Tax Newsletter JULY 2023

 Tax Newsletter

Dharmniti Law Office Co., Ltd.

Issue No. 144, in July 2023

Tax Law Updates

     1. Income tax exemption for unitholders in property funds and an exemption for value-added tax, specific business tax and stamp duty for property funds

     Royal Decree (Issue No. 763) B.E. 2566 stipulates an income tax exemption for unitholders in property funds as well as exemptions relating to value-added tax, specific business tax, and stamp duty for such funds. This exemption applies to the value of tax bases, income, or instruments arising from the conversion of property funds into trust funds, effective from 2 June 2023 (the date that the Royal Decree was enforced) up until 31 December 2024.

     For more details, please see https://bitly.ws/UdNv

     2. Income tax exemption for the Islamic Bank Asset Management Company Limited

     Royal Decree (Issue No. 764) B.E. 2566 provides for an income tax exemption for the Islamic Bank Asset Management Company Limited with respect to income derived from the government as a subsidy for support offset principal, interest, actual cost, and reserves for operations that exceed annual revenues, starting from 2 June 2023.

     For more details, please see https://bitly.ws/UdQs

     3. Corporate income tax exemption for asset management companies

     Royal Decree (Issue No. 765) B.E. 2566 provides for a corporate income tax exemption for asset management companies with respect to net profits derived from the management of non-performing loans (NPLs) purchased or transferred from financial institutions. Additionally, the Decree also provides for an income tax exemption in an amount that is equal to the portion of the provision for bad debts or the allowance for doubtful debts that the asset management company recorded in its balance sheet for the prior accounting period. The above exemptions only apply to asset management companies where the Ministry of Finance holds shares in them. This Decree applies to accounting periods starting on or after 1 January 2022. The effective date of this Decree is 2 June 2023.

     For more details, please see https://bitly.ws/UdTL

     4. Corporate income tax exemption for companies or juristic partnerships paid for e-Tax invoices or e-Receipt systems and e-Tax remittance systems

     Royal Decree (Issue No. 766) B.E. 2566 provides for a corporate income tax exemption for companies or juristic partnerships regarding expenses relating to the development of e-Tax invoices or e-Receipt systems and e-Tax remittance systems, provided that such expenses are incurred within 1 January 2023 to 31 December 2025.

For more details, please see https://bitly.ws/UdVg

     5. Specific business tax exemption for Government Cold Storage Organization business

     Royal Decree (Issue No. 767) B.E. 2566 stipulates that the Government Cold Storage Organization business is a business that shall be exempt from specific business tax. This exemption is exclusively applicable to the transfer of property rights in land used to repay the debts owed to the Ministry of Finance, starting from 28 February 2023.

For more details, please see https://bitly.ws/UdXr

     6. The criteria and procedures for the issuance, delivery, and storage of e-Tax invoices or e-Receipts using the electronic certificate for the electronic signature

     Revenue Department has issued regulations on the issuance, delivery, and storage of e-Tax invoices or e-Receipts using electronic certificates containing electronic signatures. These regulations impose criteria and procedures on the issuance, delivery, and storage of e-Tax invoices or e-Receipts using electronic certificates and electronic signatures. The purpose of these regulations is to ensure that VAT registrants and persons liable to issue e-Receipts and related persons can perform the abovementioned to comply with Ministerial Regulation No. 384 B.E. 2565.

     For more details, please see https://bitly.ws/UdZo

     7. The criteria, procedures, and conditions regarding the exemption of corporate income tax on investments in electronic data preparation systems

     The Notification of the Director-General of the Revenue Department regarding income tax (Issue No. 435) sets out the criteria, procedures, and conditions for a corporate income tax exemption on investments in electronic data preparation systems, electronic data receiving systems and tax submission systems, as well as service fees paid for electronic data preparation service providers, electronic data remittance service providers and tax remittance service providers. This Notification stipulates the criteria, procedures and conditions applicable to the corporate income tax exemption on income equivalent to expenses incurred for investments in electronic data organization systems. This Notification is effective from 1 January 2023.

     For more details, please see https://bitly.ws/PRkJ

Tax News Updates

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Highlighted Supreme Court Judgment

Supreme Court Judgment No. 7952/2551

Between                       Mr. P. No.1, Mr. T No. 2               Plaintiff

and                           Revenue Department                    Defendant

Subject: Sale of immovable property at a price which is lower than its assessed price

Disputed issue: Is the assessed price for collecting registration and juristic acts fees under the Land Code, which the assessment official used when calculating the specific business tax base for the Plaintiff, in compliance with the law?

Abbreviated judgment: Section 91/5 (6) of the Thai Revenue Code stipulates that the tax base for the sale of immovable property business in a commercial or profitable manner is the gross receipts before deduction of any expenses. If there is no compensation payable for the property transfer or if it is charged at a price that is lower than the market price without reasonable justification, then the assessment official shall have the power to determine the property’s value using the market price on the date of the property transfer under Section 91/16 (6) of the Thai Revenue Code.

     In this case, both Plaintiffs entered into a land purchase agreement and received payment according to the agreement in the amount of 7,000,000 Baht. However, the assessed price for collecting registration and juristic acts fees under the Land Code, which is the value used on the date of transfer was 12,629,200 Baht. Furthermore, both Plaintiffs gave their consent by signing the tax payment statement, authorizing the land officer to deduct personal income tax and stamp duty. Both Plaintiffs certified that the property capital used for calculating personal income tax and stamp duty amounted to 12,629,200 Baht.

     Both Plaintiffs failed to provide evidence demonstrating that adjacent land plots had lower prices than the assessed value. Therefore, it was considered that the 7,000,000 Baht sale price of the disputed land was lower than the market price and that selling at such lower price lacked reasonable cause. Therefore, the Supreme Court held that use of the assessed property value by the assessment official to collect rights and juristic acts registration fees under the Land Code, totaling 12,629,200 Baht, as the specific business tax base for both Plaintiffs was lawful. The Supreme Court ruled that the lower Court’s judgment was affirmed and held to be valid.

Legal opinion: I, the author am of the opinion that Section 91/16 (6) of the Thai Revenue Code is the provision which allows the assessment official to determine the price of a property on the basis of the market price on the date of the property transfer, especially when it is lower than the market price without reasonable cause being given. Market price, in this context, refers to the price of goods or services actually existing at any one moment.

     In this case both Plaintiffs failed to trace nearby land plots sold at lower prices than the assessed value for collecting registration and juristic acts fees under the Land Code during the same period and they also failed to prove that the price of the disputed land reflected the true prevailing market price, commonly referred to as the “market price”. Thus, in my opinion, in such case the assessment official shall have the power to determine the property’s value using the market price for collecting registration and juristic acts fees under the Land Code. This assessed price is considered closely aligned with the market price and serves as the tax basis for assessing specific business taxes for both Plaintiffs.

     Thus, for the above reasons, if both Plaintiffs could have provided evidence that other adjacent land plots during the same period had a price lower than the assessed price for collecting registration and juristic acts fees under the Land Code, or if they could have proved that the 7,000,000 Baht disputed land was the market price at the time of the transfer, then they may have been able to win the appeal. Indeed, in cases of this nature such evidence can significantly affect the outcome of the Court’s judgment, as stated in the Supreme Court’s judgment no. 10443/2550.

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. Munja Boonchuay

Translator: Ms. Nutthanicha Sricharoenvanichakul

Dharmniti Law Office Co., Ltd. (DLO)

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