GlaxoSmithKline (Thailand) Limited

GlaxoSmithKline (Thailand) Limited (“GSK”) is a company registered under Thai laws which 100% of its shares are held by foreigners. GSK has obtained foreign business licenses and the approved businesses are as follows:
Domestic wholesale of medicines for the curing and prevention of disease in humans and animals, vaccines, antibiotics medicinal, sterile products, medical equipment including spare parts and accessories for medical equipment, and consumer products (except for domestic indigenous agricultural products). Chapter 1(2): Export of medicines for the curing and prevention of disease in humans and animals, vaccines, antibiotics medicinal, sterile products, medical equipment including spare parts and accessories for medical equipment, and consumer products, Chapter 1(3): Retail sale medical equipment with special mechanism including spare parts and accessories for the aforesaid goods and Chapter 3(1): Services in consultancy, analyze, research concerning the medicines, chemicals substances, pharmaceutical products, consumer products marketing and distributing, and to maintain, research and subsidize research laboratories or experimental workshops for scientific or other technical research and experiments and to undertake inspection of any scientific and technical experiment equipments.
In addition to sale of product, for more than 10 years, GSK has entered into clinical trial contract to sponsor medical institution and their employee (Researcher) to conduct medical research to assess the safety and efficacy of pharmaceutical product (either pre-authorized market or post-authorized market) developed by GSK.
Method of payment
There are 2 types of the clinical trials funding.
1. Overhead charge payable to Institution (generally 20% of project’s budget )
2. Project’s budget; Investigator fees, volunteer (“subject”)’s traveling fees, site staff/study coordinator fees, costs for laboratory tests such as blood tests, XRay tests, Electro-Cardiogram charges are payable to Researcher.
Method of payment varies depend on the Financial Arrangement under Clinical Trial Agreement.
• Some projects, all are payable directly to Institution for their further allocating to their Researcher accordingly. There is no tax deduction.
• Some projects, the fund item No. 1 will be separately payable to Institution and item No. 2 will be payable to Researcher’s bank account in the name of department in according to the actual milestones of activity/work done so far. There is no tax deduction
• Some projects, the clinical trial is between GSK and Researcher. The item No.2 is paid directly to Researcher. In this case, 5% income tax deduction is made prior to remitting to recipient’s bank account as intimated by Researcher e.g. bank account of individual or bank account of group of people (“คณะบุคคล”) whom the Researcher is a member. In this case, the Researcher then manages the overall expenses of activities/work required within the Project.
GSK has subsequently reimbursed all payments from GSK R&D Centre in overseas.
Recently, GSK has been challenged by the tax authority that Researcher’s conducting clinical trial for GSK is made for commercial purpose and his/her performance is hence subject to VAT.

GSK policy and governance clearly and explicitly separates human research work from commercial staff involvement.
Based on the background provided, KPMG will provide advice related to the above transaction in particular;
- Withholding tax and VAT implication on the payment GSK made to Researcher and Institution
- VAT implication on the reimbursement or income received from GSK R&D Centre in overseas