3.4    Regional Operating Headquarters (ROH)

A Regional Operating Headquarters (ROH) is a juristic company or partnership organized under Thai law to provide managerial, technical, or other supporting services (see below) to its associated companies or its domestic or foreign branches.

Supporting Services

(1)    General administration, business planning, and coordination,
(2)    Procurement of raw materials and components,
(3)    Research and development of products,
(4)    Supporting technical assistance,
(5)    Marketing control and sales promotion planning,
(6)    Human resource management and training in the region,
(7)    Corporate financial advisory services,
(8)    Economic and investment research and analysis,
(9)    Credit control and administration,
(10)    Any other services stipulated by the Director-General of the Revenue Department.

Associated Company A juristic company or partnership shall be regarded as an ROH’s associated enterprise if:

A.    Shareholding basis:
i.    A juristic company or partnership holding shares in the ROH worth not less than 25% of total capital; or
ii.     A juristic company or partnership in which the ROH is a partner or holds shares worth not less than 25% of total capital; or
       iii.    A juristic company or partnership in which a juristic company or partnership under (i.) is a partner or holds shares worth not less than 25% of total capital.

B. Control basis:
i.     A juristic company or partnership that has the power to control or supervise the operation and     management of the ROH; or
       ii.    A juristic company or partnership that the ROH has the power to control     or supervise the         operation and management; or
       iii.    A juristic partnership that a juristic company or partnership in (i.) has the power to control or         supervise the operation and management.


Incentives The government provides tax breaks and incentives to attract foreign companies to set up in the Kingdom.

A.    Reductions/exemptions on Corporate Income Tax

i.    Business income – ROH will be taxed at the reduced corporate rate of 10% on income derived from the provision of qualifying services to the ROH’s associated companies or branches.
ii.    Royalties – Royalties received from associated companies or branches arising from Research and Development (R&D) work carried out in Thailand will be subject to tax at a reduced corporate rate of 10%. This benefit is extended to include Royalties received from a third party providing services to the ROH’s branches or associated companies using the ROH’s R&D.
iii.    Interest – Interest income derived from associated companies or branches on loans made by an ROH and extended to its associated companies or branches will be subject to tax at a reduced corporate rate of 10%.
iv.    Dividends – Dividends received by an ROH from associated companies will be exempt from tax. Dividends paid to companies incorporated outside of Thailand and which do not carry on business in Thailand will be exempt from tax.

B.    Accelerated Depreciation Allowances

    25% of asset value is allowed as an initial allowance and the remaining can be deducted for over 20     years for the purchase or acquisition of buildings used in carrying out the operations of the ROH.

C.    Expatriates

i.    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.
ii.    An expatriate who works for an ROH may choose to be subject to withholding tax at the rate of 15% for up to 4 years. By doing so, the expatriate is allowed to omit such income in the calculation of their annual personal income tax liability.

Requirements In order for an ROH to be eligible for tax benefits, it must fulfill the following conditions:

•    The ROH must be a juristic company or partnership incorporated under Thai law;
•    The ROH must have at least 10 million baht in paid-up capital on the closing date of any accounting period;
•    The ROH must provide services to its overseas affiliated companies and/or branches in at least 3 countries excluding Thailand;
•    At least half of the revenue generated by the ROH must be derived from service provided to its overseas affiliated companies and/or branches, although this requirement will be reduced to not less than one-third of the ROH's revenue for the first 3 years;
•    The company must submit the notification to the Revenue Department; and
•    Other requirements may be imposed by the Director-General of the Revenue Department.

3.4.1    Updated ROH Policy

In August 2010, the Thai government introduced attractive new incentives, aiming to supercharge the ROH program’s popularity and make companies with regional headquarters here even more competitive.

Among the ROH incentives granted by the Revenue Department, Ministry of Finance, qualifying companies that set up regional operating headquarters in the country are entitled to a 10-year corporate income tax (CIT) rate of 0% on the portion of income derived from their overseas operations. A rate of just 10% is levied on income from their domestic operations.

A five-year extension on the corporate tax exemption is possible under certain conditions, meaning that the CIT benefits can be granted for a total of 15 years under the expanded program. In addition, a personal income tax rate of only 15% will be applied for 8 years on income earned by the company’s expatriate employees in Thailand, if the income generated from services provided to overseas companies is at least 50% of the company’s total revenue.

Another advantage of entering the program is that the dividends received by the ROH from its associated companies are tax exempt. Likewise, exemption applies to the dividends paid out of the ROH’s net profits to its companies incorporated abroad and not carrying on business in Thailand.

Enhancements to the ROH scheme now also allow new and existing companies to qualify as a treasury center to further reduce their cost and improve convenience. As part of this, the Bank of Thailand is making foreign currency dealings of regional headquarters easier. ROH companies can transfer, lend or borrow with their overseas affiliates in foreign currency rather than being restricted to convert into Thai baht. In addition, no approval is required for foreign currency deposit for money borrowed from domestic commercial banks, foreign deposit, and investment abroad, if the sum is under USD500 million.

The following table highlights the two ROH schemes available in Thailand.

    Option #1 Current ROH Tax Regime     Option #2** New ROH Tax Regime
1. Criteria     • Paid-up capital of at least 10 million baht
• Establishment of 3 associated companies/ branches in the 1st year
• Income generated from overseas services =50% of total company income.     • Paid-up capital of at least 10 million baht • Establishment of associated companies/ branches establishment: in at least 1 country within the 1st year, at least 2 countries within the 3rd year, and at least 3 countries within the 5th year
• Having staff working for ROH services and running business operation.
• Having operating expenses =15 MB/year or investment spending =30 MB /year
• By the end of 3rd year, having skilled staff of at least 75% of employees, and at least 5 employees, that receive remuneration of at least 2.5 MB/year

2. Corporate Income Tax
• Overseas income
• Local income    
• 10% unlimited period
• 10% unlimited period    
• Exempt for 10 years*
• 10% for 10 years*

3. Dividends    
Exempt    
Exempt for 10 Years(If income generated from overseas services =50% of total company income)

4. Interest    
10% unlimited period    
10% for 10 Years* (If income generated from overseas services =50% of total company income)

5. Royalties    
10% unlimited period    
10% for 10 Years* (If income generated from overseas services =50% of total company income)

6. Personal Income Tax for each foreign employee    
Flat rate of 15% for a period not more than 4 Years    
Flat rate of 15% for a period not more than 8 years (If income generated from overseas services =50% of total company income) only for executive and experts position.


7. Accelerated Depreciation     Accelerated Ratio (25% of asset value in 20 years)     -

8. Notification Period    
No time limit     Within 5 years from the date the relevant law becomes effective
* Extension of 5 years if all criteria have been met and if the company’s accumulated operating expenses exceed 150 million baht by the end of the 10th year.
** Effective date published in Royal Gazette

Updated 27 September 2011

Data Verified by Seri Manop & Doyle Ltd.