Tax Newsletter
Dharmniti Law Office Co., Ltd.
Issue No. 145, in August 2023
Tax Law Updates
1. The form for requesting a tax refund under the petroleum income tax law application
The Notification of the Director-General of the Revenue Department regarding Petroleum income tax (Issue No.7) stipulates the tax return form and the place to submit the tax return for petroleum income tax. The specified tax return forms are Form Kor. 10, which is the request for a tax refund, and Form P.NG.P.70, which is the statement of petroleum income tax. These forms are utilized specifically for requesting a refund of the tax.
For more details, please see https://bitly.ws/Vh8v
Tax News Updates
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Highlighted Supreme Court Judgment
Supreme Court Judgment No. 5605/2530
Between Mr. V. Plaintiff
and Company L. No. 1 and Revenue Department No. 2 Defendant
Subject: Severance pay upon termination
Disputed issue: Is severance pay provided by the employer to the employee considered as assessable income under the Thai Revenue Code?
Abbreviated judgment: Thai law provides that severance pay, provided by the employer to the employee (in the case of termination by the employer), is considered as assessable income under the Thai Revenue Code. The payment made by the Defendant No.1 to the Plaintiff, as ordered by the Labour Court, stems from the Plaintiff ‘s claim to recover a specific amount from Defendant No.1, as the Plaintiff ‘s employer. Therefore, Defendant No. 1 was obligated to provide severance pay to the Plaintiff upon the termination of his employment due to their legal relationship as employer and employee. This payment is considered as income derived from employment, which is deemed as assessable income in accordance with Section 40 (1) of the Thai Revenue Code. Despite the fact that severance pay is paid after the termination of employment, it remains categorized as assessable income and is not exempt from taxation in accordance with Section 42 of the Thai Revenue Code.
Therefore, the Defendant No.1, who is responsible for paying the severance pay according to the court order, is subject to withhold income tax and remit such tax to the tax authorities (Defendant No. 2) in accordance with Sections 50 and 3 Decem of the Thai Revenue Code. Thus, the Plaintiff has no right to claim the withheld tax money back under the complaint. The Central Tax Court’s judgment was affirmed and held to be valid given that the Plaintiff’s appeal was found to be unreasonable.
Legal opinion: I, the author am of the opinion that the interpretation of the law should consider both the letter of the law and the spirit of the law to reveal its true purpose. The relevant laws are as follows:
Section 39 of the Thai Revenue Code prescribes that “Assessable income means income that is taxable under this Chapter. Such income also includes a property or any other benefit received which may be computed into a monetary value …”
Section 40 prescribes that “Assessable income is income of the following categories …
(1) Income derived from employment … or any money, property or benefit derived from employment”.
Based on the abovementioned provisions, assessable income includes property or any other benefit received which may be computed into a monetary value that is derived from employment, which means a person, called the employee, agrees to render services to another person, called the employer, who agrees to pay remuneration for the duration of the services. (Section 575 of the Civil and Commercial Code).
It is evident that the Plaintiff was formerly employed by Defendant No. 1 and that his employment was terminated by Defendant No.1 (termination without fault). Thus, Defendant No. 1, as the employer, was required to provide severance pay to the employee in accordance with Section 118 of the Labor Protection Act, B.E. 2541.
Even though the Plaintiff received severance pay upon termination from Defendant No. 1, and the employment contract has ended, the reason why the Plaintiff received severance pay was due to his employment with Defendant No. 1 which gave him the right to claim such severance pay from his employer. Therefore, I agree with the Supreme Court’s decision which held that the severance pay received by the Plaintiff is deemed as income derived from employment in accordance with Section 40(1) of the Thai Revenue Code.
Furthermore, when considering the provisions regarding assessable income which shall be exempt from taxation in accordance with Section 42 of the Thai Revenue Code which prescribes that “The assessable income of the following categories shall be exempt for the purpose of income tax calculation…
(13) Compensation against wrongful acts …”
I would like to point out that based on the abovementioned provisions, the law provides an income tax calculation exemption for assessable income obtained as compensation for wrongful acts. However, the law does not provide an exemption for assessable income in the form of severance pay arising from termination of employment.
As per the facts, the Plaintiff was required to include their severance pay, which is considered as income derived from employment, when calculating their personal income tax in accordance with Sections 40(1) and 39 of the Thai Revenue Code. Thus, for the above reasons, the author agrees with the above judgment of the Supreme Court.
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 with respect to Thai tax law.
Author: Ms. Areeya Pechprapai
Translator: Mr. Raqsabhumi Chotmanodham
Dharmniti Law Office Co., Ltd. (DLO)
Address: 2/2 Bhakdi Building, 2nd Floor, Wireless Road, Lumpini Sub-district, Pathumwan District, Bangkok 10330
Tel: 0-2680-9753, 0-2680-9777
E-mail: areeyap@dlo.co.th
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