Tax Newsletter
Dharmniti Law Office Co., Ltd.
Issue No. 138, in January 2023
Tax Law Updates
1. The criteria, procedures, and conditions regarding the exemption of assessable income paid for domestic training and seminars, and tourist areas for the domestic training and seminars in addition to secondary tourism provinces;
2. The criteria, procedures, and conditions regarding the exemption of assessable income paid for space rental or service fees for participating in trade fairs, exhibitions, or trade shows in Thailand;
3. Additional specifications regarding the location for receiving tax refunds and processing tax payments in accordance with the Thai Revenue Code;
4. The criteria, procedures, and conditions regarding the exemption for businesses of social enterprises and persons supporting the business activities of social enterprises;
5. Tax measures in the year 2023 “Shop Dee Mee Kuen”.
Tax News Updates
1. Tax measures for supporting education;
2. The tax exemption for supporting climate change solutions;
3. The exemption of specific business tax for the Office of SMEs Promotion (OSMEP) on providing loans under the subsidiary SMEs support program through the Small and Medium Enterprise Development Fund.
Highlighted Supreme Court Judgment
Supreme Court Judgment No. 11271/2555
Between Company K. Plaintiff
and Revenue Department Defendant
Subject: Entering into a surety contract with a financial institution for affiliated companies
Tax Law Updates
1. The criteria, procedures, and conditions regarding the exemption of assessable income paid for domestic training and seminars, and tourist areas for the domestic training and seminars in addition to secondary tourism provinces
The Notification of the Director-General of the Revenue Department (Issue No. 429) stipulates the criteria, procedures, and conditions regarding the exemption of assessable income paid for domestic training and seminars held within 15 July 2022 to 31 December 2022, and eligible tourist areas for such domestic training and seminars including eligible secondary tourism provinces as prescribed by the Royal Decree (Issue No. 757).
In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.
For more details, please see https://bit.ly/3k9rPsO
2. The criteria, procedures, and conditions regarding the exemption of assessable income paid for space rental or service fees for participating in trade fairs, exhibitions, or trade shows in Thailand
The Notification of the Director-General of the Revenue Department regarding income tax (Issue No. 430) stipulates the criteria, procedures, and expenses paid for space rental or service fees for participating in trade fairs, exhibitions, or trade shows in Thailand. To be eligible, the event must be held and the payment made within 15 July to 31 December 2022. However, a juristic person claiming such exemption is required to secure and keep a certificate issued by the organizer of the event.
In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.
For more details, please see https://bit.ly/3SfSqRO
3. Additional specifications regarding the location for receiving tax refunds and processing tax payments in accordance with the Thai Revenue Code
Revenue Departmental Order No. Tor. Por 349/2565 stipulates an additional location, the Satun Area Revenue Office, for the acceptance of tax refunds and payments.
In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.
For more details, please see https://bit.ly/3SehMiO
4. The criteria, procedures, and conditions regarding the exemption for businesses of social enterprises and persons supporting the business activities of social enterprises
The Notification of the Director-General of the Revenue Department (Issue No. 47) stipulates the criteria, procedures, and additional conditions regarding tax exemptions applicable to social enterprises and persons who support the business activities of approved social enterprises according to the Notification of the Director-General of the Revenue Department (Issue No. 38).
In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.
For more details, please see https://bit.ly/3El44om
5. Tax measures in the year 2023 “Shop Dee Mee Kuen”
Ministerial Regulation (Issue No. 386) (B.E. 2565) stipulates the personal income tax exemption used for the purchase of goods or services in Thailand from 1 January 2023 to 15 February 2023. This exemption applies to purchases of goods or services from businesses that issue tax invoices (for VAT registrants) or receipts (for non-VAT registrants) in accordance with Section 105 of the Thai Revenue Code.
The above exemption shall be the actual amount spent provided that it does not exceed 30,000 Baht of costs paid for certain goods or services (whether in the form of a paper or e-Tax invoice, or e-Receipt). Furthermore, in relation to purchases of goods or services ranging from 30,001 to 40,000 Baht, these shall be exempted only if such tax invoices or receipts are issued through the e-system.
In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.
For more details, please see https://bit.ly/3k3QH5q
Tax news
1. Tax measures for supporting education
On 27 December 2022, the Cabinet passed a resolution approving an income tax, value-added tax, specific business tax, and stamp duty exemptions for natural persons, companies, or juristic partnerships who donate money to educational institutions. The resolution further provides that eligible tax deductions shall be entitled to a tax deduction equivalent to double the amount of money donated provided that such donation is done via the e-Donation channel of the Revenue Department from 1 January 2023 to 31 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/3IbvX3z
2. The tax exemption for supporting climate change solutions
On 27 December 2022, the Cabinet passed a resolution approving the following criteria related to climate change:
1) Extension of the corporate income tax exemption on net income derived from the sale of carbon credits in Thailand under the Thailand Voluntary Emission Reduction Program from the date that the Royal Decree is enforced until 31 December 2027.
2) Additional specification of details applicable to the tax exemption for natural persons and an extension of the eligible period applicable to the tax exemption for companies or juristic partnerships regarding income derived from the e-Donation channel to the Royal Forest Department to support the Ministry of Natural Resources and Environment’s project on the Creation of Community Forests and the Reduction in Global Warming from 1 January 2023 to 31 December 2027.
In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.
For more details, please see https://bit.ly/3IbvX3z
3. The exemption of specific business tax for the Office of SMEs Promotion (OSMEP) on providing loans under the subsidiary SMEs support program through the Small and Medium Enterprise Development Fund
On 27 December 2022, the Cabinet passed a resolution approving the draft Royal Decree which granted a tax exemption to businesses under OSMEP. Specifically, income derived by such businesses from lending in the subsidiary SMEs support program through the Small and Medium Enterprise Development Fund, as prescribed by the Cabinet Resolution dated 1 September 2019, shall be deemed as exempted from specific business tax from 1 September 2020 (the date that the program starts having its interest receivable).
In this regard, it shall be subject to the criteria, procedures, and conditions stipulated by law.
For more details, please see https://bit.ly/3IbvX3z
Highlighted Supreme Court Judgment
Supreme Court Judgment No. 11271/2555
Between Company K. Plaintiff
and Revenue Department Defendant
Subject: Entering into a surety contract with a financial institution for affiliated companies
Disputed issue: Is a surety contract entered into by the Plaintiff with a financial institution for affiliated companies to be considered as a business with regular transactions similar to commercial banks, which is subject to specific business tax (“SBT”) in accordance with Section 91/2(5) of the Thai Revenue Code?
Facts: The Plaintiff operated its business relating to the production, export, and distribution of printed circuit boards (PCB), telecommunication tools, and various electronic tools. Furthermore, the Plaintiff held 43.9 percent of the shares in Company A. Additionally, Company AP held more than 90 percent of the shares in Company A. The Plaintiff entered into a surety contract with both companies, permitting them to utilize the loan as capital for their operations. However, the Plaintiff had exclusively entered into this surety contract with these two specific companies, without making similar agreements with any other entities. Furthermore, the Plaintiff did not charge any surety fees from either of these two companies.
Abbreviated judgment: The Supreme Court found that the Plaintiff’s objectives in clause 25 of its affidavit of company registration provided that it could engage in “suretyship and operating in a business involving suretyship services; assuming liability or fulfilling contractual performance for individuals or other juristic persons, with or without collateral or security; providing suretyships and engaging in suretyship services for individuals intending to enter or leave Thailand in compliance with the law governing immigrants; providing suretyships for foreigners involved in business, tax law compliance, labor law adherence, and other legal matters; providing bail to accused in criminal cases and defendants in court proceedings; providing surety for individuals or assets to authorized officers in compliance with relevant laws.” Thus, these objectives were deemed normal objectives for the Plaintiff, necessitating a case-by-case assessment of the Plaintiff’s transactions.
Even though the Plaintiff entered into numerous surety contracts for affiliated companies, involving substantial amounts, no fees were collected by the Plaintiff for providing these sureties. The primary objective behind these surety contracts was to facilitate loans for the affiliated companies from commercial banks. This action constituted an inter-corporate transaction where gains or losses were shared exclusively among the corporate entities.
The Court noted that the Plaintiff had to allocate funds to financial institutions as per the surety contract for the collapsed affiliated companies, allowing the deduction of the aforementioned surety amount as bad debts for net profit calculations. However, the aforementioned case is a matter of corporate income tax, which is not related to SBT.
Based on the facts, The Supreme Court held that the surety contract entered into by the Plaintiff with its affiliated companies did not constitute a business with regular transactions similar to commercial banks, which would be subject to SBT in accordance with Section 91/2(5) of the Thai Revenue Code.
Legal Opinion: I, the author am of the opinion that the Plaintiff had not previously been involved in the business of providing suretyship to other individuals or entities in commerce, and that this act of providing surety for its affiliated companies was a one-time occurrence.
Based on the facts, there is a key issue as to whether the surety contracts entered into by the Plaintiff with its affiliated companies under terms and conditions set by a financial institution should be considered as a business with regular transactions similar to commercial banks, which is subject to SBT in accordance with Section 91/2(5) of the Thai Revenue Code. Deciding this issue requires an analysis of the potential benefits earned by the Plaintiff from charging fees or assessing compensation, such as interest or other advantages from executing such contracts, and whether this resembles the typical operations of a commercial bank or not.
As per clause 25 of the Plaintiff’s objectives, as stated in its affidavit of company registration, it can engage in suretyship and operating a business involving suretyship services and because of this it could be deemed that the Plaintiff operated its business with regular transactions similar to those of commercial banks. However, the Plaintiff did not charge any surety fees from its affiliated companies and only provided sureties exclusively to both affiliated companies, thus such surety by the Plaintiff is not considered as the actions of a company that operates its business with regular transactions that are similar to those of commercial banks in accordance with Section 91/2(5) of the Thai Revenue Code, which in turn shall be subject to SBT. Thus, for the above reasons, I the author agree 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: Mr. Supachai Sangmongkol
Translator: Ms. Nutthanicha Sricharoenvanichakul
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
Email: Rattawutc@dlo.co.th
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