DLO’S Tax Newsletter
Issue No. 122, September 2021
Tax Law Update
1. The extension period of the reduction of value-added tax (“VAT”) rate for
all sales, services or importation
2. The withholding tax (“WHT”) refund for the interest obtained from savings bond issued by the Ministry of Finance
3. VAT operation for the operator providing a service via electronic from foreign country
4. The extension period of WHT reduction for the payment of assessable income via e-Withholding Tax
Tax News
1. Establish the criteria for the tax refund of WHT for the interest via electronic system
Interesting Supreme Court Judgment
Supreme Court Judgment No. 3874/2560 (2017)
Between Thai Revenue Department Plaintiff
A limited company Aor. and eight people Defendant
Subject: Claim of tax arrears creditor for the unpaid shares including interest
Tax Law Update
1. The extension period of the reduction of VAT rate for all sales, services, or importation.
Royal Decree (Issue No. 724) B.E. 2564 (2021) prescribes to reduce VAT rate and remains levy VAT at a rate of 6.3 percent for all of the sales, services, or importation when the tax point occurs between 1st October 2017 and 30th September 2023.
In this regard, the criteria, procedures, and conditions are subject to the Director-General Announcement.
For further information, please see https://bit.ly/3zwlF8x.
2. The tax refund for the interest obtained from savings bond issued by the Ministry of Finance
Royal Decree (Issue No. 376) B.E. 2564 (2021) prescribes that any person whose income tax is withheld wish to request for the tax refund pursuant to Section 63 of Thai Revenue Code (“TRC”) for the interest of which the only part prior to being a savings bond holder which is obtained from the savings bond issued by the Ministry of Finance. Such person shall file the request for the tax refund via the electronic system of the financial institution which has made an agreement with Thai Revenue Department (“TRD”) on the electronic system development of tax refund.
In this regard, the criteria, procedures, and conditions are subject to the Director-General Announcement.
For further information, please see https://bit.ly/3zuC51i.
3. VAT operation for the operator providing a service via electronic from foreign country
Royal Decree (Issue No. 377) B.E. 2564 (2021) prescribes the criteria of making, sending, obtaining or keeping the documents and any evidence and the procedures of VAT electronic registration for the business operator providing a service via electronic from foreign country.
In this regard, the criteria, procedures, and conditions are subject to the Director-General Announcement.
For further information, please see https://bit.ly/3gJXM67.
4. The extension period of WHT rate reduction for the payment of assessable income via e-Withholding Tax
Revenue Departmental Order No. Tor.Por. 336/2564 (2021) prescribes to extend the period of WHT rate reduction at a rate of 2 percent for the payment of assessable income via e-Withholding Tax previously between 1st October 2020 and 31st December 2021 to presently between 1st October 2020 and 31st December 2022.
For further information, please see https://bit.ly/3yxsxkK.
Tax News
1. Measurements on the extension period of VAT rate reduction
On 24th August 2021, the Cabinet approved the measurements on the extension period of VAT rate reduction through the tax collection at a rate of 6.3 percent (excluding the local tax) or 7 percent (including the local tax) up to 2 years, effective from 1st October 2021 to 30th September 2023.
In this regard, the criteria, procedures, and conditions are prescribes by the laws.
For further information, please see https://bit.ly/3sULUmI.
Interesting Supreme Court Judgment
Supreme Court Judgment No. 3874/2560 (2017)
Between Thai Revenue Department Plaintiff
A limited company Aor. and 8 people Defendant
Subject: Claim of tax arrears creditor for the unpaid shares including interest
Issue: Whether or not the plaintiff is entitled to claim for the interest on the unpaid share?
Fact: A limited company Aor. (“Company”), the first defendant, conducted the business on furniture trading by having the second – eighth defendants as the shareholders who not yet paid up the shares. On 31st August 2005, the Company filed the Form P.P.30 and the Form P.N.D.50 by means of lacking tax payment. The Revenue Department officer (“Officer”) therefore set the total value of the tax arrears pursuant to the notification regarding lacking tax payment. Subsequently, the Officer collected the tax arrears by garnishing the money of the Company’s bank account. The Company had no ownership of other properties. The registered capital was 1,000,000 baht dividing into 10,000 shares and each share values 100 baht. The second – eighth defendants were the shareholders of the Company and paid the share values only 25 baht per share, the outstanding of unpaid value was 75 baht per share. Hence, the plaintiff sent the letter of warning to the Company for the payment of the tax arrears and notified the shareholders to settle the debt of the unpaid shares as each shareholder held. Nevertheless, the Company still not settled its debt to the plaintiff and did not claim its right to make the second – eighth defendants pay for the unpaid shares. Thus, the plaintiff as a tax creditor exercised its right in lieu of the Company, a tax debtor, by sending the letter of notification to the second – eighth defendants as the shareholders to conduct the payment of the unpaid shares to the plaintiff. However, the second – eighth defendants did not pay for the unpaid shares to the plaintiff. As such, the Central Tax Court rendered the judgment to the defendants to pay for tax, fine, and surcharge to the plaintiff without the plaintiff’s right to claim for any interest. The plaintiff accordingly appealed to the Supreme Court.
Judgment : The Central Tax Court is of the view that pursuant to Section 1122 of Civil and Commercial Code (“CCC”), it is obvious that if the shares are not duly paid in due time, the defendants shall be liable to pay for interest from the due date of share payment to the date of payment completion. When the second-eighth defendants still have not completed the share payment to the Company, the plaintiff who is entitled to exercise the right in lieu of the Company sends the letter of notification to the second-eighth defendants to make them pay for the unpaid shares to the plaintiff.
Although the plaintiff does not specify the interest rate in the letter of notification to the second-eighth defendants, Section 7 of the CCC stats that “Whenever interest is to be paid, and the rate is not fixed by a juristic act or by an express provision of law, it shall be 7.5 percent per year.” Therefore, the shareholders shall pay for interest at a rate of 7.5 percent from the due date of share payment to the plaintiff pursuant to Section 1122 of the CCC in conjunction with Sections 7 and 225 of the CCC.
Accordingly, the second-eighth defendants shall pay for tax together with the interest at a rate of 7.5 percent per year of the unpaid shares after the date of prosecution to the date of payment completion.
Opinion: The writer agrees with the Supreme Court’s judgment that pursuant to Section 12 of the TRC, when the tax payable is due but it is not paid, it shall be deemed the tax arrears and the Director-General shall have the power to seize or attach the assets of a person liable to pay tax without the Court’s summon or order.
In conjunction with Section 233 of the CCC, if the debtor refuses or neglect to exercise a claim which leads to the disadvantage of the creditor, the creditor may exercise such claim in his own name on behalf of the debtor. Pursuant to Section 1105 of the CCC, at the stage of meeting to incorporation, the shareholders are required to pay the first payment on the shares no less than twenty-five percent of their nominal amounts. Pursuant to Section 1110 paragraph 2 of the CCC, at the statutory meeting, the directors shall make calls upon the shareholders to make the first payment of shares no less than 25 percent of the total reserved shares. Pursuant to Section 1120 of the CCC, at the general meeting, the directors may make calls upon the shareholders in respect of all money being due on their shares and pursuant to Section 1122 of the CCC, if the call payable in respect of any share has not been paid on the day fixed for payment thereof, the holder of such share is bound to pay interest from the day fixed for payment to the time of the actual payment in full.
From the above provisions, in case the Company has the tax arrears, the TRD as a creditor of the Company has a power to levy the tax arrears without bringing the case to the Court; it means the TRD has the power to seize the Company’s properties or attach any of the Company’s claims. This also means that in case the Company has the right to claim for the due debt of the Company’s debtor, the TRD has a power to attach such right in order to settle the TRD’s debt and the Company having the right to claim the shareholders for the payment of the unpaid shares is a creditor of the shareholders.
Accordingly, if the Company is a creditor of the shareholders and the TRD is a creditor of the Company and the Company owes the RD the tax arrears and does not make calls upon the shareholders to pay for the unpaid shares, the TRD shall be entitled to exercise the Company’s right to obligate the debtors. This means that the TRD exercises the Company’s right to make the shareholders pay for the unpaid shares within the limited period of time.
Nevertheless, when the fact appears that the shareholders do not pay for the unpaid shares within the fixed period, the shareholders shall pay for the interest of the unpaid shares from the due date to the date of complete payment in full.
Consequently, the Supreme Court Judgment that the second-eighth defendants shall pay for tax together with the interest at a rate of 7.5 percent per year of the unpaid shares after the date of prosecution to the date of completion is legitimate.
Mr. Warinthorn Saruno
Should you have any queries on tax and legal issues, please contact
Dharmniti Law Office Co., Ltd.
2/2 Bhakdi Building, 2nd Floor, Wireless Road, Lumpini sub-district, Pathumwan district, Bangkok 10330.
Tel: 0-2680-9751, 0-2680-9785.
Email: warinthorns@dlo.co.th
1Section 12 of TRC prescribes that
“Tax payable or remittable under this Title, when it is due but not paid or remitted shall be deemed as tax arrears.
In order to recover tax arrears, the Director-General shall have the power to seize or attach and sale by auction assets of a person liable to pay or remit tax throughout Thailand without the Court summons or order. The Director-General may delegate such power to a Deputy Director General or Chief of Regional Revenue Office. …”
2Section 233 of CCC prescribes that
“If, to the prejudice of the creditor, the debtor refuses or neglects to exercise a claim, the creditor may, in order to protect his obligation, exercises such claim in his own name on behalf of the debtor, except those which are purely personal to the debtor.”
3Section 1105 of the CCC prescribes that
“Shares may not be issued at a lower price than their nominal amount.
The issue of shares at a higher price than their nominal amount is permissible if sanctioned by the memorandum.
In such case the excess amount must be paid together with the first payment.
The first payment on the shares must not be less than twenty-five percent of their nominal amounts.”
4Section 1110 of the CCC prescribes that
“When the statutory meeting has been arranged already, the promoters shall assign all obligations to the directors.
When the directors have already adopted such obligations, the directors shall make calls upon the promoters and the people wishing to purchase the shares to pay for the shares by money with the amount of no less than twenty-five percent per share as prescribed in the prospectus.”
5Section 1120 of the CCC prescribes that
“Unless otherwise decided by a general meeting, the directors may make calls upon the shareholders in respect of all money being due on their shares.”
6Section 1122 of the CCC prescribes that
“If the call payable in respect of any share has not been paid on the day fixed for payment thereof, the holder of such share is bound to pay interest from the day fixed for payment to the time of the actual payment.”
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