The objective of Tor Por 299/2561 is to eliminate the differences between the recognition of revenue and expenses from rental property for accounting and tax purposes, for both the lessor and the lessee of the property.

Previously, Clause 3.4 of Tor Por 1/2528 provided that both lessors (ie the companies or juristic partnerships carrying on a business of property rental) and the lessees shall calculate their rental income and related expenses in each accounting period according to the proportion of period of rental of property (ie on an accrual basis ). This previous version of Clause 3.4 potentially resulted in different revenue and expense recognition methods for accounting and tax purposes. For example, based on the relevant accounting standard, the lessee would apply a straight line method to recognize the rental expenses throughout the rental period for accounting purposes. However, for tax purposes, Clause 3.4 required the lessee to recognize the rental expenses in the periods in which they arose on an accrual basis, which may result in different amounts of expense being recognized in different periods (depending on the terms of the rental agreement).

This could result in the rental expense differing for accounting and tax purposes, in which case the lessee would need to adjust the rental expense in their tax calculation.

Under Tor Por 299/2561, Clause 3.4 now provides that companies or juristic partnerships who are the lessor or lessee of property may choose whether to calculate their rental income or expenses on an accrual basis, or on another suitable basis in accordance with generally accepted accounting standards for income and expense recognition. Therefore, if the lessor or lessee chooses to apply an accounting method which is acceptable under accounting standards for tax calculation purposes, there may not be a difference between their rental revenue and expense recognition for accounting and tax purposes. In this case, the lessor or lessee would not need to make any further tax adjustments for their rental income or expenses.

Under this order, if the lessor or lessee has chosen any method for calculation of rental income or expenses for tax purposes, such method shall be applied throughout, except where approval to change method of computation is obtained from the Director-General of Revenue Department. This order shall be enforced on the computation of income tax of a company or a juristic partnership whose accounting period begins on or after 1 January 2018 onwards. Tor Por 299/2561 does not mention whether the alternative method can apply to the existing rental agreements which were executed before 1 January 2018. On the basis that the effective date of this Order is for the computation of income tax for the accounting period that begins on or after 1 January 2018, the alternative method should apply to the rental agreements executed on or after 1 January 2018.

Contributed by BENJAMAS KULLAKATTIMAS, Head of Tax, KPMG in Thailand

These drafts will also amend the existing 1966 laws to help with the liberalisation of capital movement and labour, as well as promote SMEs, the PM’s adviser Nattaporn Jatusripitak said.

The definition of chambers of commerce and trade associations’ authorisation and duties have been revised and licence fees increased. A chamber of commerce will now have to pay Bt2,000 for a licence from Bt500, while a trade association will be charged Bt1,500 instead of Bt500. The new bill allows a chamber of commerce to promote trade, make contracts and become a contract partner with the state. It will also be able to operate specific enterprises, promote service, trade and independent occupations, as well as provide trade-related advisory services for their members. A vote from three-fourths of the members will be required to abolish a chamber of commerce, while the registrar can abolish a trade association.

In the same meeting, the Cabinet also promoted Metropolitan Electricity Authority (MEA)’s former deputy governor Kirapat Jiamset to become governor. It made National Bureau of Agricultural Commodity and Food Standards’ former deputy secretary-general Pisan Pongsapitch into Agriculture and Cooperatives Ministry’s inspector-general.

Department of Agricultural Extension (DOAE)’s former deputy director-general Prasong Prapaitrakul was also named the ministry’s inspector-general, while former DOAE’s deputy director-general Sunram Sarabun was promoted to the director-general’s post.

Another inspector-general of the Agriculture and Cooperatives Ministry was Veerachart Kuienrat, who was previously deputy director-general of the Department of Livestock Development.

Rice Department’s former deputy director-general Krishnapong Sripongpankul was named the ministry’s director-general, while Department of Agriculture’s former deputy director-general Siriporn Boonchoo was named director-general of the Department of Sericulture.

Petcharat Sinauy, former deputy permanent secretary of the Labour Ministry, became director-general of the Department of Employment, while former Labour inspector-general Wiwat Chirapanvanich was named Labour Ministry’s deputy permanent-secretary.

The Cabinet also gave the green light to a draft on easing the bureaucracy involved in getting licences.

Nattaporn said this move complied with Thailand’s application for World Property Intellectual Organisation (Wipo)’s Copyright Treaty.

The new bill will allow Thai licence holders to be protected and be able to use their rights among Wipo members, while promoting new creative work particularly involving digital content and building up the confidence of creators.

The drafted bill also revises the duties of Internet service providers, under which people can have a website taken down or removed if it is found to be using copyrighted content.

A fund analyst with Morningstar said the last quarter will see more capital moving into mutual funds, particularly LTFs and TFF.

In the first nine months of this year, Thailand’s mutual fund industry has been relatively volatile, registering a 0.47 per cent rise in net asset value (NAV) from the end of last year, to Bt5.04 trillion, she said.

Thailand has seen a net outflow of capital worth Bt40.425 billion in the third quarter, continued from the previous quarter after capital inflows for 12 consecutive quarters. In the first nine months of this year, net outflow of capital totalled Bt24.142 billion.

She said that given the upward trend in interest rates, which affects returns on fixed income, uncertainty over taxes on fixed-income funds and some positive economic indicators, investors are expected to avoid fixed income investment and shift their capital to equity funds. This is particularly in case of those investing in promising companies listed on the Thai stock exchange.

Despite the US-China trade war, depreciation of the Turkish lira that fuelled concerns over emerging market investments and the US interest rate hike, the Stock Exchange of Thailand Index closed 10.08 per cent higher at 1,756.41 at the end of the third quarter. This was after Thailand’s better-than-expected economic expansion of 4.6 per cent in the second quarter.

In the third quarter of this year, large-cap equity funds recorded the highest net capital inflow of Bt71.794 billion with a combined NAV of Bt702.575 billion, followed by property-indirect global funds with net inflow of Bt31.740 billion, aggressive allocation funds with net inflow of Bt28.878 billion, conservative allocation funds at Bt20.694 billion and global equity funds at Bt17.166 billion.

Largest net outflow

Global bond funds suffered the most net capital outflow of Bt83.058 billion in the nine-month period, trailed by money market funds’ Bt65.317 billion, mid-long term bond funds’ Bt18.937 billion, global healthcare funds’ Bt17.912 billion and global high yield bond fixed- term funds’ Bt16.799 billion.

Thai equity funds excluding LTFs and retirement mutual funds (RMFs) have been on a recovering path in the third quarter with net capital of Bt8.874 billion flowing into large-cap equity funds and Bt1.472 billion exiting small and mid-cap funds.

In the first nine months of this year, net capital of Bt68.109 billion moved into large-cap equity funds despite a combined medium return of 0.21 per cent, while Bt2.421 billion moved out of small to mid-cap equity funds whose return remained negative at 4.46 per cent.

Thai equity funds excluding LTFs and RMFs, at the end of September, booked a 24.53 per cent increase in NAV to Bt305.467 billion, from the end of last year.

Thanachart Fund Management managed to capture the highest share of 15.49 per cent in the Thai mutual fund market, followed by Bualuang Asset Management’s 15.08 per cent, Krungsri Asset Management’s 13.08 per cent, SCB Asset Management’s 13.03 per cent and Kasikorn Asset Management’s 9.14 per cent.

“Small and medium-sized banks started to play in the equity mutual fund market this year and have a chance to overtake large-sized banks,” the analyst said.

In the first nine months, LTFs recorded a total net outflow of Bt1.746 billion. The long-term funds booked a net outflow of Bt13.712 billion in the first quarter with net inflows of Bt8.831 billion and Bt3.135 billion in the second and third quarters, the analyst said while expecting most of capital to flow into LTFs in the last quarter.

LTFs registered a 1.83 per cent decline in NAV from the end of last year to Bt389.932 billion at the end of September.

RMFs recorded Bt7.998 billion in total net inflow for the first nine months of this year, with a 2.62 per cent rise in NAV from last yearend to Bt261.301 billion.

“On the issue of how much countries can rely on imports of rice alone to sustain their population, I would say that large countries like India need to achieve self-sufficiency,” said Ashok Gulati, former chairman of the Commission for Agricultural Costs and Price, at the 5th International Rice Congress yesterday during a panel discussion.

The Congress is the biggest gathering of leaders, scientists, policymakers, agriculture experts and technology providers in the rice sector. It is organised by the International Rice Research Institute and the Agri-Food and Veterinary Authority of Singapore. It provides panel discussions and a venue for all players in the rice industry to meet, share and learn about the latest policies and technological innovations shaping the future of the world’s most important staple crop. The congress is held once every four years.

Despite continuous growth in the volume of international rice trade, reliance on rice imports is still questionable for large countries like India, Gulati said.

“There can be tectonic shifts in the price of rice, as seen from the 2007-8 crisis when the price of rice in India more than doubled. Despite these crises, India is still the largest exporter of rice in the world. Last year, India’s rice exports were valued at $7.7 billion,” he said.

However, when the price of rice spikes, large countries will struggle to feed their populations if they rely only on rice imports. Hence, instead of relying heavily on rice imports, large countries also have to achieve self-sufficiency in rice production and strike a correct balance on the volume of buffer stocks they hold, he suggested.

The second challenge to international rice trade is government subsidies to local smallholdings farmers. Subsidies not only hinder international trade, but also discourage efficiency, leading to slower adoption of new agricultural technology, according to Gulati.

Instead of giving free subsidies, governments need to change their policy in order to incentivise farmers to use new technology and save energy. This is equivalent to rewarding farmers who adopt new agricultural technology to improve production efficiency, he says.

From January to August, Thailand exported a total of Bt115.71 billion worth of rice globally, growing by 5.05 per cent compared to the same period last year. Despite the growing export value, the growth rate has fallen.

From January to August 2017, the total value of rice exports from the Kingdom were worth Bt110.15 billion, up 14.15 per cent compared to the same period in 2016, according to the Information and Communication Technology Centre with cooperation from the Customs Department.

As part of its survey on the economy, the global research and consultancy firm asked more than 100 C-suite executives from across the country’s industries a wide-ranging series of questions on a face-to-face basis aimed at gauging business sentiment.

When asked, 81 per cent of respondents said they believed their firm was likely or very likely to make a significant capital investment in the coming 12 months, suggesting that Thailand 4.0, the government’s long-term strategy for economic development, and the Eastern Economic Corridor policy, which aims to overhaul the country’s manufacturing industries, are instilling confidence among business leaders.

OBG’s findings also indicate that executives recognise the need to address skills gaps in the labour market, as efforts to move Thailand towards a high-income, value-based economy take shape. Almost one-fifth (19 per cent) of business leaders interviewed chose engineering as the skill they felt to be most in-demand, ahead of leadership, selected by 18 per cent of respondents, research and development (16 per cent), and computer technology (13 per cent).

In answering a separate question, executives appeared broadly confident about the level of business transparency in Thailand, with more than three-quarters (76 per cent) of those interviewed viewing it as high or very high relative to the region.

The local tax environment (business and personal) was also viewed favourably by the majority of interviewees. Taxes have been a key focus for the country’s leaders in recent years and remain so, with further changes affecting land, property and e-business taxes in the pipeline, as the government seeks to find a balance between boosting the public coffers and galvanising economic activity. Just under two-thirds (63 per cent ) of business leaders surveyed told OBG they believed the current tax climate to be competitive on a global scale. Similarly, 66 per cent of respondents described their level of satisfaction with local suppliers and service providers as high or very high, spelling good news for the country as it eyes the development of advanced industries that require strong supply chains.

Unsurprisingly, when asked which external event they felt would have the biggest impact on Thailand’s economy in the short to medium term, almost half (44.4 per cent) of executives interviewed cited fluctuations in Chinese demand, followed by trade protectionism. Exports account for over 70 per cent of Thailand’s GDP, with the largest share (12.4 per cent) imported by China.

Commenting on the results in his blog, Patrick Cooke, OBG’s regional editor for Asia, said that while the group’s second survey on Thailand suggested business leaders were broadly supportive of the national drive to put in place the systems and infrastructure needed for developing advanced manufacturing and high-tech services, it had also highlighted some of their concerns.

“A recurring theme that emerged from Oxford Business Group’s on-the-ground research over the past 12 months has been the urgent need for Thailand to invest in education and skills development to ensure its workforce is equipped for the demands of a rapidly evolving economy,” he said. Cooke added that the escalation of trade tensions between the US and China into a trade war is clearly another worry for the business community.