Thailand Hong Kong Branch Office Profits Withholding Tax
Tax Insight | March 2008
In January and February 2008, another historic first ever tax development has taken place between Thailand and Hong Kong, that being the Double Tax Agreement (DTA) entered into between the two countries now prescribes exemption from Thailand profits remittance tax on a remittance of profits from a Thailand Branch of a Hong Kong company to its head office in Hong Kong.
In 2005, Thailand and Hong Kong entered into a DTA, which was at that time Hong Kong’s very first DTA with an Asian country, and now in 2008 that DTA prescribes Thailand's very first exemption from Thailand branch office profits remittance tax.
Thailand’s tax laws follow the taxing principles of a “developing” nation whereby it claims its sovereign right to tax income and profits earned by foreign companies from sources in and from Thailand, and taxation on a remittance of profits out of Thailand to a foreign country is one of the basic tax rights claimed by Thailand.
But notwithstanding that, in January and February 2008, the authorized representatives of the Government of Thailand and the Government of Hong Kong exchanged letters, wherein The Excellencies agreed as follows:
“... either Contracting Party shall not impose, in accordance with its domestic laws and regulations, a tax on profits remitted by a permanent establishment of an enterprise of the other Contracting Party in its territory, as defined under Article 5 of the Agreement.
... this Note and Your Excellency’s Note in reply to that effect constitute an agreement between the two Governments, which shall form an integral part of the Agreement and shall enter into force on the date of entry into force thereof.”
This Tax Insight Article is general information only. It should not be used to determine any matter without consulting with an experienced Thailand tax advisor.