Growing Your Business With A South East Asian Headquarters Company

If you are an international business, more than likely you are conducting operations in the SE Asia region through a network of distributors in the various countries in the region, and the establishment of a Headquarters company in the region not only makes business sense, it is often a must to manage the growth of the business in the region.

Whilst the tax laws of Hong Kong, which only subject profits arising in Hong Kong to tax in Hong Kong, provided a natural advantage for a regional headquarters company to be located in Hong Kong, Singapore saw the benefits and set out to capture the regional headquarters market, and successfully attracted many international companies to its shores. Malaysia then attracted a share of the market, followed by Thailand.

By and large, the choice of jurisdiction for the location of a SE Asian Headquarters company is dictated by a jurisdiction’s environmental attributes that help to ensure success for the SE Asian business operations.

And in an effort to attract more internationals to Thailand, the Thai Government has (effective mid-November 2010) re-vamped the tax concessions under the Thai regional headquarters regime, and has placed Thailand at the forefront of the tax incentive offerings by Hong Kong, Singapore and Malaysia.

Thailand

In August 2002, in an effort to persuade the international companies away from Hong Kong, Singapore and Malaysia, the Thai Government introduced a Regional Operating Headquarters model (now known as ROH Model 1).

But the tax incentives offered under the ROH 1 regime weren’t enough to entice internationals to Thailand, and from mid November 2010, the Thailand Government now offers an enhanced ROH regime (known as ROH Model 2), which provides the following tax concessions:

• 0% corporate income tax on headquarters services income received from associated companies and branches outside Thailand for 10+5 years;
• 10% corporate income tax on headquarters services income received from associated companies and branches inside Thailand for 10+5 years;
• 0% corporate income tax on dividends received from associated companies and branches outside Thailand;
• 0% withholding tax on dividends paid out of the headquarters income to shareholders in foreign countries;
• 15% personal income tax on salaries paid to expatriate employees for hire of labor work in Thailand for 8 years; and
• 0% personal income tax on salaries paid to expatriate employees for hire of labor work outside Thailand.

Along with the above enhanced tax incentives under ROH Model 2, the Thai Government has also streamlined the required amount of paper work that the Government agencies in Thailand formerly required for the establishment of an ROH under the Model 1 regime.

For further information and assistance in Thailand, please contact RSM Advisory