Capital Inflow Tax

[lingling]

Capital inflows subject to 30% withholding

Bank of Thailand to order financial institutions to withhold reserve requirement of 30 per cent of capital inflows, effective as of Tuesday to curb rising short-term inflows which push bath to a new 9-year high Monday at Baht35.09 to the US dollar.

Funds withheld from inflows for foreign direct investment can be returned as soon as evidence of the investment is provided.

Otherwise, all of the withheld funds can be returned after one year, as long as it can be documented that the initial funds remained in the country for the entire period. If the funds are withdrawn from the country in less than one year, only two-thirds of the amount withheld will be returned to investors.

-- from The Nation

http://www.nationmultimedia.com/breakingne...newsid=30021867

Now, how will this work? My company mainly export services, and we get paid in USD by customers outside of Thailand. Will the government sit on 30% of our export income for a year?

[lingling]

Phew, the BOT website was more clear than the nation article.

The BOT, therefore, decided to implement an unremunerated reserve requirement on short-term capital inflows. Financial institutions are required to withhold 30 percent of foreign currencies bought or exchanged against the Thai baht, except those related to trades in goods and services, or repatriation of investments abroad by residents.

http://www.bot.or.th/bothomepage/General/P.../Eng/n5149e.htm

Of course, that raises the question: if you withdraw THB with a foreign Visa/MC/Amex, will the ATM only spit out 70% of the amount withdrawn?

[Naam]

Of course, that raises the question: if you withdraw THB with a foreign Visa/MC/Amex, will the ATM only spit out 70% of the amount withdrawn?

*****

of course not and there's no such thing like an imposed tax. perhaps today's e-mail from my bank will shed more light on it:

The Bank of Thailand has imposed a reserve requirement on inflows of investments. The 30% reserve will not be refunded unless funds are invested for more than one year (see statement below).

There may be a sell-off in the stock market in Thailand tomorrow as this is bad news for stock market investors with a short-term horizon. Inflows brought before 19 Dec 06 will not be subjected to the new requirement.

We have not been recommending the Thai stock market because of the political and economic uncertainty after the recent coup. However, Thailand is still a good long-term investment and for those who have a long-term investment in this market, we think holding on to such investments will yield decent returns.

The Reserve Requirement on Short-Term Capital Inflows

Dr. Tarisa Watanagase, Governor of the Bank of Thailand (BOT), announced that despite recent measures aiming at discouraging short-term capital inflows and limiting Thai baht speculation, short-term speculative inflows of various forms continue to persist, as evidenced by the volatility of the Thai baht and its rapid pace of appreciation.

The BOT, therefore, decided to implement an unremunerated reserve requirement on short-term capital inflows. Financial institutions are required to withhold 30 percent of foreign currencies bought or exchanged against the Thai baht, except those related to trades in goods and services, or repatriation of investments abroad by residents. The details of the measure and related operational procedures are summarized as follows:

1. After one year, customers whose foreign currencies have been withheld can request for refunds by submitting related evidence to prove that the funds have been in Thailand for at least one year.

2. Once financial institutions have examined and certified the one-year minimum stay period, they shall inform the BOT to return the funds, through them, to their customers.

3. Should any customers wish to repatriate their funds earlier than one year, they would be refunded only two-thirds of the amount.

4. Foreign exchange transactions which have been traded prior to 19 December

2006 are exempt from this reserve requirement.

5. Foreign direct investments or unrequited transfers would initially be subject to the reserve requirement but shall be refunded upon submission of supporting evidence through financial institutions. Once financial institutions have examined and certified the legitimacy of such claims and the BOT deems it appropriate, the BOT shall promptly return the full amount.

6. Financial institutions shall remit the required reserves, in the form of foreign currencies, to the BOT on the 7th of the subsequent month.

7. The earnings received from this measure would be earmarked for public benefits.

In order to regulate foreign short-term capital inflows, several countries have imposed reserve requirements on such inflows during critical times. The BOT views that the present situation warrants the introduction of such measure to prevent speculative pressure on the Thai baht. The BOT will closely monitor and assess the impact of this measure.

Bank of Thailand

18 December 2006

[Naam]

USD/THB 35,88

[jing jing]

Hold on, I'm a little bit slow here... does this mean that every time I transfer funds for living expenses into my Bangkok Bank account from overseas, they will withhold 30%? If so, this could easily be the straw that breaks the camel's back for all of us living here on income earned abroad.

[lingling]

Hold on, I'm a little bit slow here... does this mean that every time I transfer funds for living expenses into my Bangkok Bank account from overseas, they will withhold 30%? If so, this could easily be the straw that breaks the camel's back for all of us living here on income earned abroad.

Well, the BOT press release says:

Financial institutions are required to withhold 30 percent of foreign currencies bought or exchanged against the Thai baht, except those related to trades in goods and services, or repatriation of investments abroad by residents.

So if you are exporting your services abroad, then that should fall under the "trade in goods and services" exception. But the question is what happens if you are just bringing in your own cash - will they withhold 30% of that until you can prove that you used it as payment for goods and services?

For example, how about those who transfer in 800k for a retirement visa? Will they need to transfer B1.14M in order to get 800k in their Thai bank account, with the remainder held by the bank for a year?

[nev]

so what implications is there to me sending 10000 baht for my girlfriend to pay for her room and living.

[lingling]

so what implications is there to me sending 10000 baht for my girlfriend to pay for her room and living.

Send B14300.

[jing jing]

So the workaround would be to have one's foreign currency exchanged into baht before transferring it to Thailand? That just seems way too simple.

[malcolminthemiddle]

What about funds imported for a property purchase?

[yamaharr1]

So they will keep 30% right off the top and those of us who have it coming in as a service will also have to pay another 30% in taxes so it will be a combined amount of 60% if I understand this right. So that means for every 40,000 Baht you earn you will only get 16,000 Baht then pay your own expenses you will have enough to buy a Pepsi.

Yea Thailand is much better under the new ruling party. I think there jealousy of Thaksin needs to stop already when will there undirected anger subside.

[nev]

so if i send money tomorrow,in aussie dollars they take 30% if i send in thai baht there is no 30% held back, is this correct?

[jumnien]

Don't believe everything you read in a newspaper. Don't worry, they're not taking anything out of your money transfers. Do you guys worry about the world spinning slower too?

[Meerkat]

Don't panic Mr. Mannering!

According to BOT Deputy Governor Atchana Waiquamdee (quoted on Bloomberg ) , the withholding tax only applies for transactions over USD 20,000, so even those who need to bring more in could dribble it over a few days. Marginally higher bank charges maybe, but shouldn't overly affect the bulk of members here. It is of course the institutional hot-money the BOT is targeting.

[lingling]

Don't believe everything you read in a newspaper. Don't worry, they're not taking anything out of your money transfers. Do you guys worry about the world spinning slower too?

So you mean that BOT just posted this on their website just for fun?

http://www.bot.or.th/bothomepage/General/P.../Eng/n5149e.htm

[nev]

Don't believe everything you read in a newspaper. Don't worry, they're not taking anything out of your money transfers. Do you guys worry about the world spinning slower too?

thanks mate just need a straight answer.

[jumnien]

Use common sense.

[jing jing]

Use common sense.

I'm not sure what you mean by this; the rule clearly and unambiguously states that financial institutions are instructed to withhold 30% of overseas funds exchanged from foreign currencies to baht. Now someone has said they heard something on Bloomberg about a 20K USD threshold, but nowhere in the rule is this amount specified.

Since when does common sense have anything to do with bureaucratic rules and regulations?

[Pappiklon]

QUOTE:

'The BOT, therefore, decided to implement an unremunerated reserve requirement on short-term capital inflows. Financial institutions are required to withhold 30 percent of foreign currencies bought or exchanged against the Thai baht, except those related to trades in goods and services, or repatriation of investments abroad by residents. The details of the measure and related operational procedures are summarized as follows'

I was about to transfer the equivalent of 2million baht to cover the cost of a refurbishment, would they withold 30%, what I don't understand is the 'except those related to trades in goods and services' Is the use of my money in this instance to purchase a service. They started demolishing the interior of my condo today, there is no way I can transfer another 600,000 baht and leave it sitting in a Thai bank for a year earning minimal interest.

Would appreciate any knowledgable answers to my question, Thanks

[old wanderer]

QUOTE:

'The BOT, therefore, decided to implement an unremunerated reserve requirement on short-term capital inflows. Financial institutions are required to withhold 30 percent of foreign currencies bought or exchanged against the Thai baht, except those related to trades in goods and services, or repatriation of investments abroad by residents. The details of the measure and related operational procedures are summarized as follows'

I was about to transfer the equivalent of 2million baht to cover the cost of a refurbishment, would they withold 30%, what I don't understand is the 'except those related to trades in goods and services' Is the use of my money in this instance to purchase a service. They started demolishing the interior of my condo today, there is no way I can transfer another 600,000 baht and leave it sitting in a Thai bank for a year earning minimal interest.

Would appreciate any knowledgable answers to my question, Thanks

I have exactly the same problem. I need to have 5,000,000 baht in the country by April. Since there is no currency import ceiling anymore. I think I will go to Singapore do a Dollar/baht exchange, and fly to BKK.

Still a bunch of currency to carry, unless I can get travelers checks in baht denomination in Singaprore.

[danone]

for "goods and services" includes property, doesn't it.

buying property is an FDI, for which the 30 percent deposit rule does not apply.

I guess. and hope.

[endure]

What about those on a pension extension who bring in their 800,000bt for immigration purposes?

[pumpuiman]

Does someone have a straight answer? I have to send about 4000 dollars to my mother in laws Bangkok bank account soon for a house payment. Will I be penalized 30%?

Please, does anyone know for sure?

Eric

[pumpuiman]

Ok.....think I found my answer.......As from Tuesday, 30 per cent of all foreign currency inflows of more than $20,000 will be held on deposit – interest free – by the central bank, unless it relates to a trade in goods or services.

Whew!!

Good news for me.....If anyone knows different, let me know.

Thanks,

Eric

Edited December 18, 2006 by pumpuiman

[alexth]

Is that $20,000 the limit per week? Month? Year? What if I bring $5,000/day? They'll wait for me to accumulate $20,000 and then hit me with a 30% tax or what?

[kokothemonkey]

Is that $20,000 the limit per week? Month? Year? What if I bring $5,000/day? They'll wait for me to accumulate $20,000 and then hit me with a 30% tax or what?

better choice is to not send to money to LOS. they will devalue baht to 38 jsut to prop up exporters. so assume 30% plus any loss on depreciating baht of 6% (2/36 to 38)

Edited December 18, 2006 by kokothemonkey

[Naam]

They'll wait for me to accumulate $20,000 and then hit me with a 30% tax or what?

the word "tax" is NOWHERE mentioned except by the participant who initiated the thread. as of now the implications are (as usual) not very clear but the BOT decision mentions clearly

quote: "reserve requirement on short-term capital inflows"

expatriates who transfer THB or foreign currencies to Thailand in order to cover their cost of living should have nothing to worry. but that's just my personal opinion.

a bit trickier is the situation for those who want to invest several millions for business or immobile property. i have no idea how these cases will be treated.

[jumnien]

Use common sense.

I'm not sure what you mean by this; the rule clearly and unambiguously states that financial institutions are instructed to withhold 30% of overseas funds exchanged from foreign currencies to baht. Now someone has said they heard something on Bloomberg about a 20K USD threshold, but nowhere in the rule is this amount specified.

Since when does common sense have anything to do with bureaucratic rules and regulations?

In Thailand, rules and regulations clearly prohibit prostitution. If you use common sense you will notice that these rules and regulations have little effect on daily living.

As for those of us who bring quantities of money to Thailand in order that we may acquire "goods and services", I don't think we need to assume that the sky is falling. I suppose if I was currency speculating in amounts over 100,000,000 baht I'd be worried a bit.

[Meerkat]

Is that $20,000 the limit per week? Month? Year? What if I bring $5,000/day? They'll wait for me to accumulate $20,000 and then hit me with a 30% tax or what?

I'd assume it's a daily limit (but it could simply be a limit per transaction, so maybe you could bring in $100k in 5 tickets on one day). Bear in mind that the BOT is trying to stop institutional money flows - the millions being shifted in the blink of an eye. For a bank to try and split $10m into 500 separate 20k tickets to get round the law would simply be impractical (transaction costs), so there doesn't need to be a time period on each deal.

Personally I think it's a foolish move which, on top of recent political events, will only do harm to Thailand's capital markets. Trying to manipulate the FX market, whether by naked currency intervention or through short-term capital controls, rarely ends up doing the job it was designed to do. The fact as well that it is primarily a USD problem rather than a THB one makes such measures even more mind-boggling.

Shame I'm still long Thai equities, but don't want to sell with the maddening horde. Might even be worth buying more after the initial sell-off in anticipation that it will be over-sold.

Edited December 19, 2006 by Meerkat

[Pappiklon]

QUOTE:

'The BOT, therefore, decided to implement an unremunerated reserve requirement on short-term capital inflows. Financial institutions are required to withhold 30 percent of foreign currencies bought or exchanged against the Thai baht, except those related to trades in goods and services, or repatriation of investments abroad by residents. The details of the measure and related operational procedures are summarized as follows'

I was about to transfer the equivalent of 2million baht to cover the cost of a refurbishment, would they withold 30%, what I don't understand is the 'except those related to trades in goods and services' Is the use of my money in this instance to purchase a service. They started demolishing the interior of my condo today, there is no way I can transfer another 600,000 baht and leave it sitting in a Thai bank for a year earning minimal interest.

Would appreciate any knowledgable answers to my question, Thanks

I have exactly the same problem. I need to have 5,000,000 baht in the country by April. Since there is no currency import ceiling anymore. I think I will go to Singapore do a Dollar/baht exchange, and fly to BKK.

Still a bunch of currency to carry, unless I can get travelers checks in baht denomination in Singaprore.

In order to get what was formerly a TT3 (now I believe called a Foreign Transaction Form) on bringing in funds to Thailand for the purpose of purchasing a property you had to tranfer over $20,000. On my refurbishment I was going to get a TT3 which would then allow me to take my money back out of Thailand when I sell my property as I can prove I brought it in. Money related to purchase of a condo has to come into your account in foreign currency, ie you can't get a TT3 if you transfer or deposit the funds in Thai Baht. Whereas the purchase of a property might in itself be outside the scope of these regulations. If you bring money in any other way you will not be able to get a TT3 which you will need when you go to transfer your money out of Thailand to show you didn't earn it here by illigally working o r doing businesss without having paid income or business tax on your money. So if you bring your money in from Singapore or anywhere else in Thai Baht, or TC's, in bundles of $19000 (under the 20k limit) or any other way than direct bank transfer you might find yourself having a problem when you go to transfer it out......and don't forget there are low legal limits on the amount of Thai Baht you can physically take out of Thailand.