Problems relating to Trade and Investment on Thailand
12. Exchange controls |
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Issue |
Issue details |
Requests |
Reference |
| (1) Nebulous Implementation Rules for Practical Employment of Foreign Exchange Transactions | - GOT has notified its approval concerning settlement of account in foreign exchange between the domestic enterprises, without however, providing the precise details of practical implementation rules. Differing interpretations have been returned to enquiries made to various customers of an MFS. The competent authorities give their replies only verbally, and would not reply in writing, including e-mail (that can be used as evidence). According to a person working for a Japanese affiliated financial institution, the settlement in foreign currency in less than 1% in that financial institution. | - It is requested that GOT promulgates precise implementing rules related to the domestic transactions in foreign currency. | |
| (2) Inconsistency between the Deregulation in The Foreign Exchange Control Measures and the Tax Administration | - Since the 2010 announcement of foreign currency restrictions deregulation, basically it is moving for the better. However, the deregulation does not work in substance for absence of consistency with the taxation administration. - Despite the bank of Thailand's deregulation of foreign exchange control (FEC) and revenue department's promulgation of guidelines on tax implementation rules in October 2010, due to the paucity of dissemination within the ministries and agencies in concern, officers response vary. Taxpayers must continue to be on the alert concerning taxation. |
- It is requested that BOT and revenue department work together on domestic settlement in foreign currency to eliminate the tax levy risks. - Further improvement is requested in regard to the following incidental conditions that could cripple operation: -- Repeal of the rules requiring individual bank account management by the underlying asset. -- Repeal of the following conditions for the domestic settlement of account in foreign currency: (1) Only enterprises with foreign currency gained from export are entitled to make the payment, (2) Submission to the bank of materials that show the real demand, and (3) Acquisition of revenue department approval on issuing foreign fund invoices. - It is requested that GOT provides staff education within the ministries and agencies in concern. |
- Ministry of Finance Order |
| (3) Operational Difficulty in the Thai Domestic Employment of Foreign Currency Transactions | - While BOT allows domestic transactions in foreign currency, its employment is difficult in actual practice. It concerns the problem over treatment of the value added tax (VAT) exchange rate, which must be the rate in effect on a trading day. It is practicably impossible to convert by each day the vast numbers of tax invoices. | - It is requested that BOT and internal revenue service, by mutual collaboration, create an environment, which facilitates practical work. | - The Exchange Control Act (B.E. 2485) - Value Added Tax Legislation |
| (4) Rapid Exchange Fluctuations | - Radical exchange fluctuations prevail. As it stands, Member Firm's Subsidiary (MFS) benefits from exchange gain on a direct export transaction in yen. Nevertheless, negotiation for raise in price is difficult. In a transaction with its parent company, the prevailing Yen depreciation enables MFS to offer special prices to its customers. However, MFS runs on a thin margin, so that if the exchange rate swings toward appreciation of Yen, it will instantly show operational loss: such is the severity of the fluctuation band. | - It is requested that GOT will use its best efforts to: -- stablise the exchange rate fluctuations, and -- keep the fluctuation band within 6% in 6-months. |
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