Regional Operating Headquarters: Criteria for Special Privileges
In the previous article (How to Establish a Regional Operating Headquarters in Thailand), we addressed the basic definition of a Regional Operating Headquarters and how it is formed. As we mentioned, an ROH is a Limited Company set up in Thailand by a multinational corporation to provide management and technical services to enterprises in its network or to its branch offices whether in Thailand or abroad. However, in order for an ROH to receive special privileges, it must also meet certain criteria provided by the Revenue Department. According to the Revenue Department, an ROH must:
- Have a paid-in capital of at least 10,000,000 baht at the end of each accounting year;
- Provide services to enterprises in its corporate network or its branches offices which located in foreign countries;
- Receive income and royalties for management, technical, and support services from its overseas network which equals at least 50% of its total income, except for the first three accounting years, where it only has to account for 33% of the total income.
However, the above definition raises the issue of what qualifies a certain company as being an “enterprise” within the corporate network of an ROH. According to the Revenue Department, a company will be considered an “enterprise” within the corporate network either based on the equity relationship or management relationship between the company and the ROH. If a company owns at least 25% of shares in the ROH or vice versa, that company will be considered within the ROH’s corporate network; or if there are two separate companies and one owns at least 25% of shares in the ROH and the ROH owns at least 25% in the other, then both companies will be considered part of the ROH’s corporate network.
Finally, a company may be considered with an ROH’s corporate network if it has control over the management of the ROH or vice versa; or if there are two separate companies and one has control over the management of the ROH and the ROH has management over the control of the other company, then both companies will be considered part of the ROH’s corporate network.
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