Tax Newsletter JULY 2016

DLO’S Tax Newsletter

Issue 67 July 2016

Tax Law Update

Value Added Tax Exemption for Importers Importing Concept Cars or Concept Motorbikes

Royal Decree (No.613) B.E.2559 provides an exemption for value added tax (VAT) for importers, who are researchers, developers or vehicle testers approved by the Director – General of the Excise Department, which import concept cars or concept motorbikes for the purpose of researching, developing or testing vehicles provided that they are granted an excise tax exemption under the Excise Law.

This Royal Decree has been effective since January 1, 2016.

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

The Criteria for Exemption Income for Expenses in Songkran Festival

In accordance with Ministerial Regulation No. 315 (B.E.2559) which provides an income tax exemption, in cases where a person spends money on food and beverages, and pays such money to a tourism business or hotel in connection with traveling in Thailand in the period of April 9 – 17, 2016, Such actual expenses are able to be applied as an allowance when calculating personal income tax, but shall allowance must not exceed 15,000 Baht.

The Director – General of the Revenue Department has issued the Notification of Director – General of Revenue Department regarding income tax (No. 268), in order to impose certain criteria and conditions with respect to such income tax exemption for a taxpayer who is a natural person, these criteria are as follows:

1. For an individual: the exemption cannot exceed 15,000 Baht.

2. For spouses:

–    For a husband or wife who has assessable income: the exemption cannot exceed 15,000 Baht.

–    For both husband and wife who have assessable income: exemption cannot exceed 15,000 Baht/Person.

3. The taxpayer must not deduct input tax (in accordance with the tax invoice) with output tax (in calculating VAT).

The above criteria have been effective since April 9, 2016.

For more details, please see: http://goo.gl/j3Nt2l, http://goo.gl/yQdL9i and https://goo.gl/4gwcZD

The Extension Period of Personal Income Tax Exemption for Traveling in Thailand

Ministerial Regulation No. 316 (B.E.2559) provides an extension period for the personal income tax exemption on actual expenses relating to services or accommodation in connection with traveling in Thailand, but such expenses cannot exceed 15,000 Baht, and must be incurred between January 1, 2016 to December 31, 2016 (the previous Ministerial Regulation provided that the period ended on December 31, 2015)

The exemption must comply with certain criteria, methods and conditions as notified by the Director – General of Revenue Department.

For more details, please see: http://goo.gl/UVlwLW and http://goo.gl/ekNtte

Extension of Time in Filing the Corporate Tax Returns for the Promoted Projects Companies

The Notification of the Ministry of Finance dated June 16, 2016 provides an extension of time in filing corporate tax returns and in claiming a tax refund for companies and juristic partnerships that have been granted Board of Investment (BOI) investment promotion  privileges on more than one project and who have filed tax returns and have paid corporate income tax, incorrectly because they have not included income and expense from all projects derived within the same accounting period in the computation of finding the net profits and losses of business granted BOI investment promotion (BOI) privileges.

The companies and juristic partnerships are entitled to file their corporate tax returns within June 15, 2016 to August 1, 2016 and shall not be subject to paying a fine and surcharge. If the companies and juristic partnerships have already appealed the above mentioned issue to the Commission of Appeal or to the Court, the companies and juristic partnerships must withdraw their appeal or the case in order to be entitled to take advantage of this Notification.

If the companies and juristic partnerships have already paid their corporate tax, fine and/or surcharge but the time for claiming their tax refund is overdue according to the Section 27 Ter of the Revenue Code, then the permitted time in claiming such fine and surcharge shall be extended until August 1, 2016.

For more details, please see  http://goo.gl/Rdhgg7

Revenue Department (RD) warning to companies that have registered a single account system with the RD that have yet to file corporate tax return (P.N.D. 50) within the deadline

The Revenue Department has issued Explanation (No.5) dated June 22, 2016 to notify companies that have registered for the single account system, which have not yet filed corporate tax returns (P.N.D. 50) in relation to2015 within the prescribed deadline, that they must  take the following action:

1. If a company has its accounting period ending on December 31, 2016, the company must file its corporate tax returns (form P.N.D. 50) within August 31, 2016 and pay applicable taxes, surcharges and fines according to the law; or
2. If a company has its accounting period beginning  after January 1, 2015 but not after December 31, 2015, the company must file its corporate tax returns (form P.N.D. 50) within the prescribed time for filing the corporate tax returns (form P.N.D. 51) within the next accounting period and pay applicable taxes, surcharges and fines according to the law.

If a company fails to file its corporate tax returns (form P.N.D. 50) within the abovementioned prescribed time, the General – Director of Revenue Department has the authority to revoke the company’s rights which is to be exempt from tax examination and to conduct a tax investigation/audit according to the Royal Act, moreover the RD has the authority to apply a retrospective tax assessment on the accounting period starting before January 1, 2016.

For more details, please see http://goo.gl/X1zudV

Tax News

Reducing Taxes and Fees to Promote Investment in Real Estate through Trust

The Thai Cabinet has issued a draft of a Ministerial Regulation which proposes to reduce taxes and fees to provide incentives for investment in real estate through Trusts. The draft Ministerial Regulation aims to achieve this by reducing registration fees for juristic acts in relation to real estate and condominium, from 2 percent to 0.01 percent, however such fees shall not exceed THB 100,000. This reduction in fees is proposed to apply to the following cases:

1. For general real estate

1.1) The conversion of a property fund into a trust division; and

1.2) The replacement of the trustee.

2. For condominiums

2.1) The conversion of a property fund into a trust division; and

2.2) The replacement of the trustee.

For more details, please see http://goo.gl/ye0XJZ

Government will not increase VAT, the Ministry of Finance is studying the tax incentives relating to hiring elderly and retired persons

Mr. Somkid Jatusripitak, the Deputy of Prime Ministry of Thailand has stated that the Government will not increase the Value Added Tax (VAT) from its current rate of 7 percent, after its current temporary reduction expires at the end of September 2016. Mr. Somkid noted that even through Thailand’s economic trend is improving; it is not a suitable time to increase the rate of VAT.

With regard to the Social Sustainability Policy, the Government has assigned the Ministry of Finance to study tax incentives to encourage the employment of elderly and retired persons. The incentives will aim to persuade a private company to employ these types of individuals by providing them with a tax benefit. The proposed incentives will be released in the near future.

For more details, please see http://goo.gl/0zxl2r

Interesting Dika (Supreme Court) Judgment

Dika (Supreme) Court Judgment No. 15100/2558, in re:

T. Company                                                  Plaintiff

The Revenue Department                           Defendant

Issue: Income tax calculation for using the accumulated deficit from a business granted an income tax exemption (from the BOI) and net losses from the business granted such income tax reduction.

In regards to the Investment Promotion Act B.E.2520 it does not prescribe the calculation method for net profit or net loss on paying corporate income tax (CIT) for  companies which operate both Board of Investment (BOI) promoted projects and non-BOI promoted projects, and for companies which operate only the BOI promoted projects. Therefore, the calculation of net profit and net loss in relation to paying applicable CIT must be subject to the Revenue Code.

The Plaintiff showed that an accumulated deficit occurred from a project that was granted a CIT exemption for the accounting period 1997 in the amount of 1,558 Million Baht. In this regard, the Plaintiff was entitled to carry forward such deficit to the project that was granted the CIT reduction and the taxable project for the accounting periods 1998 to 2002. Therefore, after deducting the profit as of the accounting period in 1998, the Plaintiff had an accumulated deficit of 925 Million Baht for the project granted a CIT exemption.

In the 2002 accounting period which is the last year that the Plaintiff was granted a CIT reduction, the Plaintiff had profit of 529 Million Baht. From the previous accounting periods running from 1999 to 2001, the Plaintiff’s project (that was a granted CIT reduction) showed losses of 17 Million Baht, 343 Million Baht and 6 Million Baht respectively. In this regard, firstly the Plaintiff must carry forward the incurred losses from the project granted CIT reduction from the accounting periods 1999 to 2001 respectively, afterwards the Plaintiff is entitled to carry forward the accumulated incurred deficit from the project granted CIT reduction in the accounting period 1997, in relation to the remaining amount of 925 Million Baht. Therefore, in the 2002 accounting period, the Plaintiff’s project (which was granted a CIT reduction) had no profit, and still had an accumulated deficit of 762 Million Baht.

Additionally, as a result of deducting the remaining accumulated deficit of 762 Million Baht from the profit derived from the taxable project in the 2002 accounting periodin the amount of 342 Million Baht, the taxable project had no profit in the 2002 accounting period and had an accumulated deficit remaining in the amount of 420 Million Baht. Nevertheless, the Plaintiff was not entitled to carry forward the remaining accumulated deficit in the 1997 accounting period 1997 because it exceed five years since the date it was granted the CIT exemption according to section 31 (4^th para) of the Investment Promotion Act B.E.2520.

Legal Opinion

From the above Supreme Court judgment, there are issues to consider relating to whether the plaintiff can choose to deduct the net loss carried from the business granted income tax exemption (a promoted business from the Boards of Investment: BOI) before net loss from a business granted an income tax reduction (a business that has been promoted from the Board of Investment: BOI) or not. Moreover, what if the business deducts a net loss from a business granted income tax reductions that should have been paid in another accounting period but have paid in the wrong accounting period?

In this case, the plaintiff had a net loss carried from a business granted an income tax exemption and a net loss from a business granted income tax reduction for a 5 year period from a BOI promoted business which is only tax benefits after the expiration of the period of promotion of business; it is not a method of tax calculation. When the plaintiff has to calculate profit or loss in the period that is no longer subject to BOI, it must follow the rules of the Revenue Code because the Investment Promotion Act B.E. 2520 has not yet stipulated any rules in relation to tax calculation.

Whereas, Section 31 fourth paragraph of the Investment Promotion Act B.E. 2520 permits a promoted company to deduct net losses carried from the promoted business for a period of not more than five years from the expiry date of the promotion by choosing to deduct such loss from the net profit of any one year or several years. This means that if the business has a net loss carried, it can deduct it from net profit until there is no net losses in the 5 year period after the expiration of the promotion period of the business. This Act has not stipulated a specific method for tax calculation but it is only a benefit that is received after the expiration of the promotion period. Therefore, to deduct an expense of a juristic person; it must deduct such net loss from the non-promoted business that has been calculated by the rules as prescribed in the Revenue Code; then, if net profit remains, it can deduct such benefit from net loss carried from the promoted business.

Nevertheless, Section 65 Ter (12) of the Revenue Code has stipulated that net losses from previous accounting periods cannot be deducted as an expense except net losses carried forward for 5 years up to the present accounting period which means that if the business has a net loss, it can deduct such net loss carried for 5 year since its first net loss. Furthermore, Sections 65 and 65 Ter (9) provide that an expense that should have been paid in another accounting period cannot be deducted in the present accounting period except in those cases when it cannot be entered into any accounting period, then it maybe entered into the following accounting period.

According to the above law, it shall conclude that if the business has a net loss in an accounting period and its business also has a net loss in the following accounting period, it cannot deduct such net loss in the following accounting period because there has be no net profit to deduct it from but such net loss can be carried of not more than 5 years. Besides, if it has net profit in the next accounting period, it must deduct such net loss in the next accounting period because the Revenue Code stipulates that to calculate tax under Sections 65 Bis and 65 Ter.

Therefore, if the business did not deduct the net loss in an accounting period that first has a net profit; it means that the business did not deduct such net loss in the right accounting period that should have paid first. Hence, it cannot deduct such net loss in the next following accounting period anymore. Moreover, please note that Supreme Court Judgment No. 3185/2522 provides a similar judgment to that delivered second issue in this case.

Ms. Chatwalee Maitri
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 chatwaleem@dlo.co.th