THAILAND Law and Practice Contributed by: John Frangos, Nuanchun Somboonvinij, Santhapat Periera and Niti Muangkote, Tilleke & Gibbins
tax is applicable under a double tax agreement (if any). • Customs duty: the importation of an aircraft of an unladen weight exceeding 15,000 kilograms (Harmonised Code No 8802.400) is exempt from customs duty. • VAT on importation of leased property: the impor - tation of an aircraft into Thailand is subject to VAT, which is currently imposed at the rate of 7%. The principal base for VAT computation is the aggregate of the value (CIF price) of the imported property or goods, customs duty, excise tax (if any) and other fees or surcharges applicable to the items imported. The VAT is payable by the importer upon the payment of import duty. If the importer is a VAT registrant, the VAT payable can be set off against the importer’s VAT liability or a refund can be claimed. • VAT on rental payment: a lease of an aircraft is considered a provision of service performed in a foreign country and being used in Thailand. The lease is therefore subject to 7% VAT under Section 83/6 (2) of the Thai Revenue Code. The lessee, as a payer of rental income, is liable to self-assess and remit 7% VAT to the Revenue Department on or before the seventh day of the month following the month of payment. If the lessee is a VAT registrant, this VAT can be used to set off the lessee’s VAT liability or a refund can be claimed. • Stamp duty: an aircraft lease agreement is not sub - ject to stamp duty. If the agreement is considered a hire purchase agreement, ad valorem stamp duty will be applicable. 2.4.2 Effects of Leasing on the Residence of a Foreign Lessor Subject to the terms of the lease and other relevant facts or circumstances, it is unlikely that a foreign les - sor will be considered to be resident, domiciled or carrying on business in Thailand by reason only of its execution or enforcement of an aircraft lease. For tax, see 2.4.1 Tax Requirements for a Foreign Lessor . 2.4.3 Engine Maintenance and Operations Subject to the terms of the lease and other relevant facts or circumstances, it is unlikely that a foreign les -
sor will be subject to liabilities in respect of aircraft or engine maintenance and operations imposed on it by reason only of its execution of an aircraft lease. There is, at present, no specific law governing the obligation of the parties on the maintenance and operations of the aircraft or engine. However, under the Civil and Commercial Code of Thailand (CCC), a lessor is generally liable for any defect arising during the lease period and the les - sor must make all necessary repairs other than those required by laws or custom to be carried out by the lessee. If a lessee has incurred any expenses for the preservation of the leased property, the lessor will have to reimburse the lessee for all necessary and reasonable expenses, except expenses for ordinary maintenance and minor repairs. The parties to a lease agreement may contractually agree otherwise on these, as is typically the case in an aircraft lease. 2.4.4 Damage or Loss Caused by an Asset Subject to the terms of the lease and other relevant facts or circumstances, it is unlikely that a foreign air - craft or engine owner or lessor, or financier, will be liable under the doctrine of strict liability as a result of damage or loss caused by the asset. The doctrine of strict liability is technically a common law principle. The lessor will more likely be liable under Thai tort law (eg, for wrongful acts). 2.4.5 Attachment by Creditors Subject to the terms of the lease and other relevant facts or circumstances, it is unlikely that creditors of a domestic lessee could attach an aircraft leased to it but owned by a different entity. In the case of unpaid governmental fees for the operation prescribed by law, the aircraft might be prohibited from flying in Thailand. However, it will probably not be attached or retained by the governmental entity, which is the creditor in this case. The responsible authority can just refrain from
issuing a permit for the aircraft to fly. 2.4.6 Priority of Third Parties’ Rights
The obligations of a lessee under an aircraft or engine lease rank at least equally (pari passu) in respect of priority with all other unsecured obligations of the lessee under Thai law. The exception to this is spe - cific classes of creditors. These classes of creditors
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