Thailand Issues Incentives to Counter COVID-19 Impact: Phase One
- On March 4, 2020, the Thai government issued Phase One of the incentives to counter the COVID-19 outbreak.
- The stimulus package, valued at 100 billion baht (US$3.2 billion), provides assistance for businesses and households in the form of low-interest loans and cash handouts.
- Investors should seek the assistance of local advisors to better understand how they can benefit from these relief measures.
On March 4, 2020, the Thai government issued incentives to counter the economic impact of the COVID-19 pandemic.
Named, Phase One, this is the first of three stimulus packages, providing assistance for businesses and households in the form of low-interest loans and cash handouts.This stimulus package is valued at 100 billion baht (US$3.2 billion) and comes as the number of COVID-19 cases in the country increases to more than 2,000 amid 33 fatalities. The pandemic has already taken a heavy toll on the tourism sector and exports – two sectors that account for two-thirds of the country’s GDP.
To know more about the tax relief measures issued by the government through this stimulus, read our article here.
Investors should seek the assistance of local advisors to better understand how they can benefit from these relief measures.
Support for businesses
State-owned Government Savings Bank (GSB) has allocated 150 billion baht (US$4.5 billion) worth of low-interest loans. The GSB will lend to commercial banks with a lowered interest rate if just 0.01 percent, allowing commercial banks to grant loans to businesses with an interest rate of two percent.
Businesses can receive this rate for the first two years on the first 20 million baht (US$612,000).
The Social Security Office (SSO) in Thailand has also provided 30 billion baht (US$918 million) worth of soft loans with the interest rate set at three percent for SSO-registered entrepreneurs.
Withholding tax deductions
The withholding tax rate has been reduced from 3 to 1.5 percent starting from April 1 until September 30, 2020. This tax rate will be reduced again to 2 percent from October 1 until December 31, 2020.
Businesses that participate in the ‘Good Exporter’ program can receive VAT refunds within 15 days, compared with the typical 30 day refunds. A Good Exporter is defined as a public or limited company that is VAT registered, adheres to export regulations, and must have a ratio of goods exported abroad for no less than 50 percent of total sales.
This is only available for businesses if the VAT returns are filed through the e-filing system.
For businesses that file paper returns, the VAT refunds can be received within 45 days (compared to the usual 60 days).
Deduction in salary costs
SMEs can deduct 300 percent of eligible salary costs paid to employees for the period April to July 2020. They must fulfil several conditions:
- The salaries that are eligible for the 300 percent deduction must be below 15,000 baht (US$454) per month, per employee;
- The total number of employees cannot exceed 200;
- The SME’s annual revenue does not exceed 500 million baht (US$15.1 million);
- Employees must be insured under the national social security program; and
- The number of insured employees during the stated period should not be lower than the number of insured employees as of December 31, 2019.
The GSB has allocated 30 billion baht (US$918 million) in low-interest loans for individuals, and there is a reduction in the Social Security Fund (SSF) contribution from 5 percent to 4 percent.
Further, individuals who are SSF registered can receive unemployment compensation worth up to 50 percent of their salaries.
The government also approved 17 billion baht (US$520 million) in remedial measures by reducing water and electricity bills by three percent. Certain businesses such as hotels will have their period of electricity payments extended.