Capital Inflow Tax

[samtam]

Yes, but it's rather a sledge hammer approach to a rising baht. It has also had rather limited impact on the value of the baht/USD. Whether it brings on a property recession is another matter, but foreign buyers are not going to invest another 30% (cost + no interest for 1 year) in an already oversupplied market. Anyway, people can still speculate on a baht increase by buying the stockmarket, now that these transactions are exempt.

[Naam]

but foreign buyers are not going to invest another 30% (cost + no interest for 1 year) in an already oversupplied market. Anyway, people can still speculate on a baht increase by buying the stockmarket, now that these transactions are exempt.

are you people who spread rubbish reading the news???

[samtam]

I'm not reading the news, I'm calling the bank

[samtam]

Dr Naam, I'm fascinated by your inside track knowledge. Can you provide a source, as it seems to be more up to date than HSBC, other banks. Whilst the rules may change again, I have just spoken to HSBC again and they confirm the only exemption is purchses of shares. I have not read anywhere that this has changed. Please enlighten us all.

[lkm]

Two days ago I asked Bangkok Bank too! They also told me that is no effect on us!!! Please not scarring us ok!

[obsession]

expecially this paragraph:

"The rules would have limited international investors to using 70 percent of their funds to buy Thai stocks. The requirements stay in effect on other investments, including bonds and property, Pridiyathorn said."

Thanks Gaudente. Thats what I read too.

DrNaam. Could you please post where it says that property is exempt as I cant find it. It would be much appreciated.

Why does everyone think that people are panicking for just trying to clarify if 30% of their money is going to be held. Not panicking, just being sensible. Do you expect us to transfer possible short funds? Its easy to scoff when your not the one sending funds at this time.

[obsession]

I forgot to add that the property agent didnt put up much of an argument when I said that I was holding off transfering the money until the rules wre made clear. They initially said that they hadnt heard of it, but eventually admitted they had. So if they accept that property might be subject to the 30% witholding tax then I will hold off until I read otherwise.

[reasonstobecheerful]

Here is the original statement:

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

Here is part 1 of the amendment:

"1. Foreign currencies bought or exchanged against baht for equity investments in the SET in MAI and in TFEX(futures) and AFET(agrifutures) are exempt from the 30% reserve requirement. Financial institutions shall ensure that such foreign exchange transactions are for the aforementioned purposes."

Parts 2,3,and 4 are only detail.

Although in the original statement it talks about "short term capital inflows" being subject to withholding who is to decide what is short term? Although one would hope property money is exempt nowhere do I see a rescindment of the clear quote in a previous post that any effect on property funds would stand.

More to the point when I called my local banker, at a pretty main branch for foreign transactions, just now to ask about the 30% and equity or property funding she said they just don't know. Ergo sending funds for either would be demented.

Edited December 21, 2006 by reasonstobecheerful

[Meerkat]

As far as I can tell, they set the new measures because they believed there was an impending speculator attack. They saw an unusual and severe rise in foreign capital inflow, and decided this was bad for Thailand. We all know the economy isn't that large by world standards, and could easily be pushed around by speculators with large pockets. Is it wrong for the BoT to try to manage the economy to the benefit of the country, rather than the benefit of foreign investors? Is it wrong for them to say, "we do not want currency speculators in our market"?

I think it is interesting to consider this question, independently of how well or how poorly the BoT executed on their intentions. I suspect that this forum is very divided on the underlying principle, much less on policy matters for trying to follow the principles...

It is a good question.

A government should of course manage the economy for the benefit of the country, but doing so does not mean it has to be at the expense of foreign investors. If they're worried about the strength of the currency affecting exporters, however, it would make more sense to implement domestic measures rather than trying to take on what is generally a very efficient market played by people with a lot more teeth. It is also a market the country desperately needs in order to facilitate the very same foreign trade that the BOT's measures were planned to protect.

One method might be to offer tax breaks to exporters. These could be funded by issuing more government debt, which in itself should have an added benefit of weakening the currency (feel free to pick holes in that idea – I gave it about as much thought as Monday's plan). Perhaps an even better idea would be to open up the Forex and interest rate derivative markets instead of segregating between on- and off-shore. This would have the impact of increasing liquidity (and decreasing paper-work) for firms to purchase hedges against adverse FX movements, as companies in most countries are able to do.

Again I'll come back to Thailand's fundamental strengths. Remember that, in spite of an advancing THB, exports rose by 20% y/y in October and by 21% in November to $11.9bn – a record $1.74bn trade surplus. Strip out that 16% FX rise this year, and you still have strong numbers. Real industrial production growth is higher than in every major Asian economy except HK, China and South Korea. Is it any wonder the SET and THB have gained so much? All this talk about a 35 baht exchange rate being "a nightmare for the export sector" seems a bit far-fetched to me. Nightmare for the expat sector, maybe.

[Naam]

"DrNaam. Could you please post where it says that property is exempt as I cant find it. It would be much appreciated."

*****

obsession,

let's not go back but deal with the present situation as that's much easier. the fact is that all restrictions have been lifted again except the one concerning the purchase of short term bonds denominated in THB.

that's what my bank (Siam Commercial Bank) told me yesterday. important is (much more than it was before) that any transfer should be explicitly "labelled", e.g. "investment immobile property" or "living cost Thailand 2007" or "purchase of new car", etc, etc., etc. thus ruling out the undesired "short term temporary inflow of foreign capitalfor the purpose of currency speculation".

i am not in a position to judge whether the information from SBC is 100% correct or whether the BOT has again amended the measures.

[CRUNCHER]

Here is the original statement:

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

Here is part 1 of the amendment:

"1. Foreign currencies bought or exchanged against baht for equity investments in the SET in MAI and in TFEX(futures) and AFET(agrifutures) are exempt from the 30% reserve requirement. Financial institutions shall ensure that such foreign exchange transactions are for the aforementioned purposes."

Parts 2,3,and 4 are only detail.

Although in the original statement it talks about "short term capital inflows" being subject to withholding who is to decide what is short term? Although one would hope property money is exempt nowhere do I see a rescindment of the clear quote in a previous post that any effect on property funds would stand.

More to the point when I called my local banker, at a pretty main branch for foreign transactions, just now to ask about the 30% and equity or property funding she said they just don't know. Ergo sending funds for either would be demented.

You obviously have an honest bank to admit that they do not know. Reading this and other threads most banks (as well as agents and the press) are guessing and puttting their own interpretation on things. To me buying property is basically a long term thing, but not everyone sees it that way. I suspect some banks are holding on to the 30% to be safe knowing that it will be easier to give it back to the customer later than the other way round.

Until BOT gets it's act together and gives clear clarification none of us know what is happening for sure.

[Meerkat]

"DrNaam. Could you please post where it says that property is exempt as I cant find it. It would be much appreciated."

*****

obsession,

let's not go back but deal with the present situation as that's much easier. the fact is that all restrictions have been lifted again except the one concerning the purchase of short term bonds denominated in THB.

that's what my bank (Siam Commercial Bank) told me yesterday. important is (much more than it was before) that any transfer should be explicitly "labelled", e.g. "investment immobile property" or "living cost Thailand 2007" or "purchase of new car", etc, etc., etc. thus ruling out the undesired "short term temporary inflow of foreign capitalfor the purpose of currency speculation".

i am not in a position to judge whether the information from SBC is 100% correct or whether the BOT has again amended the measures.

So as facts go...er...it isn't one!

[CRUNCHER]

"DrNaam. Could you please post where it says that property is exempt as I cant find it. It would be much appreciated."

*****

obsession,

let's not go back but deal with the present situation as that's much easier. the fact is that all restrictions have been lifted again except the one concerning the purchase of short term bonds denominated in THB.

that's what my bank (Siam Commercial Bank) told me yesterday. important is (much more than it was before) that any transfer should be explicitly "labelled", e.g. "investment immobile property" or "living cost Thailand 2007" or "purchase of new car", etc, etc., etc. thus ruling out the undesired "short term temporary inflow of foreign capitalfor the purpose of currency speculation".

i am not in a position to judge whether the information from SBC is 100% correct or whether the BOT has again amended the measures.

So as facts go...er...it isn't one!

Well it might be a fact......but then again it might not.

I appreciate DrNaam has meant well trying to put people straight, but the fact is he does not know, I do not know and you do not know. What we need is authoratative information. That can only come from BOT. Problem is I do not think that even they know. Headless chickens seldom know what is going on.

[samtam]

As you say Dr Naam does not know, but he suggests that my source from HSBC is rubbish, and the moderators should castigate me for speading incorrect information. My information from HSBC, (which I qualified) is 100% accurate. The gracious apology is most welcome.

[Martin]

In post #177, 'OlRed Eyes' asked:

"Martin, you not one o' them survivalists from 'merika per chance? "

I don't know if I am or not 'cos I don't know what he means!!

I put 'merika' into Google Search, but got no elucidation. Certainly, I have no connection to the belly dancer of that name!

What I do know is that I am a survivalist from the economic wreckage left by the 1929 crash and the ensuing Great Depression. There aren't many of us around as the birthrate was low in the era 1920 to 1945 (and, of course, the health problems of old age means that even those of us who haven't been swept up by the Grim Reaper (yet) tend not to be very active).

In those hard times, we were brought up under the rule of "Children are to be seen and not heard", so we are known as the Silent Generation.

Compared to the later generations (Baby-Boomers, Generation X etc), we have had the advantage that we listened more to the voices of experience, as we didn't suffer the blight of Doctor Spock's child-rearing theories.

Consequently, we recognise that 'speculator' is a rude word meaning 'someone hoping to get something for nothing'.

We also learnt that 'no great enterprise ever succeeded without it was founded on deep moral purpose'. Hence we think that the modern short-termism is a recipe for disaster.

We were taught to put our savings to work by buying 'assets that sweat'---shares in companies that had some substance---and be prepared to leave them there through the various ups and downs, till we needed to liquidate them to fund our retirement activities.

We also learnt that inflation is a device whereby the young rob the old of their savings.

And that government deficits that are financed by selling long-term bonds are a device whereby one generation takes something and passes the bill (plus interest) to the next generation.

Do you wonder that I look at the American and British Governments' behaviour and say: "It will end in tears"?

[cclub75]

that's what my bank (Siam Commercial Bank) told me yesterday. important is (much more than it was before) that any transfer should be explicitly "labelled", e.g. "investment immobile property" or "living cost Thailand 2007" or "purchase of new car", etc, etc., etc. thus ruling out the undesired "short term temporary inflow of foreign capitalfor the purpose of currency speculation".

In plain english : a beautifull loophole.

-"Transfert of 412 millions USD on my thai account in order to pay my restaurant and bar bills for the next decade".

-the clerk at SCB, reading the fax : "Hum. That looks suspicious. What should I do ? Let's call Miss Tarisa at the BOT"

-"Alloooooooo kha ? I'm on holidays. Call the finance minister".

It's going to be a hard job...

[Meerkat]

Consequently, we recognise that 'speculator' is a rude word meaning 'someone hoping to get something for nothing'.

We also learnt that 'no great enterprise ever succeeded without it was founded on deep moral purpose'. Hence we think that the modern short-termism is a recipe for disaster.

We were taught to put our savings to work by buying 'assets that sweat'---shares in companies that had some substance---and be prepared to leave them there through the various ups and downs, till we needed to liquidate them to fund our retirement activities.

Whilst I agree with much that you point out in your post, the above simply shows a poor understanding of capital markets. Without speculators, those same companies you wanted to invest in would find it much harder to raise the capital required to produce the "sweat", and without those speculators, you'd find it much harder getting out of your assets to fund those retirement activities.

Speculators are often castigated - mostly by poorly-managed governments and companies who get found out and rightly punished by them.

[Burgernev]

Samtam,

Your info comes from a bank, as does Dr Naam's.

Same same, yet you talk about apologies!?!?

Don't be sad man.

[cclub75]

By the way, they have just opened... the parachute.

"BOT Governor Tarisa Watanagase on Thursday said the reserve requirement on short-term capital inflows was a temporary measure that could be scrapped as soon as the baht's volatility eased. "

http://www.bangkokpost.com/breaking_news/b...s.php?id=115332

Let's bet : a Z-turn or a half U-turn... let's say... hum... next week. Non. On 2 january. Yes that sounds good. After new year.

I start to believe, like our dear Bendix, that everything was... just a dream.

[Livinginexile]

I forgot to add that the property agent didnt put up much of an argument when I said that I was holding off transfering the money until the rules wre made clear. They initially said that they hadnt heard of it, but eventually admitted they had. So if they accept that property might be subject to the 30% witholding tax then I will hold off until I read otherwise.

I'm with you obsession, I will write off my 25% deposit that I have allready paid and walk away. On principle I would not give the Thai gov. an extra 30% so they can earn free interest for a year.

The way this government is behaving there is a very good chance they can imply further penalties for farangs owning asets in Thailand.

One thing is for sure, the juta have a lot of assets in $US, this way their ill gotten fortunes increase in value when they repatriate them back to Thailand. It's the only logical reason for this insane move.

[samtam]

Samtam,

Your info comes from a bank, as does Dr Naam's.

Same same, yet you talk about apologies!?!?

Don't be sad man.

Yes, but I didn't say that his information was rubbish. Neither did I ask for the moderators to deport him.

[obsession]

Thanks for the replies. I was hoping I had missed a press release or something, but it is now clear that even the banks dont know. It was a very inexpensive condo I was buying, but I dont want to risk tying up the extra 30% for a year interest free. I feel a bit guilty because the seller has cleared out the furniture for me, which will make it harder for them to sell or rent out. But it aint my fault.

[Geppis72]

Thanks for the replies. I was hoping I had missed a press release or something, but it is now clear that even the banks dont know. It was a very inexpensive condo I was buying, but I dont want to risk tying up the extra 30% for a year interest free. I feel a bit guilty because the seller has cleared out the furniture for me, which will make it harder for them to sell or rent out. But it aint my fault.

Asia Property Report - December 20 - news

Thai Property immune from Baht regulations

The Thai property industry is breathing a collective sigh of relief following an announcement by the Bank of Thailand that property – including land and condominiums – is exempt from the new reserve requirement on short-term capital inflows.

The announcement was posted on their website Wednesday, clearing up some of the confusion surrounding the Bank’s measures.

This means foreign purchasers of condominiums can bring funds into Thailand to purchase condominium property. According to a major local bank, foreign condominium purchasers should clearly state the project name and unit number when remitting funds.

Ms. Aliwassa Pathnadabutr, managing Director of CB Richard Ellis Thailand said, “We welcome this clarification which means that foreign property purchasers are not affected by the new regulations. We believe that this will reassure existing and potential property purchasers.”

Complete article :

http://www.property-report.com/aprarchives...amp;date=201206

[obsession]

Asia Property Report - December 20 - news

This means foreign purchasers of condominiums can bring funds into Thailand to purchase condominium property. According to a major local bank, foreign condominium purchasers should clearly state the project name and unit number when remitting funds.

Thanks Geppis72.

I had to fill out the uk banks swift form online and print it out. Its the only way they transfer funds. Theres no space for extra information like a condo address. I guess I am still not going ahead yet, but thanks for the info.

[Nawtilus]

Well, I transfered Oz dollars on the day that his happened and it arrived all ok, no 30% deduction and it was over the 20k amount.

The exchange rate was even better than expected....I was expecting the worst, so for once in this country pleasantly surprised.

[LaoPo]

Asia Property Report - December 20 - news

This means foreign purchasers of condominiums can bring funds into Thailand to purchase condominium property. According to a major local bank, foreign condominium purchasers should clearly state the project name and unit number when remitting funds.

Thanks Geppis72.

I had to fill out the uk banks swift form online and print it out. Its the only way they transfer funds. Theres no space for extra information like a condo address. I guess I am still not going ahead yet, but thanks for the info.

If you decide to go ahead:

1. print a copy and send it registered (with receipt of delivery) to the bank with additional info for which condo the money is.

2. send the same per email telling them the money is on its way.

3. You might ask your bank to write a letter what the money is for. (if you wish them to know, that is )

LaoPo

[CRUNCHER]

Thanks for the replies. I was hoping I had missed a press release or something, but it is now clear that even the banks dont know. It was a very inexpensive condo I was buying, but I dont want to risk tying up the extra 30% for a year interest free. I feel a bit guilty because the seller has cleared out the furniture for me, which will make it harder for them to sell or rent out. But it aint my fault.

Asia Property Report - December 20 - news

Thai Property immune from Baht regulations

The Thai property industry is breathing a collective sigh of relief following an announcement by the Bank of Thailand that property – including land and condominiums – is exempt from the new reserve requirement on short-term capital inflows.

The announcement was posted on their website Wednesday, clearing up some of the confusion surrounding the Bank’s measures.

This means foreign purchasers of condominiums can bring funds into Thailand to purchase condominium property. According to a major local bank, foreign condominium purchasers should clearly state the project name and unit number when remitting funds.

Ms. Aliwassa Pathnadabutr, managing Director of CB Richard Ellis Thailand said, “We welcome this clarification which means that foreign property purchasers are not affected by the new regulations. We believe that this will reassure existing and potential property purchasers.”

Complete article :

http://www.property-report.com/aprarchives...amp;date=201206

This is another press/property agent report. I cannot find it on the BOT website. I admit I am pretty thick so could someone point out to me where it is.

[Gaudente]

According to a major local bank, foreign condominium purchasers should clearly state the project name and unit number when remitting funds.

Complete article :

http://www.property-report.com/aprarchives...amp;date=201206

ACCORDING TO A MAJOR LOCAL BANK ????????

That means all the article is based just on an interpretation a local bank gave , it has no more value of chit-chat here...this morning Tarisa interviewed on ChannelsNewsAsia clearly stated that the 30% withheld on bonds AND REAL ESTATE STAYED EFFECTIVE.

And if you bother to read the complete article, you can laugh at all the absurd remarks about "how well" the stock worked 2 days ago...typical Thai crap !

[Naam]

Honourable Samtam, Esq., Sir,

-i solemnly declare to try hard not to use obscene expressions and swear words such as "rubbish" in future. however, the emphasis is on "try hard".

-i did not call any information from HSBC rubbish. your posting did not mention where your information came from.

-your quote "i am calling my bank" means (based on my limited knowledge of the english language) that your are going to call your bank, i.e. future and not past tense like "i have called my bank".

however, as you feel insulted please feel free to challenge me for a duel (preferably heavy sabres) or alternatively share a good bottle of thirty year old portwine in my home once we know for sure that the BOT measures are of no concern for us non-speculators.

p.s. i called my bankers in Singapore and they confirmed the information i received from Siam Commercial Bank .

[Nawtilus]

As I said, I transfered more than the 20k requirement and stated 'property purchase' on the transfer, the funds were released in full to me.

So as far as any property relation is concerned, everyone should stop worrying about it. If you still are and I can understand that, TIT, go to your bank here before you transfer it and ask about it, go to head office not a local branch and still if worried, transfer less than the 20k, but as far as Bkk Bank is concerned, did not happen.