Editorial staff

DLO’S Tax Newsletter

 

Issue 71 November 2016

 

Thais are in tears all over the Kingdom

Wishing the late King rest in Heavenly Peace

In praise of his great vision and wisdom, H.M. King Bhumibol Adulyadej

In remembrance of his majesty, The People’s King, forever and ever.

 

Budhima Kerdsiri -  Author
Montree Atchariyasakulchai - Translator

 

Inside this Issue

Tax Laws Update

1. Remuneration on concept car manufacturing service not included in VAT calculation; and

2. Extension of 7% rate of Value Added Tax for a further One Year Period

Tax News

1. The Cabinet Approved the Ministry of Finance to Amend the Purchasing of Immovable Property Tax Law;

2. Ministry of Finance had a plan to increasing tax from land owner, after land market price has increased due to infrastructure investment; and

3. MOF confident that Land and Building Tax Act will be enforced in 2017

Interesting Dika (Supreme Court Judgment)

            Dika (Supreme Court Judgment) No. 2050/2559, in re:

            N. Company                                                                            Plaintiff

            Revenue Department                                                             Defendant

            Issue: Taxable royalty under section 40(3) of the Revenue Code

 

 

Tax Law Update

1. Remuneration on concept car manufacturing service not to be included when calculating VAT.

            The Notification of General Director of Revenue Department on Value Add Tax (No.210) amended clause 2 (22) of the Notification of General Director of Revenue Department on Value Add Tax No.40 by prescribing the remuneration that a VAT registrant that derives from concept car manufacturing service or concept motorcycle use for research and development or test drive granted excise tax regarding to the law shall not be included when calculating  VAT according to Section 79 (4) of the Revenue Code.

            If the VAT registrant intends to receive such tax incentive then it should provide evidence in writing which certifies the excise tax exemption and its approval to be a researcher and developer or test driver from the Excise Department.

            This exemption is effective since January1, 2016.

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

2. The Extension of Collecting Value Added Tax in the Rate of 7 Percent in the Period of One Year

            On November 1, 2016, the National Council for Peace and Order issued an order no. 65/2559 which prescribed the extension of the period for the reduction of collection rate of value added tax rate by keeping it at 7 percent during the period October 1, 2016 to September 30, 2016.

            The effective date of this extension is October 1, 2016.

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

 

Tax News

1. The Cabinet Approved the Ministry of Finance to Amend the Purchasing of Immovable Property Tax Law

            On October 18, 2016, the Cabinet approved a draft of the Amendment Act of the Revenue Code (No….) B.E…..on personal income tax relating to transferring right or possessing right on immovable property by using the actual purchase price or assessable cost of the Land officer whichever is higher as the tax base in order to calculate personal income tax derived from the transferal of immovable property, formerly, it only used the assessable cost as the tax base to calculate income tax.

            For more details, please see: http://goo.gl/oHiLm7

2. Ministry of Finance plan to increase tax from land owners, after market price of land increases due to infrastructure investment

            The Permanent Secretary of the Ministry of Finance disclosed that the MOF is considering income taxation based on increases to  land price that occurs due to benefits arising from nearby infrastructure investment e.g. roads, motor way, port, airport or train and also investment of state enterprise.

            As a first step, the MOF proposes to tax land owners in accordance with its investment plan who have benefited because such infrastructure/development has resulted in land price increases. Moreover, the MOF plans to have a clear conclusion on this tax issue in 2017.

            For more details, please see https://goo.gl/M8jW81

3. MOF confident that Land and Building Tax Act will be enforced in 2017

            The Deputy Minister recently said in seminar relating to “Consideration on the Land and Building Tax Act” held by Thai Chamber of Commerce, that the draft of the Land and Building Tax Act has already been reviewed by The Office of the Council of State already which has made several observations/comments that need to be improved before it can then be sent to the National Legislative Assembly for its consideration. From that point, the Government will consider the applicable tax rates and he noted that he expects that this law will enforced in 2017. The Deputy Minister assured the members of the seminar that this new law will not adversely affect to poorer members of society who only have their first house. The main target for this tax will be land for industrial and commercial purposes.

            For more details, please see https://goo.gl/7jGdWS 

 

Interesting Dika (Supreme Court Judgment)

            Dika (Supreme Court Judgment) No. 2050/2559, in re:

            N. Company                                                                            Plaintiff

            Revenue Department                                                             Defendant

            Issue: Taxable royalty under the Revenue Code Section 40 (3)

 

            The Plaintiff purchased and imported a complete set of Private Automatic Branch Exchange (PABX) to Thailand by separating it into several parts on the import declaration form which excluded the price of FD-Software from other components. The FD-Software was an essential program for operating the PABX system which had to be installed in the PABX; in this regard the PABX could not operate without having the FD-Software. Therefore, the FD-Software was deemed as one of the PABX’s components. Additionally, in this case it could be considered that the Plaintiff did not intend to purchase and import only the FD-Software under the characteristic of a licensing agreement, rather the Plaintiff purchased and imported the PABX together with the FD-Software which is the essential and specified software for operating the PABX system.

            The Court considered that the Plaintiff did not import the PABX system from a foreign country by separating the essential software from other components which shall be considered as a taxable royalty in accordance with Section 40 (3) of the Revenue Code; therefore, the Plaintiff was not subject to deduct the corporate income tax according to Section 70 of the Revenue Code. With regard to the Value Added Tax (VAT), the Court considered that the disputed purchasing and importing was not considered as a business person providing services abroad and such service is used in Thailand in accordance with Section 83/6 of the Revenue Code; therefore, it was not within the scope of VAT.

 

Legal Opinion

            The Revenue Department considered this issue in accordance with the Revenue Department’s Ruling, No. KorKhor 0706/1347 which held that if the purchase of software, which is attached with a machine and installed to control the machine, if the price of machinery is charged separately from the price of software, then the payer must deduct tax from the payment of software because it is income in accordance with Section 40 (3) of the Revenue Department.

            The writer agrees with the Supreme Court’s Judgment in respect of the machinery and software purchased as they are in a complete set of goods, and such software is an essential part in controlling the machinery and cannot be used in other machines. Hence, such software is to be treated as part of machine even if the price of software is charged separately from the price of the machine, and the payment of software is not considered as income in accordance with Section 40 (3) of the Revenue Department and is not subject to tax deduction under Section 70 of the Revenue Code. Furthermore, if the purchase of the machine and software are in the complete set of goods as mentioned above, it will not be subject to value added tax and considered as a business person providing services abroad and such service is used in Thailand in accordance with Section 83/6 of the Revenue Code.

            Therefore, the Revenue Department should provide a guideline to the Revenue Officer for considering whether the essential program of a machine should not be treated as royalty income in accordance with Section 40 (3) of the Revenue Code, in order to comply with the Supreme Court’s Judgment.

Phagarmas Sanguanrat

 

            Should you require any legal advice on tax law then please contact us at Dharmniti Law Office Co., Ltd. 2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok, Tel : (66) 2680 9751, (66) 2680 9760 Email: budhimak [at] dlo.co.th or chatwaleem [at] dlo.co.th

 

    Legal Services in Taxation: -

1. Tax Advice

2. Tax Returning

3. Tax Planning

4. Tax Inspection

5. Tax Filing

6. Testifying to the Officer

7. Tax Assessment Appeal

8. Tax Litigation

 

Contacts:

Kamphol Sapprung

+662 680-9724

kamphols [at] dlo.co.th

 

Budhima Kerdsiri

+662 680-9751

budhimak [at] dlo.co.th

 

Chatwalee Maitri

+662 680-9760

chatwaleem [at] dlo.co.th