17 th Annual Conference Maximise Shareholder Value 2016 Tax Panel
Agenda Section one - The Tax Function of the Future Section two - Tax Life Cycle Section three - Changes, improvements and updates to laws 2
The Tax Function of the Future 1 3
Our predictions 4
Our predictions Regulatory Global tax information reporting requirements (e.g. BEPS and similar transparency initiatives) will grow exponentially and will have a material impact on the operations and related budget allocations within the tax function. Regulators will demand transparency regarding global taxation, necessitating clear and thoughtful communications with public stakeholders about corporate contributions to the communities in which they do business. Information sharing will be commonplace among taxing jurisdictions, and taxing authorities will have the capability to mine data and conduct global audits, resulting in increased disputes. 5
Our predictions Risk & Governance Many jurisdictions will legislatively require the adoption of a tax control framework which follows guidelines similar to Sarbanes- Oxley and COSO (Committee of Sponsoring Organizations of the Treadway Commission). Enhanced stakeholder scrutiny and reputational risk will force companies to continuously re-evaluate their tax decisions. Strategic focus on jurisdictional reporting and documentation of business activities, including transfer pricing, will be critical to managing the increased tax controversy resulting from transparency initiatives. 6
Our predictions Data The majority of tax functions will receive all information in a 'tax ready format' from either their enterprise-wide financial systems or a dedicated tax data hub. Dedicated tax data hubs will become mainstream and be developed internally, licensed from a third-party vendor, and/or accessed through an accounting firm as part of a co-sourcing arrangement. Data security will be high on the agenda of tax functions due to concerns over confidential information being inadvertently released or shared publicly. 7
Our predictions Technology More companies will use their enterprise-wide financial systems to prepare tax calculations (e.g. income tax accounting and indirect taxes), thereby replacing spreadsheets and/or traditional tax technology solutions. The vast majority of tax functions will rely on professional data analysis tools to assist in the decision-making process in areas such as detection of risk, opportunity identification, projections and scenario planning, and overall business support. 8
Our predictions Process Most global tax preparatory compliance and reporting activities, including data collection and reconciliations, will be performed within the company's shared service centre or will be co-sourced with a third party. Tax functions will use real-time collaboration tools to automate their workflow, document management, calendaring, and internal controls. 9
Our predictions People A successful tax professional of the future will be highly proficient in data analysis, statistics, and technology, as well as process improvement and change management. Tax functions will employ dedicated tax IT, data and project management specialists who will develop, champion, and execute the tax technology and transformation strategies. 10
Tax function of the future In conclusion Lots of internal and external changes and influences are impacting how tax is managed in organizations The management of tax in the future will be very different to how tax is managed today Historic practices and processes will need to be revamped, and fresh, innovative approaches utilizing technological know-how will be crucial 11
Tax Life Cycle 2 12
BEPS Action Items No Action Area of focus OECD Deadline(s) 1 Address the tax challenges of the digital economy Digital economy December 2015 2 Neutralise the effects of hybrid mismatch arrangements Coherence (Hybrids) September 2015 3 Strengthen CFC rules Coherence (CFCs) September 2015 4 Limit base erosion via interest deductions and other financial payments 5 Counter harmful tax practices more effectively, taking into account transparency and substance Coherence (Debt) December 2015 Coherence ( Deals ) December 2015 6 Prevent treaty abuse Substance (Treaty) September 2015 7 Prevent the artificial avoidance of PE status Substance (PE) September 2015 8 Assure that transfer pricing outcomes are in line with value creation: intangibles 9 Assure that transfer pricing outcomes are in line with value creation: risks and capital 10 Assure that transfer pricing outcomes are in line with value creation: other high-risk transactions 11 Establish methodologies to collect and analyse data on BEPS and the actions to address it 12 Require taxpayers to disclose their aggressive tax planning arrangements Substance (TP) September 2015 Substance (TP) September 2015 Substance (TP) September 2015 Transparency (Data collection) September 2015 Transparency (Schemes) September 2015 13 Re-examine transfer pricing documentation Transparency (Documentation) September 2015 14 Make dispute resolution mechanisms more effective Transparency (Disputes) September 2015 15 Develop a multilateral instrument Multilateral instrument December 2015 13
Tax Life Cycle Tax Policy Design Tax Policy Implementation Tax Documentation Key messages: Starting point establish tax policy (fit for purpose ) Tax documentation is the end of the life cycle Policy implementation is the glue between the policy and the documentation 14
Changes, improvements and updates to laws What you need to know 3 15
Content overview Purpose of law enactment 1 To improve efficiency and process through technology 2 To adjust laws to suit the changing economy 3 To be stricter and tougher in law enforcement 4 To improve living quality Update on laws 1 e-filing 2 3 4 New Collateral laws BOI Licensing Facilitation Act 5 6 Debt Collection Act Constitutional Act on the prevention and suppression of corruption (No. 3), B.E. 2558 7 Machine Registration Act (No. 3), B.E. 2015 8 9 Provident Fund Act (No. 4), B.E. 2558 Social Security Act (No. 4) B.E. 2558 16
e-filing 1 17
e-filing DBD Notification dated 4 September 2015 Duties of account preparer File audited financial statements, auditor s report and annual report by hand or by via e-filing 31 Dec April May June 4 months 1 month 1 month Closing date AGM Document submission e-filing 18
Process overview 1 2 3 4 Registration Preparation Submission Status Check 1 2 days Within 30 days Within 1 month after AGM Apply for Submit Receive Activate Prepare information Submit the following Check the status of FS user name application activation company s for submission via e- documents via e-filing system submission via the e- & password and code from account form (Online) or by filling in: filing system via DBD supporting DBD via XBRL (Offline) Balance sheet website documents email Print receipt Profit and loss statement to DBD Statement of change of shareholders equity Form SBC. 3 + financial statements, SBC 3/1 (if any), BOJ. 5 (if any) Attachment Report of independent certified public accountant Notes to the FS Print out Form SBC. 3 19
New Now New Collateral laws 2 Qualified collateral Requirements Laws Personal Written evidence Guarantee (CCC amendment no 20 and 21) Immovable/special movable properties Contract + Asset s registration Mortgage (CCC amendment no 20 and 21) Tangible properties Handover Pledge Intangible assets Inventories Raw materials Intellectual properties Contract registration No need to handover No need to register the assets Business Security Act (Draft version waiting for publishing in Royal Gazette) Rights of claims Enterprise 20
New Collateral laws 1. Rights of person who gives collateral 2. Collateral enforcement Transfer Use Assets/Right of claims Enterprise Possession Disposal Confiscation Auction Enforcement officer Inquisition Rights over the collateral (unless agreed otherwise) Mortgage Set-off Others Make decision Pledge Exchange 21
32 New Collateral laws Process of Mortgage enforcement under amendment of CCC Which law will govern? 12 February 2015 Old (CCC) Advance notice for mortgage enforcement within reasonable time One-month advance notice to mortgage Pull transferee out of for an mortgage important enforcement statistic goes in this area 14pt Georgia judicial right only (white) Mortgage enforcement requires exercise of Latest (Amendment No. 21 ) Advance notice for mortgage enforcement Mortgaged by debtor: Notice to debtor not less than 60 days in advance Mortgaged by third party: Notice to third party mortgagee within 15 days after notifying the debtor Extension of notice period to not less than 60 days Not necessary to exercise judicial right to undertake public auction. 22
BOI 3 Update on interesting investment schemes Merit-based incentives (Decentralization) Investment in special economic development zones IHQ & ITC 23
BOI Merit-based incentives (Decentralization) 3 additional years of corporate income tax exemption shall be granted. Projects with activities in Group A1 or A2 which are already granted an 8-year corporate income tax exemption shall instead receive a 50% reduction of corporate income tax on net profit derived from promoted activity for 5 years after the corporate income tax exemption period expires.! Amnatcharoen @ Buengkan # Buriram $ Chaiyaphum % Kalasin ^ Maehongson & Mahasarakham * Mukdahan ( Nakornphanom ) Nan _ Nongbualamphu + Phare - Roi Et = Sakaew { Sakhonnakhon } Sisaket Sukhothai [ Surin ] Ubonratchatani \ Yasothon 24
BOI Investment in special economic development zones Nong Khai 6 Tak 1 Nakhon Panom 7 Kanjanaburi 8 5 Chiang Rai Incentives for activities on BOI General list 3-year additional exemption of CIT, not exceeding 8 years in total Projects with activities in Group A1 or A2 which are already granted 8-year CIT shall receive additional 50% reduction CIT for 5 years. Incentives for targeted activities for Special Economic Development Zones (13 targeted industries) Exemption of corporate income tax up to 8 years Additional 50% corporate income tax exemption for 5 years. 2 Sakaew 3 Trat 10 year double deductions from the costs of transportation, electricity, and water supply 25% deduction of the cost of installation or construction of facilities (apart from normal depreciation deduction) Same incentives Exemption of import duties on machinery Songkla 4 9 Narathiwas Exemption of import duty on raw materials imported, used in production for export. Non-tax incentives i.e. permission to own land and permission to bring in experts to work. 25
What is IHQ & ITC Milestone IHQ regimes were developed from the ROH regimes ITC regime was developed from IPC and IPO regimes IHQ/ITC Timeline 2002 ROH Regime 1 1999 IPO 2010 ROH Regime 2 2011 IPC 2015 IHQ & ITC 27 July October 20, 2015 2015 26 26
Scope of Activities 27
Discrepancy of activities under IHQ Supporting, Managerial & Technical BOI RD FBA Sourcing services Goods (RM and parts) RM and parts Services only (no trading activities) Other activities ` ` Excluding services under the list three attached to the FBA e.g. accounting, legal, architectural, engineering TC Services BOI BOT RD 1) Treasury Centre under the Exchange Control Law governed by BOT ` ` ` 2) Lending and borrowing of Thai currency ( Baht ) in the following cases: (a) Funds borrowed from Thai financial institutions or associated enterprise in Thailand; and (b) Funds obtained from TC operations ` ` ` 28
Discrepancy of activities under ITC Trading transactions ITC Services BOI RD FBA 1) Out - Out ` ` 2) Out In ` ` 3) In-In ` ` 4) In Out ` Services relating to ITC 1) Procurement of goods ` ` 2) Storage of goods prior to delivery ` ` 3) Packaging services ` ` 4) Transportation of goods ` ` 5) Insurance of goods ` ` 6) Advisory, technical and training services relating to goods ` ` 29
Criteria and Condition for Operation and tax Maximising under IHQ and ITC BOI condition for investment promotion RD conditions for tax maximizing IHQ ITC IHQ ITC IHQ THB 10 million paid-up registered capital Having the paid-up registered capital on the last day of each accounting period from THB 10 million upwards THB 15 million operating expenses Having operating expenses paid to the receivers in Thailand not less than THB 15 million in each accounting period. 1 foreign associated enterprise Providing services to at least 1 foreign associated enterprise. THB 1 million investment amount for each IHQ & ITC Must have a new investment amount investing in fixed assets at least THB 1 million per each. 2127 September October 2015 2015 29 30
Licensing Facilitation Act 4 21 July 2015 came into effect Enforcement: licensing, registration and any prior notification required by law Every 5 years A review to repeal licensing or replace licensing with other measures A review report to be submitted to the Cabinet for approval Authority s responsibilities 1 Review completeness of the application and documents /evidence a) Advise the applicant if: additional documents are required correction is needed; or b) Write a memo of any deficiency and additional documents required, specify time period, give the memo to the applicant if there is no submission of requested documents by the deadline: i. return application with written reason for the return; or ii. the applicant may appeal 2 Consider the application within the specified period of time a) After completion, notify the applicant within 7 days b) If consideration is delayed, update the applicant every 7 days on reason of delaying until completion Licensing Manuals Prepare licensing manual for the public within 180 days from the date of announcement in Government Gazette. The manual must include: 1 2 3 Rules, procedures and conditions Transitional provisions are not applicable to previously filed applications. Work flow and period of time for granting the license Required documents to be attached to the application (no additional documents/evidence to be called) 31
Debt Collection Act Law enforcement Took effect on 2 September 2015) Allow debtors to lodge complaints to the Committee Who are debtors? a) Individuals b) Individual debt guarantors Debt collector cannot do the following: a) Threaten the debtor, use violence, use insulting language b) Disclose a debt of the debtor to unrelated parties c) Use false information to deceive the debtor, e.g. falsely claiming to be a state official and threatening to sue the debtor or seize the debtor s assets d) Collect fees or expenses or force the debtor to write cheques, knowing that the debtor cannot pay. e) Show information, symbol, mark or business name on any correspondence suggesting that the communication is about debt collection f) Contact debtor via open letter, fax or nondiscreet method g) Contact other persons who are not debtors 5 Who are debt collectors? a) A creditor who makes loans to debtors b) A business operator under the law on consumer protection c) A person arranging gambling d) Creditors in the ordinary course of business e) Creditors authorized attorneys Persons delegated by the attorneys to take charge of debt collection f) Debt collection agency Debt collection agency s authorized attorneys Evidence must be presented for e) and f) Communication with debtors Debt collectors must: a) Register themselves with the authority within 90 days from the end of 180 days of announcement a) Notify debtor/identify themselves to debtor b) Contact debtor by: i. written notice to the address provided by debtor/ debtor s domicile ii. Hours of communication via all media; e.g. telephone, online media: o From 8.00 a.m. 8.00 p.m. on business days or 8.00 a.m. 6.00 p.m. on public holidays 32
Debt Collection Act Punishment for debt collectors THB 500,000 a jail term of up to 5 years and/or a fine not exceeding Baht 500,000 for threatening the debtor or identifying himself as a state official THB 300,000 a jail term of up to 3 years and/or a fine not exceeding Baht 300,000 for deceiving the debtor into believing that: the debt collector is a lawyer; the debtor will be sued or assets will be seized or attached; information will be given to the credit bureau; or the debt collector is hired by the credit bureau THB 100,000 a jail term of up to 1 year and/or a fine not exceeding Baht 100,000 for violating the law THB 100,000 A fine not exceeding Baht 100,000 for failure to identify themselves Applicable to directors, managers or authorized persons of a company who have the power to give or not give instructions or the power to act or not act if debt collector is a legal entity 33
Constitutional Act on the prevention and suppression of corruption (No. 3), B.E. 2558 6 Increased penalty to one times or twice the damages incurred or benefit received for: Juristic persons having no appropriate internal control measures to prevent bribery Juristic persons related parties (employees, representatives, affiliated companies acting on behalf of the juristic persons) Increased penalty for state, foreign state and foreign organization staff and officials demanding/accepting bribes. Punishment of up to 5 year imprisonment and/or a fine not exceeding Baht 100,000 for: Intermediaries who accept bribes Persons who give, accept or promise to give assets or other benefits to motivate state, foreign state and foreign organization staff and officials to take or not take an action or to prolong a misconduct 34
Machine Registration Act (No. 3), B.E. 2015 7 24 August 2015 came into effect Machinery Machine must pass inspection by the government official or a certified private machine inspection agency 1 2 3 Punishment for: Submission of false report: imprisonment for a term up to one year and/or a fine not exceeding Baht 20,000 Relocation of mortgaged machinery out of the production line Violation by a juristic entity: Managing Director Manager Other persons with authority to give instruction or not give instruction to take or not take actions No ministerial regulations have yet been issued. 35
Provident Fund Act (No. 4), B.E. 2558 8 Social Security Act (No. 4) B.E. 2558 9 @ #! Options to receive provident fund payment Resign at the age of 55 Instalment payment Employees can choose to contribute at a max rate of 15% one lump sum payment Investment of provident fund Employees can choose investment policy. $ Employer or employee s contribution payment can be suspended or postpone if severely and economically affected by disaster 15% Benefits must not prejudice the rights and benefits that the insured or beneficiary is entitled to under other laws. Additional benefits for the insured Reduction of employer contribution if severely and economically affected by disaster.! # @ 36
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