Tax Newsletter OCTOBER 2015

DLO’S Tax Newsletter

Issue 59 – October 2015

Tax New Update

Tax Benefit in Case of Donated Money or Property

The Cabinet of Thailand has issued Royal Decrees (Numbers 593 & 594) B.E. 2558 to provide tax benefits to donor of money or property to the Promotion and Development Education Fund for Disabled Person, and the Thailand Unity Anti-Trafficking Project. The benefits given are as follows:

1. In the case of individuals, they receive an exemption on personal income tax after the deduction of expenditure and allowance for the amount they  donate provided that the amount does not exceed 10 percent when it is combined with donated money under Section 47 (7) of Revenue Code such as donations to hospitals.
2. In the case of a juristic person, they receive an exemption on corporate income tax for the amount they donate or the value of the property transferred  provided that such donation or transfer does not exceed 2 percent of its net profit when it is combined with their other expenditure for charity or to the state.

However, to receive these benefits, the applicant must comply with the  conditions as provided under the Royal Decrees. These Royal Decrees have been effective since September 27, 2015.

For more details, please visit: http://goo.gl/8byt7N and http://goo.gl/V3yGFA

Extension of Reducing VAT for 1 Year

According to the announcement of National Council for Peace and Order (No. 92/2557), to reduce VAT rate from 10 percent to 6.3 percent for sale of goods and services or importation.

The Cabinet of Thailand has issued Royal Decree (No. 592) B.E. 2558 to retain the same rate as that which  expired in September 30, 2015 and to extend this rate until September 30, 2016. Following this, the rate will be changed to 9 percent from October 1, 2016.

This Royal Decree has been effective since October 1, 2016.

For more details, please visit: http://goo.gl/sBvtlB

Note: in practice the rate of VAT is 7 percent which is inclusive of local tax at 0.7 percent.

Give tax benefit for Juristic Person in Special Economic Zone

The Cabinet of Thailand has issued Royal Decree (No. 591) B.E. 2558 to provide tax benefits for corporations or juristic persons who have businesses constituted in Special Economic Zones. Under this latest law corporate income tax is reduced to 10 percent of net profit on income earned from production and services in Special Economic Zones for 10 accounting periods. The features, qualifications and methodology of calculation for an  accounting period must be in compliance with this Royal Decree.

This Royal Decree has been effective since September 10, 2015.

For more details, please visit: http://goo.gl/NyyfJK

The Statement of the Revenue Department regarding Income Tax on Non-Formal Private School Education (Tutorial)

           Royal Decree (No. 588) B.E. 2558 and Ministerial Regulation (No. 307) B.E. 2558, have been issued to abolish the tax exemption on income, dividend and profit share that is received from Non-Formal Private School Education (Tutorial businesses).

The Revenue Department has issued the following explanation regarding this change:

In the case of Individual Taxpayers

1. For Individual Taxpayers who are earning income/dividend or profit from Non-Formal Private School Education must bring such income derived from July 11, 2015 to be included in the calculation for paying income tax. Such amount can have expenses relating to such income (that are reasonable and necessary) deducted  according to Sections 65 Bis and 65 Ter of the Revenue Code as they shall be applied mutatis mutandis.
2. In relation to dividends or shared profit  paid to taxpayers that is derived from juristic persons conducting this type of business from July 11, 2015, such income shall be included in the calculation for paying income tax, such calculation shall not permitted expenses to be deducted However, in the case of a taxpayer being unable to separate profit before this law comes into force, the law provides that the taxpayer can make an average of such income according the proportion of profit shared over the period that that this business pays such income to the individual taxpayer.

In the case of Juristic Persons

1. For taxpayers who are juristic persons that bringing income received from this type of  business since July 11, 2015 to be calculated for determining corporate income tax they are entitled to deduct expenses relating to such income in accordance with Sections 65 Bis and 65 Ter of the Revenue Code.
2. In relation to dividends and shared profit that is derived from a juristic person conducting this type of business which is paid from July 11, 2015, such income shall be included when calculating net profit. However if the juristic person is unable to separate from which period such income is paid it shall be entitled to use the average of the proportion of profit for the  accounting period of the juristic person as the payer of dividend and shared profit according to the criteria of Section 65 Bis (10) of the Revenue Code.
3. Foundations or associations must include income (less expenses) which is received from conducting this type of business from 11 July 2015 to be included when calculating corporate income tax liability.

           For more details, please visit: http://goo.gl/3Q70IG

The Modification of Criteria to Income Tax Exemption in Case of Pension Insurance

The Director – General of the Revenue Department has issued the Notification of the Revenue Department regarding Income Tax (No. 261) which has amended the Notification of the Director of Revenue Department regarding Income Tax (No. 194) in which the previous Notification provided an exemption on income tax of 15 percent of assessment income which  must not exceed 200,000 Baht whereas the new Notification gives a 15 percent exemption of tax assessable income that is received (in each year) provided that such exemption must not exceed 200,000 Baht.

Apart from the modification mentioned above remains accordingly the Notification (No. 194).

This Notification has been effective since September 11, 2015.

For more details, please visit: http://goo.gl/UmdqkE

Extend the Limit to file Por. Ngor. Dor. 2 and Por. Ngor.Dor. 2 Kor. By Paper and Recordable Media Formats until B.E. 2559

The Director – General of the Revenue Department has issued the Notification regarding Income Tax (No. 260) which amended the Notification regarding Income Tax (No. 255) as well as the Notification concerning Income Tax (No. 58) which prescribes guidelines for filing Por.Ngor.Dor. 2 and Por.Ngor.Dor. 2 Kor. The changes made are as follows:

1. Filing Por. Ngor. Dor. 2

1.1    The time limit for filing personal income tax return on withholding tax using paper format according to the prescription of the Revenue Department has been extended from August 2015 until June 2016.

1.2    The time limit for submitting an income tax return on recordable media in a computer system has been extended from August 2015 until June 2016

2. Filing Por. Ngor. Dor. 2 Kor.

2.1    The time limit for filing an income tax return for  withholding tax using  paper format has been extended from 2014 until 2016.

2.2    The time limit for submitting Por. Ngor. Dor. 2 Kor. on recordable media in a computer system has been extended until 2016.

This Notification has been effective since August 7, 2015.

For more details, please visit: http://goo.gl/NpxCgP

The Guideline in Considering ‘Reasonable Reason’ in Case of Failing to Submiting Por. Ngor. Dor. 54 absence over 25 Percent

The Director – General of the Revenue Department has issued the Revenue Department’s Order No. Por. 152/2558 that prescribed that the following circumstances are considered as being ‘reasonable reasons’ under section 67 ter of Revenue Code.

1.  If a company makes an estimate of its net profit and files a half tax year return which is not less than half of the corporate income tax which it filed in the previous accounting period.

2.  If a company makes an estimate of the net profit it will receive or may receive in the accounting period which is not less than the net profit that it filed for corporate income tax in the previous accounting period. However,  it will not be considered as a ‘reasonable reason’ if it files a half tax year return for an amount less than half of corporate income tax which had been filed in the previous accounting period because it receives a tax exemption or a reduction in the applicable tax rate.

These will be used in calculating income tax for companies which have the accounting period starting on or after January 1, 2012.

For more details, please visit: http://goo.gl/Lg4mdm

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Tax News

The Amendment Draft of Promotion Investment Act

The Secretary General of the Board of Investment of Thailand has announced that the Cabinet of Thailand has agreed to the Amendment of the Promotion Investment Act in relation to the right to  reduce corporate income tax, extending the applicable period from 8 years to 13 years. This Amendment  also reduced of the corporate income tax rate to 90 percent over 10 years from the original position which provided for 50 percent over 5 years.

          For more details, please visit: http://goo.gl/Sv2pZC

The Amendment of the Law in the Case of Collection of Double Tax

The Spokesman has announced that the Cabinet of Thailand has agreed to an exemption of income for shared profit that is derived from ordinary partnerships or non-juristic bodies of persons which are not a juristic person and have to consider such income as being assessable income which is not to be included when calculating tax payment. However, the criteria must be considered by the Revenue Department and the Department of Business Development in order to make it enforceable.

          For more details, please visit: http://goo.gl/tXSVZ0

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Interesting Dika (Supreme Court) Judgments

Dika (Supreme) Court Judgment No. 8306/2557, in re:

Mr. T                                                  Plaintiff

Revenue Department                       Defendant

Subject                                              Assessable income, evaluative asset and calculated interest

The Plaintiff, an independent director received a warrant to buy ordinary shares from Company C for 4.50 Baht per share without consideration of whether the ordinary shares had greater value. When Company C gave this benefit to the Plaintiff, it was considered as being income derived from a post or from the performance of work. Moreover, this warrant is a trading security that can be calculated as part of assessable income. Therefore, it is considered as the Plaintiff’s assessable income according to Section 39 of the Revenue Code.

The Defendant evaluated the warrant by comparing it with the average value of an ordinary share of Company C in April 2004 (the month that the Plaintiff received the warrant) in the Stock Exchange of Thailand and decreasing it in accordance with  the amount of the buying value thus resulting to the value of the warrant which is an acceptable method. Even though an ordinary share and a warrant are different types of securities, they are related as the  warrant gave the Plaintiff the  right to buy ordinary shares at a set price.

The receiver of the warrant received benefit from of an ordinary share decreasing value of share buying by using an average value of an ordinary share in April 2004. It did not use a specific price to evaluate the warrant which will be prohibiting in Section 9 bis of the Revenue Code.

To consider an interest paid under Section 4 decem of the Revenue Code, when the Plaintiff filed a tax return for a warrant which had been withheld in an exceeded amount, the plaintiff has the right to receive an interest within 3 months from the next day of the filing of their tax refund according to Clause 1 (2) of the Ministerial Regulation No. 161 (B.E. 2526). Moreover, the Central Tax Court has the right to make a decision on this matter in relation to legal issues that may arise.

Legal Opinion

Although, Section 4 decem of the Revenue Code stipulates that only the Director- General of the Revenue Department or his authorized representative can decide to pay an interest to a tax payer receiving a tax refund, the author is of the opinion that the law only stipulates  an authorized person for the procedure. The author is of the view that if an issue arises concerning the application or applicability of the legal conditions of the Ministerial Regulation No. 161 (B.E. 2526), then this person has no authority to exercise their legal discretion. Therefore, when the tax payer filed this case, the Tax Court had the jurisdiction to determine this case. The author concurs with the judgment of the Supreme Court in this case.

Mr. Taradol Chantarasap
Lawyer

Should you require any legal advice on tax in the workplace then please contact us at Dharmniti Law Office Co., Ltd. 2/2 Bhakdi Building 2^nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok, Tel : (66) 2680 9751, (66) 2680 9753 Email: budhimak@dlo.co.th or sureelukt@dlo.co.th