2. Taxation for foreign investors doing business outside ...

Stock Dividends

2. Taxation for foreign investors doing business outside of Thailand

Income from direct investment in common stocks via the Exchange

Tax rate

Dividends :

Individual Investor

10% withholding tax

Juristic investor

10% withholding tax

"The company has opted to pay stock dividends twice since 2009 as HMPRO aimed to boost the trading liquidity of our stock. If we had chosen to increase capital, our existing shareholders would have had to seek cash in order to maintain their ownership proportions. Stock dividends will also enable us to maintain our financial liquidity.

Another key factor causing the company to pay stock dividends is that the company has been able to maintain consistent a profit growth rate. Thus, the dilution effect from a stock dividend has been minimal, which means higher returns for shareholders"

Mr. Khunawut Thumpomkul, Managing Director of Home Product Center Plc. (HMPRO)

"The company paid dividends with both cash and stock dividends, which

will boost the company's cash flows and keep shareholders happy. But the drawback

is that the value of stock dividends must be included in withholding tax payments.

Thus, amount of cash dividends must be paid at least enough to cover the withholding

tax.

GOH KOK CHENG (Dickson),

CEO/President of BGT Corporation Plc

(BGT)

joins with

Thanachart Securities Pcl.,

62 The Stock Exchange of Thailand Building, Ratchadapisek road, Klongtoey, Bangkok 10110

Stock Dividends

Stock Dividends

Stock Dividends

A stock dividend is a dividend payment in the form of newly -issued shares. It is another alternative for companies in paying returns to shareholders, rather than the cash dividends generally paid. The number of shares paid as dividends is in proportion to each investor's shareholding. Subsequently, a listed company has to register a capital increase.

Payment of stock dividends will not impact shareholders' equity in the financial statements. However, retained earnings will decrease, while the number of ordinary shares and/or share premium will increase by an equivalent amount.

Benefits for the company

Company

Being able to keep cash for investment and business expansion without the need to seek additional capital from external sources which might have costs of financing. If the company pays cash dividends, its cash liquidity will decrease.

Maintaining financial liquidity

Maintaining a debt to equity ratio

Maintaining the firm's attractiveness as an investment despite having no cash dividend

Shareholders

Adding free float shares, boosting stock liquidity and consequently benefiting future fund-raising

Maintaining returns on investment to shareholders

Relevant notification

Public Companies Limited Act B.E.2535 Section 115 and 117

Issue for consideration

Impact on the company's share price, which may fall due to the higher number of shares

Listed Company Development Department, The Stock Exchange of Thailand

Stock Dividends

Summary of procedures in paying stock dividends

The Board of Directors resolves to pay stock dividends, increase capital and schedule a meeting of shareholders

> 14 days

Determine the list of shareholders' names as of the book-closing date who have the right to attend the upcoming shareholders' meeting (XM) and receive dividend payment (XD) (in case

the XM and XD are scheduled for the same date)

Within 2 months

Hold shareholders' meeting: Resolution to approve capital increase requires approval by > 3/4 of attending shareholders who have voting rights and resolution to approve dividend payment

< 14 days

Register the capital increase with the Ministry of Commerce

> 5 business days

Provide list of shareholder names as of the record date who have the right to receive dividends (XD) (in case XD is not on the

same date as XM)

- Register the paid-up capital with the Ministry of Commerce - Report the results of capital increase share allotment and

submit to the SET for listing the increased shares

TIPS

The company should consider paying stock dividends together with cash dividends to cover the cost of withholding taxes which the company needs to deduct from total value of dividend paid. Transferring retained earnings at par value will be subject to lower withholding tax costs than a transfer based on the market price. Paying an interim dividend can be made only when such a payment is already prescribed in the company's articles of association. - The board of directors can approve the interim cash dividend payment without approval from a shareholders' meeting, but the board must notify shareholders in the next shareholders' meeting. - The board of directors must seek approval from a shareholders' meeting for a capital increase to support an interim stock dividend payment.

Listed Company Development Department

Stock Dividends

TIPS

Section 115 of the Public Companies Limited Act (B.E. 2535) stipulates that dividend payment must be made within one month from the date that the shareholders or directors, as the case may be passed such a resolution.

If the company intends to schedule the record date for the right to attend the shareholders' meeting and approve dividend payment to be on the same day as the record date to receive dividends, it should be aware of the risk that the shareholders' meeting may vote against these agenda items. The shareholders and investors will be impacted from the change of rights. To avoid such a risk, the company should schedule the two record dates to be at least five business days apart.

Taxation of dividend payments

1. Taxation of Thai and foreign investors doing business in Thailand

Income from direct investment in the common stocks via the Exchange

Dividends :

Individual Investor

Tax rate

10% withholding tax on dividends paid by listed or limited companies Investor is given option of (a) paying the 10% withholding tax or (b) reporting the dividends for year-end tax payment Taxes are waived for dividends paid by companies granted tax privileges from the Board of Investment.

Juristic investor

There is a 10% withholding tax if the taxpayer is not listed company

If a Thai company or a mutual fund is the shareholder in question, taxes are waived if the shares are held at least 3 months before and after the dividend payment date.

If a juristic shareholder: (a) holds at least 25% of outstanding shares of the dividend-paying firm, and (b) the shares have been held for at least 3 months before and after the dividend payment and (c) the company paying dividends does not hold any shares of the juristic shareholder receiving those dividends taxes are waived

Taxes are waived for dividends paid by firms granted tax privileges from the Board of Investment, except such firm is Thai NVDR company Ltd.

The Stock Exchange of Thailand

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