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Copyright SGA 2001

BOT Issues New Foreign Exchange Rules

Suvarn Valaisathien spoke at the Foreign Correspondent's Club of Thailand on 9 May 2001 and gave an overview as to what the policies would be concerning the Thaksin government. Dr. Suvarn is a lawyer by trade and expert in taxation and is currently the Thailand Deputy Minister of Commerce.ew rules announced by the Bank of Thailand (BOT) require, that banks processing foreign exchange transaction shall specify the reasons behind transfers, the names of counterparties and what the positions of the parties are. The new rules are intended to prevent the outflow of baht to the offshore markets and prevent further declines in the value of the Thai currency.

(1) Public Companies Act:
If not by 6 June 2001, then by August 6 because the Parliament is busy right now. There were five areas discussed by Dr. Suvarn.

He new rules apply to non-resident juristic persons and ordinary persons and there are separate rules for each group.

The rules are more stringent for non-resident juristic persons and require the bank performing the exchange to request authorization from the BOT and to gather and investigate supporting documents and fax them to the BOT on the day of the exchange.

For non-juristic non-resident persons, the rules are more lax. For exchange of a value of less than 200,000 baht, no authorization or supporting documents are required by the BOT. For exchanges for a value between 200,000 and 5,000,000 no special authorization is required from the BOT but the Bank must collect supporting documents and store them for a period of three years.

Transactions that exceed Baht 50 million per day per person require BOT permission. For transactions between 5 and 50 million, financial institutions are required to submit records of each transaction to the BOT.

Further, the Central Bank has reaffirmed its prior ruling that prevents banks from making direct baht denominated loans to non-residents.

Foreign Business Act Developments

Certain Businesses No Longer Open To Foreigners Under New Foreign Business Act

Since coming into effect in March last year, the Foreign Business Act makes certain businesses closed to foreigners. The Foreign Business Act replaced the old Alien Business Law and delineates a number of businesses that are prohibited to foreigners. One category of business is providing "services". Although the Act allows for the Ministry of Commerce to announce what service businesses are permitted for foreigners to engage in, no such announcements have been made as yet. As a result, all service businesses are effectively barred to foreigners at the present time.

However, if a company or branch office was in existence prior to the effective date of the new Foreign Business Act a grace period was established to obtain a permit to continue in operation in the prohibited categories of businesses. The deadline for such a permit expired 2 March 2001 and no extension has been provided for. New categories of businesses no longer open to foreigners include the following service businesses:: rental businesses, deposit of goods, warehouse, pawnshop, school, theater, money-lending, leasing and insurance.

Under the new Foreign Business Act, engaging in a restricted business without a license would be subject to a fine of Baht 100,000 to 1,000,000 and/or up to three years imprisonment.

Finance To Consider Tax Overhaul

The Revenue Department will submit a study of the pros and cons of new taxation proposals to the Ministry of Finance. The proposals include corporate tax cuts for listed firms, a VAT increase and the separation of dividend tax credit from personal income tax.

The proposed reduction of corporate tax for firms listed or the stock Exchange of Thailand from 30 percent to 20 percent is aimed at increasing capitalization of the market. This tax cut would initially reduce the government's revenue but is expected to generate additional revenue in the future as the tax base is increased by more forms listing.

VAT Filing by Internet

A recent announcement by the Director general of the Revenue Department has stated that the Revenue Department is developing a service project on tax return filing via the Internet. The pilot project is expected to commence in May 2001 and will provide VAT return services. The program will be voluntary and registrants using the program would be required too use one of four designated banks from their accounts would be debited. The web site address is www.rd.co.th.

On-line Registration for New Companies

The Commercial Registration Department will soon be allowing online registration of companies.

It is expected that on-line registration will help relieve the backlog of work created by the manual registration process and the department's lack of staff. Last year new company registrations totaled 29,148. Applicants would be able to pay on-line for registration of a memorandum of association and reserving the name of a company Commercial Registration Act of 1956 requires a company owner to apply for commercial registration within 30 days of starting a business. The address of the new web site www.thairegistration.com.

Case Analysis:
Wahl Clipper v. PCL Co Ltd.

Supreme Court of Thailand (Sarn Dika)

No. 2817/2543

The case involved a trademark holder who was the major distributor of barber products in Thailand.

The local distributor tried to prevent a repair shop and a foreign importer from distributing similar products based on infringement of trademark. The Court ruled that the defendants who held bona fide rights to the products, although the products may have been purchased outside of Thailand could not be prevented from re-selling these products within Thailand.

Plaintiff # 1 claimed that it was the only company in Thailand that had the right to use the trademark and also had the right prevent others from using the trademark. There were other businesses that sold products with the same trademark of Plaintiff # 1.

The Court ruled that the Plaintiff did not have the right to prevent the defendants who bought products from the agent of Plaintiff Number #1 outside of Thailand to re-sell within Thailand.

EXPAT CORNER
Immigration Update

The Immigration Department has recently started to enforce new retirement visa guidelines.

Although the change in the regulations were approved over two years ago, they have only recently begun to be applied. There are three categories for Retirees living in Thailand:

(1) Those who received a permit to stay before October 1998 and who have maintained an unbroken record of annual extensions with the Immigration Department since then and they must, as previously, be able to show that they have 200,000 baht in a Thai bank when they apply for an extension

(2) Those over 55 years old arriving now on a Non-Immigrant O visa. They must have either 800,000 baht in a Thai bank or an assured income of at least 65,000 per month

(3) Those who arrived in October 1998, or thereafter, who have already obtained a permit to stay on the basis of having 200,000 baht. in a Thai bank, must increase the amount to 800,000 baht before applying for the next extension

New IRS Rules for Taxpayers Filing Abroad

Previously, documents sent to the IRS were deemed timely files if their postmark from a foreign mailing service was within the filing deadline period. Under new regulations effective from January 11, 2001, a document sent to the IRS must be both postmarked prior to the filing deadline period and received by the IRS within the same period of time as if it were sent by the US Postal Service.

Authorities have interpreted this to mean that to be timely sent, a document from abroad must be received by the IRS in the same period of time as a similar document sent by the US Postal Service, which would normally mean approximately three (3) days.