Revenue Department of Thailand Issues Ruling
The Revenue Department of Thailand recently issued a ruling on the conversion of foreign currency for a dividend distribution, which appears to conflict with previous guidance on currency conversions. Company C distributed dividends to foreign Company D in the amount of THB 13.7 million and deducted withholding tax, leaving a net dividend of THB 12.33 million to be distributed. This was converted to the Euro on 19 November 2008 at an exchange rate of EUR 1/ THB 44.36, amounting to EUR 278,358.88. On 4 December 2008, Company C filed a withholding tax return in accordance with section 70 of the Revenue Code reporting the dividend amount of EUR 309,287.64 based on the exchange rate on 19 November 2008, but converted into Thai baht based on an exchange rate of the Bank of Thailand issued on 18 November 2008 equivalent to THB 13,755,660.58, and deducted tax at the rate of 10% (amounting to THB 1,375,565.88). The Revenue Department ruled that Company C distributed the dividend in Thai currency and was able to calculate the withholding tax accordingly, so there was no need to convert from foreign currency to Thai currency. This ruling appears to be in conflict with the guideline in RD Order No. 132/2548, which requires the conversion of foreign currency for the payment of dividends to foreign shareholders.
