Tax Newsletter JUNE 2021

DLO’S Tax Newsletter

Issue 119 June 2021

Tax Law Update
1. Amendment of the procedure to write-off bad debts from debtor account
2. The procedure of deduction and remittance of the assessable income for repayment of Student Loan Fund (Gor Yor Sor.)
3. Extension of the filing and payment schedules for withholding tax and VAT returns via the internet.
4. Corporate Income Tax (“CIT”) exemption for income paid for participating in a seminar in Thailand
5. CIT exemption for promoting and supporting the e-tax system

Tax News
1. Tax measures to encourage ex-convict employment.
2. Tax measures to encourage the vaccine procurement donation
3. Tax measures to encourage Small and Medium-sized Enterprises (SMEs) into a digital economy
4. Extension of tax measure encouraging Human Resources Development for Industry 4.0 and tax measure for supporting the relocation of production facilities of foreign investors (Thailand Plus Package)
5. Regulation regarding the enforcement of e-service law

Interesting Deka
Dika (Supreme Court Judgment) No. 3615/2561, in re:
Between   Company Tor          Plaintiff
        Revenue Department     Defendant
Issue:     The non-deductible expense in case there is no obligation to pay under the agreement

Tax Law Update

1. Amendment of the procedure to write-off bad debts from debtor account

   Ministerial Regulation (No. 374) B.E. 2564 (2021) amended the procedure to write-off bad debts from debtor account, which could be summarized as follows:

   1.1 Amending the written-off of bad debts procedure according to the amount of debts of each debtor as follows:

   1.2 In case the action in court has been taken in the foreign court or the other similar actions have been taken abroad, there must be an existence of evidence of such action issued by the authorized person of such country which translated into Thai and such translation shall be certified in accordance with the Ministry of Foreign Affairs’ regulation re: documents authentication (former, the revenue department did not admit the judgment, decree or order of the foreign court to be used in writing-off the bad debts from the debtor account)

   1.3 The bad debts arising from the granting credit which has reserved fund reached 100 percent in accordance with the procedure issued by Bank of Thailand and has the characteristics as prescribed by law, can be written-off without taking the action of the procedure in item 1.1.

   1.4 The writing-off bad debts approval by the director or managing partner in case the debt is not over 2,000,000 baht shall proceed within terms as follows:

      (1) For the writing-off bad debts of the accounting period starting in or after 1 January – 31 December 2020, the director of the company limited or managing partner of the partnership (the creditor) shall approve and given an order for the writing-off the bad debts from the debtor account within 60 days after the last day of the accounting period or 60 days after this ministerial regulation has been published in the Government Gazette (29 April 2021) whichever is later.

      (2) For the writing-off bad debts of the accounting period starting on or after 1 January 2021, the director of the company limited or managing partner of the partnership (the creditor) shall approve and given an order for the writing-off the bad debts from the debtor account within 30 days after the last day of the accounting period.
   For more details, please see: https://bit.ly/2RrT6bs

2. The procedure of deduction and remittance of the assessable income for repayment of Student Loan Fund (Gor Yor Sor.)

   Notification of the Director-General of the Revenue Department Re: The Procedure of deduction and remittance of the assessable income for repayment of Student Loan Fund in accordance with Student Loan Fund Act B.E. 2560 (2017) (No. 3) prescribed that the government authority or private organization who pay an income derived from employment, whether in the form of salary, wage, per diem, bonus according to Section 40 (1) of the Revenue Code to their employees shall deduct such assessable income in the amount informed by the Student Loan Fund for their employees’ loan repayment via DSL system and remit such deducted income to the Revenue department’s Krungthai bank account name “กรมสรรพากร 2 เพื่อรับชำระเงินคืนกองทุนเงินให้กู้ยืมเพื่อการศึกษา” within the remittance of withholding tax period. This announcement shall come into force from 22 June 2020.
   For more details, please see: https://bit.ly/2S2ZNkb

3. Extension of the filing and payment schedules for withholding tax and VAT returns via the internet

   Ministerial of finance re: Extension of the period for withholding tax and VAT return filing and payment via internet network (No.5) extends the period of withholding tax return filing and payment (PND 1, PND 2, PND 3 and PND 53) and VAT return (PP 30 and PP 36) via the internet as follows:

   3.1 For tax returns filing and tax payment of June 2021, extends due date from 15 or 23 July 2021 to within 30 July 2021;
   3.2 For tax returns filing and tax payment of July 2021, extends due date from 15 or 23 July 2021 to within 30 August 2021.

4. CIT exemption for income paid for participating in a seminar in Thailand.

   The Royal Decree (No. 716), B.E. 2564, granting 100 percent of income tax exemption for the expenses paid for seminar room, accommodations, deliver fee or other expenses relating to the participation in a seminar in Thailand that the companies or juristic partnership organizing for their employees or the service fee of such seminar paid to the travel agency in accordance with tourism business and guide law during the period 1 January 2021 through until 30 September 2021.
   For more details, please see: https://bit.ly/3fIfirv

5. CIT exemption for promoting and supporting the e-tax system

   The Royal Decree (No.718) B.E.2564 prescribes the exemption procedure for promoting and supporting the e-tax system in the calculation of corporate income tax as follows:

   5.1 An exemption for an income in the amount of 100 percent of the expense actually paid for the electronic system for preparing and receiving data or the costs of e-tax invoices storage program, computer or other devices used for the purpose of preparing, delivering, receiving, or storage the e-tax invoices or e-receipts of the companies or juristic partnerships business but not for repair in order to maintain its present condition during the period 1 January 2020 through until 30 September 2022.

   5.2 An exemption for an income in the amount of 100 percent of the expense actually paid for the costs of the electronic system for remitting taxes or computer program, e-receipts storage devices, computer devices, or other related devices for the propose of tax remittance of the companies or juristic partnerships business but not for repair to maintain its present condition during the period 1 January 2020 through until 30 September 2022.

   5.3 An exemption for an income in the amount of 100 percent of the expense actually paid during the period 1 January 2020 through until 30 September 2022 as follows:
      (1) The service fee paid to the service providers for preparing electronic data or deliver electronic data, e-receipts or electronic data storage usage for preparing, delivering, receiving, or maintaining the e-tax invoices or e-receipts;
      (2) The service fee paid to the service providers for tax remittance, e-tax receipts, or electronic data storage usage for withholding tax, income tax, and VAT remittance
   For more details, please see: https://bit.ly/34zguqv

Tax News

1. Tax measures to encourage ex-convicts’ employment.

   On 5 May 2021, the Cabinet passed a resolution giving in principle approval to the CIT exemption for the companies or juristic partnerships who hire the ex-convicts released from the prison not over 3 years from the release date till the employment up to 50 percent of the employment expenses paid per person per month in the accounting period starting in or after 1 January 2021 through until 31 December 2021.
Moreover, such companies or juristic partnerships are not exempted whether in all or parts by other Royal Decree.
   For more details, please see: https://bit.ly/3uXfacO

2. Tax measure to encourage the vaccine procurement donation

   On 5 May 2021, the Cabinet passed a resolution giving in principle approval to the tax benefits for the donation made to the National Vaccine institute as follows:
   2.1 For individuals, a cash donation made to the National Vaccine institute can be deducted as an allowance for an actual donated amount. However, when including this amount with the donations in accordance with Section 47 (7) of the Revenue Code, it must not exceed 10% of the taxpayer’s assessable income after deducting expenses and allowances.
   2.2 For companies or juristic partnerships, a cash or property donation made to the National Vaccine institute can be deducted as an expense for an actual donated amount. However, when including this amount with expenses for public charity or public benefit in accordance with Section 65 ter (3) (b) of the Revenue Code, it must not exceed 2% of net profit of such company/juristic partnership before the deduction of such expenses.
   2.3 The donation in items 2.1 and 2.2 must be made through the e-donation system of the Revenue Department during 1 January 2021 and 31 December 2023.
2.4 VAT exemption for VAT registrant who made a property donation to the National Vaccine institutes for the efficiency and sufficient research, development, production, and distribution of the vaccine from 1 January 2021 until 31 December 2023.
   For more details, please see: https://bit.ly/3uXfacO

3. Tax measures to encourage Small and Medium-sized Enterprises (SMEs) into a digital economy

   On 11 May 2021, the Cabinet passed a resolution giving in principle approval to a tax exemption to a company or juristic partnership with paid-up capital less than 5 million baht at the end of the accounting period and have an income from the sale of goods or provision of services in an accounting period less than 30 million baht, up to 100 percent of the expense paid to purchasing or using services of computer software or software registered by the Digital Economy Promotion Agency, Ministry of Digital Economy and Society but not exceeding 100,000 baht for purchases made on or after the accounting period starting 1 January 2021 until 31 December 2022.
Moreover, such companies or juristic partnerships are not be exempted whether in all or parts by other Royal Decree such as BOI or EEC.
   For more details, please see: https://bit.ly/33OY70E

4. Extension of tax measure encouraging Human Resources Development for Industry 4.0 and tax measure for supporting the relocation of production facilities of foreign investors (Thailand Plus Package)

   On 25 May 2021, the Cabinet passed a resolution giving in principle approval to the extension of the tax benefits period for motivating an investor to support the industry and human resources development for Industry 4.0 on the investment of machine and computer programs connected with the machine of automatic system investment, and highly skilled workers employment and high potentials workers development. The resolution extends the period under the original tax measures which ended on 31 December 2020 for 2 more years (extend to 31 December 2022).

5. Regulation regarding the enforcement of e-service law

   On 25 May 2021, the Cabinet passed a resolution giving in principle approval to the regulation regarding the enforcement of e-service law as follows:

   5.1 The regulation for preparing, delivering, receiving, and storing the summons, tax payment notification, form, documents report, or other letters with electronic processes via the Revenue department’s website for the entrepreneur providing electronic services or electronic platform from a foreign country.

   5.2 The regulation for VAT registration and notify changes in essential particulars of the VAT registration via the Revenue department’s website for the entrepreneur providing electronic services or electronic platform from a foreign country such as the name of the entrepreneur, website, and email.
   For more details, please see: https://bit.ly/3vGPtNJ

Interesting Deka
Dika (Supreme Court Judgment) No. 23615/2561, in re:
Between   Company Tor          Plaintiff
        Revenue Department     Defendant
Issue:     The non-deductible expense in case there is no obligation to pay under the agreement
Issue to consider : Whether Insurance premium that the Plaintiff paid to Company Or for risk prevention of selling a debtors of the Plaintiff’s affiliate company to Bank Sor is a non-deductible expense.
Fact : The plaintiff operating an investment, marketing, and management services business. The plaintiff has 3 affiliate companies (“affiliate companies”). The plaintiff has entered into a Credit management service Agreement with affiliate companies by sale out the debts of the affiliate companies’ debtors which is not due to Bank Sor, but Bank Sor will buy such debts only if such debts are insured. Therefore, the plaintiff paid the insurance premium to Company Or, the insurance company, to ensure such debts for Bank Sor instead of entering into a guarantee agreement with Bank Sor directly. The plaintiff included such insurance premium as an expense in its tax calculation to pay CIT.

   The defendant testified that Bank Sor, the buyer of affiliate companies’ debtors, has set a condition that the seller needs to ensure the debts, so each affiliates companies who is the creditor are borne to pay the insurance premium according to the proportion of the amount and value of its debtors’ account. Moreover, none of the clauses in the agreement specified that the plaintiff’s as the contractor needs to be accountable for any expense resulting from its management service. However, clause 3 of such agreement states that “in case there are expenses incurred due to the management of the business under the care and administration of the plaintiff who performed its management service under the agreement, such expense shall be liable by the affiliate companies. If the plaintiff has paid an advance for the affiliate companies, the affiliate companies shall return such advance amount to the plaintiff”.

   The insurance premium paid by the plaintiff is deemed as advance payment of the affiliate companies, which shall be returned according to the agreement. Such expense is not specifically for the purpose of the plaintiff’s business which is deemed as non-deductible expenses in the CIT calculation.

Judgment of the Supreme Court : According to the Credit management service agreement between the plaintiff and the affiliate companies, such agreement specified that if there are any expenses incurred due to the performance of the agreement and an advance has been paid by the plaintiff, the affiliate companies are liable to return such advance amount to the plaintiff. The agreement clearly states that it is the responsibility of the affiliate companies, not the plaintiff, and it does not appear that the plaintiff has a duty or necessity to pay such expense on behalf of the affiliate companies. The insurance premium paid by the plaintiff is particularly beneficial to the affiliate companies. The evidence that the plaintiff has attested is insufficient to be admissible that such insurance premium is an expense specifically for the purpose of making profits or for the business. Therefore, the paid insurance premium is deemed as a non-deductible expense in the CIT calculation in accordance with Section 65 (13) of the Revenue Code.

Legal Opinion : The author agrees with the judgment of the Supreme Court because in the business operation an affiliate company can be viewed as one but from a legal perspective each company is one juristic person apart from the others. Each company shall operate its business to maximize the benefits of itself and is bears its own expense as appropriate. According to the judgment of the Supreme Court, the Credit management service agreement clearly states that it is the responsibility of the affiliate companies to bears such expenses not the plaintiff and it does not appear that the plaintiff is of the responsibility to pay such expense. If the plaintiff paid for such expense despite there is not the plaintiff’s responsibility, it is unreasonably burdened to the plaintiff’s business. Additionally, the payment of such insurance premium is particularly beneficial to the affiliate companies, not the plaintiff. Therefore, such expense is not for the purpose of the business and shall not be allowed as expenses in the CIT calculation.

Author: Maysaya Seelavun
Translator: Achiraya Sutisoontarin

Should you require any legal advice on Thai tax law then please contact us at
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