Tax Newsletter AUGUST 2018

DLO’s Tax Newsletter

                                                                                                                                                                                                                                                                    Issue 92 August 2018

Inside this Issue

Tax Laws Update

1. Amendment of the regulation regarding the exemption for the purpose of income tax calculation on interest derived from savings deposits held with a bank in Thailand.

2. Regulation regarding the deduction of assessable income of government officers and employees of the Government in order to repay debts to the Student Loan Fund.

3. Regulation regarding adding additional specific areas apart from second-tier tourism provinces of Thailand in order to receive tax benefits from holding training seminars and for tourism and accommodation.

Tax News

1. Draft Royal Decree issued under the Revenue Code regarding Value Added Tax rate reduction (No. …) BE …. to extend the period of Value Added Tax rate reduction.

2. Draft Royal Decree issued under the Revenue Code (No…) BE …. regarding tax measures to relieve the effects of increased minimum wage.

3. Draft Bill amendment to the Revenue Code (No…) BE …. regarding Value Added Tax from e-Business entrepreneurs based overseas.

Interesting Deka

Dika                   (Supreme Court Judgment) No. 1104/2561, in re:

Between            Company Hor.                                       Plaintiff

Revenue Department                              Defendant

Issue :               Prohibition on a person who is not a VAT registrant or a person authorized to issue tax invoices to issue tax invoices under Section 86/13 of the Revenue Code.

Tax Laws Update

1. Amendment of the regulation regarding the exemption for the purpose of income tax calculation on interest derived from savings deposits held with a bank in Thailand.

The Ministerial Regulation No. 339 (B.E.2561) has amended Clause 2 (38) of Ministerial Regulation No. 126 (B.E.2509) by providing an additional exemption on interest and returns on savings deposits held with a bank in Thailand. The eligible exemption must be the return on a savings deposit held under the religion of Islam, whereby the bank undertakes to return the deposit intact as and when the customer demands in accordance with the principle of Wadiah (Safe Custody) between 2003 (B.E. 2546) and the tax filing, which had the return of the savings deposit in the tax calculation, which must be submitted from 2004 (B.E. 2547) onwards, however, the exemption shall not exceed 20,000 baht per tax year.

For more details, please see: https://bit.ly/2NIln65

2. Regulation regarding the deduction of assessable income of government officers and employees of the Government in order to repay debts to the Student Loan Fund.

The Notification of the Director-General of Revenue Department dated July 19, 2018 provides that a Ministry, Sub-Ministry, Department or other government sectors according to the law of Reorganization of Ministry, Sub-Ministry and Department who is a payer of assessable income under Section 40 (1) of the Revenue Code must deduct the assessable income of the government employee and permanent employee that is a subordinate to the payer; where such  employee has borrowed money from the Student Loan Fund under the Student Loan Fund Act B.E. 2560. The Student Loan Fund will inform the amount of the loan to the payer and the payer must remit the deduction of income through the Comptroller General’s Department’s system. Thereafter, the Comptroller General’s Department shall transfer the money to the Revenue Department. The Notification shall be enforced from July 1, 2018 onwards.

For more details, please see: https://bit.ly/2zYRTz9

3. Regulation regarding adding additional specific areas apart from second-tier tourism provinces of Thailand in order to receive tax benefits from holding training seminars and for tourism and accommodation.

The Notification of the Director-General of Revenue Department dated July 2, 2018 provides additional districts/locations in Thailand apart from the second-tier tourism provinces that shall be eligible for tax deductions for eligible juristic persons holding staff training seminars as well as for accommodation & tourism; this change was made according to the recommendation of the Ministry of Tourism and Sports as detailed in the attachment of this Notification. The additional locations shall be regarded as eligible tourism zones for holding training seminars by companies or juristic partnerships for their employees and for tourism and accommodation. Some of the new additional locations include: Khao Phanom District, Plai Phraya District and Lam Thap District in KrabiProvince, and Ban Lat District and Nong Ya Plong District in PhetchaburiProvince.

The Notification shall be enforced from January 1, 2018 until December 31, 2018

For more details, please see: https://bit.ly/2tgeKQF

Tax News

1. Draft Royal Decree issued under the Revenue Code regarding Value Added Tax rate reduction (No. …) BE …. to extend the period of Value Added Tax rate reduction.

On 3 July 2018, the Cabinet approved the draft Royal Decree issued under the Revenue Code regarding Value Added Tax rate reduction (No …) BE …. It provides for a one year extension of the effective period for the Value Added Tax rate reduction, such that it shall be maintained at the current rate of 6.3 percent (excluding local tax) or 7 percent (including local tax). This extension shall be enforced from October 2018 until September 30, 2019.

For more details, please see: https://bit.ly/2JkXU9u

2. Draft Royal Decree issued under the Revenue Code (No…) BE …. regarding tax measures to relieve the effects of increased minimum wage.

On 10 July 2018, the Cabinet approved the draft Royal Decree issued under the Revenue Code regarding a Value Added Tax rate reduction (No …) BE …. It provides an income tax exemption for income received as daily wages to employees at the rate of 15 percent. However, the individual person or company or juristic partnership who is an employer and would like to receive the exemption must comply with the following conditions:[r1]

2.1 Individual person; to be eligible, the individual person must have assessable income under Section 40 (5) (6) (7) or (8) of the Revenue Code; furthermore, the employee must have a duty to pay Personal Income Tax (PIT) under Section 48 (1) of the Revenue Code. To be eligible, the total number of employees under the employment of such individual person must not exceeded 200 persons and the total PIT liability of the individual person shall not exceeded 1 million baht per year before expenses and allowance deductions, however, the individual person has to comply these conditions only for the tax year that the individual person wishes to use this the income tax exemption.  

2.2 Company or juristic partnership; to be eligible they must not have more than 200 employees, moreover the legal entity must not have income from the sale of goods or provision of services which in total exceeds 1 million baht per year, however, they have to comply with these conditions only for the tax year that they wish to use this income tax exemption.

For more details, please see: https://bit.ly/2OhbFsO

3. Draft Bill amendment to the Revenue Code (No…) BE …. regarding Value Added Tax from e-Business entrepreneurs based overseas.

On 17 July 2018, the Cabinet approved the bill issued under the Revenue Code (No …) BE …. It provides regulations regarding VAT, including:

• how to send a summons,
• a notification to pay tax,
• the tax rate for the VAT calculation, and
• how to file a tax return and how to remit tax

for a business person residing outside Thailand but who carries on their business through electronic means to a client who is not a VAT registrant and who utilizes such service in Thailand.

For more details, please see: https://bit.ly/2LiB1sl

Interesting Supreme Court Judgment

Dika                   (Supreme Court Judgment) No. 1104/2561 in re:

Between            Company Hor.                           Plaintiff

Revenue Department                  Defendant

Issue:                Prohibition on a person who is not a VAT registrant or a person authorized to issue tax invoices to issue tax invoices under Section 86/13 of the Revenue Code.

The Plaintiff was a public company that received a subsidy from Company Oor, which was a company located in Hong Kong, in order to advertise its product (the “Subsidy”). In October 2008 and March 2009, the Plaintiff included the Subsidy in its VAT calculation and thereafter remitted VAT to the Revenue Department. However, the Assessment Officers of the Defendant assessed that such Subsidy was not deemed to be a payment received from the sale of goods or provision of services and as such had no VAT liability under Section 77/1 (8) (10) and Section 77/2 (1) of the Revenue Code. Therefore, the Defendant argued that the Plaintiff issued a tax invoice without proper  authorization and as such it was liable to value added tax for the amount shown in the tax invoice in accordance with paragraph two of Section 86/13 of the Revenue Code; furthermore, the Defendant argued that the Plaintiff was liable to a fine calculated at twice the amount of tax according to Section 89 (6) of the Revenue Code as well as a surcharge of 1.5 percent per month or fraction thereof (for the unpaid tax) in accordance with Section 89/1 of the Revenue Code. However, after the VAT calculation, there was an excess tax payment made in such tax month, thus the Plaintiff had no surcharge liability according to Section 89/1 of the Revenue Code but it was still liable to a fine of twice the amount of tax payable in the months of October and January. Therefore, the Assessment Officers issued a VAT assessment letter to the Plaintiff.

The Plaintiff appealed the assessment to the Commission of Appeal. The Commission of Appeal agreed with the Assessment Officers, nevertheless, it was believable that the Plaintiff issued the tax invoice due to a misunderstanding of the law with no intention to avoid paying applicable tax; moreover the Plaintiff cooperated with the examination, therefore, the Commission of Appeal decided that the VAT fine should be waived. However, the Plaintiff appealed this decision to the Supreme Court.

The Supreme Court decided that the Subsidy, which the Plaintiff received from the affiliated company for advertising the products, was not the tax base from the sale of goods or the provision of services and therefore was not liable to VAT. The Court also held that the Plaintiff had no authority to collect VAT and issue the tax invoice. As a result, given that the Plaintiff is a VAT registrant but had no authority to issue the tax invoice, such tax invoice was prohibited in accordance with Section 86/13 of the Revenue Code. Thus the Supreme Court agreed with the decision of the Central Tax Court. The Supreme Court ruled that the appeal of the Plaintiff was ill-founded.

Legal Opinion

The author agrees with the Supreme Court’s judgment because the tax base for the sale of goods or the provision of services under the Revenue Code must be the total value received or receivable by a business person from the sale of goods or the provision of services, including money, property, consideration, service fees or benefits calculable into money term in accordance with Section 79 and in conjunction with Section 77/1 (19) of the Revenue Code. Therefore, the Subsidy that was received from Company Oor to advertise its product was free-of-charge and there was no obligation on the Plaintiff to return the favor. Thus, it was not deemed to be consideration from the sale of goods or the provision of services, hence the Plaintiff had no authority to collect VAT or to issue the tax invoice. Thus, the actions of the Plaintiff by issuing the tax invoice for such Subsidy, recording the output tax and including it in the VAT calculation were deemed to be the VAT registrant issuing an unauthorized tax invoice. Thus, the writer agrees that the Plaintiff was guilty.

Author: Tiprawee Khudkham

Should you require any legal advice on Thai tax law then please contact us at Dharmniti Law Office Co., Ltd. 2/2 Bhakdi Building 2^nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330 Tel: (66) 2680 9777 Fax: (66) 2680 9711 Email: budhimak@dlo.co.th