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March 2003, the House of Representatives rejected the latest
version of the Geographical Indications Act (GI Act) based
on the failure of the Act to protect animal and plant varieties
native to Thailand.
indications are those that identify the place of origin of
a product where a specific quality, reputation or other characteristic
of a product can be attributed to the geographical origin.
The EU has already enforced a GI bill to protect products
with unique geographical connections such as French Champagne
and Scotch Whiskey.
existing bill was drafted by the Commerce Ministry Intellectual
Department to meet Thailand's obligation under the WTO's trade
related aspects of intellectual rights (TRIPS).
House rejected the existing bill stating that it did not include
plant and animal strains and food and agricultural products
on its list, thus allowing competitors to make use of Thai
groups have protested over the GI act and cited US lobbying
efforts intent on excluding Thailand agricultural products
from the protected products list. Fruit and rice strains such
as Jasmine rice, (along with non-agricultural products such
as Thai traditional massage and medical treatments) were excluded
from the proposed Act. An American firm has already reportedly
used the name "Jasmine" in their rice.
Ruling Affects BOI
early March 2003, Deputy Prime Minister Dr. Somkid Jatusripitak
issued a statement clarifying the effects of a recent World
Trade Organization (WTO) ruling that may affect Board of Investment
WTO ruling was that corporate tax exemptions for export businesses
violated WTO rules. Pursuant to the WTO's agreement on Subsidies
and Counterfeiting measures, Thailand had been ordered to
cease benefits by the end of 2002. Thailand had requested
a ten year exemption, but this was turned down by the WTO
which will now only allow a one year extension.
Deputy Prime Minister stated that projects that are not involved
in export and projects that were approved by the BOI subsequent
to August 1, 2000 would not be affected by the WTO ruling.
The only BOI projects affected by the WTO ruling would therefore
be those who received tax privileges and whose 10 year export
condition has not yet expired. Further the WTO has allowed
the BOI a one year period to implement new restrictions and
there is an additional 2 year grace period.
currently comprise about 55% of gross domestic product, which
is much higher than it has been in the past. The BOI has been
actively involved in the establishment and promotion of export
industries and the BOI tax holidays and waivers have been
a key force in this development.
to the BOI, 532 projects will be affected. Extensions on privileges
after the close of 2003 (during the two year grace period)
will be considered on a yearly basis.
BOI is currently considering options to compensate investors
and prevent the relocation of industries to competitor countries.
Other BOI News:
in January 2003 indicated that Board of Investment officials
were considering offering greater incentives to foreign film-makers
establishing projects within Thailand, Among the benefits
being considered are: Foreign actors may be taxed a flat rate
of 10% rather than the existing progressive taxation of a
maximum of 37%. Another consideration is an exemption to the
BOI's zoning requirements which favors businesses in outer-lying
regions rather than Bangkok. This is due to the fact that
Bangkok locations are more favorable for filmmakers.
Promotion for Electronic Industry
December, the BOI introduced a new promotional package for
the Electronics Industry that applied to businesses having
sales of at least 2.5 billion per year. Benefits including
tax and import duty exemptions would be similar to those offered
other businesses. Requirements for eligibility include technology
transfer programs for Thai entrepreneurs. Further, qualifying
projects would not be restricted to current investment zones.
8 December 2002, the Act regarding Fraudulent Borrowing was
signed into law. The Act replaces a previously issued Royal
Proclamation. The Act states that whoever advertises to the
public that they will pay a rate of interest higher than the
maximum rate allowed to financial institutions on money loaned
to them, when he or she knows that such money will be used
to make payments to (other) Lenders and realizes that it would
not be possible to operate a legitimate business under the
offered rate of interest, said person shall be guilty of an
offense of fraudulent borrowing.
any person who does not hold a valid license to operate a
business involving payment by means of foreign currency and
who makes an announcement or advertisement to the public that
offers either (1) buying or selling of foreign currencies,
or (2) speculating profits regarding the rate of exchange
of different currencies, shall also be guilty of Fraudulent
person reporting the offense shall be entitled to a reward
if an arrest has been made. The reward shall be computed at
25% of the fines imposed on the offender.
to a recent ruling of the Revenue Department, (Por 116/2545),
global internet services provided to Thai companies are liable
for value added tax (VAT) in Thailand. The Thai company must
remit 7% VAT to the Revenue Department even though the global
internet services may be provided by a company outside of
Thailand. Provided that the services are "used in Thailand"
some services that may be included are: (1) the use of ISP's
that provide internet access to Thailand (2) sales of space
on a server located outside of Thailand, (3) storage of data
departmental instruction is retroactive to 7 February 2001.
Companies that have not paid the VAT on these services are
likely to be charged penalties and surcharges. Since the directive
is not considered a new law, but rather an interpretation
of any existing law, retroactive application is permitted.
Operating Center Defined
December 2002, the scope of activities of "Regional Operating
Headquarters" has been replaced with a new definition.
Under the new notice of the Board of Investment the following
activities would be within the scope of activities of a Regional
Operating Headquarters, regardless of whether the office is
located in Thailand or abroad: (1) General administration
business planning, business coordination, (2) Procurement
of raw materials and parts, (3) Research and development of
products, (4) Technical support, (5) Marketing and sales promotion,
(6) Regional management and training, (7) Financial advice,
(8) Analysis and research on economic and investment, (9)
Provision of control on credits, (10) Rendering of other supporting
services as deemed suitable by the office in each individual
Industry Scrutinized by Trade Competition Law
November of 2002, the Trade Competition Board decided to abandon
the approach to defining "market dominance" that
treated all industries identically. Under the previous definition
dominant position was defined by holding more than a one third
market share and one billion baht in annual sales. Pursuant
to the Trade Competitions Board's new directive, dominant
position is determined on an industry basis. Additionally,
under the new approach, the dominant position criteria is
applied to either a single company or those companies operating
in collective form.
and retailing businesses are also defined differently. A single
operator in the wholesaling or retailing industries will be
considered "market dominant" if it has a market
share of greater than 27 billion baht of sales and a market
share of 20% or greater.
two industries to be first reviewed by the Trade Competition
Board are the motorcycle industry and the wholesale/retail
industry. Pending cabinet approval the following definition
would apply: A single operator would be treated as dominant
if it holds a market share of greater than 33.33% and sales
exceeding five billion baht per year. The definition would
also apply to combined shareholdings if greater than 66.66%
provided that each enterprise has greater than 10% share of
of the trade competition act are subject to criminal as well
as civil penalties.
on Consumer Credit Law
mid-March of 2003, the controversy surrounding the consumer
credit law was partly resolved. Controversy has surrounded
the enactment of the new credit data law.
institutions or credit bureau executives who violated the
disclosure laws face fines up to 500,000 baht and imprisonment
of five to ten years. The two areas that have created controversy
are (1) the requirement that banks notify borrowers within
30 days if information is submitted to the credit bureau and
(2) financial institutions would have to submit borrowers
an update on their payment information once a year.
agencies and banks were uncertain whether the notification
requirement applied retroactively and temporarily ceased operations
until clarification was provided.
Approves Excise Tax
a new tax framework approved in January 2003, massage parlors,
nighclubs, karaoke lounges, movie theatres, telecommunications
companies and race tracks among other businesses shall be
liable to pay excise tax. The law was intended to allow the
imposition of taxes on services. Three main sectors are affected:
entertainment venues, gambling venues and businesses affecting
the environment. A 50% maximum tax rate would be applied to
telecom services under state concessions or licenses.
mid-March 2003, the Commerce Ministry ordered some 2,000 gem
and jewelry shops to set up a fund to compensate buyers who
have been overcharged when making purchases in Thailand. In
addition to existing penalties, shops will risk a loss of
their license and penalties including fines of up to 140,000
baht and up to seven years in jail. Under the new measure,
members of the Thai Gem and Jewelry Association will be required
to set up a fund to compensate customers who have overcharged,
Non-member shops must set up a bank guarantee with the Department.
late April, the director general of the Co-operatives Promotion
Department announced that the Kingdom's 5,900 co-operatives
shall be restructured under stricter regulations in an attempt
to curb abuse. The director general has cited problems with
the co-operative system stemming from poor management and
accounting systems. The new legislation is intended to tighten
requirements on co-operative boards in order to rectify management
problems. The theory behind cooperatives is that the members
work together for their joint benefit but there have been
abuses wherein individuals have exploited government promotion
benefits offered cooperatives.
Checks for SEC
Rules were announced in March 2003 by the Stock Exchange of
Thailand in order to curb security issues and "staff
poaching". A "history check" involving liabilities
owed to their employers will be checked prior to issuing new
identification cards to traders. "Staff Poaching"
wherein one brokerage house buys out key personnel or even
whole departments of competing firms in order to gain their
client base is also being targeted. Currently market regulations
impose a strict minimum commission of .25% on transactions
and marketing officers compensations packages as well.
International School Regulations
Regulations may impose limits on the minimum amount of land
required for international schools as well as raising the
minimum required credentials of teachers according to reports
in January. The regulations are expected to take effect later
this year. The minimum land requirements for international
primary and secondary schools will be raised to five rai from
the existing 2 rai. Other new requirements are that international
land established on leased land must have leases of at least
15 years (ten years for kindergartens) and the reservation
of one third of the schools lands for "green zones"
and another one third for recreational zones. One period a
week must be devoted to Thai language and culture classes
for foreign students. Head masters must hold at least a bachelor's
degree in education management or the equivalent. Teachers
shall hold at least a bachelor's degree with at least 15 teaching
credits, a teaching license or at least three years teaching
preliminary draft of the Human Trafficking Act was reviewed
in public hearing on 23 April 2003, The Act is intended to
amend the earlier 1997 Act. The Act was drafted by a committee
comprised of experts on children and woman's rights. The present
committee criticized the earlier Act for focusing solely on
trafficking for sexual purposes while ignoring trafficking
for other purposes. The Act would attempt to correct inequities
that were failed to be addressed by the earlier Act such as
victims of human trafficking being charged with criminal offenses
themselves such as illegal entry and or fake passports. Other
changes to the Act include increased penalty and the banning
of publication of names and pictures of the victims.
amended version of the Witness Protection Bill was passed
by the House of representatives and is pending approval be
the Senate as of late April 2003.
the bill, witnesses in serious cases, such as money laundering,
drugs, child prostitution, corruption and organized crime
may be eligible for special protection entitlements, including:
(1) Special protection for witnesses and family members, (2)
Relocation and stipends for up to one year, (3) Witness information
will be protected by the Justice Ministry, (4) compensation
witnesses and families in cases if death, injury, loss of
freedom and loss of rights, (5) witnesses have right to appeal
package provided for their protection, and (6) penalties for
persons disclosing confidential witness protection information.
The program would operate under the Ministry of Justice.
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