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THAIBEV TAX STRATEGY (CONCEPTUAL FRAMEWORK) 

ThaiBev Tax Policy are founded in the principles in the overall vision 2020, mission, values, sustainability goals and good corporate governance principles that have already been implemented in the ThaiBev Group.

In support of our overall business strategy and good corporate governance objectives, we pursue a tax policy that is principled, transparent and sustainable in the long term. We have established principles governing our tax policy and related tax practices which have been the result of a longstanding ThaiBev experience and which are directed by ThaiBev’s Board of Directors, and are annually reviewed and approved by the meeting of Group Finance and Accounting which is chaired by CFO in order to accomplish our commitment and responsibility towards our stakeholders. Our tax policy and related tax practices are set out below:
Tax Code of Practice
contains principles that aim to achieve sustainable and competitive taxation and sustainable value and growth including good corporate tax citizenship with added value for society. Tax Code of Practice sets out clear articulation of our tax governance framework and ThaiBev’s perspective on tax risk. Our tax principles are set out below.
a) Compliance:
We act at all times in accordance with all applicable laws and relevant international standards and we aim to comply with the spirit as well as the letter of the tax laws in the countries in which the company operates.
b) Corporate ethics:
Our Tax Code of Practice is based on our corporate governance as laid out in our Business Ethics of Thai Beverage Group which requires that our business be transacted in accordance with a high standard of corporate conduct appropriate to our standing as a major company with worldwide operations.
c) Transfer pricing:
We aim to pay an appropriate amount of tax according to where value is created within the normal course of commercial activity. Any intragroup pricing is aimed at achieving a commercial market price. We are on the path of developing and implementing a group transfer pricing policy to align with the arm’s -length principle under its respective domestic jurisdiction regulations and transfer pricing laws.
d) Tax Structuring:
Our tax structuring must be based on sound commercial rationale. We do not enter into tax fraudulent, contrived or abnormal tax structures shifting profits to secrecy jurisdictions or so-called tax havens. Furthermore, we will not enter into complex tax structures where the primary objective is accessing tax benefits and the main purpose is tax avoidance. We have responsibility to our shareholders to be financially efficient and deliver a sustainable taxation that enhances shareholder value.
f) Tax Incentives:
In line with the objective of tax efficiency, we will seek to make use of legally available tax incentives, within the context of sound and sustainable business decision-making. Incentives may include tax holidays, accelerated asset allowances or other incentives. All are in the context of national or local tax policy and would generally be available to any business that meets the relevant criteria. These incentives may influence our business decision making, but are only one of a range of economic factors taken into account.
g) Relationships with tax authorities:
We respect the right of governments to determine their own tax structures, rates of tax and collection mechanisms. We seek an open and constructive dialogue with the tax authorities in pursuit of professional, constructive and transparent working relationships.
Tax Risk Management and Tax Control Framework
We focus on risk governance includes the identification and management of all material business risks, including but not limited to strategic, financial, operational, reputational, and environmental, information technology to ensure that ThaiBev operates in compliance to legal requirements.

We are fully compliant with tax laws and regulations in all jurisdictions where we operate. And in this context we aim to manage our tax risks including tax consequences due to changes in government tax policies or administrative tax practices. This encompasses maintenance of documented policies and procedures in relation to tax risk management and completion of thorough risk assessments in all its taxation affairs. This includes, among others, compliance, operational and external reporting risks
a) Process Compliance:
We commit to act responsibly in relation to our tax affairs. This means that we comply with the tax laws and regulations of each region in which we operate. Where tax laws do not give clear guidance, prudence and transparency shall be the guiding principles. We furthermore commit to be globally compliant in timely, accurate and complete filing of tax returns and striving to avoid adjustments, fines and interest costs. Our economic contribution, of which tax forms a part, is important and we aim to ensure that we pay the right and proper amount of tax in each region in which we operate. Operational controls apply to all processes relating to the management of tax liabilities for which tax is accountable.
b) Monitoring & Reporting:
We are committed to appropriate internal and external tax monitoring and reporting and accurate representation of current and deferred tax expenses.

We acknowledge tax as a relevant factor in the meeting of Group Finance and Accounting which is chaired by CFO in decision making process. Tax risks are being monitored and reviewed on a structural basis and form a recurring item on the meeting of Group Finance and Accounting’s agenda. Management controls are in place and ensure that, at the highest level, tax is aligned with our tax policy in a controlled and standardised manner. They encompass the authority, objectives, principles, rules, and related assurances that underpin tax activities and establish boundaries for tax.
c) Reputational risk:
We are committed to effectively monitor and manage compliance and reputational risks related to our tax affairs. We periodically review the quality and integrity of tax arrangements, as well as the accuracy and comprehensiveness of tax data, tax returns and reported results regarding tax provisions, exposures and deferrals.
d) Culture of risk management:
We are committed to engender knowledge and understanding and to instil tax risk management into awareness of all tax practitioners who are directly responsible for ThaiBev’s taxation including giving a direction to other divisions on tax related issues and thereby aiming for tax risk management to be part of corporate culture. We periodically provide special trainings in tax risk management in order to understand risk factors, risk process and management tools used to address risk consistently.
e) Tax control framework:
ThaiBev is in a continuing process of improving and implementing tax risk management in the company and the development of Tax Control Framework is part of that continuous commitment and process in the years to come which includes internal processes, roles, responsibilities, reporting and risk mitigating policies for ThaiBev business transactions and their potential tax consequences.

In order to operationalize our Tax Risk Management commitments, ThaiBev has introduced a Tax Control Framework (“TCF”) including internal processes, roles, responsibilities, reporting and risk mitigating policies for ThaiBev business transactions and their potential tax consequences.

ThaiBev aims to be "in control" of all tax issues, being able to detect, document and report any relevant tax risks in a timely way, and bringing all tax processes in the scope of the Tax Control Framework. In this way the ThaiBev Tax Control Framework should enable ThaiBev to identify, mitigate, control and report tax risks internally and when necessary externally.

The main focus is on managing the risk associated with taxes for its Thai and foreign entities. This includes keeping current with tax laws and changes as they occur, improving controls over tax financial reporting requirements, managing the global tax audit activity, determining that compliance with tax requirements occurs in every jurisdiction, providing access to proper expertise in each jurisdiction and accurately reporting global tax accounts by jurisdiction.

ThaiBev supports the increased focus on financial reporting and enhanced demand for improved transparency by investors, shareholders, public, governments and management alike. The ThaiBev TCF should result in an effective, efficient and transparent tax function in which for each tax process in the organization, the roles and responsibilities are defined and procedures, process (and tools) are made available and properly documented and reported.
Tax Transparency
Our tax communication to governments is based on transparency fulfilling all statutory disclosure requirements on taxation. Our clear and transparent tax policy are disclosed in the public domain accompanied by ThaiBev regional tax report.

For us good corporate citizenship includes excellence in tax governance, tax accountability and tax transparency building trust with societies and stakeholders. We are committed to open and transparent principle based approach towards taxation.
Transparency to Tax Authorities
a) For us this means, first of all, transparency to tax authorities where full disclosure will be given to fulfil all regulatory requirements in all jurisdictions we operate in.

b) This includes information necessary to properly understand entries in a tax return and information specifically requested during tax audit enquiries. In this context, we ensure that proper documentation is kept to meet local tax requirements.
Transparency to Other Stakeholders
a) For us this means, first of all, transparency to tax authorities where full disclosure will be given to fulfil all regulatory requirements in all jurisdictions we operate in.

b) This includes information necessary to properly understand entries in a tax return and information specifically requested during tax audit enquiries. In this context, we ensure that proper documentation is kept to meet local tax requirements.
Transparency to Other Stakeholders
a) We are committed to tax transparency responsibilities towards our stakeholders in the widest sense in line with our sustainability approach. In that spirit of transparency and continued disclosure we have decided to publish our tax policy.

b) We are transparent about our approach to tax and will put forward understandable, timely and transparent communication about our tax policy. We believe that this tax transparency is a cornerstone of good tax governance.

c) Furthermore, we support efforts to ensure that companies are appropriately transparent on their economic contribution. In order to provide greater insight and clarity, we are committed to transparency and accountability in disclosure on taxation in ThaiBev regional tax report indicating revenue, operating profit and taxes paid.
Tax Reporting
Tax Reporting FY2018
Country / Region Total revenue Profit (loss) before tax (*) Tax Expense
Thailand 175,465,912,952.98 14,976,902,892.48 3,299,854,405.80
Vietnam 43,442,216,700.32 5,472,040,972,37 1,082,108,334.88
Myanmar 7,400,822,793.37 2,231,978,077.45 142,132,077.08
Asian Pacific 3,325,598,002.20 (1,884,485,806.71) 2,206,498.10
Europe 2,919,262,001.68 359,711,269.59 83,120,325.27
USA 44,615,739.32 (51,422,071.79) -
Total 232,598,428,189.88 21,104,725,333.39 4,609,421,641.13

Remark (*) excluding share of profit from normal operation of investment in associates and joint ventures.



Note to Myanmar - Two subsidiaries in Myanmar have been granted the income tax exemption for a period of 5 years from Myanmar Investment Commission which was expired in December 2018.

Note to Asian Pacific region- Hong Kong adopts a territorial source principle of taxation. Only profits which have a source in Hong Kong are taxable there. Profits sourced elsewhere are not subject to Hong Kong Profits Tax and Singapore Corporate Income Tax.
Effective Tax Rate
ThaiBev’s effective tax rate explanations
Consolidated Financial Reporting (THB) FY2017 FY2018
Earning before tax(*) 39,812,397,460.16 25,334,964,524.37 *
Reported Taxes 5,131,633,815.91 4,609,421,641.13
Reported Tax Rate (in %) 12.9% 18.2%
Cash income tax paid (THB) 3,634,832,444.48 6,965,318,134.87
Cash Tax Rate (in %) 9.1% 27.5%

Remark (*) including share of profit from normal operation of investment in associates and joint ventures.

The cash tax rate in FY18 increased from 9.1% in the prior year to 27.5%. – Generally, cash tax paid in any particular year may differ from the tax accrued on profits for the year. The average cash tax rate as calculated above substantiated our statement in FY17 that 50% of income tax charged on income derived in FY17 has already been paid in FY18. In addition, the tax paid significantly increased due to the acquisitions of the Grand Royal Group in Myanmar and Sabeco in Vietnam which represented by 25% of the total tax paid in FY18.

A large majority of the Group’s income is derived from Thailand which is subject to the CIT at 20%. However, the reported tax rate in FY18 is 18% which is slightly lower. From the annual report, the reconciliations of the ETR provide reasons as follows:

Effect of different tax rates in foreign jurisdictions mainly represents tax effect from income of THB 112m derived by The Grand Royal Group (“GRG”), Myanmar subsidiary which are subject to the higher tax rate at 25% and income of THB 94m derived by ThaiBev under IHQ tax regime since FY16 resulting in certain types of income is entitled to a tax exemption or tax reduction for 15 accounting periods from the date of the approval by the Thai Revenue Department.

It is worth noting that Thailand joined OECD's Inclusive Framework on Base Erosion and Profit Shifting (BEPS) in 2017 and the IHQ scheme was featured as a harmful tax practice and should be suspended. In response to this, Thailand government has announced the International Business Center (“IBC”) regime that is in line with the OECD’s Inclusive Framework which will replace the IHQ.

As ThaiBev aims to achieve sustainable and competitive taxation, and act at all the time with relevant international standard, ThaiBev is ready to convert the IHQ to the IBC in June 2019. Under IBC regime, the preferential income rates of between 3% and 8% will be applied depending upon its annual expenditure to be spent in Thailand in each respective tax year.

“Income not subject to tax” mainly arises from income derived by Hong Kong subsidiaries. Hong Kong adopted territorial rule where income derived offshore will not be taxable in Hong Kong.

In addition, dividend income will be exempt from Thai tax due to tax legislation in Thailand provides a participation exemption rule for the Thai parent company on the dividend received from its subsidiaries.

ThaiBev’s subsidiary, has been granted tax privileges by the Board of Investment relating to the projects of electricity generation from biogas at distilleries and production of beverage. The privileges granted includes the tax exemption for the income derived from the promoted businesses for 8 years from the date on which income is first derived from the promoted businesses. Similarly to Myanmar operation, 2 subsidiaries has been granted the tax exemption for 5 years from Myanmar Investment Commission which has been already expired in December 2018.

“Expenses not deductible for tax purposes” mainly represents non-deductible expense amounting to THB 904m incurred by subsidiaries located in Hong Kong by which its non-taxable income was derived i.e. dividend and gains from disposal resulting in expenses relating to such non-taxable income should not be claimed.

There was a negative figure reconciled against the above non-deductible, arising from a number of tax incentives as follows:

  • The training fee charged by Thai Beverage Training Co., Ltd. can be a tax deductible for 200% based on the Thai government policy to promote the development of employee skills.

  • The 50% and 100% additional tax deduction from the acquisition of new capital expenditure during 2016-2017.

  • The public donations to educational and sport institutions which can be a tax deductible for 200%.

“Recognition of previously unrecognized tax losses” mainly represents the reversal of losses incurred in the year prior to THB 80m deferred tax assets.