Notice: Starting with December 2018, applications for Regional Operating Headquarters (ROH) are no longer accepted.
The existing ROH companies that are currently receiving tax incentives may continue benefitting from these incentives until until the end of 2020. Alternatively, these companies have the possibility to either convert into an International Business Center (IBC) by filing an application at RD or apply for another BOI promotion, without being penalized for such termination.
A Regional Operating Headquarters (ROH) is a juristic company or partnership organized under Thai law to provides any of the following services to its associated enterprises or branches, whether located in Thailand or abroad:
1. Managerial and administrative services
2. Technical services
3. Supporting services engaged in:
• General administration, business planning and coordination
• Procurement of raw materials and components
• Research and development of products
• Technical support
• Marketing control and sales promotion planning
• Personnel management and regional training
• Corporate Financial advisory services
• Economic or investment research and analysis
• Credit management and control
• Any other activity stipulated by the Director General of the Revenue Department
An associated enterprise is defined as a juristic company or partnership:
1. That is holding shares in the ROH worth not less than 25% of total capital
2. In which the ROH is a partner or holds shares worth not less than 25% of total capital
3. In which a juristic company or partnership under number 1 is a partner or holds shares worth not less than 25% of total capital
4. Which has the power to control or supervise the operation and management of the ROH
5. In which the ROH has the power to control or supervise the operation and management
6. In which the juristic company or partnership under number 4 has the power to control or supervise the operation and management
The registration as ROH is possible for existing Thai companies, as well as newly founded Thai companies.
An existing Thai company that wants to obtain ROH status and its advantages can apply for it at the Large Taxpayer Office, the responsible tax authority.
Newly founded Thai companies can apply for ROH status together with the application for a tax number and the registration for Value Added Tax.
ROH companies incorporated in Thailand under the original scheme enjoy the following privileges:
Incentives granted by the Revenue Department (RD)
Corporate income tax at the rate of 10% of net profits for:
• Income derived from services provided to the ROH’s foreign branches or associated enterprises
• Royalties received from associated companies or branches arising from R&D work carried out in Thailand
• Royalties received from a third party providing services to the ROH’s branches or associated enterprises using the ROH’s Research & Development (R&D)
• Interest received from the ROH’s foreign branches or associated enterprises for loans granted, provided that such loans are made from other sources and extended to the ROH’s branches or associated enterprises.
Corporate income tax exemption for:
• Dividends received from the ROH’s associated enterprises
• Dividends paid out of the ROH’s net profits to its companies incorporated abroad and not carrying on business in Thailand
Corporate Income Tax (CIT) privileges will be granted for 10 years. A five-year extension is possible under certain conditions.
Accelerated depreciation for the purchase or acquisition of buildings used in carrying out the operations of the ROH at the rate of 25% on the date of acquisition. The residual value can be depreciated within 20 years.
Personal Income Tax
An expatriate who is assigned by the ROH to work outside of Thailand is exempt from personal income tax in Thailand for services outside of Thailand. However, the said income must not be borne by the ROH or its associated company in Thailand.
An expatriate employed by the ROH may choose to be subject to withholding tax at the rate of 15% (instead of progressive rates 0-35%) on gross income and benefits derived from employment, for up to 8 consecutive years, if the income generated from services provided to overseas companies is at least 50% of the company’s total revenue.
In the calculation of Corporate Income Tax, the non-qualified income must be separated from the qualified income and its related expenses. In case the expenses cannot be separated, the ROH company must allocate non-qualified and qualified expenses by the ratio of the received income or with the approval of the Director General of the Revenue Department, use other ways of calculation.
In order for an ROH to be eligible for tax benefits under the original scheme, it must fulfill the following conditions:
• The ROH must be a juristic company or partnership incorporated under Thai law
• The paid-in capital must be at least 10 million Baht on the last day of the accounting period
• Provision of services to its branches or associated enterprises in at least three countries excluding Thailand
• Half of the company’s total income is derived from the services provided to its branches or associated enterprises in other countries and royalties received from outside of Thailand for the use of the ROH’s Research & Development (R&D), or even one-third of the total revenue in the first three accounting periods of its operation as ROH. In case of force majeure, the income threshold may be lowered for one accounting period
• The ROH must notify of the Revenue Department of its incorporation, and benefits will be given starting from that moment.
If the ROH fails to fulfill any of the aforementioned conditions, it will be liable for all taxes and surcharges retroactively.
Foreign companies that wish to be granted non-tax privileges given under the Investment Promotion Act, in addition to the above-mentioned tax privileges, must apply for investment promotion privileges from the Board of Investment (BOI) before notifying the Revenue Department of their intention to register as ROH in order to be able to hold the majority of the shares in the ROH company.
The BOI promotion provides additional tax and non-tax benefits such as:
• Eased requirements for hiring of expatriates
• Permission to own land
• Majority of foreign ownership
• Exemption of import duty on machinery for R&D and training activities
• Exemption of import duty on raw materials used in manufacturing export products for 1 year which can be extended as deemed appropriate by the BOI.