The private sector has urged the Finance Ministry to speed up issuing a royal decree to exempt dividend income tax for foreign investment.
Kitipong Urapeepatanapong, chairman of the tax law committee of the Board of Trade of Thailand, said a letter will be submitted to the Finance Ministry requesting it push forward issuing executive decree No.442 on the exemption of dividend income tax for overseas investment.
The law will support private sector investment in other countries as the Asean Economic Community (AEC) looms in 2015.
The amendment of this royal decree has been carried on from the previous government, with the new version stating for any Thai company or holding company that invests in another country and has already paid its corporate tax, the remittance of dividends paid from such investments will be exempted from tax.
After the change in government last year, the issue was sent back for revision by Finance Minister Kittiratt Na-Ranong.
"Companies know the minister does not agree with this tax rule and have therefore requested that the Revenue Department reconsider it, as he is afraid it may provide a tax loophole for Thai companies," said Mr Kitipong.
"Mr Kittiratt also doesn't want companies bringing foreign currency to prevent baht appreciation. We don't know whether this is true or not, but our position is the government should issue the decree to strengthen the capacity of Thai investments abroad. Otherwise, Thai companies will have higher costs than similar companies located in other countries."
Mr Kitipong said for Thai companies invested in Hong Kong, Singapore or other tax havens, their profits from investments are considered foreign sources of income which face no tax. However, if that income has been allocated to Thai companies and is transferred to Thailand, it will face a 23% tax this year and 20% next year.
Thai investors have complained about this issue for two to three years, so if the government ignores the request, Thai companies may not repatriate their profit, hurting the country, he said.
"This should be an urgent issue as the European debt crisis will allow us to buy at a bargain. We are looking for opportunities to buy assets or businesses overseas," said Mr Kitipong.
If Thailand lags behind in tax regulations, foreign investors may turn to other countries in the region with dividend tax exemption because they can still sell to all Asean countries under the AEC.
About the author
- Writer: Phusadee Arunmas
Position: Business Reporter