)
Child support
Up to 2 children at a Up to 3 children at a
time (below 6 years time (below 6 years
of age) of age)
Unemployment
Compensation is Additional compen-
given in case of ter- sation in case   of
mination or resigna- temporarily cease
tion only of operation as well
(e.g. during flood)
Wilful injury, disability, death
Compensation of in- Even in case of wil-
jury, disability, and ful intention, the
death will not be compensation will
paid if it is caused by be paid.
wilful intention.
Retirement
Non-Thai citizens Retired non-Thai
who retire and do citizens will get old-
not  wish  to  stay  in age compensation,
Thailand do not get regardless whether
old-age   compensa- they stay in Thailand
tion. or not.
Penalty
Employers are liable Employers are addi-
if the Social Security tionally liable for
declaration form omission of filing or
contains falsified failure to file the So-
statements. cial Security declara-
tion form.

 

Additionally, under the newly amended law all temporary government employees, private school teachers and employees who regularly travel to work abroad are eligible to participate in social security, while the old law prohibited these employees from par-ticipation.

 

 

 

 

It should be expressly noted that the failure to file the Social Security declaration form within due time can be penalised by up to 6 months imprisonment or a fine of up to THB 20,000 or both.

 

  • Real Estate

 

Foreigners who inherit a condominium unit in principle have to dispose it within 1 year unless such foreigners are granted a residence permit in Thailand or are allowed to enter into Thailand according to the Investment Promotion Law. The same conditions will be applied to foreigners who accept the transfer of a condominium unit by giving.

 

  1. DTA Thailand – Ireland

 

The Double Taxation Agreement between Thailand and Ireland was signed on 11 March 2015. For more details, please follow the below link.

 

http://download.rd.go.th/fileadmin/downl oad/nation/ireland_e_22042515.pdf

 

  • Customs Duty

 

The Customs Department has announced to exempt the import duty (Duty Free/Quota Free: DFQF) for goods imported from

 

“Least Developed Countries (LDCs)”, effective from 9 April 2015 until 31 December 2020.

 

The importer needs to present the certificate of origin issued in accordance with the regulation of the origin for LDCs by DFQF be-fore taking the goods out from the Customs warehouse. In case of not being able to present the certificate of origin, the importer has to pay duty in advance and request a refund later, or pay a collateral security to the Customs Department.

 

  1. Court Jurisdiction


 

The Office of Court Of Justice (OCOJ) announced on 15 June 2015 to set up 3 new divisions in the Criminal Court, namely 1) Human Trafficking Division, 2) Narcotics Division and 3) Public Sector Corruption Division. Due to the facts that these types of cases are complicated and usually involve high-profile persons, specialised judges in each area are required to handle these cases.

 

The jurisdiction of the Public Sector Corruption Division, which is opened in the Court of First Instance, will not overlap with the Supreme Court’s Criminal Division for

 

Persons Holding Political Positions. The Public Sector Corruption Division will have jurisdiction over cases involving lower-ranking government officers, while the Supreme Court’s Criminal Division for Per-sons Holding Political Positions will handle cases involving high-ranking officers or politicians.

 

VII.    VAT exemption for sample goods

 

In case a company gives sample goods to customers for testing before buying the product, this transaction is not subject to VAT. However, this only applies under the following conditions:

 

  • Such goods are non-consumable goods;

 

  • The goods must be intended for temporary use in order to test the quality or effectiveness of the product itself;

 

  • The customer will have to return the goods to the company when their testing is complete.

 

VIII.     Social Security:

 

Even if you are no longer employed, you may still exercise your benefits of the Security Programme under a self-insurance scheme, Section 40. The rates for contributions and the benefits under this Section are markedly different from those of the insured persons under Section 39. The rate of the contribution varies between THB 100 to 350 depending on your choice of coverage. The covered benefits apply in the events of accidents and ailments, death, invalidity and pension benefits.

 

  1. New amendment of the Provident Fund Act

 

A provident fund (PVD) is one of the most common employee’s benefits in Thailand, and is regulated by the Provident Fund Act B.E. 2530 (1987) (PFA). Normally, the employer and the employee make equal contributions to the PVD on the agreed percentage between 2-15% of the employee’s salary every month.

 

The new amendment No. 4 of the PFA was announced in the Royal Gazette on 11 August 2015, and will come into effect on 9 No-vember 2015.

 

The main changes to the PFA are as follows:

 

  • Allowing the employee to make a higher contribution than the em-ployer: The old law compelled both parties to make equal contributions and the common contribution rate is relatively low at 3-5%, so the benefit at retirement is often not enough to cover the cost of living after retire-ment; the new law therefore allows higher contributions by the employee.

 

  • Temporary cease of contribution: The Treasury Minister can order to temporarily cease contributions to the PVD, in areas affected by natural disaster or crisis, for a maximum of 1 year.

 

  • Default investment policy: Previ-ously, if an employee did not choose an investment plan, the lowest risk investment plan was used, which only generates minimum profits for the member. Now, the PVD can set up the “Default Policy” on invest-ment for the PVD to generate more profits.

 

  1. Retirement or resignation after 55 years old: Under the old scheme, employees could only ask for retirement benefits (e.g. installment payments) in case of retirement at the age of 55. The new amendment also allows employees who quit after turning 55 to be able to ask for the same benefits as retirement.

 

  1. Continuous saving / contribution: In case the employee drops out of the membership of a PVD (e.g. resignation, PVD is revoked, etc.), the employee can transfer all contributions to a Retirement Fund (RMF) or other PVD. This regulation is en-acted to solve the problem when an employee is out of the membership of the PVD and he/she has to with-draw all funds from the PVD, which can be completely spent, instead of saving.

 

The new amendment is aimed to enable PVD members to make continuous contributions in a sufficient amount to cover their cost of living after retirement.

 

  • Licensing Facilitation Act

 

The Licensing Facilitation Act (LFA) was announced at the beginning of this year and came into effect on 21 July 2015. The aim of this act is to impose rules and regulations for more transparency and timely fashion in licensing application processes.

 

The LFA requires the officer to set up a specific time frame for the license application, as well as to produce a manual for the applicant. Concrete criteria and specific procedures have to be fixed. Every 5 years, these rules and criteria have to be reviewed and changed if necessary by the authorities involved.

 

For the English version of this act, please follow the link below:

 

http://www.opdc.go.th/uploads/files/2558 /LICENSING_FACILITATION_ACT_20 15.pdf

 

On the effective date of the LFA (21 July 2015), the government announced that the Licensing Facilitation Centre shall be established to give advice to the public and to initially resolve basic problems.

 

  1. Interesting Supreme Court Deci-

sions

 

Specific Business Tax (1691/2556): This decision concerns companies that buy debts from the Financial Sector Restructuring Authority (FSRA) to be collected and managed (factoring business).

 

The Supreme Court ruled that such business is considered “similar to business of the commercial banking”, because such company can enjoy the right under the credit agreements and can collect the principal amount, as well as interest, like the creditor of the loan. This is considered as a business “similar to the business of commercial banking ” which is subject to Specific Business Tax.

 

Labour (2403-2430/2543): In order to not be subject to severance pay, a fixed-term employment agreement has to be for one of the following types of work:

 

  • Special project work;

 

  • Work of temporary nature with definite ending date; or

 

  1. Seasonal work;

 

and “these works have to be finish within a period 2 years” (Section 118 Labour Protection Act). The Supreme Court has ruled in this case that the period of 2 years does not refer to the period of the employment agreement but it refers to the period of the actual work to be done.

 

In other words, if the employer hired the employee to work on a special project, and the parties concluded a 2 years employment agreement, but the project which the employee is working on lasts for 3 years, this employment does not fall into the exemption of the severance payment. The employee would be entitled to 90 days wage severance pay at the end of the employment, because the project period lasted longer than 2 years. The period of less than 2 years under Section 118 of the LPA refers to the period of the temporary works/ special projects, rather than the actual period of the employment agreement.

 

 

 

 

Legal/Tax News Update Thailand No. 004

 

 

 

 

 

 

Legal/Tax Update Thailand

 

 

 

December 2015

 

 

Although Lorenz & Partners always pays greatest attention on updating the information provided in this newsletter we cannot take responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

 

 

Welcome back to the fourth issue of our Legal/Tax News Update (Thailand) in 2015.

 

  • Amendment (No. 27) of the Civil Procedure Code: Supreme Court Appeal requires Approval

 

It is common practice in Thailand for the losing party in a court case to delay the ren-dering of the final judgement by appealing the case to the Court of Appeal and the Su-preme Court. Under the old law, any case with a dispute amount of more than THB 200,000 could be appealed to the Supreme Court. This low barrier led to a huge number of cases that were appealed to the Supreme Court, and currently, it may take several years to receive a final judgement.

 

The delayed final judgment affects the confidence and faith vested in the Thai justice system. The solution is to limit the number of cases that can be appealed to the Supreme Court.

 

Under the recently amended law, approval has to be requested from the Supreme Court in order to submit the case to the Supreme Court. This request should be lodged within one month after the judgment of the Court of Appeal has been rendered. The submitted requests will be reviewed and decided by majority vote of a panel of four Supreme Court judges. In case at least two of the judges vote ‘Yes’, the case can be appealed to the Supreme Court.

 

The judges’ decision to accept or decline the case shall be based on the question whether the case contains any crucial legal questions that require a decision of the Supreme Court. The legal questions that should be considered as crucial include:

 

 

  • Questions related to the public interest or public moral;

 

  • The judgment or order of the Court of Appeal contradicts a norm previously set by a judgment or order of the Supreme Court;

 

  • Legal questions that have not been previously decided by the Supreme Court;

 

  • The judgment or order of the Court of Appeal contradicts a judgment or order of another court;

 

  • For the development of legal interpretation; and

 

  • Other crucial questions set forth by the Chief Justice of the Supreme Court.

 

The new law came into effect on 7 November 2015, but it will not affect legal cases that have been lodged in the Court of First Instance before this date. Such cases will be conducted under the old law, including the right to appeal to the Supreme Court. Please note that this law only concerns civil cases, not criminal cases.

 

The amendment also specifies that the judgement or order of the Court of Appeal is final (unless it is approved to be appealed to the Supreme Court), which poses a problem to legal cases that have to be appealed from the Court of First Instance directly to the Supreme Court (e.g. labour, IP and in-ternational trade, bankruptcy, taxation cases).

 

 

To harmonise the appeal procedure, the Cabinet approved the establishment of a “Special Jurisdiction Court of Appeal”. Special jurisdiction cases (e.g. labour, IP and international trade, bankruptcy, taxation cases) shall be appealed to this court instead of the Supreme Court. Details are still under review.

 

  • Maintaining VAT at 7% until 2016

 

Royal Decree No. 592 was announced on 26 September 2015 to maintain the VAT rate at 7% until 30 September 2016.

 

The VAT rate specified in the Revenue Code is 10%, comprising of actual VAT of 9% and local tax of 1%. Since 1992, all governments have been maintaining the reduced 7% rate VAT as a stimulus measure (except in 1997 due to the financial crisis). Royal Decree No. 592 is a continuation of this pol-icy.

 

  • New Policies to boost Real Estate Market

 

In an attempt to boost the Thai economy, the Cabinet has approved a stimulus plan for the real estate sector by decreasing the trans-fer fee (normal rate 2%) and mortgage registration fee (normal rate 1%), both to 0.01%.

 

Both individuals and companies can benefit from the reduced rate, whether for new or old properties.

 

Types of Properties: The properties that are covered by this scheme can be separated into the following three categories:

 

 

  • Condominiums: 1) whole condominium building, and 2) condomin-ium unit.

 

Mortgage Registration : The reduced rate only applies to mortgage registrations result-ing from primary finance, e.g. to finance a building on the land, or the land itself; it does not apply to the transfer of the mort-gage right (refinance).

 

Please note, however, that the withholding tax (progressive personal income tax rate, or 1% for corporate taxpayers) and specific business tax (3.3%) remain unchanged.

 

Period: The reduced fees will apply for a period of 6 months, from 29 October 2015 until 28 April 2016.

 

Government Housing Bank Loans: Besides the reduction of fees at the Land Department, the government also approved a financial support scheme for persons with low or medium income (less than THB 30,000 per month) in the form of residential loans through the Government Housing Bank.

 

The initial budget for this scheme is THB 10 billion. The scheme is valid from 19 October 2015 until 31 December 2016. The terms and conditions are subject to the announcement of the Government Housing Bank.

 

  1. New Bankruptcy Act Amendment

(No. 8)


 

  • Non-allotment properties  (resi-The 8th amendment of the Bankruptcy Act

 

 

dential purpose only): 1) Building, and 2) land and building (this does not apply to land without building);

 

  • Allotment properties: 1) land and building, and 2) land without building;

 

came into force on 27 August 2015. It aims to simplify and speed up the bankruptcy procedure. The newly imposed procedure is as follows:

 

  1. The official receiver has the authority to determine the validity of a claim for payment, and to give order for payment. The official receiver can issue a summons for persons who may have relevant information regarding the claim for payment. The old law vested these powers in the court;

 

  • The debtor’s proposal for a composition before bankruptcy should at

 

least include:

o   payment priority according to the law;

o   settlement amount;

 

o   procedural plan in compliance with the composition;

o   payment terms;

 

o   management plan for collateral (if any); and

o   guarantor (if any).

 

If the composition does not contain the above mentioned details, the official receiver can notify the debtor to complete the composition;

 

  1. A creditor who does not submit the claim for payment within the period of 2 months after the announcement of the absolute receivership can lodge the claim for payment only in case of force majeure;

 

  1. The penalties under the Bankruptcy Act have been amended to be appropriate for the current economy and society. New penalties range from fines up to THB 20,000 – 200,000 and/or imprisonment up to 2 months – 2 years, depending on the nature of the violation of the law. These penalties are for several offences under the Bankruptcy Act, including:

 

o small offences, such as leaving the country without approval, not attending the creditor’s meeting, or not cooperating in selling the assets, etc.;

  1. more severe offences, such as not transferring money as ordered by the official receiver, transferring or hiding assets or documents, creating encumbrances on the assets, etc.

 

These new procedures do not apply to bankruptcy cases that have been lodged with the court before 27 August 2015.

 

  • 2016 Excise Tax Rate will affect Car Prices

 

The new excise tax rate for cars and pick-up trucks will be effective and enforced from 1 January 2016.

 

Unlike the old excise tax rate that was only based on the engine capacity and type of fuel, the new rate is based on engine capacity, fuel type and CO2 emission.

 

Eco Car: The excise tax on eco cars (1,300

– 1,400 cc. engine) will be reduced from 17% to 12-14% (if CO2 emission is less than 100 g./km). This will result in a reduction of excise tax of approx. THB 12,000 for a common eco car in the Thai market (price approx. THB 400,000).

 

Sedan/SUV: The new excise tax on se-dans/SUVs depends on their CO2 emission (the rate may increase or decrease). If the vehicle supports E85 fuel, the rate is 5% lower than for vehicles that only support common fuel. For engines above 3,000 cc, the rate remains unchanged at 50%.

 

Truck: Most pickup trucks in Thailand emit more than 200 g. CO2 per km, so that excise tax will increase by 2-3% for next year.

 

PPV: Pickup-based Passenger Vehicles (e.g. Fortuner, Mu-X, Everest, etc.) will be subject to 10% more excise tax (most PPV in Thailand emit more than 200 g. CO2 per km).

 

Hybrid: Vehicles with low CO2 emission will be subject to the same excise tax rate of 10%. For some models that emit more than 100 g. CO2 per km., such as Mercedes-Benz S300 and BMW Active Hybrid, the tax will be increased by 10%.

 

New rate: Effective 1 January 2016

Type Engine CO2 emission (g./km.)
size <100 <150 <200 >200
Eco 1,300- 14%
car 1,400 cc 17%
E85 12%
Sedan <3,000cc 30% 35% 40%
/SUV E85/cng 25% 30% 35%
>3,000cc 50%
Hybrid <3,000cc 10% 20% 25% 30%
>3,000cc 50%
Type Engine CO2 emission (g./km.)
<200 >200
Pickup No cab 3% 5%
Truck +cab 5% 7%
4 doors 12% 15%
PPV <3,250cc 25% 30%
>3,250cc 50%

 

Overall, the new rate will affect most cars in the market, and the tax will increase by 3-10%.

 

 

  1. Important Supreme  Court  Decision

 

SCD 4308/2550: Warranty Clause Prescription Period: Under Section 601 of the Civil and Commercial Code (CCC), the prescription period for a claim for rectification of defects under “hire of work” agreements is one year from the appearance of the defect.

 

This prescription period, however, only applies to claims under Section 600 CCC, i.e. if there is no special agreement between the parties regarding a warranty obligation.

 

In case the warranty obligation is specified in the contract, damages from defects can be claimed up to 10 years after the occurrence of the defect as long as the claimant can prove that the defect occurred during the warranty period (Section 193/30 CCC). In the worst case scenario, the claim can be made within 10 years after the last day of the warranty period (if the defect occurs on the last day).

 

Legal/Tax News Update Thailand 01/2016