Covid-19 tax reliefs for SMEs since 2020

On April 7, 2020, the Bank of Thailand (BOT) and the Minister of Finance jointly decided to adopt four measures to maintain sufficient funds and liquidity to support small and medium-sized enterprises (SMEs).

1. Temporary stop of credit repayment

The first of the Covid measures for SMEs consisted in a stop of the repayment of credits on both the principal and the interest for a period of six months. Eligible companies are those that have taken out a loan of 100 million Bahts or less, or 29,682 (USD).

2. A favorable borrowing rate

The second of the Covid measures for SMEs consists of setting up loans at advantageous rates. For a period of two years, the Bank of Thailand will provide financial institutions with soft loans (0.01%) worth 500 billion baht. The latter will then have to lend these funds with a rate of 2% per year. To benefit from this advantageous rate, there are still conditions to be met by SMEs:

➤ To carry out an economic activity on the Thai territory
➤ Not to be listed on the Thai stock exchange or on a market for alternative investment
➤ Have a normal repayment or arrears of less than 90 days from December 31, 2019

3. An improvement of the liquidity market

The BOT and the Minister of Finance have set up a fund called “The Corporate Bond Stabilization Fund”. The purpose of this fund is to provide financial support to companies whose bonds are about to mature. Again, several criteria must be met to qualify for this fund:

➤ Be in at least one investment category
➤ To have covered the majority of its investment fund needs by bank loans or by an increase in share capital
➤ Have a long-term financing plan

4. Reduce the tax corresponding to the financial institutions development fund

In fact, the rate will be reduced from 0.46% to 0.23% for a period of two years, the objective being to positively affect companies and households.

Measures to provide smes

Covid-19 tax reliefs for SMEs since 2021

In 2021, the BOT has continued this scheme of Covid measures for SMEs. The BOT has opted for a soft loan scheme worth 250 billion Baht. This scheme will allow, according to the BOT, the guarantee of a maximum debt coverage from the Thai Credit Guarantee Corporation, up to 40% of the total credit line offered to a commercial borrower, compared to 30% previously.

This is intended to eventually allow the riskiest SMEs to access these advantageous borrowing programs.

In sum, the package addresses the limitations of the existing 500 billion baht soft loan measure by expanding the pool of eligible borrowers to include both new and existing borrowers, increasing credit limits, lengthening loan terms, and changing interest rates to better support business recovery.

Due to the covid-19 pandemic, the economic measures taken in 2020 were not sufficient to address the financial difficulties that SME borrowers may face. Therefore, the Covid measures for SMEs had to be reviewed.

The Bank of Ayudkya (known as Krungsri), the fifth largest bank in Thailand, has joined forces with the Thai Bank Association and the BOT. The Krungsri has granted its clients (regardless of the size of their structure) a two-month break on the repayment of loans, both principal and interest.

SMEs located in the controlled areas of ten provinces that had to close their companies were directly affected by this measure. Those indirectly affected, i.e., still open but whose activity has dropped considerably, have also benefited from this measure. Other appropriate Covid measures for SMEs were taken by the same bank such as:

➤ The rehabilitation of loans
➤ The setting up of an asset storage program
➤ The suspension of principal repayments
➤ Adjustment of credits
➤ A reduction in interest rates

For those who benefit from a partial suspension of debt repayment, this measure is accompanied by guarantees that contribute to the overall objective of Covid measures for SMEs. Indeed, non-repayment will not be considered as a default, in accordance with the repayment conditions set out in the relevant agreements, nor will it be considered as a restructuring of the debt.

In conclusion, this Thursday, December 23, the Ministry of Finance has pronounced on the year 2022. According to him, an economic growth of up to 4% is possible despite the variant Omicron. The economic support of the government will be directed, according to the same minister, to the economic zones in the east of the country and the export of goods.

Take advantage of measures to help SMEs deal with the Covid-19 crisis

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