For Thai corporates eyeing international expansion, managing the tax friction of repatriating profits is a top-tier priority. Under the Thai Revenue Code, Royal Decree No. 384 offers a robust “participation exemption” mechanism. When handled correctly, this allows Thai companies to bring home foreign dividends without triggering local Corporate Income Tax (CIT).
For CFOs and tax directors, this isn’t just a line item in a compliance checklist; it’s a fundamental tool for building tax-efficient regional holding structures.
The Ground Rules for Tax-Free Repatriation
To move from Thailand’s standard 20% CIT to a 0% rate on foreign dividends, your structure must hit three specific statutory markers:
- The 25% Ownership Threshold: The Thai parent company must hold a direct stake of at least 25% of the total voting shares in the foreign entity.
- The Six-Month Rule: You need to hold those shares for at least six months—either leading up to the dividend declaration or for six months afterward. In practice, a continuous holding period is the safest bet for audit trails.
- The 15% Tax Floor: This is often the trickiest hurdle. The foreign subsidiary must be subject to a corporate tax rate of at least 15% in its home jurisdiction.
If you check all three boxes, those dividends are effectively “carved out” of your Thai taxable income.
Strategy in Practice: The Singapore Example
Imagine a Thai parent company owning 100% of a Singaporean subsidiary. Since Singapore’s headline tax rate is 17% (clearing the 15% hurdle) and the ownership exceeds 25%, dividends flowing back to Bangkok are entirely exempt from Thai CIT, provided the six-month holding period is met.
This creates a seamless “upstream” flow of capital, allowing groups to recycle profits into new ventures or distribute them to shareholders without an extra layer of Thai tax leakage.
Critical Considerations for Finance Leaders
While the decree seems straightforward, the “devil is in the details” when it comes to international tax law.
1. The “Subject to Tax” Grey Area
The 15% requirement refers to the statutory rate in the foreign country. However, things get complicated if your subsidiary enjoys tax holidays, BOI-style incentives, or free-zone exemptions that pull their effective rate below 15%. If the foreign entity pays little to no tax due to specific local breaks, the Thai Revenue Department may challenge the exemption.
2. Don’t Forget Withholding Tax (WHT)
Royal Decree No. 384 only solves the Thai tax problem. You still have to account for the WHT imposed by the country where the profit was earned. CFOs should always cross-reference the relevant Double Tax Treaty (DTA) to see if WHT rates can be reduced (often to 5% or 10%) and ensure the Thai entity qualifies as the “beneficial owner.”
3. Substance Over Form
Tax authorities globally are cracking down on “letterbox” companies. Even if you meet the 25% and 15% rules, a structure that lacks commercial substance—meaning no staff, no office, and no real decision-making in the foreign jurisdiction—could be flagged under general anti-avoidance principles.
The Bottom Line
Royal Decree No. 384 transforms Thailand from a purely “territorial” tax system into a sophisticated holding hub similar to many OECD nations. By aligning your regional footprint with these requirements, you can:
- Centralize global cash management.
- Boost your group’s after-tax Return on Equity (ROE).
- Eliminate the “tax penalty” of bringing profits back to headquarters.
For more information on this topic, check out: https://unionspace.co.th/ASEAN-Business-Gateway
