TMB launches a special promotion to welcome this year Tax Saving Season with an exciting theme “TMB Money Rush Gold Rush” that offers 350 Baht cash back for every 50,000 Baht investment in the RMF/LTF funds with a maximum cash back of 7,000 Baht as well as gold chain worth 2,000 Baht for every 50,000 Baht premium subscription of TMB Smart Life 15/8 life insurance policy with a maximum 40,000 Baht worth of gold. Customers can enjoy these special offers without having to enter into a prize draw. Offers begin October 19 to December 30, 2009.
Mrs.Kanchana Rojvatunyu, Executive Vice President, Head of Retail Marketing Group, TMB Bank Public Company Limited or TMB says, “The tax saving season for 2009 is approaching and working individuals begin to look for alternative means to help them save on tax such as investing in Retirement Mutual Funds (RMF) and Long Term Equity Funds (LTF) or other investment products in the form of saving through life insurance. Therefore, TMB is launching an attractive promotion offer that is simple, raffle-free and catered to the needs of our clients under the concept ‘TMB Money Rush Gold Rush.’ The promotion allows clients not only to enjoy tax saving benefit, but also good return on the investment and a privilege to earn cash back or gold chain.”
Mr. Jumpol Saimala, Executive Vice President - Head of Wealth Management of TMB adds, “TMB Money Rush Gold Rush is a specific promotion designed to reward clients who choose to invest in TMB RMF/LTF funds of TMBAM and/or ING Funds through TMB branches. For every 50,000 Baht investment, clients will receive 350 Baht cash back and are eligible up to 500,000 Baht investment per fund. The cash back money will be deposited into clients’ TMB savings or current account within 90 days after December 30, 2009 (ending date of the promotion).”
“Moreover, clients may choose to maximize their tax saving benefits by subscribing for TMB Smart Life 15/8, a 15-year life insurance coverage policy with only an 8-year premium payment and a return of up to 190%. Clients will receive a gold chain worth 2,000 Baht for every 50,000 Baht net initial premium payment with a maximum premium payment 1 million Baht per policy. Clients can collect gold chain(s) at TMB branch where they have purchased TMB Smart Life 15/8 from March 15, 2010 onwards.
Mrs.Kanchana concludes, “TMB always strives to create promotional offers to support our financial products that are attractive to various needs of our clients. Hence, TMB believes that both cash back and gold chain offers address these needs of our clients especially during this time. More importantly, this campaign encourages our clients to invest and save for their future financial security as well as for their families through growing returns. Simultaneously, they will enjoy tax saving which eventually, becomes an additional source of income.”
All privileges mentioned above are offered to TMB clients nationwide from October 19 to December 30, 2009. Interested client can inquire further information and a prospectus guidebook at any TMB branch, call TMB Phone Banking 1558 or visit www.tmbbank.com.
Saturday, November 21, 2009
Friday, November 13, 2009
TAX BREAKS A BOON FOR ECO CARMAKERS
Tax breaks and subsidies on the purchase of eco-friendly cars after scrapping old vehicles are boosting sales of not only hybrids cars but also fuel-efficient petrol driven models.
Due to the impact of the tax break in promoting the sales of new cars, auto-makers have been working to improve the fuel efficiency of their petrol vehicles to ensure they qualify for the tax-reduction scheme.
In August, Toyota Motor improved the fuel efficiency of some models of its Vitz subcompact car. As a result, it qualified for a purchase and weight tax reduction of 75 per cent, up from the 50 per cent it could previously claim.
Sales of Vitz climbed steeply to 12,731 in September, a 27.7-per-cent rise on the same month last year.
Tax breaks for eco-friendly cars were introduced in April, with a spring 2012 time limit set for the scheme.
Under the scheme, consumers who buy new electric, hybrid and clean diesel cars are exempted from automobile acquisition and weight taxes. But petrol-fuelled car buyers also are entitled to a 50 per cent to 75 per cent tax reduction on cars that meet certain fuel efficiency and emissions criteria.
When a car owner scraps a vehicle that was first registered more than 13 years ago and purchases an eco-friendly car that meets certain criteria, he or she receives a subsidy of 250,000 yen (Bt92,730) if scrapping a family car, including a midsize and subcompact car, and a subsidy of Yen125,000 if scrapping a microcar. The subsidy scheme is set to expire on March 31.
Some Vitz models do not qualify for the tax-reduction scheme. However, for the models that qualify for a 50 per cent or 75 per cent tax reduction, car buyers can save between Yen59,900 and Yen90,000 in acquisition and weight taxes. It gives consumers an incentive to choose certain Vitz models rather than other petrol engined cars that do not qualify for the tax break.
Due to the impact of the tax break in promoting the sales of new cars, auto-makers have been working to improve the fuel efficiency of their petrol vehicles to ensure they qualify for the tax-reduction scheme.
In August, Toyota Motor improved the fuel efficiency of some models of its Vitz subcompact car. As a result, it qualified for a purchase and weight tax reduction of 75 per cent, up from the 50 per cent it could previously claim.
Sales of Vitz climbed steeply to 12,731 in September, a 27.7-per-cent rise on the same month last year.
Tax breaks for eco-friendly cars were introduced in April, with a spring 2012 time limit set for the scheme.
Under the scheme, consumers who buy new electric, hybrid and clean diesel cars are exempted from automobile acquisition and weight taxes. But petrol-fuelled car buyers also are entitled to a 50 per cent to 75 per cent tax reduction on cars that meet certain fuel efficiency and emissions criteria.
When a car owner scraps a vehicle that was first registered more than 13 years ago and purchases an eco-friendly car that meets certain criteria, he or she receives a subsidy of 250,000 yen (Bt92,730) if scrapping a family car, including a midsize and subcompact car, and a subsidy of Yen125,000 if scrapping a microcar. The subsidy scheme is set to expire on March 31.
Some Vitz models do not qualify for the tax-reduction scheme. However, for the models that qualify for a 50 per cent or 75 per cent tax reduction, car buyers can save between Yen59,900 and Yen90,000 in acquisition and weight taxes. It gives consumers an incentive to choose certain Vitz models rather than other petrol engined cars that do not qualify for the tax break.
Sunday, November 8, 2009
OPTIONS WHEN ONE PAYMENT IS TAXABLE TWICE
Many of you may think that today's topic, as suggested by the headline, is a little nonsensical. After all, one payment should never be deemed as taxable income to two separate entities at the same time, should it? Only when it occurs to your organisation will you realise that it is not a joke at all.
If you are not familiar with the franchise agreement framework, you will need to understand the relationship as well as the roles of the franchisor and the franchisee. In brief, an owner of intellectual property rights, a franchisor, will grant a licence to use trademark or trade name, whether registered or unregistered, as well as technique for the production or for the operation of the franchised business, to a franchisee for a certain period of time in exchange for the franchise fees. The franchise fee structure is often divided into an initial franchise fee that is charged at a fixed amount; and a variable fee that is tied to the gross sales revenue of the franchised business.
What is the reason behind this fee structure? The combination between the initial fee and the variable fee is not really groundless, as it is structured to help the franchisee not to incur too large a financial burden at the beginning stage when the business has not yet generated much revenue. In many circumstances, the trademark or service mark is also brand new to consumers in the local market.
To allow the franchised business to grow together with the brand, the initial franchise fee tends to be fixed at a low rate, which means that the franchisor will first contribute intellectual property rights. Certainly, the franchisor, in return, expects higher profits via the variable franchise fee from the growth of the business. This is a typical sharing scheme whereby the franchisor will contribute intellectual property rights and the franchisee will invest the costs and efforts in the local market.
The key that most franchisors expect from franchisees is the effort in marketing and promotional activities in the permitted jurisdiction (e.g. Thailand). If the franchisee does not do marketing activities actively or does not put in sufficient effort, the franchisor can hardly expect good sales volume. In the absence of good sales volume, the variable franchise fee would be marginal.
Thus, it is not a surprise to see the franchisor require the franchisee to incur an amount of marketing expenses in each year, e.g. advertisements on TV, radio, newspapers and magazines. Although the franchisee has the liberty to engage any agencies and freely negotiate advertising fees with agencies or the media, as the intellectual property rights are the property of the franchisor, it is normal that the franchisor will maintain a "control" on such advertisements to ensure that the franchisee will not do anything that may harm the brand image.
At this stage, the franchisor does not directly enjoy any monetary value from the betterment of trademark or trade names at the moment that the franchisee incurs such marketing expenditures. Only when the sales volume goes up will the franchisor receive the higher amount of the variable fee from the franchisee. Thus, no matter how much money the franchisee spends on advertising, if the sales volume is going nowhere, the franchisor won't make money.
In the tax arena, the fees paid by a Thai franchisee to an offshore franchisor, whether a fixed amount or a variable percentage, are always subject to 15% withholding tax. Also, upon payment of the fees, the franchisee will have to remit VAT which is currently imposed at the rate of 7%, to the tax authorities. While this tax liability sounds usual, the Large Taxpayers Office has challenged several franchisees on the grounds that the marketing expenses paid by them to advertising agencies (e.g. advertising agencies, TV, newspapers, media, etc) must be deemed as disguised franchise fees that have to be includable in the tax base.
As the marketing expenses help to publicise the trademark or trade name of the franchisor, and the franchisee is obligated to spend certain amounts in each year and under strict supervision of the franchisor, it can be deemed that the franchisor immediately obtains the monetary benefits in the form of higher value for its brand. Hence, marketing expenses the franchisee paid to agencies are also deemed as royalties subject to withholding tax and VAT.
Now things start to get really interesting from a tax perspective. In two weeks we'll follow up with an explanation of the caveats related to this issue.
If you are not familiar with the franchise agreement framework, you will need to understand the relationship as well as the roles of the franchisor and the franchisee. In brief, an owner of intellectual property rights, a franchisor, will grant a licence to use trademark or trade name, whether registered or unregistered, as well as technique for the production or for the operation of the franchised business, to a franchisee for a certain period of time in exchange for the franchise fees. The franchise fee structure is often divided into an initial franchise fee that is charged at a fixed amount; and a variable fee that is tied to the gross sales revenue of the franchised business.
What is the reason behind this fee structure? The combination between the initial fee and the variable fee is not really groundless, as it is structured to help the franchisee not to incur too large a financial burden at the beginning stage when the business has not yet generated much revenue. In many circumstances, the trademark or service mark is also brand new to consumers in the local market.
To allow the franchised business to grow together with the brand, the initial franchise fee tends to be fixed at a low rate, which means that the franchisor will first contribute intellectual property rights. Certainly, the franchisor, in return, expects higher profits via the variable franchise fee from the growth of the business. This is a typical sharing scheme whereby the franchisor will contribute intellectual property rights and the franchisee will invest the costs and efforts in the local market.
The key that most franchisors expect from franchisees is the effort in marketing and promotional activities in the permitted jurisdiction (e.g. Thailand). If the franchisee does not do marketing activities actively or does not put in sufficient effort, the franchisor can hardly expect good sales volume. In the absence of good sales volume, the variable franchise fee would be marginal.
Thus, it is not a surprise to see the franchisor require the franchisee to incur an amount of marketing expenses in each year, e.g. advertisements on TV, radio, newspapers and magazines. Although the franchisee has the liberty to engage any agencies and freely negotiate advertising fees with agencies or the media, as the intellectual property rights are the property of the franchisor, it is normal that the franchisor will maintain a "control" on such advertisements to ensure that the franchisee will not do anything that may harm the brand image.
At this stage, the franchisor does not directly enjoy any monetary value from the betterment of trademark or trade names at the moment that the franchisee incurs such marketing expenditures. Only when the sales volume goes up will the franchisor receive the higher amount of the variable fee from the franchisee. Thus, no matter how much money the franchisee spends on advertising, if the sales volume is going nowhere, the franchisor won't make money.
In the tax arena, the fees paid by a Thai franchisee to an offshore franchisor, whether a fixed amount or a variable percentage, are always subject to 15% withholding tax. Also, upon payment of the fees, the franchisee will have to remit VAT which is currently imposed at the rate of 7%, to the tax authorities. While this tax liability sounds usual, the Large Taxpayers Office has challenged several franchisees on the grounds that the marketing expenses paid by them to advertising agencies (e.g. advertising agencies, TV, newspapers, media, etc) must be deemed as disguised franchise fees that have to be includable in the tax base.
As the marketing expenses help to publicise the trademark or trade name of the franchisor, and the franchisee is obligated to spend certain amounts in each year and under strict supervision of the franchisor, it can be deemed that the franchisor immediately obtains the monetary benefits in the form of higher value for its brand. Hence, marketing expenses the franchisee paid to agencies are also deemed as royalties subject to withholding tax and VAT.
Now things start to get really interesting from a tax perspective. In two weeks we'll follow up with an explanation of the caveats related to this issue.
THE PROPOSED NEW PROPERTY TAX
We're going to interrupt our series on family law issues because we've received a number of emails asking us to explain about the proposed real estate tax law, formally known as Land and Building Tax Act BE (the Draft Act) pending before Parliament. The Draft Act was prepared by the Ministry of Finance and has been approved by the Council of State.
On Aug 25 this year Korn Chatikavanij, the Minister of Finance, presented the Draft Act to the cabinet. It will probably be brought before Parliament and voted upon this year, though there is, as yet, no date set for a vote. If approved, the Draft Act will be effective in January 2010. The tax rates mentioned below would be phased in over a five-year period.
The tax rate in the Draft Act for residential property on which there is no commercial activity will be 0.1% of the appraised price. The appraised price, incidentally, always includes a value for improvements such as houses or buildings on land. The existing tax scheme is in practice largely ignored. The changes in the Draft Act will, therefore, place an additional cost upon owning residential property.
The Draft Act contains a new tax of 0.5% of the appraised value for undeveloped land held for future commercial purposes or otherwise, doubling every three years, and increasing to as high as 2.0% if the land is not used over a period of years. This will be phased in. Unlike the taxes now on the books, mentioned below, it is anticipated that the new tax, starting at 0.5%, will be enforced, and may encourage holders of large blocks of land to subdivide and sell off.
The real estate taxes that exist now are inconsistent and do not provide the Thai government with what it considers to be adequate revenue. There are two important bases of taxation at present.
First, there is the Act on House and Land Tax, BE 2475 (AD 1932). This law taxes rental income or assessed rental income on property at 12.5%. Property in which the owner resides is exempt from this, however, and revenues under it overlap with the income tax law. Also, compliance is mainly voluntary and doesn't happen much.
Second, there is the Municipality Tax Act, BE 2508 (AD 1965), which applies taxes based on the Appraisal Price Law, BE 2521-2524. The Appraisal Price Law, however, sets values too low to allow for what the government considers adequate revenues. The Municipality Tax Act therefore encourages what is referred to by some in the government of speculative holding of large blocks of land.
So the Draft Act was proposed in place of existing legislation and the above existing acts will be repealed by its effect.
The yearly ceiling or maximum rates multiplied by the appraised value that will be phased in over five years under the Draft Act will be as follows:
0.5% of land and buildings used for commercial purposes.
0.1% of land and buildings used for residential purposes.
0.05% of land used for agricultural purposes.
As mentioned above, for undeveloped land the Draft Act contains an additional ceiling rate of 0.5% of the appraised value, but this rate will double every three years as long as the property is not used until it reaches 2.0% of the appraised value.
As also discussed above, the yearly tax on residential property will, under the Draft Act, eventually be 0.1% of the assessed price. This may work a hardship on the poor. There is presently talk that there may be a royal decree exempting poor people and their properties from the tax.
On Aug 25 this year Korn Chatikavanij, the Minister of Finance, presented the Draft Act to the cabinet. It will probably be brought before Parliament and voted upon this year, though there is, as yet, no date set for a vote. If approved, the Draft Act will be effective in January 2010. The tax rates mentioned below would be phased in over a five-year period.
The tax rate in the Draft Act for residential property on which there is no commercial activity will be 0.1% of the appraised price. The appraised price, incidentally, always includes a value for improvements such as houses or buildings on land. The existing tax scheme is in practice largely ignored. The changes in the Draft Act will, therefore, place an additional cost upon owning residential property.
The Draft Act contains a new tax of 0.5% of the appraised value for undeveloped land held for future commercial purposes or otherwise, doubling every three years, and increasing to as high as 2.0% if the land is not used over a period of years. This will be phased in. Unlike the taxes now on the books, mentioned below, it is anticipated that the new tax, starting at 0.5%, will be enforced, and may encourage holders of large blocks of land to subdivide and sell off.
The real estate taxes that exist now are inconsistent and do not provide the Thai government with what it considers to be adequate revenue. There are two important bases of taxation at present.
First, there is the Act on House and Land Tax, BE 2475 (AD 1932). This law taxes rental income or assessed rental income on property at 12.5%. Property in which the owner resides is exempt from this, however, and revenues under it overlap with the income tax law. Also, compliance is mainly voluntary and doesn't happen much.
Second, there is the Municipality Tax Act, BE 2508 (AD 1965), which applies taxes based on the Appraisal Price Law, BE 2521-2524. The Appraisal Price Law, however, sets values too low to allow for what the government considers adequate revenues. The Municipality Tax Act therefore encourages what is referred to by some in the government of speculative holding of large blocks of land.
So the Draft Act was proposed in place of existing legislation and the above existing acts will be repealed by its effect.
The yearly ceiling or maximum rates multiplied by the appraised value that will be phased in over five years under the Draft Act will be as follows:
0.5% of land and buildings used for commercial purposes.
0.1% of land and buildings used for residential purposes.
0.05% of land used for agricultural purposes.
As mentioned above, for undeveloped land the Draft Act contains an additional ceiling rate of 0.5% of the appraised value, but this rate will double every three years as long as the property is not used until it reaches 2.0% of the appraised value.
As also discussed above, the yearly tax on residential property will, under the Draft Act, eventually be 0.1% of the assessed price. This may work a hardship on the poor. There is presently talk that there may be a royal decree exempting poor people and their properties from the tax.
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