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Phuket Business: US tax regime – Comply or else…

Legacy Phuket Gazette

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Phuket Business: US tax regime – Comply or else… | The Thaiger
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PHUKET: At a US tax seminar held last month at the Holiday Inn, Patong, by the American Chamber of Commerce (AMCHAM) Phuket Chapter, American income earners and business operators were given a comprehensive update about the US tax regime’s reporting requirements and regulations.

Two previous articles about the seminar – published in the Business section of the Phuket Gazette on March 23 and 30 (click here) – covered the Foreign Earned Income (FEI) exclusion, foreign tax credits and other related reporting requirements such as the Foreign Bank Account Reporting (FBAR).

This article will cover the reporting requirements for foreign held assets, as well as investments in foreign corporations.

The seminar’s keynote speaker, John Andes, a US CPA and Thai-American partner with the Bangkok-based accounting firm KPMG Phoomchai Tax Ltd, covered a number of forms that Americans living or investing abroad should be aware of.

“Form 8938 must be filed by US persons with any interest in a Specified Foreign Financial Assets (SFFA), if the aggregate value of such SFFA exceeds certain thresholds,” he said.

For single persons, or those married but filing separately, the SFFA threshold is at least US$200,000 aggregate at year’s end or at least $300,00 any time during the year.

For married persons filing jointly, the thresholds are double. In addition to this, certain US persons who are shareholders, officers or director of a foreign corporation (any juristic entity) may be required to file form 5471, which covers ‘Investment in Certain Foreign Corporations’.

He said that there are four categories required to file this form, but generally, this is required to be filed by any US citizen or resident that is a director or officer of a non-US company, which has at least one US shareholder, who has at least 10% ownership in the value or voting rights of the company.

Form 5471 is required for any shareholder of a non-US company who acquires or disposes of a significant amounts of shares in the non-US company. Also, form 5471 is required where, under certain circumstances, American shareholders control more than 50% of a non-US company’s shares, either by value or voting rights.

Failure to file forms 8938 and 5471 can carry a penalty of $10,000 per incident, and in the case of form 5471, also pose potential loss of foreign tax credits.

Forms, forms and MORE forms

In addition to the 8938 and 5471 forms, American investors may also need to report other types of foreign investments such as a non-US partnership (form 8865) or disregarded entities (form 8858).

Moreover, US taxpayers must report if they are an owner of a foreign trust, as well as if they had any transactions with foreign trusts, ownership of foreign trusts and gifts or bequests from foreign individuals (form 3520 or 3520-A for owners).

Even investments in non-US companies that generate passive income may be subject to additional reporting. In some cases, where an American shareholder receives a dividend from a Passive Foreign Investment Company (PFIC), the shareholder may need to report his investment and income on form 8621.

A PFIC is determined by meeting one of two tests. The first test is met if at least 75% of the non-US company’s gross income is passive income, (interest, dividends, rent, royalty and/or capital gain income). The second test is met if at least 50% of the company’s assets have generated or are expected to generate passive income.

Cash (generating interest income), buildings and land held for lease (generating rental income), for example, would be considered passive assets.

The tax on dividends received from a PFIC, under certain circumstances, can be very costly to the shareholder. In addition to the normal income tax, there could be additional liabilities imposed on the taxpayer. The additional liabilities may be avoided by making certain elections. This is a very complex area of tax law, which may unknowingly affect many investors in Thailand, especially those who invest in companies that own and rent real estate.

Bank sanctions

Starting in 2014, as a result of the US Foreign Account Tax Compliance Act (FATCA), non-US banks, brokerages, mutual funds, asset managers and insurance providers will begin required reporting of information on many of their US account holders or else face stiff US withholding taxes on US-sourced income.

Financial institutions, if they elect to comply, must disclose information about accounts held by US persons, which have an aggregate value of at least $50,000 during the year.

Financial institutions that do not comply will be assessed a 30% withholding tax on dividend and interest income and on the proceeds from the sale of assets paid from the US.

The burden of FATCA is on the non-US financial institutions to comply. Indirectly, though, there may be a backlash to American investors and depositors if the financial institutions start to reject new accounts for Americans or ask existing American customers to discontinue their accounts.

Changes from 2013

The 2013 year introduced some changes to the taxation of American individual taxpayers.

Many of the “Bush tax cuts” stayed in effect after sunsetting in 2012, but there is now the addition of a 39.6% tax bracket for ordinary taxable income greater than $400,000 for single filers and $450,000 for joint filers. A 20% tax bracket was introduced in 2013 for long-term capital gains for these high income earners also.

In addition to these new tax brackets, FATCA imposes limitations on high income taxpayers in regards to certain itemized deductions, such as mortgage interest, state income tax, property tax and charitable donations. Deductions are lost at the rate of 3% of Adjusted Gross Income (AGI) in excess of $250,000 for single filers and $300,000 for joint filers. Also, medical expenses are deductible to the extent that they exceed 10% of AGI – previously 7.5%.

There will also be a phase-out of the personal exemption. Normally, the personal exemption is $3,900, but the exemption is reduced 2% for each $2,500 that your AGI
exceeds the AGI threshold for deductions.

There is now a 3.8% surtax on unearned (investment) income applicable to those taxpayers with modified AGI greater than $200,000 for single filers and $250,000 for joint filers.

Medicare taxes will also increase. For those subject to Medicare tax deductions, the tax rate will increase from 1.45% to 2.35% on wages over $200,000 for single filers and $250,000 for joint filers. There will also be a new 0.9% Medicare tax introduced for these higher income earners.

On a positive note, the estate and gift tax law changes were welcomed by many taxpayers. The estate tax rate was reduced from 55% to 40%, and the lifetime exclusion was adjusted to $5.12 million for 2013. The annual gift tax exclusion increased from $13,000 to $14,000 for 2013.

Conclusion

These developments, as well as those described in previous articles, only focus on US federal income tax. Some taxpayers living abroad may also be liable to state and local income taxes. Clearly, the US federal tax rules are ever-changing and as complex as ever. For most taxpayers living abroad, the reporting requirements are manageable, but for many, complex tax calculations, difficulty in reporting information and not being aware of changes to the existing tax laws will cause them to seek assistance either from professional tax advisors or from the IRS directly.

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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Business

“Come and see” – Ministry invites diplomats to see coconut-picking monkeys in action

The Thaiger

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“Come and see” – Ministry invites diplomats to see coconut-picking monkeys in action | The Thaiger
PHOTO: Atlas Obscura

The monkeys, and the Thai government, are hitting back at accusations macaque monkeys are being exploited, even abused, and forced to pick coconuts for commercial farmers. Some larger western retailers say they’re going to pull Thai coconut products off their shelves after being lobbied by animal rights activist that the coconuts were picked by abused and over-worked macaque monkeys.

The Thai Commerce Ministry, coconut farmers and the “monkey school” trainers are dismissing reports, and a dramatic video from PETA (People for the Ethical Treatment of Animal), that the coconut-picking monkeys are maltreated. So they’re organising a tour for foreign diplomats and the media to see the monkeys at work and decide for themselves.

The permanent secretary for commerce, responding to the reports, says the monkey owners don’t abuse or exploit the animals which have been “humanely trained” to pick coconuts. He has instructed attaches in foreign Thai embassies to provide an explanation to retailers in other countries who have expressed concerns and even instigated boycotts.

“The ministry is ready to invite foreign diplomats to visit coconut plantations and see how the monkeys pick coconuts so they will realise this is not animal cruelty.”

The Bangkok Post reports that Pramual Pongthawaradej, a Demo­crat Party MP for Prachuap Khiri Khan province, the Chair of a House subcommittee tackling falling coconut prices, says they’ve approached owners of coconut milk plants to justify their practices to PETA. They’ve also asked the Department of Agriculture to provide details regarding the use of monkeys to pick coconuts.

A video from Touronthai shows an operating monkey-school posted 4 years ago…

But Somjai Saekow, an owner of a monkey school which trains macaques in Surat Thani, says… “the practice of capturing monkeys from the wild to pick coconuts ceased a long time ago”.

“Currently, monkeys are bred and raised before being trained. They are not forced to pick 1,000 coconuts from trees everyday, and they don’t work every day.

“Coconut-picking monkeys are mostly males and their abilities vary. The owner of the monkey receives 2 baht per a coconut picked.”

“Foreigners may not understand our livelihood. Also, humans are not built to climb up a coconut tree to pick fruit. They will be at risk, compared to monkeys which have the natural ability to do so.”

An owner of monkeys in Surat Thani, denied the claims of poor treatment or abuse of the coconut-picking monkeys.

“There is no cruelty. Actually, they are looked after well. They are fed well with rice, milk, and fruit three times a day. They are treated like family members.”

PETA claims pigtailed macaques in Thailand were treated like “coconut-picking machines”.

“Following PETA’s investigation, more than 15,000 stores will no longer purchase these brands’ products, with the majority also no longer buying any coconut products sourced from Thailand monkey labour.”

PETA said it had found 8 farms around Thailand where monkeys had been forced to pick coconuts for commercial export.

“Male monkeys are able to pick up to 1,000 coconuts a day.”

“Other coconut-growing regions, including Brazil, Colombia and Hawaii, harvest coconuts using humane methods such as tractor-mounted hydraulic elevators, willing human tree-climbers, rope or platform systems, or ladders, or they plant dwarf coconut trees.”

“PETA went further by calling on “decent people never to support the use of monkey labour by shunning coconut products from Thailand”.

SOURCE: Bangkok Post

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PETA reveals ‘abused’ monkeys used to pick coconuts in Thailand

The Thaiger

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PETA reveals ‘abused’ monkeys used to pick coconuts in Thailand | The Thaiger
PHOTO: PETA

A boycott is in full swing amongst western retailers to pull Thai coconut products off their shelves following allegations that the coconuts have been picked by monkeys who were ‘abused’ to learn how to pick coconuts. People for the Ethical Treatment of Animals director, Elisa Allen, claims the macaque monkeys are “snatched from the wild” and cruelly trained to climb up coconut trees and pick up to 1,000 coconuts a day.

“These curious, highly intelligent animals are denied psychological stimulation, companionship, freedom, and everything else that would make their lives worth living, all so that they can be used to gather coconuts.”

PETA says that the Thai pigtailed macaques are treated like “coconut-picking machines”. A new investigation into Thailand’s coconut industry reveals the monkeys are confined to cramped cages, chained, and forced to work. PETA reports that the monkeys are used by commercial farms that supply 2 of Thailand’s best-known coconut milk brands, Aroy-D and Chaokoh. Both brands are exported EU countries and the US.

In the UK, Waitrose, Ocado, Co-op and Boots have now announced they will stop selling some coconut products from Thailand. A spokesperson for Tesco told the BBC… “Our own-brand coconut milk and coconut water does not use monkey labour in its production and we don’t sell any of the branded products identified by PETA”.

“Following PETA’s Asia’s investigation, more than 15,000 stores will no longer purchase these brands’ products, with the majority also no longer buying any coconut products sourced from Thailand monkey labour.”

PETA has shared a video narrated by Downton Abbey star Peter Egan. According to PETA, the video shows ‘monkeys pacing and circling endlessly on chains… confined to cramped cages with no shelter from the rain… forced to climb trees and pick coconuts for milk sold by major brands’.

PETE claims it had found 8 farms in Thailand where monkeys were forced to pick coconuts for export around the world. Male monkeys can pick up to 1,000 coconuts in a day. It’s thought that a human can pick about 80.

“Other coconut-growing regions, including Brazil, Colombia and Hawaii, harvest coconuts using humane methods such as tractor-mounted hydraulic elevators, willing human tree-climbers, rope or platform systems, or ladders, or they plant dwarf coconut trees.”

The group said it has uncovered “monkey schools”, where the macaque species monkeys are trained to pick coconuts, fruit, as well as ride bikes or play basketball for the entertainment of tourists.

“The animals at these facilities, many of whom are illegally captured as babies, displayed stereotypic behaviour indicative of extreme stress.”

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Crime

Prohibition activist criticises unequal enforcement of Thai alcohol laws

The Thaiger

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Prohibition activist criticises unequal enforcement of Thai alcohol laws | The Thaiger
PHOTO: The Thaiger

The head of the prohibitionist Alcohol Watch Network is criticising the Office of Alcohol Beverage Control and police for looking the other way after ML Piyapas Bhirombhakdi posted a photo of herself showing off a branded bottle of an alcoholic drink on her Instagram profile (the picture has since been deleted). Piyapas is not only a great-granddaughter of HRH Prince Nares Varariddhi, a son of HM King Rama IV, but is the wife of Chutinant Bhirombhakdi, an heir to the Boon Rawd Brewery fortune and executive vice president of Singha Corp. Her post showed her holding a new Boon Rawd product.

Kamron Choodecha argues that the bottle and brand were clearly visible and, given that Piyapas has a vested interest in Boon Rawd’s sales, her post must be construed as sales or marketing, violating the Alcohol Beverage Control Act, which prohibits any sort of alcohol marketing online. He claims the fact she has not been fined, even as police extract hundreds of thousands of baht in fines from ordinary people posting harmless photos of themselves enjoying alcoholic beverages, shows the inequality in Thai society and the privilege elites are given when it comes to the law.

Others may argue, however, that the hypocrisy of the incident illustrates only how ludicrous the law is. Sporadically enforced over the years, the law again made headlines this year when foreign-managed alcohol distributor Beervana was fined 50,000 baht for an online post describing one of its products as “refreshing,” which contravened a ban on adjectives in marketing copy.

In the days that followed reports surfaced across the country of the OABC and police summoning people and slapping them with huge fines for posts that had no connection to sales or marketing.

Most recently, a young woman in Thailand’s South was fined 17,000 baht for posting a photo of a beer she liked to a beer fan page. The page owner was so outraged that he paid 5,000 baht of the fine and met face to face with regulators to protest the law.

Even Kamron, an anti-alcohol zealot, admits that the law is being misused by police and authorities. He says simply using the word “beer” or posting photos of bottles or glasses does not break the law, as long as brands are not shown. He believes the law’s intent is only to prevent advertising of alcoholic beverages on conventional and social media platforms. He argues that if the poster had no commercial intent, no one should be fined.

“But if authorities are going to strictly interpret the law, distant royal relatives or any other elite member of society should be punished equally.”

By the way there is an alcohol ban on for the next two days.

2 Buddhist holidays, Asahna Bucha Day and the start of Buddhist Lent, fall this weekend, and as a result the government has added Monday, July 6, as a national holiday. There will be an alcohol ban on the Sunday (July 5) and Monday (July 6). No alcohol will be sold or served on these days.

Prohibition activist criticises unequal enforcement of Thai alcohol laws | News by The Thaiger

PHOTO: Nation Thailand

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