Thailand Hong Kong Branch Office Profits Remittance Tax
Tax Insight | March 2008
In January/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 allowance of an exemption from Thailand branch office profits remittance tax.
Thailand’s tax laws follow the principles of a developing nation, whereby it claims its right to tax income and profits earned by foreign companies from sources in and from Thailand, and its right to tax remittance of profits out of Thailand to a foreign country.
But notwithstanding that, in January and February 2008, the authorized representatives of the Government of Thailand and the Government of Hong Kong exchanged letters, agreeing 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.”
Accordingly, from the date of 01 January 2006, the date of entry into force of the DTA between Thailand and Hong Kong, a remittance of profits from a Thailand branch office of a Hong Kong company to the head office in Hong Kong is exempt from Thailand profits remittance tax.
This Tax Insight is general information only. It should not be used to determine any particular matter without consulting with an experienced Thailand tax advisor.