The Double Taxation Relief (Taxes on Income) (Thailand) Order 1981

EXPLANATORY NOTE

Under the Convention with Thailand scheduled to this Order air transport profits, certain trading profits not arising through a permanent establishment and the salaries of temporary business visitors are, subject to certain conditions, to be taxed only in the country of the taxpayer's residence. Where an enterprise which is a resident of one country carries on business through a permanent establishment in the other, the profits of the enterprise which are attributable to that permanent establishment may be taxed in that other country.

Governmental remuneration and pensions are normally to be taxed by the paying Government only. The remuneration of visiting teachers and certain payments made to visiting students will, subject to certain conditions, be exempt in the country visited. Income derived by a resident of one country from independent personal services performed in the other country may be taxed in that other country and income derived by public entertainers from their personal activities may normally be taxed in the country in which those activities are exercised.

Income from immovable property and capital gains arising from the disposal of such property may be taxed in the country in which the property is situated. Capital gains arising from the disposal of movable property are normally to be taxed only in the country of the taxpayer's residence unless they arise from the disposal of assets of a permanent establishment or a fixed base which the taxpayer has in the other country.

Where income continues to be taxable in both countries relief from double taxation is to be given by the country of the taxpayer's residence. The credit to be given in the United Kingdom for tax payable in Thailand is to include credit for tax spared under certain provisions of Thai law.

The Convention provides that where a United Kingdom company pays a dividend to a resident of Thailand (other than to a company which controls 10 per cent or more of the voting power in the paying company), the recipient will, subject to certain conditions, receive the tax credit to which an individual resident in the United Kingdom and in receipt of such a dividend would be entitled, less tax at a rate not exceeding 15 per cent on the aggregate of the dividend and the tax credit. In the case of a dividend paid by a Thai company to a resident of the United Kingdom the tax charged in Thailand is not to exceed 15 per cent where the Thai company is engaged in an industrial under-taking and the recipient of the dividend is a United Kingdom company which controls at least 25 per cent of the voting power in the paying company. If only one of these conditions is met then the Thai tax may not exceed 20 per cent.

The rate of tax to be imposed by the country of source on interest paid to a resident of the other country is, in general, not to exceed 25 per cent of the gross amount of the interest. In the case of interest paid to a bank or other financial institution the rate of tax in the country of source is not to exceed 10 per cent. The country of source will exempt from tax interest payable to the Government, a local authority, or Central Bank (or any agency wholly owned by such Government or local authority) of the other country.

The rate of tax in the country of source on royalties flowing to the other country is not to exceed 5 per cent in the case of copyright royalties and 15 per cent in the case of patent and certain other royalties.

There are also provisions for safeguarding residents of one country against discriminatory taxation in the other country and for the exchange of information and consultation between the competent authorities of the two countries.

The Convention is to take effect in the United Kingdom in the calendar year in which the instruments of ratification are exchanged.