THE NATIONAL Council for Peace and Order (NCPO) has issued an order under Article 44 of the charter to exempt income tax on interest revenue derived from bonds issued by the Financial Institutions Development Fund (FIDF) in a bid to boost the country’s financial system stability.
To avoid confusion among international investors in Thailand’s financial instruments, the tax liability on income from bonds issued by the Bank of Thailand as well as the FIDF should be treated in the same way so it was necessary to issue the NCPO order to grant the income tax exemption.
Entities registered overseas who have invested in Bank of Thailand and FIDF bonds are also exempted from income tax on the interest. The exemption also covers bond investors who have been holding Thai debt instruments since October 2010. The exemption came into effect last Friday after the NCPO order was published in the Royal Gazette.
The special tax measure is expected to help expand the size of the Thai bond market and increase its efficiency in terms of mobilising international funds for investment in both public and private sector projects in Thailand.
A bigger and more efficient bond market will help reduce the cost of funds raised by entities in Thailand so that they can become more competitive on the global market.
The FIDF was set up in 1985 as a separate entity of the Bank of Thailand to provide assistance to financial institutions in trouble, especially those hit hard by the 1997 Asian financial crisis.
The massive bailouts became necessary so as to minimise |damage to the country’s financial system.