Who Needs a Foreign Business Operating License?

(Updated Version July 2003)

Every person who does not have Thai nationality, every juristic person which is not established in Thailand and every kind of juristic person, whereby over 50 % of the shares or over 50% of the total capital are owned or invested by foreigners, needs for every business listed in Annex 2 and 3 of the Foreign Business Act a

Foreign Business Operating License.

Foreign Business Act B.E. 2542 (A.D. 1999)

I. Definitions under the FOREIGN BUSINESS ACT B.E. 2542 (A.D. 1999)

Who is a “Foreigner” (Sec. 4)

“Foreigner” means:

(1) Natural person who does not have Thai nationality;

(2) Juristic person not registered in Thailand;

(3) Juristic person registered in Thailand having the following characteristics:

(a) Having half or more of its capital shares held by persons under (1) or (2) or a juristic person having the persons under (1) or (2) investing with a value of half or more of the total capital of the juristic person

(b) Limited partnership or registered ordinary partnership having the person under (1) as the managing partner or manager;

(4) Juristic person registered in Thailand having half or more of its capital shares held by the person under (1), (2) or (3) investing with the value of half or more of its total capital.

For the purpose of the definitions, the shares of a limited company represented by share certificates that are issued to bearers shall be deemed as the shares of foreigners unless otherwise provided by ministerial regulations.

From the definition of “Foreigner” as specified in Section 4 of the Foreign Business Act, we can recognise that the law separates foreigners in terms of juristic persons into 2 different kinds as follows:

1. Juristic person not registered in Thailand

2. Juristic person registered in Thailand having the characteristics as follows:

Limited company or public limited company whereby over 50% of its capital shares are owned by foreigner(s)

Limited partnership or registered ordinary partnership whereby over 50% of its capital is invested by foreigner(s)

Limited partnership or registered ordinary partnership having a foreigner as the managing partner or manager.

Section 4 of this Act also specifies the meaning of “Capital” for these 3 different kinds of juristic person as the following:

“Capital” means the registered capital of a limited company or paid-up capital of a public limited company or the money invested in a partnership or juristic person by its partner(s) or its member(s).

II. Relevant Clauses

The relevant Clauses are annexed to the FOREIGN BUSINESS ACT B.E. 2542 (A.D. 1999)

1. Annex 1 – Businesses Not Permitted to Foreigners

Foreigners shall be prohibited from operating a business which is prescribed in Annex 1 due to special reasons (Sec. 8(1))

i.e.: - Newspaper publication, radio broadcasting or television station business

- Land trading

- Trading and auctioning of Thai antiques or national historical objects.

These kinds of businesses are reserved to Thai companies. It is not possible to obtain the FOREIGN BUSINESS OPERATING LICENSE.

2. Annex 2 – Businesses Permitted to Foreigners under Conditions

Annex 2 contains businesses related to the national safety or security or affecting arts, cultures, traditions, folk handicrafts or natural resources and the environments (Sec. 8 (2)). Businesses in this Annex have been divided into 3 categories:

Category 1: The businesses related to the national safety or security

i.e.: - Production, selling, repairing of firearms, gun powder and explosives

- Production, selling, repairing of ships, aircrafts or military vehicles

- Domestic land, waterway or air transportation, including domestic airline business, etc.

Category 2: The businesses affecting arts and cultures, traditional and folk handicrafts

i.e.: - Trading of antiques or handicrafts

- Production of Thai musical instruments

- Production of goldware, silverware, nielloware, bronzeware or lacquerware

Category 3: The businesses affecting natural resources or environment

i.e.: - Manufacturing of sugar from sugarcane

- Mining, including stone blasting or crushing

- Wood fabrication for furniture and utensil production.

The foreign juristic person may operate the business as prescribed above in the following cases:

1. In the case of juristic person whereby over 40% of its capital is held by Thai (ordinary person or juristic person)

2. In case that the Minister (with the approval of the Cabinet) permits, the juristic person having less than 40% of the capital held by Thai may operate the above businesses. However, the proportion of Thai and Foreign shareholders shall not be less than 75% to 25% and the number of Thai directors shall not be less than 2/5 of the total number of directors.

3. Annex 3 – Businesses Not Yet Permitted to Foreigners

Foreigners shall be prohibited from operating the businesses prescribed in Annex 3 in which Thai nationals are not yet ready to compete with foreigners (Sec.8 (3))

i.e.: - Production of plywood, veneer board, chipboard or hardboard

- Production of lime

- Engineering service business

- Architecture service business

- Legal and accounting service business

- Tour agency

- Selling food or beverages

- All other service businesses, except those prescribed in the ministerial regulations (Annex 3 (21)).

The ministerial regulations as prescribed in Annex 3 (21) of the Foreign Business Act are not promulgated yet. However, we have been informed by the Deputy Director-General of the Department of Business Development, Ministry of Commerce that draft of the ministerial regulations has been submitted to be reviewed by the Cabinet.

The service businesses prescribed in the draft of such ministerial regulations are as follows:

1. Banking

2. Investment fund

3. Insurance

4. Lending

5. School

6. Bonded warehouse

7. Pawnshop.

So far, foreigners may operate the businesses prescribed in Annex 3 in the case of receiving permission by the Director-General of the Department of Business Development with the approval of the Committee.

It means that foreigners who want to operate a business which has been prescribed in Annex 2 or 3 in Thailand shall seek permission from the Minister with the approval of the Cabinet or from the Director-General with the approval of the Committee, as the case may be.

How to Get a Foreign Business Operating License

Foreigners operating businesses in Thailand can be divided into 4 groups as follows:

GROUP 1 Foreigners operating a business in Thailand with a temporary permission from the Government

GROUP 2 Foreigners operating a business under a treaty to which Thailand is a party or by which Thailand is obligated to abide, such as the Thai American Treaty of Amity and Commerce (Now there are many new treaties such as the treaty between Thailand and Bahrain, the treaty between Thailand and AFTA and the treaty between Thailand and India)

GROUP 3 Foreigners operating a business that is promoted under the investment promotion law or permitted in writing to operate the industry or trade for export under the law governing the Industrial Estate Authority of Thailand or under other laws

GROUP 4 Foreigners operating business in all other cases.

In case a foreigner under GROUP 1-3 desires to operate a business under Annex 2 or 3, such foreigner shall notify the Director-General in accordance with the rules and procedures as prescribed in the Ministerial Regulations in order to obtain a license for operating such business in Thailand.

In case a foreigner under GROUP 4 desires to operate a business under Annex 2 or 3, such foreigner must apply for a Foreign Business Operating License in accordance with the rules and procedures as prescribed in the Ministerial Regulations.

Requirements to Get the Foreign Business Operating License

1. Minimum Capital

Section 14 of the Act specifies that:

“The minimum capital used at the commencement of the business operation shall not be less than that prescribed by ministerial regulations and shall in no case be less than two million Baht.

In the case where the businesses in the preceding paragraph require the licenses under the Annex attached hereto, the minimum capital to be prescribed in the ministerial regulations for each of the businesses shall in no case be less than three million Baht.

Ministerial regulations issued by virtue of this Section may also prescribe the time for the minimum capital to be brought or remitted into Thailand.

The provisions of this Section shall not apply in the events where the foreigners make the investment with the money or property derived from the business operation that has previously been in operation in Thailand in another business or use them as a share or an investment in other enterprises or juristic persons.”

Considering Section 14 of the Act, we can calculate the minimum capital by dividing business operations into 2 categories:

1. The minimum capital for businesses which are not listed in an Annex shall comply with the Ministerial Regulations but it shall not be less than 2 million Baht

2. The minimum capital for businesses which are listed in an Annex shall comply with the Ministerial Regulations but it shall not be less than 3 million Baht.

The minimum capital shall mean the foreign currencies that the foreigner brings in and use at the commencement of the business operation in Thailand (Sec. 4).

The newly issued Ministerial Regulation issued by virtue of Section 14 prescribes the minimum capital that needs to be brought into Thailand as follows:

1. For businesses which are not listed in an Annex, 2 million Baht.

2. For businesses which are listed in an Annex, 25% of the average annual estimated expenditure for each business for a period of three years, and must not

be less than 3 million Baht.

For example, the estimated expenditure of the company is 300 million Baht for 3 years; the average annual estimated expenditure for this company is 100 million Baht. Then, the minimum capital that this company needs to bring into Thailand is 25% of 100 million Baht, which is 25 million Baht.

However, in case that the period of business operation is less than 3 years, the minimum capital shall be averaged in accordance with the actual period of business operation on a per annum basis, but shall not be less than 3 million Baht.

3. The estimated expenditure means the amount of money that the foreigner will spend in Thailand in order to carry out its business in Thailand. The list of estimated expenditure is required to be submitted to the Department of Business Development together with the application requesting for license for operating business in an Annex.

4. The period of time that the foreigner needs to bring the minimum capital in foreign currencies into Thailand in full is within 3 years from the date of commencement of business or from the date of permission based on the following basis:

25% of the minimum capital shall be brought into Thailand during the first 3 months.

50% (including the first 25%) of the minimum capital shall be brought into Thailand within 1 year (12 months).

At least 25% of the minimum capital shall be brought into Thailand each year (25% each in the 2^nd and the 3^rd year).

5. In case that the period of business operation is less than 3 years the minimum capital must be brought into Thailand within 6 months after the date of commencement of business or from the date of permission.

The evidence to show the amount of money which has been brought into Thailand is a copy of Thor Thor 3 Form (issued by the bank that received the money) to be submitted to the Department of Business Development within fifteen days from the date prescribed above.

2. Transfer of “know-how”

The application has to describe in which way the Foreign company transfers “know-how” to Thai workers.

3. Advantage for Thailand

It has to explain what advantage Thailand gets out of the engagement of the foreign company in Thailand (i.e. improvement of Thai economy; improvement of environment).

4. Employment of Thai staff

Most of all staff that the company intends to employ should be Thai.

5. No effect to other Thai companies

There should be no effect to any Thai company competing in the same field of operation as the foreign company.

The Establishment of a Representative Office

An operation as a representative office under the old Announcement of the Revolutionary Party No. 281 is somehow still possible under the Foreign Business Act B.E. 2542 (A.D. 1999) as a service business under Annex 3 (21).

Presently, a representative office (in accordance with its definition under the Regulations of the Office of the Prime Minister in Establishment of Work Permit and Visa Center (No. 3) B.E. 2544 (A.D. 2001)) is permitted for only 5 business activities as follows:

1. Sourcing of goods or services in Thailand for the head office

2. Checking and controlling the quality and quantity of goods purchased or hired to manufacture in Thailand by the head office

3. Giving advice concerning goods of the head office sold to agents or consumers

4. Propagation of information concerning new goods or services of the head office

5. Report on business trends in Thailand to the head office.

However, it is quite obvious that there are many foreigners who have applied for a permission to operate a representative office and have been operating their businesses outside the scope of activities of a representative office.

For example,

- Purchasing order or paying for goods on behalf of the head office or its affiliated companies or any activities concerning the purchasing

- Exporting goods which have been bought by the head office or its affiliated companies

- Rendering after-sale service in terms of installation and maintenance

- Receiving purchase order or service on behalf of the head office

- Coordinating in purchasing and selling on behalf of the head office, etc.

Now, the Office of Secretary of Foreign Business Committee has been forming an investigating team in order to check on foreign business operations whether they are being done as permitted by the Department of Business Development or not.

If the foreigners were found to be operating a business other than those permitted, the Director-General may temporarily suspend or revoke the license, as the case may be.

Although Lorenz & Partners Co., Ltd. always pays greatest attention on updating the information provided in this newsletter we cannot take responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

Attachment: Application Form for Foreign Business Operating License

Tor. 4 Form Page 1

(Garuda) Department of Business Development		Application Form for Foreign Business Operating License According to Section 7 of the Foreign Business Act B.E. 2542 (A.D. 1999)	For official only Application no.: …...…… Received on: ...………...... License issuing date: ...… Business operating license no.: ...………...…..
Applicant	Name (Thai)
	(English)
	Age …………..……..years, nationality ……………..………, occupation ………………………….…... born in Thailand but does not have Thai nationality Thai nationality has been revoked Address No. ……..…… Soi ……………….….……… Road …………………….….………...……..…. Sub-district ………………..……………………….. District ……………………….……………….…... Province……………….………………………….. Postal Code ………………………...………….…… Telephone Number ………………………………….. Fax Number ………………………..……………
Business Name	(Thai)
	(English)
Address of Business Operating Place	Business operating place(s) altogether …………… place(s). (1) Address No. ……..…… Soi ……………….….……… Road …………………….….………...……. Sub-district ………………..……………………….. District ……………………….……………….…... Province……………….………………………….. Postal Code ………………………...………….…… Telephone Number ………………………………….. Fax Number ………………………..…………… (2) Address No. ……..…… Soi ……………….….……… Road …………………….….………...……. Sub-district ………………..……………………….. District ……………………….……………….…... Province……………….………………………….. Postal Code ………………………...………….…… Telephone Number ………………………………….. Fax Number ………………………..…………… (3) Address No. ……..…… Soi ……………….….……… Road …………………….….………...……. Sub-district ………………..……………………….. District ……………………….……………….…... Province……………….………………………….. Postal Code ………………………...………….…… Telephone Number ………………………………….. Fax Number ………………………..……………

Tor. 4 Form Page 2

Type(s) of Business applied for		No.	Type(s) of Business Applied for Foreign Business Operating License








Record of Business Operation		Have never been operating the applied business before Have been operated the applied business for ….……………. year(s), …………………… month(s), since …………………….……………… to ……………………………….…………………………
Capital and Sources of Capital		Capital used in the operation of applied business amounts to THB ………………………………………. (……………………………………………………………….) Sources of capital: Saving Loan Others

Tor. 4 Form Page 3
List of Supporting Documents
	Copy of passport or foreigner identity card
	Copy of household registration, residence permit, or evidence of temporary immigrant visa under the law governing immigration
	Affidavit of the applicant showing that he/she possesses qualifications under and is not prohibited by Section 16 of the Foreign Business Act B.E. 2542 (A.D. 1999)
	Document describing details of business applied for license according to types and areas as prescribed by the minister
	Map showing the location of the place of business operation in Thailand
	Power of Attorney, in case that another person is authorised to act on his/her behalf
	Evidence or other documents (if any)




Affidavit of the Applicant I hereby certify the aforementioned information as true and correct. (Signed) ……………………………….…………….. (.…………………………………….……….) Date: ………………………………..……….………				Affidavit of the Officer It is hereby certified that the above Application for a Foreign Business Operating License has been received. (Signed) ………………………………...……….. (.…………………………….…..……….) Date: ………………………..……..……………

The Thai Value Added Tax (VAT) System

The rate of Thai Value Added Tax is currently at 7 %

Question: In which cases does a company have to add Thai VAT on the invoiced amount?

(A German company gets an invoice from a Thai company or

a Thai company gets an invoice from a German company:)

Invoice issued for?

service

(“5 hour painting”)

work

(“invoice for painted wall”)

Job

performed in

Germany or Thailand

Result

used in

Germany or Thailand

The following combinations are possible:

A German company has

q service performed, that is used in Germany German VAT only

q service performed, that is used in Thailand 7 % Thai VAT

q service performed in Germany, that is used in Thailand 7 % Thai VAT

q service performed in Thailand, that is used in Germany 0 % Thai VAT

q work performed, that is used in Germany German VAT only

q work performed, that is used in Thailand 7 % Thai VAT

q work performed in Germany, that is used in Thailand 7 % Thai VAT

q work performed in Thailand, that is used in Germany 0 % Thai VAT

A Thai company has

q service performed, that is used in Germany German VAT only

q service performed, that is used in Thailand 7 % Thai VAT

q service performed in Germany, that is used in Thailand 7 % Thai VAT

q service performed in Thailand, that is used in Germany 0 % Thai VAT

q work performed, that is used in Germany German VAT only

q work performed, that is used in Thailand 7 % Thai VAT

q work performed in Germany, that is used in Thailand 7 % Thai VAT

q work performed in Thailand, that is used in Germany 0 % Thai VAT

Examples: VAT (Ministerial Information 3.May 2001)

A) Service rendered abroad, and used in Thailand:

1. In case a company registered abroad has rendered service abroad and the service is used in Thailand, it shall be regarded that the said service is rendering of service in Thailand:

The Co. has the duty to add 7% VAT

2. The rendering of service abroad and service used in Thailand refers to any action that could be used to seek benefit and which is not a sale of goods.

Transfer of ownership of intangible goods (i.e. transfer of ownership of rights in patent, a transfer of ownership of trademark, copyright, royalty) from abroad into Thailand shall not be regarded as a rendering of service abroad and that such service is used in Thailand:

0% VAT has to be added on the invoice amount

3. But: If the company registered abroad has permitted any Thai Co. or any person in Thailand to use rights, whereby this company is still the owner of the aforesaid rights, it shall not be regarded as a sale of intangible goods. It shall be regarded as a rendering of service abroad used in Thailand:

The Thai Co. has the duty to add 7 % VAT

4. A company registered abroad has rendered service abroad and the service has been used abroad, it shall be regarded that the rendering of the said service is a rendering of service outside Thailand:

0 % VAT has to be added

B) Service rendered in Thailand, and used abroad:

5. In case service is rendered in Thailand and used abroad:

0 % VAT has to be added. (Sec. 80/1 (2))

BUT:

6. Transfer of ownership of intangible goods (i.e. transfer of ownership of rights in patent, a transfer of ownership of trademark, copyright, royalty) from Thailand to abroad shall not be regarded as a rendering of service in Thailand and that such service is used abroad:

The Thai Co. has the duty to add 7% VAT

7. If a Thai Co. has permitted any company abroad to use rights (patents, etc.), whereby the Thai Co. is still the owner of the aforesaid rights, it shall not be regarded as a sale of intangible goods. It shall be regarded as a rendering of service in Thailand used abroad and VAT has to be added:

0 % VAT has to be added. (Sec. 80/1 (2))

Specific Rates of Thai VAT:

o VAT exempted business

o 0 % VAT

 VAT exempted business (Revenue Code, Div.5, Sec. 81):

q financial support from foreign headquarter to the Thai subsidiary

4 sale of:

§ agricultural products, animals, fertilizers, fish meals

§ animal feeds, drugs and chemical products of plants and animals

§ newspapers, magazines, textbooks

§ goods or provision of services by a ministry department

§ goods or provision of services exclusively for the benefit of a religion or

§ a public charity in Thailand, of which the profits are not applied for other purposes, goods or provision of services designated by a royal decree,

4 provision of:

§ educational services, an artistic and cultural service in the branch

§ services by practicing arts of healing, auditing, advocacy in courts

§ services in healing and nursing by a clinic under law governing clinics

§ research or technical services in the branch, library, museum, or zoological garden services

§ services under an agreement on hire of service

§ services of organizing amateur sports contests

§ services of public entertainers, only if being the service in the branch

§ services of domestic and international transport, not being transport by means of aircraft or sea-going vessels

§ services of letting out an immovable property on hire

§ services by a local government authority, not including its commercial services or services for seeking revenues or benefits, whether or not being a public utility

4 import of the following goods:

§ agricultural products, animals, fertilizers, fish meals

§ animal feeds, drugs and chemical products of plants and animals

§ newspapers, magazines, textbooks

§ goods from a foreign country that are brought into an export processing zone, only if the goods are exempt from import duty

§ goods listed in the part on the goods exempted from duty under the law governing customs tariff

§ goods imported and kept under the custody of the Customs Department

§ export of goods or provision of a service by a registrant liable to value added tax under Sec. 82/16, RC

§ a small company with an annual turnover less than 600.000 THB.

 Zero percent VAT (0 %VAT) (Revenue Code, Div.4, Sec.80/1):

§ provision of a service performed in Thailand and used in a foreign country, according to the categories, rules, procedures and condition, prescribed by the Director-General (provision of service performed in Thailand for manufacturing goods in an export processing zone for export and service performed in an export processing zone for manufacturing goods for export)

§ export of goods other than that exempt from value added tax

§ provision of an international transport service by aircraft or sea-going vessels by a supplier who is a juristic person.

How to calculate the amount of VAT that a Thai Co. has to pay to the Revenue Department (RD)?

1. Principles

“Output Tax” is the received VAT amount (received from customers).

“Input Tax” is the paid VAT amount (paid to supplier).

Calculation of the amount that has to be paid to the Revenue Department:

Output Tax – Input Tax = tax debt (to pay monthly)

Notice:

In case that the tax debt is negative, the tax debtor can claim this amount from the Revenue Department or use it in the future as a tax credit.

 example:

Thai company (A) has received 214 THB (200 THB for service + 7% VAT

(= 14 THB VAT) = in total 214 THB) from company (B):

200 THB

A B

VAT: 14 THB

Thai company (A) has received

VAT from company (B): 14 THB = Output tax (VAT)

The same Thai company (A) has paid 107 THB (100 THB for service and 7 THB VAT) to company (C):

100 THB

A C

VAT: 7 THB

Thai company has paid VAT

to company (C): 7 THB = Input tax (VAT)

-----------------

Thai company (A) has to pay

to the Revenue Department: 7 THB = tax debt (VAT)

14 THB Output tax - 7 THB Input tax = 7 THB VAT/ tax debt

2. Exception

It is important to distinguish between normal VAT (7%), 0 % VAT business and VAT exempted business!

“0 % VAT”-business can be used as Input tax. It is not possible to offset VAT exempted business:

If over 10 % of the company’s revenue is VAT exempted, then, the company’s claimable Input tax has to be reduced proportionally.

Claimable Input tax:

Exempted Revenue per month

1 – ------------------------------------- X total Input Tax = claimable

total Revenue per month Input VAT

Example:

		VAT (7%) -Amount:	To be used as
Total Revenue	100 THB	7	Output Tax
Thereof exempted revenue	40 THB	exempted	Output Tax
Total purchase	80 THB	5.6	Input Tax

40 THB

1 - ------------- X 5.6 THB =

100 THB

1 – (0.4) = 0.6 X 5.6 THB = 3.36 THB = claimable Input VAT

Amount of VAT to the Revenue Department =

Output VAT – claimable Input VAT:

7 - 3.36 = 3.64 THB has to be paid to

the Revenue Department

(and not: 7 – 5.6 = 1.4 THB)

Thai Withholding Tax System

THE WITHHOLDING TAX SYSTEM

1. Individual taxpayer

A Thai Company which pays taxable income to individuals/companies is generally required to withhold income tax based on the provision of the Revenue Code of Thailand and remit the same to the Revenue Department. Details of this procedure separated by income tax categories are described as follows:

1.1. Income from salary and wages

The withholding tax rate is progressive, depending on the amount of salary or wage paid (0-37%)

1.2. Income from services provided (i.e. fees, brokerages, meeting fees, and commission fees)

The withholding tax rate is progressive, depending on the amount of income (0-37%) or

15% if the recipient of income is a foreigner, who does not stay in Thailand over 180 days.

1.3. Income from interest

15% of the payment

1.4. Income from dividend

10% of the payment

1.5. Income from rent

5% of the payment

1.6. Income from liberal profession (i.e. laws, arts of healing, engineering, and architecture)

3% of the payment or

15% of the payment if the recipient of income is a foreigner, who does not stay in Thailand over 180 days.

1.7. Income from a contract of work and labor, whereby the contractor provides essential material, besides tools

3% of the payment

1.8 Income from Royalty

The withholding tax rate is progressive, depending on the amount of royalty paid (0-37%)

15% if the recipient of income is a foreigner, who does not stay in Thailand over 180 days.

At the end of the year, each taxpayer has to submit a tax computation to the Revenue Department. This tax computation needs to contain all income generated during the year. On this basis, the total personal income tax is calculated by the Revenue Department, considering the tax already withheld during the year, which is deducted from the calculation. Depending on how much tax was withheld, a payback or an additional payment might be possible.

However, if an individual taxpayer earns income in form of interest, or dividend he has the right to choose whether this payment is to be considered in his tax computation.

2. Thai Corporate Taxpayer

A Thai Company, submitting payments to another Thai Company, is not required to withhold income tax except the Revenue Code says so. The important exemptions are:

2.1. Income from services provided (i.e. fees, brokerages, meeting fees, and commission fees)

3% of the payment

2.2. Income from interest

1% of the payment paid to a Thai Company

0% of the payment paid to a Thai Bank

2.3. Income from dividend

See Newsletter Number 72

2.4. Income from rent

5% of all rental payments made and 10% of rental payments made to associations and foundations

2.5. Income from liberal profession (i.e. laws, arts of healing, engineering, and architecture)

3% of the payment

2.6. Income from payments to contractors who provide essential materials besides tools

3% of the payment

2.7. Income from royalty

3% of the payment

2.8. Income paid by Government Agency

1% of the payment

2.9. Income paid from the sale of goods

0% of the payment

3. Foreign Company (in case of “not carrying on business in Thailand”)

A foreign company, which does not carry on business in Thailand, (by having a branch office, employment, representative or go-between in Thailand), but derives income in Thailand, is generally subject to Thai Income Tax.

3.1. Income from services provided (i.e. fees, brokerages, meeting fees, and commission fees)

15% of the payment

3.2. Income from interest

15% of the payment

3.3. Income from dividend

10% of the payment

3.4. Income from rent

15% of the payment

3.5. Income from liberal profession (i.e. laws, arts of healing, engineering, and architecture)

15% of the payment

3.6. Income from royalty

15% of the payment

3.7. Income from capital gain

15% of the payment

However, the withholding tax rate might be lower due to a double taxation agreement between Thailand and a foreign country (“DTA”).

Comments

(1). Compared to the other tax rates, the tax payable on dividends is with 10% rather low. The reason for this can be found in the tax policy of the Thai Government. Since the Corporate Income Tax is already at the rate of 30%, the tax rate on dividends is not meant to be subject to a full taxation again.

(2). If a foreign company rents property to a Thai Company, the Thai Company is generally required to withhold tax at the rate of 15% on rental income.

On the other hand, if a foreign company is carrying on business in Thailand by renting property to a Thai Company, such Company has to withhold tax at the rate of 5% on the rent payment. Additionally, the foreign company has to pay corporate income tax at the rate of 30% on its net profits from rental business.

(3). Under most DTA (e.g. Thailand and Germany) withholding tax rate on interests is reduced from 15% to 0% if the lender is a (German) Bank. The rate on capital gain is reduced the same way, if the seller of a Thai Company’s stock is a German Company.

4. Foreign Company (in case of “carrying on business in Thailand”)

Foreign companies, which are carrying on business in Thailand (by having a branch office, employment, representative or go-between in Thailand and derive income in Thailand), are subject to pay tax in form of withholding tax. Important withholding tax rates are described below by categories of income:

4.1. Income from services provided (i.e. fees, brokerages, meeting fees, and commission fees)

5% of the payment

4.2. Interest paid

1% of the payment

4.3. Income from dividend

10% of the payment

4.4. Income from rent

5% of the payment

4.5. Income from liberal profession: namely, laws, arts of healing, engineering, and architecture

3% of the payment

4.6. Income from payments to contractors who provide essential materials besides tools

5% of the payment

3% of the payment if such foreign contractor has a permanent branch office in Thailand. According to Departmental Instruction No. paw 8/2528, the foreign contractor shall be treated as having a permanent branch office in Thailand only if:

a). He is the owner of this office in Thailand, or

b). he carries on other business in Thailand besides engaging in contract works, for instance, purchase and sale of goods, or

c). he has a provident fund set up for the benefit of his employees in Thailand.

Generally, the objective of the provident fund is voluntarily set up by the employees and the employer in order to promote savings, so that employees retired or dismissed from work would have a means of living without depending on State’s welfare or families.

The provident fund can be established by at least one employer and one employee. The law requires the fund to be managed by a Fund Management Company, who is neither the employee, nor the employer. For the employee, the contribution is deducted from wages at the rate not less than 2% but not exceeding 15%. For the employer, the contribution is made at the rate not less than the contribution from employee but not exceeding 15% of wages.

4.7. Income from royalty

3% of the payment

4.8. Repatriation of profit

10% of the payment made from the branch in Thailand to the foreign company.

Additionally, foreign companies, which carry on business in Thailand, are required to pay corporate income tax at a rate of 30% on their net profit as a result of doing business in Thailand but can use the tax withheld as the credit against income tax.

WITHHOLDING TAX:

Definitions:

¹hire of service: contract to perform a service (mostly on hourly basis)

example: Call centre

²hire of work: contract to perform and to finish work, to deliver a work, result example: constructing a building

³resident: Individual who stays in Thailand over 180 days,

Sec. 41 (III) RC

⁴non resident: all other individuals

⁵ liberal professions: namely laws, arts of healing, engineering, architecture, accountancy, fine arts or such other liberal professionals as may be specified by Royal Decree

⁶ non liberal professions: any other individuals or private persons, work or service

⁷ DTA: Double Taxation Agreement (with Thailand)

⁸carrying on business: a foreign company with business in Thailand, but having no office or branch and no permanent establishment

⁹ not carrying on business: a foreign company has no business within Thailand

¹⁰ permanent established: a foreign company with a permanent branch, place of management, an office, a factory, a workshop, a mine, quarry or other place of extraction of natural resources.

Quotation of the law:

Hire of service REVENUE CODE, Section 50 (1), last sentence:

(15%) All persons, partnerships, companies, associations or bodies of persons with assessable income under Section 40 shall deduct income tax at each time of payment of the income in accordance with the following rules:

(1) In the case of assessable income …, which is paid to a recipient who is not a resident of Thailand, deduction shall be made at the rate of 15 percent of the income.

Rent (15 %) (3) In the case of assessable income under Section 40 (5) (= money or any other benefits derived from letting out properties on hire, breach of hire

purchase contract, or breach of a contract of installment sale) (15%)

Liberal profession (6) (=income from liberal professions) paid to a recipient

(15 %) who is not a resident of Thailand, deduction shall be made at the rate of 15 percent of the income.

REVENUE CODE, Section 69 bis:

Government pays Subject to the provisions of Section 70, in case the Government,

(1%) a governmental organization, municipality, sanitation district or other local government authority pays assessable income under Section 40 to any juristic company or partnership, tax shall be deducted at source at rate of 1 percent.

REVENUE CODE, Section 70:

A juristic company or partnership organized under a foreign law and not carrying on business in Thailand which received assessable income under Section 40 (2), (3), (4), (5), or (6) which is paid either from or in Thailand shall pay tax. The payer of the assessable income shall deduct the tax from the income tax rate for juristic companies and partnerships, and shall remit the tax and at the same time file a return in the form prescribed by the Director-General to the local Amphur within seven days from the last date of the month in which the payment is made. In this connection, the provisions of Section 54 shall apply mutates mutandis.

Interest The provisions of the first paragraph shall not apply in the case (0%) where a juristic company or partnership incorporated under

foreign law receives assessable income in the nature of interest paid by the Government or by, a financial institution organized by

a specific law for the purpose of lending money to promote agriculture, commerce, or industry.

** REVENUE DEPARTMENT`S REGULATION No. Taw. Paw. 4/2528, clause 5,6(2),7 (1) and 8 (2),(3):

Dividends (10%) CLAUSE 5: Every juristic company or partnership organized under the Thai law […] not including a joint-venture, who pays dividends, shares of profits or any other benefits under Section 40 (4) (b) of the Revenue Code shall deduct tax at source at the rate of 10% if the payment is made to a recipient being a juristic company or partnership organized under a foreign law and carrying on business in Thailand or a partnership organized under the Thai law, but not including-

(1) A listed company,

(2) A limited company other than (1) that holds at least 25 percent of the total shares with voting rights in the limited company paying the dividends provided that the latter company does not hold any share in the limited company receiving the dividends whether directly or indirectly.

Rent (5%) CLAUSE 6 (paragraph 1): Every juristic company or partnership or any juristic person who pays rent …, to a recipient being-

(2) a juristic company or partnership carrying on business in Thailand other than that specified in (3) shall deduct tax at source at the rate of 5.0 percent;

Liberal profession CLAUSE 7: Every juristic company or partnership or any other

(3%) Juristic person who pays professional income under Section 40 (6) of the Revenue Code (Income from liberal professions only) to a recipient being-

(1) a person liable to personal income tax or corporate income tax (…), only if such person is domiciled in or a resident of Thailand or carrying on business in Thailand, as the case may be, shall deduct tax at source at the rate of 3.0 percent.

Hire of work clause 8: Every juristic company or partnership or any

(3 %) other juristic person who pays assessable income in the nature of remuneration for hire of work to a recipient being:

(1) a person liable to personal income tax, only if the remuneration is the assessable income under Section 40 (7) (= Income derived from a contract of work whereby the contractor provides essential materials besides tools) or (8) (= Income from business, commerce, agriculture, industry, transport or any other activities) of the Revenue Code, shall deduct tax at source at the rate of 3.0 percent;

(2) a juristic company or partnership organized under Thai law … , shall deduct at source at rate of 3.0 percent;

(3) a juristic company or partnership organized under a foreign law and carrying on business in Thailand with a permanent branch office in Thailand shall deduct tax at source at the rate of 3.0 percent.

REVENUE DEPARTMENT`S REGULATION No. Taw. Paw. 4/2528, clause 12:

Hire of work Every person, (juristic company …), who pays assessable income

(5 %) in the nature of remuneration for hire of work to a contractor being a juristic company or partnership organized under a foreign law and carrying business in Thailand without a permanent branch office in Thailand, shall deduct tax at source at the rate of 5.0 percent.

*** MINISTERIAL REGULATION No. 144 (B.E. 2522),

clause 2 (5),(9):

There shall be computed and deducted tax at source on every occasion of paying assessable income at such percentage of the amount of the assessable income according to category of assessable income as follows:

(5) Payment of assessable income to a juristic company or partnership under a foreign law and carrying on business in Thailand: 5.0 percent.

(9) Payment of remuneration for hire of work: 3.0 percent.

**** DOUBLE TAXATION AGREEMENT Germany-Thailand (DTA)

DTA Article 7 (1): The profits of an enterprise of a Contracting State shall be taxable only in that State when the company is registered, but if the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in that other State but only so much of them as is attributable to that permanent establishment.

Article 14:

(1) Subject to the provisions of Article 15,16 and 17 remuneration derived by an individual who is a resident of a Contracting State in respect of personal services (including the practice of a liberal profession) shall be taxable only in that State unless the services are rendered in the other Contracting State. If the services are so rendered, such remuneration as is derived there from may be taxed in that other State.

(2) Notwithstanding the provisions of paragraph 1, remuneration derived by an individual who is a resident of a Contracting State in respect of such service rendered in the other Contracting State shall be taxable only in the first-mentioned State if:

(a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned, AND

(b) the remuneration is paid by, or on behalf of, a person who is not a resident of the other State, AND

(c) the remuneration is not borne by a permanent establishment which the person paying the remuneration has in the other State.

Countries having a DTA:

Austria Hungary Netherlands Sri Lanka

Australia Indonesia New Zeeland Sweden

Bangladesh Israel Norway Switzerland

Belgium Italy Pakistan Taiwan

Canada India Philippines United Kingdom

China Japan Poland United States of America

Czech Republic Laos Romania Uzbekistan

Denmark Luxembourg Singapore Vietnam

Finland Malaysia South Africa

France Mauritius South Korea

Germany Nepal Spain

Möglichkeiten der Steueroptimierung bei Mietverträgen

Thailand / Deutschland

I. Welche Steuern fallen an?

- House and Land Tax

- Corporate Tax / Personal Income Tax

- VAT

- Stamp Duty

Es ist möglich, statt eines einheitlichen Mietvertrags mehrere, voneinander unabhängige Verträge abzuschließen. Denkbar ist etwa die Aufsplittung in:

1. Mietvertrag über die Räumlichkeiten

2. Servicevertrag (z.B. für Security Guard)

3. Mietvertrag für die Inneneinrichtung

Für jeden Vertrag gelten nunmehr eigene steuerrechtliche Besonderheiten:

1. Der Mietvertrag über Räumlichkeiten

1.1. Die Mieteinnahmen für Räumlichkeiten unterfallen der House and Land Tax in Höhe von 12,5 %. Diese ist jährlich auf die gesamten Mieteinkünfte zu zahlen und kann zusammen mit anderen Kosten von den gesamten Mieteinnahmen abgezogen werden. Der so ermittelte Gewinn/Überschuss ist mit der Körperschaftsteuer von 30% oder der Personal Income Tax zu versteuern.

1.2. VAT ist auf die Mietsumme für unbewegliche Sachen bzw. Gebäude nicht zu zahlen.

Vermietung und Verleasen sowohl unbeweglicher als auch beweglicher Sachen ist eine Dienstleistung (provision of service), deren Vergütung grundsätzlich gem. Section 77/2 RC der VAT unterfällt. Jedoch ist das Vermieten und das Verleasen von unbeweglichen Sachen bzw. von Gebäuden durch Section 81 (1) (r) RC von der VAT ausgenommen. Daher wird bei der Vermietung und dem Verleasen von unbeweglichen Sachen bzw. Gebäuden keine VAT fällig.

Zu beachten ist allerdings, dass Miet- und Leasingverträge von den thailändischen Finanzbehörden häufig nicht als solche anerkannt, sondern als dem unterfallende Dienstleistungsverträge eingeordnet werden, mit der Folge, dass die Ausnahme des Sec. 81 (1) (r) RC nicht greift. So wurde die Überlassung des Teils eines Korridors, in dem der „Leasingnehmer“ Maschinen aufstellte, nicht als Leasing anerkannt, mit der Folge, dass der Eigentümer VAT zu entrichten hatte.

Auch die Übertragung von Rechten aus Miet- und Leasingverträgen wird von den Finanzbehörden in Übereinstimmung mit D.I. No. Paw. 49 / 2542 und unter Abkehr von der früheren Praxis (vgl. No. Gor Khor 0811 / Phor. Gor. 632 vom 22. November 2001) nicht länger unter die Ausnahmeregelung des Sec. 81 (1) (r) RC subsumiert.

1.3. Vor dem Hintergrund, dass der Grundstückserwerb in Thailand für Ausländer relativ schwierig ist und Miet- bzw. Leasingverträge oftmals keine optimale Lösung darstellen, lassen viele Ausländer eine Dienstbarkeit (servitude) registrieren. Dabei ist freilich zu beachten, dass Sec. 81 (1) (r) RC ggf. nicht greift und der an den Grundstückseigentümer als Gegenleistung gezahlte Betrag der VAT unterfällt.

1.4. Beim Abschluss eines Mietvertrages über Räumlichkeiten fällt die sog. Stamp Duty in Höhe von 0,1 % auf den „Vertragswert“, also auf die gesamte Mietsumme während der Laufzeit des Vertrages, an. Sollte eine unbegrenzte Vertragslaufzeit vereinbart worden sein, wird für die Berechnung der Stamp Duty eine Laufzeit von 3 Jahren fingiert.

1.5. Der in Thailand steuerregistrierte Mieter (i.e. Thai-Company) hat 5 % Withholding Tax von der Mietsumme einzubehalten und an das Revenue Department abzuführen (Sec. 40 (5) (a) R.C., 3 tredecim R.C., D.G. N. No. Thor. Por. 4 / 2528). Der Vermieter erhält insoweit einen verrechenbaren Tax-Credit in entsprechender Höhe. Die Withholding Tax beträgt 15 %, wenn der Vermieter non-resident/Company not carrying out business in Thailand ist (Sec. 40 (5) (a) R.C., Sec. 50 (3) R.C.).

2. Servicevertrag

Auf den Servicevertrag, der das Gebäude betrifft, wird 7% VAT auf die regelmäßig zu entrichtende Gebühr zuzüglich 0,1 % Stamp Duty auf den „Vertragswert“ fällig.

Der Mieter (z.B. Thai-Company) hat 3 % Withholding Tax von der Servicegebühr einzubehalten und an das Revenue Department abzuführen (Sec. 40 (5) (a) R.C., 3 tredecim R.C., D.G. N. No. Thor. Por. 4 / 2528). Der Vermieter erhält insoweit einen verrechenbaren Tax-Credit in entsprechender Höhe.

3. Mietvertrag für die Inneneinrichtung

Eine getrennte Anmietung der Inneneinrichtung hat den Vorteil, dass die Stamp Duty entfällt. Allerdings sind 7 % VAT auf die Mietsumme zu zahlen. Gem. Section 3 (1) Royal Decree (No. 246) unterfällt die Vermietung von beweglichen Gegenständen der VAT.

Der Mieter hat auch hier 5 % Withholding Tax einzubehalten und an das Revenue Department abzuführen. Der Vermieter erhält insoweit einen verrechenbaren Tax Credit in entsprechender Höhe.

4. Schlussbemerkung

Bitte beachten Sie, dass eine etwaige Aufsplittung des Mietvertrages den tatsächlichen Umständen Rechnung trägt und einer kritischen Überprüfung durch die Finanzbehörden standhält.

Dass Vorsicht geboten ist, zeigt der Fall des Vermieters, der versucht hat, die Stamp Duty zu umgehen, indem er Gegenstände wie Telefon- und Sprinkleranlage in einem eigenen Mietvertrag zusammenfasste und somit als “movable items“ vermietete. Die Beendigung eines Vertrages sollte nach der getroffenen Vereinbarung die Auflösung der anderen Verträge zur Folge haben.

Nach der Entscheidung des Revenue Departments waren die Verträge jedoch als einheitlicher Vertrag zu behandeln, so dass im Ergebnis die Stamp Duty doch anfiel.

II. Überblick

		VAT auf Mietsumme (z.Zt. 7%)	Stamp Duty auf die gesamte Mietsumme der Vertragslaufzeit (max. 3 Jahre)	Withholding Tax auf Miete/ Gebühr	House and Land tax pro Jahr auf die gesamten Mieteinkünfte	30%Corporate Tax / 0-37% Pers. Income tax auf die Mieteinkünfte nach Abzug von „House and Land tax“ und anderer Kosten
1.	Mietvertrag Räume	n.a.	0,1 %	5% (resident ) / 15% (non-resident) /5% (Company carrying on business in Thailand) /15 % (Company not carrying on business in Thailand)	12,5 %	+ (aber an-rechenbarer Tax Credit der Withholding Tax)
2.	Mietvertrag Mobiliar	7 %	0 %	5 %	n.a.	+ (aber an-rechenbarer Tax Credit der Withholding Tax)
3.	Service Vertrag	7 %	0,1 %	3 %	n.a.	+ (aber anrechenbarer Tax Credit der Withholding Tax)

n.a.= not applicable

Obwohl Lorenz & Partners Co., Ltd. größtmögliche Sorgfalt darauf verwenden, die in diesem Newsletter bereitgestellten Informationen stets auf aktuellem Stand für Sie zur Verfügung zu stellen, möchten wir Sie darauf hinweisen, dass dieser eine individuelle Beratung nicht ersetzen kann. Lorenz & Partners Co., Ltd. übernimmt keinerlei Gewähr für die Aktualität, Korrektheit, Vollständigkeit oder Qualität der bereitgestellten Informationen. Haftungsansprüche gegen Lorenz & Partners Co., Ltd., welche sich auf Schäden materieller oder ideeller Art beziehen, die durch die Nutzung oder Nichtnutzung der dargebotenen Informationen bzw. durch die Nutzung fehlerhafter und unvollständiger Informationen verursacht wurden, sind grundsätzlich ausgeschlossen, sofern seitens Lorenz & Partners Co., Ltd. kein vorsätzliches oder grob fahrlässiges Verschulden vorliegt.

- Withholding Tax Certificate für Zinszahlungen von Thailand nach Deutschland

- Fremdwährungsrechnungen innerhalb Thailands

A. Withholding Tax Certificate für Zinszahlungen von Thailand nach Deutschland

Die Withholding Tax ist eine Quellensteuer auf das steuerbare Einkommen von Privatpersonen und Unternehmen, ist also Einkommen- und Körperschaftsteuer. Sie stellt insofern keine zusätzliche Steuer dar, sondern ist lediglich eine Erhebungsform der Einkommensteuer. Der Zahlende muss die Steuer von dem Einkommen bzw. der Rechnung direkt einbehalten und abführen (Sec. 50, 52, 53 RC).

Für ausländische Unternehmen gilt, dass bei geringerer Zugriffsmöglichkeit des thailändischen Staates eine höhere Quellensteuer verlangt wird, also z.B. dann, wenn nur vorübergehend und ohne Niederlassung in Thailand Geschäfte gemacht werden.

Die einbehaltene Steuer kann mit der in Thailand zu zahlenden Einkommen- bzw. Körperschaftsteuer verrechnet werden (Sec. 60 RC). Dies geschieht über einen Tax Credit, der bei Zahlung der Withholding Tax eingeräumt wird. Zum Nachweis erhält der Zahlungsempfänger vom Zahlenden ein Tax Certificate über die einbehaltene Steuer. Diese Tax Certificates werden zusammen mit der Jahressteuererklärung beim Finanzamt eingereicht.

Für den Fall, dass ein thailändisches Unternehmen an ein deutsches Unternehmen Darlehenszinsen zahlt, sind von diesen Zinsen 15 % Quellensteuer in Thailand einzubehalten und abzuführen (siehe Section 70 Revenue Code und siehe Artikel 7 DBA (Doppelbesteuerungsabkommen).

Bezüglich dieser abgezogenen Quellensteuer ist von der Direktion des zuständigen Finanzamtes ein "Non Resident Withholding Tax Deduction Certification" (siehe Anlage) zu beantragen und auszufüllen.

Darin muss

- der Name des Zinsempfängers sowie

- Name und Adresse des Quellensteuer-Abzugsverpflichteten

- sowie der Gross-Amount,

- Tag des Empfanges

- sowie Zinsbetrag und

- Tag der Zahlung

angegeben werden.

Mit diesem Certificate kann nunmehr nachgewiesen werden, dass die Quellensteuer ordnungsgemäß an das Finanzamt in Thailand abgeführt wurde.

Dieses Certificate ist notwendig, damit die deutsche Gesellschaft, die Empfänger der Zinszahlung ist, diese mit gegebenenfalls weiteren in Deutschland zu zahlenden Steuern verrechnen kann.

B. Fremdwährungsrechnungen innerhalb Thailands

Häufig wird behauptet, dass innerhalb Thailands Fremdwährungsrechnungen nicht zulässig sind.

Dies ist nicht zutreffend.

Genauso wie eine ausländische Gesellschaft an eine thailändische Gesellschaft eine Rechnung in jeder Fremdwährung stellen kann, ist dies grundsätzlich auch innerhalb Thailands möglich.

Allerdings weist dies, was die Berechnung der Quellensteuer und VAT betrifft, Besonderheiten auf, die dadurch verkompliziert werden, dass die Wechselkursrate im einzelnen davon abhängig ist, ob per Scheck oder per Überweisung gezahlt wird.

Im Standardfall stellt beispielsweise eine thailändische Gesellschaft einer anderen eine Rechnung über 100 US$ für Service.

Von diesem Rechnungsbetrag sind

- 3 % Quellensteuer einzubehalten und abzuführen sowie weitere

- 7 % VAT auf den Rechnungsbetrag von 100 auszuweisen

und an das zuständige Finanzamt zu zahlen (die VAT ist bis zum 15. eines jeden Monats und die Quellensteuer bis zum 07. eines jeden Monats fällig).

Da Zahlungen an das Finanzamt nur in Thai Baht zulässig sind, ist folgende Berechnung vorzunehmen:

- Bezüglich der Hauptsumme (in unserem Beispiel 100) ist die von der Bank of Thailand am Vortag bekanntgegebene Selling Rate in Anwendung zu bringen

- für die Berechnung der Quellensteuer die Buying Rate und

- für die Berechnung der VAT wiederum die Selling Rate.

Die Berechnung des tatsächlichen Zahlbetrages des Rechnungsempfängers (in unserem Beispiel hat der Rechnungsempfänger 100 – 3 + 7 = 104 zu zahlen) hängt davon ab, wie er die Zahlung ausführt.

Für den in Thailand immer noch sehr häufigen Fall der Scheckzahlung ist die Cash Rate in Anwendung zu bringen, für den Fall, dass via Baht-Net respektive Überweisung gezahlt wird, ist die tt Rate, die Electronic Transfer Rate, anzuwenden. Die tt Rate ist üblicherweise höher, allerdings können Überweisungen grundsätzlich am gleichen Tag durchgeführt werden.

Fremdwährungsrechnungen sind also auch innerhalb Thailands möglich und gerade bei größeren Projekten mit einem gewissen Importanteil auch sinnvoll.

Wir hoffen, dass Ihnen diese Informationen dienlich sind.

Sollten Sie weitere Informationen benötigen, sind wir Ihnen gerne behilflich.

Problematik der Dividendenausschüttung bei nicht vom BOI geförderten thailändischen Firmen unter spezieller Berücksichtigung des „Cross-Shareholdings“

1. Basics

Zunächst ist die vom Gewinn ausschüttbare Dividende zu berechnen.

Dafür sind 30 % Körperschaftssteuer vom Bruttogewinn abzuziehen. Danach sind vom sich hieraus ergebenden Nettogewinn 5 % bis zu einem Höchstbetrag von 10 % des registrierten Kapitals als Mindestreserve einzustellen. Der sich hieraus ergebende Restbetrag unterliegt sodann bei Ausschüttung 10 % Withholding Tax.

2. Beteiligung </>25% (Section 65 bis Abs. 10 RC)

a. Anteilsbesitz unter 25%

Der Anteilsbesitz unter 25 % stellt nach Sec. 65 bis Abs. 10 S.1 RC den Grundfall der Berechnung der ausschüttbaren Dividende dar.

In diesem Grundfall hat das empfangenende Unternehmen, die unter 1. berechnete ausschüttbare Dividende in Hälfte als steuerpflichtiges Einkommen einzustellen. Sollte das die Dividende empfangende Unternehmen einen Gewinn verbuchen, so können die 10 % Quellensteuer, die vom ausschüttenden Unternehmen bereits gezahlt wurden, als sog. „Tax Credit“ auf die zu zahlenden Körperschaftssteuer voll angerechnet werden.

b. Anteilsbesitz über 25 %

Einen Sonderfall stellt Sec. 65 bis Abs. 10 S.2 RC dar.

Für den Fall, dass ein thailändisches Unternehmen an einem anderen ausschüttenden thailändischen Unternehmen mehr als 25 % der Anteile mit Stimmrecht hält und das ausschüttende Unternehmen keine Anteile an dem Unternehmen hält, an das auszuschütten ist, kommt dem Unternehmen das Schachtelprivileg zugute. Die unter 1. berechnete ausschüttbare Dividende ist nicht vom empfangenenden Unternehmen als steuerpflichtiges Einkommen einzustellen.

Darüber hinaus hat das Unternehmen an das ausgeschüttet wird, ein Tax Credit in Höhe von 10 %, des ursprünglichen Anteils am Bruttogewinn.

3. Cross-Shareholding

Die steuerrechtliche Problematik des Cross-Shareholdings zeigt sich deutlich am Beispiel des Sec. 65 bis Abs. 10 RC. Die kumulativ vorhanden sein müssenden Voraussetzungen der Sec. 65 bis Abs. 10 S.2 RC sind:

- mehr als 25 % der Anteile am ausschüttenden Unternehmen

- Anteile mit Stimmrecht

- Keine Anteile am Unternehmen an das ausgeschüttet wird.

Zumindest der dritte Punkt liegt bei einem Cross-Shareholding naturgemäß gerade nicht vor. Dies hat zur Folge, dass der Grundfall der Sec. 65 bis Abs. 10 RC Anwendung findet.

4. Ergebnis

Im Falle des Cross-Shareholdings ist gem. Sec. 65 bis Abs. 10 S.1 RC von einer Besteuerung des hälftigen Netto-Gewinns auszugehen. Hierbei ist jedoch eine Anrechnung der vom ausschüttenden Unternehmen gezahlten Quellensteuer möglich.

5. Problematik

Dies führt zu einer Problematik, die in einem Zirkelschluss endet:

- A schüttet eine Dividende an B aus;

- B zahlt Körperschaftssteuer auf die empfangene Dividende;

- Nunmehr hat B anteilig die empfangene Dividende an A auszuschütten;

- A hat wiederum Körperschaftssteuer auf die empfangene Dividende zu zahlen;

- und so weiter (...)

Im folgenden Beispiel eine ausführliche Berechnung :

-- Cross Shareholding

100% Shares of A

Company A Company B

100% Shares of B

-- Company A

Income: 200,00

Expenses: 100,00

Gewinn vor Steuern: 100,00

- 30 % Corporate Tax: 30,00

_______

Gewinn nach Steuern 70,00

- 10 % Withholding Tax 7,00

(bei Dividendenausschüttung) _______

Ausschüttbare Dividende 63,00

A pays to B: 63,00

-- Company B

Income (nur Dividende): 63,00

Expenses: 0,00

Gewinn vor Steuern 63,00

Gem. Section 65 bis Abs. 10 RC

steuerpflichtig (50%) 31,50

- 30 % Corporate Tax: 9,45

+ Tax Credit 7,00

_______ 29,05

+ nicht steuerpflichtiger Gewinn 31,50 _______

Gewinn nach Steuern 60,55

d.h.:

Gewinn vor Steuern 63,00

-Gewinn nach Steuern 60,55

______

Steuerlast 2,45

Gewinn Company A vor Steuern: 100.00

Gewinn Company B nach Steuern 60,55

Steuerlast 39,45 %

Additional Tax 9,45 %

6. Ergebnis

Zusammenfassend kann festgestellt werden, dass das Vorgenannte einen interessanten Denkansatz zur Unternehmensplanung darstellt. Nicht außer Acht gelassen werden darf jedoch eine umfassende Steuerplanung, bei der das „Cross-Shareholding“ eine interessante zusätzliche Alternative der Steueroptimierung ist.

Haftung von Direktoren

einer thailändischen Unternehmung

I. Einleitung

Die Haftung von Direktoren für Verbindlichkeiten der durch sie vertretenen Unternehmung unter thailändischem Recht entspricht vom Grundsatz her der persönlichen Haftung von Geschäftsleitern nach dem deutschen GmbHG bzw. dem AktG. Als Direktoren werden nachfolgend die Mitglieder der Geschäftsleitung bezeichnet, seien es Geschäftsführer, Vorstände oder andere die Gesellschaft nach außen vertretende Organe. Die Gründung eines Unternehmens in Thailand durch ausländische Investoren erfolgt zumeist in Form einer Company Limited. Hierbei handelt es sich um eine der deutschen GmbH vergleichbare Kapitalgesellschaft. Sie ist ebenso dadurch gekennzeichnet, dass sie eine von den Gesellschaftern unabhängige Rechtspersönlichkeit besitzt und dass die Gesellschafter daher grundsätzlich nicht für Schulden und Verbindlichkeiten der Gesellschaft haften. Nach Section 1096 des Civil and Commercial Code (CCC) können die Gläubiger grundsätzlich nur auf das Gesellschaftsvermögen zugreifen.

Unternehmen werden in Thailand vom Board of Directors geführt, welche vom General Meeting der Shareholder gemäß Section 1121 CCC gewählt werden. Dieses „Board“ ist gegenüber den Gesellschaftern als Vertreter des Unternehmens und gegenüber Dritten (dem Staat, Vertragspartnern, Mitarbeitern) als Handlungsorgan der Gesellschaft verantwortlich.

Anders als das deutsche Recht enthält das thailändische Recht jedoch zahlreiche Haftungsregelungen, die den o.g. Grundsatz für den Direktor modifizieren und gegenüber dem deutschen Recht erweitern.

Gemäß Sec. 1144 CCC werden die Geschäfte der Gesellschaft von einem oder mehreren Geschäftsführern (Board of Directors) geführt. Als Haftungsschuldner kommen daher sowohl das sog. „Board of Directors” als auch der einzelne Director in Betracht.

Eine Haftung der Direktoren kann dabei gegenüber der Gesellschaft, gegenüber einzelnen Gesellschaftern oder auch gegenüber Dritten, etwa Vertragspartnern der Gesellschaft, bestehen. Wegen der unterschiedlichen Haftungsgrundlagen ist stets – auch unter prozessualen Aspekten - darauf zu achten, wem gegenüber gehaftet werden soll.

II. Haftung nach Zivilrecht

1. Generelle Verpflichtungen

Nach Section 1168, Absatz 1 CCC müssen die Direktoren in der Unternehmensführung die Sorgfalt eines verantwortungsbewussten und sorgfältigen Geschäftsmannes übernehmen. Diese Regelung wurde vom Obersten Gericht zum Anlass genommen, folgende Verpflichtungen der Direktoren bei der Unternehmensführung generalklauselartig festzulegen:

· Pflicht zum „redlichen Handeln“:

Direktoren müssen die Interessen aller – und nicht lediglich einiger oder vieler – Gesellschafter wahren und können nicht Handlungen vornehmen, die nach dem Gesetz oder der Gesellschaftssatzung den Gesellschaftern zustehen. In diesem Sinne haben sich die Direktoren ständig zu fragen, wie die Interessen des Unternehmens und der Gesellschafter am besten wahrzunehmen sind und entsprechend zu handeln.

· Pflicht zur „Sorgfalt und zum Fleiß“:

Entsprechend der Regelung in Section 1168 CCC haben die Direktoren das Unternehmen in einer sorgfältigen Weise zu führen, wobei die Anforderungen denen eines risikobewussten und achtsamen Geschäftsmannes entsprechen.

Direktoren sind ebenfalls zur Loyalität gegenüber dem Unternehmen verpflichtet, woraus gleichsam das Verbot folgt, in einer in Section 1168, Absatz 3 CCC beschriebenen Art und Weise in Konkurrenz zu dem Unternehmen zu treten.

2. Weitere gesetzliche Verpflichtungen

Neben den in Section 1168 CCC beschriebenen Verpflichtungen bestehen weitere Pflichten der Direktoren eines thailändischen Unternehmens, die im CCC niedergelegt sind. Obgleich die jeweiligen Tätigkeiten in der Praxis oftmals von anderen Personen ausgeführt werden, ist das Board of Directors für die ordnungsgemäße Vornahme verantwortlich. Zu nennen sind insbesondere die Pflichten zur:

· Mahnung von noch ausstehenden Einlagen (Sect. 1120),

· Weiterleitung der Bilanzen zum Handelsregister des Wirtschaftsministeriums (Sect. 1198, 1199),

· Weiterleitung der Liste aller Gesellschafter zum Handelsregister des Wirtschaftsministeriums (Sect. 1139),

· Einberufung einer gemeinsamen Versammlung aller Gesellschafter zur Darstellung der Unternehmenssituation (Sect. 1171, 1172).

3. Verpflichtung zur ordnungsgemäßen Buch- und Protokollführung

Von besonderer Bedeutung ist ferner, dass der CCC in Sec. 1206 nicht das Unternehmen, sondern die Direktoren zur Erstellung und Aufrechterhaltung einer wahrheitsgemäßen und vollständigen Buchführung anhält. Die Direktoren haben insbesondere darauf zu achten, dass die in das Unternehmen einfließenden und die vom Unternehmen ausgegebenen Geldbeträge ordnungsgemäß verbucht werden und die Aktiv- und Passivposten des Unternehmens einer korrekten Buchführung unterliegen.

Des weiteren ist in Section 1214 CCC festgelegt, dass die Rechnungsprüfer (Auditoren) zwar Gesellschafter, nicht aber Direktoren des Unternehmens sein dürfen.

Gemäß Section 1207 CCC haben die Direktoren schließlich Protokolle über die Versammlungen der Gesellschafter und Direktoren zu erstellen und zugleich die Verantwortung für die Wahrheit und die Vollständigkeit der in den Protokollen wiedergegebenen Gesprächspunkte und Entscheidungen zu übernehmen.

4. Verpflichtung zur Teilnahme an Shareholder Meetings

Dem CCC ist keine Regelung zu entnehmen, wonach Direktoren verpflichtet sind, an den Shareholder Meetings des Unternehmens teilzunehmen. Infolge der bereits genannten Verpflichtung zur Wahrnehmung der Unternehmensinteressen als sorgfältiger und risikobewusster Geschäftsmann (Sect. 1168 CCC) und aufgrund der Regelung, wonach ein Direktor alle bedeutsamen Informationen weiterzuleiten hat, wird jedoch eine Anwesenheit der Direktoren nach allg. Ansicht sowohl beim Board-Meeting als auch bei der Gesellschafterversammlung für erforderlich gehalten. Eine Anwesenheitspflicht des Direktors bei jedem Board-Meeting lässt sich zudem mit der Überlegung begründen, dass jede Entscheidung der Direktoren in einem Board-Meeting als Entscheidung der gesamten Unternehmensführung gilt und es deshalb der individuellen Verpflichtung eines jeden einzelnen Direktors entspricht, an dem Zustandekommen intelligenter und vernünftiger Unternehmensentscheidungen beteiligt zu sein.

III. Strafrechtliche Haftung

Haftungsrisiken bestehen für die Direktoren sowohl in zivil- als auch in strafrechtlicher Hinsicht, wobei eine Haftung gegenüber dem Unternehmen, den Gesellschaftern und auch gegenüber dritten Personen begründet werden kann. Da ein Direktor in eigener Verantwortung für das Unternehmen tätig wird, kann er auch persönlich in Anspruch genommen werden. Dementsprechend bietet sich die Möglichkeit, unredlich handelnde Direktoren zu bestrafen und ihnen ein weiteres Tätigwerden für das Unternehmen zu verbieten.

1. Act on offence

Sofern ein Direktor verbotene Handlungen vornimmt, haftet er dementsprechend nicht nur zivilrechtlich für den dem Unternehmen entstandenen Schaden, sondern kann ggf. auch strafrechtlich zur Verantwortung gezogen und mit empfindlichen Strafen belastet werden.

Die Bandbreite der strafrechtlichen Verantwortung reicht von

· Section 26 “Act on offence concerning Registered Partnerships, Limited Companies, Associations and Foundations, B.E. 2499” (“Act on Offence”), bei der es ein Direktor unterlässt, eine Kopie der Liste aller (ehemaligen) Gesellschafter entsprechend der Bestimmung in Section 1139, Absatz 2 des CCC zu versenden, über

· Section 27 Act on offence, falls es ein Direktor unterlässt, entgegen den Bestimmungen in Section 1172 Absatz 2 CCC ein außerordentliches Meeting einzuberufen, nachdem das Unternehmen die Hälfte oder mehr des Kapitals verbraucht hat oder gemäß Section 1174 Absatz 1 CCC eine außergewöhn-liche Gesellschafterversammlung einzuberufen, wenn 51 % der Shareholder dies verlangen, bis zu

· Section 42 Act on offence, bei der derjenige, der für eine juristische Person verantwortlich ist, einen der folgenden Aufträge ausführt oder erteilt:

· Beschädigung, Vernichtung, Veränderung, Auslöschung oder Fälschung von Konten, Dokumenten oder sonstigen Sicherheiten betreffend die juristische Person oder ihre geschäftlichen Beziehungen,

· Auflistung wahrheitswidriger Einkünfte in den Konten, um in betrügerischer Weise dem Unternehmen, Partnern oder den Gesellschaftern die korrekten Einkünfte vorzuenthalten.

Die jeweiligen Strafen liegen bei Freiheitsstrafe von bis zu sieben Jahren und/oder eine Geldstrafe von bis zu 100.000 THB.

2. Accounting Act

Neben dem Unternehmen treffen auch den verantwortlichen Direktor die in Section 7 ff. Accounting Act niedergelegten Pflichten.

Im Einzelnen hat dieser z. B. die Verantwortung dafür zu tragen, dass

· die Bilanz des Unternehmens veröffentlicht wird (Sect. 7),

· die Buchführung nicht verspätet erfolgt (Sect. 9 und 10),

· ein Finanzbericht innerhalb von fünf Monaten nach Abschluss eines Rechnungsjahres abgegeben wird (Sect. 11),

· sämtliche Unterlagen vollständig und korrekt sind (Sect. 12)

· die Buchführungsunterlagen ordnungsgemäß für mindestens fünf Jahre aufbewahrt werden (Sect. 13 und 14).

Sofern gegen eine der o. g. Pflichten schuldhaft verstoßen wird, wird der für Korrektheit der Buchführung Verantwortliche – also der jeweilige Direktor – in den Sections 27 ff. Accounting Act strafrechtlich zur Verantwortung gezogen. Dabei sprechen die strafrechtlichen Bestimmungen von einer Geldbuße über einige hundert Baht bis zu 60.000 Baht und/oder bis zu drei Jahren Gefängnis z.B. bei vorsätzlicher Fälschung der Bücher.

3. Haftung nach dem Penal Code

Section 341 des Penal Code legt fest, dass es verboten ist, dem Vermögen einer anderen Person durch falsche Behauptungen oder durch das Vorenthalten von Tatsachen Schaden zuzufügen. Verstöße werden mit einer Freiheitsstrafe von bis zu drei Jahren und/oder mit einer Geldstrafe von bis zu 6.000 Baht geahndet.

In gleicher Weise kann nach Section 264 und Section 267 des Penal Code bestraft werden, wer Urkunden oder andere Dokumente fälscht oder unberechtigterweise herstellt und/oder diese Dokumente im Rechtsverkehr gebraucht, um dem Vermögen einer anderen Person Schaden zuzufügen. Bezieht sich die Handlung auf einen Schuldschein, eine Rechnung, einen Anteilsschein oder ein sonstiges öffentliches Dokument, erhöht sich die Strafe nach Section 266 auf eine Freiheitsstrafe von mindestens einem Jahr bis zu zehn Jahren bzw. auf eine Geldstrafe zwischen 20,000 und 100.000 Baht.

Section 353 legt schließlich fest, dass es verboten ist, eine durch Gesetz oder Rechtsgeschäft eingeräumte Befugnis, fremdes Vermögen zu betreuen und die Vermögensinteressen einer anderen Person wahrzunehmen, zu missbrauchen. Wird dem Vermögen der anderen Person durch pflichtwidriges Verhalten des Vermögensbetreuers ein Schaden zugefügt, so kann dieser mit einer Freiheitsstrafe von bis zu drei Jahren und/oder mit einer Geldstrafe von bis zu 6.000 Baht belegt werden.

Unser Rat: Schließen Sie eine Haftpflichtversicherung ab und/oder erreichen Sie einen schriftlichen Haftungsausschluss, um sich vor den oben genannten Risiken bestmöglich schützen zu können.

Supreme Court Decision Case No. 6837/ 2544 (2001)

The authorized director used, in the name of the company, fake tax invoice for the benefit of company’s tax credit. The director is a co- principal in this offence according to Section 83 of the Penal Code without having to cite Section 90/5 of the Revenue Code.

Supreme Court Decision Case No. 9442/2542(1999)

The disputed cheque was signed solely by one director while according to the articles of association of the company it requires two directors to sign. However, the company itself admitted that it has issued that cheque to secure a loan. It is deemed that the company has given ratification to that act of the director. The director does not have to be personally liable.

Supreme Court Decision Case No. 5343/2542(1999)

The managing director of the company made an offer to buy rice in the name of the company. The company acknowledged the offer and received benefits arising from the sale of rice. It is deemed that the managing director was held out as an agent of the company for this transaction. The company is liable to all obligations arising from the contract.

Supreme Court Decision Case No. 1426/2542(1999)

A claim against the director according to Section 1169 of the CCC is for compensation for damages caused by the director to the company only. A shareholder cannot ask the court to annul the previous contract made between the director and a third party.

Supreme Court Decision Case No. 5585/2541(1998)

The defendant entered into a contract for building construction with the plaintiff. The defendant, then, started a company as one of the promoters and became a company’s director. After the construction was completed, another director who also was a company’s promoter paid the construction cost. The company uses the building for its hotel business. It is deemed that the company agrees to and accepts the contract between the defendant and the plaintiff for its business benefits. Accordingly, the company shall be bound by such contract.

Supreme Court Decision Case No. 2191/2541 (1998)

As Directors of the Bank, their duties are to take care of overall businesses of the Bank including ordering the Bank’s officers to do their duties in accordance with the Bank’s regulations and complying with the Act governing Commercial Banks. Since there were approvals of credits for loans, guarantees which are not in accordance with the regulations of the Bank, and negligence in collecting repayment or doing anything in order to solve the problem which caused damages to the Bank, Directors are considered committing wrongful acts against the Bank and have to pay compensation to the Bank.

The Director who is responsible for domestic credit operations, had received reports on the Bank’s debt burdens in several occasions, but did not do anything which resulted in the Bank’s inability to collect the debt repayments. He is considered committing wrongful act against the Bank and has to pay compensation as well.

Section 1168 of the Civil and Commercial Code is a provision governing business operation of company by director. The extent of director’s authorities is according to Section 1158-1164. Moreover, commercial banking business has to rely on directors’

business expertise. Especially in this case when credit approvals were made without appropriate debt securities, even though they were in consistent with Section 12 (2) and 12 bis of the Commercial Bank Act, Directors of the Banks are considered neglected in performing their duties. Consequently, it is deemed that they are not applying their diligence in doing the Bank’s businesses. They cannot refuse their liabilities by arguing that they did not acknowledge the Bank’s operations, rarely went to the office, or did not have such duties.

Various Ways of Securing Performances and Obligations in Legal Relationships

Overview

In an ordinary course of business, a contracting party assumes the risk of non-performance of the obligations under contracts by the other party. Therefore, there have been certain legal inventions created in order to secure and guaranty such performances and obligations.

1. Letter of Credit (L/C)

A L/C is normally used to secure payments owed by buyers in trades of goods. In such a transaction, the supplier will ask the buyer to provide a letter of credit and the buyer will request its bank to issue such L/C in favour of the supplier.

1.1 Players Concerned

The parties to an L/C transaction will be recognized as 1) the Issuer, which is the bank issuing the L/C, 2) the Applicant, which is the buyer, and 3) the Beneficiary, which is the supplier.

1.2 The Laws, Rules, and Regulations

L/Cs usually are governed by the Uniform Customs and Practice for Documentary Credit (UCP 500), International Stand By Practice 1998 (ISP 1998), or other internationally accepted rules endorsed by the International Chamber of Commerce (ICC), the United Nations Commission on International Trade Law (UNCITRAL), or any other internationally accepted private organizations.

1.3 Factors Taken into Account

Drafting an L/C must be done very carefully since banks have a tendency not to honor L/Cs especially when the buyer is deemed likely to become insolvent, or a bankruptcy proceeding has been filed against the buyer.

2. Guaranties Governed by Thai Suretyship Doctrine

2.1 Players Concerned

The parties concerned in this transaction are, respectively, 1) the creditor, 2) the debtor, and 3) the guarantor, which is the person guaranteeing the obligations of the debtor

2.2 The Laws

Generally, creditors are not required to exhaust remedies against debtors or to look to any other party before collecting the debts from guarantors. Several Thai Supreme Court Decisions such as Decisions Nos. 804/2500, 3944/2525, and 2093/2526 supports this point of view.

In addition, all claims arising out of or incurred in connection with the obligations under the contract secured by such guaranty are subject to the 10-year prescription period under Thai law.

3. Independent Bank Guaranties

An independent guarantee is a totally independent contract between a bank and a third party and not directly related to the underlying contract. It is the so-called “abstract nature.” Such an instrument is widely used in a construction agreement, for example.

3.1 The Laws, Rules, and Regulations

An independent bank guaranty should be drafted in a way that it is governed by internationally accepted rules so that it can be construed in accordance with such rules and can maintain its independent characteristic. Otherwise, the guaranty might be interpreted wrongly as suretyship

3.2 Non-Return of the Guaranty Document; Legal Significance; Expiration

The independent guaranty document is neither a commercial paper nor a negotiable instrument. The retention of the document in itself is, therefore, of no legal significance.

4. International Bills of Exchange and Promissory Notes

Bills of exchange play an important role in commercial and financial segments not only as a method of payments or a means of providing credit, but also as security for credits.

4.1 The Convention on International Bills of Exchange and International Promissory Notes

A few years ago an attempt to harmonize the system of using and implementing bills of exchange initiated by UNCITRAL was concluded. The United Nations General Assembly unanimously approved the text of the Convention on International Bills of Exchange and International Promissory Notes in its 43^rd Plenary Session on December 9, 1988.

4.2 Specific Characteristics of the Convention

Bills and Notes which are governed by the Convention have certain specific and interesting characteristics, which may vary considerably from those governed by local laws. However, it is necessary to keep in mind that the governing law provision of such bills or notes must read in a way that it is governed by the Convention.

4.3 Permitted Delay in Making Payments

Delay in making payments may be permitted according to Article 56(1) of the Convention. In addition, Article 56 of the Convention also provides certain excuses for the issuer not to pay upon the presentment if the bill has been protested for dishonor by non-acceptance or if the drawer, an endorser, or a guarantor has expressly waived presentment.

4.4 Additional Liability under the Bills

Article 28(3) of the United Nations Convention on International Bills of Exchange and International Promissory Notes mandates that a holder who takes an instrument after the expiration of the time-limit for presentment for payment is subject to any claim to, or defense against liability on, the instrument to which his transferor is subject. Therefore, if you decide to purchase this instrument at discount, or being a transferee to the instrument, we insist that you investigate the terms and conditions and conduct such undertaking carefully.

5. Bills under Thai Law

In general, bills, under Thai Civil and Commercial Code, consist of 1) bills of exchange, 2) promissory notes, and 3) cheques (Sec. 898).

5.1 Bills of Exchange

In a bill of exchange transaction, a person called “drawer” orders another person called “drawee” to pay to, or pay to the order of, another person called “payee,” and under Section 914, any person drawing or indorsing a bill of exchange represents and warrants that, upon due presentment, the bill shall be accepted and paid in accordance with its terms provided that the holder of a bill of exchange must present the bill for payments upon its maturity (Sec. 941).

5.2 Promissory Notes

A promissory note is a written instrument by which a person called “maker” promises to pay a certain sum of money to, or to the order of, another person called “payee.” (Sec. 982), and under Thai law, such promissory note must contain certain provisions such as an unconditional promise to pay a certain sum of money and a maturity date. Most aspects of a promissory note are, to the extent that it is not inconsistent with the nature of the instrument, governed by the law concerning bills of exchange.

5.3 Cheques

A cheque is an instrument in a written form in which a person called “drawer” orders a bank or banker to pay on demand a certain amount of money to, or to the order of, a person called “payee.” A cheque must contain specific in formation, which is, among other things, the name or trade name and address of the bank and the name or trade name of the payee along with its address or a statement indicating that the cheque is payable to bearer (Sec. 988). Again, most aspects of cheque transaction are governed by the provisions regulating those of bills of exchange so far as they do not contradict the nature of cheques (Sec.989).

With respect to proper presentment of cheques, a cheque, if payable within the city of issuance, must be presented for payments within 1 month after its issuance, or, if payable elsewhere, the cheque must be presented within 3 months (Sec. 990). However, the bank is not obligated to pay if the cheque is presented later than six months after its issuance (Sec. 991).

5.4 Prescription

Regarding prescription period under Thai law with respect to bills, subject to certain exceptions and other specific circumstances, 1) there shall be no action against the acceptor of a bill of exchange or the maker of a promissory note allowed after three years following their maturity dates have passed (Sec. 1001), 2) there shall be no action by holders against the drawer of a bill or the maker of a promissory note permitted after one year following its proper protest or its maturity, in the case of a bill with a “protest not necessary” provision, has passed (Sec. 1002), and 3) there shall be no action of recourse by indorsers against each other or against the drawer of a bill after six months following the date an indorser acquire and paid the bill or from the date has was sued (Sec. 1003).

Table: Brief of differences among L/Cs, guaranties, independent bank guaranties, and bills of exchange/international promissory notes

Instruments	Independent/ Abstract Characteristics	Expiration of instruments	Prescription period under applicable laws
1) Bills of Exchange
1a) Under Thai Law	Depending on the terms and conditions of the instruments	Can be set by the parties to the transaction or 6 months after its issuance if considered “at sight”	3 years (holders against acceptors) or 1year (holders against endorsers or drawers)
1b) Under German Law	Yes	1 year by law or can be set by the parties to the transaction	3 Years
1c) International	Yes	Can be set by the parties to the transaction subject to the laws of applicable jurisdiction	Depending upon the laws of applicable jurisdiction
2) L/Cs
2a) Local	Yes	Can be set by the parties to the transaction subject to common banking practice	N/A
2b) International	Yes	Can be set by the parties to the transaction subject to common banking practice	N/A
Instruments	Independent/ Abstract Characteristics	Expiration of instruments	Prescription period under applicable laws
3a) Under Thai Law	No	Can be set by the parties to the transaction	10 years
3b) Under German Law	No	Can be set by the parties to the transaction	30 Years
4) Promissory Notes
4a) Under Thai Law	Depending on the terms and conditions of the instruments	Can be set by the parties to the transaction	3 years
4b) Under German Law	Yes	Can be set by the parties to the transaction	30 years subject to the terms of underlying contracts
4c) International	Yes	Can be set by the parties to the transaction subject to the laws of applicable jurisdiction	Depending upon the laws of applicable jurisdiction
5) Independent Bank Guaranties
	Yes	Can be set by the parties to the transaction subject to common banking practice	N/A
6) Cheques
6a) Local cheques under Thai Law	Yes	1 month after its issuance	1 year (holders against endorsers) or 6 months (endorsers against endorsers)
Instruments	Independent/ Abstract Characteristics	Expiration of instruments	Prescription period under applicable laws
6b) International cheques under Thai Law	Yes	3 months after its issuance	1 year (holders against endorsers) or 6 months (endorsers against endorsers)
6c) Local cheques under German Law	Yes	8 days	6 months (holders against endorsers)
6d) Continental cheques under German Law	Yes	20 days	Depending on the law of the jurisdiction of issuance
6e) International cheques under German Law	Yes	70 days	Depending on the law of the jurisdiction of issuance

90 Days Reporting for Foreigner

Overview

On the 30^th of October 1998 was a press release from the Immigration Bureau (Police Department) regarding the 90 days reporting regulations for foreigner. That Press Release was issued to state that the Immigration Bureau has made some actions after received inquiries and complaints regarding the fines according to the rate set by the Penalty Committee.

“The new rate effective since October 1, 1998:

- Baht 2,000 if he personally reports to the authority (Baht 1,000 was the previous rate),

- Baht 4,000 and a daily fine of Baht 200 for each day of exceeding the time limit if being caught by the authorities (the old rate was Baht 2,000 and a daily fine of Baht 100).

This Newsletter is made in hopes that it will clarify some confusions arisen since then, and serve as a guideline for today’s considerations.

________________________________________

While there never been any amendment to the Immigration Act B.E. 2522 (1997) as proclaimed in the Press Release (i.e. changing from 90 days to 1 year reporting and in case of changing address 24 hours to 72 hours reporting), it shall not assume that the efforts to amend the Act was successful and the law has been changed.

As a result, in case foreigner stays in Thailand for a longer period than 90 days, he or his representative has to send a written notice to the Immigration Bureau upon completion of every 90 days period to inform about place of stay according to the Immigration Act B.E. 2522 (1997) Section 37(5).

“Section 37(5): If the foreigner stays in the Kingdom longer than 90 days, such foreigner must notify the competent official at the immigration Division, in writing concerning his place of stay, as soon as possible upon expiration of 90 days. The foreigner is required to do so every 90 days. Where there is an Immigration Office, the foreigner may notify a competent Immigration Official of that office.”

Please see your Arrival/Departure Card (Custom Card) attached to your passport in Item 5 under Notice section.

“5. Must notify your place of residence to the Immigration Office if you stay longer than ninety days and are required to do so every ninety days”

The foreigner or his representative can inform the Immigration Bureau 7 days before or after the exact date. If he fails to report in time, he has to report by himself and he will be subject to a fine not exceeding Baht 5,000 and a daily fine not exceeding Baht 200 until complete rectification according to Section 76.

“Section 76: Any foreigner failing to comply with Section 37(2), (3), (4) or (5) shall be liable to a fine not exceeding Baht 5,000 and a daily fine of not exceeding Baht 200 until complete rectification.”

However, in practice, the actual fine will be Baht 2,000 if the he reports by himself. In case he is being caught while trying to leave the Kingdom the fine will be Baht 4,000.

Furthermore, given the safety of foreigners from every countries and the safety of the Kingdom, the Immigration Act provides the following regulations governing the stay of foreigners:

1. The foreigner shall stay at the place reported to the immigration authority, except where it is with a reasonable cause, not possible to stay at the said place, in which case the change of the place of stay must be reported to the immigration authority within 24 hours from the time of moving, according to Section 37 (2):

“Section 37 (2): Shall stay at the place as indicated to the competent official. Where there is proper reason that he cannot stay at the place as indicated to the competent official, he shall notify the competent official of the change resident, within 24 hours from the time of removing to said place.”

2. If the foreigner changes his place of stay he has to report to the police authority at the police station of the locality in which he stays within 24 hours from the time of removal. He has to report to new police station of the locality of stay, if that place is not located in the area of the same police department as the former one within 24 hours from the time of arrival according to Section 37 (3):

“Section 37(3): Shall notify the Police official of the local police station where such foreigner resides, within 24 hours from the time of removal. In the case of a change in residence in which new residence is not located the same area with the police station for that area within 24hours from the time of arrival.”

3. In case the foreigner travels to any other province and will stay longer than 24 hours, he shall report to the police authority at the police station of that locality within 48 hours from the time of arrival according to Section 37 (4).

“Section 37(4): If the foreigner travels to any province and will stay there longer than 24 hours, such foreigner must notify the police official of the police station for that area within 48 hours from the time of arrival.”

NOTE: However, there is the Police Department Regulations effective since May 30, 1979 stating an exemption for reporting according to Section 37 (3) and (4). This exemption is effected toward foreigners who receives permission to stay temporarily under certain purposes of stay as follows:

(a) Diplomatic or consular mission.

(b) Official duties

(c) Tourism

(d) Sports

(e) Business

(f) Investment, which has been approved by the ministries or departments concerned.

(g) Investment or other affairs connected with an investment under the law governing investment promotion.

(h) Traveling through Thailand to another country.

(i) Crewmembers.

(j) Study or observation

(k) Scientific research or teaching in a research or educational institution in the Kingdom.

(l) Performance of skilled or expert work.

4. The householder, owner or possessor of the place or the manager of the hotel must report to the immigration authority of the immigration office situated in the locality in which the house or hotel is situated within 24 hours from the time the said foreigner moves in according to Section 38.

“Section 38: The house-master, the owner or the possessor of the residence or the hotel manager where the foreigner, receiving permission to stay temporarily in the Kingdom has stayed, must notify the competent official of the Immigration Office located in the same area with that house, dwelling place or hotel, within 24 hours from the time of arrival of the foreigner concerned. If there is no Immigration Office located in that area, the local official for that area must be notified.”

If the host does not report to the officer in the said period, he will be liable to a fine of Baht 4,000, even though the law states in Section 77 that he shall be liable to a fine not exceeding Baht 2,000, or if the said person is the manager of the hotel he shall be liable to a fine ranging from Baht 2,000 to Baht 10,000.

“Section 77: Whoever fails to comply with Section 38, shall be liable to a fine not exceeding Baht 2,000, but if the said person is the manager of the hotel he shall be liable to a fine ranging from Baht 2,000 to Baht 10,000.”

Conclusion

The Act as of today is still not yet amended. The Press Release is an announcement stating that there were some considerations, concerns and efforts. The proposed amendment is not the law, therefore unenforceable.

Accordingly, in any case, if you are permitted to stay in the Kingdom temporarily and stay the Kingdom longer than 90 days, you have to report to the Immigration Bureau for each and every 90 days period.

Moreover, if you stay at the place differ from the place you inform the Immigration Bureau (the address you write in the Custom Card submitted to Immigration Officer upon your arrival), the law states that you should also report to the Immigration Bureau.

Regarding the later changes of place of stay (changing place or travel to other provinces) if you qualify for an exemption (i.e. tourism, business, investment, investment under the law governing investment promotion, etc.), you do not need to report your current place of stay to local police official.

As it seems, the reporting regulations put lots of burden to the foreigners. Despite the fact that the Immigration Bureau is acting quite seriously on 90 days reporting regulation, other regulations mentioned above should not be overlooked since they are still effective. However, in case of emergency and other necessary purposes, it might be helpful if the Immigration Bureau has the foreigner’s contact information.

Attachment: 1. Translation of the Immigration Bureau Press Release regarding the 90 days

reporting to the Immigration Bureau, dated October 30,1998

2. A copy of 90 Days Form (TM. 47)

3. Table for 90 Days Reporting

Attachment: 1

Translation of the Immigration Bureau Press Release

Regarding the 90 days reporting to the Immigration Bureau

On October 30^th, 1998 at 15:00 p.m.

Since the announcement of the Penalty Committee of the Immigration regarding the adjustment of the Penalty fee for any person who is at fault according to the immigration Act 37(2),(3),(4)and (5), in case where foreigner does not report to the place, and time according to the law, they will be subject to fine of :

(a) Baht 2,000 if he personally reports to the authority (Baht 1,000 was the previous rate)

(b) Baht 4,000 and daily fine of Bath 200 for each day the exceeding time limit if he is caught by the authorities (the old rate was Baht 2,000 and daily fine of Baht 100)

This announcement is effective as of October 1,1998.

Before this announcement was made, the BOI organised a seminar for foreigners who are doing business or residing in Thailand. During this seminar, the representative of the immigration Bureau made the announcement to all the participants. Since then there have been many foreigners reporting to the Immigration Bureau. Some of the foreign communities are able to comply with the law but a majority still cannot

Therefore some of them were fined at the new rate and this caused a lot of dissatisfaction among the foreigners who blamed the Immigration Bureau for not notifying them before hand. However, in reality, this Act has been enforced by the bureau since the date it promulgated as an Act. In addition the foreigners should know this law already since there is a warning written on the Arrival/Departure Card that everybody has in their passport. (Note number 5 of the TMG).

However, there is certain number of foreigners, investors who are residing in Thailand confused by this Act. They have made many inquiries to several places regarding the enforcement of this Act. The Deputy secretary of the Broad of Trade, the Japanese Chamber of Commerce, the Taiwanese Business Community and Canadian Chamber of Commerce arranged a meeting with the General Commissioner of the Immigration Bureau for the purpose of clarification.

General Commissioner of the Immigration has been notified of the matter and would like to clarify as follows :

1. The Immigration Bureau understands the problem foreigners have regarding this Act and would like to reduce the problem by taking the following actions:

The Immigration Bureau has already written an urgent memo to the Penalty Committee requesting the reduction of the fine so that the one who does not report will not have to be subjected to such a huge amount.

Supply the new rules for reporting to the Immigration so that it will not be so much of a burden for the foreigner and at the same time compromising the security of the country. The Immigration has submitted the following regulations

Foreigners residing in Thailand more than one year have to report once a year. This is a change from the previous 90 days counting from the date that the foreigner arrives in Thailand.

If any foreigner change his/her address they should report to the Immigration the new address within 72 hours counting from the time of moving.

For foreigners who stay in Thailand not more than a year or within one year, it will be the duty of the owner of the condominium, apartment, guesthouse and hotel to report to the Immigration within 24 hours counting from the time of moving in.

2. Any foreigner who complies with the law, has to report to the Immigration every 90 days.

3. In the case where any foreigner does not comply with the law, they should wait for the agreement between the Immigration Bureau and its Penalty Committee. The Immigration Bureau has already submitted its suggestion for changes in this Act for the new revised amount of fine as an urgent matter and it should be corrected as soon as possible. However, the office in charge of this matter cannot use his/her judgement in reducing the fine.

If you report to the Immigration officers, they will proceed according to the present amount of fine. If they don’t, the officers will be neglecting their duties and charged with negligence.

Apart from this press release, the Immigration Bureau has already explained to all the Chambers for example, Taiwanese, Japanese and Canadian to help eliminating the confusion.

If there is a case of any body try to abuse the Immigration Bureau’s authority to check on any foreigners regarding this 90 days please inform the Immigration so that legal action can be done from the Immigration bureau.

Attachment: 2

Example: If a foreigner arrives on: November 7^th, 2002,

                          He has to report latest on: February 4^th, 2003.

Attachment: 3

Table for 90 days reporting

New Regulations for Work Permits

Overview

In May 2002, the Department of Employment has announced with approval from the Minister of Labour and Social Welfare the new Procedure Order governing criteria and condition for expatriate’s work permit approval. This new procedure order revises the old regulations governing work permit approval, renewal and modification of employment descriptions or locations of a workplace.

________________________________________

According to the procedure order, the permit may be granted to an expatriate who has the qualification according to one of these conditions:

1. Working for an establishment with a registered capital of at least 2,000,000 Baht. One expatriate can be hired for every 2,000,000 Baht of capital but not more than 10 expatriates.

Supported Document:

- The Certificate of juristic person registration with a fully paid-up capital not less than 2,000,000 Baht and a copy of the list of shareholders (Form Bor-Or-Jor 5).

- Financial statement with an initial working capital not less than 2,000,000 Baht certified by a certified auditor. And after deduction of debts, loans and other expenses, the establishment must have assets as cash or bank deposit not less than 2,000,000 Baht.

- Account transaction to proof cash transacting in the bank for business transaction in the amount not less than 2,000,000 Baht.

2. Working in an establishment, which has already paid income tax for juristic company to the Revenue Department in the past 3 years not less than 5,000,000 Baht. For every 5,000,000 Baht tax payment is allowed to hire 1 expatriate.

Supported Document:

- Form of tax payment on juristic person (Por Ngor Dor 91) and the receipt from the Revenue Department

3. Working for an establishment, which engages in export business and remit foreign currency of at least the equivalent of 3,000,000 Baht last year. For every 3,000,000 Baht, an establishment is allowed to hire 1 expatriate but not more than 3 expatriates.

Supported Document:

- A copy of Bill of Lading submitted to the Customs Department stating the total value of export goods.

4. Working in an establishment, which employs 50 Thai employees. An establishment is allowed to hire 1 expatriate for every 50 Thai employees but not more than 5 expatriates in total.

Supported Document:

- The proof of payment paid toward the Social Security Fund.

5. An expatriate having an income and duty to pay personal income tax to the Revenue Department of equivalent or more than 18,000 Baht, or already paid personal income tax in the past year of equivalent or more than 18,000 Baht.

Supported Document:

- If an expatriate has never worked in the Kingdom, he must provide the employment contract to the officer in order to estimate an expatriate’s ability to pay such tax. Accordingly, in the case of single expatriates, he must have personal income of at least 30,000 Baht, and in the case of married expatriate, he must have personal income of at least 45,000 Baht per month.

- If an expatriate used to have the permit, he must present proof of personal income tax payment of equivalent or more than 18,000 Baht along with a receipt from the Revenue Department.

Moreover, the Authorized Officers, on reasonable grounds, may consider work permit approval, renewal, and modification of employment descriptions and positions or locations of workplace regardless of restrictions on the number of expatriates stated above, if the work falls under the following:

1. Representative office conducting quality control, procurement, or marketing research.

Supported Document:

- The Business Operation License according to the Foreign Business Operations Act B.E. 2542 (2002).

2. The work in investment consulting, administrative consulting, technical and technology, or periodical internal audit.

Supported Document:

- Consulting contract with both parties’ official seals.

3. Tourism representatives who bring in foreigners to travel in Thailand.

Supported Document:

- Tourist agent permit issued by Thai Tourism Authority.

4. International financial institutions approved by the Bank of Thailand.

5. Temporary business of entertainment, religious, social welfare, cultural or sporting without intention to make profit and paying income tax to the government.

6. Working as a contractor on projects with the governmental bodies or state enterprises.

Supported Document:

- A supporting letter stating the number of expatriates, expatriate’s names and positions.

7. Work using mostly local raw material as an essential component in the production process or work that can reduce the use of imported raw material.

8. Work supporting export of Thai products.

9. Work, which brings new technology, which Thai people are not capable of, in order to distribute and transfer to Thai people.

10. Work in the area where there is a shortage of Thai labour.

11. Having a residency in the Kingdom.

Supported Document:

- A resident permit or certificate of foreigners.

12. Being a married couple with Thai citizen, with legally married registration, publicly cohabiting as husband and wife, and with a legal profession, which is socially respectable.

Conclusion

Compared to the former regulations concerning work permits, most people found that these new conditions sound too good to be true. However, based on our experiences, we have proved that in the real practice these new conditions do exist. Receiving work permits is a very major concern for every business. The more options for work permit are available, the more sensible and effective approaches are to be utilized.

Attachment: 1. Translation of the Department of Employment’s Procedure Order

governing criteria and condition for expatriate’s work permit approval

consideration B.E. 2545 (2002)

2. Work Permit Application Form (WP.2)

3. Work Permit Application Form (WP.1) for BOI approved company

Attachment: 1

Garuda Emblem

Procedure Order of the Department of Employment

governing criteria and condition for expatriate’s work permit approval consideration

B.E. 2545 (2002)

_______________________________

To make the consideration of approving expatriate’s working permit according to Section 7, Section 8, Section 9, and Section 21 of the Alien’s Working Permit Act B.E. 2521 to be concise according to the intention of the law, it is appropriate to define criteria and conditions in considering expatriate’s work permit approval, in respect to Section 32 of the Procedure Rule of Government Administration Act B.E. 2534. The General-Director of the Department of Employment, with approval from the Minister of the Ministry of Labour and Social Welfare, outlines this procedure rule as follows:

1. This Procedure Order is called “the Procedure Order of the Department of Employment governing criteria and condition for expatriate’s work permit approval consideration B.E. 2545.”

2. This Procedure Order will come into force after the day it is declared in the Government Gazette.

3. To cancel:

(1) Procedure Order of the Department of Employment governing criteria and conditions for expatriate’s work permit approval consideration B.E. 2537 dated 30 May 2537.

(2) Procedure Order of the Department of Employment governing criteria and conditions for expatriate’s work permit approval consideration (2^nd issue) B.E. 2541 dated 14 November 2541.

(3) Procedure Order of the Department of Employment governing criteria and conditions for expatriate’s work permit approval consideration (3^rd issue) B.E. 2542 dated 30 October 2542.

4. In this Procedure Order:

“Authorized Officers” means General-Director, Officer authorized by General-Director, or Registrar, correspondingly.

“A work permit approval consideration” means issuing a work permit according to Section 7, Section 8, Section 9, Section 15, and Section 21 of the Alien’s Working Permit Act B.E. 2521.

5. As for the rule for working permit approval, renewal and modification of employment descriptions and positions or locations of workplace, labour officer may decide only for those businesses that are not in conflict with the law and granted to an expatriate who has the qualification according to one of these conditions as follows:

(1) An expatriate must work for an establishment with a registered capital of at least 2,000,000 Baht. One expatriate can be hired for every 2,000,000 Baht of capital but not more than 10 expatriates by considering from evident documents for paid-up capital and operating capital along with account transactions, account balance and last year financial statement

(2) Working in an establishment which has already paid income tax for juristic company to the government in the past 3 years not less than 5,000,000 Baht, is allowed to have one expatriate, considering from proof of income tax payment

(3) Working for an establishment which engages in export business and remit foreign currency of at least the equivalent of 3,000,000 Baht last year is allow to hire one expatriate for each 3,000,000 Baht but not more than 3 expatriates, considering from Bill of Lading

(4) Working in an establishment which employs 50 Thai employees is allowed to hire one expatriate but not more than 5 expatriates in total, considered from the form of payment paid toward the Social Security Fund or

(5) An expatriate who has an income and duty to pay personal income tax to the Thai Government of equivalent or more than 18,000 Baht, or already paid personal income tax in the past year of equivalent or more than 18,000 Baht, considered from proof of personal income tax payment.

6. On reasonable grounds, the Director-General, Officer authorized by the General-Director, or Registrar as the case may be,[1] may consider a work- permit approval, renewal and modification of employment descriptions and positions or locations of workplace under these below criteria regardless of restrictions on number of expatriate as stated in Article 5:

(1) Representative office conducting quality control, procurement and marketing research.

(2) The work concerns investment consulting, administrative consulting, technical and technology or periodical internal audit.

(3) Tourism representatives who bring in foreigners to travel in Thailand.

(4) International financial institutions approved by the responsible government department.

(5) Temporary business of entertainment, religious, social welfare, cultural or sporting without the intention to make profit, to make income for the country, or to benefit social as a whole.

(6) Working as a contractor on projects with governmental bodies or state enterprises, which have a supporting letter to address the number of expatriates, expatriate’s names and positions.

(7) Work using mostly local raw material or work that can reduce the use of imported raw material.

(8) Work supporting export of Thai products.

(9) Work, which brings new technology, which Thai people are not capable of, in order to distribute and transfer to Thai people.

(10) Work, which Thai people are capable of, in the area where there is a shortage of Thai labour.

(11) Having a residency in the Kingdom by means of having a resident certificate or certificate of aliens.

(12) Being married with a Thai citizen, with legally married registration, publicly cohabiting as husband and wife, and a legal profession, which is socially respectable.

When the General-Director approves it, it should be reported to the Minister of the Ministry of Labour and Social Welfare for acknowledgement within the fifteenth day of the next month.

7. In the event that an expatriate, who comes from a country that might be harmful to the security of the Kingdom according to the Ministry of Foreign Affairs’ indication, applies for a work permit according to Section 7, or in the event that the other party intends to have an expatriate working for his business in the Kingdom and submits an application on behalf of an expatriate according to Section 8, the history check must be done by sending a request to the National Intelligent Agency, Centre for National Security or Special Branch Bureau, National Police Bureau.

During that history checking procedure, if it is an application according to Section 7, the permit may be granted in advance and the duration will be the same as stated in the VISA in the passport, which is not more than 90 days.

In the event that the history check turns out to be that an expatriate is a person who might be harmful to the security of the Kingdom, an approval must be prohibited or the permit issued earlier must be revoked and a letter of notification must be sent to the National Police Bureau.

8. Before the work permit expires and an expatriate wants to continue working in that position, an application to renew must be submitted to the Registrar and an applicant can temporarily continue working until the Registrar renders an order not to renew such work permit.

9. In the event that an expatriate seeks a work permit in an establishment, which is a juristic person, foundation, association, or is working for a group of persons or a person in Thailand who receives support from another country’s private organization, which is not under the control of the Department of Technical and Economic Cooperation, such organization must be checked for its establishment status in Thailand. If it has not yet applied for an establishment and/or an opening of a regional office in Thailand according to the procedure governing the establishment of another country’s private organization, the work permit consideration must be halted until such organization receives an approval according to the procedure governing its establishment.

10. In work permit consideration, in the event that the Authorized Officer has an order not to grant a permit, the written notice and statement indicating reasons of such deny must be given to applicants for acknowledgement.

11. An applicant has the right to appeal to the Minister by making an appeal in writing correspondingly to the General-Director, Officer authorized by General-Director, or the Registrar, within 30 days after the date he receives an order not to approve, not to renew, or not to approve modification of employment descriptions and locations. Then, the appeal receiver must forward an appeal to the Work Permit Consideration Committee within 50 days. The Committee will consider and propose its opinion to the Minister within 50 days. The Minister will decide the appeal within 50 days. The Minister’s decision is final.

In appealing an order not to renew the work permit, the appellant has the right to continue working until the Minister renders his decision.

12. An expatriate, who receives the work permit before the day this Procedure Order comes into force, shall have the right to continue working until the permit expires.

Declared on the 22^nd day of May B.E. 2545 (2002)

Signature

(Mr. Wanchai Padungsupalai)

General-Director, the Department of Employment

Attachment: 2

Attachment: 3

How to Secure Performances and Obligations

under Contracts

Overview

In an ordinary course of business, a contracting party assumes the risk of non-performance of the obligations under contracts by the other party although the terms and conditions have already been agreed upon. Therefore, there have been certain legal inventions created in order to secure and guaranty such performance. The legal instruments are such as:

· Letters of Credit (L/Cs)

· Guaranties governed by suretyship doctrine

· Bills of Exchange (Domestic & International)

· Independent Bank Guaranties

· Cheques / Promissory Notes

The above-referenced are the instruments, which are most widely used nowadays.

Although functioning similarly with respect to the purpose of securing the obligations and performances of the underlying contracts, such instruments operate differently in several aspects. The similarities and the differences among them will be illustrated in this Newsletter.

I. Letter of Credit (L/C)

1. Players Concerned

The parties to a L/C transaction will be named and recognised as:

1) the Issuer, which is the bank issuing the L/C,

2) the Applicant, which is the buyer and

3) the Beneficiary, which is the supplier.

In general banking practice, the bank promises to pay to the supplier upon the presentation of certain documents, depending on the terms and condition of each L/C. Generally such documents involved would be the documents proving that the goods have been shipped to the buyer, exported to certain ports, and/or inspected by the buyer.

2. The Laws, Rules, and Regulations

With respect to the general terms and conditions, L/Cs usually are governed by:

· the Uniform Customs and Practice for Documentary Credit (UCP 500), International Stand By Practice 1998 (ISP 1998), or

· other internationally accepted rules endorsed by the International Chamber of Commerce (ICC), the United Nations Commission on International Trade Law (UNCITRAL), or any other internationally accepted private organisations.

Subject to certain exceptions, L/Cs governed by such rules will indicate their expiration dates, and after such dates the bank will not be obliged to pay or to honour the L/C, but the bank may pay if ordered by its customer (generally the buyer).

3. Factors Taken into Account

Drafting an L/C must be done very carefully since banks have a tendency not to honour L/Cs especially when the buyer is deemed likely to become insolvent, or when a bankruptcy proceeding has been filed against the buyer. That is why the possibility of the buyer to reimburse the bank will be low.

II. Guaranties Governed by Thai Suretyship Doctrine

Governed by Sections 680-701 of Thai Civil and Commercial Code (CCC), a suretyship is a contract by which one person called a guarantor becomes liable to pay upon a certain non-performance of another. In the course of lending business consisting of a lender and a borrower, it is usual that the borrower does not meet sufficient credit or creditworthiness.

The lender then asks for a guaranty to merit the making of the loan to the borrower. The guarantor, as an additional payer, who is directly liable, will consequently offer its creditworthiness to the lender, so a guaranty will serve as an additional security instrument.

1. Players Concerned

The parties concerned in this transaction are, respectively:

1) the creditor

2) the debtor, and

3) the guarantor, which is the person guaranteeing the obligations of the debtor.

Although the guarantor is the secondary obligor to the obligations, the lender does not need to bring a suit and have remedy in order to ask for the payments from the guarantor. In a lending transaction, when the borrower defaults on a payment of either interest or principal, the lender can go directly to the guarantor to claim the money owed by the borrower.

2. The Laws

Applying the aforementioned to an ordinary creditor-debtor relationship, or creditors are not required to exhaust remedies against debtors or to look to any other party before collecting the debts from guarantors. Several Thai Supreme Court Decisions such as Decisions No. 804/2500 (1957), 3944/2525 (1980), and 2093/2526 (1983) supports this point of view.

In addition, all claims arising out of or incurred in connection with the obligations under the contract secured by such guaranty can be forwarded and claimed for the next 10 years commencing from the date the claims have arisen against the guarantor even if the guaranty has expired (the so-called “prescription” period), but only if the ground for such claims was incurred during the time the suretyship document was valid.

This is why we strongly recommend the readers to be very careful before entering into any contractual relationship, which might be interpreted in accordance with the Thai suretyship doctrine.

III. Independent Bank Guaranties

Sometime suretyship legal relations are mixed up with independent standards underlying bank guaranties.

There are various types of bank guaranties such as down payment guaranties, performance guaranties, warranty guarantees, and many others.

An independent guarantee is a totally independent contract between a bank and a third party and not directly related to the underlying contract. It is of so-called “abstract nature.”

It is not unusual in construction agreements that the owner of the project will make a down payment to the construction company. However, this down payment will be made only against a bank guaranty (independent from the transaction between the owner and the construction company) issued in favour of the owner from a bank acceptable to the owner.

Such instrument will be very useful in the event that the contractor becomes insolvent and can no longer continue the construction since the owner can immediately and directly request for the monies from the issuing bank, without proof evidencing that the claim against the contractor is justified.

Again, it is very important to know that a bank guaranty is an independent contract. It does not concern about any other claims of any underlying contract it secures, and the legal relationship contract between the bank and the principal only.

1. The Laws, Rules and Regulations

An independent bank guaranty should be drafted in a way that it is governed by internationally accepted rules such as those endorsed by the International Chamber of Commerce (ICC) or the United Nations Commission on International Trade Law (UNCITRAL) so that it can be construed in accordance with such rules and can maintain its independent characteristic. Otherwise, the guaranty might be interpreted wrongly as suretyship.

2. Non-Return of the Guaranty Document; Legal Significance; Expiration

The guaranty document is neither a commercial paper nor a negotiable instrument. The retention of the document in itself is, therefore, of no legal significance. Thus, if the guaranty or counter-guaranty has expired in accordance with its own terms, either on the original or on the amended expiry date, and if expiry dates are effective under local law and practice, the physical possession of the documents not confer any rights upon the beneficiary and the (counter-) guaranty can no longer be validly called. This rule is clearly confirmed in article 24 URDG (Uniform Rules for Demand Guarantees) endorsed by the ICC, which reads:

“Where a Guarantee has terminated by payment, expiry, cancellation or otherwise, retention of the Guarantee or of any amendments thereto shall not preserve any rights of the Beneficiary under the Guarantee.”

IV. International Bills of Exchange and Promissory Notes

Bills of exchange play an important role in commercial and financial segments not only as a method of payments or a means of providing credit, but also as security for credits. Using bills and notes will often facilitate the enforcement of account receivables especially.

Due to barrier removal and market integration effects, the number of bills and notes signed by foreign parties has been increasing. Consequently, many business entities will become involved in the legal questions arising out of the international use of such instruments.

1. The Convention on International Bills of Exchange and International Promissory Notes

A few years ago an attempt to harmonise the system of using and implementing bills of exchange initiated by UNCITRAL was concluded. The United Nations General Assembly unanimously approved the text of the Convention on International Bills of Exchange and International Promissory Notes in its 43^rd Plenary Session on December 9, 1988.

The Convention only applies to international bills of exchange and international promissory notes and allows the sum payable to be expressed in a monetary unit account. A stipulation to pay interest at an indicated rate, either definite or variable, is also permissible as is the payment of the sum in instalments.

When the Convention entered into force, the international instruments issued, accepted, or negotiated in the ratifying states would be subject to its provisions, even in no-ratifying states, and after ratification, instruments might be subject to the Convention by choice of law so that an even wider range of application is possible.

2. Specific Characteristics of the Convention

Bills and Notes which are governed by the Convention have certain specific and interesting characteristics, which may vary considerably from those governed by local laws. Such specific and interesting characteristics include, for example:

1) The form of any contract arising out of a bill of exchange or a promissory note is regulated by the laws of the territory in which the contract has been signed.

2) The effects of the obligations of the acceptor of a bill of exchange or the maker of a promissory note are determined by the laws of the place in which these instruments are payable.

3) The effects of the signatures of the other parties liable on a bill of exchange or promissory note are determined by the law of the country in which the signatures were affixed.

4) The form and the limits of time for protest are regulated by the laws of the country in which the protest must be drawn up.

5) The contracting states shall undertake to alter their laws so that the validity of obligations arising out of an instrument shall not be subordinated to the payment of stamp duty.

The documents mentioned here usually are utilised in a course of business involving parties from different jurisdictions, and it will be useful in connection of the transactions as such. Therefore, it will be an interesting alternative if the transaction you will be involved in to be dealt internationally. However, it is necessary to keep in mind that the governing law provision of such bills or notes must read in a way that it is governed by the Convention.

3. Permitted Delay in Making Payments

Delay in making payments may be permitted according to. Article 56(1) of the Convention, which reads:

“Delay in making presentment for payment is excused if the delay is caused by circumstances which are beyond the control of the holder and which he could neither avoid nor overcome. When the cause of the delay ceases to operate, presentment must be made with reasonable diligence.”

Article 56 of the Convention also provides certain excuses for the issuer not to pay upon the presentment if the bill has been protested for dishonour by non-acceptance or if the drawer, an endorser, or a guarantor has expressly waived presentment.

4. Additional Liability under the Bills

With respect to the expiration of the instruments and the legal effects thereafter, under United Nations Convention on International Bills of Exchange and International Promissory Notes, it is mandated that:

Article 28(3) “A holder who takes an instrument after the expiration of the time-limit for presentment for payment is subject to any claim to, or defence against liability on, the instrument to which his transferor is subject.”

Therefore, if you decide to enter into a transaction of purchasing this instrument at discount, or being a transferee to the instrument for certain consideration, we insist that you investigate the terms and conditions and conduct such undertaking carefully.

V. Bills of Exchange under Thai Law

In general, bills under Thai CCC consist of:

1) Bills of exchange (Sec. 908 - 981)

2) Promissory notes (Sec. 982 – 986)

3) Cheques (Sec. 987 - 1000)

Subject to certain exceptions, the persons executing bills are personally liable if the persons do not state that they are acting on behalf of another and, more importantly, there shall be no grace period allowed (Sec. 903).

The holder of a bill is deemed the payee, the indorsee or the bearer of such bill in case of bills payable to bearer. Moreover, forged or unauthorised signatures have no legal effect against whom the rights resulting from such signature is sought unless such party is precluded from asserting the defence as to such signatures. Notwithstanding the foregoing, however, unauthorised signatures can be ratified (Sec. 1008) Finally, alone to bills are allowed if there is not enough space to write on the bills.

1. Bills of Exchange

In a bill of exchange transaction, a person called “drawer” orders another person called “drawee” to pay to or to the order of another person called “payee.” Under Thai law, bills must contain, in particular, an unconditional order to pay a sum of money and maturity dates (Sec. 909) and if the maturity dates are not specified, such maturities are at sight (Sec. 910). Maturity dates of bills can be 1) fixed, 2) at the end of a fixed period after the date ascribed to the bills, 3) on demand or at sight, and 4) at the end of a fixed period after sight. Furthermore, interest may be imposed on the sum payable of the bills, and bills can be drawn on account of drawer or of another third party (Sec. 912).

Under Section 914, any person drawing or indorsing a bill of exchange represents and warrants that, upon due presentment, the bill shall be accepted and paid in accordance with its terms, and that, if the bill is dishonoured by non-acceptance or non-payment, it will pay to the holder or to a subsequent indorsee who has been compelled to pay it, provided that the requisite proceedings on non-acceptance or non-payment have been duly taken. However, partial indorsement is void (Sec. 922).

Subject to certain exceptions as may be stipulated by the “drawer to a bill,” a bill of exchange may be presented, either by the holder or other possessors of such bill, to the drawee to the bill for acceptance at the place where the drawee resides up to its maturity date. In addition, a third a third party or any party to the bill may guaranty payments due under a bill of exchange, in whole or in part. Such undertaking is called “aval” (Sec. 938).

The holder of a bill of exchange must present the bill for payments upon its maturity. (Sec. 941) Under Thai law, intervention of a bill of exchange transaction, either for acceptance or for payments thereto, by a third party is allowed (Sec. 950).

2. Promissory Notes

A promissory note is a written instrument by which a person called “maker” promises to pay a certain sum of money to (or to the order of) another person called “payee” (Sec. 982). Under Thai law, such promissory note must contain certain provisions such as an unconditional promise to pay a certain sum of money and a maturity date.

Most aspects of a promissory note are, to the extent that it is not inconsistent with the nature of the instrument, governed by the law concerning bills of exchange.

3. Cheques

A cheque is an instrument in a written form in which a person called “drawer” orders a bank or banker to pay on demand a certain amount of money to, or to the order of, a person called “payee.” A cheque must contain specific in formation, which is, among other things, the name or trade name and address of the bank and the name or trade name of the payee along with its address or a statement indicating that the cheque is payable to bearer (Sec. 988).

Again, most aspects of cheque transaction are governed by the provisions regulating those of bills of exchange as far as they do not contradict the nature of cheques (Sec. 989).

4. Prescription

Regarding prescription period under Thai law with respect to bills, subject to certain exceptions and other specific circumstances:

1) There shall be no action against the acceptor of a bill of exchange or the maker of a promissory note allowed after three years following their maturity dates have passed (Sec. 1001).

2) There shall be no action by holders against the drawer of a bill or the maker of a promissory note permitted after one year following its proper protest or its maturity, in the case of a bill with a “protest not necessary” provision has passed (Sec. 1002), and

3) There shall be no action of recourse by endorsers against each other or against the drawer of a bill after six months following the date an indorsee acquired and paid the bill or from the date has was sued (Sec. 1003).

Conclusion

As you have seen, there are several legal instruments, which can be used to secure the performance and the obligations under a contract. However, each of them has both advantages and disadvantages inherent in its nature. Therefore, you must be careful about choosing the instrument you want to use.

Attachment: Brief of differences among L/Cs, guaranties, independent bank guaranties, and bills of exchange/international promissory notes
Brief of differences among L/Cs, guaranties, independent bank guaranties, and bills of exchange/international promissory notes

Instruments	Independent/ Abstract Characteristics	Expiration of instruments	Prescription period under applicable laws
1) Bills of Exchange
1a) Under Thai Law	Depending on the terms and conditions of the instruments	Can be set by the parties to the transaction or 6 months after its issuance if considered “at sight”	3 years (holders against acceptors) or 1year (holders against endorsers or drawers)
1b) Under German Law	Yes	1 year by law or can be set by the parties to the transaction	3 Years
1c) International	Yes	Can be set by the parties to the transaction subject to the laws of applicable jurisdiction	Depending upon the laws of applicable jurisdiction
2) L/Cs
2a) Local	Yes	Can be set by the parties to the transaction subject to common banking practice	N/A
2b) International	Yes	Can be set by the parties to the transaction subject to common banking practice	N/A

Instruments	Independent/ Abstract Characteristics	Expiration of instruments	Prescription period under applicable laws
3a) Under Thai Law	No	Can be set by the parties to the transaction	10 years
3b) Under German Law	No	Can be set by the parties to the transaction	30 Years
4) Promissory Notes
4a) Under Thai Law	Depending on the terms and conditions of the instruments	Can be set by the parties to the transaction	3 years
4b) Under German Law	Yes	Can be set by the parties to the transaction	30 years subject to the terms of underlying contracts
4c) International	Yes	Can be set by the parties to the transaction subject to the laws of applicable jurisdiction	Depending upon the laws of applicable jurisdiction
5) Independent Bank Guaranties
	Yes	Can be set by the parties to the transaction subject to common banking practice	N/A
6) Cheques
6a) Local cheques under Thai Law	Yes	1 month after its issuance	1 year (holders against endorsers) or 6 months (endorsers against endorsers)

Instruments	Independent/ Abstract Characteristics	Expiration of instruments	Prescription period under applicable laws
6b) International cheques under Thai Law	Yes	3 months after its issuance	1 year (holders against endorsers) or 6 months (endorsers against endorsers)
6c) Local cheques under German Law	Yes	8 days	6 months (holders against endorsers)
6d) Continental cheques under German Law	Yes	20 days	Depending on the law of the jurisdiction of issuance
6e) International cheques under German Law	Yes	70 days	Depending on the law of the jurisdiction of issuance

Retention of Title and Other Securities

Overview

Problem upon the Transfer of Ownership

Under the Thai Civil and Commercial Code (CCC) the ownership of property is transferred directly in the moment of the conclusion of a contract in case of sale of ascertained property (Sec.458 CCC). If unascertained property is sold, the ownership is transferred when the property has been specified (Sec. 460 CCC). In the event that the contract is subjected to a condition or a time clause, the property will be transferred at the fulfillment of the condition or the time has arrived.

Under the Thai CCC there is no clear separation between obligatory (e.g. agreement for purchase) and real legal transaction. By following the French law system, the Thai CCC doesn’t realise the principle of the abstract nature of rights in or against a property.

This is in contrast to the German civil law, which distinguishes between obligatory and real legal transaction. The obligatory legal transaction only obligates the seller to transfer the possession of the property but does not transfer the ownership of the property. In order to transfer the ownership of the property, it is required that the contracting parties agree to transfer the ownership of the property. This is a second legal transaction that constitutes the fulfillment of the obligatory legal transaction. Therefore, the obligatory legal transaction is the means to transfer the ownership. Although there are two legal transactions under the German law, in practice both legal transactions may be concluded with a conclusion of the obligatory legal transaction and delivery of the property.

How to secure a claim?

In some cases the seller of goods doesn’t know the financial situation of the buyer. How can the seller minimise the risk of loss without knowing so? In principle, there are two possibilities to provide security for a claim:

- Creating a certain payment method (e.g. advanced payments, documentary credit, letter of credit, suretyship).

- Providing securities independent from the exchange of goods and services such as retention of title.

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1. Meaning

Sec. 459 CCC governing the transfer of ownership states that if a contract of sale is subject to a condition or time clause, the ownership of the property is not transferred until the condition is fulfilled or the time has arrived. Under the law of several countries a condition stipulating that the transfer of ownership is under the condition that the purchase price is paid is generally called a “Retention of Title”.

For instance, if the buyer is in default of its obligations, the owner of the retained property (the seller) has the right to recover his property from the buyer since the seller still has the ownership of such property (exercise of the right of ownership, Sec. 1336 CCC, comparable to the German § 985 BGB). Because of the fact that the seller doesn’t lose his ownership before the payment is fulfilled completely, retention of title constitutes a security in property’s title for the seller.

2. Retention of Title under the International Private Law (IPR)

If the property is located in Thailand, Thai law would govern the transfer of the ownership according to Sec. 16 of the “Act on Conflict of Laws B.E. 2481” which states that movable and immovable property is governed by the law of the place where the property is situated.

3. Acceptance of a foreign Retention of Title

In some countries valid retention of title may requires certain form or even registration. While Thai law does not have specific rules governing validity of retention of title, the validity of retention of title is subject to the law of the country where retention of title was made according to Sec. 9 of the Thai “Act on Conflict of Laws B.E. 2481”.

4. Continued form of Retention of Title

The continued form of retention of title means that the transfer of ownership of property is under the condition of the purchase price payment and the payment of other debts. Based on contract of sale with conditions under Sec. 459 CCC and the freedom of contract doctrine, a continued form of retention of title is acceptable. However, in practice a condition like this is unusual.

5. Extended form of Retention of Title

The extended form of retention of title means that the buyer of the property assigns the claim of payment resulting from reselling the property to the original seller. A condition like this is admissible. However, under Sec. 306 CCC governing transfer of claims, the transfer can be set up against the original seller or third party only if a notice has been given to the seller or if the seller has given a consent to the transfer. Such notice or consent must be in writing.

6. Retention of Title and “Combination and Mixing”

Combination and mixing occurs when several movable things from different persons are joined together and become component parts or indivisible. The problem is now who would be the owner of the new thing.

1) In the case mentioned above the different persons become co-owners of the new thing under Sec. 1316 CCC. Each person’s share is proportionate to the value of his thing. However, under Sec. 1316 Para 2 CCC there is one exception: if one of the things is considered the principle one, its owner becomes the sole owner. But this owner has to pay the value of the other things to their respective former owners.

2) In the case that a person makes a new thing by using materials belonging to another person, the owner of the materials will be-come the owner of such thing and have to pay for the work (Sec. 1317 Para 1 CCC). But if the value of the work greatly exceeds the value of the materials being used, it is the opposite: the worker will become the owner and have to pay to the former owner the value of the used materials (Sec. 1317 Para 2 CCC).

3) However, it is possible to stipulate a processing clause in the contract between parties since such clause is valid under the CCC. The result is that the owner of the property will not lose his ownership in case of processing.

7. Effect of the Retention of Title against third party acting in good faith

Under the Thai CCC there are special rules protecting third party acting in good faith. In case that the buyer of retained property enters into a sale contract with a third Party, the original owner will lose his ownership, if such third party does not know anything about the retention of title. However, the third party can retransfer the ownership back to the original owner in exchange of his purchase price. It is also important to note that this special protection will apply only in the case that such third party has to purchase in open market or from a “trader” dealing in such properties (Sec. 1332 CCC).

8. Effect of the Retention of Title in case of enforcing the property by a third party

In the event that a third party is about to execute a court order against the buyer, the seller has the right to secure the enforcement on his property from the third parties. But if the enforcement against the property is already being executed, the owner can file a petition for restitution of the property price against the third party. Although by compulsory auction the ownership of the property will be transferred to other party, the former owner of the property is entitled to reclaim the property by paying the new owner the purchase price or the proceeds of the auction.

9. Effect of the Retention of Title in case of Bankruptcy

In case of bankruptcy, the owner of the property is not entitled to reclaim his property since the property shall be deemed distributable among creditors in bankruptcy suit (Sec. 109 Para 3 “Bankruptcy Act B.E. 2542”). However, if the owner suffers damage resulting from the attachment of his property, he can file a petition to the court asking for repayment of the debts in respect of the price of the property. It is important to note that in case of bankruptcy the owner has no right better than other creditors even when he has retention of title as a security. (Sec. 92 “Bankruptcy Act B.E. 2542”).

10. Formalities

Under the Thai law some contract validities are subject to certain forms, especially a sale contract of unmovable property, which must be in writing if the purchase price is higher than THB 500. Under the Thai Law the retention of title can be a subordinate agreement because neither a written form nor a special kind of registration is required. It is also possible to include retention of title clause in the standard terms and conditions for sale and payment. However, under the Thai law the contracting parties generally have to sign these standard terms and conditions separately from the sale contract.

11. Similar kinds of Security

Similar to the retention of title is the so-called “Hire-Purchase” contract (Sec. 572-574 CCC), which is comparable to the German leasing contract. Under a hire purchase contract the seller lets his property out on hire and promises to sell it to the buyer. The ownership will be transferred by the last payment, which would be the purchase price. This kind of contracts in Thailand is widely used for selling vehicles.

12. Model Clause

A model clause stipulating retention of title can be as follow:

“ The Goods shall remain the sole property of Seller and Seller shall remain the sole owner of the Goods until Sales Price is fully paid. Until that time, the Buyer is entitled to sell or otherwise dispose the Goods. Seller is entitled to reclaim possession at any time from any possessor without any precondition and without any compensation or other monies.”

13. Other kinds of Title Security

1) Documentary credit / letter of credit

Another method to provide security to the parties is by using documentary credit (also called letter of credit). A documentary credit is a written instrument made by a bank guaranteeing payment to an exporter where certain documents are presented in compliance with the terms and conditions of the documentary credit such as time limit, amount of money and other documentary requirements that the seller has to fulfill in order to receive the payment. The advantage for the seller is that the payment will be assured without reference to credit worthiness of the buyer. The ad-vantage for the buyer is that he would be financially assisted during the time of placing order and receiving the goods since no cash has actually been paid or transferred. The documentary credit is separate and independent from the underlying contract. The issuing bank is only concerned with the problem whether the documents given by the seller are corresponding to those stated in the documentary credit specified requirements. Therefore, the bank has to proof the conformity of the documents with these requirements to decide whether to pay in exchange to the documents or not.

2) Other ways to secure a claim

Other kinds of security are varied depending on parties’ intentions and the nature of contracts. Such securities available under the Thai law are Suretyship (Sec. 680 CCC), Mortgage (Sec. 702 CCC), Pledge (Sec. 747 CCC) and Bank Guarantee.

Case Precedence

Supreme Court’s Decision Case No. 5591/2543 (2000)

In the contract there is a provision stating that “This sales contract will be in full effect and the ownership will pass to the willing buyer only if the willing buyer performs according to all provisions in this contract, and the willing seller has the right to terminate this contract and recall the property if the willing buyer does not perform according to any of all provisions of this contract”. The court found that it was a contract of sale subject to condition according to Sec. 459 CCC, not a hire-purchase contract. As for another provision stating that if the willing buyer is in default of payment in any installment, the willing buyer shall agree to deem that this contract is terminated immediately without prior notice, and the willing seller has the right to take the car willing to buy back without paying back the money to the willing buyer, the court found that it was an agreement by parties’ willingness in favor of the seller in case that the buyer is in default, and it does not make a contract for sale subject to condition become a hire-purchase contract.

How to Enforce Court Orders and Arbitration Awards

Overview

After obtaining a court order or an arbitral award it may occur that the defendant does not comply with the judgments or awards. While the law in principle does not allow private parties to enforce each other by themselves, the enforcement has to be done by the power of the governing law or statute.

This Newsletter is made to describe how the execution is taken place under the Thai law in respect of civil cases and international commercial disputes either those resulting from lawsuit or arbitration.

I. Execution of Court Orders[2]

Under the power of the Civil Procedure Code (CPC), the execution procedures can only begin in the following cases:

1. When the Court of First Instance or the Court of Appeal has rendered its judgment and the party who lost the case could not get an order for a stay of execution.

2. The case is final because the party who lost the case did not appeal to the higher court within a specific time period.

Under the Thai Civil Procedure Code, execution procedures are conducted through the following steps:

1. Getting a Decree

Having the defendant to acknowledge a decree from the Court to perform according to the judgment is the first step necessary before the execution. If the defendant is in the Court during the reading of judgment, the Court may record its decree and have the parties sign for acknowledgement (Sec. 272 CPC), especially in the case where it can make a compromise or settlement and the Court decides according to such compromise or settlement. The Court will decide and have both parties sign for acknowledgement by using the phrase “the Court orders the defendant to …… Otherwise, the defendant will be subject to property seizure or imprisonment” (Sec. 273 Para 4 CPC). In this case if the defendant does not perform according to such compromise or settlement, the plaintiff can ask the Court to execute immediately without having to submit a statement to the Court asking for a decree.

In the event that the defendant does not acknowledge the decree of the Court, the plaintiff’s lawyer has to ask the Court to issue a decree by making a statement to the Court saying that the case has been decided but the defendant has not yet acknowledged the Court’s decree. In practice, the Court will issue a decree and send it to the Warrant Sending Officer. Then, the lawyer has to follow up with the officer regarding when a decree would be issued and request the officer to send a decree. If the lawyer does not do so within 15 days, the officer will return a decree to the Court. The lawyer also has to check the date the defendant receives a decree in order to determine the default period. Normally, the Court will demand the defendant to perform within 1 month after the defendant receives the decree. If it is the case of posting of a decree, it will be deemed received after posting for 15 days (Sec. 79 CPC).

When the due date according to the decree comes, in case it is a deposition of the money for debt payment, the lawyer has to check whether the plaintiff has deposited the money to the Court according to the decree or not. This can be done either by making a statement to examine the file or by checking with the Court’s Treasury Department.

In order to get the money from the Court, the lawyer has to contact the plaintiff to submit a statement for taking the money. The plaintiff can take the money by himself or assign the lawyer to do so.

2. Appointing an Executing Officer

The purpose of appointing an executing officer is to proceed with the Court decision. Because the plaintiff cannot enforce the Court decision by himself, the enforcement has to be done by the power of the CPC Section 271 stating that the party who wins the case is entitled to ask the Court to execute the Court decision or Court order within 10 years after the date of decision or order.

Although the CPC does not mention an appointment of an executing officer, Section 275 provides that the creditor according to the judgement may submit an application by motion to the Court for a writ of execution and Section 276 provides that the Court shall notify such writ to the executing officer. In practice, such application shall include a wording asking the Court to appoint an executing officer to seize defendant’s property in the case of money debt.

After submitting an application mentioned above, if the motion is granted, the Court officer will issue a writ appointing an executing officer. This writ will be sent to the Execution Department in Bangkok or the Court Sheriff or the Deputy Court Sheriff in other provinces.

3. Seizure

The lawyer has to contact the executing officer for further proceedings. To do so, the lawyer must have another power of attorney signed by the plaintiff. After obtaining a power of attorney, the lawyer shall contact the executing officer. The executing officer will ask the lawyer to submit a deposit money for expenses and then set the seizure date. However, it is also necessary to submit to the executing officer a request form and a property list.

To seize property, the lawyer has to accompany the executing officer to the defendant’s residence, land, or other real estate listed (Sec. 279 CPC). The executing officer will record the seizure and announce the property seized. If the property is a movable property, the executing officer may ask the plaintiff or its representative to transport such property to the Execution Department in order to sell by compulsory auction afterward. If the property is land or other real estate, the executing officer will post a notice there stating that the property is under attachment.

The lawyer then has to follow up with the executing officer regarding when the auction date. On the auction date the lawyer will lead the auction. If the lawyer sees that the price would be too low, he may ask the executing officer to postpone the auction.

After the property has been sold, the officer will deduct expenses and executing fees and then give the money to the lawyer.

4. Attachment of Claims against Third Parties

In some cases the defendant may not have property to be seized, but monies which will be subsequently received from other persons, i.e. salary or claims against third parties. The executing officer may ask the Court to detain, which is to prohibit the defendant to dispose of such claims and prohibit third party to make payment or submit property to the defendant but to the Court in stead.

In order to attach money or property of the defendant, the lawyer has to submit a petition to the executing officer stating where to attach the defendant’s money or whom the defendant would receive money from.

According to CPC Section 310 (3) and 311, it can be inferred that the executing officer may submit an application by motion to the Court in order to attach such claims. However, in practice there are some cases that the executing officer issues an attachment order by himself.

II. Execution of Foreign Court Orders

It is a fact that every country has a different legal system and different rules dealing with the civil procedure. The enforcement of foreign court orders in principle is quite complicated and subject to certain approval procedures under the Thai law. In the opposite to domestic court orders, foreign court orders (for instance, a judgment of a German civil court) is not likely to be enforceable under the Thai law because Thailand did not sign any bilateral agreement or reciprocal agreement with Germany. Therefore, it is advisable for the parties to enter into an arbitration agreement in order to secure the enforcement and execution in case of cross-border commercial disputes.

III. Execution of Arbitral Awards

Arbitration can be defined as a voluntary agreement for the parties to submit a dispute to an impartial person (Arbitral Tribunal) to determine an equitable settlement in a judicial manner.

Arbitration can be divided into two categories, national and international arbitration. According to Chapter III of the CPC concerning national arbitration, this type of arbitration is exclusively for the case pending before a Court of First Instance where the parties can choose to submit the dispute to one or more arbitrators for settlement by filing a joint-application to the Court, and if the Court is of opinion that it is not contrary to the law, the Court shall grant the application (Sec. 210 CPC). The awards given by the national arbitration is a final binding arbitration, and the Court shall give order or judgement according to the award (Sec. 218 CPC). However, it is still considered a domestic court order, which is still subject to enforcement and execution limitation in foreign countries.

In April 2002, the Arbitration Act B.E. 2545 (2002) came into force. The new Act (replaced the Arbitration Act B.E. 2530 (1987)) was adopted from the model law governing international commercial arbitration of the United Nations Commission on International Trade Law (UNCITRAL) to develop the Thai arbitration system to be equal terms to international communities, and that there be promoted the use of arbitration proceedings in the settlement of international civil and commercial disputes. Outlined below are several advantages for the parties to refer their dispute to arbitration rather than to commence an action in court:

- The parties can choose the place of jurisdiction, the language used and the applicable law.

- The process consumes less time, cost, and effort than those in a civil court.

- In case that the dispute involves a technical matter, persons chosen to the arbitrate tribunal generally posses the more appropriate qualifications.

- Unwanted publicity can be avoided.

- Because an arbitral award is not subject to appeal it is a final and binding decision.

1. Recognition and Enforcement

Although one of the most important advantages for the parties to settle their dispute in arbitration is the international recognition of arbitral award, it is important to note that according to the new Act if the award was made in a foreign country, the Court having the jurisdiction may pass its judgement enforcing the award only when such award is subject to a Treaty, Convention, or International Agreement to which Thailand is a member, and it shall be enforceable as long as Thailand agrees to be bound by them only (Sec. 41 Para 2 “the Arbitration Act B.E. 2545”). At present, about 120 countries have signed the 1958 United Nations “Convention on the Recognition and Enforcement of Foreign Arbitral Awards”, known as the “New York Convention”. This Convention facilitates the enforcement of awards in all contracting countries and Thailand became a member in 1961.

2. Application

Under this Act in Section 9, parties can file an application to execute an arbitral award to one of the following Courts:

(1) The Central International Trade and Intellectual Property Court

(2) The Court having the jurisdiction over where the arbitration is taking place

(3) The Court having the jurisdiction where either party is domiciled

(4) The Court having the jurisdiction over the dispute duly forwarded to the arbitrator

According to Section 42 of the Act, to enforce an arbitral award the winning party has to submit an application to the court having jurisdiction within three years from the date that it may be enforceable under the award. Along with an application, the following documents shall be attached:

(1) Original of the award or its certified copy

(2) Original arbitration contract or its certified copy

(3) Thai translation of the award and contract made by an authorised translator, a Thai diplomatic representative, or the Thai consul in the country where the award or the arbitration was made

3. Judicial Review

Although the Act is meant to promote the recognition and the use of arbitration proceedings to enforce an arbitral award, the award may be rejected by the Court having jurisdiction upon the supplying of proof by the party whom the award shall be imposed on in the following reasons:

(1) A party under the arbitration contract was under some incapacity under the law applicable to the said party.

(2) The arbitration contract is not valid under the law of the country to which the parties have subjected it, or under the country where the award was made in case there is no such agreement.

(3) The party whom the award shall be imposed was not given proper notice of the appointment of the arbitral tribunal or the arbitral proceedings, or the said person was unable to present his case in the arbitration proceedings by other reasons.

(4) The award deals with a dispute not falling within the terms of arbitration contract, or contains decisions on matter beyond the scope of the agreement on submission of dispute to arbitral tribunal, however, if it can be separated, the court may withdraw only that part.

(5) The composition of the arbitral tribunal or the arbitration procedure was not in accordance with the agreement of the parties, or was not in accordance with the law of the country the award was made in case the parties have not made an agreement.

(6) The award has not yet become binding or has been withdrawn or suspended by a court having the jurisdiction or under the law of the country the award was made, except in the case it is during the period of asking the court to withdraw or suspend the award, when the court may postpone the proceedings of the application for the enforcement as it deems fit, and if the party applying for the court to enforce the award make a request, the Court may order the party whom the award shall be imposed on to furnish a suitable security.

These conditions are also in accordance with the conditions set forth in the UNCITRAL Model Law on International Commercial Arbitration.

In addition, according to Section 44 the court having jurisdiction may refuse an application if the Court is of the opinion that an award deals with the dispute that cannot be settled by arbitration under the law, or if the enforcement under the said award would be against the peace and order or the good morals of the public.

However, Section 45 prohibits parties to appeal to the higher court against the order or judgement of the court having the jurisdiction, except:

(1) The recognition or the enforcement of the said award would be against the peace and order or the good morals of the public.

(2) The said order or judgement is against the provisions of the law governing the peace and order of the public.

(3) The said order or judgement does not correspond to the award of the arbitral tribunal.

(4) The judge or the justice hearing the case has made a counter-opinion in the judgement.

(5) It is an order relating to the temporary measure to protect the benefits of the party.

4. Further procedure

After the Court has passed the order or judgment stating that the award is enforceable, further procedure shall be the same as those of Civil Court, i.e. getting a decree, appointing an executing officer, seizure, and so on (see page: 2).

Table 1: Enforcement of Court Orders

Default of a Decree

Application to appoint an executing officer

Auction

Court

Attachment/Prohibition

Money

Court

Table 2: Enforcement of Arbitral Awards

Auction

Court

Attachment/Prohibition

Money

Court

Money/Claim

Plaintiff

Transfer of Shares and Shareholder Book

Overview

The way shares are transferred under the Thai law varies according to the legal form of the company. In general the transfer of shares does not require the consent of the company, but exceptions may apply when laid down in the regulations of the company (Articles of Association). However, all shares and the transfer of them have to be recorded in a Register of Shareholders.

I. The Register of Shareholders

The Register of Shareholders is different in a Thai Limited Company (Ltd.) and in a Public Limited Company (PLC). According to Sec. 1138 of the Civil and Commercial Code of Thailand (CCC) the register of a Ltd. must contain:

1. The names and addresses, and the occupations, if any, of the shareholders, a statement of the shares held by each shareholder, distinguishing each share by its number, and of the amount paid or agreed to be considered as paid on the shares of each shareholder.

2. The date at which each person was entered in the register as a shareholder.

3. The date at which any person ceased to be a shareholder.

4. The numbers and date of certificates issued to bearer, and the respective numbers of the shares entered in each such certificate.

5. The date of the cancellation of any name certificate or certificate to bearer.

According to Sec. 61 of the Public Limited Company Act (PLCA) the register of a PLC must contain:

1. Names, nationalities and addresses of the shareholders;

2. Type, value, share certificate number and number of shares;

3. Date, month and year of registration of shareholdership or of termination of shareholdership.

The register of both forms of limited companies has to be kept at the registered office of the company. It is open to inspection by the shareholders and any shareholder is entitled to require a copy of such register against payment of an appropriate fee. The register is presumed to be correct evidence of any matters directed or authorised by law to be inserted therein (Sec. 1140 CCC; Sec. 62 PLCA).

II. Transfer of Shares of a Thai Limited Company

A Company Limited may have either share entered in a name certificate or certificates to bearer. In general the shares are entered in name certificates, while certificates to bearer may only be issued if laid down in the regulations of the company (Sec. 1134 CCC). The certificate must contain the name of the shareholder or a statement that the certificate is to bearer (Sec. 1128, par. 2, No. 5 CCC). If the regulations of the company provide for certificates to bearer, the holder of a name certificate is entitled to receive certificate to bearer on surrendering the name certificate to the company for cancellation (Sec. 1134 CCC).

The numbers and date of certificates issued to bearer, and the respective numbers of the shares entered in each such certificate must be contained in the Register of Shareholders of the company (Sec. 1138 CCC). All conversions of certificate must be laid down in the register.

Shares of a Limited Company may be transferred without any consent of the company (Sec. 1129 CCC). In regard to shares entered in a name certificate this rule is subject to restrictions in the regulations of the company. The regulations of the company may direct that every transfer of these certificates require the assent of the company (Sec. 1129 CCC).

The transfer of shares entered in a name certificate is void unless made in writing and signed by the transferor and the transferee whose signatures shall be certified by one witness at least (Sec. 1129 CCC). The number of shares to be transferred must be laid down in the contract.

Against the company and third persons the transfer is only valid, after the fact of transfer and the name and address of the transferee have been entered in the Register of Shareholders (Sec. 1129 CCC). To guarantee a proper ordinary general meeting the transfer book may be closed during fourteen days preceding this assembly (Sec. 1131 CCC).

Shares entered in a certificate to bearer are transferred by the mere delivery of the certificate (Sec. 1135 CCC).

III. Transfer of Shares of a Thai Public Limited Company

The Transfer of Shares of a PLC does not require the assent of the company. To the contrary, the company is not allowed to stipulate any limitations in the transfer of shares (Sec. 57 PLCA). Limitations are only admissible, if such limitations are for preserving the rights and interest, which the company deserves lawfully or for maintaining the ratio of shareholdings between Thai and foreigner.

The Transfer of Shares is valid upon the transferor’s endorsement of the share certificate by stating the name of the transferee and signed by both the transferor and the transferee and having delivered the share certificate to the transferee. The transfer has to be listed in the register of the company. Against the company the transfer is valid upon the company having received the application for registration; against outsiders the transfer is only valid after registration (Sec. 58 PLCA).

The company may refuse to register a transfer of share in the course of twenty-one days prior to each meeting of the shareholders.

Case Precedence

Supreme Court Decision Case No. 6908/2543(2000)

Memorandum of understanding made between the plaintiff and the defendant which states that the defendant has paid for the shares price and that the plaintiff agrees to sign a signature for transfer of his shares to the defendant is considered an agreement to transfer the shares, not a share transfer according to paragraph 2 of Section 1129 of the CCC. However, it is not void solely on the ground that it does not comply with the form as prescribed in Section 1129.

Supreme Court Decision Case No. 5873/2543 (2000)

Share transferring can not be used against a third party unless it is written the name transferring and the place of the receiver in the shareholder book according to Sec. 1129 Para 3 CCC. The plaintiff admitted that he did not notify the share transferring to the shareholder registrar, and the shareholder book still bore the plaintiff’s name as the shareholder. The plaintiff, therefore, cannot argue against a third party that there is a share transferring. The plaintiff must bring dividends derived from those shares to calculate its corporate income tax.

Supreme Court Decision Case No. 2170/2542 (1999)

Having a statement on the conditional agreement on share transfer between the plaintiff and the defendant as follows: “At the date of concluding this agreement, the seller has made an instrument in writing of the share transfer as aforementioned agreed in Clause 1…” is not considered complying with the form of share transfer according to paragraph 2 of Section 1129 of the CCC which states that it must be in writing and signed by the transferor and transferee whose signatures shall be certified by one witness at least.

Supreme Court Decision Case No. 52/2540 (1997)

Share transferring contract, signed by the seller and not identify the buyer, is made for the buyer’s convenience in order to chose whether to be named as a shareholder or to transfer to others. It is not against the law or invalid. The later buyer is in the position to proceed and finalise the transfer according to the law.

Supreme Court Decision Case No. 57/2540 (1997)

The share transferring contract is not in compliance to Sec. 1129 Para 2 CCC. The company has the right to deny the issuing of a share certificate.

Supreme Court Decision Case No. 4432/2540 (1997)

Share transferring according to Sec. 20 of the Securities and Exchange Act B.E. 2517 (1974) is not subject to Sec 1299 CCC. The ownership is transferred to the buyer immediately upon the sale. It does not need a written form, signatures by parties and witness, or a transfer registration. The transfer registration is just for the owner of the share to argue against the share-issuer company and a third party. It does not involve the completion of the sale of share.

Supreme Court Decision Case No. 6692/2540 (1997)

In case of the sale of share certificate along with share transferring document signed by the seller and not identify the buyer, the parties has entered into the sale as the sale of one kind of property, not the sale of the share value since the share value would be changed all the time. Such sale of the share certificate is not the same as the share transferring according to Sec. 1299 CCC. Therefore, the sale of share certificate would be subject to the law of contract for sale of movable property. Without making them in writing the contract of gift, the contract of exchange, and the contract of sale of share certificate are not invalid. Because the share certificate is transferred to a third party, it is a contract in favor of a third party. While a third party has stated his intention to take the benefit according to such contract, the company has to transfer the share to a third party.

- Income Tax Free for Travel Allowance
- Reporting Foreigner’s Income

This issue includes the followings:

1. Income tax free travel allowance

The summary outlines up to which amount a Thai company can pay their staff income tax free allowance for work performed for the company outside the registered office (see page 4 the Revenue Department’s Departmental Instruction No. Paw. 59/2538).

For example, if the Managing Director traveled to Germany for 12 days, the company could pay up to THB 37,200 (THB 3,100 a day) income tax-free to their employee (see page 6 Summary of Income tax free Payment for Travelling).

2. Reporting Foreigner’s income to the Revenue Department

The Revenue Department changed their regulation with regard to the income reporting of foreign employees (see page 7 Notification of the Director-General of the Revenue Department on Income Tax No. 123 and page 9 the Income Reporting Form and its Translation).

We believe the enclosed information is useful to you. In addition, the following brochures have been recently updated:

q Office Information No.: 28 Liquidation of a Thai Company

q Office Information No.: 25 What WTO means to your Business

q Office Information No.: 23 Ehe, Familie, Scheidung, Unterhalt und

Erbrecht im deutschen, thailändischen und deutsch- thailändischen Recht

q Office Information No.: 21 Pflichten und Haftung von Direktoren einer

thailändischen Unternehmung

q Office Information No.: 5b The New Arbitration Act and Execution of Arbitration Awards

q Office Information No.: 3 Immobilienerwerb durch Ausländer in Thailand

For more information about us as well as our Brochures and Newsletters, please visit our website: www.lorenz.co.th.

Lorenz & Partners

DEPARTMENTAL INSTRUCTION

No. Paw. 59/2538

Subject: Personal income tax: Travelling per diem excludible in computing personal income tax under Section 42 (1) of the Revenue Code.

To provide the Revenue officers with a guideline in practices including giving advice to payers of income and the income receivers in the form of travelling per diem in the case of performing duties occasionally outside the office or place of business, being an assessable income excludible in computing income tax under Section 42 (1) of the Revenue Code, the Revenue Department gives an instruction as follows:

Clause 1. The travelling per diem which an employee, a holder of post or office or a provider of services receives because of travelling occasionally to perform duties within or outside the country, and is excludible in the computation of personal income tax, shall be subject to the following conditions:

(1) The travelling per diem is bona fide spent by such person necessarily and exclusively for performing his duties and wholly spent for such purposes.

(2) If such person receives per diem at the rate not higher than the top per diem rate the government pays to its officials under the royal decree governing per diem for official travelling in or outside the country, as the case may be, in the nature of a lump-sum payment, such per diem shall be treated as bona fide spent by such person necessarily and exclusively for performing his duties and wholly spent for such purposes without having to possess a record to prove the payment.

(3) If such person receives per diem at a rate higher than under (2) and has no documental record to prove that the per diem has been bona fide spent by him necessarily for performing his duties and wholly spent for such purpose, only that part of the per diem which does not exceed the rate mentioned under (2) shall be treated as has been so spent.

Clause 2. The travelling for performing the duties under Clause 1 must be evidenced by a record to have had the approval of the employer or the payer of income for performing the duties outside the office or place of business, such record being required to specify also the nature of the duties to perform and the duration of the performance.

Clause 3. All the regulations, directives, instructions or rulings that are contrary to or in conflict with this instruction shall be repealed.

Clause 4. This instruction shall be effective on and from the 1^st day of January B.E. 2539.

Given on the 25^th Day of December B.E. 2538

Captain Suchart Chaovisit

Director-General of Revenue

II. Labour Protection in Specific Cases

After months of public criticism, the government conceded via the issuance of a Royal Decree dated 22^nd August 1998 prescribing the types of employment which may have different protection from the Labour Protection Act as following:

1) Employment in petroleum business for maintenance and related works in the exploration block and production area;

2) Employment involving professional or technical work, administration and management, clerical work, trading, service, production or related activities;

3) Employment in restaurant or refreshment shop (e.g. bars) which does not open or provide service continuously on each working day;

4) Employment involving professional or technical work concerning exploration, drilling, refinery and extraction, and production of petroleum or petrochemical products;

5) Employment in the management, academia, administration, finance and accounting positions;

6) Employment in sales and promotion work.

Practically every type of employment is subjected to the Ministry of Labour to prepare a directive specifying protection details different from the Labour Protection Act.

So far the Ministry of Labour has come up with the following exclusions, exception and limitations:

1. Headmasters and teachers of private schools are excluded from jurisdiction of the Labour Protection Act, and are under the auspices of Private School Act instead.

2. Domestic workers whose work is not part of a business operation are protected only for wage payment, annual leave, and sexual harassment.

3. Employees of non-profit organisations such as foundations are protected only for wage payment.

4. Technical, academic, administrative, managerial, clerical, sales and service, manufacturing work or related activities may, by mutual agreement, arrange to have work hours longer than 8 per day, but not more than 48 per week. If employees are on monthly wage rate, extra pay will be paid on the basis of average hour rate. Daily waged employee must be paid overtime rate (1.5) for the extra hours.

5. Works which may be hazardous to health and well-being of employees are specified.

6. Work outside normal hours is not to exceed 36 hours per week.

7. For work in hotels, restaurants, clubs, associations, places of entertainment, work in forests or difficult terrains, transportation, which cannot be stopped, employers may put employees to work on traditional holiday in exchange for days off on another days, or compensate with pay.

8. Employees may apply for leave for training related to the test administered by the government agencies. The application for leave must be lodged 7 days in advance.

9. Employees younger than 18 years of age cannot work in an area with temperature higher than 45 °C or noise level exceeding 48 decibels, but they may work in gasoline service stations.

10. Children below 18 (but not younger than 15) are allowed to work as attendants at gasoline service stations.

11. People in workplaces in the petroleum industry which are not easily accessible may, by mutual arrangement, work up to 12 hours/day, 28 days straight for each period in exchange for successive days off.

12. For employees in restaurants and bars with long break over 2 hours, the excess break hours are not counted as work hours.

13. Female technicians and engineers originally forbidden from working in the manufacturing or transporting of inflammable materials or explosives are now allowed to work in petroleum refineries or petrochemical plants.

14. Female employees working in administration, academic, management, finance and accounting can work overtime hours during their pregnancy.

15. Employees working as salespersons or sales promotion staffs earning commission will not be eligible for overtime or holiday wage rate except granted by employers.

16. The law is not applicable to agricultural workers and those who perform their work at home.

17. Employees in land transport business and those working as watchmen or security guards are not eligible for overtime payment. Their work hours beyond 8 hours/day will be compensated for by normal wage rate.

Important Changes in German Law 2004

January 2004

Important Changes 2004 in German Law

The following shall give an overview of the most important changes with regard to

- Tax Law

- Labour Law

- Social Security System

- Unfair Competition Law

The German government has launched a set of reforms known as the Agenda 2010 aimed at reorganising the employment market and the social security system in order to promote economic growth. Some of its measures will already become effective in 2004. As a result, work should become cheaper and German citizens should have higher net earnings

Aside from the tax cut, the most significant reforms focus on Germany’s labour market, which remains comparatively inflexible. One measure to address this problem is an amendment to the pertinent laws to the effect that small companies will have the right to lay off newly hired employees more easily. Abuse of the existing system, the ready-at-hand possibility to turn down job offers without penalty, generous unemployment benefits that offer no incentive to pick up less well-paid jobs and generously subsidised early retirement plans will be reduced.

In addition to the following overview please find our updated newsletter and brochure list as well as recent law articles that might be of interest to you.

If you require any further information, we will be more than pleased to serve you!

1. Income Tax Law:

- The minimum rate of taxation is lowered from 19.9% to 16%. The maximum rate of taxation will be 45% (instead of 48%) of any income higher than 52,151 € (instead of 55,007 €).

- The basic tax allowance increases from 7,235 € to 7,664 €.

- The allowance for business related expenses decreases from 1,044 € to 920 €.

- The claimable amount for travel expenses has been decreased from 40 to 30 Cents per km. However, any amount higher than 4,500 € can be claimed as deducible expense only in case a car is used.

- The tax-free amount for interest received has been limited to 1.370 € for singles and 2.740 € for married couples.

- All additional bonuses received for night, Sunday & holiday work, in case the hourly rate is higher than 50 € (approx. 2,500 THB/hour!) is not tax exempt any longer.

- The tax allowance concerning households is cancelled. Only single parents are granted a tax allowance of 1,308 €.

2. Labour law:

- Dismissal protection is granted to new employees only if the company already has at least ten employees.

- In case of dismissal the choice of who to dismiss will still be restricted by social criteria such as, age, alimony obligations, handicaps. But very efficient employees don‘t have to be dismissed first anymore even if with regard to social criteria they would have to.

- For set ups short-term employment is facilitated.

- A master craftsman’s certificate will only be required in 41 trades instead of 94. And even in these 41 trades assistants can go into business for themselves if they have six years of working experience out of which four are in executive positions.

3. Social Security System:

- The drastic reform of the welfare system will come into effect in 2005. As for now, benefit payment to Germans living abroad has been restricted.

- Unemployment Benefits will be paid for a maximum of 12 months, 18 months for those over 55 years of age.

- The contribution to the pension fund remains at 19.5%. There will be no rise in pensions. Retirees going on pension in April 2004 or later will get their payment not before the end of each month. Pensioners pay full contribution to the mandatory care insurance themselves. The aid for private provision in the context of the so-called Riester-Rente is simplified. The contribution assessment ceiling regarding pension insurance, care insurance, health insurance has been raised.

- Average contribution to compulsory health insurance shall fall from 14,3 to 13,6%.

- Certain benefits of the compulsory health insurance are cut, and the ensured have to pay higher contributions if they call on health service.

4. Unfair Competition Law:

Changes regarding the Unfair Competition Law affect participants in trade as well as consumers. Until today legal sales activities outside the day-to-day business that give the impression of granting benefits were very limited. Seasonal sales in winter and summer were such legal exceptions. But the winter sales of January 2004 will probably be the last of its kind. Presumably a reform of the Unfair Competition Law will become effective in spring that allows special sales activities throughout the year.

German Labour Law

June 2005

T a b l e o f C o n t e n t s

introduction to the updated edition 3

Part 1: Individual Labour law 3

I. Legal framework 3

II. Individual Labour Law 5

1. Employment Relationship 6

2. Working Hours 6

3. Permanent and Fixed-Term contracts 7

4. PAID LEAVE (VACATION), SICK LEAVE, SPECIAL LEAVE 8

5. Remuneration 9

6. termination 9

7. Employee protection 10

8. Employment of Foreigners 15

9. Deductions from salary 15

iii. System of Labour courts and Labour court procedure 17

IV. Federal Institution for employment 18

v. Unemployment AND "Hartz" Legislation 18

1. Unemployment insurance 18

2. severance payments 19

3. "Hartz" legislation 20

Part 2: Collective labour law 22

1. Trade unions and empoyer´s associations 22

2. collective bargaining agreements 23

3. worker´s representation in the enterprise 23

III. system of labour courts and labour court procedure 24

appendices 25

1. sources 25

2. useful adDresses and web pages 26

Introduction to the Updated Edition

With its “Agenda 2010”, the German Government aimed at a comprehensive reform of the German labour market. With regard to labour law, changes are made notably concerning the protection against dismissal and limited-term employment contracts (see Part 1, II, 3 and 7c). For the first time, there is a standard statutory claim to a severance payment (under certain circumstances) in the case of dismissals for operational reasons (redundancies). The new law entered into force as of 1 January 2004 onwards.

Furthermore on 9 July 2004, the Upper House of Parliament voted through the so-called labour market reforms (the so-called “Hartz IV” legislation). With the agreement of the Upper House, a law that represents the greatest and most comprehensive change in German welfare legislation since the introduction of labour and social insurance in the nineteenth century passed its last parliamentary hurdle (see Part II, VIII).

Part I: Individual Labour Law

I. Legal Framework

Labour relations between employers and employees in the Federal Republic of Germany are regulated by legislation, collective agreements and individual contracts of employment. The so-called "freedom of coalition" is guaranteed both to employers and employees under the German Constitution (Grundgesetz, GG). For the social partners, this ensures the freedom to negotiate collective agreements, i.e. autonomy in collective bargaining. The Basic Law furthermore guarantees freedom of association as well as free choice of equal treatment and in particular obliges the state to support the effective realisation of gender equality.

The major sources of labour law are:

- European Law (Directives and Ordinances of the European Union are dominating more and more the national labour law of the Member States; EU Directives must be implemented and EU jurisprudence from the European Court of Justice has legal binding power)

- Federal legislation

- Legislation of the Federal States

- Ordinances

- Collective agreements

- Employment agreements

- Company internal practices/Working Rules and Regulations

- Employer’s right to give instructions and

- Case law.

There is no consolidated Labour Code in Germany; minimum labour standards are laid down in separate acts on various labour related issues, which are supplemented by the government's ordinances.

The following Acts may be considered the key ones:

The German Civil Code (Bürgerliches Gesetzbuch, BGB) defines the employment relationship and constitutes matters of dismissal without paying attention to protection against unfair dismissal. However, issues like protection against unfair dismissals, sick leave and holidays are treated in the specific Acts mentioned below.
The Works Constitution and Employees’ Representation Act (Betriebsverfassungsgesetz, BetrVG) regulates co-relations between employers and employees.
The Act on Collective Agreements/Collective Bargaining Contracts Act (Tarifvertragsgesetz, TVG) governs collective agreements.

Other labour legislations are:

Concerning Employment Relationships:

- Federal Paid Leave Act/Federal Vacations Act (Entgeltfortzahlungsgesetz, EngeltFG; Bundesurlaubsgesetz, BUrlG)

- Employment Safety Act (Arbeitsschutzgesetz, ArbSchG)

- Act regulating the Payment of Wages and Salaries on Public Holidays and in Case of Sickness (Entgeltfortzahlungsgesetz, EFG)

- Protection against Unfair Dismissal Act (Kündigungsschutzgesetz, KSchG)

- Act on the Commercial Transfer of Employees (Arbeitnehmerüberlassungsgesetz, AÜG)

- Social Code III (Sozialgesetzbuch III, SGB III)

Concerning Occupational Training:

- Occupational Training Act (Berufsbildungsgesetz, BBiG)

- Act on Part-Time and Fixed-Term Employment (Teilzeit- und Befristungsgesetz, TzBfG).

Concerning Occupational Safety and Health, and Working Conditions:

- Maternity Protection Act (Mutterschutzgesetz, MuSchG)

- Young Workers Protection Act (Jugendarbeitsschutzgesetz, JArbSchG)

- Working Time Act (Arbeitszeitgesetz, ArbZG)

- Act on the Payment of Child Raising Benefit and Child Raising Leave (Bundeserziehungsgeldgesetz, BerzGG)

- Insolvency Ordinance (Insolvenzordnung, InsO).

Concerning Individual Dispute Settlement:

- Labour Court Act (Arbeitsgerichtsgesetz, ArbGG)

- Code of Civil Procedure (Zivilprozessordnung, ZPO).

Labour legislation is interpreted by the labour courts. Some matters, especially labour-strike regulations, are partly or even totally left to case law.

II. Individual Labour Law

Individual Labour Law is the area of labour law which regulates the relations between an individual employee and an employer. In particular, it covers the content and obligation aspects of the contract of employment and employment relationship, employee rights and employee protection.

An employee is defined as a person who works for another (the employer) on the basis of a contract under private law. The employee is in a relationship of personal subordination and subject to direction and control of his/her immediate superiors. Contrary to this, a person is considered to be an entrepreneur, if she/he is running a firm as owner or leaseholder.

Where no relationship of subordination exists but the individual depends economically on the enterprise, he/she may be a person treated in law similar to an employee (e.g. home workers, artists, musicians or freelancers). In recent years, there has been a intensive discussion accompanied by legislation as to the demarcation of self-employment and the related issue of so-called fake freelances, (“Scheinselbständige”). The latter can be characterized as persons who (i) run a firm without staff covered by the system of compulsory insurance (health-, pension-, nursing care insurance) (ii) work regularly just for one customer and (iii) do work that is typical for dependent employees.

Such individuals are treated equal to employees. Collective agreements can also be concluded for them. In general, the provisions of labour law are applicable to them as well as far as it concerned to protect them. This is especially true to the compulsory statutory insurance.

1. Employment Relationship

An employment relationship is created by a valid employment agreement. The contract of employment consists only of the specific working arrangements that are agreed between employer and employee, whereas the employment relationship encompasses the entire legal relationship between the contracting parties. The rights and obligations concerned may be laid down either by the individual contract, by collective agreement or by law.

This difference between the employment relationship and the contract of employment is particularly evident in the situation where the contract of employment is invalid and the employee has already taken up employment. In these circumstances, a legally valid employment relationship with retrospective effect including all rights and obligations between employer and employee will be presumed in the form of a de facto employment relationship.

The contract of employment is a contract of service by which the employee undertakes to perform services in accordance with the instructions given by her/his superiors (sec. 611 of the BGB). This contract establishes an employment relationship between the respective parties. Since the terms and conditions of employment and the rights and obligations of the parties are fixed mainly by statutes, collective agreements and works agreements, the actual contract usually contains working hours and nature of the activity only. Any further benefits agreed on that exceed these fixed minimum terms and conditions to the employee's advantage also forms part of the contract. The contract may not, however, deviate from the provisions of statute law, collective agreements or works agreements to the detriment of the employee. To this extent, freedom of contract is restricted under labour law.

2. Working Hours

Protection of working time is governed by the Working Time Act (Arbeitszeitgesetz, ArbZG), the Maternity Protection Act (Mutterschutzgesetz, MuSchG) and the Young Workers Protection Act (Jugendarbeitsschutzgesetz, JArbSchG). The protection applies to white-collar workers as well as to blue-collar workers and vocational trainees.

In general, working time is defined as the time from the beginning until the end of work without any breaks (sec. 2 (1) ArbZG and sec. 4 (1) JarbSchG). The statutory working time is 8 hours per day, except for Sunday and statutory public holidays, which are normally arranged to be a resting period (sec. 3 and sec. 9 ArbZG). The statutory weekly working time is thus 48 hours, but most employees in Germany have a regular working week of below 40 hours stipulated in their collective agreement. Following a recent ruling of the European Court of Justice standby service is also included in the 48 hours weekly working time. Following the ruling, the German legislator has changed the Working Hours Act. Pursuant to this, annual average working hours, including standby service, may not exceed 48 hours per week unless the employee has given his or her consent to this (which he or she can withdraw at any time).

The daily working time shall not exceed 8 hours in case of expectant or nursing mothers (sec. 8 MuSchG). The same applies to employees or trainees under 18 years (sec. 8 JArbSchG). There is also a ban on young workers working on Saturday (sec. 16 JArbSchG).

In all other cases, the regular daily working time may be extended up to 10 hours only if the mean of the daily working time in the following 6 months is 8 hours per day (sec. 3 ArbZG). This encourages flexibility of working time. However, 11 hours of uninterrupted rest after daily work must be guaranteed (sec. 5 (1) ArbZG). Also night work is legally permitted only under some strict preconditions (sec. 6 and sec. 7 ArbZG).

3. Permanent, Fixed-Term Contracts of Employment and Part-Time Work

As a rule, the contract of employment is concluded for an unlimited period. It is, however, possible for the employer and the employee to conclude a contract for a limited period only.

a. Fixed-Term Contracts

Any fixed-term contract must be consistent with the Act on Part-Time Work and Fixed-Term Employment Relationship (Teilzeitbeschäftigungsförderungsgesetz, TzBfG). The duration of fixed-term contracts must be set according to objective conditions such as a specific end date, the completion of a specific task, or the occurrence of a specific event. As of 2004 it is easier for start-up companies and those setting up businesses to limit the term of employment relationships. In the first four years after establishment of the company, they can limit employment relationships up to a total term of four years without requiring any objective reason for doing so. Before, limitations without an objective reason were subject to a general maximum limit of two years.

b. Part-Time Work

Part-time work is also governed by the Act on Part-Time and Fixed-term Employment Relationship (Teilzeitbeschäftigungsförderungsgesetz, TzBfG). It is defined as any work week of fewer hours than the weekly hours worked by full-time workers. Every full-time worker who has been employed for at least 6 months in the same establishment can request to work part-time. The employer shall accept this request unless he/she regards the request as not feasible in view of operational reasons such as when the reduction of working time may have negative impact on the organization, work flow or safety, or would lead to excessive costs. If the employer does not react to the request until a month before the desired date of entry, the request is legally considered accepted. Please note that these rules are not applicable to companies with less than 15 employees. Furthermore any kind of unjustified discrimination between part-time workers and full-time workers is prohibited.

4. Paid Leave (Vacation), Sick Leave, Special Leave

Vacation is regulated by the Federal Paid Leave Act (Bundesurlaubsgesetz, BUrlG) and by collective agreements. The statutory minimum entitlement amounts to 24 days per calendar year, not including Sundays and public holidays (sec. 3 (1) and 2 BUrlG). Saturdays are thus included in the calculation. Additional days of paid leave may be added by the particular collective agreement. In fact, a period of 4 up to 6 weeks per calendar year is usually granted by collective agreements.

Sick leave is regulated under the Act on Payment of Wages and Salaries on Public Holidays and in case of Sickness (Entgeltfortzahlungsgesetz, EntgeltFZG). If the employee has been employed for at least 4 weeks and he/she was not to blame for his/her incapacity to work, continued payment of wages can be claimed for a period of up to 6 weeks (sec. 3 (1) EntgeltFZG). The employee is thus currently entitled to claim 100% of the average income (sec. 4 (1) EntgeltFZG).

Child raising leave is governed by the Act on the Payment of Child Raising Benefit and Child Raising Leave (Bundeserziehungsgeldgesetz, BerzGG). The claim to such leave can be made by female as well as male employees but is inadmissible whilst the ban on occupation under the Maternity Protection Act applies. During child raising leave, the mutual duties laid down in the employment contract are suspended.

Another entitlement for continued payment during leave of absence is laid down in sec. 616 of the German Civil Code (Bürgerliches Gesetzbuch, BGB). Wages can also be claimed if the employee is prevented from working for personal reasons (such as e.g. death in the family, birth or attending a funeral of a relative or family member) and the absence is for an insignificant period. In fact, the employee is not always entitled to entirely claim such leave, because sec. 616 BGB may be - and in practice often is - limited or even unrecognised by collective or contractual agreements.

5. Remuneration

Actual salary is determined in the individual contract of employment, but cannot be lower than the minimum wage established in the relevant collective agreement. Unlike many other countries, there is no statutory minimum wage in Germany.

As a general rule, remuneration is determined by mutual agreement. This principle may be restricted, but only in observance of the applying statutory protection. Any salary payments are subject to tax and social security contributions (pension, unemployment, health and nursing care insurance). These must be withheld from the salary by the employer and paid respectively to the tax office or the social security institutions, along with the employers´ own social security contributions. The employer and the employee each pay half of the social security contributions, and employers must pay their share in addition to the salary.

6. Termination

An unilateral declaration of intention by one contracting party to another, stating that the contractual relationship is to be ended, takes effect when the other contracting party receives it. Notice must be given in writing in order to have legal effect.

German labour law makes a distinction between ordinary termination (with notice), whereby the employment relationship is ended when the period of notice expires (sec. 622 BGB), and extraordinary termination (without notice). In the latter type of termination, the notification takes the effect of an immediate cancellation of the employment relationship (sec. 626 BGB).

Termination by the employer is unlawful if it contravenes one of the regulations of protection against unfair dismissal or a contractual restriction of the right to terminate and the employee then invokes these infringements.

Provided no contractual restriction has been agreed, termination by the employee is lawful if due notice is given or if the termination is for cause. Termination by the employee without notice is subject to the same rules as those for summary dismissal by the employer.

7. Employee Protection

Employee protection comprises all the regulations on rights in employment, which take account of the employee's particular position of vulnerability in the employment relationship. They include especially health and safety, restrictions on working hours, maternity protection, youth employment protection, protection against unfair dismissal and protection against discrimination.

a. Maternity Protection

Maternity protection is governed by the Maternity Protection Act (Mutterschutzgesetz, MuSchG), which is supplemented by the Ordinance on Maternity Protection at the Workplace.

As a general duty the employer has to organise workflow and workplace in favour of the pregnant and nursing employees (sec. 2 (1) MuSchG). This protection applies as soon as the employer has been informed about the existent pregnancy. A ban is then put on heavy physical work or piecework as well as on work with dangerous materials (sec. 4 (1) and (2), sec. 3 MuSchG and sec. 1 of the Ordinance). In cases of the employer's misconduct he/she will be punished for a regulatory offence or even for a criminal act (sec. 21 (1-4) MuSchG).

During pregnancy and until 4 months after childbirth, the employee is additionally protected against any dismissal either with or without notice (sec. 9 MuSchG). The same absolute protection applies to the period of child-care leave according to the Act on the Payment of Child Raising Benefit and Child Raising Leave (Bundeserziehungsgeldgesetz, BerzGG). During a period of 6 weeks prior to the birth and until 8 weeks after the birth, the pregnant and nursing mother may not be occupied by the employer. In cases of premature or multiple birth, this ban lasts until 12 weeks after birth. During this period of maternity leave, the employee is paid maternity allowance out of a statutory health insurance fund and a supplement by the employer.

Another protection of the pregnant female is determined by case law: Usually unlawful answers given in the course of a job interview may lead to the entitlement of the employer to revoke the employment agreement. In such a case the employee is not protected from unfair dismissal. However, such deception is only deemed to be illegal if the question concerned is permissible. Otherwise the applicant may lie without consequence. This is true for questions regarding pregnancy because it would amount to discrimination as between male and female applicants. Only in exceptional cases (e.g. the expectant mother is not capable to do the work in question or if the question shall serve to the protection of the expectant mother or the unborn child) this type of question may be lawful and must be answered honestly. According to a recent decision of the European Court of Justice for fixed-term employment agreements the question regarding pregnancy is justified only where the pregnancy does substantially not allow the work for the entire contractual period. Furthermore it has to be stressed that any questions as to whether the candidate wants to have children are never allowed.

b. Youth Employment Protection

The employment of children is prohibited according to the Young Workers Protection Act (Jugendarbeitsschutzgesetz, JArbSchG). This applies not only to children under 15 years but also to those who are older and still obligated to attend full-time schooling (sec. 5 (1), and sec. 2 (1), (3) JArbSchG).

Workers under the age of 18 may perform their apprenticeship or traineeship. In this case the employer must observe a special protection, also laid down in the above-mentioned Act. The daily working hours must not be more than 8 and any occupation between 8 pm and 6 am is forbidden. During work, breaks of suitable duration must be ensured and Saturdays as well as Sundays are, apart from very exceptional cases, arranged to be a time for rest. Moreover, there is a ban on dangerous work, piecework, time-based work and on underground mining work.

c. Protection against Unfair Dismissal

The major sources of regulation concerning this issue are the German Civil Code and the Protection Against Unfair Dismissals Act (Kündigungsschutzgesetz, KüSchG). However, as of 1 January 2004 the latter applies only to establishments regularly employing more than ten full-time employees (not counting vocational trainees and marginal part-time workers). Before the threshold amounted to 5 employees; however, those employees who currently have protection against unfair dismissal under the old law will not lose the protection against unfair dismissal. Also, a worker must have completed a qualifying period of six months work without interruption to be eligible for protection under this law (sec. 1 (1) and sec. 23 KüSchG).

As aforementioned (see Part I, II 6), a distinction is made between ordinary termination with notice and extraordinary termination without notice. In both cases, termination at the initiative of the employer is limited by reasons of law.

Periods of notice are also stipulated by law. The minimum statutory period amounts to four weeks, and is increased by one month each time the worker has completed his/her 5^th, 8^th, 10^th, 12^th and 15^th year of working for the same employer. The maximum entitlement is seven months, after the worker has completed a 20-years period of employment. However, years of service before the employee is 25 years old are not taken into consideration to calculate his/her entitlement to notice. Collective agreements may specify longer or shorter periods of notice, whereas individual contracts of employment may only specify longer periods of notice.

Extraordinary termination is legally possible where there is a cause which makes it unacceptable for the respective party to continue the employment relationship until the end of the notice period, alternatively the contractual date of expiration. Typically it applies to cases of serious misconduct and is only possible within two weeks as of the moment when the notifying party finds out the facts that are decisive to terminate the employment relationship. In case of litigation, the same party will be required to prove the facts on which the extraordinary termination is based on.

In the case of an ordinary termination with notice the employment relationship ends when the period of notice expires. The declaration of an ordinary termination must be “socially justified”. There are three possibilities of social justification:

Dismissal on grounds of personal capability: The termination must be grounded on circumstances related to the employee’s permanent personal attributes such as lack of vocational, physical or mental qualification for the work in question, advanced age or serious illness.

Dismissal on grounds of conduct: Here the circumstances which lead to a termination must be related to wilful conduct on the part of the employee.

The line between dismissal on grounds of personal capability and dismissal on grounds of conduct is, however, fluid. Grounds relating to conduct concern individual acts committed by the employee, whereas grounds relating to personal capability are associated with certain permanent personal characteristics and abilities of the employee.

Redundancy/Termination for operational reasons (betriebsbedingte Kündigung):

Termination in the sense of redundancy is for a reason within the employers sphere of influence in running the company. Redundancy is lawful only if justified by urgent operational requirements. These can relate to economic, technical or organizational changes. The transfer of an establishment is, however, not an admissible reason. As of the amendments of the law on protection against unfair dismissal from 2004 onwards an employer will, when terminating employment, alongside with his written notice, be able to offer a newly created “statutory compensation payment” for the case that the employee decides not to file a complaint for unfair dismissal. This statutory compensation payment comprises a half monthly gross salary per year of employment. It is for the employee to decide whether or not he/she thinks it advisable to take court action, bearing in mind that, if the dismissal is held to be justified, he/she might leave the court empty handed. Therefore, judicial proceedings will be less likely when compensation is offered since, in the past, most employees sued their employers for re-instatement not because they wanted to resume work but because this was the only way to receive compensation.

In this context, further amendments concern the criteria for selecting the employees to be made redundant. From January 2004 onwards, they are considerably simplified: employers will only be obliged to take into consideration the duration of the employment relationship, age of the employee, his/her financial obligations towards family members and severe disabilities as recognised by statute. Furthermore, certain persons who are of particular importance for the establishment due to their knowledge, abilities and performances can be ignored in the selection-process as outlined above. As a result, the new rules in connection with the termination of employment will make consequences of redundancy better predictable because the criteria of selection concerning worker who are to be made redundant have been considerably simplified.

Where there is a staff committee, the employer is obliged to consult it before each case of dismissal either with or without notice, even though the council's response is not binding on the employer. The staff committee has a period of three days in case of extraordinary dismissal and one week in case of ordinary termination to agree or declare reservations in writing. Otherwise agreement is presumed by law. Termination without proper hearing of the staff committee is ineffective.

A worker who intends to take action against his/her termination must file a submission before a labour court within a time limit of three weeks as of the date he/she has received the notice. If the court is not convinced that either the ordinary termination is socially justified, or the extraordinary dismissal is for important reasons, it may order the worker's reinstatement, with back pay. In this context the termination is “socially justified” if the employee had been selected by social criteria as duration of the employment, age, martial status, having children and others. Unless the court decides that reinstatement is impractical it may assign the employer to pay compensation. The compensation is normally equal to a one-month pay per each year of service, with a maximum of twelve months. In case the worker is aged more than 55 years and is employed twenty or more years, the compensation may be even equal to eighteen-months pay.

Special rules apply to collective redundancies in establishments employing more than twenty employees, which call for the consultation of the staff committee and the setting up of a social plan.

Some groups of employees benefit from particular protection against ordinary and extraordinary dismissal due to certain individual circumstances. These specially protected groups include disabled workers, pregnant women and staff committee members.

d. Equality

The principle of equal treatment is laid down as a basic right of the German Constitution (GG). Any discrimination on grounds of sex, race, nationality, handicap, religion, political opinion and trade union activities is inadmissible. In order to fulfil the obligations arising from EU directives, sections 611 a and 611 b of the German Civil Code (BGB) were enacted in 1980. Direct and indirect discrimination on grounds of sex, also prior to the establishment of an unemployment contract, have thus been prohibited by law. A prohibition is also on sexual harassment. Although there are already special statutory provisions in force such as the Act of the Promotion of Employment (Beschäftigungsschutzgesetz, BeSchuG) and regulations are already been provided for in criminal law, the particular situation of the work environment together with its existing subordinate relationships cannot be sufficiently taken into account. The Act on Employment Protection defines sexual harassment as any deliberate, sexually oriented behaviour which injures the dignity of employees at the workplace.

Another development in this respect refers to the implementation of three EU anti-discrimination Directives. The deadlines for implementing the directives have all passed when the European Commission finally announced last year that it would file suit against Germany before the European Court of Justice. In 2005 the German Legislator finally took action and implemented the directives into the Anti-Discrimination Act.

The implementing law prohibits discrimination based on racial or ethnic origin, sex, religion or belief, disability, age or sexual orientation in employment and occupation (the prohibited grounds). It protects employees, job applicants and pensioners, against discrimination by the employer, other employees and third parties, such as clients of the employer. It also provides remedies for employees who suffer discrimination on one of the prohibited grounds. “Discrimination” also covers harassment, sexual harassment and instructions to discriminate. Furthermore a federal anti-discrimination office shall be established. Employees may file a discrimination complaint either with this office or with their employer. If the employer fails to implement measures to stop the discrimination, the affected employees may stop working to the extent that this is necessary for their protection but they will continue to be paid. Employees who are discriminated against will be entitled to financial compensation for non-financial damage.

8. Employment of Foreigners

On 1 January 2005 the New Immigration Act (“Zuwanderungsgesetz”, ZuwG) entered into force. It contains a complete revision of the entire law dealing with foreigners and constitutes the first comprehensive reform of the existing aliens law into a modern immigration law. Among various changes the provisions regarding the employment of foreigners have been completely revised. Under the old Regime two permits have been necessary, namely a residence permit and a work permit. The permits have been connected in that a residence permit can be issued only if and when the labour office decides that a work permit can be issued. According to the new Act the work permit will be issued together with the residence permit, subject only to internal approval by the labour office (one-stop-government). This is a significant simplification of process. Foreigners will therefore only have to deal with one authority. Abroad this will be the foreign missions (embassy and consulate visa offices); in Germany the alien authorities. The labour administration is involved via an internal employment approval procedure where this is required. Moreover, the Federal Employment Agency checks whether the employment of foreigners will have a negative effect on the labour market. Another preconditions for approval is that the foreign employee will not be employed under less favorable conditions than a comparable German employee.

9. Deductions from Salary (Taxes and Social Security Contributions)

These deductions mainly arise from the employer's obligations under public law to hold back Wage tax, Church tax where applicable and the Social Security Contributions (there are five branches of social insurance: pension, health, long-term care, accident and unemployment insurance) payable by employees, and to forward them to the tax office and social security collecting agencies. The amount of such deductions is determined by the employee's gross pay and marital status.

Wage Tax is a form of income tax which is levied on earnings from work as an employee. It is deducted at source by the employer and must be forwarded to the tax office by the tenth day of the following month. Taxation of an individual's income is progressive. In other words, the higher the income, the higher the rate of tax payable. The basis for calculation is gross pay, minus any tax-exempt allowances. In addition a solidarity surcharge of 5.5% is levied on the actual income tax amount. As of 1 January 2005, the basic personal allowance amounts to EUR 7,664. The basic tax rate has been reduced to 15% (in 2004: 16%), while the top rate amounts to 42% (2004: 45%). The top rate applies only to taxable income in excess of EUR 52,151.

The Social Security Contributions for health, unemployment insurance, the statutory pension scheme, long-term care and accident payable by the employee represent half of the total contributions that must be paid over to the social security institutions. The employer deducts them from the employee's gross pay and must then provide the other half from own resources and pass on the total to the institutions concerned. Accident insurance contributions are paid only by the employer.

However, social security contributions are not necessarily compulsory for an employee. Individuals whose earnings are above the so-called “Beitragsbemessungsgrenze” (income limit for chargeable contributions, in 2005, EUR 3,900 gross per month or EUR 46,800 per annum) may choose whether they will opt to remain in the statutory insurance scheme, insure themselves privately or dispense with insurance protection altogether.

The rates of contribution for the statutory health insurance amounts to an average of 14.5% in 2005, the long-term care insurance amounts to a rate of 1.7% (additional contributions are to be made by childless taxpayers in the amount of 0.25%) of the gross salary.

Unemployment insurance is the branch of statutory social security that insures employees against the risk of unemployment. The primary purpose of unemployment insurance is the prevention of loss, and only secondarily it includes the support in the form of payments (unemployed benefit). It therefore provides not only insurance payments but also funding for job creation and protection and, in the context of employment promotion, funding for fostering vocational training, entry into active employment and occupational rehabilitation. In 2005 the rate of unemployment insurance amounts to 6.5% of the gross salary. Unemployment insurance is administered by the Federal Institution for Employment (recently renamed into “Bundesagentur für Arbeit”).

The majority of gainfully active individuals working as employees and some of those working on a self-employed basis are subject to obligatory insurance under the statutory pension scheme. The protection provided covers total disability, occupational incapacity, retirement and death of the insured person. The statutory retirement pension is normally paid from the age of 65 onwards, but in certain cases even earlier. If the insured person dies there are entitlements to a widow or widower's pension and to an orphan's pension for children who are still attending school or undergoing vocational training. The amount of the pension is graded according to the income of the insured person and the duration of the insurance period. In 2005, employers and employees both pay one half of 19.5% of the latter´s gross monthly salary up to a certain income level up to a certain income level (EUR 62,400 in West Germany and EUR 52,800 in East Germany).

III. System of Labour Courts and Labour Court Procedure

The labour law jurisdiction is governed by the Labour Court Act (Arbeitsgerichtsgesetz, ArbGG). The German labour court system is three-tiered: labour courts of first instance (Arbeitsgerichte), higher labour courts (courts of appeal) in the second instance (Landesarbeitsgerichte); and, at the top, the Federal Labour Court (Bundesarbeitsgericht), which has the final say in labour law matters.

Proceedings concerning an individual employment relationship or any appeal of one by either side of the dispute lead to a judgement. They always start with a conciliatory hearing, because the Local Labour Court's first intention is an amicable settlement of the case. If a settlement is concluded at this stage, the court will generally not charge court fees other than the initial filing fee. Although each party must meet its own costs for legal representation, the losing party must bear the attorney fees of both parties. Proceedings for protection against dismissal are also given priority in the first instance (sec. 61 a ArbGG).

Disputes in terms of Works Constitution Law are part of another proceeding. They are leading to a court order which permits only restrictively amicable settlements.

Also social security cases are heard by separate courts. This is due to the fact that social security law in Germany is strictly separated from labour law, and is understood to be a part of public law. Therefore, disputes arising in the field of social security are not settled by labour courts (or administrative courts), but by special social security courts (Sozialgerichte). The large majority of the cases heard before these courts deal with questions concerning either the statutory pension scheme or unemployment insurance or total disability law.

IV. Federal Institution for Employment

The Federal Employment Service (BfA[4]) particularly organizes job placement and the planned promotion of employment (sec. 33 ff. EPA), the implementation of job creation schemes and the administration of unemployment insurance.

V. Unemployment and “Hartz” legislation

1. Unemployment Insurance

Unemployment insurance is mandatory for all employees in Germany. Contributions are 6.5% of gross monthly salary up to a certain level split equally between employer and employee.

Unemployment benefits are granted if the employer is unemployed and has worked (and paid contributions) for at least 12 month in the last three years (note that this period will be shortened to two years). To receive unemployment benefits, the employees must register at the local employment office (Arbeitsagentur) immediately, as payments will be made only from the registration date and delays can lead to further penalties.

Furthermore the employee must not “risk his/her job wilfully” if this causes unemployment (e.g. if the employee quit his job by himself or signs a cancellation agreement). Otherwise, normally a 12 week blocking period is applicable if the employee can not prove that he/she has an important reason for quitting his/her job. An important reason exists if it is unreasonable for the employee after considering all circumstances to continue the employment, for instance the employee wants to move to his spouse or partner, binding working conditions are not kept or in case of workplace bullying or harassment. In this context a recent decision of the German Federal Social Court[5] has to be cited, ruling that in general in case of a contract of cancellation a blocking period always applies.

Besides this, a jobless person who wants to get unemployment benefit has to look for a job actively, and must be available for labour exchange at every working day, otherwise the payments will be interrupted for some weeks.

Benefits are around 60% (67% in case of children) of the previous net salary. The length of time one is entitled to payments depends on the length of former employment and age. Benefits are restricted to one year for people up to 45 years. While receiving benefits one must report regularly to the local Institution of Employment and the former employee is responsible for proving that he/she is looking for work if requested.

2. Severance Payments

Different types of severance payments can be observed in Germany. The first type is based on the Protection Against Unfair Dismissal Act (KüSchG). It is applicable for firm with more than ten employees and employees with more than six months of tenure. Severance payments can be the outcome of dismissal protection claims if ordinary dismissal are socially unjustified or extraordinary dismissals are causeless. In these cases severance payments are arranged if one party makes the application to cancel the employment relationship (although the dismissal was socially not justified), because a further co-operation between the employer and the employee cannot be expected. A court decision is not necessary for a severance payment. Frequently the parties come to an agreement with the help of a court without an official decision and in many cases employees and employers agree upon a certain amount without using a court at all. They may anticipate the costs and the uncertain outcome of claims and are both better-off – in terms of expected utility – with a mutual agreement. Additionally, many firms worry about a loss of reputation if conflicts concerning dismissal become public knowledge.

A second type can occur in the context of operational changes in connection with mass dismissal and social plan.

Both types are paid as a lump sum. The size of severance payment is not clearly determined by law. There is a scope of discretion of the courts and usually (depending on the Federal State in which the proceedings take place) for each year of employment either a half or one monthly gross salary will be granted.

From a German tax perspective, a severance payment is considered compensation for the loss of future earnings and not past earnings. As of 1 January 2004 employees may receive EUR 7,200, EUR 9,000 or EUR 11,000 tax free depending on their age and seniority. The balance of the severance pay is given favourable tax treatment which reduces the effects of progressive taxation provided it is received during the course of one calendar year. The German tax authorities will only tax severance payment if Germany remains the country of residence at the time the payment is made.

As of 1 January 2003, an employee must inform the Employment Agency personally and without delay as soon as he or she finds out that his/her employment will end. If the Employment Agency is not duly informed, the employee will face a reduction in unemployment benefits (see above 2.).

3. “Hartz” Legislation

The Hartz concept is the name given to the recommendations resulting from a commission on reforms to the German labour market in 2002. Named after the head of the commission, Peter Hartz (Volkswagen´s personnel director), it went on to become part of the German governments Agenda 2010 series of reform. The reforms of Hartz I-III took place between 1 January 2003 and 2004; Hartz IV began on 1 January 2005.

Hartz I and II both came into effect on 1 January 2003, aiming at making new types of jobs easier to create, and cover for example the foundation of “staff services agencies”, support for further vocational education from the Job Agency, subsistence payments by the Job agency, new types of employment like the “Minijobs”, which lower or gradually rising taxes and insurance payments, a grant for entrepreneurs, known as the “Ich-AG” (Me inc.) and a rise in the number of job centres.

Hartz III came into effect on 1 January 2004. It aimed at restructuring and reforming the Job Centre, changing its name from the Bundesanstalt für Arbeit or Arbeitsamt (Federal Labour Institution) to the Bundesagentur für Arbeit or Agentur für Arbeit (Federal Labour Agency).

The Hartz IV reform came into effect on January 1, 2005. This part of the reform brings together unemployment benefits and social security benefits, leaving them both at approximately the lower level social security claimants received (up to EUR 345 per month plus cost of “adequate” housing).

Prior to 2005, 12 up to 32 months (depending upon the claimant´s age and work history) of full unemployment pay were followed by “Arbeitslosenhilfe” (unemployment benefits, 53 to 57% of the last net salary). From 2005 on, reception of the full unemployment pay (renamed to “Arbeitslosengeld I”) is restricted to 12 month in general and 18 month for over-55-years-old. This is now followed by the (usually much lower) Arbeitslosengeld II if the claimant fits the requirements. Whether or not the claimant is eligible for Arbeitslosengeld II now depends on his or her savings, life insurance and the income of husband or wife; only when these reserves are used up will a claimant get money from the state. The Institute for Economic Research in Halle estimates that the average long-term unemployed person will receive approx. EUR 350 per month compared to 530 before the reform.

Unemployment benefit II is in reality not a revised form of unemployment benefit but rather its abolition and transformation into social security. In the future, those who have worked for many decades and lose their job through no fault of their own will be subject to the same humiliating conditions that apply to those drawing social security benefits. Under the previous regulations, unemployment benefits were calculated according to the last net wage. The long-term unemployed, those out of work for more than one year, received 53% of their last wage. The income and property of a partner or others living in the same household was not taken into consideration. By paying contributions into the unemployment insurance scheme during his/her working life, an unemployed person had a legal claim to unemployment benefit. This legal claim is now void.

Like social security, “unemployment benefit II” entitlement is checked down to the last detail. The income and property of any partner living in the joint household will now be taken into account. Also current bank account statements are required, as are statements showing the level of any savings. An unemployed person and his or her partner can only receive benefits if their savings are below EUR 2,000 for each year of their life, up to a maximum of EUR 13,000 per partner. If an unemployed person has previously taken out capital-based life insurance for their old age they would have to cash this in prematurely and use up any proceeds – receiving far less than originally deposited. This fate will await quite a few, in view of the fact that some 70% of German citizen have taken out life insurance.

Furthermore, in order to receive even the diminished payments, unemployed persons can now be forced to accept any legal job, even if the pay does not provide subsistence and no matter how advanced their (previous) professional formation.

When the number of people who count as unemployed rose in January 2005 due to the new statistics introduced with Hartz IV and because of seasonal reasons (unemployment is much higher in the winter), this is what finally brought the total official figure over the psychologically important 5 million, the highest mark since January 1933 (just before Hitler came to power). That number alone is expected to stifle domestic demand further, and to lead to another marked drop in consumer spending after 3 already dismal years in the retail industry.

Several constitutional lawyers dispute the legality of Hartz IV law. The gravest problem seems to lie in the level of aid; EUR 345 per month, though more or less covering the most basic needs, are simply not enough for the constitutionally guaranteed “life in dignity” in a high-cost country like Germany. Another problem is the gross disproportion between the employees social insurance payments and the benefits (e.g. 30 years of unemployment insurance premiums equate some five full years of unemployment money, not the 12 month conceded by Hartz IV. Other doubts arise from then new so-called “1 EURO-Jobs” which in nature part resemble the forced labour last seen under the Third Reich dictatorship. A couple of constitutional complaints have already been announced for 2005.

Part II: Collective Labour Law

Labour relations between employers and employees are regulated in Germany by legislation, collective agreements and contracts of employment. The so-called “freedom of coalition” is guaranteed both to employers and employees under the German Constitution (GG). For the social partners, this ensures the freedom to negotiate collective agreements, i.e. autonomy in collective bargaining. Collective Labour Law is the area of labour law which regulates collective relations between employers and employees. In particular, it covers the works constitution and staff representation, the right to organize and collective bargaining autonomy.

The following Acts may be considered the key ones:

The Works Constitution and Employees’ Representation Act (Betriebsverfassungsgesetz, BetrVG) regulates relations between employers and employees.
The Act on Collective Agreements/Collective Bargaining Contracts (Tarifvertragsgesetz, TVG) governs collective agreements.

I. Trade Unions and Employers’ Association Regulations

There is no trade union law in Germany. Even though trade unions are generally defined as associations with no legal capacity, they are legally entitled to collectively bargain as well as to take legal action or to be taken to court (sec. 2 (1) Act on Collective Agreements TarifVG and sec. 10 Labour Court Act, ArbGG).

The duties and rights of trade union members are laid down in the relevant trade union's constitution. Even though the constitutions may vary between different trade unions, they traditionally establish similar essential duties and rights. Members are obliged to pay union dues, of which the amount is based on the individual wage level. At the same time they are entitled to be supported in labour disputes as well as to legal advice. The membership only ends by termination upon the worker's initiative or by exclusion on the basis of the trade union's decision, which must be in accordance with its constitution.

Employers’ associations are generally defined as associations with legal capacity. Many of the regional associations are industry-based and those of the same branch usually finally merged into an association at Federal level. The Federal associations of the different branches are unified in the two most important central confederations, the Confederation of German Employers' Associations (BDA)[6] and the Federal Union of German Industry (BDI)[7]. The BDA represents the enterprises' interest as an employer, whereas the BDI seeks to further their economic and political interests.

II. Collective Bargaining Agreements

The right of the collective industrial organizations to regulate terms and conditions of employment on their own responsibility and independently from any influence is guaranteed by the German Constitution (GG). More specifically, they have the right to create an appropriate system to regulate working life and to adjust it regularly to current economic and social developments through the conclusion of collective agreements.

Collectively agreed terms and conditions of employment apply only to members of the organizations concluding the collective agreement. In practice, however, they are usually applied to all employment relationships.

Thus, it is primarily the parties of a collective agreement who create a uniform system of employment conditions covering all establishments within each individual collective bargaining region. The most important consequence for the employees is that they are able to unite in trade unions to negotiate conditions with the employers' side, instead of having to deal with the employer on an individual basis in negotiating their terms and conditions of employment. If necessary, they can impose these by means of strikes.

In accordance with the Basic Law, collective bargaining autonomy must not be undermined by prohibiting industrial action and replacing it by state-imposed arrangements or compulsory arbitration.

III. Workers’ Representation in the Enterprise

Workers' representation in the enterprise is governed by the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG). This Act is decisively based on the term establishment. An establishment is the organizational unit in which the employer alone or together with his staff pursues particular working objectives. In an establishment regularly employing five or more employees its employees may decide to elect a staff committee. The staff committee’s period of office is four years (sec. 21 BetrVG).

The number of members of a staff committee is determined by the number of workers normally employed in the establishment. It varies from one member in establishments occupying from 5 to 20 workers to 31 members in establishments occupying from 7,001 to 9,000 employees. In establishments with more than 9,000 workers the number of members of a staff committee is increased by two members for every additional 3,000 workers. Manual and non-manual workers have separate representation on a staff committee.

The works council has rights of participation as well as of co-determination. The right of participation includes the right to be informed and to make recommendations. The right of co-determination is by far of much more practical effect, because it entails the possibility of blocking a decision of the employer which is dependant on the staff committee’s agreement. It covers subjects such as

- working rules

- working time including overtime and holiday roster

- methods of pay

- introduction and use of technical devices for monitoring employees' conducts and performances

- accident prevention and health protection

- fringe benefits and the provision and withdrawal of company-owned housing.

IV. System of Labour Courts and Labour Court Procedure

The labour law jurisdiction, which also includes trade union disputes, is governed by the Labour Court Act (Arbeitsgerichtsgesetz, ArbGG).

There are three instances, namely Local Labour Courts, Regional Labour Courts and the Federal Labour Court as the final instance.

Disputes in terms of Works Constitution Law are part of another proceeding. They lead to a court order which permits only restrictively amicable settlements.

Appendix 1: Sources

Dr. Heinrich Schönfelder

Schönfelder, Deutsche Gesetze

(Collected texts of Civil, Criminal and Procedure laws)

117^th Edition, Munich, April 2003

Dr. Otto Palandt

Kommentar zum Bürgerlichen Gesetzbuch

(Commentary to the German Civil Code)

62^nd edition, Munich 2003

Prof. Hans C. Nipperdey

Nipperdey I, Arbeitsrecht

(Collected texts of all Federal Labour laws)

69^th edition, Munich, April 2003

Appendix 2: Useful Addresses and Web-Pages

1. Federal Agency for Employment

Bundesagentur für Arbeit

Regensburger Straße 104

90478 Nürnberg

Germany

Tel: +49 (0) 911 179-0

Fax: +49 (0) 911 179-2123

E-Mail: www.arbeitsagentur.de

2. International Labour Organization (ILO)

www.ilo.org

Programme	Phone	Fax	Internet E-Mail Addresses
ILO Regional Office for Europe and Central Asia in Geneva (EUROPE)	Regional Director: +41/227 99 66 50 Secretariat: +41/22 799 66 66 Switchboard: +41/22 799 61 11	+41/22 799 60 61 +41/22 798 86 85	europe@ilo.org
Branch Office: Bonn/Germany	Director: +49/228 35 90 49 +49/288 36 23 22 +49/228 36 39 88	+49/228 35 21 86	bonn@ilo.org
MDT: Bangkok (ILO/EASMAT)	Director: +66/2 288 22 19 +66/2 288 22 20 Deputy Director: +66/2 288 17 11 +66/2 288 17 96	Director: +66/2 288 30 62 +66/2 288 30 58 Deputy Director: +66/2 288 30 60 +66/2 288 30 43	bangkok@ilo.org
Area Office: Beijing	Director: +86/1 0653 250 91 +86/1 0653 250 92 +86/1 0653 250 93 +86/1 0653 250 94 +86/1 0653 250 95 Deputy Director: +86/10653 250 96	+86/1 065 3214 20	beijing@ilo.org
Branch Office: Tokyo	+81/3 546 727 01 +81/3 546 727 02 +81/3 546 727 03	+81/3 546 727 00	tokyo@ilo.org
Area Office: Jakarta	Director: +62/2 131 413 08 +62/2 132 586 5 +62/2 131 555 75	+62/2 13100766	jakarta@ilo.org

Notarisation of Documents and Signatures

in Germany and Thailand

March 2004

I. When do I need a notarisation?

a) GERMANY

There are certain cases and transactions where a notarisation of documents or signatures is required, for example for real estate matters, registration issues, special bank transactions or if the parties concerned agreed to do so.

Typical documents requiring notarisation in Germany are:

· Real estate matters: If buying or selling real estate (land and/or buildings and apartments), notarization is generally required. It is specific of German law that you have to separate between the mere sales contract relating to a good and the actual transfer of ownership. In the case of real estate, both contracts need to be notarized. If you ask a German notary public to do so, he or she will implement these two legal transactions (sale plus transfer of ownership in one contract), the fee for which is 20/10 of the matter. However, the sales contract alone does not have to be notarized by a German notary public. This can just as well be done by a foreign notary public and in many cases, a Swiss notary public is chosen because his or her fee is negotiable. The contract concerning transfer of ownership must be notarized by a German notary public, but the fee for this transaction is only 5/10 of the matter.

· Marriage contract and same-sex partnership contracts (§ 1410 BGB; § 7 Abs. 1 LPartG,

· Declaration of adoption (§§ 1750 Abs. 1 S. 2; 1762 Abs. 3 BGB,

· Contract of inheritance ( § 2276 Abs. 1 S. 1 BGB),

· Set up of a limited company (private or public) (§ 2 Abs. 1 S. 1 GmbHG).

b) THAILAND

Although there are no notary publics in Thailand, notarisation is required or might be needful in some cases, such as:

· Real estate matters: Since the sales agreement concerning property is made

before the responsible government officer, notarisation of the sales agreement is not required.

However, if buying a condominium in Thailand as a foreigner with the assistance of a lawyer, notarisation of the power of attorney is required. The officer may also ask for notarisation of the passport copy.

· In the case of a registration of a trademark in Thailand by a foreigner, the power of attorney must be notarised.

· For projects by Government Authorities or State Enterprises the notarisation of documents showing the status of the foreign company is required.

· Registration of a branch office or representative office under the Foreign Business Act. All company registration documents and the power of attorney must be notarised.

· Notarisation of contracts might be necessary if the contracting parties agreed to do so.

II. Who is responsible for notarisation and certification?

a) Authorised persons for the notarisation of documents, transactions and for certifications in Germany are notary publics.

Furthermore there are authorities with notary power, for example embassies according to sec. 2 of the Consular Act (Konsulargesetz). According to sec. 10 of the Consular Act the notarisation which the embassies provide are equal to those of notary publics.

b) The Law Society of Thailand provides the services of notarisation and certification through specialised attorneys. They are specially certificated and called “Notarial Service Attorneys”, as is our own employee Khun Onnapa Boonpiputtanapong – see a certificate copy attached. The Law Society of Thailand will confirm their notarisation if required.

III. Legal Regulations

a) in Germany

Notarisation and the amount of notary fees are regulated in Germany by the Federal Notarisation Act (Beurkundungsgesetz), the Federal Notary Ordinance (Bundesnotarordnung) and the Federal Fees Ordinance (Kostenordnung).

Fees for notarisation and other certifications are regulated in sec. 17 Federal Notary Ordinance.

Under the provisions of this law the fees depend on the value of the matter (see below). The fee for a “simple” service can be high because of the high value of the matter or low in another case although the notary had to invest a lot of time and work.

The minimum fee is 10. - € (sec. 33 Federal Fees Ordinance).

The list on page 6 is copied from the appendix to the Federal Fees Ordinance and exhibits the amount of the fee according to the value of matter.

What is the “value of matter” mentioned in the German law?

The value of the matter depends on the economic value of the authenticated statement (sec. 18 Federal Fees Ordinance). Often the economic value of a case is expressed in the statement itself in the form of an amount of money. For example if property will be sold for 100,000. - €, the value of that matter is 100,000. - €.

However, in certain cases the value has to be estimated. If this is not possible, the value of the matter has to be fixed at 3,000. - € (sec. 30 Federal Fees Ordinance).

Additional costs

According to sec. 136 ff., and sec. 152 f. of the Federal Fees Ordinance, additional expenses can be charged, for example documentary costs (€ 0.50/page) and additional actual expenses (e.g. for travel and telephone).

According to sec. 151 a, Federal Fees Ordinance VAT has to be added.

Can the fees be reduced in Germany?

The Notary is not allowed to reduce or raise the notary legal fees (sec. 17 Federal Notary Ordinance). Thus each and every notary in Germany charges the same fees (whereas fees of notarisation in Switzerland are negotiable).

b) in Thailand

There is no regulation by law concerning notary publics in Thailand and fees are not fixed as in Germany. Therefore each “Notarial Service Attorney” in Thailand may charge as agreed.

Fees for legalizations by the Embassies are regulated in sec. 25 f. of the Consular Act.

V. Examples for the calculation of notary fees:

1. For the notarisation of a contract of sale of land including conveyance concerning property to the amount of 500,000. - €, notary fees would be calculated as follows:

· 2 fees, 1 for each contracting party (20/10)

(2 x 807, - €, see Appendix on page 6) 1,614.- €

· Fee for notarisation of an excerpt from the commercial register 25. - €

· Fees for certification of the signatures

of the contracting parties (2 x 15, - €) 30. - €

· Fee for registration and conveyance of the property 400. - €

· Expenses for documentary costs for 50 pages à 0.50 € and others 50. - €

Subtotal 2,119. - €

+ 16 % VAT (sec. 151 a Federal Fees Ordinance) 339.04 €

Total fees approximately 2,500. - €

(In THB (as of January2004) approximately 125,000. – THB)

2. For the increase of share capital in the amount of 20,000. - € including all

notarisation and registration issues, notary fees would be calculated as follows:

· Notarisation of shareholders’ resolution

(sec. 47 Federal Fees Ordinance) 114. - €

· Notarisation of the declaration of increase capital

(sec. 36 para 1 Federal Fees Ordinance) 72. - €

· Notarisation of registration in the companies’ register

(sec. 38 para 2 Federal Fees Ordinance) 36. - €

· Expenses for documentary costs for 50 pages à 0.50 € and others 50. - €

Subtotal 272. - €

+ 16 % VAT (sec. 151 a Federal Fees Ordinance) 43,52. - €

Total fees approximately 350. - €

(In THB (as of January2004) approximately 17,500.- THB)

Appendix to the Federal Fees Ordinance (sec. 32)

Value of matter
up to ... EUR

Fee
... EUR

Value of matter
up to ... EUR

Fee
... EUR

Value of matter
up to ... EUR

Fee
... EUR

1,000

2,000
3,000
4,000
5,000
8,000
11,000
14,000
17,000
20,000
23,000
26,000
29,000
32,000
35,000
38,000
41,000
44,000
47,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
130,000
140,000
150,000
160,000
170,000
180,000
190,000
200,000
210,000
220,000
230,000
240,000

10
18
26
34
42
48
54
60
66
72
78
84
90
96
102
108
114
120
126
132
147
162
177
192
207
222
237
252
267
282
297
312
327
342
357
372
387
402
417

250,000
260,000
270,000
280,000
290,000
300,000
310,000
320,000
330,000
340,000
350,000
360,000
370,000
380,000
390,000
400,000
410,000
420,000
430,000
440,000
450,000
460,000
470,000
480,000
490,000
500,000
510,000
520,000
530,000
540,000
550,000
560,000
570,000
580,000
590,000
600,000
610,000
620,000
630,000

432
447
462
477
492
507
522
537
552
567
582
597
612
627
642
657
672
687
702
717
732
747
762
777
792
807
822
837
852
867
882
897
912
927
942
957
972
987
1,002

640,000
650,000
660,000
670,000
680,000
690,000
700,000
710,000
720,000
730,000
740,000
750,000
760,000
770,000
780,000
790,000
800,000
810,000
820,000
830,000
840,000
850,000
860,000
870,000
880,000
890,000
900,000
910,000
920,000
930,000
940,000
950,000
960,000
970,000
980,000
990,000
1 000,000

1,017
1,032
1,047
1,062
1,077
1,092
1,107
1,122
1,137
1,152
1,167
1,182
1,197
1,212
1,227
1,242
1,257
1,272
1,287
1,302
1,317
1,332
1,347
1,362
1,377
1,392
1,407
1,422
1,437
1,452
1,467
1,482
1,497
1,512
1,527
1,542
1,557

Our lawyer, Ms. Onnapa Boonpiputtanapong, passed the examination that entitles her to notarise and certify documents as a “Notarial Service Attorney”.

We are pleased to be in the position to offer this service from now on, which will make many transactions faster and more efficient.

Please find attached the certificate of Ms. Onnapa Boonpiputtanapong.

Updated Supreme Court Decisions

Table of Contents*

I. TAX (17)………………………...……………….……….…..….... 3

II. Bankruptcy (15)…………...……..……...…...…..…..…...….. 8

III. Civil Execution (15)………………………...…….…..…. 12

IV. Liability of Directors (7)…………...……….….….…. 15

V. Share Transfer (7)…....……………………..…...…....…... 17

VI. Labour (29)……………………………...….…….……...….. 20

VII. BOI (2)……………………………………………..…..……... 27

________________________________

* Latest Updated: May 2003

I. TAX

1. Supreme Court Decision Case No. 6704/2541 (1998)

Expense for loss arising from sale of its shares to its sister company’s shareholders for the purpose of offsetting the loss of the sister company’s shareholders is the one not for the purpose of acquiring profits or for the purpose of business according to subsection 13 of Section 65 ter of the Revenue Code. Therefore, it is not allowed as an expense for the purpose of computing net profits.

2. Supreme Court Decision Case No. 7623/2541 (1998)

Section 83/4 of the Revenue Code regarding supplementary tax return does not prohibit the Tax Court to rule on the legality of tax assessments or decisions of the Board of Appeals.

3. Supreme Court Decision Case No. 1463/2542 (1999)

Money paid in installments is not a deposit (earnest). Therefore, it must be included in net profits to be calculated for liability of corporate income tax.

4. Supreme Court Decision Case No. 3543/2542 (1999)

Revenue and expenses not yet paid in the accounting period according to paragraph 2 of Section 65 of the Revenue Code must be certain that they would be received or paid by the tax payer as the case may be and must be in a definite amount. Therefore, estimated compensation to be paid to directors of the plaintiff, which shall be based on shareholders’ approval, is not considered expenses relevant to revenue arising in the accounting period under the said section.

5. Supreme Court Decision Case No. 2230/2543 (2000)

The plaintiff used counterfeit tax invoices to prepare its monthly VAT report. It is the violation under both Section 89 (7) (use false tax invoice) and Section 89 (4) (file tax incorrectly) of the Revenue Code. However, the plaintiff shall be subject to penalty under Section 89 (7) only.

6. Supreme Court Decision Case No. 5873/2543 (2000)

Share transferring can not be used against a third party unless it is written the name transferring and the place of the receiver in the shareholder book according to Sec. 1129 Para 3 CCC. The plaintiff admitted that he did not notify the share transferring to the shareholder registrar, and the shareholder book still bared the plaintiff’s name as the shareholder. The plaintiff, therefore, cannot argue against a third party that there is a share transferring. The plaintiff must bring dividends derived from those shares to calculate its corporate income tax.

7. Supreme Court Decision Case No. 6950/2543 (2000)

Cost of meals for the hotel’s employees, even though meals for employee are not the same for the customers, is considered “service” as defined by Section 77/1 (10) of the Revenue Code. Therefore, it is subject to value added tax.

8. Supreme Court Decision Case No. 6951/2543 (2000)

In computation of liability of excise tax on vehicles, it must take into consideration whether they are passenger cars or not. The defendant is exempted from excise tax liability since his vehicle was inspected as pickup trucks even though they are later modified to be passenger car by other persons.

9. Supreme Court Decision Case No. 586/2544 (2001)

According to paragraph 4 of Section 12 of the Revenue Code, the provisions of the Civil Procedure Code apply mutatis mutandis to the procedures for seizure and sale by public auctions of the properties of taxpayer. Such procedures must be conducted within ten years from the last due date for tax payment stated in the notice on assessment sent to the taxpayer.

10. Supreme Court Decision Case No. 586/2544 (2001)

When the defendant received a notice of assessment of corporate income tax, it is deemed that the Revenue Department has claimed for performance since this is considered an act equivalent to entering an action. The prescription of the claim against the defendant is interrupted according to Section 193/14 (5) of the CCC and begins again after the last due date stated in the notice. The plaintiff filed for an execution after ten years from the payment due date. The application is denied.

11. Supreme Court Decision Case No. 883/2544 (2001)

Transfer of ownership of the buildings constructed on the land to the lessor and occurred at the time of commencement of construction by force of an agreement between the lessor and the lessee, which also give the right to sublet the buildings to the lessee for 23 years, is considered a sale of immovable property in a commercial manner or for profits under subsection 4 of the Section and Section 3 (5) of the Royal Decree issued under the Revenue Code relating to Sale of Immovable Property in a Commercial Manner or for Profits (No. 244) B.E. 2534 (1991). Therefore, the lessee must pay Specific Business Tax.

12. Supreme Court Decision Case No. 1095/2544 (2001)

The assessment officer may correct his false assessment by annulling the assessment even if it is being taken to the Board of Appeals. If the officer does so, the Board must set aside the appeal since there is no longer an assessment to be considered.

13. Supreme Court Decision Case No. 1916/2544 (2001)

Validity of a Power of Attorney made in a foreign country must comply with the law of such country. It is not necessary to affix with stamp duty according to the Revenue Code.

14. Supreme Court Decision Case No. 2122/2544 (2001)

The Revenue Department issued a notice of assessment of corporate income tax to a company in a foreign country. It is considered that a notice has also been issued to the company’s representative in Thailand who is responsible for tax filing. The Revenue Department does not have to issue another notice to the company’s representative.

15. Supreme Court Decision Case No. 1392/2545 (2002)

Defendant admits that he has previously made an agreement to sell land and received a deposit (earnest) from the plaintiff. Later the defendant made another agreement with a third party while third party knew the existence of the previous agreement. However, in court, third party argued that the previous agreement does not affix with stamp duty, so that it cannot be admitted as evidence. The court decided that even without stamp duty, the agreement has been made. Therefore, the defendant had to sell land to the plaintiff according to the previous agreement. (Editor’s note: because the defendant admitted that the earnest was given to him, which is an accessory of the contract which requires neither stamp duty nor writing form to be valid, the Agreement to “Sell or Buy” is enforceable. See CCC Sec.456 Para. 2).

16. Supreme Court Decision Case No. 2420/2545 (2002)

Inspection conducted by the Customs Department, notwithstanding its long period of time, is not considered an exercise of its right in bad faith. The Revenue Department is entitled to bring an action against the defendant to execute tax and surcharge payment.

17. Supreme Court Decision Case No. 3700/2545 (2002)

Section 81/3 (1) of the Revenue Code requires the operator of business of selling tapioca tablets not for exportation to register for value added tax and pay value added tax by computation of output tax as deducted from input tax. The operator sold its products to exporter but has never exported the products by itself. Therefore, it has to pay tax according to Section 81/3. As a result, its application for refund of the input tax is considered a false declaration of input tax resulting in the officer refunding the input tax.

II. BANKRUPTCY

1. Supreme Court Decision Case No. 3101/2541 (1998)

Since both civil and bankruptcy case were final and the debtor did not argue that the prescription period of the debt was expired, it is not considered a debt which cannot be enforced by a legal action. Therefore, the creditor is still entitled to file an application claiming for repayment of the debt.

2. Supreme Court Decision Case No. 429/2542 (1999)

It shall not be presumed under Section 8 (4) a of the Bankruptcy Act that the debtor is insolvent only because the debtor leaves the premise in which he used to live and is unable to pay his debts owed to other creditors.

3. Supreme Court Decision Case No. 1322/2542 (1999)

According to section 108 of the Bankruptcy Act, if the official receiver later finds that the creditor’s claim is invalid or untrue, the official receiver can request the Court to dismiss the application for repayment of debt even when the order approving such application has been final.

4. Supreme Court Decision Case No. 1594/2542 (1999)

For the motion requesting the Court to annul any act of Official Receiver according to section 146 of the Bankruptcy Act, the complainant has to prove that damage has occurred and he is injured by it.

5. Supreme Court Decision Case No. 1885/2542 (1999)

The debtors has paid their debt in installments for 13 times which shows that they are willing to collect money to pay to the creditor. If they are bankrupt, they will lose their employments and possible money to repay the debt. Incomes currently made by the debtors are legitimate, and they can manage to pay the debt in the future. Therefore, it is considered a ground not justifying declaring them as bankrupt according to Section 14 of the Bankruptcy Act.

6. Supreme Court Decision Case No. 3778/2542 (1999)

In case that many persons become joint-debtors, the creditor can demand a payment from everyone individually. When the creditor demands a payment from one of the joint-debtors and he is unable to pay, the creditor can file a bankruptcy suit against that joint-debtor. A joint-debtor cannot argue the fact that other joint-debtors are still able to pay as a ground to dismiss his bankruptcy case.

7. Supreme Court Decision Case No. 4287/2543 (2000)

While one joint-debtor is able to pay the debt but another joint-debtor is not, the creditor can still ask the court to declare another joint-debtor as bankrupt individually.

8. Supreme Court Decision Case No. 5596/2543 (2000)

The bank filed a lawsuit in civil court asking for a repayment of debt. The court decided in favor of the bank and ordered the debtor to make a payment. Later the debtor did not pay, so the bank filed a bankruptcy suit in the bankruptcy court and submitted an application for a repayment of the debt. The prescription to execute the civil court order was interrupted and expired when the bank filed a bankruptcy suit. The new prescription according to the bankruptcy law applies.

9. Supreme Court Decision Case No. 2230/2544 (2001)

The Revenue Department filed a bankruptcy suit against the defendant after ten years from the date the defendant received a notice on income tax assessment. Regardless of the fact that some part payments have been made, the prescription was expired. The case was dismissed.

10. Supreme Court Decision Case No. 2651/2544 (2001)

A permanent establishment according to the Double Taxation agreement does not mean an establishment having a domicile in the Kingdom. Before the Revenue Department filed a bankruptcy suit, the branch office has been closed down due to its license expiry. Since the license was expired and the branch office did not further conduct its business, it is deemed that it no longer has a domicile in the Kingdom. Although Section 7 of The Bankruptcy Act B.E. 2483 (1940) provides that in case the debtor used to have a domicile or conduct its business in the Kingdom the creditor can file a bankruptcy suit within one year, the Revenue Department filed a bankruptcy suit after such period. As a result, the case was dismissed.

11. Supreme Court Decision Case No. 7966/2544 (2001)

Third party made a loan payment to the directors of the company after the court had issued an order of absolute receivership against the company. The official receiver can still demand the third party to made a payment to the company.

12. Supreme Court Decision Case No. 266/2545 (2002)

The plaintiff can execute the judgement within 10 years according to CPC 271. The defendant did not perform according to the judgement, so the debt become more and more. The fact that the plaintiff did not execute the judgement immediately is not considered an unjustified ground to declare the defendant as bankrupt.

13. Supreme Court Decision Case No. 3318/2545 (2002)

Since last paragraph of Section 90/42 bars Section 1119 CCC, which prohibits a set-off of payments on shares, from application to the reorganisation plan, the planner may make a plan for increase of capital by conversion of company’s debts into capital.

14. Supreme Court Decision Case No. 3318/2545 (2002)

The rights of the creditors to be performed equally during reorganisation process under Section 90/42 ter is meant to equality among the creditors within the same group only. Therefore, the right of the sole secured creditor to repayment may be set in the reorganisation plan as favorable to those of the creditors in another group.

15. Supreme Court Decision Case No. 3403/2545 (2002)

Creditor filed a civil action against Debtor and his Sureties after Debtor’s filing for reorganisation of his business. The Court of Appeals revoked the Court of First Instance’s proceedings and judgment according to Section 90/12 (4) of the Bankruptcy Act, which prohibits a civil action against the debtor in respect of his assets. But such Section gives protection to Debtor only. Therefore, Sureties is still binding upon the Court of First Instance’s proceedings and judgment.

III. CIVIL EXECUTION

1. Supreme Court Decision Case No. 334/2541 (1998)

The property was placed for public auction for 10 times during the past 5 years. The property minimum bid prizes were between 45 and 46 Million baht, and nobody placed a bid. Finally, there was a bidder who bid at 46.2 Million baht and won the auction. The defendant then submitted an application to the Court asking to cancel the sale claiming that he himself did not pay the court fee correctly. The application was denied.

2. Supreme Court Decision Case No. 6559/2541 (1998)

The plaintiff is not entitled to apply for execution of judgment again while the defendant had fully complied by going out of the disputed land 2 years ago. When the defendant came back again, the plaintiff has to file another lawsuit.

3. Supreme Court Decision Case No. 6829/2541 (1998)

Bidding at the price exceeding the scope of authority by proxy is not considered a ground to annul the force sale by public auction.

4. Supreme Court Decision Case No. 2175/2542 (1999)

To apply for a stay of execution According to Section 293 of the Civil Procedure Code, the attachment or seizure has to be taken place at the time of submitting the application.

5. Supreme Court Decision Case No. 2527/2543 (2000)

The auction bidder is considered a third person who has interests in the execution according to paragraph 2 of Section 296 of the Civil Procedure Code.

6. Supreme Court Decision Case No. 252/2544 (2001)

Changing a domicile by the defendant without informing the Court or the plaintiff is considered a concealing of its domicile to avoid execution.

7. Supreme Court Decision Case No. 252/2544 (2001)

To argued that the price at forced sale by public auction is unreasonably low and to ask the Court to issue an order annulling such sale, the defendant has to claim that the price is taken place in pursuance of a fraudulent understanding among persons relating to bidding, or with bad faith or gross negligence of the execution officer in exercising his function according to paragraph 2 of Section 309 bis of the Civil Procedure Code.

8. Supreme Court Decision Case No. 586/2544 (2001)

9. Supreme Court Decision Case No. 694/2544 (2001)

Deposit a book of bank account to the creditor does not make it a pledge contract. The creditor has no preferential right over the money in the account.

10. Supreme Court Decision Case No. 761/2544 (2001)

In a settlement or compromise, each party has their own obligations and rights toward each other. However, the party who wins the case is the only one who can apply for execution.

11. Supreme Court Decision Case No. 1316/2544 (2001)

By force of Section 35 of the Sangha Act, temple’s premises and central religious properties are not liable to execution. Therefore, the Court of First Instance’s decree prescribing transfer of ownership of the defendant’s disputed land to the plaintiff is illegitimate.

12. Supreme Court Decision Case No. 5310/2544 (2001)

The plaintiff refused to comply with the judgment ordering the defendant to register for transfer of ownership of land to the plaintiff and the judgement ordering the plaintiff to deposit a sum of money for payment as a return for the transfer to the defendant. The defendant is entitled to file an application for a writ of execution of judgment according to Section 275 and the obligation to transfer the ownership of the land is extinguished since such refusal is considered the plaintiff’s waiver of his right.

13. Supreme Court Decision Case No. 6157/2544 (2001)

The plaintiff refused to register for a hire of property agreement that restricts hirer’s rights to the degree exceeding what an ordinary hirer could comply with. It is deemed that the defendant did not comply with the first condition of the judgement. Therefore, according to the second condition of the judgement the plaintiff is entitled to file an application for a writ of execution for the money payment.

14. Supreme Court Decision Case No. 210/2545 (2002)

Although the judgment of the Court of First Instance does not contain the description of the car to be returned to the plaintiff according to the hire-purchase agreement, it is deemed that it should be in good conditions. Therefore, the plaintiff is entitled to refuse to accept the defective car and apply for execution of judgment for money payment instead.

15. Supreme Court Decision Case No. 2169/2545 (2002)

Section 304 of the Civil Procedure Code does not require the plaintiff to indicate the land to be seized to the Official Receiver. The indication made by mistake resulted only in a wrongful posting of notice of seizure, not a wrongful seizure. Therefore, the plaintiff is entitled to indicate the correct land without paying any fee again.

IV. LIABILITY OF DIRECTORS

1. Supreme Court Decision Case No. 5585/2541 (1998)

2. Supreme Court Decision Case No. 6250/2541 (1998)

The plaintiff, regardless of being a shareholder and director of the company, may not solely submit a claim to the court requesting an annulment of the contract made between the company and a third party since according to the company’s affidavit the plaintiff alone cannot act on behalf of the company. However, the plaintiff and other shareholders might use a resolution of a general meeting of shareholders to remove the old board of directors and appoint a new one, and have it submit such claim.

3. Supreme Court Decision Case No. 1426/2542 (1999)

Claims against the director according to Section 1169 of the CCC are for compensation for damages caused by the director to the company only. A shareholder cannot ask the court to annul the previous contract made between the director and a third party.

4. Supreme Court Decision Case No. 5343/2542 (1999)

5. Supreme Court Decision Case No. 9442/2542 (1999)

6. Supreme Court Decision Case No. 2685/2543 (2000)

Section 1169 of the CCC states that any single shareholder can bring a lawsuit against the directors if they cause damages to the company. However, this Section shall not apply to the case where the company is already dissolved. As the company has been dissolved, the liquidator is the only one who can act on behalf of the company.

7. Supreme Court Decision Case No. 4547/2545 (2002)

Offer to sell the disputed car was made with signature of the sole director of Company, but did not affix seal of Company, which was not in compliance with the Company’s Affidavit. But since the Company delivered and received payment for the car price afterwards, which is considered giving ratification to such offer to sell, the sale is effective and binding upon the Company, not the director.

V. SHARE TRANSFER

1. Supreme Court Decision Case No. 52/2540 (1997)

2. Supreme Court Decision Case No. 57/2540 (1997)

The share transferring contract is not in compliance to Sec. 1129 Para 2 CCC. The company has the right to deny the issuing of a share certificate.

3. Supreme Court Decision Case No. 4432/2540 (1997)

4. Supreme Court Decision Case No. 6692/2540 (1997)

5. Supreme Court Decision Case No. 2170/2542 (1999)

6. Supreme Court Decision Case No. 5873/2543 (2000)

7. Supreme Court Decision Case No. 6908/2543 (2000)

VI. LABOUR

1. Supreme Court Decision Case No. 2505/2541 (1998)

Employment is terminated immediately when the employer gives an order of dismissal to the employee.

2. Supreme Court Decision Case No. 2599-2606/2541 (1998)

The employer dismissed the employee claiming an absence of work as a cause of dismissal. When the employer was sued in court he could use only such cause as his defense.

3. Supreme Court Decision Case No. 3043/2541 (1998)

The company dissolved one of its departments and offered the employee another position. The new position is not in favor of the employee. The employee did not agree and was dismissed. It is an unfair labour practice according to Section 123 of the Labour Relations Act B.E. 2518 (1975).

4. Supreme Court Decision Case No. 7602-7603/2541 (1998)

Dismissals against some employees made by the company claiming over-employment and prevention against future loss are considered unfair labour practices.

5. Supreme Court Decision Case No. 377/2542 (1999)

The employees were dismissed by the company claiming their department’s poor performance while the company’s overall performance was good and the company still hired new employees. It is an unfair labour practices.

6. Supreme Court Decision Case No. 1260/2542 (1999)

Changing the employee’s position due to his health problem is considered a lawful order, even if the wage is lower.

7. Supreme Court Decision Case No. 3395/2542 (1999)

Company B hired the employee immediately after it acquired Company A, employee’s former employer. Unless precisely stated otherwise, it is deemed that Company B agreed to the employment conditions between Company A and the employee.

8. Supreme Court Decision Case No. 1332/2543 (2000)

In the case of an accusation made by the employee that the employer conducted an unfair dismissal, the employee does not have to lodge an appeal to the Labour Relations Committee before submitting his case to the Central Labour Court.

9. Supreme Court Decision Case No. 2258/2543 (2000)

“Sickness” as defined by Section 5 of the Workmen’s Compensation Act refers to any sickness or death of the employee arising from the nature of work or caused by the performance of his work, whether occurred during his performance of work or not.

10. Supreme Court Decision Case No. 2592/2543 (2000)

The employee took the employee’s hotel customers out of the hotel using his personal truck and received some gratuities form the customers. It is not the case that employee seriously violates the employer’s working rules.

11. Supreme Court Decision Case No. 4121/2543 (2000)

According to Section 24 of the Labour Protection Act B.E. 2541 (1998), there must be a prior agreement, express or implied, between the employer and the employee specifying the starting hour and ending hour for overtime work. The employer asks the employee to work overtime. The employee does not have to follow.

12. Supreme Court Decision Case No. 144/2544 (2001)

Dismissals against employees in some cases may be both unfair labour practices according to Section 121 or 123 of the Labour Relations Act B.E. 2518 (1975) and unfair dismissals according to Section 49 of the Act on Establishment of the Labour Courts and on Proceedings of Labour Cases B.E. 2522 (1979)

13. Supreme Court Decision Case No. 4573-5228/2544 (2001)

Bonus money is not considered money paid in return for employee’s services. Therefore, it is not a wage according to Section 5 of the Labour Protection Act B.E. 2541 (1999).

14. Supreme Court Decision Case No. 6840/2544 (2001)

The employee made mistakes several times, could not work together with others, showed no improvement, many customers returned the merchandise, and the company suffered damages. Dismissal is fair with good causes, not an unfair one.

15. Supreme Court Decision Case No. 7402-7403/2544 (2001)

Money paid monthly in a fixed amount to the plaintiff for his fuel and telephone expenses is considered wages according to Section 5 of the Labour Protection Act B.E. 2541 (1998).

16. Supreme Court Decision Case No. 7238-7239/2544 (2001)

The company orders the employee to work in another position and receive less salary. It is an order not in favor of employee. Without employee’s consent the order is in violation of Section 20 of the Labour Relations Act B.E. 2518 (1975). Non-compliance with such order is not considered a serious act against an employer’s lawful and fair order nor a negligence of duty.

17. Supreme Court Decision Case No. 9021/2544 (2001)

Sexual harassment committed by a managing director to an employee is considered a personal act that can be brought to the Criminal court, not an act on behalf of the company. The employee who quits the job by herself is not entitled to severance pay or damages from unfair termination.

18. Supreme Court Decision Case No. 599/2545 (2002)

The plaintiff became a member of the Company’s committee on procurement and logistics having the authority to determine the Company’s distributors and suppliers. His wife is a shareholder of one of the suppliers of the Company, and he regularly attended the company’s meetings of behalf of her. Such practice is considered a serious violation of the defendant’s working rule of which states that no employee shall Influences Company’s business management for the sake of his personal benefit.

19. Supreme Court Decision Case No. 1372/2545 (2002)

The plaintiff, who held discretionary power to promote the employees who work during the probation period to be permanent employees, made a threat that if any female employees did not go to nightclubs with him they would not get the position. This is considered to be a serious violation of the company’s working rules since it affected the company’s personnel administration.

20. Supreme Court Decision Case No. 2062/2545 (2002)

According to the company’s working rules, Saturday is a normal working day. While the company gave an order asking some employees not to come to work on Saturday, it does not make Saturday a weekly holiday.

21. Supreme Court Decision Case No. 2190-2193/2545 (2002)

Employment with an exemption for severance pay according to paragraph 3 of Section 118 of the Labour Protection Act B.E. 2541 (1999) must be the employment with a specific term for a special project which is not a work in the ordinary business of the employer.

22. Supreme Court Decision Case No. 2228/2545 (2002)

The employer gave an order to close a sales department office in Bangkok and move all personnel to another office in Phuket. It is not considered a relocation of place of business according to Section 120 of the Labour Protection Act B.E. 2541 (1998). The employee is not entitled to receive a special severance pay or special severance pay for advance notice.

23. Supreme Court Decision Case No. 2364/2545 (2002)

An employment contract stating that the employer can terminate the contract with no specific term of employment according to paragraph 2 of Section 17 of the Labour Protection Act B.E. 2541 (1998). The employer terminated the contract without prior notice. The employer has to pay according to Section 17. Parties cannot agree otherwise since Labour law is the law related to public orders.

24. Supreme Court Decision Case No. 2942/2545 (2002)

Since there is no specific provision regarding calculation of time prescribed in the Labour Protection Act B.E. 2541 (1998), provisions of the CCC regarding periods of time shall apply.

25. Supreme Court Decision Case No. 3177/2545 (2002)

“You should not have brought these vicious Arabs here” spoken by the plaintiff (employee) to the tourist guide after failing to stop children customers from throwing stones to the fish in the pond is not considered a serious violation of defendant’s working rules. The court ordered the defendant to pay severance pay to the plaintiff. However, since it violates the working rule on the ground of intentionally disobeys a lawful order of the defendant, the defendant’s dismissal against the plaintiff is not an unfair dismissal according to Section 49 of the Law on Establishment of Labour Courts and Labour Court Procedures B.E. 2522 (1979). The defendant does not have to pay for further damages.

26. Supreme Court Decision Case No. 3974/2545 (2002)

Section 49 of the Act on “Establishment of Labour Courts and Labour Court Procedures”, B.E. 2522 (1979) empowers the Labour Court to order the employer to accept the dismissed employee back to work or to fix the amount of damages as compensation to be paid to the employee only. Therefore, the Court may not by this section order the employer to pay compensation for damage occurred during the period of time from the date of dismissal to the date of acceptance back to work (“back pay”). However, without his performance of work the employee is entitled to wages for that period of time as compensation for damage arising from a breach of employment contract by way of unlawful dismissal.

27. Supreme Court Decision Case No. 4038-4039/2545 (2002)

Dispute over rights against unfair dismissal is dispute under Section 49 of the Act on Establishment of Labour Courts and Labour Court Procedures B.E. 2522 (1979). Thus, it has to be settled by a Labour Court. It is not obligatory to be settled by arbitration since it is not a dispute related to the employment contract.

28. Supreme Court Decision Case No. 4469/2545 (2002)

Medical technician’s negligent performance of work, making physician diagnosed diseases not comprehensively and slowly is considered one with gross negligence which causes the hospital to suffer severe loss and an act in a manner incompatible with the due and faithful discharge of his duty, since the act might extensively deteriorate hospital’s reputation. Therefore, the hospital may under Section 119 (3) of the Labour Protection Act and Section 583 CCC dismiss him without severance pay or an advance notice, and the dismissal is not considered unfair.

29. Supreme Court Decision Case No. 4547/2545 (2002)

Employer mistakenly paid severance pay to Employee who had no right to such payment. Such severance pay is considered undue enrichment under Section 406 CCC, not a property detained by a person not entitled to detain it which could be followed and recovered at any time according to Section 1336. Therefore, Employer should have entered this action for return of such payment within 1 year from the time when he became aware of such right to receive return according to Section 419 CCC. Since this action is filed after that period of time, it is barred by prescription.

VII. BOI

1. Supreme Court Decision Case No. 8952/2543 (2000)

The revenue, which will be exempted from tax calculation under BOI, must be the revenue derived from specific business operations. While the Plaintiff received BOI promotion under its mining business, interest received from its bank deposit was not considered the revenue received under its BOI promotion. However, considered the fact that the Plaintiff had cooperated well with the officials during the inspection, it showed that the Defendant did not have any intention to avoid tax payment. Therefore, all fines shall be excluded.

2. Supreme Court Decision Case No. 6842/2544 (2001)

The Defendant received customs and tax privileges under BOI imported raw material for manufacturing in Thailand. Later on, the Defendant could not use the raw material to manufacture and export the final products according to its BOI privilege conditions due to fire broken in its factory, which destroyed most of the raw material. It is deemed that the Defendant did not comply with its BOI conditions. Its license was revoked, therefore, the Defendant had to pay customs and tax which were previously exempted.

The Thai Social Security System

2004

The reform of the Thai social security system

1. Governing Law

The Social Security Scheme is operated according to the Social Security Act B.E. 2533 (A.D.1990) and its Amendments B.E. 2537 (A.D.1994) and B.E. 2542 (A.D.1999).

2. Contributions

With effect from 1^st January 2004, contributions to the Social Security Fund increased from 4% to 5%. These contributions are paid by both the employer and the employee. The employer is required to match the contribution from the employee. A supplement of 2.75% to the security contribution is paid by the government.

The monthly remuneration on which the rates are is capped at 15,000 Baht. (15 €). The employer pays his contribution in addition to the net salary. The employee’s contribution is deducted from the salary. Both contributions must be remitted to the Social Security Office within the 15th day of the following month.

3. Benefits

· Accident, sickness, child birth

In case of accident, sickness or childbirth, medical service is free of charge. For compensation for the loss of income, the employee gets 50% of his salary for a maximum of 90 days per insured event and 180 days per year.

· Disability

Medical services in case of disability are free of charge up to the amount of 2,000 THB (40 €) per month. All additional costs have to be paid by the employee. The compensation for the loss of income (50% of the monthly salary) is not limited to a certain period of time.

· Death

In case of death, funeral expenses up to an amount of 30,000 THB (600 €) are paid by the Social Security Fund. If the employee has paid contributions to the social security system for at least 36 months his family or any other person specified by the employee will get a onetime payment amounting to 1.5 monthly income. If the employee contributed to the social security system for ten years or more his family or any other specified person will get a onetime payment of 5 months salary.

· Children

Child allowance received by a Thai employee is 200 THB (4 €) per child per month for a maximum of 2 children under the age of 6 years.

· Pension benefits

With regard to pension benefits each period of time in which contributions to the social security system have been made needs to be looked at separately.

Employees who have paid contributions for less than 180 months do not receive retirement pay. If they are 55 years of age or become disabled they get a onetime payment amounting to the sum of the contributions they have made to the social security system plus interest which will be fixed each year (e.g. 2003: 6.5%). In the case of death their families receive the money.

The employee who has paid contributions for at least 180 months will receive retirement pay which is 15% of the average monthly salary for the last 60 months plus 1% of the average monthly salary multiplied by the number of years he has paid contributions for over 15 years.

If the employee dies before receiving any retirement pay his family will receive the sum of the contributions to the social security system made by him and by his employer. If he has already received retirement pay for less than 60 months his family will get a onetime payment amounting to 10 retirement payments.

· Unemployment benefits

In the case of unemployment, the former employee gets 30% of his salary for a maximum of 90 days if he resigned and 50% of his salary for up to 180 days in case of termination.

4. Outlook

Although compared to Germany these figures appear modest, there is opposition to the latest rise in contributions. The Secretary General of the Labour Congress Centre of Thai labour unions who indicated that the additional burden for low-income workers is critical. For clarification: In 2002, out of a total population, 6.22 million (approx. 10%) had a monthly (cash) income below THB 1000 (app. 20€).

Steuerfreistellung von Arbeitslohn für Auslandstätigkeiten

2004

Sehr geehrte Damen und Herren,

aus gegebenem Anlass erlauben wir uns, beiliegende Information

beizulegen.

Es gab wesentliche Änderungen des deutschen Steuerrechts.

Wir bedanken uns für Ihr Interesse,

Mit freundlichen Grüßen,

Michael Lorenz

Lorenz & Partners

I. Bisherige Rechtslage

Nach bisheriger Rechtslage waren Einkünfte in Deutschland unter Progressionsvorbehalt freizustellen, wenn:

• nach einem Doppelbesteuerungsabkommen der andere Staat ein

Quellensteuerrecht an diesen Einkünften,

• Deutschland zur Vermeidung einer doppelten Besteuerung die Freistellung

im Methodenartikel vereinbart hat und

• keine Rückfallklausel greift.

In Deutschland ansässige Arbeitnehmer, die ihren Arbeitslohn von einem ausländischen Arbeitgeber bezogen oder der Arbeitslohn einer ausländischen Betriebsstätte eines inländischen Arbeitgebers anzurechnen war und die sich im Bezugszeitraum des Doppelbesteuerungsabkommens mindestens 183 Tage im Jahr im Ausland aufhielten, wurden regelmäßig mit ihrem Arbeitslohn für im Ausland ausgeübte Tätigkeiten von der deutschen Steuer befreit.

II. Neuregelung des § 50d Abs. 8 EStG

§ 50 d Abs. 8 EStG behandelt die einkommensteuerlichen Folgen der Entsendung eines Arbeitnehmers in einen Staat, mit dem Deutschland ein Doppelbesteuerungsabkommen (DBA) abgeschlossen hat.

„(8) Sind Einkünfte eines unbeschränkt Steuerpflichtigen aus nichtselbstständiger Arbeit (§ 19) nach einem Abkommen zur Vermeidung der Doppelbesteuerung von der Bemessungsgrundlage der deutschen Steuer auszunehmen, wird die Freistellung bei der Veranlagung ungeachtet des Abkommens nur gewährt, soweit der Steuerpflichtige nachweist, dass der Staat, dem nach dem Abkommen das Besteuerungsrecht zusteht, auf dieses Besteuerungsrecht verzichtet hat oder dass die in diesem Staat auf die Einkünfte festgesetzten Steuern entrichtet wurden. Wird ein solcher Nachweis erst geführt, nachdem die Einkünfte in eine Veranlagung zur Einkommensteuer einbezogen wurden, ist der Steuerbescheid insoweit zu ändern. § 175 Abs. 1 Satz 2 der Abgabenordnung ist entsprechen anzuwenden.“

Selbst wenn nach dem Doppelbesteuerungsabkommen die Voraussetzungen für das alleinige Besteuerungsrecht durch den Tätigkeitsstaat vorliegen, soll dies allein noch nicht ausreichen, um den Arbeitslohn von deutscher Einkommensteuer freizustellen.

§ 50 d Abs. 8 EStG normiert eine einseitige Rückfallklausel, auch wenn eine solche Vereinbarung im Doppelbesteuerungsabkommen nicht getroffen wurde.

Danach wird die Freistellung bei der Veranlagung ungeachtet des Abkommens nur gewährt, soweit der unbeschränkt steuerpflichtige Arbeitnehmer nachweist, dass der Staat, dem nach dem Abkommen das Besteuerungsrecht zusteht (Tätigkeitsstaat), auf dieses Besteuerungsrecht verzichtet hat oder dass die in diesem Staat auf die Einkünfte festgesetzten Steuern entrichtet wurden.[8] Diese Einschränkung soll unabhängig davon gelten, ob nach dem einschlägigen DBA eine Rückfallklausel vorgesehen ist.

Wird dieser Nachweis erst geführt, nachdem die Einkünfte in eine Veranlagung zur Einkommensteuer einbezogen wurden, soll der Steuerbescheid insoweit nachträglich geändert werden.[9] Der Nachweis wird also wie ein Grundlagenbescheid i. S. d. § 175 Abs. 1 Satz 2 AO behandelt.

Diese Nachweispflicht betrifft aber nur das Veranlagungsverfahren. Im Lohnsteuerabzugsverfahren bleibt es dabei, dass das Betriebsstättenfinanzamt auf Antrag des Arbeitnehmers oder des Arbeitgebers eine Freistellungsbescheinigung erteilt.[10]

III. Folgen der Neuregelung

1. Auswirkungen

Die Neuregelung des § 50d EStG hat dramatische Folgen: Aufgrund der in Absatz 8 vorgesehenen Rückfallklausel (siehe § 175 der Abgabenordnung) können deutsche Steuerbescheide geändert werden mit der Folge, dass gegebenenfalls die Steuerbefreiung für die Jahre 2002/2003 aufgehoben werden könnten.

2. Ausnahmen und Beispiele

a) Von der Rückfallklausel des § 50d EStG sind nur die in Deutschland unbeschränkt Steuerpflichtigen betroffen, also diejenigen, die sich über 183 Tage im Jahr in Deutschland aufhalten, oder über eine Wohnung oder ähnliches verfügen, welches zum Wohnen grundsätzlich geeignet ist (Beispiel: Vgl. sog. „Boris-Becker-Problem“: Wohnmöglichkeit in der Wohnung seiner Schwester).

Unbeschränkt steuerpflichtig bedeutet demnach das Innehaben eines Wohnsitzes oder der gewöhnliche Aufenthalt in Deutschland.

b) Für den Fall, dass ein Mitarbeiter eines deutschen Unternehmens neben seinem Gehalt in Thailand (das im Regelfall ordnungsgemäß in Thailand versteuert wird, und zum zu versteuernden Einkommen gehört bekannterweise auch Schulgeld sowie die Housing-Allowance), darüber hinaus noch Gelder von seinem deutschen Arbeitgeber bekommt, sind diese in Deutschland gezahlten Gelder regelmäßige Betriebsausgaben und mindern den Gewinn des deutschen Mutterhauses. Diese Gelder sind in Deutschland zu versteuern, für den Fall, dass nicht nachgewiesen werden kann, dass sie nicht ordnungsgemäß in Thailand versteuert werden. Nur für den Fall, dass ein Lohnsteuerfreistellungsantrag gestellt und bewilligt wird, können diese Gelder netto ausbezahlt werden.

IV. Fazit

Die Neuregelung des § 50d Abs. 8 EStG wird für erforderlich gehalten, da fraglich ist, ob das Besteuerungsrecht des Tätigkeitsstaates tatsächlich ausgeübt wird. Letztendlich ist das Interesse des Gesetzgebers deutlich erkennbar, da er versucht, die sogenannten „weißen Einkünfte“ (Einkünfte, die in keinem Land besteuert werden) zu minimieren und dafür zu sorgen, dass möglichst steuergerechte Verhältnisse vorliegen.

De facto hat die Bundesrepublik Deutschland die „subject to tax clause“ durch die Hintertür eingeführt. Die verfassungsrechtliche Gültigkeit kann durchaus angezweifelt werden, da zumeist Doppelbesteuerungsabkommen das Besteuerungsrecht eindeutig einem Land zuweisen. Aus meiner Sicht müsste Deutschland die in Deutschland gezahlten Gelder von der deutschen Besteuerung freistellen, ungeachtet der Tatsache, ob diese Gelder tatsächlich im Tätigkeitsstaat besteuert werden, soweit nichts Gegenteiliges im Doppelbesteuerungsabkommen geregelt ist. Der Gesetzgeber sollte ob der Neuregelung des § 50d Abs. 8 EStG den Fortbestand des Auslandstätigkeitserlasses überdenken.

Power of Attorney and Transactions

of the Board of Directors

2004

Dear Ladies and Gentlemen,

Kindly find attached a summary to show you what kind of transactions have

to be signed and initiated by directors of the Thai companies and which

transactions can be handled by a power of attorney.

We hope that this information will be helpful for you. For any further

questions or additional information, please do not hesitate to contact us.

Thank you very much for your attention.

Best regards,

Michael Lorenz

Lorenz & Partners

Real estate transaction and Tax in Thailand

2004

Real estate transactions

Sales of immovable property in Thailand are subject to the following taxes and levies:

1. Business tax

Sales of immovable properties in a commercial manner or for profits are subject to specific business tax amounting to 3 % of the actual purchase price or the value appraised by the Land Department (henceforth referred to as “AV”), whichever is higher (Section 91/6 § 3, Section 91/2 Nr. 6 Revenue Code). In addition, a local (municipal) tax is collected at the rate of 10% of the specific business tax.

Following the economic crisis in Asia the specific business tax had been reduced to 0.1% and the local (municipal) tax to 0.01%. With effect from 1^st January 2004 the burden has been increased again to 3.3%.

Non-commercial sales of immovable property are subject to specific business tax including local (municipal) tax if land is sold within 5 years after it has been acquired (R.D. No. 342).

2. Stamp duty

Stamp duty is collected at the rate of 0.5% of the actual purchase price or the AV, whichever is higher (item 28 (b) Stamp Duty Schedule of the Revenue Code).

If the seller is subject to any specific business tax he is exempt from payment of the stamp duty (R.C.C.A.A (No. 30) B.E.2534 S. 13).

3. Government transfer fee

Transfer fee is collected at the rate of 2% of the actual purchase price or the AV, whichever is higher.

This fee as well had been reduced to 0.01% in 2000 for subdivided land, houses and condominiums and rose with effect from 1^st January 2004 to 2 %.

4. Withholding income tax

If a juristic person sells land the revenue is subject to tax at the rate of 30%. The withholding tax is 1% of the actual purchase price or the AV, whichever is higher. It is paid to the Revenue Department by the buyer and granted to the seller as a tax credit.

Commercial sale of land by natural persons is subject to income tax (Sec. 40 (8) Revenue Code). The buyer has to withhold the income tax (Sec. 50 (5)).

The computation of this tax is based on the appraised value of the Land Department even if the actual purchase price is higher (Sec. 49 bis Revenue Code, Order of RD No. Por. 100/2543). The percentage of the appraised value of the immovable property subject to the income tax depends on the period of time during which the seller was the owner of the land. According to the time of ownership the percentage that is subject to income tax varies from 8% to 50%. The result is divided by the number of years in possession. The quotient is multiplied by the personal income tax (that ranges in progressive rates from 5% to maximum 37%). The product is multiplied by the number of years in possession. The result of this equals the withholding income tax payable to the Land Department.

If the land sold has been inherited or acquired through another non-commercial transaction, 50% of the appraised value of the immovable property is subject to personal income tax.

Basic Principles of Foreign Investment in Taiwan

January 2005

I. Introduction

According to the 2003-2004 Global Competitiveness Report by the World Economic Forum (WEF), Taiwan ranked fifth out of 102 economies around the world and was first in Asia on the Growth Competitiveness Index (CGI). Additionally the economic potential of Taiwan is illustrated by the fact that the Island holds the fourth highest number of US patents in the world.

For all these reasons, Taiwan is one of the most favourable economic environments in Asia.

With this Newsletter we want to give you a basic overview about the possibilities of an investment in Taiwan.

II. Restrictions on Foreign Investment

Taiwan currently deregulated nearly 95% of all foreign investments. It allows foreigners to invest in all sectors except some few where restrictions apply. These areas include investments which are relevant for the national security, public harmony, social behaviour or the public health. All restricted investments in Taiwan are enumerated in a negative list.

Restricted for example are air transportation, water and gas supply or chemical products manufacturing. For some of the restricted or prohibited investments exceptions for overseas Chinese apply.

III. Foreign Ownership of Taiwan Companies

Unlike many other countries in Asia Taiwan in general allows foreigners to own up to 100% of the Company in Taiwan. Only the investments enumerated in the negative list are subject to ownership restrictions for foreigners.

IV. Application for Business Licences

A foreign investor must, according to the regulations, prepare and file an application, including all relevant documents, with the Investment Commission. After the official letter of approval has been obtained, the investor must set up a bank account at a Taiwanese bank. Afterwards, he has to remit the investment funds to that account. When the remittance is completed, the investor needs to get a confirmation of the capital amount from the Investment Commission. Once the letter of confirmation has been obtained, the company must be registered with the competent authority in charge of company registration.

According the investment volume the investment application review period approximately ranges from 2 to 5 days for investments up to 1 Million NT $ (or roughly 23,000 EUR) and 14 to 30 days for investments exceeding 1 Million NT $.

V. State Protection of Foreign Investment

Taiwan is a country which tries hard to achieve and maintain a good environment for Intellectual Property Rights (IPR). In the scope of this a number of IPR cooperation agreements were signed with advanced countries of the world to ensure an increase of global intellectual interflow. Also, Taiwan has got an educational program which shall promote IPRs. By this the idea of IPR protection among its population should be strengthened.

Many legal improvements have been made to protect IPRs. In order to achieve membership in the World Trade Organisation (WTO) in 2002, Taiwan had to revise its Patent Law so that nowadays an international standard is reached in this field as well. Copyright and Trademark Law had similar developments

However, talking about state protection of foreign investments, it has to be said that according to the “Statute for Investment by Foreign Nationals” foreign nationals holding less than 45% of the company can be expropriated, when national defence reasons are at the stake. If the foreign investor holds more than 45% of the total capital amount of the enterprise, this company shall not be subject to expropriation if the investor continuously holds more than 45% of the total capital amount for 20 years after the business started.

VI. Capitalisation

Special minimum capital requirements exist for some enlisted industries.

Beside this, a minimum capital of NT $ 1 Million (or roughly 23,000 EUR) for general companies and NT $ 0.5 Million (or roughly 11,500 EUR) for limited companies is required. However, if the company is engaged in the import/export business, the minimum capitalisation will be NT $ 5 Million (or roughly 115,000 EUR).

VII. Employment of Foreigners

When the company is already set up, foreign nationals who want to be employed by the company have to apply for a work permit with the Executive Yuan Council of Labour Affairs with the relevant information.

These information include:

1. Registration documents of the company

2. Passport of the employee

3. Certification of degrees

4. Labour agreement with the company

5. Passport photos

6. Permissions to work in the special profession (if a permission is needed)

7. Others (up to the commission)

Generally in Taiwan no employee quotas exist for foreign nationals. However, the relevant rules of employment give the competent authority the right to set up a quota if it is necessary to protect the domestic labour market.

VIII. Forms of Companies

The Taiwanese law basically knows three common and important forms of enterprises:

1. The Company Limited by Shares is similar to the German Aktiengesellschaft, which term denotes a company organized by two or more or one government or corporate shareholder. If no special rules apply for the company sector, the minimum capital for a Company Limited by Shares is NT $ 1 Million.

2. The Limited Company can be set up by one or more shareholders. The minimum capitalisation is NT $ 0,5 Million.

3. A Partnership has no minimum capital requirement. The partners liability is equal and cannot be limited.

Beside these forms there are also branch offices and representative offices known in Taiwan.

A Branch office generally is profit seeking and therefore has to be registered under Taiwanese Law.

Representative offices are not allowed to generate profits and should only be used for representing the foreign company in Taiwan. Thus a company registration is not required.

There are few further forms of enterprises existing though they are not relevant to foreigners.

IX. Financial Funding Services and Incentives

Taiwan has special programs to help businesses to get access to capital. For example low interest loans for small and medium size enterprises are provided for the purchase of automatic machinery, for anti-pollution machinery or for businesses which promote the “traditional sectors.”

In order to modernise the Taiwanese economy the Government also enacted the Statute for Upgrading Industries. Under the rule of this statute preferential taxes are granted to special industrial sectors which are supposed to improve the economical infrastructure of Taiwan.

XI. Summary

Due to the fact that the Taiwanese Government early realised the necessity of protecting foreign investors and their intellectual and non-intellectual property, investments in Taiwan are generally safe compared to other Asian countries.

Although the average wage for an industrial worker in 2003 with 42,000 NT $ (app. 1000 EUR) is high compared to other countries in the region, the political and economical stability in Taiwan and its expected GDP of 18,000 USD per capita in 2005 makes it well worth a consideration about an investment.

Although Lorenz & Partners Co., Ltd. and Formosan Brothers always pay greatest attention on updating the information provided in this newsletter we cannot take responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

Rechtsänderungen in Deutschland für die Steuerjahre 2004/2005

Februar 2005

Einführung

Dieser Newsletter soll Ihnen einen kurzen Überblick über die wesentlichen Änderungen des deutschen Rechts für die Jahre 2004 und 2005 geben. Neben Änderungen im Steuerrecht bringen insbesondere das umstrittene „Arbeitslosengeld II“ sowie das Alterseinkünftegesetz bedeutende Neuerungen im deutschen Sozialversicherungs- und Arbeitsrecht mit sich.

1. Steuerrecht

- In-Kraft-Treten der letzten Stufe der Steuerreform mit Absenkung des Spitzensteuersatzes auf 42% und des Einstiegssteuersatzes auf 15%. Unverändert bleibt der Grundfreibetrag (7.664 EUR für Ledige, 15.328 EUR für zusammenveranlagte Ehegatten), der Spitzensteuersatz greift ab einem Jahreseinkommen von 52.152 EUR bei Ledigen und 104.304 Euro bei Verheirateten.

· Alterseinkünftegesetz: Alle Renten werden schrittweise bei ihrer Auszahlung besteuert und nicht mehr, wie vorher, bei Einzahlung in die Rentenkasse.

· Für 2005 sind 50%,

· für 2006 52% und schrittweise bis zum

· Jahr 2040 100% der Rentenauszahlungen zu versteuern.

· Der Ansatz gilt sowohl für Rentner, die erstmals in 2005 Rente beziehen als auch für solche, die bereits vor 2005 Rente erhalten haben. Für alleinstehende Rentner gilt ein Grundfreibetrag in Höhe von 18.900 Euro pro Jahr, der doppelte Freibetrag (= 37.800 Euro) für Ehepaare.

- Alle Kapitalgewinne aus Kapital-Lebensversicherungen werden ab dem 1. Januar 2005 besteuert. Das bedeutet konkret, dass die Differenz zwischen eingezahlten Beiträgen und der Auszahlungssumme als Kapitalerträge mit dem persönlichen Steuersatz versteuert werden müssen.

- Die Steuerabzugspauschale für Arbeitszimmer in Höhe von 1.250 EUR kann künftig nur noch pro Arbeitszimmer und nicht mehr pro Person geltend gemacht werden. Bei Ehepartnern mit einem gemeinsamen Arbeitszimmer werden daher jeweils nur 625 EUR pro Person berücksichtigt (sog. objektbezogene Abzugsbeschränkung).

- Die Möglichkeit, den Finanzbehörden straffrei zuvor hinterzogene Steuern nachzumelden, läuft zum 31. März 2005 aus. Die nachgemeldeten Beträge mussten bei Nachmeldung bis 31. Dezember 2004 mit 25%, ab dem 1. Januar 2005 mit 35% versteuert werden. Ab dem 31. März 2005 droht auch bei Selbstanzeige wieder eine strafrechtliche Verfolgung.

2. Sozialrecht

- Zusammenlegung von Sozialhilfe und Arbeitslosenhilfe im sog. Arbeitslosengeld II („AG II“). Die jeweilige Höhe orientiert sich an der Bedürftigkeit des Empfängers. Die Möglichkeiten der Reduzierung bzw. Streichung im Falle der Ablehnung zumutbarer Arbeit wurden erheblich erweitert. Durchschnittlich wird das AG II in den alten Bundesländern 345 Euro für Alleinstehende betragen, in den neuen Bundesländern 331 Euro.

- Kindererziehende Arbeitnehmer zahlen künftig 0,85% ihres Bruttolohnes in die Pflegeversicherung ein, kinderlose 1,1%.

3. Sonstiges

- In-Kraft-Treten der LKW Maut (Höhe basierend auf Achszahl und Schadstoffemissionen) auf deutschen Autobahnen. Durchschnittsgebühr beträgt 12,4 Cent/km.

- Übergangsvorschriften des Schuldrechtreformgesetzes bzgl. Verjährung laufen Anfang 2005 aus. Fortan gilt generell für die meisten Ansprüche nach §195 BGB eine Verjährungsfrist von 3 Jahren (statt früher 30 Jahren) gerechnet ab Entstehung des Anspruchs sowie Kenntnis des Gläubigers von Anspruch und Person des Schuldners. Für verschiedene Anspruchsarten gelten nach §§ 196, 197 BGB längere Verjährungsfristen von 10 bzw. 30 Jahren. Die Einzelheiten sind dort aufgelistet. Danach gilt bspw. weiterhin die 30jährige Verjährungsfrist für Eigentumsherausgabeansprüche sowie rechtskräftig festgestellte Ansprüche (bspw. aus Urteilen deutscher Gerichte). Die zehnjährige Verjährungsfrist findet grundsätzlich auf Grundstücksgeschäfte Anwendung.

4. Aktuelle Gerichtsentscheidungen

- Das BVerfG hat entschieden, dass die gesetzliche Regelung der Ladenschlusszeiten an Sonn- und Feiertagen nicht dem Grundgesetz widerspricht, da es Ausdruck des Arbeitszeitenschutzes sei. Das im Ladenschlussgesetz festgelegte Öffnungsverbot für Ladengeschäfte an Sonn- und Feiertagen ist daher verfassungsgemäß und bleibt unverändert bestehen.

- Die Spekulationssteuer auf Aktiengewinne innerhalb Jahresfrist verstößt laut BVerfG (Urteil vom 09.03.2004, Az.: 2 BvL 17/02) für 1997 und 1998 gegen das steuerliche Gleichbehandlungsgebot und ist damit verfassungswidrig (Stichwort „Dummensteuer“), da eine effektive Kontrolle von Spekulationsgewinnen durch die Steuerbehörden nach geltender Gesetzeslage nicht erfolgt. Zumindest für 1997 und 1998 kann die Spekulationssteuer daher zurückgefordert werden. Für die Folgejahre hat das Urteil zwar keine Bindungswirkung, eine Anfechtung der Steuerbescheide ist jedoch insoweit sinnvoll, als eine gerichtliche Überprüfung auch der Folgeregelungen zu erwarten ist.

5. Aktuelle Steuerinformation:

Aus gegebenem Anlass weisen wir darauf hin, dass das Bundesfinanzministerium derzeit offensichtlich verstärkt ungefragt steuerliche Kontrollmitteilungen nach Thailand quasi wahllos versendet. Uns liegt ein Anschreiben des Bundesfinanzministeriums an das thailändische Finanzministerium vor, in dem ohne weitere Kommentierung 19 (!) Anträge auf Befreiung von der Lohnsteuerabzugspflicht an die thailändischen Behörden weitergereicht wurden. Einer dieser Anträge wurde uns zugeleitet.

Nach unserer Auffassung stellt dies gegebenenfalls einen eklatanten Rechtsverstoß gegen das Steuergeheimnis dar und führt bei einigen Unternehmungen zu ganz erheblichen (ggf. auch teuren) Irritationen, wenn diese vertraulichen Informationen in den Betrieben weitergegeben werden.

Falls Sie auch Derartiges erlebt haben oder gegen Derartiges vorzugehen wünschen, bitten wir um Hinweis.

Basic Principles of Direct Foreign Investment in Vietnam

March 2005

I. Introduction

Nearly 20 years have passed since Vietnam initiated its economic reforms in 1986, During that time a dynamic business environment that is both liberal and international in outlook has for a large part replaced the former orthodox communist, state-planned, and -controlled approach. Foreign companies and individuals are permitted to invest in almost every sector of the Vietnamese economy and the government promotes a large number of industries and regions though attractive incentives for foreign investment, to foster the country’s development. Its new development strategy has resulted in among the higest economical growth rates paralleled only by China and a foreign direct investment sector, already accounting for almost 35% of the industrial output and contributing significantly to the high growth of industrial production, according to the United Nations for more than 10% since 1990.

II. Foreign Ownership of Vietnamese Companies

Vietnam allows foreigners to invest in Vietnamese companies including certain companies set up by the government, shareholding companies, limited liability companies, partnerships and to set up joint ventures or invest through certain types of cooperations. There are no requirements for Government approval for this kind of financial investment. However, the percentage of foreign equities is limited to 30% of the company’s equity. Foreign investors are allowed to remit profits from their investments after fulfilling their tax obligations. Besides that, unlike other countries in the region, wholly owned foreign enterprises are possible in Vietnam.

III. Restrictions on Foreign Investment

Direct foreign investment is prohibited or strictly controlled in certain sensitive areas or areas that would adversely affect national security, the environment, or Vietnam's cultural heritage. With regard to every foreign investment, the repective investors has to apply for a investment license issued by . The government can prohibit, or simply refuse to grant a license for investments in those sectors, in which it believes Vietnamese are as capable as foreigners or in which foreign investment would not materially contribute to the development of the Vietnamese economy. This restriction has been enforced less strictly in response to a diminished level of foreign investment.

Similarly, foreign investments in purely retail or distribution activities are not possible at present; retail or distribution must be complemented by the production of the products in Vietnam. The government also occasionally suggests that it will not license further foreign-invested enterprises in areas where the market is already well served and/or competitive. However, these statements have frequently not been enforced.

IV. Term of Licenses

The term of an investment license depends on the nature of the respective project the license has been issued for and on the term of the associated land lease, if any, subject to a general maximum duration of 50 years. Only certain enterprises funded from abroad may be granted licenses for up to 70 years with the decision, being made by the government on a case by case basis.

V. State Protection of Foreign Investment

The Foreign Investment Law sets forth that "the State of Vietnam protects industrial property rights and guarantees legitimate interests of foreign investors in respect of technology transfers in Vietnam". This very broad and general statement can most likely not be interpreted as a substantive guarantee, and, thus, seems to be more of the nature of a statement of intent. In any event, the specific laws on capital contribution to foreign-invested enterprises and industrial property define some of the rights that such generalities purport to protect. Foreign investors also are guaranteed "fair and equal treatment in accordance with the Foreign Investment Law".

VI. Capitalization

Vietnamese law does not generally impose capitalization requirements on foreign-invested enterprises, although capital stock (equity) must amount to at least 30% of a joint venture's financing, and at least 30% of this capital stock has to be contributed by the foreign investor. Capitalization is linked to certain fiscal and operational privileges. For instance, the level of withholding tax on repatriation of profits is directly linked to the amount of legal capital contributed by the foreign investor. Corporate income tax reductions and tax breaks for several years are also available as incentives.

VII. Export Requirements

Foreign-owned enterprises can set up their registered offices in an export-processing zone if they export all of their products. In all other cases, the enterprise has to locate in an industrial zone. These zones also offer a range of tax breaks to foreign-invested enterprises. The tax breaks are more favourable if these foreign invested enterprises meet certain export quotas. Foreign-owned enterprises that manufacture products for export are entitled to an exemption from import duties on the raw materials, spare parts and components imported for the production of export products.

VIII. Technology and Equipment

The Vietnamese government prohibits foreign investors from utilizing outdated or inadequate technology or used equipment. For certain occasions, it is specified that equipment and machinery must be new and appraised by an independent Vietnamese or international organization. However, there is a sense of reality in that the government recognizes that in some cases an investor may want to protect its sophisticated technology and not bring it into the country or recognizes that the investment will not support highly sophisticated technology or state-of-the-art equipment. Therefore, in some cases, as long as safety is not at risk, used equipment is allowed but not. Further the monetary value of used equipment may not be over-stated.

IX. Employment of Foreigners

Foreign-invested enterprises may employ foreigners where advanced technical skills are required and no suitably qualified Vietnamese employees are available. There is no fixed timeframe, after which for a foreigner to be replaced by Vietnamese employees. However, an enterprise is required to have a plan for training Vietnamese workers to replace foreign employees. At present several measures have been passed by the government to limit the number of foreign staff in relation to Vietnamese employees, but it remains to be seen if and to which degree they will actually be enforced, as until now, the authorities’ view concerning this matter was very laid back.

X. Local Procurement

Foreign-invested enterprises are also encouraged to give priority to purchasing Vietnamese equipment, machinery, materials and means of transportation, but only where technically and commercially such items are similar to those which the enterprise would otherwise purchase abroad.

There is no comparable requirement to favour Vietnamese service providers, except for occasions where the law requires contracts to be put out to tender. The entire scheme of local procurement must be revised if Vietnam is to gain WTO accession.

XI. Summary

Development of a rule of law in Vietnam is still in its infancy. Accordingly, there are numerous commercial activities currently being undertaken by foreign investors which outstrip the legal protection afforded to them. That is not to say that remedies are not available or that means of enforcing contracts cannot be found. However, protection is frequently obtained on ad hoc basis, and the range of remedies available may vary greatly depending on the identity of the local party involved, the investor and the relief sought. The pace of legal chance in Vietnam is rapid and constant checking and rechecking of information is advisable. At present, no efficient official system exists for capturing all the laws in a timely basis, although great improvements have been made. Despite all, the fast growing Vietnamese economy certainly offers a wide range of business opportunities.

Dual Nationality Thailand /Germany

April 2005

The passport is the finest part of a person.

It comes, as well, not so easily into being as a person.

A person can be brought about everywhere, in the most lighthearted way

and without any good reason, but never a passport.

Therefore a passport is recognized, if it is a good one,

whereas a person might be as good as possible

and is nevertheless not recognized.

Berthold Brecht, Flüchtlingsgespräche

I. Who belongs to a nation state and who does not?

This question is usually posed in two situations, either when a child is born or when someone wants or has to change his or her state membership. Hereinafter the acquisition of nationality by birth shall be represented.

States are generally free to determine who are their own nationals under customary international law (See Art. 1 Hague Convention of 1930 on certain questions relating to the conflict of nationals).

According to the legal system, three basic principles are involved:

ius soli – the territorial principle (birthplace), (e.g. United States of America, Ireland (1^st generation), France (3^rd generation),
ius sanguinis – the principle of descent, (e.g. Germany, Denmark, Italy)
ius domicilii – the principle of residence (e.g. Netherlands (minimum 5 years), Germany (minimum 8 years), France (minimum 5 years).

Ius soli and ius sanguinis regulate how nationality is acquired by birth. Apart from the acquisition of nationality of birth, humans can become members of a state by naturalization. In this case the residence of the person is used as a criterion to attribute nationality (ius domicilii).

The combination of ius sanguinis and ius soli may lead to dual nationality although the principle of avoidance of multiple nationality still marks the law on nationality. In general, those applying for naturalization must give up their foreign nationality. But there are generous exceptional rules, which allow the previous nationality to be retained.

This applies for example to:

· naturalization of the citizens of the European Union

· release from the foreign nationality is legally impossible or unacceptable for such persons (e.g. degrading methods of release)

· elderly persons

· victims of political persecution

Multiple nationalities can be passed on to the children of multinationals.

II. Thai and German Nationality Act

In Thailand

According to the Thai Nationality Act (2535 B. E.), a person either born within the territory of the Kingdom of Thailand (except one of his parents is an illegal foreigner) or born of a father or a mother outside the territory of the Kingdom of Thailand regularly acquires the Thai nationality. Double citizenship is allowed: A person of Thai nationality doesn’t have to renounce Thai nationality while acquiring a foreign nationality.

In Germany

Germany combines the ius sanguinis with elements of the ius soli: In addition to ius sanguinis rules, an ius soli for children is implemented, provided certain prerequisites are fulfilled.

In principle the child is German if one of his parents is German (ius sanguinis).

Children born abroad whose German parents or German mother or father were born after 31 December 1999, will in principle no longer acquire German nationality.

Exceptions to this rule:

1. The German parent reports the birth to the competent diplomatic representation within one year. Where both parents are German nationals, this legal consequence shall only apply where they both fulfil the conditions stipulated in Sect. 4 National Act (Staatsangehörigkeitsgesetz “StAG”)

2. The child would otherwise be stateless.

Children of foreign parents shall acquire German citizenship by birth in the domestic territory if one parent has legally been resident in the domestic territory for at least eight years and possesses a right of residence or has possessed a residence permit for an unlimited period for three years. Between the age of 18 and 23 years, these children have to decide whether they want to keep the German nationality or the nationality of their parents. Where the person considers he wishes to keep the foreign citizenship, German citizenship shall be lost upon the statement being received by the competent authority. It shall also be lost where no statement has been made by the 23^rd birthday.

III. Example:

A Thai woman and a German man marry. The marriage has to be acknowledged by the German immigration authorities. If the marriage is not regarded as a fictitious marriage, the woman regularly gets the German nationality after 3 years of staying in Germany (including 2 years of marriage). During this time, the original Thai nationality has to be given up.

After the marriage the couple gets a baby. This child acquires the German nationality as a result of ius sanguinis. In addition, depending on the following preconditions, the child acquires the Thai nationality:

· Place of birth: Thailand à the child gets both nationalities;

· Place of birth: Germany à the child gets both nationalities if his mother holds still the Thai nationality.

If the child is born in Germany after his mother gave up her Thai nationality, the child can only acquire the German nationality.

Multiple nationality can be passed on to this child if it is born in the United States of America and his mother is still a Thai citizen. The child acquires the American nationality as a result of ius soli, the Thai and the German nationality as a result of ius sanguinis.

Although German law does not except dual nationality in most cases, this child does not have to decide whether to keep the nationality either of his father or his mother: The child acquires two nationalities, it becomes a dual national.

Appendix:

Nationality Act (Staatsangehörigkeitsgesetz, (StAG)

In the version published on 22 July 1913 (Reich Law Gazette I p. 583 - Federal Law Gazette III 102-1),

as last amended by the Act of 23 July 1999 (Federal Law Gazette I pp. 1618 ff.)

Chapter I General Provisions:

Section 1

A German is any person possessing citizenship in a federal state (Bundesstaat) (sections 3 to 32) or direct citizenship of the Reich (sections 33 to 35).

(…)

Chapter II Citizenship in a federal state

Section 3

Citizenship in a federal state shall be acquired

1. by birth (section 4);

2. by a declaration pursuant to section 5;

3. by adoption (section 6);

4. by the issue of a certificate pursuant to section 15 subsection 1 or 2 of the Federal Expellees Act (section 7);

4a. by transfer as a German without German citizenship within the meaning of Article 116 paragraph 1 of the Basic

Law (section 40a);

5. for a foreigner by naturalisation (sections 8 to 16 and 40b).

Section 4

(1) A child shall acquire German citizenship by birth where one parent possesses German nationality. Where at the time of the birth only the father is a German national, and where for proof of descent under German law recognition or determination of paternity is necessary, the claim for acquisition shall require a determination of paternity which is valid under German law; the declaration of recognition must be made or the procedure for determination commenced before the child has attained its 23^rd birthday.

(2)…..

3) A child of foreign parents shall acquire German citizenship by birth in the domestic territory if one parent has legally been normally resident in the domestic territory for eight years and possesses a right of residence or has possessed for three years a residence permit for an unlimited period. The acquisition of German citizenship shall be recorded by the registrar responsible for certifying the birth of the child. The Federal Ministry of the Interior shall be empowered, with the consent of the Bundesrat, to issue on the basis of a statutory order regulations for the procedure for the registration of the acquisition of citizenship in conformity with the first sentence of this subsection.

(4) German citizenship shall not be acquired in keeping with subsection 1 in the case of a birth abroad where the German parent was born abroad after 31 December 1999 and is normally resident there unless the child would otherwise become stateless. The legal consequence contemplated by the preceding sentence shall not ensue where the German parent reports the birth to the competent diplomatic representation within one year. Where both parents are German nationals, the legal consequence contemplated by the first sentence of this subsection shall only ensue where they both fulfil the conditions there stipulated.

(…)

Section 29

(1) A German who after 31 December 1999 has acquired citizenship pursuant to section 4 subsection 3 or through naturalisation pursuant to section 40b and possesses a foreign citizenship shall be required to state after attaining the age of majority and after being advised in keeping with subsection 5 whether he wishes to retain the German or the foreign citizenship. The statement shall be made in writing.

(2) Where the person incurring the obligation contemplated by subsection 1 states that he wishes to keep the foreign citizenship, German citizenship shall be lost upon the statement being received by the competent authority. It shall also be lost where no statement has been made by the 23^rd birthday.

(3) Where the person incurring the obligation contemplated by subsection 1 states that he wishes to keep German citizenship, he shall be obliged to furnish proof that he has given up or lost the foreign citizenship. Where such proof is not furnished by his 23^rd birthday, German nationality shall be lost unless the German has already received upon application the written approval of the competent authority to retain German citizenship (retention approval). The application for the granting of retention approval, including as a precautionary measure, may only be made up to the 21^st birthday (exclusion limit). The loss of German nationality shall only take effect when the application becomes the subject of a final rejection. The possibility of provisional legal redress under section 123 of the Rules of the Administrative Courts shall remain unaffected.

(4) The retention approval pursuant to subsection 3 shall be granted where giving up or losing the foreign citizenship is not possible or cannot reasonably be expected or where multiple nationality would have to be or could be accepted or in the case of naturalisation in accordance with section 87 of the Aliens Act.

(5) The competent authority shall advise the person who is subject to the requirement contemplated by subsection 1 of his obligations and of the possible legal consequences as set out in subsections 2 to 4. The advice shall be formally served. Such service shall be made immediately after the 18^th birthday of the person who is subject to the requirement of section 1. The provisions of the Act to regulate service in administrative proceedings shall be applied

(6) The continuation or loss of German nationality under this provision shall be determined ex officio. The Federal Ministry of the Interior may, by statutory order and with the consent of the Bundesrat, issue provisions regulating the procedure to determine the continuation or loss of German nationality.

Recent Developments in

Taiwanese Business Law

May 2005

I. Introduction

As we recently extended our services to Vietnam and Taiwan, in the following we would like to keep you informed about current legal changes in Taiwan.

II. Tax Law

1. Income tax of branches of “profit-seeking enterprises”

Unlike the corporate tax system in Germany, the profit-seeking enterprise tax is imposed not only on corporations and cooperative organizations, but also on sole proprietors and partnerships. Regarding sole proprietors and partnerships, individual income tax is levied in addition to the profit-seeking enterprise tax and double taxation avoided through a special imputation credit system.

The tax rate of 25 % (2004) is the maximum rate in a progressive tax structure. The rate is applicable on income in excess of TW$ 100,000 (approx. EUR 1,250).

Where the head office of a profit-seeking enterprise is located outside the territory of Taiwan, for instance in Germany, but the enterprise has a permanent establishment (PE) or a business agent within the territory of Taiwan, profit-seeking enterprise income tax shall be levied on that part of the business profits derived from operating within the territory of Taiwan. The PE or agent shall have the obligation to pay tax and shall be responsible for filing a tax return for the fiscal year (as of assessment period 2005 = calendar year) and paying income tax. The tax return has to be filed within the period from 1 May to 31 May of each year, e.g. for assessment period 2004 until 31 May, 2005.

Remunerations paid by a branch of a foreign company in Taiwan to the parent company in Germany for the provision of services shall be deemed as the income of the parent company from source in Taiwan. The income derived from sources in Taiwan has to be reported in the tax return of respective PE or agent. Any omission or under-reporting of income derived from such a branch is subject to a fine of no more than twice the amount of the evaded taxes.

Irrespective of the above, according to the transfer pricing regulations in Taiwan, a PE in Taiwan which pays remunerations to its foreign parent company needs to provide proof to the fiscal authorities that the transfer pricing of such payment is in conformity with “arm’s length transaction principles” and that such transaction is reasonably categorized and recognized within the entire enterprise. Otherwise the authorities may adjust the amount in accordance with the regular business practice and add the respective amount to the taxable income.

2. Stock Options

The income of stock options granted to employees in Taiwan by foreign companies as a consequence of work performed in Taiwan shall be subject to income tax. Pursuant to the latest Explanation of the Ministry of Finance in Taiwan in April 2004, the time of receiving stock warrant income or any convertible bond income shall be the exercise date.

Regarding an employee, however, who is not a national of Taiwan and/or resident in Taiwan for less than 183 days during the same taxable year, the income with respect to the realization of stock warrants has not to be declared in his tax return and is separately subject to a 20 % withholding tax, irrespective of the actual residence on the exercise date of the stock warrant.

3. Stock Interests

The draft Amendment of Article 24 of the Taiwanese Income Tax Act states that income of branches of foreign companies, e.g. a PE of a German corporation, derived from interest of short-term commercial papers (interest on public debts, corporate bonds, financial, various kinds of short-term commercial papers, deposits and other loans) by a profit-seeking enterprise shall not be added to the amount of income of the profit-seeking enterprises, but withheld with a flat rate of 20 % instead.

4. Value-Added and Non-Value Added Business Tax

Business tax, in the form of value-added or non-value-added tax, is generally levied on the sale of goods or the provision of services within the territory of Taiwan and the import of goods. In other words, any transaction of goods or services within the territory of Taiwan including importation is subject to business tax. Concerning trade through the internet the National Tax Administration recently declared that the trade will be subject to business tax provided that the trade value exceeds NT$ 60,000 (approx. EUR 1,500) for three to four transactions through internet per month with the exemption to the trade value for each transaction is no more than NT$ 1,000 (approx. EUR 25).

Another exemption applies to individual persons selling used merchandise, daily consumables or auctioning second-hand goods, provided that the goods are not stocks (in this case the sale is subject to business tax), Art. 3 Value Added and Non-Value-Added Business Tax Act.

III. Labour Law

According to Article 46 of the Employment Service Act 2003 the scope of work a foreign worker may be employed for in Taiwan is limited to:

· specialized or technical work

· Director/Manager/Business executive positions if the business is invested in or set up by overseas Chinese or foreigners with the authorization of the Government of Taiwan

· teachers at schools, colleges or universities established for foreign residents or foreign languages teachers

· sport coach and athletes

· religious, artistic and show business workers

· crew members of vessels

· marine fishing/netting workers

· household assistants

· work designated by the Central Competent Authority with respect to major national construction projects or economic or social development needs

· other specialized work as approved by the competent authority or due to a lack of such specialists in Taiwan and business necessity to hire the specialist

Furthermore the competent authority has to consult the respective authority dealing with the field of work with respect to qualifications of the foreign worker. Another precondition of the employment of foreigners is a written employment contract with a limited duration. In case no duration has been determined the duration is deemed to expire with the underlying work permit.

IV. Corporate Law and Partnerships

1. Broadened Scope of Application of Limited Partnerships

A partnership under Taiwanese Law has only one form of partners, and the partner is unlimited liable towards any obligations of the company. Taiwan’s Council for Economic Planning and Development and the Ministry of Economics are currently drafting a bill regarding a Limited Partnership Act that will enhance the flexibility of corporate operations in Taiwan. It is especially envisaged to enlarge this form of partnership with limited liability from venture capital, which the drafting is originally aimed at, to such professions as accountants, lawyers and architects, thus relieving them the risk of bearing unlimited liability.

2. Determination of the promoters of a Company limited by shares

The Taiwanese Supreme Court recently held referring to the foundation of a company limited by shares that despite the fact that Article 129 of the Company Act states that the promoters shall draw up the articles of incorporation and shall affix thereon their respective signature or personal seals, it does not deal with the questions who the promoters actually are. To determine the promoter it also has to be taken into account whether respective persons de facto engage in the foundation process.

The determination of the promoters of a Company can be a vital issue where there are “sleeping promoters”, especially when the promoters are imposed heavy obligations and liability pursuant to company law, the Security Act and related financial laws in Taiwan. For instance, if a person knew the set-up of a company, contributed capital, but did not attend the founding meeting or sign on the memorandum of association, he shall still be deemed as the promoter and shall be jointly and severally liable for the consequences of his acts in forming the company and all expenses incurred.

V. Restrictions on Foreign Investment in Securities

In general, except a few industries on which upper limits of foreign investments apply, off-shore institutional foreigners are granted the right to hold up to 100 % of the total outstanding shares in companies listed in the local market. Therefore, a German investor may invest directly in Taiwanese securities without any investment ceiling.

As of 2003 all foreign investors can invest in the securities market after simply registering with the Taiwanese Stock Exchange and obtaining an investment ID. However, it is necessary for them to appoint a local agent or representative to undertake matters such as opening accounts for trading in Taiwanese securities, applying to exchange, convert into, or subscribe to domestic corporate bonds; applying for exchange settlement, paying taxes and exercising rights in purchased securities.

Foreign institutional investors which hold shares in public companies are also prohibited from handing the proxies printed and distributed by the companies to solicitors or consigned agents.

How to Book

Foreign Currency Invoices

within Thailand

August 2005

Dear Ladies and Gentlemen,

Kindly find attached a short information about how to book foreign currency invoices within Thailand.

We do believe it is very important to know, that various exchange rates differ depending on how you pay.

We thank you for your attention.

Best regards,

Michael Lorenz

Lorenz & Partners

How to book foreign currency invoices within Thailand?

I. Example:

A Thai company A invoices to another Thai company B for services performed in Thailand.

The amount due for A is calculated as follows: 100 EUR

Minus 3% withholding tax (3) EUR

Plus additional 7% VAT +7 EUR

So B has to pay (100 ./. 3 + 7) 104 EUR

The Thai company B has to pay 3% withholding tax to the Revenue Department, on behalf of the service provider (and issue a withholding tax certificate, so A can offset the withholding tax amount against the corporate income tax liability).

The amount of EUR 7 VAT has to be declared to the Thai tax authorities and has to be submitted.

PLEASE NOTE:

Ø The VAT return has to be submitted together with payments due to the Revenue Department within 15 days from the end of the month in which the VAT is to be accounted for.

Ø Withholding tax has to be remitted to the Revenue Department within seven days of the date of remittance.

II. How to calculate the exchange rate?

1. If you receive payments:

If you receive money, you have to use the buying rate.

Please note that the difference in exchange rates are dependent upon the method of payment:

Ø If you are paid by cheque or bill of exchange, you have to use the sight bill rate.

Ø If you are paid by bank transfer (baht net), you have to use the telex transfer rate (T/T rate).

Although the payment dates are different (for principle VAT and withholding tax), you have to use the same exchange rate (= Rate as published by Bank of Thailand or (since March 2005) published by the commercial bank the company normally uses) one day before the amount has been received).

For example:

A Thai company A issues an invoice to Germany, amounting to EUR 100. Payment is received in THB, amounting to THB 5,143 (the commercial Bank rate in this example is 51.43 THB/EUR).

However, the buying rate announced by the Bank of Thailand is 51.50 THB/EUR.

Therefore the transaction will be shown as follows:

Invoice amount (100 x 51.50) = 5,150 THB

The difference resulting from actual exchange rate and the exchange rate of Bank of Thailand (THB 5,150 ./. THB 5,143 = THB 7) is recognized as gain/loss on exchange rate.

2. If you pay

If you pay the money, you have to use the average selling rate in any of the above cases.

For example:

A Thai company A received an invoice from a German supplier B, amounting to

EUR 100. A has to pay this invoice in THB, amounting to THB 5,243 (the commercial Bank rate in this example is 52.43 THB/EUR).

However, the average selling rate announced by the Bank of Thailand is 52.36 THB/EUR.

Therefore the transaction will be shown as follows:

Invoice amount (100 x 52,36) = 5,236 THB

Input VAT (By Phor.Phor.3b: 7% x 52) = 367 THB

Withholding tax (if any: e.g. 15% x 100 x 52) = 785 THB

The difference resulting from actual exchange rate and the exchange rate of Bank of Thailand (THB 5,243 ./. 5.236 = THB 7) is recognized as gain/loss on exchange rate.

Einkommensbesteuerung in Vietnam unter Berücksichtigung des Doppelbesteuerungsabkommens Deutschland und Vietnam

September 2005

Veröffentlicht in der RIW

Vietnam ist in den vergangenen Jahren aufgrund seiner politischen Öffnung sowie des damit verbundenen Wirtschaftswachstums als Investitionsstandort für deutsche Unternehmen erheblich attraktiver geworden. Mit der politischen Öffnung ging eine grundsätzliche Modernisierung des Rechts- und Steuersystems einher. Seit dem 27. Dezember 1996 ist das Abkommen zwischen der Bundesrepublik Deutschland und der Sozialistischen Republik Vietnam zur Vermeidung der Doppelbesteuerung auf dem Gebiet der Steuern vom Einkommen und vom Vermögen (DBA Vietnam) in Kraft. Von besonderem Interesse sind Regelungen des nationalen Steuerrechts Vietnams, die einige Besonderheiten aufweisen. So finden beispielsweise auf Ausländer günstigere Steuerprogressionen Anwendung als auf vietnamesische Staatsangehörige. Dieser Artikel stellt die wesentlichen Grundzüge der vietnamesischen Einkommensbesteuerung sowie die Auswirkungen des DBA Vietnam auf diese dar.

Das deutsch-vietnamesische DBA ist nur eines von über 38 DBA, welche die vietnamesische Regierung im Zuge wirtschaftlicher Reformen mit verschiedenen Ländern abgeschlossen hat.[11] Hierzu zählen beispielsweise das DBA mit Thailand (in Kraft getreten am 1. Januar 1993), der Schweiz (1. Januar 1998), den Niederlanden (1. Januar 1996) sowie Japan (1. Januar 1996). Durch die Vermeidung internationaler Doppelbesteuerungssachverhalte versucht die vietnamesische Regierung, weitere Anreize für vermehrtes Investment in Vietnam zu schaffen.

I. Das Doppelbesteuerungsabkommen Deutschland-Vietnam

Das Doppelbesteuerungsabkommen zwischen Deutschland und Vietnam orientiert sich in seinem Wortlaut im Wesentlichen am OECD-Musterabkommen für den Bereich der Steuern vom Einkommen und vom Vermögen (OECD-MA)[12]. Allerdings haben Deutschland und Vietnam das Musterabkommen nicht vollständig übernommen, sondern die Besonderheiten der Besteuerungssysteme der beiden Vertragsstaaten durch Abweichungen gegenüber dem OECD-MA berücksichtigt. Unterschiede zwischen dem OECD-MA und dem DBA Vietnam finden sich insbesondere in den Bereichen der Besteuerung von Dividenden, Zinsen und Lizenzgebühren, sowie im Bereich der Besteuerung von unselbständiger Arbeit und den Methoden zur Vermeidung von Doppelbesteuerung.

Eine Abweichung findet sich beispielsweise in der Regelung des Art. 20 (3) DBA zur Besteuerung der Vergütung von Studenten bzw. Praktikanten. Während das OECD-MA in Art. 20 OECD-MA eine Besteuerung von Einkünften eines Studenten, Praktikanten oder Lehrlings, der sich in einem Vertragsstaat ausschließlich zu Studienzwecken aufhält und die Zahlungen für seinen Unterhalt, sein Studium oder seine Ausbildung erhält, ausschließt, wenn es sich um Einkünfte aus Quellen außerhalb des Studienortes handelt, gewährt das DBA Vietnam diese Steuerbefreiung nur auf Einkünfte bis zu einer Ge-samthöhe von 4.600 EUR je Kalenderjahr.[13]

Die Anwendbarkeit des DBA zwischen Deutschland und Vietnam beurteilt sich (ebenso wie in Art. 4 OECD-MA vorgesehen), nach der Ansässigkeit der Steuersubjekte. Dabei wiederholt das DBA Vietnam den Art. 4 OECD-MA mit der Version des Musterabkommens von 1963, d.h. ohne den Satz 2 der Ergänzung des OECD-MA von 1977. Der Wortlaut des Musterabkommens wurde mithin bis auf den Ausschluss der Quelleneinkünfte nach Art. 4 (1) S. 2 OECD-MA übernommen. Somit ist nach dem DBA Vietnam die Annahme abkommensrechtlicher Ansässigkeit als Folge der „fiktiven unbeschränkten Steuerpflicht“ gemäß § 1 Abs. 3 EStG nicht bereits wegen Art. 4 (1) S. 2 OECD-MA (1992) ausgeschlossen.[14] Im Ergebnis ergibt sich jedoch kein Unterschied zur Regelung des Musterabkommens, denn die Steuerpflicht muss zumindest durch eines der Merkmale des Abs. 1 S. 1 DBA Vietnam begründet sein. Da § 1 Abs. 3 S. 1 EStG aber das Fehlen von Wohnsitz oder gewöhnlichem Aufenthalt im Inland voraussetzt, kann durch die „fiktive unbeschränkte Steuerpflicht“ keine abkommensrechtliche Ansässigkeit im Sinne des DBA Vietnam eintreten.[15] Ebenfalls fehlt die dem OECD-MA (1992) beigefügte Ergänzung des Art. 4 (1) S. 1, letzter HS., die klarstellt, dass auch die Vertragsstaaten selber und ihre Gebietskörperschaften „ansässig“ im Sinne des DBA sind. Das Fehlen dieses Halbsatzes, der lediglich der Klarstellung der Rechtslage diente, hat jedoch keinen inhaltlichen Einfluss auf den Gleichlauf von DBA Vietnam und OECD-MA.[16]

Eine Person ist nach vietnamesischem Steuerrecht (Art. 3 Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Income Tax on High-Income Earners, in Kraft seit 1. Juli 2004) als in Vietnam ansässig (und damit grundsätzlich steuerpflichtig) zu behandeln, die entweder die vietnamesische Staatsangehörigkeit besitzt oder falls nicht, ihren ständigen Wohnsitz in Vietnam hat bzw. sich 183 Tage oder mehr innerhalb von 12 aufeinanderfolgenden Monaten in Vietnam aufhält. Dabei wird der Zeitraum ab dem Datum der Ankunft in Vietnam gezählt. Veranlagungszeitraum ist das Kalenderjahr.

Für den Fall, dass der Steuerpflichtige sowohl nach deutschen als auch nach vietnamesischen Steuerrecht als im jeweiligem Staat als steuerrechtlich ansässig gilt und demnach im jeweiligen Staat grundsätzlich unbeschränkt steuerpflichtig ist, bestimmt sich seine Ansässigkeit nach DBA wie im OECD-Musterabkommen nach Art. 4 (2) OECD-MA. Grundsätzlich ist also auf den Wohnsitz, den ständigen Aufenthalt oder bei Unternehmen auf den Sitz der Geschäftsleitung abzustellen.

II. Einkommensbesteuerung in Vietnam

Grundsätzlich sind Ausländer unabhängig von ihrer Ansässigkeit verpflichtet, für das Einkommen aus Tätigkeiten in Vietnam Einkommenssteuer in Vietnam zu zahlen. Dabei wird die Einkommenssteuer sowohl auf regelmäßiges Einkommen (insbesondere Einkünfte aus selbständiger oder unselbständiger Tätigkeit) als auch auf unregelmäßiges Einkommen (beispielsweise Lotteriegewinne, Veräußerungsgewinne, Lizenzeinkünfte aus Technologietransferleistungen) erhoben. Die Einkommenssteuer ist an die zuständige örtliche Steuerbehörde (Tax Department) der jeweiligen Stadt bzw. Provinz in Vietnam zu entrichten.[17]

1. Einkünfte aus unselbständiger und selbständiger Tätigkeit

Unter einem regelmäßigen Einkommen ist das unselbständige Einkommen einer angestellten Person zu verstehen, das diese im Rahmen ihres Anstellungsverhältnisses verdient. Bei Angehörigen freier Berufe, wie beispielsweise Ärzten oder Rechtsanwälten, betrifft die Einkommenssteuerpflicht deren Einkommen aus ihrer selbständigen Tätigkeit. Bezüglich der Steuerpflicht von Deutschen findet grundsätzlich Art. 2 und Art. 4 DBA Vietnam Anwendung, die den Art. 2, 4 OECD-MA entsprechen. So müssen z.B. Ausländer, die sich länger als 183 Tage in Vietnam aufhalten und eine Vergütung von einem in Vietnam niedergelassenen Arbeitgeber erhalten, in Vietnam Einkommenssteuer abführen, auch wenn sie nicht in Vietnam ansässig sind.[18]

1.1. Besteuerung regelmäßigen Einkommens in Vietnam ansässiger Personen

Die vietnamesische Steuer auf regelmäßiges Einkommen eines ortsansässigen Ausländers berechnet sich auf der Basis von progressiven Steuerraten und basiert auf dem durchschnittlichen monatlichem Gehalt der steuerpflichtigen Person. Vietnam besteuert dieses Einkommen (wie auch Deutschland) nach dem Welteinkommensprinzip, so dass die Einkommenssteuer unabhängig davon erhoben wird, ob das Gehalt außerhalb oder innerhalb von Vietnam bezogen wird. Zu dem steuerpflichtigen Einkommen zählt Einkommen in Form von Gehalt, Einkünften, die als Vergütungen für die Überlassung der Nutzung oder des Rechts auf Nutzung der Verwendung von Patent- und Markenrechten einzustufen sind, sowie Entgelten für die Bereitstellung von wissenschaftlichen, technischen und beratenden Tätigkeiten oder anderen Dienstleistungen (auch Maklereinkünfte und Einkommen aus Nebentätigkeiten).[19] Bei der Ermittlung der Steuerlast ist zu beachten, dass das zu versteuernde Mindestmonatseinkommen und die Steuersätze bezüglich eines steuerpflichtigen ortsansässigen Ausländers sich von denen einer Person vietnamesischer Staatsangehörigkeit unterscheiden; die Einkommenssteuer eines Ausländers ist dabei geringer als die eines Vietnamesen. So beträgt der Grundfreibetrag eines in Vietnam ansässigen Ausländers in Vietnam acht Millionen VND (Vietnamesische Dong, umgerechnet ca. 420 EUR), während eine Einkommensbesteuerung eines inländischen Einkommens eines Vietnamesen bereits ab einem Einkommen von fünf Millionen VND (umgerechnet ca. 260 EUR) beginnt.

Die gegenwärtigen Steuersätze für in Vietnam ansässige Ausländer können der folgenden Tabelle entnommen werden.

Level

Durchschnittliches monatliches Einkommen in VND (Vietnam Dong)

EUR

Steuersatz in %

8.000.000 oder weniger

8.000.000 bis 20.000.000

20.000.000 bis 50.000.000

50.000.000 bis 80.000.000

mehr als 80.000.000

415

415 bis 1.040

1.040 bis 2.600

2.600 bis 4.150

4.150

Die Besteuerung des Einkommens eines in Vietnam ansässigen vietnamesischen Staats-angehörigen richtet sich hingegen nach den in der folgenden Tabelle dargestellten Steuersätzen.

Level

Durchschnittliches monatliches Einkommen in VND (Vietnam Dong)

EUR

Steuersatz in %

5.000.000 oder weniger

5.000.000 bis 15.000.000

15.000.000 bis 25.000.000

25.000.000 bis 40.000.000

mehr als 40.000.000

260

260 bis 780

780 bis 1.300

1.300 bis 2.080

2.080

Durch die Kombination einer niedrigeren Mindesthöhe des zu besteuernden Einkommens von vietnamesischen Staatsangehörigen und der geringeren Stufung der Steuersätze, die bis zum Level 4 bereits ab einem weiteren Einkommen von 10 Millionen VND (umgerechnet ca. 530 EUR) einen um weitere 10 Prozentpunkte erhöhten Steuersatz vorsehen, kommt es zu erheblichen Differenzen zwischen der Einkommenssteuerpflicht von Ausländern und Vietnamesen. So beträgt zum Beispiel die Einkommenssteuer, die auf Einkünfte aus unselbständiger Tätigkeit in Höhe von ca. VND 23.800.000 (umgerechnet etwa EUR 1.160) zu entrichten ist, für einen vietnamesischen Staatsangehörigen 2.725.000 VND (umgerechnet ca. 145 EUR), während ein in Vietnam ansässiger Ausländer für das selbe Einkommen Steuern nur in Höhe von 1.925.000 VND (umgerechnet ca. 100 EUR) entrichten muss (Differenz 45%).

1.2 Besteuerung regelmäßigen Einkommens nicht in Vietnam ansässiger Personen

Ein nicht in Vietnam ansässiger Ausländer[20], ist in Vietnam nur mit dem Einkommen steuerpflichtig, das er in Vietnam verdient. Dies folgt aus seiner Eigenschaft als Steuersubjekt der vietnamesischen Einkommenssteuer, die erhoben wird, wenn Einkommen aus einer Anstellung in Vietnam verdient wird. Allerdings unterscheidet sich die auf Einkommen nichtansässiger Ausländer erhobene Einkommenssteuer von der auf Einkommen ortsansässiger Ausländer erhobenen Steuer dahingehend, dass diese nicht auf der Basis von progressiven Steuersätzen berechnet, sondern pauschal erhoben wird. Der pauschalierte Steuersatz auf das gesamte Einkommen eines nicht ortsansässigen Ausländers für in Vietnam geleistete Tätigkeiten beträgt 25%. Bedeutsam ist, dass sich die Besteuerung von Einkommen eines nicht in Vietnam ansässigen Ausländers nicht auf sein Welteinkommen erstreckt. Diese Regelung steht im Einklang mit Art. 15 DBA Vietnam, soweit das Gehalt von einer Betriebsstätte oder einer festen Einrichtung übernommen wird. Dabei hat das DBA Vietnam die Regelung des Art. 15 OECD-MA weitestgehend übernommen und nur im Abs. 2 a) eine andere Formulierung gewählt. Während im OECD-MA darauf abgestellt wird, dass das Einkommen, das eine in einem Vertragsstaat ansässige Person für eine im anderen Vertragsstaat ausgeübte unselbständige Arbeit bezieht, nur im Ansässigkeitsstaat besteuert wird, wenn der Empfänger sich im anderen Staat insgesamt nicht länger als 183 innerhalb eines Zeitraums von zwölf Monaten, der während des betreffenden Steuerjahres beginnt oder endet, aufhält, stellt das DBA Vietnam bezüglich des Aufenthaltszeitraums auf das Kalenderjahr ab.

2. Einkommenssteuerpflicht auf unregelmäßiges Einkommen

Unter unregelmäßigem Einkommen in diesem Sinne sind nach vietnamesischem Steuerrecht unregelmäßige Einkünfte steuerpflichtiger Personen zu verstehen, die beispielsweise aus den Erträgen von Technologietransferleistungen herrühren.

Bei der Besteuerung von unregelmäßigen Einkommen unterscheidet das vietnamesische Steuerrecht weder hinsichtlich der Steuersätze noch hinsichtlich der Steuerstufen zwischen Ausländern und Vietnamesen. Eine Besteuerung von unregelmäßigem Einkommen fällt an, wenn derartige Einkünfte den Betrag von 15.000.000 VND (umgerechnet 800 EUR) übersteigen. Dabei ist zu beachten, dass Einkünfte aus Technologietransfer nicht separat bei jeder Zahlung, sondern im Zusammenhang mit der Abwicklung des Gesamtvertrages besteuert werden.

Die Besteuerung von unregelmäßigen Einkommen erfolgt durch pauschale Steuersätze von 5% oder 10 %, wobei die Höhe des Steuersatzes von der Herkunft des Einkommens abhängt. So werden unregelmäßige Einkünfte aus Technologietransfers, soweit sie einen Betrag von 15 Millionen VND pro Transfer übersteigen, pauschal mit 5 % besteuert.

Einige Arten unregelmäßiger Einkünfte, wie zum Beispiel Dividendenzahlungen, Zinsen, Lizenzgebühren oder Vergütungen für technische Dienstleistungen, können als Steuerobjekte sowohl in Vietnam als auch in Deutschland besteuert werden. Eine Doppelbesteuerung ist jedoch durch Art. 10, 11, 12 DBA Vietnam grundsätzlich ausgeschlossen, da in diesen Fällen im Regelfall eine Anrechenbarkeit für im anderen Land geleisteten Steuerzahlungen erfolgt. Die Vorschriften des DBA Vietnam enthalten jedoch in dieser Hinsicht einige Besonderheiten gegenüber dem OECD-Musterabkommen.

2.1 Besteuerung von Dividenden

In Vietnam ansässige ausländische Unternehmen, die Gewinne ausschütten und ins Ausland transferieren, unterliegen einer Dividendensteuer (Profit Remittance Tax). Dabei ist der jeweils geltende Steuersatz in der Investitionslizenz des Unternehmens angegeben. Der Dividendenbegriff nach der Regelung des Art. 10 DBA Vietnam beinhaltet (vergleichbar mit dem OECD-MA) Einkünfte aus Aktien, Genussrechten oder Genussscheinen, Kuxen und Gründeranteilen, sowie Einkünfte aus anderen Rechten – ausgenommen Forderungen – mit Gewinnbeteiligung und aus sonstigen Beteiligungen stammende Einkünfte, die nach dem Recht des Quellenstaats den Einkünften aus Aktien steuerlich gleich gestellt sind. Dabei sind im DBA Vietnam letztere, anders als im OECD-MA vorgesehen, nicht ausdrücklich auf Einkünfte aus Gesellschaftsanteilen beschränkt.[21] Der Steuersatz bestimmt sich in Abhängigkeit des ausländischen Anteils am Stammkapitals der Gesellschaft. Eine Besonderheit des DBA Vietnam besteht darin, dass es im Gegensatz zu sämtlichen anderen seit 1996 von Deutschland abgeschlossenen Abkommen nicht einen beiderseitigen Schachteldividenden-Höchstsatz von 5 %, wie vom OECD-MA vorgeschlagen, annimmt, sondern den Höchstsatz nur für „Superschachtel“ - Beteiligungen ab 70 % anwendet und für geringere Schachtelbeteiligungen ab 25 % einen Höchstsatz von 10 % vorgibt.[22]

2.2 Besteuerung von Zinsen

Zinseinkünfte werden in Vietnam seit dem 1. Januar 1999 mit einer Quellensteuer belegt. Ausländische Unternehmen, die in Vietnam Zinsen vereinnahmen, müssen diese Einkünfte versteuern. Die Besteuerung von Zinsen nach DBA Vietnam ist in Art. 11 DBA geregelt, der die Regelung des Art. 11 OECD-MA weitestgehend übernommen hat. Der höchstmögliche Quellensteuersatz beträgt nach DBA Vietnam 10 %, wobei keine Begrenzung für gewinnabhängige Zinsen vorgesehen ist. Abweichend vom OECD-MA wurde im Protokoll zum DBA Vietnam 1995[23] unter Ziffer 5 zu Artikel 11 bestimmt, dass der Quellensteuerhöchstsatz auf 5 % der Zinsen begrenzt ist, wenn die BRD nach nationalem Steuerrecht keine Quellensteuer auf Zinsen erhebt, die an in Vietnam ansässige Personen gezahlt werden. Über das OECD-MA hinausgehend gewährt das DBA Vietnam in Art. 11 Abs. 3 Quellensteuerbefreiungen in Vietnam und Deutschland für Zinsen, die an qualifizierte Zinsempfänger gezahlt werden.[24]

2.3 Besteuerung von Einkünften aus Lizenzgebühren und Vergütungen aus technischen Dienstleistungen

Auch Einkünfte aus Lizenzverträgen sowie Vergütungen für technische Dienstleistungen unterliegen der Quellenbesteuerung. Bezüglich der Besteuerung von Einkommen aus Lizenzgebühren und Vergütungen aus technischen Dienstleistungen sieht das DBA Vietnam in Art. 12 in Übereinstimmung mit dem OECD-MA eine der Höhe nach begrenzte Besteuerung im Quellenstaat vor. Im Gegensatz zum OECD-MA unterscheidet das DBA Vietnam (ebenso wie das DBA Indonesien) zwischen Lizenzgebühren und Gebühren für technische Dienstleistungen, für die zwar die gleichen Regelungen gelten, auf die jedoch ein unterschiedlicher Quellensteuersatz angewendet wird.[25] Dabei beträgt der Quellensteuersatz höchstens 10 % des Bruttobetrages bei Lizenzgebühren und 7,5 % des Bruttobetrages im Fall der Vergütung von technischen Dienstleistungen. Das DBA Vietnam hat den Art. 12 in seinem Abs. 5 gegenüber dem OECD-MA um eine Legaldefinition ergänzt und damit vorgegeben, wann Lizenzgebühren aus einem Vertragsstaat stammen. Im Gegensatz zum deutschen Steuerrecht kommt es nach Art. 12 (5) Vietnam nicht auf den Ort der Verwertung, sondern auf den Ort Ansässigkeit des Schuldners bzw. der Belegenheit seiner Betriebsstätte oder festen Einrichtung an.[26]

2.4 Besteuerung von Gewinnen aus der Veräußerung von Vermögen

Einkünfte aus der Veräußerungen von Unternehmensbeteiligungen werden in Vietnam mit 25 % Kapitalertragssteuer (Capital Gains Tax) besteuert. Dabei wird die Besteuerung von Gewinnen aus der Veräußerung von Vermögen in grenzüberschreitenden Fällen durch das DBA Vietnam in Art. 13 weitestgehend in Übereinstimmung mit dem OECD-MA geregelt. Allerdings ist zu beachten, dass im Gegensatz zu den meisten anderen deutschen DBA nach Art. 13 (4) DBA Vietnam das hieraus folgende Belegenheitsprinzip auch für Gewinne aus der Veräußerung von Anteilen an einer Immobiliengesellschaft Anwendung findet.[27]

3. Absetzungsmöglichkeiten von in Vietnam zu zahlender Einkommenssteuer

Bevor auf die Möglichkeiten von Einkommenssteuerbefreiungen oder Reduzierungen der Einkommenssteuer einzugehen sein wird, die nur in bestimmten Fallgestaltungen gewährt werden ist auf die Absetzungsmöglichkeiten nach vietnamesischen Steuerrecht von Ausgaben von der Einkommenssteuer hinzuweisen.

Ausländische Arbeitnehmer, die in Vietnam einkommenssteuerpflichtig sind, können bestimmte notwendige Ausgaben von der Einkommenssteuer absetzen. Zu diesen Ausgaben gehören Reisekosten für Geschäftsreisen inklusive Übernachtungskosten und Verpflegungsmehraufwendungen sowie Schulungs- und Ausbildungskosten, die direkt an die ausbildende Organisation gezahlt werden, Schulgeld für schulpflichtige Kinder des in Vietnam steuerpflichtigen Ausländers, das direkt an die vietnamesische Schule gezahlt wird und jährliche Kosten für Heimreisen in das jeweilige Heimatland.

Der vom Arbeitgeber gezahlte Wohngeldzuschuss wird von den vietnamesischen Steuerbehörden nur teilweise besteuert. Zwar ist der Wohngeldzuschuss in der jeweils aktuell gezahlten Höhe steuerpflichtig. Allerdings wird nur der Teil des Wohngeldzuschusses besteuert, der 15 % des insgesamt zu versteuernden Einkommens nicht übersteigt. Ein darüber hinausgehender Zuschuss des Arbeitgebers wird nicht besteuert und kann mithin steuerfrei gewährt werden.

Die Absetzung dieser Kosten von der Einkommenssteuer erfolgt nicht automatisch durch die Steuerbehörden, sondern muss vom steuerpflichtigen Arbeitnehmer bei der für ihn zuständigen Steuerbehörde geltend gemacht werden. Für die Beantragung der Kostenabsetzung ist es erforderlich, dass der Arbeitsvertrag zwischen dem steuerpflichtigen Arbeitnehmer und seinem Arbeitgeber die einzelnen gewährten Zuschüsse im Einzelnen explizit aufführt. Um einen Missbrauch dieser Absetzungsmöglichkeiten zu verhindern, die im Fall der Besteuerung des Wohngeldzuschusses z.B. darin bestehen könnten, dass der Arbeitgeber über 80 % des Gehalts als Wohngeldzuschuss und nicht als einkommenssteuerpflichtiges Gehalt gewährt, verlangen die vietnamesischen Steuerbehörden eine exakte Dokumentation der Einzelleistungen. Insbesondere an die Ausstellung von Mietbescheinigungen, die Voraussetzung für eine Befreiung der Besteuerung des Wohngeldzuschusses werden besondere Anforderungen gestellt.

III. Steuerbefreiungen- und Reduzierungen in Vietnam durch das DBA

Das Doppelbesteuerungsabkommen zwischen Deutschland und Vietnam sieht für bestimmte Sachverhalte Steuerbefreiungen bzw. Steuerreduzierungen von der in Vietnam zu zahlenden Einkommenssteuer vor. Dabei ist wiederum zwischen den in Vietnam ansässigen und den nichtansässigen Ausländern zu unterscheiden.

1. Steuerbefreiung für in Vietnam ansässige Ausländer

Eine Befreiung von der Einkommenssteuer für in Vietnam erhaltene Bezüge kommt bei unterschiedlichen Sachverhalten in Betracht. Hervorzuheben sind die vom DBA Vietnam in Art. 20 geregelten Steuerbefreiungen für Ausländer, die vor ihrer Ankunft in Vietnam in Deutschland ansässig waren und deren Tätigkeit sich auf eine höchstens zwei Jahre andauernde Lehr-, Vorlesungs- oder Forschungstätigkeiten an Universitäten, Schulen, Museen oder einer anderen kulturellen Einrichtung Vietnams beschränkt oder die sich als Student, Praktikant oder Lehrling in Vietnam aufhalten und Einkünfte beziehen. In Bezug auf Steuerbefreiungen dieser Personengruppen geht das DBA Vietnam über das OECD-MA hinaus, das seinerseits in Art. 20 OECD-MA ausschließlich die Steuerfreistellung für Unterhaltszahlungen aus dem Ausland an Studenten, Praktikanten und Lehrlinge im Vertragsstaat regelt.[28] Diese Regelung hat das DBA Vietnam im Wortlaut in Art. 20 (2) übernommen.

Darüber hinausgehend regelt das DBA Vietnam in Art. 20 (3) die begrenzte Befreiung von Steuerzahlungen für Arbeitseinkünfte im Gastland. Dabei stellt das DBA Vietnam keine Ausnahme dar, denn fast die Hälfte der deutschen DBA stellen für einen zumeist begrenzten Zeitraum Einkünfte von Studenten und Lehrlingen steuerfrei, soweit diese Vergütungen für eine im Gastland ausgeübte, unselbständige Arbeit erhalten, mit der sie die Mittel für ihren Unterhalt oder ihre Ausbildung ergänzen.[29] Das DBA Vietnam verlangt jedoch nicht, dass die Mittel für den Unterhalt oder die Ausbildung gezahlt werden, sondern lediglich, dass die vergütete Arbeit im Zusammenhang mit dem Studium oder der Ausbildung steht. Zusätzlich enthält Art. 20 (3) DBA Vietnam eine betragsmäßige Obergrenze für solche steuerfreien Einkünfte von 4.600 EUR.[30]

Ebenfalls über Art. 20 OECD-MA hinausgehend, ist die in Art. 20 (1) DBA Vietnam getroffene Regelung bezüglich einer Steuerbefreiung von Einkünften von Lehrern, Professoren und Forschern. Während das OECD-MA dieser Personengruppe keine besonderen Steuervergünstigungen einräumt, sondern wie andere Empfänger von Einkünften aus unselbständiger Arbeit nach Art. 15 OECD-MA behandelt, werden Gastprofessoren, Gastlehrer oder Gastforscher, die sich lediglich zur Ausübung ihrer Lehr- oder Forschungstätigkeit für höchstens zwei Jahre in Vietnam aufhalten, nach Art. 20 (1) DBA Vietnam von Einkommenssteuer befreit, soweit das Einkommen aus Deutschland und nicht aus Vietnam gezahlt wird.

2. Gewährung von Steuerbefreiungen sowohl für ortsansässige als auch nicht ortsansässige Ausländer in Vietnam

Unabhängig davon, ob die steuerpflichtige Person in Vietnam ortsansässig ist oder nicht, ist sie gemäß Art. 19 DBA Vietnam von der Einkommenssteuerentrichtung in Vietnam ausgenommen, wenn ihr Gehalt oder ihre Pension auf eine frühere Tätigkeit im öffentlichen Dienst in Deutschland zurückzuführen ist. Diese, dem „Kassenstaatsprinzip“[31] folgende Regelung, wurde aus dem OECD-MA (Art. 19 OECD-MA) übernommen und besagt, dass Vergütungen für im öffentlichen Dienst geleistete Arbeit grundsätzlich allein der Staat besteuert, der die Vergütung zahlt.[32] Der andere Vertragsstaat ist zur Besteuerung dieser Bezüge selbst dann nicht befugt, wenn der Bezieher der Vergütung dort ansässig ist. Entsprechend dem OECD-MA sieht das DBA Vietnam vor, dass die Voraussetzung der „Staatsangehörigkeit“ für die Ausnahme vom Kassenstaatsprinzip durch eine qualifizierte Ansässigkeit ersetzt werden kann.[33] Über das OECD-MA hinausgehend, erweitert das DBA Vietnam, wie auch andere DBA mit Entwicklungsländern, in Art. 19 (4) DBA Vietnam die Anwendung des Kassenstaatsprinzips auf Vergütungen, die im Rahmen von Entwicklungshilfeprogrammen gezahlt werden.[34] Die Befreiung ist jedoch nach Art. 19 (3) DBA Vietnam nicht auf Vergütungen oder Ruhegehälter für Dienstleistungen anzuwenden, die im Zusammenhang mit der gewerblichen Tätigkeit des Vertragsstaats erbracht worden sind. Insofern weicht das DBA Vietnam nicht vom OECD-MA ab, das eine ähnliche Regelung in Art. 19 (3) vorsieht.

3. Einkommenssteuerreduzierung für nicht in Vietnam ansässige Ausländer

Eine in Deutschland ansässige Person, die aus Vietnam ein Einkommen bezieht, kann in Vietnam mit diesem Einkommen steuerpflichtig sein. Soweit sie zum Beispiel dieses Einkommen in Form von Dividenden, Zinsen oder Lizenzgebühren und Vergütungen für technische Dienstleistungen erhält, kommt ebenfalls eine Besteuerung nach den in den gegenwärtigen vietnamesischen Steuergesetzen festgelegten Steuersätzen in Vietnam in Betracht. Dabei ist jedoch zu beachten, dass die Steuersätze nicht die bereits in Art. 12 DBA Vietnam für solche Einkünfte festgelegten Sätze übersteigen. So darf zum Beispiel der maximale Steuersatz erhoben auf technische Dienstleistungen nicht mehr als 7,5 % vom Bruttobetrag dieser Vergütungen betragen. Sollte der in den gegenwärtigen Steuergesetzen Vietnams festgelegte Steuersatz diesen Maximalsatz übersteigen, wird die Einkommenssteuer dementsprechend reduziert. Diese (in vielen deutschen DBA vorgesehene) der Höhe nach begrenzte Besteuerung von bestimmten Einkommensarten im Quellenstaat, geht nicht auf das OECD-MA zurück[35], sondern wurde entsprechend dem UN-Musterabkommen übernommen.[36]

Die in Vietnam gezahlte Steuer kann, soweit der Steuerpflichtige auch in Deutschland mit diesen Einkünften aus unselbständiger Tätigkeit steuerpflichtig ist, gegen Vorlage eines ordnungsgemäßen Quellensteuerzertifikates im Regelfall nach den allgemein geltenden Grundsätzen auf die deutsche Einkommenssteuer angerechnet werden.

IV. Beantragung von Steuerabzügen, -reduzierungen und Steuerbefreiungen in Vietnam

Übereinstimmend mit dem OECD-MA regelt das DBA Vietnam die Methoden zur Vermeidung einer Doppelbesteuerung in Art. 23. Dabei sieht das DBA Vietnam in Art. 23 (1) für in Vietnam ansässige Personen zur Vermeidung einer Doppelbesteuerung von in Deutschland steuerpflichtigem Einkommen grundsätzlich die Anrechnungsmethode vor, während bei der Festsetzung der Steuerpflicht einer in Deutschland ansässigen Person nach Art. 23 (2) DBA Vietnam grundsätzlich die Freistellungsmethode angewendet wird.[37] Ausnahmen von der Freistellungsmethode auf in Deutschland ansässige Personen finden sich in Art. 23 (2) b) DBA Vietnam, wonach auf Dividenden, Zinsen, Lizenzgebühren, der Veräußerung von Geschäftsanteilen und den Einkünften von Künstlern und Sportlern in Vietnam gezahlte Steuern bei der Erhebung der deutschen Einkommenssteuer angerechnet werden.[38]

Wie oben bereits ausgeführt, kann ein in Vietnam ansässiger Steuerzahler in Deutschland gezahlte Steuern auf in Vietnam abzuführende Steuern anrechnen lassen. Zusätzlich kann er, unabhängig davon ob er in Vietnam ansässig ist oder nicht, von der Steuerzahlungspflicht in Vietnam befreit werden bzw. nach den Regelungen im DBA auf die Anwendung reduzierter Steuersätze zurückgreifen.[39]

Um eine Anrechnung, Reduzierung oder Befreiung von der Steuerlast zu erlangen, muss der Steuerzahler einen entsprechenden Antrag an die zuständige Steuerbehörde in Vietnam stellen. Anderenfalls läuft er Gefahr, sein Einkommen sowohl in Deutschland als auch in Vietnam versteuern zu müssen, ggf. höhere Steuersätze als im DBA vereinbart zu zahlen oder möglicherweise nicht auf eine Steuerbefreiung von in Vietnam verdienten Einkommen zurückgreifen zu können. Zuständig für die Gewährung von Steueranrechnungen, Steuerreduzierungen oder einer Befreiung von der Einkommenssteuer sind die erwähnten lokalen vietnamesischen Steuerbehörden (Tax Departments). Der generelle Antrag für die Anrechung von Steuerzahlungen in Vietnam für eine in Vietnam ansässige Person muss grundsätzlich folgende Belegdokumente enthalten:

· Kopie des deutschen Steuerbescheides

· Kopie der deutschen Einkommenssteuererklärung und

· einen Abrechungsbescheid der deutschen Steuerbehörden über in Deutschland gezahlte Steuern.

Im Fall der Steuerbefreiung genügen Belegdokumente, die nachweisen, dass der Antragsteller bspw. vor seinem Studium, Lehr- oder Forschungstätigkeit in Deutschland ansässig war bzw. dass der Antragsteller die bezogene Pension für frühere Tätigkeiten im öffentlichen Dienst erhält.

Soweit ein Antrag auf Steueranrechnung oder –befreiung von einer in Deutschland ansässigen Person gestellt wird, müssen diesem folgende Dokumente beigefügt werden:

· eine Bescheinigung über die Ansässigkeit in Deutschland

· eine Kopie der Gewerbeanmeldung in Deutschland oder eine Kopie des Reisepasses des Steuerzahlers

· Kopien der mit dem Unternehmen zusammenhängenden Verträge (Arbeitsverträge, Verträge über technologische Transfers, etc.)

· Kopie der Steuerbescheinigung des deutschen Finanzamtes und

· eine Bescheinigung der Organisation oder der Person, die das Gehalt des Steuerzahlers zahlt, über den Zweck und Stand der Beschäftigung in Vietnam.

Abhängig vom gestellten Antrag entscheidet die in Vietnam zuständige Steuerbehörde dann, ob eine Steueranrechnung, eine Steuerbefreiung oder eine Reduktion der Steuern vorgenommen wird.

V. Zusammenfassung

Die Besteuerung von Einkommen durch die vietnamesischen Steuerbehörden wird durch das Abkommen zwischen der Bundesrepublik Deutschland und der Sozialistischen Republik Vietnam zur Vermeidung der Doppelbesteuerung auf dem Gebiet der Steuern vom Einkommen und vom Vermögen von 1996 modifiziert. In weiten Teilen, insbesondere was die Methoden der Vermeidung einer Doppelbesteuerung von Einkommen angeht, unterscheidet sich das DBA Vietnam nicht wesentlich vom OECD-MA und mithin auch nicht von anderen Doppelbesteuerungsabkommen zwischen Deutschland und anderen Staaten, die in diesem Zeitraum abgeschlossen worden sind.

Beachtenswert sind jedoch die Besonderheiten des vietnamesischen Einkommenssteuerrechts. Dabei fällt insbesondere die Unterscheidung bei der Erhebung von Einkommenssteuer auf regelmäßiges Einkommen zwischen in Vietnam ansässiger Ausländer und Personen vietnamesischer Staatsangehörigkeit auf. Nicht nur die höhere Untergrenze des zu versteuernden Einkommens bei Ausländern von 8 Millionen VND, statt 5 Millionen VND bei Vietnamesen, sondern auch die günstigere Progression der für Ausländer geltenden Einkommenssteuersätze stellen eine Besonderheit dar[40].

Außerdem sind die Regelungen des vietnamesischen Steuerrechts betreffend die Möglichkeiten einer Absetzung von Ausgaben von der Einkommenssteuer bzw. der Einkommenssteuerbefreiung von bestimmten Einkommensarten hervorzuheben[41].

Insgesamt bemüht sich Vietnam um die Einhaltung internationaler Standards und versucht, durch nationale Regelungen auch im Einkommensteuerrecht Investitionsanreize zu schaffen. Soweit Fragen einer möglichen Doppelbesteuerung von Einkommen eines in Vietnam ansässigen deutschen Arbeitnehmers entstehen, kann mithin zumindest in weiten Teilen auf bereits zum OECD-MA von 1992 entwickelte Grundsätze bei der Beurteilung der steuerrechtlichen Fragestellungen zurückgegriffen werden.

Obwohl Lorenz & Partners größtmögliche Sorgfalt darauf verwendet, die in diesem Newsletter bereitgestellten Informationen stets auf aktuellem Stand für Sie zur Verfügung zu stellen, möchten wir Sie darauf hinweisen, dass dieser eine individuelle Beratung nicht ersetzen kann. Lorenz & Partners übernimmt keinerlei Gewähr für die Aktualität, Korrektheit, Vollständigkeit oder Qualität der bereitgestellten Informationen. Haftungsansprüche gegen Lorenz & Partners, welche sich auf Schäden materieller oder ideeller Art beziehen, die durch die Nutzung oder Nichtnutzung der dargebotenen Informationen bzw. durch die Nutzung fehlerhafter und unvollständiger Informationen verursacht wurden, sind grundsätzlich ausgeschlossen, sofern seitens Lorenz & Partners kein vorsätzliches oder grob fahrlässiges Verschulden vorliegt.

Betriebsstätte im Ausland:

Entstehung und steuerliche Konsequenzen

Oktober 2005

I. Einleitung

Plant ein Unternehmen zu expandieren und dabei eventuell einen neuen Standort zu gründen, stellt sich die Frage, wie die neue Niederlassung rechtlich in die Unternehmensorganisation eingeordnet und organisiert werden kann. Mit der Gründung einer Niederlassung oder auch nur mit einer zeitlich begrenzten Auslandsbetätigung des Stammhauses verbunden sind steuerrechtliche Fragen, die je nach Unternehmensgestaltung, konkreter Betätigung und deren Dauer erheblich sind. Mögliche organisatorische Formen der Auslandsaktivität sind Direktgeschäfte, die Gründung einer Tochterkapitalgesellschaft oder einer Tochterpersonengesellschaft sowie die nachfolgend behandelte Betriebsstätte.

Steuerrechtliche Probleme entstehen insbesondere dann, wenn das Stammunternehmen in einem ausländischen Staat unter Umständen unfreiwillig einen Sachverhalt realisiert, der als Betriebsstätte zu qualifizieren ist. Grundsätzlich sind die Unternehmensgewinne gänzlich dort zu versteuern, wo das Unternehmen seinen Sitz hat (Sitzstaat), selbst wenn das Unternehmen international tätig wird. Von diesen steuerrechtlichen Grundsätzen wird aber bei Vorliegen einer Betriebsstätte im Ausland eine Ausnahme gemacht: In diesem Fall steht dem Staat, in dem die Betriebsstätte ansässig ist (Betriebsstättenstaat/Quellenstaat), das Besteuerungsrecht hinsichtlich des Betriebsstättengewinns zu. Die Existenz einer Betriebsstätte entscheidet demnach über die Aufteilung der Gewinne zwischen Sitz- bzw. Quellenstaat und kann somit für die Steuerlast eines Unternehmens von erheblicher Bedeutung sein.

II. Entstehung einer Betriebsstätte

Bei einer Betriebstätte handelt es sich um eine vom Hauptunternehmen abhängige, rechtlich nicht selbständige Niederlassung, d.h. einen mit dem Stammhaus einheitlichen Geschäftsbetrieb an lediglich räumlich getrennten Stellen.

Die Existenz einer Betriebsstätte führt im nationalen als auch im internationalen Steuerrecht zur beschränkten Steuerpflicht (§ 49 Abs. 1 Nr. 2 a des Einkommensteuergesetzes, EStG bzw. Art. 7 Abs. 1 des Musterabkommens der Organisation for Economic Co-operation and Development, OECD-MA). Eine genauere Definition der "Betriebsstätte" findet sich in § 12 S. 1 der Abgabenordnung (AO) und in der Regel im jeweils maßgeblichen Doppelbesteuerungsabkommen (DBA). Sofern Gewinne eines Unternehmens mit Sitz in einem Staat, mit dem die Bundesrepublik ein DBA geschlossen hat, besteuert werden sollen, geht die Definition des jeweiligen DBA derjenigen des § 12 AO vor.

Text Box: Betriebsstätte
im Sinne des § 12 AO
• feste Geschäftseinrichtung oder Anlage
• auf Dauer angelegt (nachhaltig)
• der Unternehmenstätigkeit dienend
• Verfügungsmacht über die Einrichtung Gemäß § 12 AO ist eine Betriebsstätte eine feste und auf eine gewisse Dauer angelegte Geschäftseinrichtung oder Anlage, die der Tätigkeit eines Unternehmens dient. Die Betriebsstätte muss örtlich fixiert sein und der Unternehmer muss darin seine gewerbliche Tätigkeit ausüben, wobei er eine gewisse Verfügungsmacht über die Einrichtung haben muss.

Als Betriebsstätten sind insbesondere anzusehen:

► die Stätte der Geschäftsleitung (Beginn: bereits ab Aufnahme der Tätigkeit!)

► Zweigniederlassungen (§ 13d HGB)

► Fabrikations- oder Werkstätten

► Warenlager

► Ein- oder Verkaufsstellen sowie

► Bauausführungen oder Montagen, wenn die einzelne Bauausführung oder

Montage bzw. mehrere nebeneinander bestehenden Bauausführungen/Montagen länger als sechs Monate dauern (abweichend hiervon u.U. das DBA)

► Ständiger Vertreter (dies ist eine Person, die nachhaltig die Geschäfte eines Unternehmens besorgt und dabei dessen Sachweisungen unterliegt, insbesondere wer für das Unternehmen nachhaltig Verträge abschließt oder vermittelt oder Aufträge einholt oder einen Bestand von Waren und Gütern unterhält und davon Auslieferungen vornimmt)

Im Unterschied zur deutschen Regelung gilt in den Bestimmung der DBA der meisten Länder, dass eine Betriebsstätte dann nicht entsteht, wenn die Bau- oder Montageausführungen weniger als neun bis zwölf Monate andauern (im deutsch-thailändischen DBA ist dieser Zeitraum allerdings – wie in der AO – auf sechs Monate beschränkt). Daneben ist die maßgebliche Zeitdauer einer jeden einzelnen Tätigkeit (Bauausführung oder Montage) deutscher Unternehmen im Ausland für sich zu betrachten. Eine Zusammenrechnung mehrerer Bauausführungen oder Montagen ist, anders als im Bereich des § 12 Satz 2 Nr. 8 AO, nicht zulässig.

Als Negativkatalog nennt das DBA Thailand folgende Fälle, in denen keine Betriebsstätte angenommen wird:

► Einrichtungen, die ausschließlich zur Lagerung, Ausstellung oder Auslieferung von Gütern oder Waren des Unternehmens benutzt werden:

► Bestände von Gütern oder Waren des Unternehmens, die ausschließlich zur Lagerung, Ausstellung oder Auslieferung unterhalten werden;

► Bestände von Gütern oder Waren des Unternehmens, die ausschließlich zu dem Zweck unterhalten werden, durch ein anderes Unternehmen bearbeitet oder verarbeitet zu werden;

► Eine feste Geschäftseinrichtung, die ausschließlich für den Güter- oder Wareneinkauf oder die Informationsbeschaffung unterhalten wird;

► Eine feste Geschäftseinrichtung, die ausschließlich zur Werbung, Informationserteilung, wissenschaftlicher Forschung oder ähnlicher Tätigkeiten vorbereitender Art oder Hilfstätigkeiten unterhalten wird.

Darüber hinaus kann aber eine Betriebsstätte durch die Tätigkeit eines ständigen Vertreters entstehen.

Im DBA-Recht wird zwischen dem sog. abhängigen und unabhängigen Vertreter unterschieden. Sobald der Vertreter abhängig ist (also kein wirtschaftliches Risiko trägt) und – einschränkend gegenüber § 13 AO – seine Vollmacht gewöhnlich ausübt und nicht nur Tätigkeiten unterstützender Art durchführt, liegt eine Vertreterbetriebsstätte vor. Aber auch wenn eine Vertreterperson für das Unternehmen die Vertragsverhandlungen bis zur Abschlussreife führt, der zivilrechtliche Vertrag dann nur der Form halber von der Unternehmensleitung im anderen Vertragsstaat unterschrieben wird, reicht dies ggf. zur Entstehung einer Betriebsstätte aus.

Auch hier ist also genau zu betrachten ob und wann eine Betriebsstätte entsteht und die Gewinne entsprechend im Land der Tätigkeit des Vertreters zu versteuern sind.

Entscheidend für das Verständnis der Problematik der Betriebsstättenbesteuerung ist, dass die Entstehung einer Betriebsstätte nicht im Ermessen des Steuerschuldners steht, sondern sich nach den tatsächlichen Gegebenheiten richtet.

Rechtsfolge einer Betriebsstätte ist in erste Linie, dass der durch die Betriebsstätte ermittelte Gewinn im Quellenstaat zu versteuern ist.

Im ungünstigsten Fall kann dies zu einer Doppelbesteuerung des Gewinns führen. Dies gilt insbesondere dann, wenn im Ansässigkeitsstaat in Unwissenheit des Bestehens einer Betriebsstätte Steuern für Gewinne entrichtet wurden, die der Betriebsstätte zuzurechnen sind.

III. Besteuerung der Betriebsstätte/Betriebsstättengewinn

Der Gewinn der Betriebsstätte ist unter Berücksichtigung sämtlicher der Betriebsstätte zurechenbaren Erträge und Aufwendungen zu ermitteln (zu einzelnen Positionen . Der Gewinn der ausländischen Betriebsstätte ist dabei nach den Grundsätzen des deutschen Steuerrechtes zu ermitteln. Der Sitzstaat stellt den anteiligen Gewinn der ausländischen Betriebstätte bei Vorliegen eines DBA im Regelfall steuerfrei (ggf. unter Progressionsvorbehalt), d.h. es wird nur noch der Restgewinn besteuert.

Liegt kein DBA vor, erfolgt grundsätzlich die Besteuerung des Gesamtgewinns unter Anrechnung der auf den Betriebsstättengewinn bereits erhoben Steuern (Anrechnungsmethode ggfs. auch wahlweise Abzugsmethode).

Da die Betriebsstätte immer nur ein Teil des Gesamtunternehmens ist, ist das Gesamtergebnis auf Stammhaus und Betriebsstätte aufzuteilen. Dies kann dergestalt erfolgen, dass die Betriebsstätte ihren Gewinn gesondert mit eigener Buchführung (aber nach deutschen Gewinnermittlungsvorschriften) ermittelt (sog. direkte Methode),

oder indem der Gesamtgewinn des Unternehmens aufgrund eines sachgerechten Schlüssels zwischen Stammhaus und Betriebsstätte aufgeteilt wird. Generell wird die direkte Methode von der deutschen Finanzverwaltung präferiert. Das DBA Thailand sieht in Art. 7 Abs. 3 die Aufwandszuordnung nach der direkten Methode vor, die indirekte Methode wird zwar nach der Rechtsprechung des Bundesfinanzhofes hierdurch nicht ausgeschlossen. Aus thailändischer Sicht ist dies jedoch nicht unproblematisch.

IV. Finanzierung der ausländischen Betriebsstätte

Die Betriebsstätte muss über das zur Erfüllung ihrer Funktion notwendige Kapital verfügen (sog. Dotationskapital). Ist dem nicht so, ist der Gewinn so zu ermitteln, als sei ihr das notwendige Eigenkapital zur Verfügung gestellt worden. Endsprechend sind in diesem Fall die hieraus entstehenden Fremdkapitalzinsen nicht als Kosten absetzbar.

V. Wirtschaftliche Austauschbeziehungen zwischen Betriebsstätte und Stammhaus

Bei Nutzungsüberlassungen ist das überlassene Wirtschaftsgut, sofern es von beiden Betriebsteilen genutzt wird, bei dem Betriebsteil zu aktivieren, der es überwiegend nutzt. Ein Betrag, der dem Fremdvergleichsgrundsatz entspricht (also was voneinander unabhängige Dritte vereinbart hätten), ist erfolgswirksam zu verrechnen.

Bei gewerblichen Dienstleistungen ist der Verrechnungspreis als Marktpreis, subsidiär als Selbstkosten mit einem angemessenen Gewinnaufschlag (5-10%) zu ermitteln).

Ferner ist bei der Überführung von Wirtschaftsgütern zwischen Stammhaus und Betriebsstätte zu beachten, dass eine solche nur dann steuerneutral vorgenommen kann, wenn die Besteuerung der stillen Reserven sichergestellt ist.

VI. Rechtsfolgen

Die Rechtsfolgen der Entstehung einer Betriebsstätte sind nicht zwangsläufig problematisch. Dies gilt sowohl bei Vorliegen eines Doppelbesteuerungsabkommens als auch bei Tätigkeiten in Staaten ohne Doppelbesteuerungsabkommen.

Die Problematik ergibt sich aus der gegebenenfalls unterschiedlichen Definition des Betriebsstättenbegriffs im Sitz- und Quellenstaat.

So entsteht regelmäßig nach thailändischem Recht eine Betriebsstätte bereits, sobald das Unternehmen in Thailand tätig wird. („..carrying on business in Thailand“), während nach DBA eine Betriebsstätte meist erst nach sechs Monaten besteht. Sobald ein Unternehmen in Thailand tätig wird, sind gemäß der nationalen Steuergesetzgebung Quellensteuern in unterschiedlicher Höhe einzubehalten. Eine Rückforderung ist grundsätzlich selbst dann problematisch, wenn sämtliche formalen Voraussetzungen erfüllt wurden. Wurde keine steuerliche Registrierung des Unternehmens in Thailand vorgenommen, ist eine Rückforderung bezahlter Quellensteuer so gut wie ausgeschlossen.

Beispiel:

Das deutsche Unternehmen A schließt einen Montagevertrag mit dem thailändischen Unternehmen B. Die Errichtung der Anlage dauert vier Monate. Hierfür stellt das Unternehmen A dem Unternehmen B EUR 100.000 in Rechnung. Eine steuerliche Registrierung von A in Thailand erfolgt nicht.

Nach deutsch-thailändischem DBA besteht in diesem Fall kein Besteuerungsrecht durch die thailändischen Steuerbehörden, da eine Betriebsstätte nicht besteht. Es besteht jedoch die Gefahr, dass die thailändischen Finanzbehörden fälschlicherweise 5% Quellensteuer erheben. Andererseits ist jedoch auch eine Anrechnung auf die deutsche Körperschaftssteuer nicht möglich, da mangels Betriebsstätte ein Besteuerungsrecht Thailands nach Doppelbesteuerungsabkommen nicht gegeben ist. Möglich ist daher allenfalls ein Abzug der gezahlten Steuern als Kosten. In letzter Konsequenz bedeutet dies, dass 5% des Umsatzes als zusätzliche Kosten in die Kalkulation des Projektes eingestellt werden müssen. Je nach Branche übersteigt dies bereits den kalkulierten Gewinn.

Vermieden werden können derartige Doppelbesteuerungen nur durch eine intensive und detaillierte Planung von Auslandsprojekten. Hierbei müssen die Unwägbarkeiten, beispielsweise in Bezug auf die Projektdauer mit in die Überlegungen einbezogen werden. Dies beginnt mit der Gestaltung der Verträge, geht über die steuerliche Registrierung des ausführenden Unternehmens bis hin zu der tatsächlichen Abwicklung des Zahlungsverkehrs sowie den damit verbundenen Steueranmeldungen und -erklärungen. Im Regelfall empfiehlt sich hierbei zumindest eine steuerliche Registrierung des Unternehmens für die Dauer eines Projektes. Je nach Umfang ist unter Umständen sogar die Gründung einer Projektgesellschaft ratsam. Eine interne Planung ist in jedem Fall unvermeidlich.

Andernfalls können sich selbst eigentlich gewinnträchtige Projekte schnell als verlustbringend erweisen.

Validity of Clauses concerning

Applicable Law, Place of Jurisdiction

and Arbitral Awards in International Contracts

November 2005

Introduction

This newsletter deals with the following three issues:

I. Validity of “Applicable Law” Clauses

II. Validity of “Place of Jurisdiction” Clauses

III. Validity of Arbitration Clauses

The third topic concerning the validity of arbitration clauses comprises two sub-issues, which have to be distinguished: (i) the enforceability of foreign arbitral awards and (ii) the validity of arbitration clauses in Thai government related contracts. The enforceability of foreign court judgements is additionally addressed in this context.

I. Validity of “Applicable Law” Clauses

Question: Is an “Applicable Law” clause in an international contract valid and enforceable under Thai law?

Answer: Sections 13, 8 of the “Conflict of Laws Act” determines:

Section 13. The question as to what law is applicable in regard to the essential elements or effects of a contract shall be determined by the intention of the parties thereto. If such intention, expressly or implied, cannot be ascertained, the applicable law is the law common to the parties when they are of the same nationality, or, if they are not of the same nationality, the law of the place where the contract has been concluded.

A contract shall be deemed not to be void if it is concluded in accordance with the form prescribed by the law which governs the effects of such contract.

Section 8. Whenever the choice of law of a foreign country shall govern the relationship of the parties is not proved to the satisfaction of the Court, the internal law of Siam (Thailand) shall apply.

Comment: An applicable law clause is valid and enforceable under Thai law. However, Thai courts will apply such law (in case it is a foreign law) only if a copy of the relevant law involved together with a Thai translation is provided to the Court. Such requirements might be sufficiently met by presenting the relevant clauses etc.

II. Validity of “Place of Jurisdiction” Clause

Question: Is a “Place of Jurisdiction” clause in an international contract valid and enforceable under Thai law?

Answer: Section 4 (1) of the Civil Procedure Code and Sections 150, 151 of the Civil and Commercial Code lay out:

Section 4. Unless otherwise provided by law,

(1) the plaints shall be submitted to the Court within the territorial jurisdiction of which the defendant is domiciled or to the Court within the territorial jurisdiction of which the cause of action arose, whether the defendant shall have domicile within the Kingdom or not (…)

Section 150. An act is deemed to be void if its object is expressly prohibited by law or is impossible, or is contrary to public order or good morals.

Section 151. An act is not deemed to be void on account of its deviating from a provision of any law if such law does not relate to public order or good morals.

Comment: Since the Civil Procedure Code is a law governing public order, it cannot be agreed to the contrary, as of Section 151 of the Civil and Commercial Code makes clear. Any contract clause that does not adhere this law is void by virtue of Section 150 of the Civil and Commercial Code. Therefore, a Place of Jurisdiction clause is void.

Supporting Supreme Court Decision:

A clause in the bill of lading states that any case which might arise shall be submitted to the UK Courts. This clause is contrary to Section 4 (1) of the Civil Procedure Code, which is a law governing public order, and is therefore void (SPC Case No. 951/2539 (1996)).

III. Validity of an Arbitration Clause

Question: (A) Enforceability of Foreign Arbitral Awards

Is an arbitral award obtained outside the territory of Thailand recognised and enforceable under Thai law?

Answer: Section 41 of the Arbitration Act B.E. 2545 (A.D. 2002) states:

Section 41. (…) In case the arbitral award is obtained in a foreign country, the court of jurisdiction shall adjudge to comply with the award only when such award is under enforcement of a treaty, convention or international agreement in which Thailand is a party, and the enforcement shall be effective only insofar as Thailand agrees to be obliged.

Comment: According to Section 41 of the Arbitration Act B.E. 2545 (A.D. 2002), if the award has been rendered in a foreign country, a Thai court may pass its judgement enforcing the award when such award is subject to a treaty to which Thailand is a party.

At present, nearly all internationally trading countries have signed the 1958 “United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards”. This Convention facilitates the enforcement of awards in all contracting countries, and Thailand became a member-party in 1961.

Therefore, it can be generally concluded that arbitral awards made outside Thailand are recognised and enforceable under Thai law if further requirements according to national and international law are fulfilled.

Supporting Supreme Court Decisions:

Numerous amounts of foreign arbitral awards have been recognised and enforced by the Thai courts. Here are some recent examples of Supreme Court Decisions: SPC 5513/2540 (1997), SPC 7128/2540 (1997), SPC 1772/2542 (1999), SPC 8151/2542 (1999), SPC 1916/2544 (2001).

Comparison with the Enforceability of Foreign Court Judgements:

We can compare the above conclusion with the case of judgements made by a foreign court (foreign court judgements).

Foreign court judgements are very difficult to be enforced in Thailand as such procedure is very time consuming and not seldom overly bureaucratic.

The procedure can start by the interested person submitting a request to the Ministry of Foreign Affairs of the country of the court that renders the judgement. The said Ministry will then proceed with the Ministry of Foreign Affairs of the country of the court that should enforce the judgement. The Ministry will issue a letter to the court that the judgement will be enforceable. Finally, the court enforces the foreign judgement. Each step requires a significant amount of proceeding/waiting time.

Therefore, from a formally legal point of view both foreign arbitral awards and foreign court judgement are enforceable in Thailand. However, in most cases the latter requires a long and complex procedure because in each step the validity and correctness of the foreign court order might be questioned by the parties.

Question: (B) Validity of an Arbitral Clause in a Thai Government-related Contract

Is an arbitral clause in a Thai government-related contract valid and enforceable under Thai law?

Answer: Section 15 of the Arbitration Act B.E. 2545 (A.D. 2002) and Clause 5 of the Notice of the Office of the Prime Minister governing Compliance with the Decisions of the Arbitrators B.E. 2544 (A.D. 2001) state:

Section 15. Regarding a contract concluded between a government agency and a private individual, irrespective of being an administrative contract or not, both parties may agree to use the arbitration procedures to settle disputes and the said arbitration contract shall bind both parties.

Clause 5. A government agency shall comply with the arbitral award, except in the case the award is illegal under the applicable law, is obtained by an illegitimate act or through illegitimate procedure, or is outside the scope of the arbitration contract.

Comment: Recently, there is a highly controversial case. An arbitration panel awarded THB 6.2 Billion (approx. EUR 124 Mio.) in favour of a private foreign party on a concession contract concluded between the Expressway and Rapid Transit Authority (ETA) and a private consortium. Correspondingly, the government side has put forward efforts to get such award revoked by the Administrative Court on the grounds that it would implicate the administrative law and was in conflict with the public order.

Regardless of the high profile of this case there has been precedent of the Administrative Court that recognises arbitral clause in an administrative contract as valid and enforceable (Central Administrative Court Decision Case No. 1454/2544). The validity and enforceability is further endorsed under Section 15 of the Arbitration Act, that an arbitration clause may be included in contracts between a Thai government agency and a private entity, and under Clause 5 of the above-referred Notice of the Office of the Prime Minister, that the related government agency must comply with the arbitral award.

Therefore, for the time being it can be concluded that an arbitral clause in a Thai government-related contract is valid and enforceable in Thailand.

Note, however, that a recent cabinet resolutions issued on 27 January 2004 and on 4 May 2004 has established a policy that inhibits the government agencies, including private enterprises, from agreeing on arbitral clause in a new concession contract unless approved by the cabinet on a case by case basis. Moreover, many agencies nowadays have a policy in place restricting itself to no longer include an arbitral clause in any kind of contracts.

Summary

In summary:

1. An “Applicable Law” clause is valid and enforceable. However, Thai courts will apply such law (in case it is a foreign law) only if its substance has been proved to the Court by presenting a copy together with a Thai translation.

2. A “Place of Jurisdiction” clause is void.

3. Foreign arbitral awards are recognised and enforceable in Thailand, in contrast to foreign court judgements which are due to factual circumstances in practice not enforced in Thailand.

4. Arbitration clauses in Thai government-related contracts are valid and enforceable in Thailand. However, due to the government’s current policy new contracts with the government, especially concession contracts, will not be agreed by the government side unless approved by the Cabinet on a case by case basis.

Work Permit for Foreigners

employed in Vietnam

June 2005

I. Introduction

One of the major issues basically all foreigners setting up business in Vietnam have to face is the topic of Vietnamese work permit.

Frequent questions concerning this subject are for example, in which situations one has to obtain a work permit, what are the requirements for the issuance of a work permit, are work permits valid for a limited time only or which consequences one will encounter in case of breach with the set procedures.

The latest changes in Vietnamese law regarding the employment of foreigners have been introduced by the Government Decree 105/2003/ND-CP, dated September 17, 2003 (“Decree 105”) and Circular 04/2004/TT-LDTBXH, dated March 10, 2004 (“Circular 04”), complementing the Vietnamese Labour Code, being the basis of Vietnamese labour law.

This newsletter aims at providing at a glance a general overview on these matters by addressing the questions raised above in the light of the current legislation and its implementation on a day-to-day basis.

II. Requirements

1. General Obligation to Obtain a Work Permit

According to Vietnamese law, a foreigner working for an enterprise or organization in Vietnam for a period of three months or more must obtain a work permit from the local Department of Labour, War Invalids, and Social Affairs (“DOLISA”). For enterprises operating in an industrial zone, the appropriate body may also be the respective zone authority.

However, Vietnamese law also provides for some cases in which a foreigner does not need to apply for a work permit, among which are the following:

· A foreigner who enters Vietnam to resolve an emergency case. An emergency case is defined as a complicated technical or technological incident, which affects or threatens to affect production or business activities. A further prerequisite is that such an emergency case cannot be handled by Vietnamese experts or foreign experts who are currently working in Vietnam

· Management positions, such as members of the board of management, generals and deputy generals of joint ventures, directors and deputy directors of other foreign invested enterprises

· Chief representatives of representative offices and heads of branches

· A foreign lawyer who has been granted a certificate to practice his/her profession in Vietnam.

In these cases, the employer has to inform the local DOLISA at least seven days in advance on the name, age, nationality, passport number, dates of commencement and termination of work and the nature of the work.

2. Appropriate Employer

Enterprises of all economic sectors, Vietnamese as well as foreign or international organizations, are entitled to employ foreign persons. The employer must have a training plan to train Vietnamese to replace their foreign employees.

In general, a Vietnamese individual is not allowed to employ a foreign person. Correspondingly, the following paragraphs refer only to companies and organizations but not to individuals as employers.

3. Employee Requirements

A foreigner wishing to work for an enterprise or organization in Vietnam must meet all of the following conditions:

· Minimum age of 18 years

· Good health suitable to the requirements of the job

· High professional or technical qualifications, experience in one’s career or in management that Vietnamese employees do not yet possess

· No criminal convictions or civil record in respect of a breach of national security or any other crime as well as no current criminal prosecutions or criminal sentences not yet been discharged in accordance with Vietnamese and foreign laws.

4. Procedure to Apply for a Work Permit

A foreigner willing to work in Vietnam has, according to Circular 04, to submit two copies of his/her application to the prospective employer including the following documents:

· Application form

· Copy of his/her criminal record

· Copies of university diplomas or certificates testifying the skill level of the employee

· A recent health certificate issued by a hospital (not older than 6 months)

· Curriculum vitae

· 3 passport-size colour photographs

After receipt of the aforementioned documents, the employer, who is responsible for applying for the work permit on behalf of its prospective foreign employees, has to submit one copy of this application, along with the proscribed standard application form for a work permit issued by the MOLISA to the respective Department of Labour, Invalids and Social Affairs, responsible for the district where the enterprise has its registered offices.

Within 15 days, the DOLISA will notify the employer of its respective decision.

Labour contracts are only allowed to be entered into after the issuance of a respective work permit. . After conclusion of the employment agreement a copy of the signed labour contract (on standard form) then has to be forwarded to the statutory body that has issued the work permit.

III. Term of Work Permit

As a result of the governmental efforts to increase the skill base of local staff, work permits for foreigners are issued for a limited time span only and employers are asked to train appropriate Vietnamese employees to take on their roles over time.

Thus, the general term of a work permit is tied to the term of the labour contract up to a maximum of 36 months. However, it may be renewed for another 36 months if no Vietnamese employee is able to replace the foreign employee at that time. The maximum period of the first extension is three years. If the employer’s training plan has not yet been completed after the first extension, a second extension may be allowed, but such a second extension is subject to approval by the Chairman of the provincial level People’s Committee.

IV. Limit on the Number of Foreign Employees

An important change compared to former legislation is that the new acts introduce a limit on the number of foreign employees working within an organisation/enterprise.

According to Decree 105, a Vietnamese enterprise can, irrespective of its size, in all cases employ one foreigner, but is generally not allowed to employ a number of foreigners exceeding 3% of its total staff and is subject to an absolute maximum of 50 foreigners.

The 3% threshold does not apply to organizations which are not enterprises e.g. representative offices. However, the recruitment of a foreign employee of such an organization is subject to approval by the Chairman of the provincial-level People’s Committee.

This did not remain without harsh criticism. In particular, Foreign Invested Enterprises (“FIEs”) complained that these restrictions are keeping foreign experts from coming to Vietnam to contribute their knowledge. Thus, the Ministry of Labour, War Invalids and Social Affairs issued Circular 04, raising the 3% cap by 50% to 4.5% for positions Vietnamese employees are not able to fill. This derogation is not automatic but subject to the prior approval of the Chairman of the People’s Committee for the city/province in which the employers registered office is located. Another exception applies for foreign invested projects, which were approved prior to the effective date of Decree 105. Nevertheless, the current legislation still poses a disincentive for foreign investors and knowledge carriers.

V. Consequences of Breach

Working in Vietnam without a work permit is still solely an administrative violation. Such violation is subject to administrative sanctions, but not criminal liability. Correspondingly, a foreigner may not be imprisoned but deported. An employer whose foreign employees do not have a work permit may be fined.

VI. Outlook

The legal framework regulating the working requirements for foreigners in Vietnam is an example for the rapid development of Vietnamese law in many areas, however, not always clarifying existing issues.

For example, the fact that Decree 105 does not mention any requirement of an employer to obtain approval from the relevant authority before recruiting foreigners, while under Circular 04, prior to such recruitment, the employer has to send a written request to the municipal or provincial people’s committee in charge justifies the raised allegation of certain inconsistencies still prevailing after the issuance of the most recent legal acts.

However, in many areas, the advantages of setting up and expanding business in Vietnam certainly outweigh such drawbacks by far and the recent developments in growing direct investments reflect the Government’s efforts to provide for a liberal, attractive business environment for foreign investors.

Since the legal situation in Vietnam is still developing at a rapid pace and, as mentioned above, the most recent developments have not been free from criticism, it is strongly recommended to obtain legal advice to avoid the risks of not adhering to statutory requirements, even if the potential consequences are limited.

Although Lorenz & Partners Co., Ltd. always pays greatest attention on updating the information provided in this newsletter we cannot take any responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if not generated deliberately or grossly negligent.

Legal Changes in Thailand

Februar 2005

I. Foreign Business Law

(A) Privilege under the Thai-Australian Free Trade Agreement

The Thai-Australian Free Trade Agreement extends the rights of conducting business in Thailand to Australian individuals and companies. They have the right to apply for a Foreign Business Certificate under the Thai-Australian Free Trade Agreement for the following businesses (which are normally) prohibited to foreigners under the Thai Foreign Business Act):

1. Mining, including rock blasting or crushing

2. Construction, rendering basic services to the public in public utilities or transport requiring special tools, machinery, technology or construction expertise

3. Operation of restaurant

4. Service business as a general consultant for ROH or its subsidiaries

5. Operation of convention hall

6. Operation of international trade exhibition centre

7. Sales and installs any kinds of product produced by Australian companies registered in Thailand

8. Operation of university or institute which specialist in science and technology especially life science, bio-technology and nano-technology

9. Operation of hotel and resort, minimum capital THB 800 Mio., minimum 100 rooms for guests

10. Operation of zoo or amusement park, minimum capital THB 1,000 Mio.

11. Operation of aquarium, minimum capital THB 200 Mio.

12. Operation of port for tourist boat

(B) Privilege under the Thai-American Treaty of Amity

The Thai-American Treaty of Amity expired on 1 January 2005 without further extension and the Thai-American Free Trade Agreement is still not yet concluded.

However, the Department of Business Development, Ministry of Commerce, still accepts the applications for applying for a Foreign Business Certificate under the privilege of the Thai-American Treaty of Amity. There were no further information on how long the American companies will be treated as if the Thai-American Treaty of Amity was still valid.

Therefore, we assume the regulation will be applied until a new regulation within the Thai-American Free Trade Agreement will be in place.

(C) Regulations regarding Minimum Capital

The period of time for a foreign individuals or foreign juristic persons, which are not established in Thailand, to bring the minimum capital for operating each project into Thailand is set at 3 years.

At least 25% of the minimum capital must be brought into the Kingdom of Thailand within 3 months after receiving the Foreign Business Certificate and altogether 50% within the first year, and the rest at least amounting to 25% per year.

If the period of operation in Thailand is shorter than 3 years, the full amount of the minimum capital must be brought in within 6 months from the date of starting the operation or from the receipt of the permission to operate the business in Thailand, whichever comes first.

II. Tax Law

Thai Revenue Department announced a further tax cut for Small and Medium sized Entities (SME’s). With Royal Decree No. 394 dated 21 January 2005 income tax rate for SME’s (registered capital less than 4,000,000 THB) was reduced from 20% to 15% for the first million of taxable income. Tax rate for income from 1,000,001 THB to 2,000,000 THB remains at 25%. Any income above 2,000,000 THB is taxed at 30%.

III. Labour Law

To obtain a work permit for each foreign employees a minimum registered capital of THB 2 Mio. has to be fully paid up.. However, the maximum amount of work permits for a company without Board of Investment (BOI) approval is generally limited to 10.

The minimum capital requirement for work permit application applied by foreigners who works in foreign company (company registered outside Thailand) has been increased to THB 3 Mio. per 1 work permit.

For further details we refer to our Newsletter No. 32, which can be downloaded from our webpage www.lorenz.co.th.

IV. Intellectual Property Law

In order to motivate people to register more patents, registering-fees for patents and petty patents have been lowered. If a non-profit organisation registers a patent, in some cases no fees has to be paid at all.

V. Bankruptcy Law

The Bankruptcy Act (No. 7) B.E. 2547 (2004) revised the way a bankrupt person can be released from bankruptcy. Generally it shortens the bankruptcy period to 3 years for ordinary bankrupt persons. After that period, the person is automatically released from bankruptcy. Stricter provisions apply to bankrupt persons which have committed dishonest acts, e.g. hiding property in order to avoid distribution in the bankruptcy case, or which have already been bankrupt within three years before.

Forms of Direct Foreign

Investment in Vietnam

July 2004

I. Introduction

There are three main types of foreign-invested enterprise which are permitted in Vietnam. They are:

q Joint venture company;

q Business co-operation contract; and

q 100% foreign-owned enterprise.

There is also a joint stock company which can be formed by a foreign-owned enterprise. It permits such companies to issue stock and have greater flexibility in respect of their governance.

II. Joint Venture

1. In General

In the past, the joint venture was less popular means of doing business in Vietnam than the 100% foreign-owned enterprise. Most potential local partners were State-owned, the objectives of the company were often tied to the fiscal interests of the State and not the commercial interests of the joint venture. But foreign investors are no longer steered towards particular Vietnamese business partners by various Government ministries or organizations. The local partner is now more likely a private rather than State-owned enterprise. Nowadays, for every one joint venture investment license issued, approximately seven or eight investment licenses are issued for 100% foreign-owned enterprises.

2. Legal Status and Capitalization

A joint venture is established as a limited liability company. The foreign partner is required to make a minimum capital contribution of 30% of legal capital, while the Vietnamese partner is required to contribute a “reasonable proportion”. The typical legal capital contribution ratio of a joint venture has been 70 per cent foreign and 30% Vietnamese. Since May 7, 2003, a joint venture can be formed by a 100% foreign-owned enterprise and a Vietnamese enterprise.

Capital contributions can be made in cash or in the form of assets. The norm still is that the Vietnamese party--especially if it’s in a State-owned enterprise--generally contributes land and buildings and occasionally brand names. These are not always sufficient to constitute a 30% contribution and, therefore, they often must be overstated or other adjustments must be made. The Ministry of Planning and Investment has the power to review the value of capital contributions by either party. Unless agreed otherwise, the joint venture's profits are shared between the parties in the same proportion as their capital contributions.

3. Officers of the Joint Venture and the Board

The board is the highest decision-making body of the joint venture. Members of the board are appointed by the joint venture parties in proportion to their respective capital contributions. The chairman of the board is appointed by the joint venture parties. He has limited administrative powers; for example, he can convene board meetings, and he is charged with monitoring implementation of board resolutions.

In addition to the board, a joint venture must have a general director and at least one deputy general director. Either the general director or the first deputy general director must be a Vietnamese citizen. The general director is the legal representative of the joint venture before the courts and State authorities of Vietnam.

III. The Business Co-Operation Contract

Unlike a joint venture or a 100% foreign-owned enterprise, a business co-operation contract creates no legal entity; it simply is a contractual arrangement between at least one foreign party and at least one Vietnamese party.

The brevity of the law on business co-operation contracts means matters such as management and operational structures and the role of key personnel need to be addressed in some detail. There is consequently little guidance as to what the Ministry of Planning and Investment will find acceptable. The Foreign Investment Law does not specify any minimum or maximum levels of interest, which the foreign or local partner should have in a business co-operation contract.

IV. 100% Foreign-Owned Enterprise

The corporate structure of an enterprise with 100% foreign capital is the same as for a joint venture, except that the foreign investor owns 100% of the capital. In addition, the rules intended to protect a Vietnamese investor, of course, do not apply. The enterprise is established as a limited liability company and it is a Vietnamese legal person subject to the laws of Vietnam. In the past, licenses for 100% foreign-owned enterprises were limited, but this form has now come into much wider use and today new licensees are more likely to be 100% foreign-owned than joint ventures. The foreign investor can control its own destiny and avoid the need to reconcile foreign and Vietnamese management and business practices. An inability to reconcile these techniques between foreign and State-owned enterprises has lead to the declining use of the joint venture.

V. Other Investment Vehicles

Investment can also be effected through the following means:

1. The Resident Representative Office

Opening a resident representative office is probably the simplest way to establish a presence in Vietnam. Resident representative offices are permitted to initiate, accelerate and supervise economic, technical and scientific co-operation projects with Vietnamese parties. However, they cannot themselves enter into commercial contracts. Many requirements that previously existed have been dropped. To be eligible to open a resident representative office the foreign company basically only needs to have its business legally registered abroad.

2. The Branch

In addition to foreign law firms and banks that may operate branches, foreign traders and tourism agencies are also allowed to operate branches in Vietnam. However, foreign traders are only allowed to buy certain kinds of goods for export, including handicrafts, agro-products (except rice and coffee), vegetables and fruits, manufactured consumer goods, meat, poultry, livestock and processed food. They may import machinery and equipment for mining, agro- and aqua-product processing and materials to produce medicines for humans and animals, fertilizers and insecticides for sale in Vietnam. To be eligible to open a branch foreign traders must have been registered and operating in their country for at least five years.

VI. Summary

The pace of legal change in Vietnam, especially the comprehensive Law on Foreign Investment, is rapid and constant checking and rechecking of information is advisable. The legal framework for foreign investment has gone through many transformations as changing needs are identified. Progress has not been even, but the pace of change has increased, and this reflects a progressive, favourable attitude toward foreign investment. Even so, it is advisable to conduct research and due diligence in Vietnam before undertaking any sort of investment.

Operational Considerations for

Foreign Investment in Vietnam

November 2005

I. Introduction

Vietnam is a country of some ambivalence. Although it is politically oriented towards socialism, reforms brought laws allowing e.g. private enterprises and direct foreign investment. The constitution now acknowledges the importance of market forces and the need to internationalize the economy. The important, nonetheless unanswered, question now is, how far the government is willing and able to push further reforms.

This newsletter might help you weighing the opportunities as well as the risks of an investment in Vietnam.

II. Land

The rules that relate to land ownership and usage are complex. Many cultural, economic and political considerations--past and present--have influenced the way in which land usage has evolved. Land in Vietnam may not be privately owned. Instead, the Vietnamese State owns the land, and land-use rights are issued by the State in the form of a grant, whereby the land must be used for certain specific purposes.

Foreign-invested enterprises may take a lease of land from or through the State for the purpose of conducting their licensed operations. Foreigners who are not licensed to operate in Vietnam may not take a lease of land. When a lease from the State expires, the right to use the land - and any infrastructure connected to the land - reverts to the State with no compensation. Privately owned buildings may be leased to licensed investors. Foreign-invested joint venture banks and branches of foreign banks in Vietnam are allowed to take security over Vietnamese land and buildings.

Vietnamese partners in joint ventures contribute their capital mainly in the form of land-use rights which have already been assigned to them. There may even be cases where Vietnamese partners are assigned land for the express purpose of permitting the Vietnamese entity to participate in a joint venture.

III. Intellectual Property

Vietnam has signed a number of international treaties on intellectual property protection, including:

- the Paris Convention;

- the Madrid Agreement; and

- the Patent Co-Operation Treaty.

Vietnam protects inventions, utility solutions (similar to an invention but without the creative element), industrial designs, trademarks and copyrights. Appellations of origin, business secrets, geographical indications and trade names are also protected. All intellectual property rights, including, for the time being, trademarks, business secrets, geographical indications and trade names, must be registered with the National Office of Intellectual Property. Copyrights are under the Ministry of Culture and Information. Protection is on a first-to-file basis.

Unregistered trademarks are not protected except recognized well-known marks. A copyright may be registered, but registration is not necessary in order to have protection. Copyright protection arises from the time the work is created in definite form or, in the case of foreigners, created in definite form in Vietnam or first published or broadcast in Vietnam. Vietnam is not a signatory to the Berne Convention. Accordingly, the legal framework for business secrets, geographical indications and trade names is very basic.

IV. Technology Transfer and Licensing

Technology transfer is often an essential part of the investment. A technology transfer contract, if it involves transfer of technology from abroad and/or if it is paid from the State budget and has a value of less than US$ 30,000, is subject to registration with the Ministry of Science and Technology. Technology transfer contracts which are valued exceeting US$ 30,000, and are paid from the State budget require an approval from that Ministry. Technology may be transferred to a foreign-invested enterprise as a contribution of capital, in which case the transferor is paid out of its share of the profits, or it may be transferred under a transfer agreement and not capitalized, in which case remuneration is by way of royalties.

Licensing technology is a further option, but outright transfers are officially encouraged. Technology transfer agreements are subject to a maximum duration of seven years (exceptionally ten years).

Current legislation sets a specific cap on capitalization of intellectual property. For foreign-invested enterprises, value of the contribution of technology which can be capitalized can be agreed amongst investors.

Non-capitalized transfers are also subject to restrictions on pricing and pricing structure. Royalties may be based on a percentage of the after-tax profit attributable to sales of the product produced by the transferred technology; maximum royalties are 25 per cent of net after-tax profit. This is the officially preferred basis of remuneration. Alternatively, royalties may be based on a percentage of the net selling price of the product produced by the transferred technology or on a combination of both calculations. In such case, the permitted maximum is 5 per cent (exceptionally 8 per cent) of net selling price, as defined. The total aggregate rate may not exceed any of the two separate methods

The transferee has the exclusive right to use the technology in Vietnam. It may further develop the technology without the consent of the transferor; where the transferor is interested in the results, it must agree with the transferee on the transfer of the results based on the principle of mutual benefit. The transferee may require the owner (or a court or other competent State body) to compel a third party which is infringing the intellectual property right to desist, and the owner must assist the transferee in the litigation (possibly, only the prosecution) of any claim in connection with intellectual property rights. A sub-transfer of the technology may not generally occur without the consent of the transferor but, where the sub-transfer is in the interests of the State or the public, according to a decision of the competent State authority, the transferor may not withhold consent.

The parties must inform each other of new technical and scientific knowledge which will affect the implementation of the contract, and they must consider the possibility of amending (or even canceling) the contract in the light of any such developments. The technology transfer agreement may not contain certain anti-competitive provisions, such as provisions:

- which compel the transferee to receive, inter alia, materials and equipment from a specified source;

- whereby the transferee agrees to reduce, inter alia, production or prices; and

- which restrict the transferee’s right to export or to develop the technology or to receive similar technology from other sources.

Licensing is also permitted under Vietnamese law. However, as the licensee retains the right to use the licensed product after expiry of the license (except in the case of trademarks), the Vietnamese concept of a license differs from the notion of a license as generally held by foreign investors. Regrettably, it also blurs the distinction between license and transfer. It is furthermore prohibited to include in the licensing contract certain anti-competitive clauses broadly similar to those forbidden by the laws on technology transfer. Vietnam has not yet recognized the concept of franchising, except as a license of trademark rights.

V. Secured Lending

However, Vietnam permits borrowers to mortgage and pledge a variety of assets. Vietnam has just established a National Center for Registration of Security Transactions where information regarding security transactions can be recorded, and this information is available to the public. This Center came into operation in January, 2002. The Center has proved itself to be reliable and efficient. Many foreign and Vietnamese lenders have registered their secured transactions with the Center.

The Civil Code suggests that any Vietnamese person or entity (including foreign-invested enterprises) may take a pledge or a mortgage of buildings to secure a “civil obligation”. What is meant by “civil obligation” is not clearly defined. Vietnam categorizes contracts as civil contracts or economic contracts, and a civil obligation might be considered to be an obligation arising from a civil contract. Economic contracts may generally only be entered into between businesses and they relate to production, exchange of goods or provision of services or they otherwise relate to business.

VI. Foreign Exchange

It is the responsibility of the foreign-invested enterprise to ensure that it meets its own foreign exchange expenditure requirements. The expectation is that foreign-invested enterprises will export sufficient products to meet their needs. However, the government has not enforced this requirement. Companies which require hard currency may purchase it at commercial banks. The government does not guarantee the availability of hard currency, except in the case of certain, special projects. However, the law does stipulate that the Ministry of Planning and Investment guarantees its “assistance” where the foreign-invested enterprise suffers a foreign exchange shortage and is engaged in projects such as:

- Construction of infrastructure;

- Manufacture of import substitutes; and

- Other important projects, of which the government has identified

There are no material restrictions on remitting foreign exchange abroad where the foreign exchange is available and the remittance is of one of the following:

- Profits earned from business operations;

- Revenue earned in respect of the provision of services and transfer of technology;

- Principal of and/or interest on a loan;

- Invested capital;

- Any other sum of money and/or assets legally owned by the foreign investor.

Similarly, foreign employees are entitled to repatriate their Vietnam-sourced income after payment of income tax. If conversion is possible, it must be at the rate published on the date of conversion.

VII. Unfair Competition

Vietnam has no general law on unfair competition. Monopolies, cartels, abuse of market share and unfair pricing are not adequately policed in Vietnam yet. Indeed, there are a number of State-owned monopolies. There are some rather specific and some rather vague laws on the subject, but they do not form a complete body of law. As noted, in technology transfer and licensing, certain anti-competitive agreements are prohibited. However, there is no definition of what a monopoly is and what steps may be taken to prevent or break up a monopoly. In banking, a credit organization is prohibited from participating in contracts or agreements or taking other steps by which it would achieve a dominant role in the monetary, financial or foreign exchange markets or from taking steps which would result in achieving unfair superiority over a third party. Other isolated examples of such laws may be found.

However, the Vietnamese Government is aware of such deficiencies and tries to tackle them. For example, in 2004 an Anti Trust Agency was set up in order to improve the situation.

Vietnamese contract law comprises certain very general principles which do not really offer a sufficient basis to curb unfair and anti-competitive business practices. Even so, there are some attempts. A civil contract, for example, may not be contrary to social morality, and it must be based, inter alia, on equality, good will, co-operation and good faith. An economic contract must be based, inter alia, on mutual benefit and equality of rights.

VIII. Banking

A foreign-invested enterprise or a party to a business co-operation contract is permitted to open an account, in both Vietnamese Dong and the relevant foreign currency, with a bank in Vietnam. In special cases, a foreign-invested enterprise or a foreign party to a business co-operation contract may open an offshore account after permission is obtained from the State Bank of Vietnam. However, the law does not define the phrase “special cases”.

IX. Insurance

A foreign-invested enterprise or a party to a business co-operation contract may purchase life, health, property and civil liability insurance cover. It may purchase insurance from a Vietnamese insurance company or a foreign-invested insurance company licensed to operate in Vietnam.

X. Labor

As mentioned above, Vietnamese workers should be recruited ahead of foreigners, unless advanced skills which Vietnamese candidates do not possess are required. In addition, efforts should be made to train Vietnamese employees to perform such jobs.

The local trade union is required to establish a union organization at all business enterprises in Vietnam, foreign-invested enterprises included. Businesses are required to co-operate closely with the union and to create favourable conditions for union activities. They may not harass any employee for forming, joining or participating in a union. Labor disputes must be resolved in consultation with the union. In certain circumstances there is a right to strike.

XI. Accounting and Financial Matters

Foreign-invested enterprises and parties to business co-operation contracts, with the consent of the Minister of Finance, may adopt international accounting standards and principles which are widely accepted and recognized by the Ministry of Finance. Obtaining such consent is not simple. However, most foreign-invested enterprises that use Vietnamese accounting standards say that they are easily adapted to international reporting requirements.

All records and accounts must be kept in the Vietnamese language, and (if desired by the foreign-invested enterprise and approved by the Ministry of Finance) a widely used foreign language such as English or French. Arabic numerals are mandatory. All values must be recorded in Vietnamese currency or in a foreign currency approved by the Ministry of Finance. All physical materials must be recorded using the official units of measurement in Vietnam.

Annual audits are required to be conducted by an independent auditing company licensed to operate in Vietnam. All major international accountancy firms have offices in Vietnam.

VI. Summary

Due to the fact, that Vietnam is facing an atmosphere of change, it is essential to be aware of both the risks and the opportunities of an investment in Vietnam. Therefore it is highly advisable to carefully evaluate the current situation in Vietnam before undertaking any sort of investment there. Anyhow it can be said, that Vietnam is heading to the right direction and that it is trying to catch up with the international standards.

Hiring and Firing

-

Hints on Common Stumb-ling Blocks for Foreign Companies in Taiwan

Jan 2006

Introduction

Legal cornerstones of labor and social security law in Taiwan are the Labor Standard Law (LSL), the Labor Insurance Act and the National Health Insurance Act. However, both labor and social security law further consist of several additional regulations, acts, and decrees, ranging from the recently enacted gender equality law to regulations about occupational hazards. In a nutshell, Taiwanese labor law and social security law in its basic structure is comparable to the systems in European countries. However, certain specific differences have proven to be stumbling blocks for foreign companies in Taiwan, especially for foreign management personnel - this brief shall focus on some of these, as selected topics only.

One particular feature of the current social security system in Taiwan is the regulation of retirement payments (pension payments) within the LSL, rather than in a separate act. A second particularity is the obligation of the employer to pay a substantial “severance pay” to the employee, in case of a termination of the employment contract. In principle, this termination fee is payable independent of the party terminating the contract, i.e. also if the employee decides to leave the company. This severance pay has historical roots: In essence, severance pay represents a form of social security, in view of the fact that the system of retirement payments is incomplete at best, and always insufficient with regard to the actual amounts paid.

Finally, it may be stated that another special characteristic of law in Taiwan in general, and of labor and social security law in particular, is its fast pace of change. The transformation from an agricultural to a manufacturing dominated, and further to a service-based society has brought and continues to bring with it a series revisions and new legislation – a speed of legislative change with which foreign companies are mostly not familiar with. This said, the legislative body is currently experiencing a major overhaul of the retirement system, replacing the patchwork in place with a modern system of pension plans, within which employers and employees may choose between various levels of both contribution and risk allocation.

“Hiring” in Taiwan – attention recommended

Different situations require different solutions: Local staff, expatriates, local senior management - foreign companies sometimes stumble over the differences, by not sufficiently accounting for within the employment contracts. Regarding the content of these contracts – required in writing, according to the Taiwanese law – find below some comments on selected issues.

With regard to local staff, companies with more than 30 employees in Taiwan are required to complement the employment contracts with so-called work rules (Articles 70 and 71 LSL), comprehensively regulating matters such as, among others: work hours, wage calculations, bonuses and compensations, work leaves, and termination of the employment agreement. In view of the frequent and recent legal changes regarding just such topics, it is paramount to have the work rules updated accordingly, while failure to do such may result in wrong HR decisions, based on faulty work rules – needless to say that such flawed decisions may result in litigation against the employer.

As concerns social security, foreign headquarters, respectively their group HR department, are customarily not able to oversee in detail compliance with local requirements for social security contributions and related accounting principles. In Taiwan, this may, for example, apply to contributions to the retirement fund in general (Article 56 LSL); and for M&A activities and their effects on the retirement fund and the provisional reserves for severance pay (Article 20 LSL, Article 15 of the M&A Law).

When it comes to expatriates, some foreign companies tend to structure the employment based on two or more contracts, including offshore payments. However, practice shows that foreign companies still are only partially aware of legal requirements (and more important: sanctions) regarding work permits, income taxation, and specifically tax declaration. In order to avoid unpleasant surprises, professional counsel should review the suggested employment contract(s), offshore structures, and the underlying taxation issues.

Conflicts may finally arise out of misunderstandings regarding overlapping allowances and special payments (e.g. parachute provisions, golden handshake) for local senior management, where sometimes both local mandatory regulations and world-wide group policies apply concurrently, the latter based upon the wording of group standard employment contracts for such senior management. Such conflicts are avoided by proceeding to a clear assessment, at the moment of hiring, of all applicable later payments.

„Firing” – careful steps are the way of choice

The cultural and practical environment in Taiwan for an employer to terminate employment contracts has greatly changed over the past few years. Keywords are a rising need for competitiveness within the global economy and higher unemployment rates on the one side, and growing awareness of workers’ rights, and an increase of rule of law on the other side. All these have recently resulted in a greater willingness of fired employees to attack their former employers in court. No matter if such claims are based on reasonable grounds or not, ongoing litigation incur for a company costs and possible reputation damages, both internal and external. Therefore, the risk of litigation shall be minimized or avoided, by carefully planning and implementing the termination of employment contracts, in order to ensure full compliance with the law.

Naturally, the topics and proposed solutions discussed herein do not apply to all and any situations. Rather, to assess the specific risks and to choose appropriate strategies, certain key factors shall be taken into account, such as the position of the particular employee within the company, the degree of confidentiality of the assigned work, existing relationships between the employee and other company staff, etc.

Similar to other jurisdictions, Taiwanese law provides that the employer may dismiss an employee by ordinary termination for certain legitimate reasons, but subject to an advance notice, in order to protect the interests of the employee (Article 11 LSL). Further, the employer may dismiss an employee without advance notice, in case of severe misconduct of the employee (Article 12 LSL). In addition, so-called fixed-term contracts (in principle limited to a maximum duration of one year) are automatically terminated at expiration of the contract. Finally, labor law contains certain provisions protecting the employee from being dismissed, among others, during maternity leave or while being absent for receiving medical treatment (Article 13 LSL).

The labor law of Taiwan (Article 11 LSL) stipulates five legitimate motives for an ordinary termination, with advance notice, of a labor contract. In other words, any ordinary termination requires by law one of these motives, lest the termination be illegal and subject to a fine. In most situations, an employer may base a termination notice on only one of the following three motives:

a) the company is generating losses (Article 11 LSL, item 2),

b) a change of business scope requires of reduction of the work force and the employee concerned cannot be assigned to another appropriate position (Article 11 LSL, item 4),

c) the employee concerned is incompetent (Article 11 LSL, item 5).

Therefore, it is paramount that the employer mentions the motive of termination within the termination notice and ensures that the motive is backed up with sufficient evidence. In practice, and if the business-related motives (Article 11 LSL, item 2 and 4) do not apply, it is suggested that the motive of “incompetence” be documented in writing, in form of at least two written warnings, where the lack of ability is indicated, and which may later serve to prove that the employee was in fact not able to fulfill the assigned work in a satisfactory manner.

As a last resort, and if further complications are to be expected, the employer may opt for professional outplacement services, being a keystone within a larger termination agreement, and which may allow the employee to quit the company with both the necessary face saving, and a certain financial assurance.

Summary

HR is one of the key factors for commercial success, and the continuously developing legal and cultural environment in Taiwan will further emphasize the importance of good governance of HR issues.

Awareness of the local labor law, including social security law, has become a must for international companies in Taiwan, with the ultimate goal of legal compliance. Sufficient attention shall be paid to the drafting of employment contracts, including the work rules in case of larger companies.

Equally, decisions to dismiss employees should be planned and implemented in such a manner, that litigation risks, and therefore costs, are minimized and at best avoided.

Although Lorenz & Partners Co., Ltd. always pays greatest attention to updating the information provided in this newsletter, it cannot take any responsibility for the topicality, completeness or quality of the information provided. None of the information contained in this newsletter is meant to replace a personal consultation. Liability claims regarding damage caused by the use or disuse of any information provided, including any kind of information which is incomplete or incorrect, will therefore be rejected, if such information is not generated deliberately or grossly negligent.

Translations of

Thai Personal Income Tax Forms

February 2005

Introduction

As filling in and understanding personal income tax forms can be a difficult matter in a well known language this is much more the case in a language you are not familiar with. In Thai it becomes even more complicated due to the different letters. Normally expatriates get the form filled in by Thai staff. However, considering the liability you take by signing the form reveals, how important it is to know what you are about to confirm with your own name.

We want to help you getting a better understanding of Thai personal income tax forms, the so called “Phor. Ngor. Dor. 90”. Due to this reason, we send you a translated version of the form, hoping that it will be of value for you and your company.

In case of any further question which may arise about this subject please do not hesitate to contact us.

Lorenz & Partners

Flowchart: Alternate Process: (REVENUE PERSONAL INCOME TAX FORM
Tax Year 2003
Department’s Seal) for Income Earners in General Case

Income earner ID card no. Spouse

(Specify only in the case of first year submission) Date of birth __/___/___ ID card no.

Tax ID card no. (Specify only in the case of first year submission) Date of birth ___/___/___

(Specify only in case not having ID card number)

Name ___________________________________________ Tax ID card no.

(Specify clearly whether Mr., Mrs., Miss, Rank, Estate, Ordinary partnership, or Group of persons) (Specify only in case not having ID card number)

Surname __________________________________________ Name _______________ Surname ________________

(Specify clearly whether Mr., Mrs., Miss or Rank)

Address: Building: _________ suite no. ______ floor: ____ mooban: ________ (1) earn income, but (2) earn income, tax base included

address no. __________ moo: ____ trok/soi: ___________________________ married during tax year (3) earn income, tax base not

road: ______________ sub-district: ___________________________________ included

district: ______________________ province: ___________________________ divorced during tax year (4) no income

Postal code: Telephone: Home __________ Office ___________ died during tax year

Status of income earner Receipt book no. ____________ no. __________________

Amount of money: THB __________________

(1) Natural person (4) Ordinary partnership

(2) Died during tax year (5) Non-juristic group of persons Receipt book no. ____________ no. __________________

Amount of money: THB __________________

(3) Undivided estate Signed _____________________ Receiver

Date _______________________

Additional tax Overpaid tax 1 1

Income earner THB _____________ Satang _________ Income earner THB ____________ Satang ___________

Spouse THB _____________ Satang _________ Spouse THB ____________ Satang ___________

Total THB _____________ Satang ________

Certification Request for tax return 1

I hereby certify that all of the information shown herein is true and correct. I would like to request for return of overpaid tax as follows:

Herewith attached are the evidences and attachments (if any) of _____ set(s). Income earner: THB ______________ Satang ____________

Signed _____________________________________ Income earner Spouse: THB ______________ Satang ____________

Signed _____________________________________ Spouse

Signed _____________________________________ Representative Signed _________________________________ Income earner

(____________________________________) Signed _________________________________ Spouse

as ___________________________________ Submitted on: ___________________________

Address (of the representative) _________________________________________

_____________________________________________________________

Submitted on: ______________________

For Your Information

1. Submission of Phor.Ngor.Dor.90 form and tax payment via internet

2. Printing out Phor.Ngor.Dor.90 form from the internet

3. Tax calculation program according to Phor.Ngor.Dor.90 form via internet

PAGE 2

Section 1 Assessable income according to Section 40 (1) (2)

Income earner Spouse

1. Rounded Rectangle: In case both the income earner and the spouse earn income and live together through the tax year, if the income is included for tax calculation, the remaining balance under 6. of the spouse must be included in Section 10 1. of the income earner. Section 40 (1) e.g. salary, wage, pension, etc.

2. Deduct (1) Provident Fund reserves (for the excess of THB 10,000)

(2) Government Pension Fund reserves

(3) Private school teacher welfare fund reserves

(4) Severance pay according to the lablour law

(if included for tax calculation)

Sum (1) to (4) (evidences for (1) to (4) totals ___set(s))

3. Section 40 (2) e.g. meeting fee, broker fee, etc. Income earner

Spouse

4. Remaining balance: Income earner (1.– 2. + 3.); Spouse (1.– 2.)

5. Deduct expenses Income earner

Spouse *

6. Remaining balance (4. – 5.) taken to include in Section 10 1.

* In case the spouse earn income according to both Section 40 (1) and 40 (2) the expenses of the income according to Section 40 (1) must be averaged and filled in

“Spouse” column at Spouse and the expenses of the income according to Section 40 (2) must be averaged and filled in the “Income earner” column

at Spouse

Section 2 Assessable income according to Section 40 (3) Section 4 Assessable income according to Section 40 (5)

1. Value of goodwill, other royalties, income in Money or other benefit received from:

the nature of annuity received according to a 1. Letting of property

will, other juristic act or court judgment, etc. (1) House, building, other construction

(1) (specify) _______________________ 1 or floating house

(2) (specify) _______________________ 2 Deduct expenses 30% as actual

(3) (specify) _______________________ 3 Remaining balance 1

2. Copyright fee of income earner (2) Others (specify) ______________________

Deduct expenses (40%, max. THB 60,000) Deduct expenses __% as actual

Remaining balance 4 Remaining balance 2

3. Copyright fee of spouse (3) Others (specify) _______________________

Deduct expenses (40%, max. THB 60,000) Deduct expenses __% as actual

Remaining balance 5 Remaining balance 3

Sum 1 to 5 taken to include in Section 10 1. 2. Breach of hire-purchase/sales in instalment

Deduct expenses 20%

Remaining balance 4

Sum 1 to 4 taken to include in Section 10 1.

Section 3 Assessable income according to Section 40 (4) Section 5 Assessable income according to Section 40 (6)

1. Interest, difference between the redemption Income from liberal professions: namely law,

value and the buying price of a bill or a debt medicine, engineering, architecture, accounting,

instrument whereby the payee is the first holder fine arts

(in case not paying tax at the rate of 15.0%) 1. Medicine

2. Dividend derived from a mutual fund or IFCT, Deduct expenses 60% as actual

etc. (in case not paying tax at the rate of 10.0%) Remaining balance 1

3. Dividend derived from a foreign company 2. Others (specify) _______________________

4. Dividend derived from a company or a juristic Deduct expenses 30% as actual

partnership established under Thai law Remaining balance 2

(in case not paying tax at the rate of 10.0%) 3. Others (specify) _______________________

5. Tax credit for dividend under 4. ** Deduct expenses 30% as actual

6. Others (specify) ____________________ Remaining balance 3

Sum (1. to 6.) taken to include in Section 10 1. Sum 1 to 3 taken to include in Section 10 1.

** Please see the detail in the instructions Page 2.

Page 3

List of expenses to be deducted as necessary and appropriate for income under Section 40 (5), (6), (7) or (8) (if the provided space is not enough please have an attachment)      For income under Section 40 (5)                                                1

1.       ___________________________

2.       ___________________________

3.       ___________________________

4.       ___________________________

5.       ___________________________

Total

For income under Section 40 (6)                                              1

1.       ___________________________

2.       ___________________________

3.       ___________________________

4.       ___________________________

5.       ___________________________

Total

For income under Section 40 (7)                                              1

1.                   ___________________________

2.                   ___________________________

3.                   ___________________________

4.                   ___________________________

5.                   ___________________________

Total

For income under Section 40 (8)                                              1

A.                  Cost of sale

1.                               Inventories in early year

2.                               plus buying goods during year

                               Total

3.                               deduct inventories at the

ending year

                     Remaining balance

B.                  Expenses

1.                               Salary

2.                               _______________________

3.                               _______________________

4.                               _______________________

5.                               _______________________

                                 Total

                                 Sum (A. + B.)

Section 6 Assessable income according to Section 40 (7)

Income derived from a contract of work whereby

the contractor provides essential materials besides

tools

Deducting expenses 70% as actual

Remaining balance taken to include in Section 10 1.

Section 7 Assessable income according to Section 40 (8)

1. Income from business, commerce, agriculture,

industry, transport, or any other activities, incl.

selling immovable property for commercial

purpose

(1) (specify) _______________________

deduct expenses ___% as actual

Remaining balance 1

(2) (specify) _______________________

deduct expenses ___% as actual

Remaining balance 2

(3) (specify) _______________________

deduct expenses ___% as actual

Remaining balance 3

(4) (specify) _______________________

deduct expenses ___% as actual

Remaining balance 4

2. Distribution of profit derived from a mutual

fund under SEC Act (in case not allowing tax

payer to withhold the tax at the rate of 10.0% or

allowing to withhold but request for tax return or credit)

deduct expenses ___% as actual

Remaining balance 5

3. Income from selling of immovable property

(in case including this with other income)

(1) being an inheritance or a gratuitous gift

deduct expenses 50%

Remaining balance 6

(2) derived for non-commercial purpose

deduct expenses ___% as actual

Remaining balance 7

Sum 1 to 7 taken to include in Section 10 1.

Section 8 List of income from selling of immovable property derived for non-commercial purpose and that the tax base will be not be included with other income

No.	1. Amount of income from selling immovable property	2. Expenses as necessary and appropriate	Amount of years of possession	3. Tax to be paid	4. Withholding income tax	3 - 4 4 -4 additional/overpaid payment





(Evidences attached __set(s) Total amount of additional overpaid tax taken to include in Section 10 11. "income earner"

PAGE 4

Section 9 List of allowances and exemptions after deductions

	Income earner	Spouse
1. Income earner (THB 30,000* or 60,000 as the case may be), Spouse* (THB 30,000* in case income will*
be separately calculated)
2. Spouse (THB 30,000* in case income will be included or in the case of no income)*
3. Children THB 15,000 per a child:_____child(-ren) (for those not studying or studying abroad, if calculating
separately, THB 7,500* per a child)*
Children THB 17,000 per a child:_____child(-ren) (for those studying within the country, if calculating
separately, THB 8,500* per a child)*
4. Life assurance premium
5. Reserves for Provident Fund (max. THB 10,000)
6. Buying price of investment units in a mutual fund for living purpose
7. Buying price of building/loan interest for buying, hire-purchasing or constructing residence
8. Contributions to the Social Security Fund
9. Sum (1. to 8.) taken to be filled in Section 10 2.
(Evidences attached for 4. to 8. ___ set(s))

Section 10 Tax calculation

	Income earner	Spouse
1. Income after deducted by expenses (the total sum from the last item of Section 1 to Section 7)
2. Minus Allowances (from Section 9 9.)
3. Remaining balance (1. - 2.)
4. Minus donation (max. 10% of 3.)
5. Gross income (3. - 4.)
6. Tax calculated from gross income under 5.
7. Tax calculated from assessable income from THB 60,000 upwards, 0.5% of gross income
before deducting expenses under Section 1 to Section 7 (not including income under Section 40 (1))
= __________________* 0.005 =
8. Income tax to be paid (the larger amount between 6. and 7.)
9. Minus withholding income tax and tax credit
paid withholding income tax under Phor.Ngor.Dor.93 and Phor.Ngor.Dor.94 forms
10. Additional Overpaid tax
11. Additional Overpaid tax (taken from Section 8* (if any))*
12. Total additional overpaid tax of income earner, additional overpaid tax of spouse
13. Set-off excess tax between the spouses
14. Remaining balance of additional overpaid tax
(Evidences attached for 4. to 9. ___ set(s))
*In the case of having attachment(s) additional form submission overdue form submission*
15. Plus additional tax (taken from C 6. of attachment (if any))
16. Minus overpaid tax (taken from C 7. of attachment* (if any))*
17. Minus tax paid under Phor.Ngor.Dor.90 PhorNgorDor.91 Form (in the case of additional submission)
18. Additional Overpaid tax of income earner, additional overpaid tax of spouse
19. Set-off excess tax between the spouses
20. Remaining balance of additional overpaid tax
21. Plus surcharge (if any)
22. Total additional overpaid tax

Recent Developments

in Taiwanese Business Law

July 2005

I. Introduction

As we recently extended our services to Vietnam and Taiwan, in the following we would like to keep you informed about current legal changes in Taiwan.

II. Tax Law

1. Income tax of branches of “profit-seeking enterprises”

The tax rate of 25 % (2004) is the maximum rate in a progressive tax structure. The rate is applicable on income in excess of TW$ 100,000 (approx. EUR 1,250).

2. Stock Options

3. Stock Interests

4. Value-Added and Non-Value Added Business Tax

III. Labour Law

According to Article 46 of the Employment Service Act 2003 the scope of work a foreign worker may be employed for in Taiwan is limited to:

· specialized or technical work

· Director/Manager/Business executive positions if the business is invested in or set up by overseas Chinese or foreigners with the authorization of the Government of Taiwan

· teachers at schools, colleges or universities established for foreign residents or foreign languages teachers

· sport coach and athletes

· religious, artistic and show business workers

· crew members of vessels

· marine fishing/netting workers

· household assistants

· work designated by the Central Competent Authority with respect to major national construction projects or economic or social development needs

· other specialized work as approved by the competent authority or due to a lack of such specialists in Taiwan and business necessity to hire the specialist

IV. Corporate Law and Partnerships

1. Broadened Scope of Application of Limited Partnerships

2. Determination of the promoters of a Company limited by shares

The Taiwanese Supreme Court recently held referring to the foundation of a company limited by shares that despite the fact that Article 129 of the Company Act states that the promoters shall draw up the articles of incorporation and shall affix thereon their respective signature or personal seals, it does not deal with the questions who the promoters actually are. To determine the promoter it also has to be taken into account whether respective persons de facto engage in the foundation process.

The determination of the promoters of a Company can be a vital issue where there are “sleeping promoters”, especially when the promoters are imposed heavy obligations and liability pursuant to company law, the Security Act and related financial laws in Taiwan. For instance, if a person knew the set-up of a company, contributed capital, but did not attend the founding meeting or sign on the memorandum of association, he shall still be deemed as the promoter and shall be jointly and severally liable for the consequences of his acts in forming the company and all expenses incurred.

V. Restrictions on Foreign Investment in Securities

Foreign institutional investors which hold shares in public companies are also prohibited from handing the proxies printed and distributed by the companies to solicitors or consigned agents.

RESIGNATION LETTER

Zweck und Form des Resignation Letter

November 2005

A. Einführung

„Resignation Letter“ ist der Begriff für eine schriftliche Aufkündigung eines Direktorenverhältnisses, in welcher der Direktor seinen Status als Direktor der Gesellschaft zurückgibt und aus seiner Stellung ausscheidet.

Gemäß Sec. 1144 des Civil and Commercial Code (CCC) Thailand werden die Geschäfte einer thailändischen Unternehmung von einem oder mehreren Geschäftsführern (Board of Directors) geführt. Dieses „Board“ ist gegenüber den Gesellschaftern als Vertreter des Unternehmens und gegenüber Dritten (z.B. gegenüber Vertragspartnern und Mitarbeitern) als Handlungsorgan der Gesellschaft verantwortlich. Ebenso wie im deutschen Recht können Gläubiger nach Sec. 1096 CCC grundsätzlich nur auf das Gesellschaftsvermögen als Haftungsmasse zugreifen. Allerdings wird die Haftung für Gesellschaftsschulden durch das thailändische Gesellschaftsrecht auf die Direktoren ausgeweitet. Als Haftungsschuldner kommen daher sowohl das sog. „Board of Directors“ als auch der einzelne Direktor in Betracht. Der Direktor einer Thailand Co. Ltd. hat folglich ein besonderes Interesse daran, sich aus seiner Direktorenposition lösen zu können, um nicht von Dritten in die Haftung für Gesellschaftsschulden genommen zu werden.

Umgekehrt ist auch die Gesellschaft und mit ihr die Gesellschafter daran interessiert, sich im Problemfall schnell von einem Direktoren lösen zu können, da dieser ansonsten aufgrund seiner statusrechtlichen Position als Direktor selbst bei Beendigung seines arbeitsrechtlichen Anstellungsverhältnisses weiterhin die Möglichkeit hat, die Gesellschaft zu verpflichten.

B. Problematik der Auflösung von Direktorenverhältnissen

Zur Aufhebung der statusrechtlichen Position als Direktor ist allerdings ein sogenannter Resignation Letter erforderlich. Dieser beinhaltet die Erklärung des Direktors über die Beendigung seiner Funktion als Direktor für die Gesellschaft. Dieser Resignation Letter ist vom Direktor selber zu unterschreiben. Die Unterschriften der zeichnungsberechtigten Direktoren des „Board of Directors“ für die Gesellschaft sind für die Wirksamkeit der Kündigung der gesellschaftsrechtlichen Stellung nicht erforderlich, werden aus formalen Gründen dennoch geleistet.

Das Erfordernis einer Unterschrift des Direktoren kann zu Problemen führen, wenn dieser die Unterschrift des Resignation Letter verweigert, um die Aufhebung seiner statusrechtlichen Position zu verhindern. In einem solchen Fall ist die Gefahr des Missbrauchs der Direktorenposition gegeben.

Wichtig herauszustellen ist, dass das Erfordernis eines speziellen Resignation Letter zur Aufhebung der statusrechtlichen Position als Direktor auch dann besteht, wenn das arbeitsrechtliche Verhältnis zwischen dem Direktor der Gesellschaft und der Gesellschaft bereits durch eine Kündigung beendet worden ist. Denn ebenso wie im deutschen Gesellschaftsrecht besteht die gesellschaftsrechtliche Stellung als Direktor unabhängig von dem arbeitsrechtlichen Anstellungsverhältnis fort.

C. Der Resignation Letter

Der Resignation Letter wird nach der Unterzeichnung durch den ausscheidenden Direktoren von der Gesellschaft an das Ministry of Commerce weitergeleitet, welches die Änderung im „Board of Directors“ verzeichnet.

Zwar ist die Beendigung des Direktorenverhältnisses mit Unterzeichnung des Resignation Letter wirksam und die Weiterleitung an das Registration Office (Ministry of Commerce) nur deklaratorisch. Allerdings ist zu beachten, dass die Beendigung des Direktorenverhältnisses Dritten gegenüber solange nicht geltend gemacht werden kann, wie eine Registrierung beim Ministry of Commerce nicht erfolgt ist. D.h., dass ein Direktor, obwohl ein Resignation Letter bereits wirksam unterzeichnet ist, weiterhin die Gesellschaft in ihrem Namen verpflichten kann, obwohl er im Innenverhältnis nicht mehr dazu berechtigt. Zwar hat die Gesellschaft dann im Innenverhältnis Haftungsansprüche gegen diese Direktor, kann sich aber von ihren Verpflichtungen im Außenverhältnis nicht lösen.

So kann zum Beispiel ein bereits ausgeschiedener Direktor, der seinen Resignation Letter unterschrieben hat, im Namen der Gesellschaft ein Darlehn aufnehmen. Obwohl der Direktor in diesem Fall nicht mehr für die Gesellschaft hätte handeln dürfen, kann die Bank von der Gesellschaft die Rückzahlung des Darlehns verlangen, wenn nicht die Beendigung des Direktorenverhältnisses im Zeitpunkt der Aufnahme des Darlehns bereits beim Ministry of Commerce registriert war.

D. Verhinderung des Missbrauchs durch vorsorgliche Aufsetzung eines Resignation Letters

Um die oben beschriebene Missbrauchssituation zu verhindern und sicherzustellen, dass die Gesellschaft einem ihrer Direktoren seine statusrechtliche Position entziehen kann, ohne dass es zur oben beschriebenen „Pad-Situation“ wegen der Unterschriftsverweigerung kommt, ist es beiden Seiten zu empfehlen, einen derartigen Resignation Letter bereits vorsorglich aufzusetzen. Dabei wird ein Resignation Letter, ähnlich wie der im Anhang dargestellte, aufgesetzt und vom Direktoren vorsorglich unterschrieben. Danach übergibt der Direktor den bereits unterschriebenen Resignation Letter, in dem lediglich das Beendigungsdatum fehlt, an die Gesellschaft, so dass diese nunmehr die unterschriebene Kündigung des Direktoren sozusagen als „Blanko-Exemplar“ vorrätig hat. Im Falle der Notwendigkeit der Auflösung des Direktorenverhältnisses, kann die Gesellschaft auf diesen ihr bereits vorliegenden Resignation Letter zugreifen, ohne von einer erneuten Unterschrift des Direktoren abhängig zu sein. Sie bedarf mithin nicht mehr der Mitwirkung des Direktoren, um sich von ihm zu lösen.

E. Fallgruppen, in denen der Einsatz eines Resignation Letters hilfreich ist:

Von Relevanz sind deshalb Resignation Letter vor allem in den Fällen

- der Beendigung des, der Direktorenposition zugrundeliegenden, Arbeitsverhältnisses des Direktoren,

- einer Mandatsbeendigung im Fall eines „Nominee Director“,

- der Insolvenz der Gesellschaft

- oder in anderen Fällen, die aufgrund einer erhöhten Rechtsunsicherheit eine schnelle Aufhebung der Direktorenposition erfordern.

F. Zusammenfassung

Die Abfassung eines vorsorglichen Resignation Letter zwischen der thailändischen Gesellschaft (Co. Ltd.) und ihren Direktoren, in der oben beschriebenen Form, sollte bei jeder Berufung eines neuen Direktoren zum Pflichtprogramm gehören. Ebenso sollte bei der Gründung einer Thailändischen Co. Ltd. und der gleichzeitigen Bestellung von Direktoren der Gesellschaft, neben dem Arbeitsvertrag und der Bestellungsvereinbarung als Direktor, zugleich ein Resignation Letter aufgesetzt und von der Gegenseite unterschrieben ausgetauscht werden. Auf diese Weise können die oben beschriebenen Missbrauchssituationen vermieden werden.

G. Anhang: Beispiel eines Resignation Letters

Date: ____________________

To: The Board of Directors of __________________Co., Ltd.

Subject: Resignation of Director

I,______________________, a director of ________________ Co., Ltd. (the “COMPANY”), hereby resign from all of my positions in the Company effective: ____________________.

Therefore, please kindly inform the Ministry of Commerce about my resignation from the Board of Directors and release me from all liabilities

Yours faithfully,

__________________________ Witness__________________________

( ) ( )

Signature Signature

Accepted by Authorised Director(s) of ____________Co., Ltd. on: __________

__________________________ Witness__________________________

( ) ( )

Signature Signature

(Company Seal)

Lorenz & Partners Co., Ltd.

Legal, Tax and Business Consultants

22^nd Floor, Sathorn City Tower

175 South Sathorn Rd., Sathorn

Bangkok 10120, Thailand

Tel.: +66 – (0) 2 287 1882

Fax: +66 – (0) 2 287 1871

E-mail: info@lorenz.co.th

BOI Criteria & Benefits

according to Activities under Category 7.10 November 2005

I. Criteria for Category 7.10 Approval

IN GENERAL

According to the Board of Investment Announcement No. 1/2543 Re: Policies and Criteria for Investment Promotion Policies for Investment Promotion (if not specified otherwise), there are certain criteria for granting respective privileges to promoted entities as follows::

1. Criteria according to Investment Capital

A minimum level of investment capital (excluding cost of land and working capital) of one million baht shall be required for all types of activities eligible for promotion (Board of Investment Announcement No. 2/2543: Types, Sizes and Conditions of Activities Eligible for Promotion)

Project that has investment capital of 10 million baht and upwards (excluding land and working capital) must obtain ISO 9000 certification or similar international certification.

For a project with investment capital (excluding cost of land and working capital) not exceeding 500 million baht:

- The value added is not less than 20 percent of sales revenue, except projects that manufacture electronic products and parts or process agricultural produce, and projects granted special approval by the Board;

- Ratio of liabilities to registered capital should not exceed 3 to 1 for a newly established project. Expansion projects shall be considered on a case by case basis;

- Modern production processes and new machinery are used. In cases where old machinery will be used, its efficiency must be certified by reliable institutions and the Board's approval must be obtained;

- Adequate environmental protection systems are installed. For projects with a potential environmental threat, the Board shall prescribe special conditions on both the location of the project and the manner of pollution treatment.

For a project with investment capital (excluding cost of land and working capital) exceeding 500 million baht, criteria above shall be used and a feasibility study of the project must be submitted.

2. Criteria according to Foreign Shareholding

For a project in service business under Schedule One of the Foreign Business Act B.E. 2542, Thai nationals must hold shares totalling over than 50 percent of the registered capital;

The Board may specifically fix the shareholding of foreign investors on some promoted projects when it is deemed appropriate.

3. Criteria for Granting Tax and Duty Privileges

Zone 1 - Approved projects shall be granted:

- 50 percent reduction of import duty on machinery that is subject to import duty of not less than 10 percent;

- Corporate income tax exemption for 3 years for projects located within industrial estates

- Exemption of import duty on raw or essential materials used in the manufacturing of export products for 1 year.

Zone 2 - Approved projects shall be granted:

- 50 percent reduction of import duty on machinery that is subject to import duty of not less than 10 percent;

- Corporate income tax exemption for 3 years, increased to 5 years for projects located within industrial estates or promoted industrial zones

- Exemption of import duty on raw or essential materials used in the manufacturing of export products for 1 year.

Zone 3 - Approved projects shall be granted:

- Exemption of import duty on machinery;

- Corporate income tax exemption for 8 years

- Exemption of import duty exemption on raw or essential materials used in the manufacturing of export products for 5 years

Exceptions

When different tax and duty privileges have been specified to particular activities on the List of Activities Eligible for Promotion or when the Board considers that special reasons apply to certain activities

List of Activities Eligible for Investment Promotion

Activity: 7.10 Trade and investment support offices

Conditions:

1. Projects must be approved by relevant government agencies

2. Only non-tax privileges will be granted

3. Annual operating expenses must not be less than 10 million baht

4. Business plan and scope of operation must be approved by the Board

II. Benefits for Category 7.10 Business

The BOI offers two kinds of benefits: Tax-based incentives, such as tax holidays or tariff exemptions, and non-tax privileges, such as guarantees, protections, permissions, and services.

The non-tax privileges are available to all BOI-promoted projects, regardless of location, industry, or condition.

According to the List of Activities Eligible for Investment Promotion, however, it is expressly provided that only non-tax privileges will be granted. As a result, tax-based incentives is not available to Category 7.10 businesses.

Generally, BOI-promoted companies may also be granted the right of land ownership in Thailand under the following bases or as the BOI deems appropriate (Announcement of the Board of Investment No. 2/2546):

1. Land for the establishment of offices for promoted projects must not exceed 5 rai

2. Land for the residences of executives or experts must not exceed10 rai

3. Land for the residences of employees must not exceed 20 rai.

In addition, according to Condominium Act (No. 3) B.E. 2542 (A.D. 1999), promoted companies enjoy the right to own condominium units, in some cases up to 100%.

With regard to visa and work permits, staff of promoted companies are entitled to “One-Stop Service Centre,” which will considerably quicken the visa and work permit procedures. Foreigners can be brought into the country for feasibility studies, as well as technicians and experts, without limit

III. Eligible Businesses

Scope of Business of Trade and Investment Support Offices (according to Office of the Board of Investment Announcement No. Por 12/2543) are as follows:

1. Monitoring and/or servicing affiliates

2. Advisory services on business operations except those engaged in buying and selling securities and foreign currency exchange. As for accounting, legal, advertising, architectural and civil engineering businesses, business licenses shall be obtained from the Department of Commercial Registration or related governmental agencies prior to promotion application.

3. Information services on goods sourcing

4. Engineering and technical services, except those related to architecture and civil engineering

5. Testing and certifying standards of products, production and services that do not qualify for investment promotion under activity 7.13 of the list of promotional activities attached to Board of Investment Announcement No. 2/2543

6. Export trading

7. Business activities related to machinery, engines, tools and equipment such as:

- Importing for wholesaling

- Training services

- Installation, maintenance and repairs

- Calibration that does not qualify for investment promotion under activity 7.14 of the list of promotional activities attached to Board of Investment Announcement No. 2/2543

8. Software design and development that does not qualify for investment promotion under activity 5.8 of the list of promotional activities attached to Board of Investment Announcement No. 2/2543

9. Wholesaling products manufactured in the country

Projects which operate their business under any of the above type of activities could apply for investment promotion under the category of Trade and Investment Support Offices.

Establishment of a Branch Office in Thailand

December 2004

Establishment of a Branch Office in Thailand

According to the Foreign Business Act B.E. 2542 (1999), foreigners are prohibited from operating some categories of business, and some categories of business can be operated by obtaining a license or a certificate according to the Business Lists as a case maybe.

“Foreigner” under the Foreign Business Act (FBA) means:

1. Natural person not of Thai nationality

2. Juristic person not registered in Thailand

3. Juristic person registered in Thailand having half or more of its capital shares held by person or juristic person as mentioned in 1 or 2.

4. Juristic person registered in Thailand having half or more of its capital shares held by the person under 1, 2 or 3.

The Business List under the FBA

· Business List 1: covers business which foreigners are not allowed to operate.

· Business List 2: foreigners can operate business if permitted by the Minister of Commerce with the approval of the Cabinet.

· Business List 3: foreigners can operate business if permitted by the Director-General of the Department of Business Development with the approval of the Committee.

Although there is no requirement for foreign companies to establish the Branch Office in Thailand, but most business activities of the Branch Office often fall into one of the categories which require a license under the Foreign Business Act.

As a condition for approval of a Foreign Business License to Branch Office, minimum working capital in foreign currency amounting to a total of 3 million Baht must be brought into Thailand. The amount of not less than 25 percent of the minimum capital must be brought or remitted within the first 3 months. In the first year, the capital must be bought or remitted totally not less than 50 percent. Then, for the remainder, an amount of not less than 25 percent of the minimum capital must be successively brought or remitted each year. This amount may be changed by subsequent Ministerial Regulations.

A Branch Office may exist for an indefinite period up to its date of dissolution, unless a shorter period is indicated in the application as a result of a contract in Thailand.

Documentation Required

General documentation required to be submitted to Ministry of Commerce:

- Copy of Company Affidavit or other documents showing juristic person status with particulars of name, capital, objectives, address, list of directors and signing authority

- Power of Attorney issued by the authorised person(s) of the juristic person appointing its representative(s) in Thailand

- Copy of Passport, Foreign Certificate or copy of Identity Card of the representative(s)

- Copy of Household Registration, Resident Permit or document showing temporary visa under the law governing immigration, of the representative (s)

- Affidavit of the applicant stating that the applicant, its director(s), manager(s) or representative(s) are qualified and are not disqualified according to Section 16 of the Foreign Business Act B.E. 2542

- Letter describing details of the business activities applied for licence

- Map showing roughly the location of its business operating place in Thailand

- Power of Attorney, in case other person(s) is/ are authorised to act on its behalf

Establishment of a Regional Office and Regional Operating Offices in Thailand

April 2005

General Information

Regional Office is a kind of service businesses under List three (21) of Foreign Business Act 1999. A regional office is established by a transnational corporation in a country other than the country where it is registered as the head office, without having to be registered as a juristic person under the law of the country of establishment.

Scope of Businesses

Regional office can carry out only 7 business activities:

· Communicating, coordinating and directing, on behalf of the head office, the operation of branches and affiliates which are located in the region

· Providing services in consulting and management

· Training and personnel development

· Financial management

· Marketing control and sale promotion planning

· Product development

· Services in research and development

General Characteristics of a Regional Office

· Must already have at least one established branch office or affiliate in the Asian region

· Non revenue-generating activities

· No authority to accept purchasing order or to make offer for selling or to negotiate for carrying out of business with person or juristic person in the country in which it is established

· All expenditures incurred by the regional office must be borne by the head office.

· It is not subject to corporate income tax, in accordance with the revenue code except deposit interest of remitted funds from the head office has to pay tax.

Minimum Capital

Regional Office has to bring or remit foreign currencies as minimum capital into Thailand at least 3 million baht. An amount of not less than 25 percent of the minimum capital must be brought or remitted in the first 3 months, which will meet 50 percent of the minimum capital within the first year and the remainder, an amount of not less than 25 percent of the minimum capital will be brought or remitted in each year.

Documentation Required

General documentation required to be submitted to Ministry of Commerce:

· Copy of Company Affidavit or other document showing juristic person status with particulars of name, capital, objectives, address, list of directors and signing authority

· Power of Attorney issued by the authorised person(s) of the juristic person appointing its representative(s) in Thailand

· Copy of Passport, Alien Certificate or copy of Identity Card of the representative(s)

· Copy of Household Registration, Resident Permit or document showing temporary visa under the law governing immigration, of the representative(s)

· Affidavit of the applicant stating that the applicant, its director(s), manager(s) or representative(s) are qualified and are not disqualified according to Section 16 of the Foreign Business Act B.E. 2542 (A.D. 1999)

· Letter describing detail of the business activities applied for licence

· Map showing roughly the location of its business operating place in Thailand

· Power of Attorney, in case other person(s) is/are authorised to act on its behalf

Work Permit for Foreigner

Due to the change of the Department of Employment regulations in 2004, regional offices in Thailand can apply for foreigners’ work permit at not more than 5 persons.

Exemption are granted to a regional office which has brought money into Thailand in the past year at a minimum of 10 million baht.

Differences to a Representative Office

Representative office can carry out only 5 business activities:

1. Sourcing of good or service in Thailand for the head office

2. Checking and controlling the quality and quantity of goods purchased or hired to manufacture in Thailand by the head office

3. Giving advice concerning goods of the head office sold to agents or consumers

4. Propagation of information concerning new goods or services of the head office

5. Report on business trends in Thailand to the head office

One different general characteristic of a representative office is that the representative office is not required to have at least one established branch office or affiliate in the Asian region.

Representative Offices in Thailand operating the following businesses can apply at not more than 2 persons:

· Providing advice in various aspects concerning the goods of the head office which are distributed to distribution agents or users

· Propagation of information relating to new goods or services of the head office

· Reporting of business movements in Thailand to the head office

The following businesses can apply at not more than 5 persons:

· Providing sources of goods or services in Thailand to head office

· Inspection and control of quality and quantity of the goods bought by the head office or the goods manufactured in Thailand under an order of the head office

Exemptions are granted to the representative offices which can secure sources for the purchase of goods or services in Thailand for the head office and the head office buys goods or services from a manufacturer in Thailand by which the total value of the goods or services in the past year is not less than 100 million baht.

Repräsentationsbüro in Thailand

December 2005

Repräsentationsbüro in Thailand

Ein interessanter Weg des Tätigwerdens in Thailand ist die Errichtung eines Repräsentationsbüros. Diese in der Vergangenheit häufig genutzte Möglichkeit ist nunmehr durch verschiedene Gesetzesänderungen deutlich erschwert worden. Nach Ersetzen des „Alien Business Act“ durch den „Foreign Business Act“ B.E. 2542 (der auch das „Revolutionary Party’s Decree No. 281“, welches die Errichtung eines Repräsentationsbüros regelte, außer Kraft setzte) ist nun das Repräsentationsbüro dem neuen Recht folgend nicht mehr ausdrücklich aufgeführt.

Praktisch ist es jedoch möglich, ein Repräsentationsbüro zu eröffnen, indem unter denselben Voraussetzungen wie zuvor nach dem „Foreign Business Act“ B.E. 2542 ein „Service Business as a Representative Office“ beantragen wird.

1. Voraussetzungen für die Eröffnung

Der Antrag auf die Eröffnung eines Repräsentationsbüros muss an die Alien Business Section, Business Registration Division 2, Department of Commercial Registration, Ministry of Commerce gerichtet sein.

Folgende Dokumente sind notwendig und müssen dem Commercial Registration Department vorgelegt werden:

1) eine Kopie des Handelsregisterauszuges des Mutterhauses und die Bilanz, beglaubigt durch einen Notar, wobei die Beglaubigung von der thailändischen Botschaft oder einem thailändischen Konsulat beglaubigt werden muss;

2) eine Vollmacht des Mutterhauses, die eine Person als Manager des Repräsentationsbüros in Thailand berechtigt, auch diese beglaubigt durch einen Notar, wobei die Beglaubigung von der thailändischen Botschaft oder einem thailändischen Konsulat legalisiert werden muss;

3) eine Vollmacht des bevollmächtigten Managers des Repräsentationsbüros, welche einen Rechtsanwalt berechtigt, die Dokumente vorzulegen und für das Mutterhaus die Registrierung vorzunehmen;

4) eine Photokopie des Passes des leitenden Managers des Repräsentationsbüros, sofern er kein thailändischer Staatsangehöriger ist;

5) eine Karte, die die Lage des Repräsentationsbüros zeigt;

6) weitere Dokumente, die das Projekt bezeichnen und über Aktivitäten des Repräsentationsbüros Auskunft geben (Organigramm)

7) Broschüre des Mutterhauses

8) Liste der thailändischen Kunden

9) Kopien der Rechnungen des Mutterhauses an thailändische Kunden

Anmerkung : Bei Vorlage der Dokumente darf die Beglaubigung nicht älter als 6 Monate sein.

Wenn die Erlaubnis erteilt wird, so gelten die folgenden weiteren Voraussetzungen:

· Der Gesamtaufwand zur Finanzierung des Repräsentationsbüros darf das siebenfache Stammkapital des Mutterhauses nicht übersteigen.

· Das gesamte Kapital zum Betrieb des Repräsentationsbüros muss vom Mutterhaus aus dem Ausland nach Thailand transferiert werden und mindestens 5 Mio. THB betragen. Wobei 1 Mio. THB in den ersten sechs Monaten eingebracht werden müssen und weitere 1 Mio. THB innerhalb der darauffolgenden sechs Monate, danach 1 Mio. THB jedes Jahr bis das Gesamtkapital von 5 Mio. THB erreicht ist.

· Mindestens eine für das Repräsentationsbüro verantwortliche Person muss in Thailand leben.

Die Erlaubnis wird für einen Zeitraum erteilt, der im Ermessen des Ministry of Commerce (MOC) steht. Nach Ablauf dieser Zeit kann eine Verlängerung gestattet werden, wenn eine lückenlose Dokumentation zeigt, dass die Arbeit bis dato erfolgreich war.

Schließlich muss für den ausländischen Mitarbeiter des Repräsentationsbüros eine Work Permit (Arbeitserlaubnis) beantragt werden.

Da das Repräsentationsbüro kein Einkommen erzielt, unterliegt es auch nicht der thailändischen Steuer. Allerdings müssen alle Angestellten, die in Thailand leben, ihre persönliche Einkommensteuer in Thailand bezahlen.

Üblicherweise dauert die Registrierung eines Repräsentationsbüros nach Einreichung aller Unterlagen 3 Monate.

2. Beschränkung der geschäftlichen Betätigung eines ausländischen Staatsangehörigen

Die geschäftliche Betätigung eines Repräsentationsbüros ist auf folgende Aktivitäten beschränkt:

· Kontrolle der Qualität und Quantität von Gütern, die an das Mutterhaus geliefert werden, bzw. Kontrolle der Produktion, die ein Subunternehmer für das Mutterhaus vornimmt

· Hilfestellungen und sonstige Leistungen bez. der Güter, die durch das Mutterhaus an Groß- oder Einzelhändler verteilt werden

· Sammeln und Weiterleiten von Informationen über neue Produkte und Dienstleistungen für das Mutterhaus

· Berichte an das Mutterhaus über die geschäftliche Situation in Thailand.

Einem Repräsentationsbüro ist es also nicht erlaubt, selbständig Geschäfte zu betreiben. Es darf für das Mutterhaus tätig werden aber keinerlei Einkommen aus seiner Tätigkeit innerhalb Thailands erzielen.

3. Unterhaltskosten

Da das Repräsentationsbüro keine Einnahmen haben darf, muss dessen Finanzierung durch die Hauptverwaltung nachgewiesen werden, indem es innerhalb von drei Jahren 5 Mio. THB (ca. 105.000 €) in das Land einführt. Darin können sämtliche Kosten eingerechnet werden auch z.B. Reisekosten.

Kosten

Für die Anmietung eines Büros im Großraum Bangkok fallen folgende Kosten an: 200 – 500 THB/m²(ca. 4 – 10 €) plus Nebenkosten plus 1 - 3 Monatsmieten Kaution. Die Kosten für die Einrichtung eines Büros sind mit denen in Deutschland vergleichbar, wenn man lokale Einrichtungsgegenstände verwendet.

Arbeitskosten

Die Arbeitskosten für eine Sekretärin (mit Englischkenntnissen) betragen ca. 15.000 – 35.000 THB (ca. 300 – 700 €) pro Monat einschließlich Lohnnebenkosten. Für einen Sachbearbeiter (mit Englischkenntnissen) fallen 15.000 – 30.000 THB (ca. 300 – 600 €) pro Monat einschließlich Lohnnebenkosten an.

Fahrzeug

Die Kosten für ein Fahrzeug betragen für einen Mittelklassewagen, z.B. Toyota Corona1,6, 5-jährige Abschreibung, inklusive Nebenkosten ca. 30.000 THB (ca. 600 €) pro Monat. Das Gehalt für den Fahrer beträgt ca. 7.500 THB (ca. 150 €)

Service-Appartement

Ein Service-Appartement (50 m²) inklusive Gemeinschaftsraum kann ab ca. 30.000 THB (ca. 625 €) pro Monat angemietet werden. Für eine Familie (Haus, Appartement ca. 200 m²) fallen an Kosten ca. 70.000 – 150.000 THB (1.400 – 3.000 €) an. Eine Maid kostet im Monat ca. 7.000 THB (ca. 140 €).

Steuerpflicht des Geschäftsführers einer der deutschen Körperschaftssteuer unterliegenden Gesellschaft mit Wohnsitz im Ausland

Januar 2008

A. Rechtslage

1. Einführung

Den Ausführungen liegt folgender Sachverhalt zugrunde:

Herr Meyer ist Geschäftsführer der deutschen Müller-GmbH mit Sitz in Rosenheim. Herr Meyer lebt dauerhaft in Bangkok (Thailand) und verbringt im Laufe des Jahres weniger als sechs Monate in Deutschland.

Diese Situation ist mit einigen steuerrechtlichen Besonderheiten verbunden, die im Folgenden näher erläutert werden sollen.

Der Ausgangspunkt ist die Vorschrift des § 1 Abs. 4 EStG, danach gilt:

„Natürliche Personen, die im Inland weder Wohnsitz noch ihren gewöhnlichen Aufenthalt haben [sondern z.B. in Thailand] sind (...) beschränkt einkommenssteuerpflichtig [in Deutschland], wenn sie inländische [deutsche] Einkünfte im Sinne des § 49 haben“

§ 49 EStG bestimmt, welche Einkünfte ihrer Art nach unter die beschränkte Steuerpflicht iSv § 1 Abs. 4 EStG fallen. Anknüpfungspunkt der Besteuerung ist weniger die Person des Einkommensbeziehers als die Quelle, aus der die Einkünfte fließen.

2. Grundsätze

Es wird also nicht das Welteinkommen, sondern es werden nur die in §49 EStG genannten Einkünfte vom deutschen Fiskus besteuert.

Beschränkt steuerpflichtige Einkünfte gem. §49 EStG sind:

1. Einkünfte aus einer im Inland betriebenen Land- und Forstwirtschaft (..); [z.B.Weinbau, Gartenbau, Pferdezucht]

2. Einkünfte aus Gewerbebetrieb (...);[z.B. gewerbliche Unternehmen]

3. Einkünfte aus selbständiger Arbeit (...), die im Inland ausgeübt oder verwertet wird oder worden ist; [z.B. freiberufliche Tätigkeit: z.B. Anwalt, Arzt]

4. Einkünfte aus nichtselbständiger Arbeit (...), die

a) im Inland ausgeübt oder verwertet wird oder worden ist (...);[z.B. Gehälter, Gratifikationen]

b) aus inländischen öffentlichen Kassen

c) als Vergütung für eine Tätigkeit als Geschäftsführer, Prokurist oder Vorstandsmitglied einer Gesellschaft mit Geschäftsleitung im Inland bezogen werden

d) als Entschädigung im Sinne des § 24 Nr. 1 für die Auflösung eines Dienstverhältnisses

e) an Bord eines im internationalen Luftverkehr eingesetzten Luftfahrzeugs ausgeübt wird

5. Einkünfte aus Kapitalvermögen (...);[z.B. Gewinnanteile, Dividenden, Zinsen]

6. Einkünfte aus Vermietung und Verpachtung (...);[z.B. von unbeweglichen Vermögen (Wohnung) in Deutschland]

7. sonstige Einkünfte iSd § 22 Nr. 1, soweit sie dem Steuerabzug unterworfen sind; [z.B. wiederkehrende Bezüge (Renten)]

8. sonstige Einkünfte iSd § 22 Nr.2 (...);[z.B. private Veräußerungsgeschäfte]

9. sonstige Einkünfte iSd § 22 Nr.3 (...) [z.B. Einkünfte aus gelegentlicher Vermittlung]

3. Doppelbesteuerungsabkommen

Besteht jedoch ein Doppelbesteuerungsabkommen, so gehen die dortigen Regelungen der Anwendung des § 49 EStG vor (vgl. § 2 AO). § 49 EStG ist mithin nur anwendbar, wenn das entsprechende DBA der Bundesrepublik ein Besteuerungsrecht zuweist.

Ein Doppelbesteuerungsabkommen kann jedoch keine inländische Steuerpflicht begründen oder erweitern, sondern nur eine bestehende Steuerpflicht einschränken. Durch Verzicht auf eine inländische Besteuerung wird folglich jeder Besteuerungstatbestand des § 49 EStG gegenstandslos, so dass deutsche Einkommenssteuer nicht zu entrichten ist.

4. Steuerpflicht des Geschäftsführers einer GmbH nach § 49 Abs. 1 Nr. 4 a) [Ausübung oder Verwertung im Inland]

Gem. § 49 Abs.1 Nr. 4 EStG sind inländische Einkünfte die der beschränkten Steuerpflicht unterliegen

„Einkünfte aus nichtselbständiger Arbeit (§19), die im Inland [Deutschland] ausgeübt oder verwertet wird oder worden ist (...)“

a. Merkmal: Ausübung der Tätigkeit

Die Problematik, die bezüglich der Geschäftsführung im Ausland besteht ist, wo die Ausübung der Tätigkeit des Geschäftsführers stattfindet.

Der Ort der Arbeitsausübung befindet sich grundsätzlich dort, wo sich der Arbeitnehmer zur Ausführung seiner Tätigkeit persönlich aufhält. Besonderheiten gelten allerdings für andere als körperliche Tätigkeiten. Hierbei kann sich die Frage ergeben, ob nicht die „Ausübung“ einer Tätigkeit eher dort geschieht, wo die Tätigkeit Wirkungen entfaltet, als dort, wo sich die Person im Augenblick der Tätigkeit tatsächlich aufhält.

aa. Frühere Rechtsprechung

Diesbezüglich wurde von der deutschen Rechtssprechung für Organe von Kapitalgesellschaften entschieden, dass die Tätigkeit am Ort des Sitzes der Gesellschaft ausgeübt wird. Argumentativ wurde dies begründet, dass bei einer Arbeitsausübung, die maßgeblich in der Wahrnehmung von Leitungsfunktionen besteht, sich die Tätigkeit der betreffenden Person nicht im Treffen und der Bekanntgabe von Entscheidungen erschöpft, sondern in der Durchsetzung der erteilten Weisungen kraft der Persönlichkeit und des Geschickes der Leitungsperson, so dass das entscheidende Gewicht jeder Einzelanweisung sich am Ort des Unternehmens entfaltet, auch wenn die Person dort nicht anwesend ist.

bb. heutige Rechtsprechung

Dem wurde entgegnet, dass letzten Endes der Ort der Tätigkeit durch den Ort der Verwertung ersetzt wird.

Dieser Gegenauffassung hat sich nunmehr auch die deutsche Rechtssprechung angeschlossen und sich damit völlig von der eigenen herkömmlichen Auffassung gelöst. Für den Ort der Tätigkeit wird nunmehr auf den tatsächlichen Aufenthaltsort des Geschäftsführers abgestellt. Die Folge dieser Rechtssprechung ist, dass der im Ausland ansässige Geschäftsführer seine Tätigkeit nicht im Inland (Deutschland) ausübt, mithin keine Steuerpflicht in Deutschland besteht.

b. Merkmal: Verwertung der Tätigkeit

Darüber hinaus ist zu untersuchen, wo es bei Entscheidungen des Geschäftsführers zu einer Verwertung iSv. § 49 Abs.1 Nr. 4 EStG kommt. Sollte die Tätigkeit des im Ausland ansässigen Geschäftsführers in Deutschland verwertet werden, wäre dieser im Inland steuerpflichtig.

Hierbei ist zu beachten, dass die reine Arbeitsleistung nicht der Verwertung zugänglich ist. Es genügt auch nicht, dass die Vergütung zu Lasten eines inländischen Auftraggebers gezahlt wird.

Vielmehr setzt Verwertung einen über die Arbeitsleistung hinausgehenden Vorgang voraus, ein körperliches oder geistiges Arbeitsprodukt, das der Steuerpflichtige selbst dem Inland zuführt. Darüber hinaus kann nur derjenige, der die verwertbare Leistung selbst erbracht hat, nicht ein Dritter, der das Ergebnis einer selbständigen Tätigkeit erworben hat, verwerten. Befindet sich der Geschäftsführer im Ausland ist eine Verwertung in Deutschland nicht gegeben.

Indem der Geschäftsführer der inländischen Unternehmung lediglich Anweisungen an diese gibt, die Dritte umsetzen, wird die Arbeitsleistung des Geschäftsführers nicht iSv § 49 Abs.1 Nr. 4 EStG verwertet.

c. Fazit

Die beschränkte Steuerpflicht des im Ausland ansässigen Geschäftsführers ist nicht schon nach § 49 Abs. 1 Nr. 4 a) EStG begründet, da mit Thailand als Ort der Tätigkeit weder eine Verwertung noch eine Ausübung der Tätigkeit in Deutschland stattfindet. Deutschland hat insoweit kein Besteuerungsrecht, so dass es auf die Regelungen im Doppelbesteuerungsabkommen nicht ankommt.

Voraussetzung ist jedoch, dass die Unternehmung in Deutschland weiterhin unbeschränkt steuerpflichtig ist, damit es nicht zur Anwendung des § 12 KStG und mithin zur Auflösung und Liquidation der Unternehmung kommt. Solange jedoch der Sitz gem. § 11 AO in Deutschland beibehalten wird, begründet dieser nach § 1 Abs. 1 KStG stets die unbeschränkte Steuerpflicht, so dass bei einer Verlegung der Geschäftsleitung die deutsche Kapitalgesellschaft nicht aus der unbeschränkten Steuerpflicht gem. § 12 KStG ausscheidet. Etwas anders gilt jedoch nur dann, wenn der Ort der Geschäftsleitung der einzige Anhaltspunkt für die unbeschränkte Steuerpflicht ist.

5. Steuerpflicht des Geschäftsführers einer GmbH nach § 49 Abs. 1 Nr. 4 c) [Ausübung oder Verwertung im Inland]

Es ist jedoch denkbar, dass der im Ausland ansässige Geschäftsführer gem. § 49 Abs. 1 Nr. 4 c) EStG in Deutschland beschränkt steuerpflichtig ist. Die Vorschrift wurde durch das Gesetz zur Änderung steuerlicher Vorschriften 2001 (Steueränderungsgesetz 2001) eingeführt.

Die Intention des Gesetzgebers war es, einen Steuertatbestand zu schaffen, der die Einkünfte in Deutschland besteuert, sobald die Bundesrepublik das Besteuerungsrecht hat. Die Änderung dient dem Ausgleich der einschränkenden Auslegung des Verwertungstatbestandes durch die Rechtssprechung.

Der Wortlaut macht das Besteuerungsrecht der Bundesrepublik Deutschland von zwei Voraussetzungen abhängig. Zum einen muss der Geschäftsführer eine Vergütung für seine Tätigkeit von der Gesellschaft erhalten. Zum anderen muss sich die Gesellschaftsleitung der Kapitalgesellschaft im Inland befinden. Soweit das erste Tatbestandsmerkmal keine besonderen Schwierigkeiten aufwirft, hängt der Ort der Geschäftsleitung von den Umständen des Einzelfalls ab.

Gem. § 10 AO ist die Geschäftsleitung der Mittelpunkt der geschäftlichen Oberleitung. Dieser ist dort, wo der für die laufende Geschäftsleitung maßgebende Wille gebildet wird. Bei einer Körperschaft ist das regelmäßig dort, wo die zur Vertretung befugten Personen die ihnen obliegende laufende Geschäftsführertätigkeit enthalten. Das ist der ort, an dem sie die tatsächlichen, organisatorischen und rechtsgeschäftlichen Handlungen vornehmen, die der gewöhnliche Betrieb der Gesellschaft mit sich bringt, d.h. es kommt auf die Erledigung der Tagesgeschäfte an. In der Regel sind es die Büroräume des Unternehmens, wenn dort die maßgeblichen Entscheidungen getroffen werden. Ist dies nicht der Fall, so kommt es auf den Wohnsitz des Geschäftsführers an, falls er von dort aus entscheidend tätig wird.

1. Beispiel (GmbH mit einem Geschäftsführer)

Der Wohnsitz des Geschäftsführers einer GmbH befindet sich im Ausland. Der Ort der Geschäftsleitung liegt somit weiterhin an dem Ort der Tätigkeit, mithin im Ausland. Die Geschäftsleitung findet somit nicht im Inland statt.

Ergebnis:

Für den alleinigen Geschäftsführers einer deutschen Gesellschaft im Ausland ergibt sich entgegen der eindeutigen Intention des Gesetzgebers keine Änderung der bisherigen Rechtslage. Weiterhin befinden sich der Ort der „Ein-Mann“-Geschäftsleitung im Ausland, so dass die Bezüge (Gehalt) des Geschäftsführers nicht in Deutschland steuerpflichtig sind.

2. Beispiel (GmbH mit zwei Geschäftsführern)

Fraglich ist jedoch, wie der Fall zu beurteilen ist, wenn zwei Personen, sowohl jeweils einer im In – und einer im Ausland, die Geschäftsführer der Inlandsunternehmung sind. Nunmehr ist der alleinige Ort der Geschäftsführung nicht mehr auf das Ausland beschränkt. Die Geschäftsleitung befindet sich auch im Inland. Die Folge könnte die inländische Steuerpflicht beider Geschäftsführer sein, was ein erstaunliches Ergebnis wäre.

Es könnte daran gedacht werden auf § 10 AO abzustellen, der auf den Mittelpunkt der geschäftlichen Oberleitung abstellt, um den Ort der Geschäftsleitung zu bestimmen.

Es bleibt diesbezüglich abzuwarten, wie die deutschen Finanzämter und Gerichte auf eine entsprechende Konstellation reagieren werden und ob der Schwerpunkt der Geschäftsführung hierbei eine Rolle spielen wird.

In dieser Hinsicht könnte - je nach Auffassung der Finanzverwaltung der Finanzgerichte - das Besteuerungsrecht der Bundesrepublik Deutschland bestehen, so dass es auf die Regelungen des Doppelbesteuerungsabkommens maßgeblich ankommt.

B. Doppelbesteuerungsabkommen

Die speziellen Regelungen der Doppelbesteuerungsabkommen könnten § 49 Abs.1 Nr. 4 EStG ausschließen. Eine Untersuchung soll anhand des deutsch-thailändischen Doppelbesteuerungsabkommens (DBA) geschehen.

Eine entsprechende Regelung findet sich in Art. 14 DBA.

„(...)können Vergütungen, die eine in einem anderen Vertragsstaat [Thailand] ansässige natürliche Person[z.B. Geschäftsführer einer deutschen GmbH] für unselbständige oder selbständige Arbeit (...) bezieht, nur in diesem Staat [Thailand] besteuert werden, es sei denn, dass die Arbeit in dem anderen Vertragsstaat [Deutschland] ausgeübt wird.(...)“

Nach DBA ist lediglich auf den Ort der Arbeitsausübung abzustellen. Dieser liegt bei dem Geschäftsführer mit Wohnsitz im Ausland einer der deutschen Körperschaftssteuer unterliegenden Gesellschaft, wie oben festgestellt, nicht im Inland sondern im Ausland. Demzufolge ist das Gehalt des Geschäftsführers in Deutschland nicht steuerpflichtig.

Eine Ausnahme ergibt sich jedoch für die Zeit der Tätigkeit in Deutschland. Da für diesem Zeitraum der Ort der Ausübung der Tätigkeit Deutschland ist, hat Deutschland für diesen Zeitraum auch das Besteuerungsrecht.

Eine Besteuerung wird somit grundsätzlich bei Auslandstätigkeit in einem DBA-Staat durch das jeweilige DBA ausgeschlossen.

§ 49 EStG ist mithin nicht anwendbar.

C. Unternehmenssteuerreform 2008

Aufgrund der Unternehmenssteuerreform 2008 sind hinsichtlich der Besteuerung ausländischer Geschäftsführer in Deutschland keine speziellen Änderungen ersichtlich.

D. Fazit

Wie die Darstellung gezeigt hat, besteht für einen im Ausland ansässigen Geschäftsführer grundsätzlich eher keine beschränkte Steuerpflicht in Deutschland. An dieser Rechtslage wird sich durch die Unternehmensreform 2008 auch nichts ändern.

E. Besteuerung eines deutschen Direktors in thailändischen Gesellschaften

Den weiteren Ausführungen liegt folgender Sachverhalt zugrunde:

Eine in Deutschland unbeschränkt steuerpflichtige Person ist Mitglied des Board of Directors in einer thailändischen Limited Company. Sie ist zur Vertretung der Gesellschaft berechtigt, nimmt aber gleichzeitig auch Kontrollfunktionen gegenüber anderen Personen wahr.

Aufgrund der unbeschränkten Steuerpflicht in Deutschland und der Einkünfte aus Thailand können beide Länder einen Anspruch auf Besteuerung der Bezüge erheben. Zur Abgrenzung der Besteuerungsrechte kann somit das Doppelbesteuerungsabkommen zwischen Deutschland und Thailand vom 10. Juli 1967 (BGBl. 1968 II, S. 590; im Folgenden DBA) herangezogen werden. Bei den Bezügen des Director handelt es sich um eine unselbständige Tätigkeit i.S.d. Art. 14 DBA. Die Konsequenz der Anwendung von Art. 14 DBA wäre die Besteuerung in Deutschland als dem Ansässigkeitsstaat. Art. 14 DBA weist Thailand nur dann das Besteuerungsrecht zu, wenn die Arbeit in Thailand ausgeübt wird. Nach der oben getroffenen Annahme, wird jedoch die Leitungsfunktion von Deutschland aus wahrgenommen, so dass es beim Besteuerungsrecht Deutschlands verbleibt.

Etwas anderes würde jedoch dann gelten, wenn auf den Sachverhalt Art. 16 DBA Anwendung finden würde. Dieser erlaubt die Besteuerung der Bezüge in Thailand als dem Staat, in dem die Gesellschaft ihren Sitz hat. Die Anwendung von Art. 16 setzt jedoch voraus, dass „Aufsichtsrat- oder Verwaltungsratsvergütungen“ vorliegen. In dieser Hinsicht ist jedoch darauf hinzuweisen, dass die deutsche Übersetzung von der thailändischen/englischen abweicht. In der englischen/thailändischen Fassung ist vielmehr von „board of directors“ die Rede.

Dieser Begriff ist im DBA nicht einheitlich definiert, so dass grundsätzlich jedes Land den Begriff nach seinem nationalen Recht unter Berücksichtigung des DBA-Zusammenhangs auslegen kann, Art. 3 Abs .2 DBA.

Aus der Thai-/englischen Perspektive wird es sich bei dem „board of directors“ um ein Organ handeln, das zur Vertretung der Gesellschaft befugt ist.

Aus der deutschen Sicht handelt es sich bei dem Begriff des „Aufsichts- oder Verwaltungsrats“ jedoch um ein Organ, das zur Überwachung der Geschäftsführung bestimmt ist. Kein Aufsichtsrat liegt aus der deutschen Sicht dann vor, wenn die Befugnisse nicht nur auf die Überwachung der Geschäftsführung beschränkt sind. Nimmt ein Organ auch unmittelbare Leitungs- oder Mitverwaltungsaufgaben wahr, so ist er dann kein Mitglied des Aufsichtsrats. Dieser sprachliche Unterschied führt zu der Konsequenz, dass in dem vorliegenden Beispielsfall Deutschland Art. 14 [unselbständige Tätigkeit; Besteuerung in Deutschland] und Thailand Art. 16 [board of directors; Besteuerung in Thailand] anwenden würden. Die Besteuerung könnte nur durch ein langwieriges Verständigungsverfahren vermieden werden.

In der deutschen Literatur werden unterschiedliche Ansätze vorgeschlagen, um dieses Problem zu lösen. Laut Vogel (in: Vogel, DBA, 4. Auflage, 2003, Art. 16, Rn. 11) sollten Organe thailändischer Gesellschaften nach dem thailändischen Verständnis behandelt werden. Danach sei Art. 16 anzuwenden, da die Limited Company eine thailändische Gesellschaft ist. Toilf (in: Die Besteuerung von Geschäftsführern, Vorständen und Aufsichtsräten, S. 381ff, 389) und Land (in: SWI 1992, S. 328) schlagen vor, den englischsprachigen Wortlaut stets anzuwenden, da dieser dem OECD-Musterabkommen entspreche, welches als Auslegungshilfe herangezogen werden solle.

Der deutsche Bundesfinanzhof hat sich jedoch in seiner Rechtsprechung vom 31.1.1978 (VIII R 159/73, BStBl. 1978 II, 352) und vom 5.10.1994 (I R 67/93, BStBl. 1995 II, 95) einer anderen Literaturauffassung von Wassermeyer (Debattin/Wassermeyer, OECD-MA, Art. 16, Rn. 15) angeschlossen. Danach soll Art. 14 Anwendung finden. Dies ergebe sich aus dem Verhältnis zwischen Art. 14 und Art. 16. Darüber hinaus solle die deutsche Finanzverwaltung nur eigenes Verständnis zugrunde legen. Diese Auffassung hat damit zur Folge, dass wenn jemand geschäftsführende Aufgaben in Thailand wahrnimmt, dann kann er aus der deutschen Sicht nicht mehr als Aufsichtsratsmitglied nach Art. 16 angesehen werden. Er kann nur unter Art. 14 fallen. Die thailändische Finanzverwaltung stellt jedoch nach wie vor darauf ab, ob jemand Mitglied des „board of directors“ ist und wendet Art. 16 DBA an. Aus den divergierenden Auffassungen kann unter Umständen eine Doppelbesteuerung resultieren.

Zur Vermeidung von Situationen, in denen Bezüge des directors doppelt – einmal in Deutschland als Einkünfte aus unselbständiger Tätigkeit und einmal in Thailand als Bezüge eines Mitglieds des „board of directors“- besteuert werden, ist im Vorfeld ein Beratungsgespräch unentbehrlich.

[1] This phrase was added according to the Procedure Order of the Department of Employment governing criteria and condition for expatriate’s work permit approval consideration (2^nd issue) B.E. 2545, dated July 11, 2002.

[2] See Preecha Mahorabutr, Guideline for Litigation, Chapter 12 Common Civil Execution Procedures, P. 179 - 205, Kumpol Legal Book Publishing (1993)

[3] If the right of superficies is not made in writing and is not registered by the competent official, the building is not regarded as a component part of the land (Section 146 CCC) and thus is not owned by the land owner (Supreme Court Decision Case No. 116/2513 (1970)). It takes effects only against the first owner as a personal right, not against the new owner (Supreme Court Decision Case No. 3702/2535 (1992). Therefore, the new owner may exercise his right of ownership over the land by asking the superficies right holder to get out and remove the house or building out of the land. The superficies right holder may claim against the first owner for compensation for breach of contract. Therefore, it is important that the right of superficies should be registered.

[5] BSG vom 18. Dezember 2003, Az.: B 11 AL 35/03R

[6] BDA = Bundesvereinigung der Deutschen Arbeitgeberverbände

[7] BDI = Bundesverband der Deutschen Industrie e.V.

[11] DBA Vietnam vom 16. November 1995, BGBl. II 1996, 2623, BStBl. I 1996, 1422; in Kraft getreten: 27. Dezember 1996 (BGBl. II 1997, S.752).

[12] Zur Entwicklung der OECD (Organization for Economic Co-operation and Development) Musterabkommen vgl. Vogel, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Einleitung.

[13] Prokisch, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 20, Rn. 29; siehe dazu auch unter 3.1.

[14] Lehner, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 4 Rn. 29.

[15] Vgl. mit weiteren Nachweisen: Lehner, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 4, Rn. 29.

[16] Lehner, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 4, Rn. 24.

[17] Zum Vergleich: Bei einer Einkommensbesteuerung von Unternehmen ist die örtliche Steuerbehörde Vietnams der jeweiligen Stadt oder Provinz zuständig, in der das Unternehmen seinen Sitz hat.

[18] Art. 3 Ordinance Amending and Supplementing a Number of Articles of the Ordinance on Income Tax on High-Income Earners (in Kraft seit 1. Juli 2004).

[19] Im Gegensatz werden folgende Einkommensarten nicht besteuert: Zinsen auf Bankeinlagen und Spargelder, Zinsen auf Schuldverschreibungen, Wechsel, Anleihen, Obligationen und Aktien. Ebenfalls keine Einkommenssteuer wird auf finanzielle Entlohnungen für technische Entdeckungen, Erfindungen, nationale und internationale Preise oder finanzielle Vergünstigungen für staatlich verliehene Preise und Titel verlangt. Vom versteuernden Einkommen ausgenommen sind auch sozialversicherungsrechtliche Beihilfen, Versicherungsleistungen, Abfindungszahlungen, Arbeitslosengeld, sowie die vom Gehalt abgezogenen Beiträge zur Sozial- und Krankenversicherung.

[20] Zum Begriff der Ansässigkeit nach vietnamesischen Steuerrecht siehe oben unter 1.

[21] Tischbirek, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art.10, Rn. 204.

[22] Für Einzelheiten zur Besteuerung von Dividenden bei Schachtelbeteiligungen nach dem DBA Vietnam siehe: Tischbirek, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art.10, Rn.71 u. 76.

[23] Protokoll zum DBA 1995 anlässlich der Unterzeichnung des Abkommens zwischen der Bundesrepublik Deutschland und der Sozialistischen Republik Vietnam zur Vermeidung der Doppelbesteuerung auf dem Gebiet der Steuern vom Einkommen und vom Vermögen am 16. November 1995 in Hanoi. Veröffentlich u.a. in: Beck’sche Textausgaben, Doppelbesteuerungsabkommen, Hrsg. Prof. Dr. Franz Wassermann.

[24] Zu Einzelheiten vergleiche Pöllath, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 11, Rn. 49ff..

[25] Pöllath, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 12, Rn. 84.

[26] Für den deutschen Lizenzgeber können sich deswegen Schwierigkeiten wegen des Verhältnisses zu § 34 d EStG bei der Anrechnung der gezahlten Steuer ergeben. Vgl. insoweit Pöllath, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 12 Rn.36.

[27] Prokisch, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 13,
Rn. 57j.

[28] Vgl. Insoweit Prokisch, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 20, Rn. 3ff..

[29] Prokisch, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 20, Rn. 28.

[30] Prokisch, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 20, Rn. 29.

[31] Als vom „Kassenstaat“ gezahlt, gelten die Vergütungen, die vom Vertragsstaat selbst oder von einer seiner Gebietskörperschaften geleistet werden, vgl. Rodi, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 19, Rn. 21.

[32] Rodi, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 19, Rn. 16.

[34] Rodi, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 19, Rn.41.

[35] Pöllath, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 12, Rn.30.

[36] United Nations Model Double Taxation Convention Between Developed and Developing Countries, Revised Version, New York 2001; vgl. auch Pöllath, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4. Auflage, 2003, Art. 12, Rn. 30.

[37] Eine Übersicht findet sich bei: Vogel, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4.Auflage, 2003, Art. 23 Rn.16.

[38] Zur Freistellungsmethode vgl. Vogel, in: Vogel/Lehner, DBA – Doppelbesteuerungsabkommen Kommentar, 4.Auflage, 2003, Art.23 Rn.56 ff.; zur Anrechnungsmethode vlg. Vogel, a.a.O., Art. 23 Rn.122 ff..

[39] Bezüglich der Reduzierung vgl. Ausführungen zu Art. 12 DBA Vietnam (Lizenzgebühren und Vergütungen für technische Dienstleistungen) oben unter 2.2.3.

[40] Siehe dazu nähere Erläuterungen oben unter 2.1.1.

Summary of Income Tax Free Payment for Travelling, but still Tax Deductible for the Company
A. Company payments to Managing Director (per day) for:		Thailand (main Company office in Bangkok)		All other countries
A. Company payments to Managing Director (per day) for:		Bangkok	Outside Bangkok	All other countries
· Travel	to get reimbursed by Company, need Receipt	no limit	no limit	no limit
· Accommodation, Hotel	to get reimbursed by Company, need Receipt	no limit	no limit	no limit
· Food (business purpose)	to get reimbursed by Company, need Receipt	no limit	no limit	no limit
· Food (personal purpose)	even with Receipt, if reimbursed, then taxable for employee
· Extra monies, Additional Salary, Bonus for work outside:	No Exemption, taxable for employee!!
· but per diem	Tax free to cover extra costs (without Receipt) caused by traveling, maximum up to:	THB 144.00	THB 240.00	THB 3,100.00

B. Company payments to Supporting Staff (per day) for:		Thailand (main Company office in Bangkok)		All other countries
B. Company payments to Supporting Staff (per day) for:		Bangkok	Outside Bangkok	All other countries
· Travel	to get reimbursed by Company, need Receipt	no limit	no limit	no limit
· Accommodation, Hotel	to get reimbursed by Company, need Receipt	no limit	no limit	no limit
· Food (business purpose)	to get reimbursed by Company, need Receipt	no limit	no limit	no limit
· Food (personal purpose)	even with Receipt, if reimbursed, then taxable for employee
· Extra monies, Bonus for work outside, Additional Salary:	No Exemption, taxable for employee!!
· but per diem	Tax free to cover extra costs (without Receipt) caused by traveling, maximum up to:	THB 72.00 - THB 108.00	THB 120.00 - THB 180.00	THB 2100.00

Example: MD fly to Europe for 10 days, he or she can get Tax free as lump-sum per diem of THB 31,000 (without Receipt) + actual expense for plane ticket, hotel room, and dinner party (for clients or customers only (!!), all with receipt)

Who Needs a Foreign Business Operating License?

(Updated Version July 2003)

Tor. 4 Form Page 1

Applicant

Tor. 4 Form Page 2

List of Supporting Documents

Affidavit of the Applicant

Date: ………………………………..……….………

Affidavit of the Officer

Date: ………………………..……..……………

The Thai Value Added Tax (VAT) System

Invoice issued for?

service

o VAT exempted business

o 0 % VAT

Output Tax – Input Tax = tax debt (to pay monthly)

To be used as

Total Revenue

Total purchase

Output VAT – claimable Input VAT:

Thai Withholding Tax System

Möglichkeiten der Steueroptimierung bei Mietverträgen

Thailand / Deutschland

II. Überblick

n.a.

- Withholding Tax Certificate für Zinszahlungen von Thailand nach Deutschland

- Fremdwährungsrechnungen innerhalb Thailands

B. Fremdwährungsrechnungen innerhalb Thailands

Problematik der Dividendenausschüttung bei nicht vom BOI geförderten thailändischen Firmen unter spezieller Berücksichtigung des „Cross-Shareholdings“

-- Cross Shareholding

Gewinn vor Steuern: 100,00

Gewinn nach Steuern 70,00

Ausschüttbare Dividende 63,00

A pays to B: 63,00

-- Company B

Gewinn Company A vor Steuern: 100.00