Newsletter JUNE 2016

DLO’S Tax Newsletter

Issue 66 June 2016

Tax Law Update

Tax Exemption for Specific Business Tax and Duty for National Saving Funds (NSF)

Royal Decree (No. 605) and (No. 606) B.E. 2559 has stipulated that Specific Business Tax and Duty will be exempted for the business of NSF.

This exemption has been effective since May 12^th 2011.

For more details, please see: http://goo.gl/9kygt0 and http://goo.gl/Whabhc

Tax Benefit for SMEs for hiring students to work in an accounting field

Royal Decree (No. 607) B.E. 2559 has stipulated that companies or juristic partnerships registered under Thai law that have fixed assets (excluding land ) of less than 200 million Baht that have less than 200 employees, can deduct double their expenses for monies that are paid for hiring students to work in an accounting field. The students must be studying in an accounting educational institution course that has certified by the Ministry of Education .

However, this benefit is effective for such expenses that have been paid in the accounting period starting from January 1^st 2016 up until December 31^st 2018.

For more details, please see: http://goo.gl/Ev4qIS

Cancellation of Tax Exemption of Value Added Tax (VAT), Specific Business Tax(SBT) and Stamp Duty for Property Fund

Royal Decree (No. 239) and (No. 240) B.E. 2534 and Royal Decree (No. 10) B.E. 2500 previously provided an exemption on VAT, SBT and Stamp Duty for Property Funds for the purpose of fixing problems in financial institutions and their right of claims as set according to the law of Securities and Exchange. However, Royal Decree numbers 608, 609 and 610 B.E. 2559 have cancelled these exemptions effective from May 25^th 2017.

For more details, please see: http://goo.gl/yWgMmH, http://goo.gl/HfwKsF and http://goo.gl/z6U6g4

Tax Benefits for Seminars held in Thailand

Royal Decree (No. 611) B.E. 2559 and the Notification of the General – Director of Revenue Department (No. 267) has stipulated that expenses of a company or juristic person that are paid for seminar rooms, accommodation, transportation or other expenses regarding seminars provided for employees of the company or juristic person in Thailand, or expenses paid to tourism businesses according to the Law of Tourism Business and Guide Registration for Seminar, can double such deduction from their actual expenses as expenses to offset against their tax liability.

The expenses must be incurred between January 1^st, 2016 and December 31^st, 2016 and must comply with the criteria prescribed by the General – Director of the Revenue Department.

For more details see: http://goo.gl/rnPYOa and http://goo.gl/sQiIoO

Tax exemption for Specific Business Tax for International Headquarter Company

Royal Decree (No. 612) B.E. 2559 has amended Royal Decree (No. 586) B.E. 2558 by exempting special business tax for international headquarter companies which have income from administration of money for affiliated companies.

This exemption has been effective since May 2^nd, 2016 onwards.

For more details, please see http://goo.gl/zk7cJK and http://goo.gl/XSVzNm

Payment of Stamp Duty for Renting a Property and Hire of Works

The Notification of the General – Director of Revenue Department regarding Stamp Duty (No. 37) has been amended by the Notification of the General – Director of the Revenue Department regarding Stamp Duty (No. 54) by providing that rending a property and hire of works between private companies, which are valued at over 1 million Baht, must pay stamp duty in cash instead of affixing a duty stamp.

The Revenue Department has issued the Revenue Department Order No. Por.153/2559, which provides the criteria and practice guidelines for Revenue Officers regarding the abovementioned issue, and providing a sample to make it clear for all concerned.

For more details see: http://goo.gl/pAqJ9h

Tax News

National E-Payment Project

The Minister of Finance has announced that the conclusion of the National E-Payment project meeting is that income tax collection through E-payments will commence from October 2016 and will be applied to large businesses. However, for medium and small businesses, the E-Payment gateway will commence from 2017

For more detail please see: http://goo.gl/nkAbND

Tax exemption for the conveyance of the real estate to a child

The Cabinet has approved in principle a tax exemption for the conveyance of the real estate from a father to a child which will grant an exemption of 20 million Bath per person per year but such exemption shall not include cases where the conveyance is made to an adopted child.

In addition, the cabinet has endorsed tax incentives for donating to education technology support and foreigners filming in Thailand.

The above incentives shall be subject to the rules, procedures and conditions that are prescribed by the government.

For more details, please see http://goo.gl/H1wWd9

Cabinet amends the conditions for capital expense deductions

The cabinet has approved revised terms of capital expense deduction for assets in the “sector of equipment and large permanent building”. Previously, these assets must be acquired and available by the intended date of December 31 ^st, 2016, however these terms have been subsequently modified by not requiring such properties to be available by the intended date of December 31 ^st, 2016.

For more details, please see http://goo.gl/Jidh2i

According to the rules, procedures and conditions prescribed by the government.

Resubmission of the financial statements via the DBD e-Filling system.

The Department of Business Development (DBD), Ministry of Commerce has issued a notified that a juristic person who has submitted their financial statements for accounting period 2015 either in person or via mail must resubmit such financial statements via the DBD e-Filling system within June 30, 2016.

For more details, please see http://goo.gl/7a9ydL

Interesting Dika (Supreme Court) Judgment

Dika (Supreme) Court Judgment No. 15345/2558, in re:

Issue: The calculation of profit or loss for a project which has been granted a BOI Promotion Certificate.

M. Company                          Plaintiff

The Revenue Department    Defendant

The Plaintiff was granted a Board of Investment (BOI) promotion certificate under the Investment Promotion Act B.E.2520 between the accounting periods from 1 October 1986 to 30 September 1987 until 1 April 1998 to 31 March 1999 for a total of 44 promoted projects. The Plaintiff filed form PND 50 (regular submission) for such accounting periods and paid Corporate Income Tax (CIT) without exercising a tax benefit from the Investment Promotion Act because such tax benefit was complicated and unclear. At the end of the accounting period of 31 March 1999, the Plaintiff had represented a net loss carry forward for 5 accounting periods in the amount of 1,038,804,177 Bath.

On 29 November 2005, the Plaintiff filed form PND 50 (additional submission) for such accounting periods and exercised a revised net loss for the promoted projects under the Investment Promotion Act in each project to calculate net profit and net loss in order to pay the CIT for the year end in the accounting period of March 31, 1998 to March 31, 1999 by representing the revised net loss carried forward for 5 accounting periods in the amount of 4,532,611,630 Bath.

The Defendant had assessed CIT for the year end of the accounting period of March 31, 1998 to March 31, 1999 by including income and expenses of every promoted project arising from the same accounting period and when the net loss occurred, it would be carried forward for 5 years of accounting periods. The Board of Investment of Thailand and the Committees of the Council of State had identified that the loss of each project should be calculated for the net profit in order to pay CIT. Finally, this case was entered into the Court and the Central Tax Court issued an order to revoke the Defendant’s assessment.

The Supreme Court stated that the Investment Promotion Act and the Notification of the Board of Investment No.13/2541 did not prescribe the calculation method for profit and loss with respect to paying CIT. Therefore, the company, which was granted a promotion certificate, must be subject to the Revenue Code. When the Defendant contended that Section 65 of the Revenue Code be used for the purposes of calculating profit and loss of the Plaintiff by considering all of the promoted projects because they were the same entity, the defendant’s claim was found to be acceptable.

Legal Opinion

In addition to the benefits that the Plaintiff received under the Investment Promotion Act, the Plaintiff also received rights to apply annual losses of the project, which were granted on the promotion certificate, which occurred between the periods when it received Investment Promotion, to deduct the net profit arising after the period of exemption on CIT. However it would be carried forward for 5 years of accounting periods starting from the due date of receiving the exemption on CIT in accordance with Section 31 of the Investment Promotion Act.

When the Plaintiff’s promoted projects reached the due date, the Plaintiff applied the loss of each promoted project to calculate the net profit in order to pay CIT in the year end period of March 31, 1998 – March 31, 1999. The Supreme Court identified that the Plaintiff was a company which was considered as a single legal entity, with 44 promoted projects, and therefore must include net profit or net loss. If a net loss had occurred, then it would be calculated along with the net profit in order to determine CIT liability for the company.

With respect to the Supreme Court’s ruling, I the writer have the following different points of view::

Remark I The Investment Promotion Act provides benefits to specific promoted projects but this does not mean when a juristic person receives Investment Promotion it should receive such benefit across all of its business. In the writers opinion this Act aims to provide benefits to the promoted project but not for the juristic person. Thus, in the case the Supreme Court decided that the promoted juristic person had to include the profit and loss from every promoted project before calculating CIT liability, which in the writers view would be in conflict with the main objective of the Investment Promotion Act.

Remark II If the promoted company has to calculate the net profit arising from every promoted project} this seems to be unjust to companies obtaining one promoted project with respect to tax benefit. In this regard, promoted companies that obtain one promoted project are entitled to entirely deduct their incurred losses during promoted period, whilst on the other hand promoted companies that obtain more than one promoted project must calculate their profit and loss by deducting their profit and loss which arises in other promoted projects.

Remark III In the event of calculating profit or loss arising from every promoted project, if the promoted projects are not terminated at the same time, it would raise the question as to how to calculate profit or loss arising from every promoted projects where some promoted projects had already been terminated.

Remark IV The Investment Promotion Policy provides rights to a taxpayer to deduct losses arising during the period that they receive investment promotion after the promotion period has been terminated. Furthermore, it intentionally provides tax benefits to promoted companies and also provides benefits to projects that would be advantageous for developing technology and new innovations in Thailand. The objective is to persuade foreign investors to increase their foreign direct investment in Thailand so that national industries can improve and develop. Thus, when the Supreme Court delivered its judgment which deprived the taxpayer’s of available benefits under the Investment Promotion Act the writer is of the view that it will likely result in foreign investors deciding not invest in Thailand or to move their investment to other countries and this would cause significant damage to Thailand in the future.

Furthermore, the Supreme Court’s judgment seems to diminish the credibility of the Board of Investment and the Committee of Council of State which are considered as the government agencies which identify what losses promoted companies were able to deduct each promoted project. Hence, this judgment of the Supreme Court could undermine the confidence of applicants which receive investment promotion as they may consider that the Board of Investment and the Council of State’s decisions can be overturned by the Courts.

However, the Writer would like to recommend that the Revenue Department and the Board of Investment should work together to jointly prescribe the criteria or guidelines regarding the calculation of profit or loss for promoted projects, which are granted a promotion certificate, so that both bodies are consistent and moving in the same direction. This approach would not only increase the credibility of both government agencies but would help to instill confidence with foreign investors which have or will apply for investment promotion under the Investment Promotion Act.

Mr. Ratchasak Kunkanya
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