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1 Effective Tax Planning and Compliance in Treasury Management Prepared by Picharn Sukparangsee at the Conference on Integrated Financial Risk Management.

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Presentation on theme: "1 Effective Tax Planning and Compliance in Treasury Management Prepared by Picharn Sukparangsee at the Conference on Integrated Financial Risk Management."— Presentation transcript:

1 1 Effective Tax Planning and Compliance in Treasury Management Prepared by Picharn Sukparangsee at the Conference on Integrated Financial Risk Management arranged by the Asia Business Forum on September 7-8, 2010 at the Land Mark, Bangkok

2 2 TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE I. LATEST UPDATES ON RELATED TAX AND COMPLIANCE II. HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS III. EFFECTIVE PRACTICES TO ENHANCE TAX COMPLIANCE IV. HOW TO MEASURE AND IMPROVE THE EFFECTIVENESS OF TAX PLANNING AND COMPLIANCE IN THE CURRENT TIME V. Effective Tax Planning and Compliance in Treasury Management

3 3 TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE I.

4 4 Understand basic principles of taxation law. Review transactions and structure of a company for tax efficiency Regularly update important tax rules, regulations, cases and rulings Principles of taxation Equality of taxationEquality of taxation Certainty of taxationCertainty of taxation FairnessFairness EfficiencyEfficiency I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

5 5 Ideal tax policies 1. Tax policies should be less complex. 2. Tax policies should be simple and certain. 3. Structure and provisions of taxation law should be straightforward, unambiguous, consistent and coherent. 4.the rules of the tax structure should be clear, reliable and foreseeable. In reality, tax laws and regulations become increasing complicated and highly difficult for ordinary people to understand. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

6 6 Revenue Code of Thailand Personal income tax source doctrine and resident doctrinesource doctrine and resident doctrine total incometotal income expenses and allowancesexpenses and allowances new tax exemptions or reductionsnew tax exemptions or reductions Corporate income tax recognition of revenues and expenses on accrual basisrecognition of revenues and expenses on accrual basis requirements for computation of net profits or lossesrequirements for computation of net profits or losses expenses prohibited for computation of the net profitsexpenses prohibited for computation of the net profits I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

7 7 Thai income tax law is based upon the worldwide income basis, not territorial basis. Personal income tax is chargeable on a source basis and a resident basis. Corporate income tax is collectible on the principle of incorporation and the principle of doing business in a jurisdiction. Capital gain tax is part of income tax under Thai taxation law. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

8 8 Value added tax sale of goods, provision of service import of goods and service export of good and services Specific business tax specific businesses such as banking, insurance and real estate businesses Stamp duties Instruments I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

9 9 Double taxation agreements between Thailand and its counterparties cover only income tax and petroleum tax, not value added tax and specific business taxcover only income tax and petroleum tax, not value added tax and specific business tax Benefit to residents of the contacting states onlyBenefit to residents of the contacting states only allocation of income and capital gainsallocation of income and capital gains Specific income and other incomeSpecific income and other income Relief from double taxation- exemption method and credit methodRelief from double taxation- exemption method and credit method Exchange of informationExchange of information I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

10 10 Important issues Exemption, a waiver or reduction of tax should be looked at.Exemption, a waiver or reduction of tax should be looked at. Corporate structure should be tax efficient.Corporate structure should be tax efficient. More companies will have more expenses for computation of the corporate income tax.More companies will have more expenses for computation of the corporate income tax. Corporate shareholding should be compared with individual shareholding.Corporate shareholding should be compared with individual shareholding. Contents of agreements should be reviewed to have proper tax benefits.Contents of agreements should be reviewed to have proper tax benefits. Tax managers of a large company should be employed to take care of tax matters.Tax managers of a large company should be employed to take care of tax matters. Unilateral tax relief is useful for corporate shareholding in a foreign country.Unilateral tax relief is useful for corporate shareholding in a foreign country. Overseas transactions should take into consideration the tax issues.Overseas transactions should take into consideration the tax issues. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

11 11 Forms of doing business and tax liabilities 1. Subsidiary 2. Branch 3. Agency 4. Distributorship I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

12 12 Subsidiary A subsidiary is separated from its parent company. A subsidiary shall pay corporate income tax on the net profits arising in and out of Thailand. If the subsidiary pays dividend to its parent company, withholding tax shall be chargeable on the dividend paid by the subsidiary to its parent company. For VAT, authorized directors of the company shall file an application for registration of VAT and pays VAT. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

13 13 Branch A branch is nor regarded as a separate entity from its head office. The head office and its branch shall be deemed to be the same entity. The branch shall pay tax on its profits arising from the business operation in Thailand only. If the branch remits profits to the head office, the profits shall be subject to withholding tax. An employee or a representative of the branch shall file an application for VAT and pay VAT. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

14 14 Sale Agency or Exclusive Agency an independent agent shall act as a general agent.an independent agent shall act as a general agent. an dependent agent has a different tax implications from an independent agent.an dependent agent has a different tax implications from an independent agent. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

15 15 An independent agent under the tax ruling of the tax appeal committee shall have the following: 1. An agent in Thailand shall act as an agent of companies in foreign countries in general, not act as one company in a foreign country only. 2. no agreement is made between the agent in Thailand and a company in a foreign country which limits the right of the agent to act as the agent of other companies in a foreign country. No practice on limit of the right of the agent occurs. 3. The agent in Thailand receives no other benefits other than the commission for the sale of the goods. 4. The buyer shall directly pay for the goods to the seller. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

16 16 VAT If the foreign seller sells the goods through its agent in Thailand on a temporary basis, no application for registration for VAT is required. However, an application for temporary trade is allowed. If the foreign seller sells the goods through its agent in Thailand on a regular basis, an application for registration for VAT is required. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

17 17 Distributor 1. Sale Distributorship The manufacturer appoints a sale distributor and will not appoint other distributors but reserve the right to make a direct sale in a country. 2.Exclusive Distributor The manufacturer undertakes that the distribution in a foreign country will be made by an exclusive distributor in that country. The relationship between the manufacturer and the distributor is a sale agreement and an agency agreement. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

18 18 Distributor Agreement 1.The sale agreement between the manufacturer and the distributor 2. The sale agreement between the distributor and the buyer in Thailand. As a result, the manufacturer in a foreign country has no legal relationship with a buyer in Thailand. Risk on the sale of the goods is with the distributor. The distributor is not required to file the tax return and pay tax. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

19 19 However, in practice, the Revenue Department accepts only the case that the buyer in Thailand pays for the goods to the distributor only. If the buyer in Thailand pays for the goods directly to the Manufacturer in a foreign country, it is deemed by the Revenue Department that the distributor acts as a representative or a go-between of the manufacturer and shall file the tax return and pay tax. The Supreme Court may agree or disagree with the Revenue Department on the issues in relation to the distributor on a case-by-case basis. I.TREASURY DUTIES WITH REGARD TO TAX PLANNING AND COMPLIANCE

20 20 LATEST UPDATES ON RELATED TAX AND COMPLIANCE II.

21 21 Tax benefits 1. Payment for equipment for saving of energy The replacement of the existing equipment for saving of energy of not more than Baht 50 Million for 5 accounting periods 2.Payment of training of employees Two times of expenses paid. 3. Payment for R&D Corporate income tax is exempted for income of a company or a partnership equivalent to 100% of expenses paid for R&D to government authorities or a private sector as published in the government gazette. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

22 22 4. Payment for operation of the project under the BOI % of payments for transportation, electricity and water supply % of payments for transportation, electricity and water supply 4.2payments for installation or construction of facilities for the operation of the business from profits of not more than 25% of the investment. 5. Payments for support of education 2 times of the payment 6. Payment for support of learning and entertainment 2 times of the payment 7.Partial Transfer of Business Tax exemption for the partial transfer of business to be completed within 31 December II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

23 23 ROH (Regional Operating Headquarters) The new tax incentives for the ROH are set forth below: 1. personal income tax for the income of any foreigner working for the ROH in Thailand is 15% for a period of 8 years. 2. personal income tax for the income of any foreigner working for the ROH outside Thailand is exempted from Thai tax. 3. the profits of the ROH derived from services provided from the ROH to its affiliated companies outside Thailand are exempted from corporate income tax. 4. corporate income tax for income derived from services provided to affiliated companies in Thailand of the ROH is reduced 10% for a period of 15 years. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

24 24 Issues 1. the difference on preparation of ROH activity/ account and non-ROH activity/account 2. application for investment promotion shall be submitted to the Office of the BOI. 3. the timing of the letter of notification of the use of the tax benefits. 4. VAT of 0% or 7% depends upon the facts whether service is provided to a company outside Thailand and the service is used in Thailand or in a foreign country. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

25 25 Property Tax A land and building Bill is still under consideration of the Finance Ministry. The existing Building and Land Act Only the rental of the land and building is taxable. The rate of the tax is 12.5 % of the annual rental received. A Land and Building Bill The value of the land and the building is taxable regardless of whether the land and the structure can be let. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

26 26 Tax rates -land for commerce – 0.50% of the value of the property -land for residence – 0.10% of the value of the property -land for agriculture – 0.05 % of the value of the property VAT Rate The reduction of the rate of VAT from 10% to 7% due to expire on 30 September 2010 shall be extended until September It should be noted that the Vat reduction has been made since II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

27 27 Tax Rates for listed companies At present, the net profits of companies listed on the MAI are subject to 20% corporate income tax. 25% corporate income tax is chargeable on the net profits of companies listed on the SET. It is in the process of consideration whether the tax benefits for companies listed on the MAI and the SET would be extended after 30 September 2010 by the Government. Reduction for transfer of houses and condominium The tax incentives for transfer fees of condominium to 0.1% expired on 30 June II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

28 28 Bad Debts Disposition of bad debt losses under tax law shall be the debts which the company has recognized as revenue and paid corporate income tax. Debt Restructuring A financial institution can have a debt restructuring with its debtor or a guarantor. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

29 29 The debt restructuring results in the following which shall be deemed to be a justifiable ground only for the debt restructuring made from 1 January 2010 to 31 December reduction of interest and other similar actsreduction of interest and other similar acts transfer of property or provision of service to the financial institution without any compensation or compensation or service fee lower than the market pricetransfer of property or provision of service to the financial institution without any compensation or compensation or service fee lower than the market price repayment of the principal before payment of interest, fees and service feesrepayment of the principal before payment of interest, fees and service fees A debtor shall include a guarantee. A financial institution shall include other creditors. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

30 30 MIS, GIS and tax liability A state enterprise entered into an agreement on Management Information System and Geographic Information System : MIS and GIS with the Academic Service Center of a University. 1.The University is a juristic person under the Act of 2008 and is not a partnership or a company. The Payment paid by the state enterprise to the Center is not subject to withholding tax. 2.The Center belongs to a state enterprise under supervision of the University. The University is an operator and shall pay VAT. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

31 31 Withholding tax on Jewelry A person, a group of persons, a partnership or a company making the payment under Section 40(8) for jewelry to an individual taxpayer shall have 1% withholding tax on the payment. However, the provision shall not apply to the payment for jewelry to an individual who is a buyer for his consumption without any intention to resell it. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

32 32 Transfer Pricing Payment for a purchase of goods or provision of services shall be made at the market price. Audit of the transfer pricing is conducted on a random basis by the Revenue Department. The revenue Department normally looks at the transfer of revenues from an affiliated company in Thailand to its parent company in a foreign country. If affiliated companies charge compensation between related transactions at the price lower than the market price, the Revenue Department is empowered to assess the revenue of affiliated companies. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

33 33 Examples on the transfer pricing 1.net profits of a subsidiary in Thailand in the present tax year is lower than that in the previous tax year. 2.profits of a subsidiary is transferred in a form of royalty or management fees, advisory fees, or service fees to its parent company II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

34 34 Compliance with the transfer pricing regulations 1.Comparable Uncontrolled Price Methods (CUP) 2Resale Price Method (RPM) 3Cost Plus Method (CPM) 4Other methods 4.1Profit Split Method; and 4.2 Transactional Net Margin Method II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE Advance Pricing Agreement or the APA can be made with the Revenue Department.

35 35 Payment of front-end fee Company A as an operator shall pay the front-end fee and interest to the bank. The payments are expenses of Company A for carrying on its business for profits. VAT and prohibited tax A company purchased land and building. Subsequently, the company purchased another land and building and terminated the previous agreement on the purchase of land and building and used the number of the previous building and notified the change later. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE continue next page

36 36 VAT and prohibited tax It shall be deemed that the Company sold the first land and building and the input VAT from the payment for materials and the payment for the design of the first building is the prohibited input VAT to be deducted from the output VAT. On the other hand, the company made the payment for materials and the payment for the design of the second building, the payments are deemed to be the input tax which is direct and relevant to the business operation of the Company, as a result, the Company can offset the input VAT from the output VAT. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

37 37 " VAT foreign sale and Domestic sale In the first case, the Company sells the goods to a foreign customer on the condition that the foreign customer shall receive the goods at the premise of the company in Thailand. The Customer shall proceed with the export invoice in the name of the Company. The Company is entitled to 0% VAT. In the second case, the Company sells the goods pursuant to the order of the foreign customer. The foreign customer receives the goods in Thailand. It is a sale of goods in Thailand. The Company shall pay 7% VAT. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

38 38 Guarantee Payment Company A pays the guarantee to Company B under the joint agreement on payment of the guarantee for the use of gas. Company A shall return half of the guarantee to Company B. The guarantee is not deemed value of the tax base because the guarantee is made under the joint commercial agreement. Company A has not duty to issue its tax invoice. The guarantee is nevertheless is regarded as revenue of Company A for the purpose of computation of corporate income tax. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

39 39 Land and Depreciation The Company purchased land in Chonburi with ore. The Company cannot deduct the payment for the purchase of the land as expense. The Company cannot have depreciation or amortization of the payment for the land. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

40 40 Interest – Refinance of Domestic Loan by Foreign Loan II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE Refinance Loan Purchase Company A Land Bank B in Thailand Bank C in foreign country

41 41 II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE Company A borrowed money from Bank B in Thailand to purchase land in Thailand. The loan and its interest are regarded as capital expenditure and cannot be deducted as revenue expenses. Company A thereafter had a refinance from Bank C in a foreign country to repay the domestic loan. The interest paid by Company A to Bank C is considered to be capital expenditure.

42 42 VAT Rulings Sale of fresh milk The business of sale of fresh milk without mixing of taste, smell and colour is exempted from VAT and input tax arising from a purchase of raw material, equipment and machinery for carrying on the business is a prohibited input tax. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

43 43 Advisory Business Company A carries on the advisory business to customers in a foreign country and the result of the work is all used in a foreign country. O % VAT is applied. Free Zone A company in a free zone takes cars from the free zone to be kept at the warehouse of the company outside the free zone, the company is regarded as an importer and shall pay VAT on cars and the VAT liability arises on the date on which the cars are taken out of the free zone not for export. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

44 44 Computer Program A company sells and installs computer programs to its customers and ownership of the software belongs to the software ownership company. It falls under service, not sale and shall be subject to VAT at the time of the payment. Service out of Thailand A company proceeded for repair and addition of a gymnasium located in Laos which falls within service provided out of Thailand. The payment received by the company is not subject to VAT. The company is not required to pay VAT and issue the tax invoice. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

45 45 Payment for mould delivered in Thailand A Thai company made the payment for manufacture of the mould to a Chinese company which sent its employees to install the mould, provided advice and had a test run of the mould for 1 or 2 weeks in Thailand, it is deemed that the Chinese company carried on its business in Thailand. If an agreement does not provide for the right to make a copy, to modify and to distribute the use of the mould and for the transfer of technology, the payment is regarded as business profit. If the Chinese company has no permanent establishment in Thailand, the Chinese company is required to pay tax in Thailand. The payment by the Thai company to the Chinese company was for the service to the Chinese company provided in a foreign country but the service was applied in Thailand, the Thai company shall remit the VAT within 7 days. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

46 46 Specific Business Tax If a buyer pays government fee, tax, withholding tax and specific business tax in place of the seller, the seller shall include the fees and the taxes paid by the buyer as the revenue of the seller for computation of corporate income tax in a relevant accounting period. The fee and the taxes on the sale and purchase of land paid by the buyer in place of the seller are in the nature of investment on the land and are prohibited from being deducted as expenses. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

47 47 BOI – BOI and Non-BOI businesses A company with investment promotion from the Board of Investment is entitled to deduct an annual loss of the tax exemption business from the net profit of the non-tax exemption business. After the period of exemption of corporate income tax, the company has the right to deduct the accumulated losses of the tax exemption business to deduct from the net profits arising after the period of the exemption of corporate income tax. II. LATEST UPDATES ON RELATED TAX AND COMPLIANCE

48 48 HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS III.

49 49 Source income and resident income in a source country or a resident country should be considered. A DTA country and a non-DTA country should be studied. Payment for goods is generally exempted from withholding tax. Combination of a sale of goods and a provision of service is not subject to withholding tax but separation of a sale of goods and a provision of service results in withholding tax on a service fee. Service fees should be distinguished from royalty. Gross-up provision should be allowed for cross-border transaction only. A domestic transaction should not have a gross-up provision. Holding company and operating companies should be properly incorporated in a foreign country. III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

50 50 Revenue Expenses and capital expenditures should be carefully considered. Sale and goods to a DTA foreign company Receipt of services from a DTA foreign company Tax planning for real estate company A relevant DTA should be taken into consideration. Interest on the loan should be paid by a Thai company to a foreign bank, not a foreign company. Use of the network of the DTA for the tax planning III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

51 51 Business profits The payment for use of software is subject to withholding tax. Training of personnel for utilization of the software is related to the royalty which is chargeable to tax. Service A company entered into an agreement for preparation of food and drink for people for consumption. It is a service on restaurant which is not subject to withholding tax. It the withholding tax is made, the company can receive the refund within 3 years from the last date of the due date of filing the tax return. III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

52 52 Dividend Unilateral relief is available for the payment of dividend by a foreign company to its Thai holding company provided that certain conditions are satisfied. Interest paid to a foreign branch Interest paid to a foreign branch of a Thai bank Company A entered into a loan agreement with the Hong Kong branch of Bank B which is incorporated under law of Thailand. The Hong Kong Branch raised its fund from customers in Hong Kong. Company A paid interest to the Hong Kong Branch, it is regarded as payment of interest to Bank B in Thailand, Company is not required to withhold tax on the interest. As the Hong Kong Branch is operated outside Thailand, the payment of interest to the Hong Kong branch is not chargeable to specific business tax. III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

53 53 Payment of royalty The rate of withholding tax for payment for the use of software may be reduced under certain DTA between Thailand and its counterparties. Sale of shares for capital gains A company in Singapore sells shares of a Thai Company to another Thai company and receives capital gains, the capital gains are subject to 15% withholding tax unless the company in Singapore does not carries on its business in Thailand, the capital gains are exempted from Thai tax. III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

54 54 Thin capitalization Issues a multinational corporationa multinational corporation an associated enterprisean associated enterprise excessive interest rateexcessive interest rate debt to equity ratiodebt to equity ratio III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

55 55 Thai taxation law has no provisions on thin capitalization. However, the Office of the BOI may impose the debt to equity ratio for any company applying for investment promotion in Thailand. Thailand has Foreign Exchange Act to control inward and outward remittance of money into and out of Thailand. Excessive interest rate may lead to non-deductibility of excessive interest expenses. This means that if the interest rate is capped at 15%. But the interest rate is charged at 20%. Only 5% excessive interest rate is prohibited to be deductible. III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

56 56 Thin capitalization is a form of very low equity financing by a parent company into its associate enterprise including its subsidiary, branch or permanent establishment at the same time, the parent company lends a very high loan to its subsidiary. Thin capitalization applies to the case : 1. A MNC lends money to its subsidiary. 2. A MNC holds shares in its subsidiary. In case the MNC is a lender and a shareholder of its subsidiary. Profits of the subsidiary can be transferred by the subsidiary to its parent company. Payment for shares is regarded as shareholders equity and cannot be deducted as expenses. But payment of interest is deductible as the tax expenses. III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

57 57 SWAP -select a counter party, not the same bank, for a swap transaction -pay fees in a transaction -avoid default payment Currency Swap No payment is made between difference between cross currencies under cross currency swap. As a result, no assessable income arises. III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

58 58 Interest Swap In general, difference between interest rates under interest rate swap between company A and Bank A (if company A enters into a loan agreement with bank B) is regarded as income under Section 40 (8). In particular, difference between interest rates under interest rate swap between company A and Bank B (if company A enters into a loan agreement with bank B) is regarded as income under Section 40 (4). Default Payment In the case of default of payment under interest rate swap, cross currency swap or cross currency interest swap, interest or penalty is regarded as interest under Section 40 (4) (a). III.HOW TO REVISE TREASURY TRANSACTIONS FOR MORE FAVOURABLE TAX SAVINGS

59 59 EFFECTIVE PRACTICES TO ENHANCE TAX COMPLIANCE IV.

60 60 Existing laws and regulations on taxation have been complied with. It is beneficial to update on new tax benefits. Agreements and legal documents shall be in line with the requirement for compliance with taxation law. Consulting with experienced tax lawyers. IV. EFFECTIVE PRACTICES TO ENHANCE TAX COMPLIANCE

61 61 HOW TO MEASURE AND IMPROVE THE EFFECTIVENESS OF TAX PLANNING AND COMPLIANCE IN THE CURRENT TIME V.

62 62 Use of tax benefits under the Revenue CodeUse of tax benefits under the Revenue Code Use of tax lossesUse of tax losses Tax effectiveness under DTATax effectiveness under DTA Issues under Tax rulingsIssues under Tax rulings V. HOW TO MEASURE AND IMPROVE THE EFFECTIVENESS OF TAX PLANNING AND COMPLIANCE IN THE CURRENT TIME

63 63 V. HOW TO MEASURE AND IMPROVE THE EFFECTIVENESS OF TAX PLANNING AND COMPLIANCE IN THE CURRENT TIME Company D Company C Company B Company A Foreign Country Thailand Chart 1 Tax Planning by way of stepping stones

64 64 V. HOW TO MEASURE AND IMPROVE THE EFFECTIVENESS OF TAX PLANNING AND COMPLIANCE IN THE CURRENT TIME Company C Company B Company A Country 2 Country 1 Chart 2 Country 3 Tax Planning by way of stepping stones

65 65 Preparing proper documents of transactions Reasons can be effectively raised with officials of the Revenue Department. V. HOW TO MEASURE AND IMPROVE THE EFFECTIVENESS OF TAX PLANNING AND COMPLIANCE IN THE CURRENT TIME

66 66 SCL Picharn Sukparangsee PARTNER SIAM CITY LAW OFFICES LIMITED 20th Floor, Rajanakarn Building, 183 South Sathorn Road, Bangkok 10120, Thailand Tel: (662) – 8 Fax: (662) THANK YOU


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