Tax Newsletter AUGUST 2015

DLO’S Tax Newsletter

Issue 57 – August 2015

Tax Law Update

Inheritance Tax Law

The National Legislative Assembly (NLA) has issued the Inheritance Tax Act 2015 that stipulates key criteria for individuals who must pay inheritance tax. An inheritance tax income exceeding 100 million Baht is subject to 10% inheritance tax payment, with exception to an heir who is a parent, child or descendent where the rate required is 5%.

Additionally, a key amendment was made in the Revenue Code in consistent with the Act mentioned above. By which: inheritance income received from the transfer of ownership or possessory right of real estate where it is free of charge; inheritance received as a support fund or for the purpose of foster care; or from gifts of value made during an individual’s lifetime, that are made on the basis of cultural or religious tradition, shall be exempt from inheritance tax payment – unless the amount exceeds 10 million Baht, or up to 20 million Baht contingent on the circumstances.

This will come into effect February 2, 2016

For more details, please visit: https://goo.gl/NL2uKo  and https://goo.gl/1hFjKT

Modification of Tax Exemption for Private School

            The Royal Decree (No. 284) B.E. 2538 provides a  tax exemption on the income and dividends of a juristic company or partnership that  operate private school businesses.

The Cabinet has issued the Royal Decree (No. 588) and (No. 589) B.E. 2558, which amended the criteria for the tax exemption for income and dividends as mentioned above, specifically in the case of foundations or associations whereby income and dividends are received from non-formal private school institutions including tutorial schools shall not qualify for this tax exemption.

Therefore, the Ministry of Finance issued the Ministerial Regulation (No. 307) B.E. 2558, which  amended Section 2(1) and (37) of the Ministerial Regulation (No. 126) B.E. 2509 in order to make them more consistent with the Royal Decrees mentioned above. Where income, dividends or profit sharing of a juristic company or partnership, is to be exempted from income tax, unless it is derived from non-formal private school education, including  tutorial school. Furthermore, Section 2(57) has been amended regarding personal tax exemptions on income received from the Aid Fund under the law governing private schools.

These Royal Decrees have been effective since July 11, 2015

For more details, please visit: http://goo.gl/fboe5H and http://goo.gl/Jh7YcE

 Tax Benefits for Private School Businesses

The Cabinet has issued the Royal Decree (No.590) B.E. 2558 which provides tax benefits for Private School Businesses as follows:

1. Exemption on income tax, value added  tax (VAT), special business tax (SBT) and stamp duty applies, without compensation, to;  those who have been granted permission to establish a private school which attain the ownership or possessory right of the entire land, part of the land and including any other property  of schools – under the law governing private schools.
2. Exemption on VAT, SBT and stamp duty for schools without compensation – under the law governing private schools – in the case where the property mentioned above in paragraph 1, is no longer beneficial or useful or shut down, and is returned  back to the licensee permitted to establish a  private school, original owner,     or heir.
3. Exemption on income tax, SBT, and stamp duty for donors; of land possessory right of land to a private school – under the law governing private schools – whereby the donor shall not include the cost of the property as a deducted tax expense.
4. Exemption on SBT and stamp duty for schools without compensation – under the law governing private schools – in the case where the property  as mentioned in paragraph 1, is no longer beneficial or useful or shut down, and is returned back to the donor or heir.
5. Exemption on income tax to the licensee establishing a private school, original owner or heir for income received  from the transfer of property without compensation from private schools – under the law governing private schools.

However, transferring, receiving  the title or possession of property, must follow the conditions prescribed under the Royal Decree.

This Royal Decree  has been effective since July 11, 2015

For more details, please visit: http://goo.gl/f2kgfq

Guideline on Paying Income Tax in the Case of ‘Other’ Income  that is not Rental Income

The Minister of Finance has issued a Notification of the Ministry of Finance that provides lessors with the right (person: owner of property) to make an average additional charge (key money paid by a prospective tenant to a landlord) of:  building costs, repair costs, etc. according to the number of years of the tenancy. Further, lessors must file  the latter charge together with the average  income tax payment  by March of the following year.  Where the lessor is unable to file the form on time a surcharge for late submission prescribed by the law, shall be paid. For the taxpayers who do not file the form for the additional charge, the assessment officer shall have the power to charge, in accordance with Section 60 Bis of the Revenue Code.

In case where the Revenue Department has issued a Revenue Department Order for lessors who do not want to make an average additional charge, must to take the additional charge to be filed as per Por. Ngor. Dor. 90 or  in such a case  where lessors want to make an average  additional charge,  such  charge shall  be filed as per Por. Ngor. Dor. 93.

For more details, please visit: http://goo.gl/zw0yk2 and http://goo.gl/d3MQNB

The Criteria Amended for the Right of Tax Exemption for Purchasing a Long Term Equity Fund (LTF) Investment Unit

The Director General of the Revenue Department has issued the Notification of Revenue Department on income tax (No. 257) to amend the criteria of Section 2, 3 and 5 of the Notification of Revenue Department (No. 169), regarding the right for an individual whose purchased an Investment Unit of an LTF to receive a tax exemption on that unit The significant amendment is that an individual can purchase one LTF investment unit or several units, but the total investment shall not  exceed 15% of the assessable income received and must be taxed, compared to the previous Notification which provides that 15% of the assessable income is received in the taxable year.

This Royal Decree has been effective since  January 1, 2015

For more details, please visit: http://goo.gl/G3zbTD

The Criteria Amended for the Right of Tax Exemption for Returning a Retirement Mutual Fund (RMF) Investment Unit

The Director General of the Revenue Department has issued the Notification of Revenue Department on income tax (No. 258) to amend the criteria of Section 1, 2 and 5 of the Notification of Revenue Department (No. 170) which is about the right to exempt income tax from selling an RMF Investment Unit.  The tax exemption is calculated from the base of assessable income received in a taxable year, compared to the previous Notification that calculates from the base of income received in each year.

This Notification has been effective since January 1, 2015

For more details, please visit: http://goo.gl/BAX3XT

The Criteria Amended for the Right of Tax Exemption for Purchasing a Retirement Mutual Fund (RMF) Investment Unit

The Director General of the Revenue Department has issued the Notification of Revenue Department on income tax (No. 259) to amend Section 2, 3 and 7 of the Notification of Revenue Department (No. 171) regarding the tax exemption on the purchase of a RMF Investment Unit.  is calculated from the base of assessable income received, in a taxable year, compared to the previous Notification that provides the base of income received in each year.

This Notification has been effective since January 1, 2015

For more details, please visit: http://goo.gl/nwgbmU

Tax News

Extending Period of VAT 7% for 1 Year

The Minister of Finance has announced that the rate of VAT,  currently 7%, will  remain stable for the following year, as the Thai government plans to increase consumption, in the face of Thailand’s current economic slowdown.

For more details, please visit: https://goo.gl/HQ0k47

State Audit Commission (SAC) sets up offices for collecting income

The chairman of the SAC board concluded from the SAC committee meeting that the board was in favor of establishing offices to collect income. The purpose of this is to accelerate income collection from state enterprises and the affairs of other state agencies. This is one of the measures adopted, to  help reduce the budget deficit problem and to prevent corruption.

For more details, please visit: http://goo.gl/AVGYzK

Interesting New Law

Enforcement on Anti – Corruption Law

            The National Legislative Assembly has issued the Constitution Amendment Act  on the protection and suppression of corruption (No. 3) B.E. 2558. A notable amendment is that the penalties for state officers, who wrongfully request, receive or accept assets or other benefits may face imprisonment, life imprisonment, a fine, or capital punishment.

This has been effective since July 10, 2558.

            For more details, please visit: http://goo.gl/eXmHbM

Interesting Dika (Supreme Court) Judgments

Supreme Court Judgment No. 13721/2557, in re:

Company A                            Plaintiff

Revenue Department           Defendant

Subject                                   Revenue recognition under accrual basis

The Plaintiff received gas compensation from the Electricity Generating Authority of Thailand (EGAT), despite the fact that the compensation was received during the experimentation process  of the electricity generators. Before the Plaintiff received the investment promotion the compensation was not considered as income from the business that the Plaintiff received from  promoting investment. However, such compensation is still considered to be the income from the Plaintiff’s business under Section 65 of the Revenue Code.

The sales contract for electricity between the Plaintiff and EGAT stipulated that during the experimentation stage of the electricity generators that EGAT shall remunerate the Plaintiff where the Plaintiff has had to pay for fuel from PTT Public Company Limited (PTT). The Plaintiff fuel purchase from PTT was recorded and amounted to 35,768,080.93 Thai Baht in B.E. 2542. The compensation received by the Plaintiff should be the exact amount  that it had paid to PTT in B.E. 2542. While the method and billing schedule that the Plaintiff mentioned as to the remuneration  from EGAT in 2543, the change of criteria for tax collection under Section 65 Para 2 of Revenue Code cannot be changed. As a result, the record of revenue recognition of the Plaintiff in B.E. 2542 was lower than the reality, so the assessment officer had the right to inform and change the compensation amount to be correct and avoid net loss for the Plaintiff.

Legal Opinion

Notably, the year the revenue recognition of gas compensation that the Plaintiff received from the EGAT was a vital point  In this case, Section 65 Para 2 of Revenue Code provides that in the calculation of income and expenses for juristic person, shall apply an accrual basis with respect  to income that increases within an accounting period, even though it is not yet received in  that accounting period, it shall be included as income for that accounting period.

From this principle, the accrual basis is defined as the right of claim that the other party pays should be certain  (compare to Judgment Dika No. 3543/2542 and No.4808/2546). We must consider the contract condition concerning the right of claims of the parties, particularly the condition of the sale contract that stipulates  that EGAT will pay the exact l cost incurred during the process of the experiment of electricity generators and, where the gas cost was incurred by the Plaintiff in B.E. 2542. Thus it shall be considered that the Plaintiff has the right to claim for gas compensation from EGAT whereby the Plaintiff should have received remuneration in B.E 2542, not B.E 2543 when the remuneration was actually received.

Mr. Taradol Chantarasap
Lawyer

Should you require any legal advice on tax in the workplace then please contact us at Dharmniti Law Office Co., Ltd. 2/2 Bhakdi Building 2^nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok, Tel : (66) 2680 9751, (66) 2680 9753 Email: budhimak@dlo.co.th or sureelukt@dlo.co.th