Tax Law Updates (March)

This tax newsletter covers the following issues:

1. Exemption on income tax, VAT , specific business tax and stamp duty for income donated to support sporting  activities.

2. The rules for writing off bad debts from debtor’s account of a creditor who is a financial institution or other creditors.

3. The rules concerning allowance deduction and portion of interest income between a husband and wife.

4. The Revenue Department allows tax payers to use their outdated tax identification number or their new tax identification number (which has 13 digits) for issuance of their withholding tax certificate.

 Exemption on income  tax, VAT , specific business tax and stamp duty for income donated to support sporting  activities from 1 January 2013 until 31 December 2015.

Royal Decree Number 559(2013) provides an income tax exemption for personal income tax and corporate income tax with respect to charitable donations made to:

1.         The Sports Authority of Thailand;

2.         The Boards of Provincial Sports that are established by the Sports Authority of Thailand;

3.         Provincial Sport Associations;

4.         Sport Associations of Thailand that are set up by the Sports Authority of Thailand;

5.         The Department of Physical Education;

6.         The National Sports Development Fund (established by a resolution of cabinet on 16 February 1999).

The details of the tax exemption are as follows:

(1) In the case of natural persons, there shall be an income tax exemption on assessable income after deducting expenses and allowances , the exemption shall be calculated at the rate of double the amount paid to support applicable sporting activities; but this amount plus the expenses used to support education , must not exceed 10% of the taxpayers’ assessable income after deducting such expenses and allowances.

(2) In the case of juristic companies or partnerships, there shall be a similar exemption from income tax on income as it shall be calculated at the rate of double the monetary or asset contribution made; but according to section 65 ter (3) of the Revenue Code this amount plus the expenses used to support education and the expenses to construct and maintain a play-ground, public park, or private stadium being open for public usage must not exceed 10% of the net profit before deducting expenses on charity,  public benefits and expenses to support educational or sporting activities.

A natural person or juristic company or partnership shall be exempt from income tax, VAT, specific business tax and stamp duty on income derived from the transfer of assets, the sale of goods, or the issuance of instruments by reason of supporting applicable sporting activities as mentioned above, whereby the transferor shall not deduct the cost of the asset(s) or goods exempt from such tax as expenses in the computation of donator income tax.

For more information please see: http://goo.gl/47u0G

 Prescription of rules for writing off bad debts from debtor’s account of a creditor who is a financial institution or other creditors, for the portion of debts discharged by the creditor to its debtors during 1 January 2012 – 31 December 2012; and

The rules for writing off bad debts from flood & disaster-ridden debtor’s account of a creditor who is a financial institution or other creditors, for the portion of debts discharged by the creditor to its debtors during 25 July 2011 until 31 December 2012 due to the reconstruction of debts under the guidelines for debt reconstruction during 25 July 2011 until 31 December 2015.

Ministerial Regulation Number 297 (2013) Amends clause 6 bis and clause 6 quarter of Ministerial Regulation Number 186 (1991) as follows:

With regard to writing off bad debts from the debtors’ account of a creditor who is a financial institution and other creditors, for the portion of debts discharged for debtors , due to the reconstruction of debts which have been done under guidelines for debt reconstruction of financial institutions & notified by the Bank of Thailand (BOT), they shall be allowed without having to comply with the rules in clauses 4, 5, or 6 of Ministerial Regulation No. 186 (1991).

For more information please see: http://goo.gl/mDrCN

Ministerial Regulation Number 298 (2013) amends Ministerial Regulation No. 186 (1991) by adding clause 6 decem and clause 6 undecim which prescribes the rule of writing off bad debts from flood disaster-ridden debtors’ account of a creditor who is a financial institution and other creditors, for the portion of debts discharged for debtors , due to the reconstruction of debts which have been done under guidelines for debt reconstruction of financial institutions as notified by the BOT, they shall be allowed without having to comply with the rules stated in clauses 4, 5 or 6 of Ministerial Regulation No. 186 (1991). 

For more information please see: http://goo.gl/zvpQJ

Amendment of the rules concerning allowance deduction and portion of interest income between a husband and wife

The rules of deducting an  allowance for interest paid on a loan for buying, hire-purchasing or building a habitation that was mortgaged on a loan under clause 2(52), clause 2(53) and clause 2(59) of Ministerial Regulation Number 126 (1966)

The Notification of the Director-General of Revenue on income tax (No. 224) amended clause 2(9) of the Notification of the Director-General of Revenue on income tax (No. 165).

The Notification of the Director-General of Revenue on income tax (No. 225) amended clause 2(9) of the Notification of the Director-General of Revenue on income tax (No. 166).

The Notification of the Director-General of Revenue on income tax (No. 226) amended clause 2(9) of the Notification of the Director-General of Revenue on income tax (No. 167)

The Notification of the Director-General of Revenue on income tax (No. 238) amended clause 2(9) of the Notification of the Director-General of Revenue on income tax (No. 86)

The changes made by these Notifications are as follows:

In the case of every person who has assessable income and has a right to claim an allowance for interest paid on a loan on a residence before get married they still have a right to a tax exemption on their income as follows:

 In the case of a husband and wife individually filing separate tax returns regarding assessable income derived from the preceding tax year under the first paragraph in section 57 sex  of the Revenue Code and in the case of a husband and wife individually filing separate tax returns on assessable income under section 40(1) , the husband and wife shall each be granted a deduction allowance for interest paid on a loan on a residence up to 100,000 baht.

If a husband and wife file a tax return and pay income tax on combined income, this shall be treated as income of the relevant spouse under the third paragraph in section 57 sex of the Revenue Code, furthermore the spouse who is deemed to have the income shall be granted a deduction allowance for interest paid on a loan on a residence up to 100,000 baht and this deduction shall also be granted to the other spouse in that tax return, up to 100,000 baht.

For more information please see : http://goo.gl/4qtl6 , http://goo.gl/uvYho , http://goo.gl/78gQBandhttp://goo.gl/EfdVk

Amendment of the rules concerning portion of interest income between a husband and wife who have received interest on:

1.         savings deposits with banks in Thailand, or

2.         deposits made in Thailand with a bank, or

3.         a saving co-operative, or

4.          interest from a bank deposit in Thailand provided that such interest is derived from a fixed deposit account with the term of one year or longer.

The changes made by these amendments are as follows:

The Notification of the Director-General of Revenue on income tax (No. 227) amended clause 6 of the Notification of the Director-General of Revenue on income tax (No. 55),

The Notification of the Director-General of Revenue on income tax (No. 228) amended clause 5 of the Notification of the Director-General of Revenue on income tax (No. 64); and

 The Notification of the Director-General of Revenue on income tax (No. 229) amended clause 4 of the Notification of the Director-General of Revenue on income tax (No. 137) as follows:

In the case of a husband and wife who are joint depositors and who cannot separate interest income that they earned together, such interest income shall be apportioned on a 50/50 basis between the husband and wife.

If a father and/or mother make a deposit for their child (including an adopted child) into one of the following:

A. saving deposits with a bank in Thailand,

B. deposit made in Thailand with a bank, or

C. saving co-operative,

then in the case of interest earned this income shall be treated as belonging to the child.

In the case of interest earned from bank deposits in Thailand made by an ordinary partnership or a non-juristic body of persons, the income shall be treated as belonging to such partnership or such non-juristic body of persons.

For more information please see: http://goo.gl/FH5mR , http://goo.gl/uq0wyandhttp://goo.gl/ORDBf

Amendment of the rules regarding the deduction of maintenance allowance for a father and/or mother under section 47(1)(j) of the Revenue Code; and

Amending the exemption on taxable income for monies which the tax payer paid on health insurance premiums for the purpose of insuring their father and/or mother and also for the father and/or mother of the taxpayer’s spouse.

The Notification of the Director-General of Revenue on income tax (No. 230) amended clause 1(6) of the Notification of the Director-General of Revenue on income tax (No. 136); and

The Notification of the Director-General of Revenue on income tax (No. 234) amended clause 1(6) of the Notification of the Director-General of Revenue on income tax (No. 162).

The changes made by these amendments are as follows:

Parental Maintenance Allowance – In the case of a husband and wife who individually file separate tax return regarding their assessable income derived from the preceding tax year under the first paragraph in section 57 sex of the Revenue Code , and in the case of a husband and wife who individually file separate tax returns on assessable income under section 40(1), a husband and wife shall each be granted a deduction allowance of 30,000 baht for their respective parents if the parent(s) are under the care and support of the taxpayer.

Parental Health Insurance Premiums – With regard to health insurance premiums paid by a taxpayer for their mother and/or father or their spouses’ mother and/or father, the taxpayer can exempt income tax on the actual amount spent on such insurance premiums but the exemption must not exceed 15,000 baht per parent.

If a husband and wife file a combined tax return and pay income tax on combined income, it shall be treated as income of either the husband or the wife under the third paragraph in section 57 sex of the Revenue Code.

Maintenance Allowance:

The husband and wife who are deemed to have a combined income shall be granted the right to deduct a maintenance allowance of 30,000 baht for their respective parents if they are under the care and support of the taxpayer. The taxpayer shall also be permitted to deduct a maintenance allowance of 30,000 baht with respect to the father and mother of taxpayer’s spouseif they are under the care and support of the spouse.

Health Insurance Exemption:

The husband and wife who are deemed to have a combined income shall be able to receive an exemption on their taxable income on the actual amount which must not exceed 15,000 baht when the tax payer has paid health insurance premium(s) for the father and/or the mother of the taxpayer. This exemption is also available to the taxpayer up to 15,000 baht with respect to health insurance premiums paid for the mother or father of their spouse.

For more information please see:http://goo.gl/NUFsyand  http://goo.gl/4imU1

Amendment of the rules concerning:

– Income tax exemption with regard to the income of a taxpayer who is a resident in Thailand and is older than 65 years of age in that tax year;

– Income of taxpayers who are disabled and have a disability identity card under the law concerning the Support and Development of Disabled People.

Paragraph 2 in clause 2 of the Notification of the Director-General of Revenue on Income Tax (No. 231) amended clause 4 of the Notification of the Director-General of Revenue on Income Tax (No. 150); and

The Notification of the Director-General of Revenue on Income Tax (No. 232) amended clause 4 of the Notification of the Director-General of Revenue on Income Tax (No. 197)

The changes made by these Notifications are as follows:

In the case of a taxpayer who is a husband or wife and they both have assessable income, the husband and/or wife who is granted an income tax exemption as mentioned above shall each be granted an exemption on their income.

For more information please see: http://goo.gl/u3JX and http://goo.gl/qpKXt

Amendment of the rules and regulations for exemption on income from the purchase of immovable property, being a building with land or a residential unit in a condominium which is the taxpayers’ place of residence .

The Notification of the Director-General of Revenue on Income Tax (No. 223) amended clause 1 (6), clause 1(7) and Clause 1(8) of the Notification of the Director-General of Revenue on Income Tax (No. 213) as follows:

In the case of a husband or wife who purchases immovable property, being a building and land or a residential unit in a condominium which is the place of residence of the husband or wife, the husband or wife who makes the purchase shall be granted an income tax exemption subject to them having a taxable income.

In the case of a husband and wife who each have an assessable income and each purchases an immovable property, being a building and land or a residential unit in a condominium which is their place of residence they shall each be granted an income tax exemption.

In the case of a husband and wife who individually file separate tax return regarding their assessable income derived from the preceding tax year under the first paragraph in section 57 sex of the Revenue Code; and

In the case of a husband and wife who individually file separate tax returns on their assessable income under section 40(1) of the Revenue Code,

The husband and wife shall each be granted an income tax exemption.

If the husband and wife file a joint tax return and pay income tax on combined income, it shall be treated as income of the husband or wife under the third paragraph in section 57 sex of the Revenue Code. In the case of a husband and wife who are deemed to have a combined income and file a joint tax return they shall be granted this income tax exemption if they both have taxable income and each purchase immovable property (detailed above) they shall each be granted the right to use this income tax exemption.

For more information please see : http://goo.gl/rrzq6

Amendment of the rules for exemption on income from the amount of life insurance premium paid by the taxpayer under the first paragraph in clause 2 (62) of the Ministerial Regulation No. 126 (1996); and

Amendment of the rule for exemption on income from the amount of pension insurance premium paid by the taxpayer under second paragraph in clause 2 (61) of the Ministerial Regulation No. 126 (1996).

– The Notification of the Director-General of Revenue on Income Tax (No. 235) amended clause 3(3) of the Notification of the Director-General of Revenue on Income Tax (No. 172); and

– The Notification of the Director-General of Revenue on Income Tax (No. 236) amended clause 2(3) of the Notification of the Director-General of Revenue on Income Tax (No. 194).

The changes made by these Notifications are as follows:

In the case of a husband and wife who individually file separate tax return regarding their assessable income derived from the preceding tax year under the first paragraph in section 57 sex  of the Revenue Code and in the case of a husband and wife who individually file separate tax returns on their assessable income under section 40(1) of the Revenue Code, a husband and wife shall each be granted the right to an income tax exemption on the actual amount of life insurance premium they pay which is greater than 10,000 baht but not exceeding 90,000 baht. The husband or wife shall also each be granted the right to an income tax exemption on the actual amount of pension insurance premiums they pay but such premiums cannot be in excess of 15% of their individual assessable income, this income tax exemption cannot exceed 200,000 baht.

If a husband and wife who both have taxable income and file a joint tax return and pay income tax on their combined income, their income shall be treated as income of the spouse who lodges the joint tax return under the third paragraph in section 57 sex of the Revenue Code.

In the case of life insurance premiums paid by the taxpayers, the taxpayer shall be granted an income tax exemption on the actual amount of life insurance premiums that they pay subject to the condition that such premiums are greater than 10,000 baht but not exceeding 90,000 baht. This income tax exemption is able to be granted to both the husband or wife if they each pay such premiums.

In the case of pension insurance premiums, the tax payer shall be granted an income tax exemption on the actual amount of pension insurance premiums they pay subject to the requirements that such premiums do not exceed 15% of their assessable income, this exemption cannot exceed 200,000 baht.  This particular income tax exemption is able to be granted to both the husband or wife if they each have taxable income and each pay such pension insurance premiums.

The taxpayer who exercises the right to an income tax exemption due to paying pension insurance premiums and their spouse was also the recipient of income, and they:

– paid monies to a mutual fund for provident funds under the law governing Provident Funds; or

– paid monies to the Government Pension Fund under the law governing Government Pension Funds; or

– paid monies to the Welfare Fund under the law governing Private Schools as the case may be; or

– paid for investment units in a Retirement Mutual Fund under the law governing Securities and Exchanges ,

Then the payment to the fund(s) as mentioned above, if combined with the amount of pension insurance premium they paid in a calendar year, must not exceed 500,000 baht in that calendar year.

The exemption as mentioned above must not exceed the net assessment income after deducting expenses under section 42 bis to section 46 of the Revenue Code.

For more information please see: http://goo.gl/4imU1 and http://goo.gl/wR77E

The Revenue Department allows tax payers to use their outdated tax identification number or their  new tax identification number (which has 13 digits) for issuance of their withholding tax certificate.

The Notification of the Director-General of Revenue on the Rules, Procedures and Conditions whereby a person having the duty to pay personal income tax, a juristic company or partnership and an income payer has the duty to deduct withholding tax shall have and use a tax identification number for operation under the Revenue Code (No. 5), stipulates that the previous tax identification number can continue to be used for the issuance of their withholding tax certificate until 31 July 2013, however if they wish to lodge a withholding tax return and remittance, they must use their new 13 digit tax ID number.

For more information please see:http://goo.gl/ZhM96