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The Thai government’s economic response to COVID-19

Tanva Mahitivanichcha Tanva Mahitivanichcha

Like many countries, Thailand is facing serious economic challenges amid the COVID-19 pandemic. Businesses are seeing a severe deterioration in their customer bases, and some are being forced to shut down. Many other companies are reducing working hours and laying off staff as they struggle to manage cash flow and stay in business.  

To alleviate the financial strife that both workers and businesses are experiencing, the Thai government has approved several fiscal and tax policies.


Fiscal stimulus measures

Thus far, the Thai Cabinet has approved a fiscal stimulus bill worth 517 billion baht. This money will go towards a variety of essential economic needs.

The social security system will pay unemployed workers up to 50% of their wages for up to six months. For labourers and workers who are not covered by social security, 45 billion baht has been earmarked for cash handouts.

To assist affected clients, Special Financial Institutions will relax conditions regarding loan payments and warranties by offering principal payment deferrals, reduced interest, and penalty payment relief.

The state-owned Government Savings Bank has allocated up to 30 billion baht to provide low interest loans for individuals. 

The Government Savings Bank will also loan a total of 150 billion baht to various financial institutions at an interest rate of 0.01% per annum. These institutions will then provide businesses with low-interest loans – 2% on the first 20 million baht, for the first two years.     

Additionally, the Social Security Office and financial institutions will offer low-interest loans to employers who are registered with the Social Security Office and have contributed to the Social Security Fund for at least three months. These loans can total up to 30 million baht and will have an interest rate starting at 3% per annum. Upon receiving the loan, employers must retain insured employees for at least three years.  

Finally, the Bank of Thailand is urging financial institutions to alter loan classifications, as a way of allowing indebted businesses to retain sufficient liquidity to carry out day-to-day operations. 


Tax measures

The government is extending the deadline for corporate income tax payments by three months, until August 2020. Moreover, the deadline for VAT and special business tax payments has been extended by one month.

The withholding tax rate for taxes paid via electronic means (e-withholding tax) will be reduced to 1.5% from 3% for payments made from 1 April 2020 to 30 September 2020, and reduced to 2% for payments made from 1 October 2020 to 31 December 2021.

SMEs that participate in the low-interest loan programme and are registered for the single financial account programme will be permitted to deduct 1.5 times the interest incurred between 1 April 2020 and 31 December 2020 from their expenses.

Furthermore, SMEs will be allowed to deduct three times the amount paid on employee salaries between April 2020 and July 2020 from expenses, provided that employees are insured persons with salaries not exceeding 15,000 baht per month and that the number of employees remains equal or higher to what it was on 31 December 2019.

For goods exporters, the VAT will be refunded within 15 days if the PP 30 form is filed online, and within 45 days if the PP 30 form is filed with the Revenue Department Office.


Other measures

The relevant authorities will postpone the due dates of the electricity and water bills for people affected by COVID-19. 

Social Security Fund contributions for employers will be reduced from 5% to 4%.

Government agencies and state enterprises will reduce, defer or postpone rent fees, government fees, service fees, and other payments for business operators affected by the pandemic.

The Revenue Department will allow an additional personal income tax deduction for the purchase of investment unit in the Super Saving Fund (SSF) that places at least 65% of the investment in securities registered with the Stock Exchange of Thailand. The deduction is limited to 200,000 baht for an investment purchased between 1 April 2020 and 30 June 2020, and the purchaser must hold the investment unit for at least 10 years. This deduction is not subject to the cap on ordinary SSF reductions or pension funds which is set at the limited of 500,000 Baht per person per annum.

Lastly, the government has earmarked 20 billion baht to provide additional aid and employment incentives for individuals affected by COVID-19.


Brighter days ahead

The above fiscal and tax measures should go a long way to support individuals and businesses throughout the ongoing crisis.

This pandemic poses the greatest economic challenge we have faced in recent history, and extraordinary measures must be taken to ensure the survival of businesses. By taking swift action, the government is giving companies the ability to weather the ongoing storm, and emerge from this crisis in a strong position to reboot the economy.