Your Snapshot of Key Legal Developments in Asia
Issue 2 - Apr/May/Jun 2017
- Implementation of Value Added Tax for Non-Taxable Supplies
- Implementation of Withholding Tax on Dividend Distributions
- Procedure for the Online Application of Trademark Registration
- Restrictions on Investment into Free Trade Zones in China Further Loosened
- Draft Measures on Transfer of Personal and Important Data out of China Released
- New Malaysian Code on Corporate Governance Takes Effect on 26 April 2017
- First Data User to be Charged under the Personal Data Protection Act 2010
- Public Consultation on Personal Data Protection (Transfer of Personal Data To Places Outside Malaysia) Order 2017
- Amendments Tabled in Parliament to Regulate E-hailing Services in Malaysia
- Introduction of a New Cybersecurity Law in Malaysia
- Philippine Lower House Approves First Package of Tax Reform Bill
- PCOO Urges Congress to File Freedom of Information Bill
- Implementing Rules and Regulations of the Credit Surety Fund Cooperative Act
- House Approves Bill on Irrigation For Farmers
- Amendments to Laws On Insolvency and Debt Restructuring Come into Force
- Criteria for Removal of Liquidators
- Re-affirming the High Threshold for "Unconscionability" in the Context of Resisting Payment for On-Demand Bonds
- Do Hacked Emails Retain Confidentiality?
- Exemptions from the Foreign Business Licence Requirement
- Amendments to the Direct Sales and Direct Marketing Act
- Introduction of the Thai Court’s Electronic Filing System
- Updates on the Revenue Code
- Amendments to the Customs Act
Implementation of Value Added Tax for Non-Taxable SuppliesThe Ministry of Economy and Finance ("MEF") issued Prakas No. 559 on 25 May 2017 ("Prakas 559") concerning the implementation of value-added tax ("VAT") for non-taxable supplies. Prakas 559 aims to provide all taxpayers the exhaustive list of non-taxable supplies as well as provide certain relevant definitions following the amendment in the 2017 Law on Financial Management. There are 11 categories of the supplies that are non-taxable in Cambodia, meaning that taxpayers operating with these 11 categories are not required to charge VAT to the customers.
According to Article 5 of Prakas 559, the 11 categories of non-taxable supplies are as follows:
- Public postal service;
- Hospital, clinic, medical and dental services and the sale of medical and dental goods incidental to the performance of such services;
- Services of transportation of passengers by a wholly state-owned public transportation system;
- Insurance services;
- Primary financial services;
- Importation of articles for personal use that exempt from custom duties;
- Non-profit activities in the public interest;
- Educational services;
- Electricity and clean water;
- Unprocessed agricultural products; and
- Services relating to the collection or removal of waste material either solid or liquid
Implementation of Withholding Tax on Dividend DistributionsThe Ministry of Economy and Finance ("MEF") issued Prakas No. 518 on 5 May 2017 ("Prakas 518") concerning the implementation of withholding tax ("WHT") on dividend distributions. Prakas 518 aims to provide clarity and guidance on the application of the WHT regulations on dividend distributions from resident taxpayers in Cambodia to their non-resident shareholders with reference to Articles 26 (new) and 33 (new) of the Law on Taxation, stating that a dividend that is distributed from a resident taxpayer to a non-resident taxpayer will be subject to a 14% WHT on the amount paid.
According to Article 6 of Prakas 518, if the conversion of retained earnings to share capital is correctly processed, it will not be considered as a distribution of dividends and therefore not subject to WHT. The conversion is treated as correctly processed when a taxpayer fulfils the following conditions: (1) has a resolution of the Board of Directors approving the conversion; and (2) has any evidence to show that the change in share capital has been approved by the Ministry of Commerce, and the increase in share capital has been reflected in the Memorandum and Articles of Association.
However, Article 7 of Prakas 518 states that subsequent to the conversion, upon the sale of shares by the non-resident shareholders or the distribution of share capital to non-resident shareholders, either during operation or at liquidation, the portion of the share capital that has been originally converted from retained earnings will be subject to 14% WHT.
Click here to read our client update.
Procedure for the Online Application of Trademark RegistrationThe Ministry of Commerce ("MOC") issued Prakas No. 125 on 05 May 2017 ("Prakas 125") regarding the procedure for online trademark registration. According to Prakas 125, an applicant who has permanent residence or business operations located in the Kingdom of Cambodia can file the application online by himself; alternatively, an applicant who has permanent residence or business operations located abroad can file the application through a trademark agent. The online trademark registration must be done via this website address: www.efiling.cambodiaip.gov.kh. Furthermore, for the online filing, all users are required to have a user ID and password, which can be requested from the Department of Intellectual Property Rights ("DIPR") of MOC.
Any person who provides false information during the submission of online trademark (or any other services related to online trademark) registration application shall be sanctioned in accordance with article 63 of Law concerning Marks, Trade Names and Unfair Competition.
However, after the online submission of the application, the original copy and the certified true copy of the required documents must also be manually submitted to the DIPR.
Restrictions on Investment into Free Trade Zones in China Further LoosenedOn 16 June 2017, China officially released its updated negative list for admission of foreign investment in the free trade zones, which will be implemented with effect from 10 July 2017. Compared to the 2015 version, the new negative list has cut 10 items and 27 restrictions across eight industries. Railway transport equipment manufacturing, pharmaceutical manufacturing (except for manufacturing traditional Chinese patent medicines with confidential prescriptions and investing in applications of processing technology of traditional Chinese medicines prepared in ready-to-use forms), road transport, reinsurance cede-in or cede-out business, accounting and audit are no longer included in the "negative list". Now the number of items on the list has been reduced essentially by half compared to the 2013 version, from 190 to 95.
Apart from newly lifted restrictions, the new negative list also extends its scope of application beyond the four free trade zones in Shanghai, Tianjin, Guangdong and Fujian, to cover other seven new free trade zones approved in March, which are in Chongqing, Liaoning, Zhejiang, Henan, Hubei, Sichuan and Shaanxi.
Draft Measures on Transfer of Personal and Important Data out of China ReleasedOn 11 April 2017, the Cyberspace Administration of China released a highly anticipated draft of the Measures on Security Assessment of the Cross-Border Transfer of Personal Information and Important Data (the "Draft Measures") for public comments, for a period of one month until 11 May 2017. The Draft Measures were released pursuant to the Cybersecurity Law ("CSL"), which took effect from 1 June 2017.
Under the CSL, operators of critical information infrastructure are required to store personal information and important data collected and generated during their operations in the People's Republic of China within the country itself, and if such data needs to be transferred overseas, to obtain a security assessment from the authorities prior to such transfer. The Draft Measures extend the scope of this requirement to cover network operators as well. The Draft Measures also set out the types of data to be localised, the factors to be considered in a security assessment, and when the security assessment should be requested.
Click here to read our client update.
Minister of Transportation Revisits Online Taxi Issue with New RegulationAs a response to large-scale protests by taxi drivers in March last year, the Government issued on 1 April 2016 Minister of Transportation Regulation No. PM 32 of 2016 on Unscheduled Public Transportation Services ("MOTR 32/2016", or the "Regulation"). The Regulation, which came into force on 1 October 2016, sought to address, among other things, the different types of unscheduled public transportation service (penyelenggaraan angkutan orang dengan kendaraan bermotor umum tidak dalam trayek), the rights and obligations of public transportation companies and, very specifically, the role of app-based transportation service providers in providing transportation services.
The Regulation failed to resolve the tension between conventional taxi providers and the providers of app-based, online taxis. In a bid to rectify the deficiencies inherent in the Regulation, the Minister of Transportation issued on 31 March 2017 Regulation No. PM 26 of 2017 on Unscheduled Public Transportation Services ("MOTR 26/2017"). MOTR 26/2017 revoked MOTR 32/2016.
Click here to read our client update.
Amendments to Investment Promotion LawThe amended Investment Promotion Law (No. 14/ NA, 17 November 2016) came into operation on 19 April 2017. The changes to the law seek to remove the barriers to investments into the Lao PDR. Key changes:
- creation of the Investment Promotion and Management Committee which has the ultimate responsibility of approving and overseeing investments in controlled business sectors, concessionary business and Special Economic Zones ("SEZ"). The registration process in the revitalised one-stop shop within the Ministry of Planning and Investment has also been streamlined for increased ease of doing business in the country.
- addition of Value-Added Tax ("VAT") exemptions and state land lease / concession rental fee holidays to the investment incentives already provided for by the law
- specification of promoted business activities with a minimum capital investment of one billion and two hundred million LAK, and 30 local blue-collar workers, and 50 local white-collar workers with an employment contract for at least 1 year
- reduction in the land concession term for an SEZ from 99 years to 50 years, with possible extension of term subject to the approval of the National Assembly.
New Malaysian Code on Corporate Governance Takes Effect on 26 April 2017The Securities Commission Malaysia released the new Malaysian Code on Corporate Governance 2017 ("MCCG"). The new MCGG, which replaced the 2012 code, came into operation on 26 April 2017. It introduces substantial changes and recommendations with a view of raising the standards of corporate governance of companies in Malaysia. The MCCG now employs the CARE approach (abbreviated from the term 'Comprehend, Apply and Report') by shifting from the 'comply or explain' method in the 2012 code to an 'apply or explain an alternative' method. This is believed to allow greater flexibility in the application of the best practices.
The new MCCG also adopts a proportionate application to companies depending on size, complexity and suitability. While the MCCG applies to all listed companies in Malaysia, certain practices are only applicable to 'Large Companies', which are companies on the FTSE Bursa Malaysia Top 100 Index or companies with market capitalisation of RM2 billion and above at the start of their financial year. In addition, the MCCG now expressly encourages non-listed entities including state-owned enterprises, SMEs and licensed intermediaries to embrace the MCCG to enhance accountability, transparency and sustainability.
Click here to read our client update.
First Data User to be Charged under the Personal Data Protection Act 2010A company which operates a local private college has become the first data user to be charged for alleged breach of the Malaysian Personal Data Protection Act 2010 ("PDPA"). The company was charged in the Sessions Court for processing personal data of its former employees without a valid certificate of registration issued by the Personal Data Protection Department ("PDPD"), in contravention of section 16(1) of the PDPA. Section 16(1) requires certain classes of data users to be registered, and to be issued with a valid certificate of registration by the PDPD.
This marks the commencement of the enforcement phase of the PDPA by the PDPD and the Personal Data Protection Commissioner, Puan Khalidah binti Mohd Darus.
Click here to read our client update.
Public Consultation on Personal Data Protection (Transfer of Personal Data To Places Outside Malaysia) Order 2017The Personal Data Protection Commission (the "Commissioner") launched a public consultation exercise on the proposed "Personal Data Protection (Transfer Of Personal Data To Places Outside Malaysia) Order 2017" (the "Proposed Order"). The consultation exercise ended on 4 May 2017.
The Proposed Order is a "White List" which permits the transfer of personal data to certain jurisdictions outside Malaysia, in accordance with Section 129(1) of the Personal Data Protection Act 2010 ("PDPA"). The effect of this "White List" (once it is officially issued by the Commissioner, and comes into legal effect) is that Data Users will be permitted to transfer personal data to the jurisdictions that have been identified, and will no longer be required to fulfill the prescribed conditions under Section 129(3) prior to the transfer of personal data to the said jurisdictions. These conditions include: (i) obtaining consent of the Data Subjects prior to transfer of personal data outside Malaysia; (ii) undertaking reasonable precautions and exercising due diligence to ensure that the recipient place will not process personal data in any manner which would contravene the PDPA.
Click here to read our client update.
Amendments Tabled in Parliament to Regulate E-hailing Services in MalaysiaIn April 2017, the First Reading of the Commercial Vehicles Licensing Board (Amendment) Act 2017 ("CVLBA") was tabled in the Malaysian Parliament. The amendment act is intended to regulate e-hailing services such as Uber and Grab. Under the CVLBA, e-hailing services will require a licence to carry out operations.
Clause 2 of the CVLBA bill introduces new definitions of "e-hailing vehicle", "intermediation business" and "intermediation business licence". E-hailing vehicles have been defined as "a motor vehicle…used for the carriage of persons on any journey in consideration of a single or separate fares for each of them, in which the arrangement, booking or transaction and the fare for such journey are facilitated through an electronic mobile application provided by an intermediation business", while an "intermediation business" refers to the business of "facilitating arrangements, bookings or transactions of an e-hailing vehicle".
According to the bill, intermediation businesses require a new category of licence, termed an "intermediation business licence" to operate. The intermediation business licence will be issued by the Land Public Transport Commission (SPAD). Applicants will have to pay a fee and must provide complete information of their financial standing to prove their ability to maintain and operate the intermediation business. Operating an intermediation business without a license is an offence punishable by a fine not exceeding RM500,000 or imprisonment not exceeding 3 years or both.
The Second Reading of the CVLBA is expected to be tabled in the Dewan Rakyat in July.
Introduction of a New Cybersecurity Law in MalaysiaIn June 2017, the Deputy Prime Minister of Malaysia, Dato' Seri Dr. Ahmad Zahid Hamidi announced that the Malaysian Government has handed a draft bill to the Attorney General in relation to a new law aimed at protecting Malaysians from cybersecurity threats.
The new law is aimed at aiding the government in "combating all sorts of cybercrime" including the recruitment and financial sourcing by terrorist groups, money laundering and online gambling. The proposed law also places the National Cyber Security Agency ("NCSA") under the jurisdiction of the National Security Council ("NSC") to ensure more "coordinated action against cybersecurity threats in Malaysia", and empowers the NCSA to deal with cyber crimes.
The bill will be tabled in the next Parliament sitting from July to August.
Implementation of Tourism Tax in MalaysiaThe Tourism Tax Act came into operation on 1 July 2017. The Act introduces a 'tourism tax' which will be charged on tourists staying at any "accommodation premises" made available by an operator. The tourism tax regime will be administered by the Royal Malaysian Customs Department (the "Customs").
The tourism tax will be collected from all types of premises used as accommodation for tourists, such as registered hotels and inns. Rates start from RM2.50 a room each night for a non-rated accommodation to RM20 a room each night for a five-star accommodation. The tourism tax applies to all guests, regardless of their nationality or purpose of travel (whether holiday or business).
According to newspaper reports, the tourism tax is expected to bring in RM654.62mil (assuming a 60 per cent occupancy rate at the more than 11 million hotel rooms nationwide). It is also reported that the tourism tax will be used to develop the tourism industry, namely, the enhancement of tourism infrastructure and facilities, as well as tourism promotional activities and campaigns for the country.
Any person operating accommodation premises in Malaysia will be required to register with the Customs within 30 days from the date of coming into force of the Act. A failure to comply with the registration requirements is an offence.
However, the Tourism Tax Act does give the Minister of Finance the power to exempt persons or class of persons from the imposition of the tourism tax.
Landmark Decision on Assessment of Compensation in Compulsory Land AcquisitionIn Malaysia, right to property is subject to the statutory power of the State Authority to acquire land compulsorily from land owners under the Land Acquisition Act 1960 ( "Act"). Therefore, it is paramount and crucial that land owners whose lands have been compulsorily acquired are entitled to adequate compensation under the constitutional safeguard of Article 13 of the Federal Constitution.
A recent Federal Court decision in two cases of Semenyih Jaya Sdn Bhd; Amitabha Guha and Parul Rani Paul v. Pentadbir Tanah Daerah Hulu Langat (which were heard together) examined and entrenched this constitutional safeguard of adequate compensation.
In this case, the Federal Court declared Section 40D of the Act to be unconstitutional and invalid as the Act effectively imposes on a High Court Judge (when reviewing the Land Administrator's award of compensation on an appeal) a duty to rubber-stamp the decision / opinion of the two assessors (who are qualified valuers sitting in open Court with the Judge) on the amount of compensation for the land acquired, thereby taking away the judicial power from the High Court Judge.
However, the Federal Court's declaration will only bind pending cases at first instance or at the appellate stage – all proceedings involving compensation in land acquisition matters which had taken place and been determined under Section 40D of the Act prior to the date of this judgment of the Federal Court (i.e. 20 April 2017) will remain status quo.
Click here to read the article on this, titled "Landmark ruling on compensation in compulsory land acquisition", penned by Christopher Lee & Ong's Heng Yee Kiat. This was featured in the 2 May 2017 issue of the Sun.
Further Liberalisation on TradingFollowing liberalisation of trading (i.e. importation, sale and distribution of finished products) of fertilisers, seeds, pesticides, hospital equipment and construction materials ("Prescribed Goods") in 2015 and 2016, to foreign-Myanmar joint venture companies, the Ministry of Commerce ("MoC") recently announced on 12 June 2017, by way of Notification No. 36/2017, that foreign companies (including 100% foreign-owned companies registered in Myanmar) are now permitted to undertake trading of the Prescribed Goods, provided the prescribed conditions are met. Such conditions include the requirement to obtain a trading permit, having a bank account in Myanmar, and undertaking to ensure compliance with applicable laws and that the Prescribed Goods meet the prescribed quality and standards.
In addition, the MoC further issued two notifications on 21 June 2017, namely, Notification No. 37/2017 and Notification No. 38/2017. The first relates to the removal of materials related to aircrafts from the MoC's "Negative List" (a list of goods which by default require a specific import licence), and the second is a statement requesting companies to avoid intentionally presenting false invoices and sale contracts when applying for import licence from the MoC. All three notifications are available in Burmese on the MoC's website at http://www.commerce.gov.mm/.
Philippine Lower House Approves First Package of Tax Reform BillThe House of Representatives approved, on a 246-9 vote with one abstention, its version of the first package of the proposed comprehensive tax reform bill titled the "Tax Reform for Acceleration and Inclusion Act (TRAIN)" ("Bill") on 31 May 2017.
The first tax reform package seeks to cut personal income taxes among compensation income earners. This includes raising the exemption for compensation-income earners to those earning an annual income of Php250,000 (about USD 5,000) from the previous threshold of Php10,000 (about USD 200) annually. There is likewise an increase in the annual income thresholds for each tax bracket, which will result in reducing taxes due from those who would thus be considered as falling within the lower tax brackets. The reduction in personal income taxes, however, brings a corresponding proposal to raise excise taxes on fuel, new cars and sugary drinks. The Bill also proposes the removal of certain value added tax exemptions, such as those for the lease of residential units with a rent not exceeding Php10,000 per month. The Bill is expected to raise an additional Php133.8 billion in government revenues, or about 0.8 percent of gross domestic product in 2018 alone, which could be used to finance President Duterte's infrastructure program as well as programs on education, health and social protection.
Finance Secretary Carlos Dominguez III stressed that the proposed tax reform measures will further increase investors' confidence to the Philippines. He hopes for the approval of the first package before end-2017. The Senate will resume deliberations on the tax reform bill once sessions start in July. Should the Senate approve the House of Representatives' proposed bill, this will be forwarded to the President for signature before it is published and can be enforced as a law.
PCOO Urges Congress to File Freedom of Information BillPresidential Communications Operations Office ("PCOO") Undersecretary Noel Puyat and Assistant Secretary Kristian Ablan urged both chambers of Congress to pass the Freedom of Information ("FOI") Bill during an FOI Conference held on 15 June 2017.
Mr. Puyat mentioned that the implementation of the FOI stands as one of the key pillars of the Duterte administration in its bid to "bring back the faith, trust and confidence of the people in the government". The FOI Bill has already hurdled the committee level at the House of Representatives, while the Senate version is already up for plenary debates. The Bill will cover all government agencies, departments, and bureaus, among others, unlike the executive order issued by President Duterte in 2016 which only covers the executive branch of government.
The FOI Bill embodies the two aspects of the right to information as mandated by the 1987 Constitution, namely, full public disclosure and citizens' access to information. Aside from reiterating the Constitution's mandate to disclose the Statements of Assets, Liabilities, and Net-Worth of certain public officials, the Bill also requires government agencies to publish public interest documents or records on their website. The Bill also mandates every citizen's right to ask for and receive information from government, and sets the procedure for requesting access to such information and documents. The Bill also imposes administrative and criminal liabilities for violating the right to information.
Implementing Rules and Regulations of the Credit Surety Fund Cooperative ActFollowing the passage of Credit Surety Fund Cooperative (Republic Act No. 10744 or the "CSF") Act on 6 February 2016, the heads of the Bangko Sentral ng Pilipinas, Department of Finance and the Cooperative Development Authority are to complete the signing of the Implementing Rules and Regulations ("IRR") this June-July so that it may be published and enforced.
CSF is a fund generated from contributions of well-capitalized and well-managed member-cooperatives / non-government organizations, local government units, governmental financial institutions, and other institutions / government agencies. The CSF shall serve as security for the loans that will be obtained by qualified Micro and Small Business Enterprises ("MSMEs") from banks by way of surety covers, in lieu of hard collaterals.
The passage of the CSF Act and the signing of the IRR is expected to provide MSMEs with access to financing, which is seen to be the roadblock for MSMEs' continued growth in the Philippines. The IRR, in particular, will standardize the technical and financial support and delineate the roles of the concerned government institutions. With the signing of the IRR, the number and reach of operating CSFs are expected to increase.
House Approves Bill on Irrigation For FarmersThe House of Representatives, in a 220-0 vote, approved House Bill 5670 ("Bill") dubbed as the "Free Irrigation Services Act", which seeks to strengthen assistance to farmers, agrarian reform farmers, and indigenous cultural communities by providing them with free irrigation services.
Under the Bill, the Government shall promote and institutionalize irrigation systems that are free, effective, suitable, applicable and efficient as a key strategy to achieve genuine agricultural development. Apart from granting full subsidy of irrigation fees, farmers are also relieved of all unpaid irrigation service fees, back accounts and the corresponding penalties. The Bill also mandates the National Irrigation Authority to provide technical and financial assistance to local government units, all farmers, agrarian reform farmers, and members of the indigenous cultural communities with respect to irrigation systems located, utilized, and managed in their respective jurisdictions / areas.
The Bill is expected to be passed in the Senate before the year ends, according to one of its authors. Should the Senate approve the proposed Bill, this will then be forwarded to the President for signature before it is published and can be enforced as a law.
Amendments to Laws On Insolvency and Debt Restructuring Come into ForceWith the coming into force of the Companies (Amendment) Act 2017 on 23 May 2017, the amendments to Singapore's laws on insolvency and debt restructuring came into effect, thus heralding a new insolvency and restructuring landscape in Singapore.
Amendments have been made to the scheme of arrangement regime in order to facilitate a more effective implementation of debt restructuring proposals. New measures include enhanced moratoriums against actions by creditors, new rescue finance provisions and cram-down provisions.
The judicial management process has also been amended. Amendments include the lowering of the insolvency threshold for a judicial management application, allowing foreign companies with a connection to Singapore to apply for judicial management, and the removal of the veto power of a creditor holding a floating charge over all or substantially the whole of a company’s assets. New rescue finance provisions have also been introduced to the judicial management process.
Click here to read our client update.
Criteria for Removal of LiquidatorsWhen a company enters into liquidation, control of the company's operations shifts into the hands of the appointed liquidators. In Petroships Investment Pte Ltd v Wealthplus Pte Ltd (in members' voluntary liquidation) (Koh Brothers Building & Civil Engineering Contractor (Pte) Ltd and another, interveners)  SGHC 122, the High Court examined the circumstances in which it would order liquidators to be removed from their positions.
Click here to read our client update.
Re-affirming the High Threshold for "Unconscionability" in the Context of Resisting Payment for On-Demand BondsOn-demand bonds provide an important degree of certainty in commercial arrangements. Upon demand, the beneficiary of the bond is able to receive payment of a sum not exceeding the bond amount. In Tactic Engineering Pte Ltd (in liquidation) v Sato Kogyo (S) Pte Ltd  SGHC 103, the Singapore High Court affirmed that beneficiaries will not easily be prevented from calling on on-demand bonds. While the issuer may resist payment on grounds of unconscionability, proving such unconscionability continues to be challenging.
Click here to read our client update.
Do Hacked Emails Retain Confidentiality?The confidentiality of and legal professional privilege over documents and communications are key concerns of any client. They are also of concern to corporate entities with in-house counsel who provide legal advice to management. These issues take on a new dimension in an age when the security of computers is threatened as never before. In the case of Wee Shuo Woon v HT S.R.L.  SGCA 23, the Singapore Court of Appeal had to consider whether advice that had been accessed by hacking the client's email account and then posted on WikiLeaks were in the public domain and no longer entitled to legal protection.
Click here to read our client update.
Exemptions from the Foreign Business Licence RequirementThe Ministry of Commerce has issued regulations exempting the following businesses owned by foreigners (either majority or wholly) from the requirement to apply for a foreign business licence:
- Certain financial institutions and related businesses (e.g., those providing Islamic financial services, cash management services, or carrying out sale and purchase of debts arising under loan transactions).
- An asset management business under relevant laws.
- A representative office and regional office of a foreign entity operating an international trade business under regulations relating to the establishment of a visa and work permit centre.
- A service business which contracts with a government entity or state enterprise (as defined under the law on government budget procedures).
Amendments to the Direct Sales and Direct Marketing ActThere are amendments to the Direct Sales and Direct Marketing Act which will come into force on 14 September 2017. Significant changes include the following:
- Requirement that the direct sales business operators must be a partnership with a minimum registered capital of THB 500,000, or a public / private limited company with a minimum registered and paid-up capital of THB 1,000,000. An individual is no longer allowed to apply for the direct sales business registration.
- Requirement for direct sales business operators to be jointly liable with independent distributors towards consumers for any defects to products or services sold, or any damages incurred as a result of the independent distributors' non-compliance with the Act.
- Requirement for direct sales and direct marketing business operators to provide a guarantee (e.g., in a form of cash, bank guarantee, or government bond) to the Consumer Protection Board at the amount to be prescribed by the Direct Sales and Direct Marketing Commission.
- Requirement for direct sales and direct marketing business operators to prepare a sale and purchase document for products or services, to be distributed to consumers together with the products or services. The documents must be in Thai language, easy to read and understand, and contain certain information not previously required (i.e., name of the buyer and the seller, date of purchase and delivery, and the consumers’ right to terminate the contract).
Introduction of the Thai Court’s Electronic Filing SystemFrom 4 May 2017, the filing of a plaint to commence proceedings may be made by electronic means. In order to take advantage of the electronic filing service, a party to the case and its lawyer are required to register with the Office of the Judiciary as a user. The registered user would be able to submit the plaint via the electronic filing system, and pay the court fees by credit or debit card, by a bank remittance, or any other method to be specified by the Office of the Judiciary. At present, the service is available at the Civil Court, the Bangkok South Civil Court, and the Thon Buri Civil Court, and only for certain types of cases, namely those involving sale and purchase transactions, hire of property, mortgage, pledges and guarantees, lending, hire-purchase and credit cards. The system will be gradually implemented throughout the country and for a wider range of cases.
Updates on the Revenue CodeThe Revenue Code has been amended to conform with the terms of reference issued by the Asia Pacific Group on Money Laundering ("APG"), of which Thailand is a member. The terms of reference of the APG require member countries to follow the recommendations of the Financial Action Task Force ("FATF") that certain serious criminal offences relating to taxes and duties should be deemed to be predicate offences under anti-money laundering laws. More specifically, pursuant to the Revenue Code amendment, an offence of tax evasion of THB 10 million or more, or an offence of fraudulent claim of tax refund of THB 2 million or more, would also be considered as a predicate offence of money laundering if a taxpayer (i) has acted as part of a network to falsify transactions or conceal revenue figures for tax evasion purposes, and (ii) conceals or hides assets/properties used in relation to the commission of the offence.
Amendments to the Customs ActLong awaited amendments to the Customs Act B.E. 2469 (1926) were published in the Royal Gazette on 17 May 2017 and will become effective on 13 November 2017. Significant changes include the following:
- The penalty for alleged duty evasion has reduced from four times the duty paid value of the goods to a range of between half the deficit duty to four times the deficit duty, which we expect to have an impact on the decisions made by alleged offenders to either settle the case at Customs level or defend allegations in court proceedings, although they would need to take into account the possible imprisonment of individuals concerned.
- Substantially reduced rewards payable to informants and officials with a maximum amount per case.
- Post-audit will be limited to a five-year period following importation, which is also in line with the document retention period.
- The Board of Appeal must now rule on appeals within 180 days from the date on which the submission of relevant documents is complete.
- Strict liability language in Section 115 quarter in respect of a person responsible for the operations of an alleged offender who is a juristic person will be replaced with language consistent with recent amendments to the Act Amending the Law on the Criminal Liability of Representatives of Juristic Persons B.E. 2560 (2017).
Draft Decree on Compulsory Social Insurance for ForeignersIn April 2017, the Government released the draft decree to set forth a social insurance regime for foreigners in Vietnam. Under this draft, commencing from 1 January 2018, Vietnamese enterprises would be required to pay mandatory social insurance premiums for its foreign employees (excluding those on internal assignment to Vietnam).
Under this decree, the employer is required to contribute 18% of the foreign employee's monthly salary into the social insurance fund, while employees need to contribute 8%. The proposed regime has sparked some concern within the business community, considering the high rate of contribution which would escalate their costs of hiring expatriates.
Draft New Labour CodeA draft of the new Labour Code has been released and, if passed, would replace the existing Labour Code 2012.
Key changes in the draft (compared to the existing Labour Code) include (i) allowing termination without cause for definite term and seasonal / specific job contracts, (ii) automatic renewal or conversion of labour contracts in the event the employee continues working beyond the term in his / her existing contract, and (iii) redefining "salary" to include "bonuses", which aims to circumvent the current practice of employers decreasing their mandatory insurance premiums and severance obligations by declaring salaries as monthly "bonuses" instead of base salaries.
Effectiveness of the Decree on Commercial MediationOn 15 April 2017, Decree No. 22/2017/ND-CP guiding commercial mediation came into effect. The Decree marked the first specialised legislative instrument for commercial mediation. Prior to the Decree, the procedures for mediation and their treatment were governed by general instruments such as the Civil Code and the Commercial Law.
Under this Decree, disputants are able to refer a dispute to mediation pursuant to the rules of a mediation centre (e.g., VIAC's Rules of Conciliation) or the procedures proposed by a mediator. If the dispute cannot be settled by mediation, it may be referred to the court for final resolution. An agreed mediation outcome can be submitted to the courts for recognition and enforcement.
Please note that whilst the information in this Update is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice.