Tax exemption on profit remittance under the Double Tax Agreement (“DTA”) between Thailand and Hong Kong

(11/2008)

Since the DTA between Thailand and Hong Kong became effective on 7 December 2005, there has been uncertainty as to whether or not the tax exemption on the remittance of profits from a permanent establishment situated in the other State would apply. (e.g. tax under Section 70 bis of the Thai Revenue Code).

On 11 January 2008, the Thai Ministry of Foreign Affairs issued a letter to the Hong Kong Authority to confirm its understanding that the tax exemption will apply to the remittance of profits by a “permanent establishment”.

On 21 February 2008, the Hong Kong Authority confirmed the above understanding in its reply to the Thai Ministry of Foreign Affairs.

In this regard, the above exchange of letters between the Thailand and Hong Kong authorities would be considered as an integral part of the DTA between Thailand and Hong Kong.

As a result, it is confirmed that the remittance of profit as above is exempt from tax under the DTA between Thailand and Hong Kong and is retroactively effective from 7 December 2005, which is the effective date of the said DTA.

This is according to a letter issued by the Thailand Ministry of Foreign Affairs to the Director-General of the Revenue Department on 4 March 2008.