Tax Newsletter APRIL 2017

DLO’s Tax Newsletter

Issue 76 April 2017

Inside this Issue

Tax Laws Update

1. Tax evasion and or tax fraud now constitutes the offense of money laundering

2. Tax Exemption for national team athletes and coaches for prizes awarded at sporting events

3. Tax incentive for corporate entities investing in the infrastructure or development and reconstruction of tourist attractions in rural areas

4. 200% tax concession rate for senior employee wages

5. Penalties, surcharges and fines are disallowable expenses according to the Revenue Code

6. Revenue Officers not permitted to extend summons after 5 year period

Tax News

1. Land and Building Tax Code passed the first reading of the Bill by the National Assembly

2. Amendment of the Revenue Code

Interesting Deka (Supreme Court Judgment)

Deka                      (Supreme Court Judgment No. 5695/2559), in re:

Between                C. Company                                                   Plaintiff

Revenue Department                                    Defendant

Issue:                    Making duplicate copies of documents

Tax Laws Update

1. Tax evasion or tax fraud now constitutes the offense of money laundering

The Revenue Code Amendment Act (No.45) B.E.2560 (2017) defined the offense of tax evasion, attempted tax evasion and tax fraud as serious acts and predicate offenses under the Prevention and Suppression of Money Laundering Act. Offenses under the Act include:

1) Committing an offense under sections 37, 37 Bis and 90/4 of the Revenue Code and;

2) Committing tax evasion or tax fraud from 10 million Baht per tax year or obtaining a tax refund by fraudulent, artifice or other similar means for amounts greater than 2 million Baht and;

3) Offenses relating to the creation of false business transactions or the concealment of income tax for the purpose of committing income tax evasion or tax fraud and;

4) Concealing or hiding assets related to the offense for the purpose of preventing the tracing of assets.

This Act has been effective since April 2, 2017.

For more details, please see http://goo.gl/B5OzyN

2. Tax Exemption for national team athletes and coaches for prizes awarded at sporting events

Ministerial Regulation No. 325 (B.E.2560) (2017) and Notification of the Director-General of Revenue Department on Income Tax (No.293) defines an exemption of personal income tax for athletes and coaches who receive prizes for attending sporting events or on occasions according to tradition not exceeding 10 million Baht in the following circumstances:

1) Where athletes and coaches are permitted to participate in sporting festivals, international competitions and amateur sporting events under the conditions in these laws;

2) The athlete or coach receives a reward from the government or private sector for no commitment within one year of their event officially ending;

3) There is evidence to prove that money received was a gift presented as a reward from a ceremony.

This Ministerial regulations has been effective since February 1, 2017.

For more details, please see http://goo.gl/e2DCQ0 and http://goo.gl/zs8Eoo

3. Tax incentive for corporate entities investing in the infrastructure or development and reconstruction of tourist attractions in rural areas

Royal Decree (No. 632) B.E. 2560 (2017) and the Notification of the Director General of Revenue Department (No. 3) have prescribed an exemption on income tax for expenses incurred when investing in the infrastructure or development and reconstruction of tourist attractions in rural areas. Eligible entities may claim a deduction for twice the amount of investment expenses paid and the relevant rules, procedures and conditions are as follows:

1) Entities must invest in infrastructure according to a government program or project which is not provided for in the government budget;

2) Investments must not duplicate a government program which has already been budgeted for;

3) Entities must transfer ownership of the properties to the government without remuneration;

4) Entities must obtain a certification letter and evidence of investing in the infrastructure from the government;

5) Entities must not record the expenses of investing in the infrastructure as public expenditure in order to claim the tax incentive;

6) Entities are not permitted to apply their investment in applicable infrastructure projects to obtain other tax or BOI incentives either partially or entirely.

In addition, this Royal Decree provides tax incentives that exempts income tax, value added tax and stamp duty from income derived from the transfer of properties, sale of goods or the execution on an instrument for the purpose of transferring ownership rights arising from investment in the infrastructure to the government for no remuneration.

For more details, please see: https://goo.gl/bY1IAo and https://goo.gl/o76bLU

4. 200% tax concession rate for senior employee wages

Royal Decree (issue no. 639) B.E 2560 (2017) provides a tax exemption for juristic persons or partnerships for senior employees of Thai nationality aged over 60 years of age provided that they are not or have never been a director or shareholder of the related company and are already employed by the juristic person or partnership. Eligible companies can deduct as a double expense the amount of expenditure paid for hiring senior employees. However, deductions shall only apply to wages not exceeding 15,000 THB per person per month for the accounting period after 1 January 2017. Furthermore, the employer can only claim the tax exemption if such senior employees do not exceed 10% of the total number of their employees.

For more details, please see https://goo.gl/OfXH6E

5. Penalties, surcharges and fines are disallowable expenses according to the Revenue Code

Board of Taxation opinion no. 40/2560 explains that penalties, surcharges and fines according to the Revenue Code are disallowable expenses for corporate income tax computation in accordance with section 65 ter (6) of the Revenue Code and withdraw their opinion no. 10/2528.

Opinion no.40/2560 has been effective since 18 March 2017.

For more details, please see https://goo.gl/04tzoH

6. Revenue Officers not permitted to extend summons after 5 year period

The Board of Taxation’s opinion no. 41/2560 explains that where it is believed that a person has submitted an unrealistic or incomplete tax form, an Revenue Officer has the power to issue a summons within 5 years of submission to appear for an investigation. In accordance with the Minister’s power pursuant to section 3 octo of the Revenue Code, the Board’s opinion confirms that it is not possible for a Revenue Officer to issue a summons for a tax assessment beyond the 5 year time limit.

For more details, please see https://goo.gl/6RmCXp

Tax News

1. Land and Building Tax Code passed the first reading of the Bill by the National Assembly

On 31 March 2017 the National Assembly approved the Land and Building Tax Code as proposed by the Thai Cabinet. The proposal aims to exclude taxation for farmers who rent land so as to protect them from tax burdens arising from the demands of land owners. The National Assembly also want local governments to assist people by providing clear tax rates and propose that a progressive tax rate apply to land over 500 acres so as to assist in reducing the gap between the rich and the poor.

For more details, please see https://goo.gl/IYJw4p

2. Amendment of the Revenue Code

The Deputy Finance Minister has revealed that the new Revenue Code will be drafted and proposed to the Cabinet by September 2017 and will include the following amendments.

1) Process of issuing summons, investigation, assessment and appeal;

2) Ecommerce business taxation including multinational social media;

3) Transfer pricing; and

4) Thin Capitalization.

For more details, please see https://goo.gl/7GDHsc

Interesting Deka (Supreme Court Judgment)

Deka                      (Supreme Court Judgment No. 5695/2559), in re:

Between                C. Company                                                   Plaintiff

Revenue Department                                    Defendant

Issue:                    Making duplicate copies of documents

The plaintiff had asked to inspect and make duplicate copies of documents for use in filling an appeal. An officer of the defendant permitted the plaintiff to inspect and make handwritten copies of the documents but did not give permission for duplicate copies of documents to be made. Therefore, the plaintiff was prevented from knowing which documents or evidence were used during the tax assessment and was prevented from fully showing or proving their rights in the dispute because the plaintiff had previously sent all of the documents to the defendant.

The Tax Division of the Supreme Court considered that when the officer of the defendant did not permit the plaintiff to make duplicate copies of documents, it amounted to a denial of the plaintiff’s right to dispute or defend themselves. This is an unlawful act according to Section 31 of the Administrative Procedure Act B.E. 2539 which assures the right to inspect and make duplicate copies of documents. Moreover, the fact that the defendant’s officer permitted the plaintiff to inspect and copy the entire document indicates that there was no legal or other reason to forbid the plaintiff from inspecting or copying the documents.

The Tax Division of the Supreme Court has decided to withdraw the decision of the Commission of Appeal and requires the defendant to allow the plaintiff to make duplicate copies of the documents that the plaintiff has the right to inspect for the purpose of filling an appeal to the Commission of Appeal. The plaintiff has 30 days from the date of receiving permission to make duplicate copies of the relevant documents.

Legal Opinion

According to the above mentioned Supreme Court Judgment, the legal issue concerned the plaintiff’s right to make duplicate copies of documents when appealing a tax assessment, which, often involves accounting and tax documents that typically combine many details and various documents. In this case, the plaintiff did not know which documents or evidence was used for tax assessment purposes and did not have access to sufficient information in order to prepare their appeal.

Section 31 paragraph 1 of the Administrative Procedure Act B.E. 2539 stipulates that a participant shall be entitled to inspect the documents which are necessary for making an objection, giving an explanation or safeguarding his or her rights. Section 31 paragraph 2 of the Act also stipulates that expenses relating to the inspection of documents or evidence or the making of duplicate copies shall be in accordance with the rules and procedures prescribed in the Ministerial Regulation. In considering both paragraphs, the right to inspect the documents also includes the right to make duplicate copies. However, if the defendant is of the opinion that such documents are confidential the defendant has the right to forbid an inspection of such document according to Section 32 of the Administrative Procedure Act B.E. 2539. In this case it appears that the defendant does not consider the documents to be confidential because they permitted the plaintiff to inspect and make handwritten copies of documents which the plaintiff is also legally entitled to make duplicate copies of.

Therefore, the writer agrees with the Supreme Court Judgment which considered the defendant’s failure to permit the plaintiff to duplicate copies of such documents as an unlawful act according to Section 31 of the Administrative Procedure Act B.E. 2539.

In addition, it is also interesting to note that the officer of the defendant has issued a written tax assessment to the plaintiff since B.E. 2551 (2008) and had not permitted the plaintiff to duplicate copies of documents from the time of the plaintiff’s first tax assessment. The Supreme Court subsequently issued a judgment in B.E.2559 (2016) to withdraw the decision of the Commission of Appeal and the plaintiff had the right to duplicate copies of documents for an appeal to the Commission within 30 days from the date of receiving a permit to duplicate copies of such documents. Effectively this means that both of the plaintiff and the defendant have wasted significant amounts of time, money and resources during their eight year lawsuit because they are now required to start a new process and follow the appeal procedure in the Commission of Appeal. This especially applies to the plaintiff who now faces double expenses regarding their law suit against the government and there is no stipulated a remedy for this in the Revenue Code. Furthermore, there is no surcharge exemption for the taxpayer in the case where the Supreme Court has issued a judgment to restart the process. It is the opinion of the writer that the Government should issue a law or other measure to remedy a tax payer in these circumstances.

Ms. Chatwalee Maitri

Should you require any legal advice on Thai tax law then please contact us at Dharmniti Law Office Co., Ltd. 2/2 Bhakdi Building 2^nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330 Tel: (66) 2680 9777 Fax: (66) 2680 9711 Email: budhimak@dlo.co.th