Tax Newsletter SEPTEMBER 2016

DLO’S Tax Newsletter

Issue 69 September 2016

Inside this Issue

Tax Laws Update

1. The Stock Exchange of Thailand becomes a juristic person under the Revenue Code;

2. Personal Income Tax Exemption for Expenses relating to Services or Accommodation spent on travel in Thailand;

3. Exemption on income tax regarding National Savings Fund;

4. Exemption for donations made to the Education Technology Fund;

5. The regulations regarding the deduction of depreciation for car rental business and concept car business;

6. Rules and Regulations of the Donation to Educational Institutions; and

7. Exemption and support on tax practice under the Revenue Code (No.6)

Tax News

1. On 9 August 2016, the Thai cabinet agreed to several measures for promoting an individual into businesses in the form of a juristic person; and

2. Revenue Department agreed the allowance for buying health insurance

Interesting Dika (Supreme Court) Judgment

Dika (Supreme Court) Judgment No. 1109/2559, in re:

Tax Laws Update

1. The Stock Exchange of Thailand becomes a juristic person under the Revenue Code

The Notification of the Director-General of Revenue Department (No. 271) B.E. 2559 prescribes the status of the Stock Exchange of Thailand (“SET”) as a company or juristic partnership under  section 39 of the Revenue Code which shall have the duties as specified in the Revenue Code in the same way as that of a company or juristic partnership.

This Notification has been effective since August 9, 2016.

For more details, please see: http://goo.gl/ZWvMYQ and http://goo.gl/EU1wmS

2. Personal Income Tax Exemption for Expenses relating to Services or Accommodation spent on travel in Thailand

Ministerial Regulation No. 316 (B.E. 2559) provides an extension period for personal income tax exemption on actual expenses relating to services or accommodation spent on travel in Thailand for an amount not exceeding 15,000 Baht. Such expenses must be incurred between January 1, 2016 to December 31, 2016 (the previous Ministerial Regulation provided that the period expired on December 31, 2015).

In light of the foregoing paragraph, the Notification of the Director-General of Revenue Department (No. 273) B.E. 2559 prescribes criteria, procedures and conditions for income tax exemptions for expenses relating to services or accommodation as follows:

1) For an individual, the exemption shall not exceed 15,000 Baht;

2) For spouses:

If either the husband or wife has assessable income, the exemption shall not exceed 15,000 Baht;

If however both the husband and wife have assessable income, then each party shall be entitled to the exemption for an amount not exceeding 15,000 Baht.

3) The Individual having an income must pay the service fee and accommodation cost in relation to traveling by himself/herself; and

4) The Business operator must provide any evidence proving the receipt of money with the individual’s name, amount paid and date/month/year of payment.

This Notification has been effective since January 1, 2016.

For more details, please see: http://goo.gl/kb5EGx and http://goo.gl/kmPtGx

3. Exemption on income tax regarding National Savings Fund

Royal Decree No.314 (B.E. 2559) prescribes an exemption on income tax for an individual regarding the Notification of the Director-General of Revenue Department (No.274) and (No.275) and prescribes the rules, procedures and conditions of the income tax exemption as follows:

1) Income paid as a saving deposit to the National Saving Fund can be deducted from the assessable income after deducting applicable expenses.

2) Money or any benefits acquired from the National Saving Fund will be exempted from the calculation of   assessable income provided that there is a proof of disability from the physician or in case of death, the notification of death etc.

This exemption has been effective since January 1, 2015.

For more details, please see http://goo.gl/E7iGvp and http://goo.gl/dpevHe and http://goo.gl/VLZTjo

4. Exemption for donations made to the Education Technology Fund

Royal Decree (No.619) B.E.2559 prescribes the exemption of income tax for donations of money and assets to the Education Technology Fund that was founded by the Ministry of Education, the criteria for this exemption are as follows:

• For individuals, the donation can only be made in the form of money; however
• For a corporation, a donation can be made  in the form of either money or an asset
• This exemption has been effective since August 6, 2016.

For more details, please see http://goo.gl/yGmUvQ

5. The regulations regarding the deduction of depreciation for car rental business and concept car business

Royal Decree (No.620) B.E.2559 prescribes new regulations which exempt excise tax for the car rent business where such vehicles are not used in other activities apart from its business.  Concept car businesses are also exempt from excise tax where such concept cars as used exclusively for the purpose of researching, developing and testing. The businesses as prescribed in such new regulations are entitled to deduct depreciation from the total cost. However, the cars must be acquired from January 1, 2016 onwards.

This exemption has come into force since August 6, 2016.

For more details, please see http://goo.gl/nUSZpC

6. Rules and Regulations of the Donation to Educational Institutions

Royal Decree (No. 616) B.E. 2559 provides double exemption for donations to educational institutions, both including tutorial schools, with such decree being effective from January 1, 2016 until December 31, 2018. Furthermore, the Royal Decree also provides an exemption on income tax, value added tax, specific business tax and stamp duty for income derived from the transfer of properties, sale of goods or making of such instruments.

The Notification of the Director-General of the Revenue Department (No. 1) B.E. 2559 prescribes the following criteria and conditions for donations to educational institutions:

1) Income tax exemptions for donations

1.1)  For Individuals: the donation must be in the form of money only; and

1.2)  For Corporation: the donation can either be in the form of money, property or goods.

2) Exemption on income tax, value added tax, specific business tax and stamp duty for income derived from the transfer of properties, sale of goods or making of such instruments.

Any person applying for the above tax exemption is required to have written evidence issued by the educational institution (recipient); for example, a thank-you letter or certificate of appreciation from the recipient educational institution.

This Notification has been effective since July 28, 2016.

For more details, please see: http://goo.gl/BtX7RT and http://goo.gl/qVHMZr

7. Exemption and support on tax practice under the Revenue Code (No.6)

The Revenue Department has issued a Notification regarding exemption and support on tax practice under the Revenue Code (No. 6) dated August 9, 2016. The Notification provides that where a juristic person has entered into the Register on a Single Account Program and has already submitted a financial statement to DBD, but later finds a mistake relating to accounting, then they are entitled to make an accounting adjustment for the 2016 accounting period in order to comply with the actual business condition.

For more details, please see http://goo.gl/MrTnCg

Tax News

1. On 9 August 2016, the Thai cabinet agreed to several measures for promoting an individual into businesses in the form of a juristic person

The draft details of these promotion measures are as follows:

1) Income from Section 40(7) and 40(8) of the Revenue Code, with the prescribed standard deduction of 60 percent to be applied with income earned from January 1, 2016 and thereafter;

2) Exemption on income tax, value added tax, specific business tax and stamp duty for an individual who transfers his ownership of properties or other assets to a company or juristic person registered during August 10, 2016 through until December 31, 2016;

3) Small and medium size enterprise (SME) can deduct the expenses incurred from company registration and audit fees as double expenses for 5 accounting periods; and

4) Reduce registration right and contract fee from 2 to 0.01 percent when transferring immovable property or a condominium of shareholder in order to pay the share to a newly established juristic person.

These measures will not become effective unless there is the legislation to support such measures.

For more details, please see http://goo.gl/rTDpne

2. Revenue Department agreed the allowance for buying health insurance

The General Insurance Association of Thailand revealed that the Revenue Department has agreed to the measure which entitles a person who enters into health insurance contract to use their insurance premium in an amount not exceeding 15,000 Baht per year as a deduction provided that such health insurance fund is not exceed 500,000 Baht. This measure is a result of the promotion on the use of health insurance and the reduction of the government’s expenditure on public healthcare. However, this measure will not become effective unless supporting legislation is enacted which implements such measure.

For more details, please see http://goo.gl/X9tHtO   

Interesting Dika (Supreme Court) Judgment

Dika (Supreme Court Judgment No. 1109/2559), in re:

In this case, the Plaintiff declared the price of goods in the import declaration which were lower than the price indicated in the documents seized by the Customs Department. It can be seen that the Plaintiff realized the real price of the goods but intentionally declared the imported price lower than the real price in order to avoid tax payment under the law; therefore, the plaintiff was liable for the payment of fines and customs surcharges. The Court considered that such fines and surcharges are an expense which is not for the purpose of making profits or for the business because these expenses were spent for exonerating the liability resulting from illegal acts. For this reason, such fines and surcharges cannot be regarded as an expense for making profits or for the business according the Revenue Code Section 65 Ter (13).

In addition, the Court considered that the fines and surcharges according to Section 65 Ter (6) are not only limited to the Revenue Code, but also include fines levied under the criminal law and surcharges imposed under other laws.

Legal Opinion

With respect to the Supreme Court’s judgment, I the writer, without having any interest in this case, have the following different points of view:

1. In the calculation of payment of the corporate income tax (CIT) according to Section 65 Ter (6), the Commission of Taxation’s decision No. 10/2528 defined the term “fine and/or surcharge and criminal fine” as meaning the fine and/or surcharge and criminal fine under the Revenue Code only.

2. Although the above decision is not a law for the Court’s consideration, it can be deemed as a guideline for tax payers to comply with the provisions under the Revenue Code since B.E. 2528 (1985). Therefore, this guideline should be applicable until it is repealed by the Commission of Taxation’s new decision or amended by the law; otherwise, it will be inconsistent with the fundamental principle of taxation that tax should be certain for taxpayers to comply with.

3. The meaning of Section 65 Ter (6) should be narrowly interpreted because the Revenue Code is a public law which stipulates the duty of persons to the state and affects people’s rights and properties. Therefore, it should be strictly and carefully interpreted in a way that would not adversely affect the people’s rights which might consequently cause taxpayers to be subject to additional tax payment.

Thus, with the respect to the Court’s judgment, I the writer, disagree with the above Court’s judgment that interpreted the meaning of the fine and/or surcharge and criminal fine according Section 65 Ter (6) to include the fine and/or surcharge and criminal fine under other laws.

4. In B.E. 2525 (1982), before Section 65 Ter (6) was amended to be in the form that it is in at present, it stipulated only “Income of company or juristic partnership”. In this regard, the meaning should be interpreted consistently with other words in the same subsection such that the fine, surcharge, criminal fine are only in connection with the income tax of the company or juristic partnership. If the legislators intentionally mean it as the fine, surcharge and criminal fine under other laws, they would likely have clearly stipulated it or added it as a new subsection into the Revenue Code.

5. The Supreme Court’s application of Section 65 Ter (13) re: the expense spent for the purpose of making profits or for the business to the fine and/or surcharge or criminal fine appears to be erroneous because the Revenue Code stipulates the specific provision in Section 65 Ter (6) which should be applied to this case instead of Section 65 Ter (13) which is the general provision.

However, I the writer, agree with the Supreme Court’s concept and reason that the expense spent for exonerating the liability resulting from illegal acts should not be regarded as the expense spent for making profits or for the business because the juristic person should not illegally seek profits and the tax law should not promote such activity by allowing the exonerated expenses as an expense for the purpose of CIT calculation. However, the Supreme Court’s concept and reasons are not statue law and the tax law is a public law affecting people’s rights and properties which should be interpreted and applied strictly and carefully. If the State regards that any provision is unclear, the state should amend such provision to be clearer so that tax payers can be certain of the law and thus comply with it.

Mr. Montree Atchariyasakulchai

Should you require any legal advice on tax law 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 9760 Email: budhimak@dlo.co.th or chatwaleem@dlo.co.th