Tax Newsletter FEBRUARY 2023

Tax Newsletter

Dharmniti Law Office Co., Ltd.

Issue No. 139, in February 2023

Tax Law Updates

1. The criteria, procedures, and conditions regarding the exemption of assessable income used for the purchase of goods or services;
2. The calculation of foreign currency into Thai Baht in 2022;
3. Electronic channel for contacting the Revenue Department B.E. 2566;
4. The standard of the form, the method of sending, the keeping of written evidence, and information security for operations relating to electronic processes;
5. Additional specifications on tax invoices under Section 86/4 (8) of Thai Revenue Code;
6. Additional specifications on debit notes under Section 86/9 (7) of Thai Revenue Code;
7. Additional specifications on credit notes under Section 86/10 (7) of Thai Revenue Code;
8. The criteria, procedures, and conditions regarding the exemption of assessable income for community enterprises;
9. Additional specifications for input tax which shall not be deducted from the VAT calculation under Section 82/5 (6) of Thai Revenue Code.

Tax News Updates

1. The properties which are exempted for tax under the Land and Building Tax Act B.E. 2562;
2. The excise rate;
3. The fees and fee exemptions regarding the seeking of permission pursuant to the law on excise;
4. The type and features of excise stamp and tax return signs;
5. The extension of the tax measures supporting donations to the public health sector;
6. The extension of the tax measures supporting the electronic tax system.

Highlighted Supreme Court Judgment

The Supreme Court Judgment No. 5897/2550

Between Company L. as the Plaintiff and Revenue Department as the Defendant

Subject: Prohibited expense in the case of a capital reduction in accordance with Sections 65 Bis (1) and 65 Ter (17) of the Thai Revenue Code.

Tax Law Updates

1. The criteria, procedures, and conditions regarding the exemption of assessable income used for the purchase of goods or services

In accordance with the Notification of the Director-General of the Revenue Department (Issue No.431),
it prescribes details regarding the personal income tax exemption which shall be the actual amount but not exceeding 40,000 Baht of costs paid for certain goods or service to a VAT registrant in Thailand between 1 January 2023 and 15 February 2023. Furthermore, the tax invoice issued pursuant to Section 86/4 of Thai Revenue Code or the receipt issued pursuant to Section 105 Bis of Thai Revenue Code is required.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3IdO6h5

2. The calculation of foreign currency into Thai Baht in 2022

The Notification of the Revenue Department regarding the calculation of value or price in foreign currency into Thai currency dated 4 January 2023 prescribes the rate for the calculation of amount in foreign currency into Thai currency to be based on the average exchange rate on the last day of 2023 which commercial banks buy or sell and which is calculated by the Bank of Thailand for the implementation pursuant to Section 65 Bis (5) of the Thai Revenue Code.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3xxXJlQ

3. Electronic channels for contacting the Revenue Department B.E. 2566

The Notification of the Revenue Department stipulates that the webpage www.rd.go.th/rdeservice is an electronic channel for the filing of requests, or other documents or evidence with the Revenue Department so as to facilitate and make filing easier for the public.

For more details, please see https://bit.ly/3Z6I4Wz

4. The standard of the form, method of sending, the keeping of written evidence, and
   the information security for operations relating to electronic processes

The Notification of the Director-General of the Revenue Department (Issue No.48)
imposes criteria regarding the documentation and the procedures of filing or sending the documents or written evidence via electronic system of the Revenue Department or other electronic methods, including the procedures for keeping a tax invoice or a receipt which a VAT operator is subject to doing for a buyer or a service recipient via electronic methods.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3KlXD8p

5. Additional specifications on tax invoices under Section 86/4 (8) of Thai Revenue Code

The Notification of the Director-General regarding value-added tax (Issue No. 247) stipulates additional wording in Clauses 10 and 11 of the Notification of the Director-General regarding value-added tax (Issue No. 39) as follows:

Clause 10: In the case that a VAT registrant makes a tax invoice in lieu of an abbreviated one using an electronic method, the statement in such tax invoice shall further specify that “This is the cancellation of an electronic abbreviated tax invoice No. … dated … and the new electronic tax invoice is issued instead.”

Clause 11: In the case that a VAT registrant makes a tax invoice using an  electronic signature with an electronic certificate and submits it to a buyer or a service recipient, the statement in such tax invoice shall further specify that “This document is made and sent to the Revenue Department via electronic method.”

For more details, please see https://bit.ly/3SkDK3F

6. Additional specifications on the debit note under Section 86/9 (7) of Thai Revenue Code

The Notification of the Director-General of the Revenue Department regarding value-added tax (Issue No. 248) stipulates additional wording in Clause 1/1 of the Notification of the Director-General of the Revenue Department regarding value-added tax (Issue No. 194). The Notification provides that if a VAT registrant makes a debit note using an electronic signature with an electronic certificate and submits it to a buyer or a service recipient, such debit note must contain a statement which provides that “This document is made and sent to the Revenue Department via electronic method.”

For more details, please see https://bit.ly/3kiAIQN

7. Additional specifications on credit notes under Section 86/10 (7) of Thai Revenue Code

The Notification of the Director-General of the Revenue Department regarding value-added tax (Issue No. 249) stipulates additional wording in Clause 1/1 of the Notification of the Director-General of the Revenue Department regarding value-added tax (Issue No. 195). The Notification provides that if a VAT registrant makes a credit note using an electronic signature with an electronic certificate and submits it to a buyer or a service recipient, then such credit note must include text which specifies that “This document is made and sent to the Revenue Department via electronic method.”

For more details, please see https://bit.ly/3lNvmgS

8. The criteria, procedures, and conditions regarding the exemption of assessable income for community enterprises

The Notification of the Director-General of the Revenue Department regarding income tax (Issue No. 432) imposes a duty on community enterprises which are ordinary partnerships or non-juristic bodies such that they shall need to be registered and issued with a certificate of registration from the Department of Agriculture Extension pursuant to the Community Enterprise Promotion Act B.E. 2548. Furthermore this Notification requires community enterprises to prepare accounts or a report showing their income and expenses pursuant to the Notification of the Director-General of the Revenue Department regarding income tax (Issue No. 161), and they are also required to file personal income tax for assessable income received between 1 January 2023 and 31 December 2025.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3Sev0vZ

9. Additional specifications for input tax which shall not be deducted from the VAT calculation under Section 82/5 (6) of the Thai Revenue Code

The Notification of the Director-General of the Revenue Department regarding value- added tax (Issue No. 250), imposes additional wording in Clauses (m) and (n) of Clause 4 (the second paragraph of (4)) of the Notification of the Director-General of the Revenue Department regarding value-added tax (Issue No. 42) as follows:

Clause (m): The transfer of collateral assets to settle a debtor’s debt according to the criteria, procedures, and conditions issued from Royal Decree regarding tax exemption (Issue No. 721) B.E. 2564 which is made from 14 July 2021.

Clause (n): The sale of assets to the trust’s trustees imposing the provisions on redemption of company or juristic partnership pursuant to the criteria, procedures, and conditions of Royal Decree regarding tax exemption (Issue No. 753) B.E. 2565 which is made from 19 July 2022.

For more details, please see https://bit.ly/413By4J

Tax News Updates

1. Properties which are tax exempt under the Land and Building Tax Act B.E. 2562

On January 10^th, 2023, the Cabinet passed a resolution approving a tax exemption with respect to the land and building tax for the building owned by Dhanarak Asset Development Co., Ltd. at the Government Complex Commemorating His Majesty the King’s 80 Birthday Anniversary 5^th December 2007. Such tax-exempted building must be constructed from the funding through securitization and shall only apply to the part of the building which is leased by the Treasury Department and used by government agencies and utilities for government officials.

This tax exemption shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3SeJUlP

2. The Excise Rate

On January 10, 2023, the Cabinet passed a resolution approving the following criteria relating to excise tax rates:

1) The criteria on the excise rate applying to brewed liquor which has a non-commercial purpose, namely, beer, wine and sparkling wine made from grapes, brewed liquor made with grapes or grape wine, and other kinds of brewed liquor, and distilled liquor with non-commercial purpose, namely, white liquor and other kinds of distilled liquor shall be consistent with the Ministerial Regulation regarding the manufacture of liquor B.E. 2565, which has already been effective since 2 November 2022.

2) The criteria applicable to the tax payment at zero percent and the rate referenced in the same type of liquor manufactured for commercial purpose stipulated in Ministerial Regulation regarding excise rate (second issue) B.E. 2560.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3SeJUlP

3. The fees and fee exemption regarding the seeking of permission pursuant to the law on excise

On January 10^th, 2023, the Cabinet passed a resolution regarding the approval issuance fee for permission to manufacture liquor for non-commercial and commercial purposes so that it shall be consistent with the Ministerial Regulation regarding the manufacture of liquor B.E. 2565 and the fee for changing the location of such manufacturing activity.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3SeJUlP

4. The type and features of excise stamps and tax return signs

On January 10^th, 2023, the Cabinet passed a resolution approving the amendment of Clause 8 (2) of the Ministerial Regulation prescribing the types and characteristics of excise stamps and tax return signs of government agencies B.E. 2563 to regulate the types and characteristics of liquor stamps which shall apply to brewed and distilled liquor such that they shall be consistent with the statements specified in the Ministerial Regulation regarding the manufacture of liquor B.E. 2565 from “liquor stamp for brewed or distilled liquor manufactured locally” to instead be “liquor stamp for brewed or distilled liquor from small-sized liquor factory using a machine… and middle-sized liquor factory using a machine…”.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3SeJUlP

5. The extension of the tax measurement in support of the donation to public health section

On January 24^th, 2023, the Cabinet passed a resolution approving an increase in the number of entities that can receive tax exempt donations from applicable donors (including natural persons, companies, or juristic partnerships) for the purpose of supporting public health. Under the resolution the number of entities that can receive such donations was increased from 10 to 13.

The resolution also extended the exemption applicable to income tax, value-added tax, specific business tax and stamp duty for assessable income that is derived from the transfer of assets, the sale of goods, or an undertaking conducted due to the donation to the abovementioned 13 entities. The resolution further provides that eligible tax deductions shall be entitled to a tax deduction equivalent to double the amount of money or assets donated provided that such donation is done via the e-Donation channel of the Revenue Department for donations made from 1^st January 2023 through until 31^st December 2024.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3I8bpZI

6. The extension of the tax measurement in support of electronic tax system

On January 24^th, 2023, the Cabinet passed a resolution approving an extension of the time applicable to the tax measures regarding investment promotion via the electronic tax system in accordance with Royal Decree regarding tax exemption (Issue No. 718) B.E. 2564. The resolution extended the expiry date from 31^st December 2022 through until 31^st December 2025. Moreover, in relation to the promotion of e-Withholding Tax in accordance with Ministerial Regulation No. 373 (B.E. 2564) regarding income tax, the expiry date shall be extended from 31^st December 2022 through until 31^st December 2025. Furthermore, the withholding tax rate for the payment of assessable income via e-Withholding Tax shall be reduced from 2 percent to 1 percent to encourage business operators to withhold and remit this tax via the e-Withholding Tax channel.

In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.

For more details, please see https://bit.ly/3I8bpZI

Highlighted Supreme Court Judgment

Supreme Court Judgment No. 5897/2550

Between                       Company L.                    Plaintiff

and                              Revenue Department       Defendant

Subject: Prohibited expense in the case of a capital reduction in accordance with Sections 65 Bis (1) and 65 Ter (17) of the Thai Revenue Code

Disputed issue: Is a capital decrease by means of a decrease in the number of shares held deemed to be a prohibited expense when calculating net profit or loss in accordance with Section 65 Bis (1) of the Thai Revenue Code?

Facts:   The Plaintiff is a juristic person (a limited company), which purchased shares of Company S. as an asset in order to gain benefits from the dividends issued by such company. Subsequently, the general meeting of shareholders of Company S. passed a special resolution to conduct a capital decrease given that Company S. wished to write off an accumulated loss and to be able to amend its corporate registration so that it could be changed to be a public company limited. The capital decrease, therefore, resulted in the number of shares that the Plaintiff was holding in Company S to decrease in proportion to the percentage of the capital decrease. As a result of the capital decrease, the Plaintiff didn’t receive any money for the decreased number of shares which thereby resulted and thus it recorded the value of the decreased shares as an expense when calculating its corporate income tax based on its net profit.

The Defendant’s assessment official was of the opinion that the Plaintiff’s expense which was equivalent to the decreased share value was a prohibited expense with respect to the calculation of net profit in accordance with Section 65 Ter (17) of the Thai Revenue Code. When the adjustment of net profit was made, it resulted in the Plaintiff being subject to pay additional corporate income tax. Furthermore, the Defendant’s assessment official issued a letter to the Plaintiff notifying it of the change to the net loss result and also notifying it to pay additional corporate income tax together with a fine and surcharge.

Judgment: Section 65 Ter (17) of the Thai Revenue Code was made to prohibit a company or a juristic partnership from deducting the value of assets with low appraisal as an expense when calculating net profit given that such value is not an actual expense. Given this, the actual expense will be incurred if there is a sale of an asset at a price which is lower than the purchased one.

As per the facts, the capital decrease of Company S., only resulted in a decrease in the total value of shares held by the Plaintiff pursuant to the proportion of value or number of shares decreased, which also decreased the value of the Plaintiff’s share investment (by asset).

Thus, the capital decrease of Company S. was deemed by the Court as the value of assets apart from devalued assets in accordance with Section 65 Ter (17) of the Thai Revenue Code which shall not be applied when calculating net profit or loss in accordance with Section 65 Bis (1) of the Thai Revenue Code.

Legal opinion:   I, the author, agree with the abovementioned Supreme Court Judgment given that the capital decrease through the reduction in shares is not deemed as the sale of shares which results in a shareholder gaining any profit or loss but is deemed as a capital loss which does not stem from a sale. Given this, the Plaintiff as a juristic shareholder cannot use the decreased amount of share capital as an expense when calculating net profit or loss when determining the amount of corporate income tax which shall be payable. Nevertheless, if there is a sale of such asset and it appears that there is a loss incurred, the Plaintiff will be entitled to take such loss from the capital decrease through the reduction in the number of shares as an expense when calculating net profit in accordance with Section 65 Ter (17) of Thai Revenue Code.

Please note that the above opinion only reflects the author’s personal view. When considering tax law and its application it is necessary to carefully consider the individual facts of each case. The application of the aforementioned Supreme Court Judgment is made for the purpose of the readers’ better understanding about tax law.

Author: Ms. Nutthanicha Sricharoenvanichkul

Translator: Mr. Raqsabhumi Chotmanodham

Dharmniti Law Office Co., Ltd. (DLO)

Address: No. 2/2 Bhakdi Building, 2 nd Floor, Wireless Road, Lumpini Sub-district, Pathumwan District, Bangkok 10330

Tel: 0-2680-9753, 0-2680-9777

E-mail: rattawutc@dlo.co.th