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Published on April 2, 2008

One option that may be available is for the employer to operate in Thailand through a Regional Operating Headquarters (ROH). Introduced by the government to encourage both foreign and Thai multinationals to take advantage of Thailand's strategic location within the region and establish administrative centres, an ROH offers a range of both tax benefits and Board of Investment (BoI) incentives.

The principal benefit of such an arrangement to the expat employee is a flat rate of personal income tax of 15 per cent - versus progressive rates of zero to 37 per cent - for the first four years of employment in Thailand. The expat employee sent to work in another country by the ROH may also receive a tax exemption in Thailand on income paid by the foreign company.

Neither does the expat need to be recruited from abroad; as long as he or she is hired by the ROH, he may already be present in Thailand, allowing existing staff to be transferred to the "new" ROH.

A company operating as an ROH is also entitled to generous tax incentives, but as may be expected, the rules governing eligibility are quite restrictive, and the use of an ROH will not, therefore, be appropriate in all

cases.

An ROH may be apposite where managerial, administrative, technical and other supporting services, collectively known as "qualifying services", are provided to subsidiaries and affiliate companies in at least three foreign countries. Among the tax benefits available to the ROH are:

lA concessionary corporate income tax rate of 10 per

cent - versus the normal rate of 30 per cent - on qualifying income.

lTax exemption for dividends received from subsidiaries and affiliate companies.

lTax exemption for certain dividends paid out to foreign corporate shareholders.

An ROH may even be used to minimise tax for the whole group if qualifying services currently performed by affiliated companies are outsourced to the ROH, to benefit from the favourable corporate income tax rate.

Among the BoI incentives the ROH can obtain is the ability to have the ROH completely owned by foreign shareholders, eligibility to purchase land in order to carry out business and fewer restrictions on the hiring of expat staff.

There are, of course, other requirements to be met for an ROH to qualify for the tax incentives, but in the right circumstances the potential tax savings may be considerable, which makes this an option worth considering for many companies employing expat staff.

james harley

The  Nation