Tax Newsletter DECEMBER 2015

DLO’S Tax Newsletter

Issue 61 – December 2015

We wish you good health and fortune

All ventures thorough and complete

All things arise victorious

We wish you safe and free from harm

Budhima  Kerdsiri –  Author
Sam – Translator

Tax Law Update

To Specify Income Excluded from Tax Calculations

The Ministry of Finance has issued Ministerial Regulation (No.309) B.E. 2558 to stipulate that the share of profits derived from a non–registered ordinary partnership or a non–juristic body of persons, will be exempt for the purposes of income tax calculations:

1. Rent from a co-owned property, where the property was inhertied or gifted.
2. Interest on personal deposits which have been withheld; specifically, where a claim was not filed for the receipt of withholding tax or a tax credit that has been withheld.

This Ministerial Regulation will apply for assessable income from 2015.

For more details, please see: http://goo.gl/aPML9f

Criteria for Corporate Tax Benefits in the Special Economic Zone

Royal Decree (No. 591) B.E. 2558 reduces corporate tax rates for businesses operating in the Special Economic Development Zone (SEDZ).

In order to clarify matters and impose additional rules, the Director–General of the Revenue Department has issued Notification Regarding Income Tax (No. 262).  The inclusions are as follows:

1. Clarifying the meaning of “Special Economic Development Zone”, “Revenue from the production of goods”, “Revenue from services rendered”, and “Revenue from other business activity”.
2. From 10 September 2015 to 31 December 2017, person(s) seeking such benefits must inform  the Director–General of the Revenue Department, by submitting a request to the relevant Large Business Tax Administration Office or Revenue Office.
3. To be considered for corporate tax benefits, a request under No. 2 must include a business plan which provides the general details of the person(s) making the application, in addition to the details of the business.
4. Net profit and net loss calculations will be exercised in accordance with the rules prescribed in section 65, section 65 bis, and section 65 terof the Revenue Code.
5. For a juristic person(s) that conducts business in the SEDZ, which has revenue streams from more than one business that may or may not receive corporate tax benefits; where any net loss is accrued by any one business, the net loss must be retained by that business and cannot be included in the net profit and loss calculations of the other business.

Notification (No. 262) has been in effect since September 10, 2015.

For more details, please see: http://goo.gl/ye4WRR

Tax News

Tax Benefits in the Thailand-Chile Free Trade Agreement (FTA)

The Minister of Commerce announced that the Thailand-Chile FTA has been in force since November 5, 2015. The tax rate on 90 % of Thai and Chilean products and imported goods will be reduced to 0%. The tax rate on the remaining 10% of products and imported goods will be reduced to 0% within eight years.

For more details, please see: http://goo.gl/9nwR3Q

Reducing the Personal Income Tax Rate

Acting as the Chairman on Tax Reform, the Secretary of Finance announced that they had attended a meeting with the Revenue Department in order to reduce the personal income tax rate. These considerations should be concluded by December, 2015.

For more details, please see: http://goo.gl/7HYMxd

Revenue Collection Below Target

The Treasury Spokesperson announced that the Government had received a net profit of 165,304 million Baht in October 2015 – the first month of the 2015-2016 fiscal year – which was 1,212 million Baht or 0.7% lower than expected. The key reason given for this revenue drop was that revenue derived from withholding tax, corporate income tax, and tobacco tax were lower than forecasted.

For more details, please see: http://goo.gl/3djgMP

Interesting Dika (Supreme Court) Judgments

Dika (Supreme) Court Judgment No. 12846/2557, in re:

Rules for calculating the tax base of the sale of goods or the provision of services

Company O                               Plaintiff

The Revenue Department        Defendant

The plaintiff was assessed by the defendant in the December 2004 (B.E. 2547) and December 2006 (B.E. 2549) tax year, over whether the plaintiff had declared a false income statement for the sale of goods.

Section 79 of the Revenue Code stipulates that the tax base for the sale of goods is the total value received or receivable by business person(s).

Section 79/3 (1) of the Revenue Code stipulates that where goods are received with no consideration, or  consideration lower than market price without reasonable cause, the value of the tax base shall be the market price of the goods on the date the tax liability takes place.

The defendant claimed the applicable standard to set the tax base for the sale of goods of the plaintiff,  was to be no lower than the sum of a customs officer’s assessment of the value of the tax base on the imported goods, and the applicable import duty of the Customs Department. This method is an average price that has been calculated by statistically analyzing the collective value of the goods of every importer. This standard is a reasonable method to set a price of goods. Additionally, the plaintiff previously agreed to pay an import duty and Value Added Tax (VAT), where the plaintiff had been calculating VAT by using an input tax from this method. Therefore, the assessment is the closest that can be reasonably set to the market price. When the plaintiff failed to provide the Court with an alternative assessment, it must be considered that the sale of goods of the plaintiff was unreasonably lower than the market price.

Legal Opinion

The important issue to consider is  whether the calculation for the sale of used motor vehicles from the plaintiff’s import business was correct.

Section 79/3 (1) of the Revenue Code stipulates the market price of goods is calculated on the date the tax liability takes place. In this case, where there is no legally prescribed calculation of the market price, the alternative is to use a practical standard which the defendant has set (as mentioned above). Therefore, if the plaintiff sets a price lower than the market price, it can be assumed that the plaintiff’s sale of goods is lower than market price without reasonable cause, therefore a   customs officer has the authority to impose additional VAT. Moreover, where the sale of goods are lower than the market price without reasonable cause, a customs officer may increase the plaintiff’s income and corporate income tax pursuant to section 65 Bis (4) of the Revenue Code.

However, if the plaintiff can prove there was reasonable cause to set the price of goods below market value, the plaintiff may not be at fault. This  will be considered on a case-by-case basis.

A practical example is in the case of the sale of motor vehicles lower than market price because of an economic crisis. The company was the distributor and seller of one type of motor vehicle. The company had to sell cars for company liquidity. Therefore, the sale of goods lower than market price was reasonable (see Dika (Supreme) Court Judgment No. 5639/2550).

Mr. Taradol Chantarasap
Lawyer

Should you require any legal advice on tax law 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