Baker & McKenzie Successfully Represents Bangkok Airways in Landmark Tax Dispute
Deal Announcement
3 May 2012
Bangkok, Thailand, 3 May 2012 – Baker & McKenzie successfully represented Bangkok Airways in litigation before Thailand’s Central Tax Court regarding a THB117 million house and land tax assessment imposed on its property fund by the Koh Samui Municipality. The Court, which agreed with Bangkok Airways and Baker & McKenzie, fully dismissed the tax assessment and ordered the Municipality to return contested tax payments, plus statutory interest, to the airline. This case is significant because it is the first instance that a municipal government has assessed a house and land tax based on a property fund arrangement (using a lease agreement as a financing mechanism).
The Koh Samui Municipality imposed an annual 12.5 percent house and land tax on the yearly payouts of a property fund launched by Bangkok Airways in 2006, through which Bangkok Airways leased the Samui International Airport to the property fund and, thereafter, the fund leased the Airport back to Bangkok Airways. The Central Tax Court fully dismissed the assessment on grounds that the property fund was part of a financing transaction, rather than actual property leasing.
The Baker & McKenzie team was led by Bangkok-based Corporate & Commercial partner Peerapan Tungsuwan and included Tax partner Chinawat Assavapokee, and Litigation partner Suksawat Watewai. They were supported by associates Somsuk Phoungnak, Nopporn Charoenkitraj and Jugkrid Danchalermnon.
“This is a landmark case as it sets precedent on how property funds may be assessed by municipal governments and provides grounds for other taxpayers, who employ the same or similar financing mechanism, to challenge the basis of future tax assessments on their property-related funds. The result of this case could also save THB 38 million each year to our client over the 30 year period of the property fund,” Peerapan Tungsuwan said. “We are extremely honored to be chosen to represent our long-standing client, Bangkok Airways, in this ground-breaking case. The team worked diligently to safeguard Bangkok Airways’ position and we are pleased with the outcome of this hard-fought trial.”