Editorial staff

DLO’S Tax Newsletter

 

Issue 84 December 2017

Inside this Issue

 

Tax Laws Update

1. Corporate income tax (CIT) exemption for expenses relating to buying or hiring for the development of a computer program.

2. Personal income tax exemption for expenses related to Goods or Services spent between November - December 2017.

 

Tax News

1. Tax aid measures for promoting donations made to the persons who suffered from the floods in 2017 (additional measures).

2. Tax measures for promoting donations made to educational institutions, which were established according to agreements made between the Government of Thailand and specialized agencies of the United Nations.

3. Tax measures for promoting the purchase of gold bars in the Gold Future Centre.

 

Interesting Deka (Supreme Court Judgment)

Dika                       (Supreme Court Judgment) No. 7052/2559, in re:

Between                Company G.                                                                   Plaintiff

                              Revenue Department                                                    Defendant

Issue:                     Whether the differential regarding a premium payment is allowed as an expense in the calculation of net profits under section 65 ter (13) of the Revenue Code.

 

Tax Laws Update

1. Corporate income tax exemption for expenses for buying or hiring to make a computer program.

               Royal Decree (No.647) B.E. 2560 provides a corporate income tax deduction for companies or juristic partnerships, which have paid-up capital on the last day of an accounting period that does not exceed 5,000,000 Baht and which have income from the sale of goods and services in an accounting period that does not exceed 30,000,000 Baht (SMEs), in the amount of 100% of expenses for buying or hiring to develop a computer program to the seller or contractor or service provider of the computer program, which have been registered at the Office of the Digital Economy. This CIT exemption shall only apply to the portion that does not exceed 100,000 Baht with respect to the accounting period after January 1, 2017. To take advantage of these measures, taxpayers will need to comply with all relevant rules, procedures and conditions as prescribed by law.

               For more details, please see: https://goo.gl/FM8anW

 

2. Personal income tax exemption for expenses relating to goods or services spent between November - December 2017.

                Ministerial Regulation No. 333 (B.E.2560) and Notification of the Director-General of Revenue Department on Income Tax (No.311) provides an exemption on personal income tax for expenses arising from the purchase of goods and services from a Value Added Tax (VAT) registrant. To be eligible, tax payers must obtain a tax invoice and it should be noted that such deductible expenses shall not exceed 15,000 Baht. Moreover, the expenses must be paid within November 11, 2017 to December 3, 2017. However, certain goods or services are not eligible for this tax exemption i.e. alcohol, cigarettes, oil and gas for vehicles, cars, motorcycles, guide fees and accommodation fees.

For more details, please see: https://goo.gl/NUJ5px and https://goo.gl/BHwuEc

 

Tax News

1. Tax aid measures for persons who suffered from the floods in 2017 (additional measures).

                The expired Royal Decree (No.645) B.E. 2560 prescribed a condition for donors to receive an allowance or deduction for expenses in the amount of 150 percent of money or asset donated in the computation of their income tax for donations made between July 5, 2017 to October 31, 2017. On October 31, 2017, the Cabinet agreed to extend the tax aid measures for promoting donations made to persons who suffered from the floods as specified in such Royal Decree; therefore, the benefits provided under this Royal Decree will now be extended to donors who donate between November 1, 2017 through until December 31, 2017. To take advantage of these measures, taxpayers will need to comply with all relevant rules, procedures and conditions as prescribed by law.

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

 

2. Tax measures for promoting donations made to educational institutions, which were established according to agreements made between the Government of Thailand and specialized agencies of the United Nations.

               On November 7, 2017, the Cabinet agreed to exempt expenses for donations to educational institutions, which have been established according to agreements made between the Government of Thailand and specialized agencies of the United Nations from the date that the Royal Decree is effective through until December 31, 2018. In the case of a natural person, these measures entitle them to receive a deduction of 200 percent of the money donated in the computation of the taxpayer’s income tax, provided that such deduction shall not exceed 10 percent of the assessable income of the tax payer after deducting other expenses and allowances. In the case of donations made by a juristic person, they shall be able to deduct 200 percent of the money or asset donated to applicable educational institutions in the computation of their corporate income tax provided that such deduction shall not exceed 10 percent of the juristic person’s net profit before deducting expenses for charitable purposes.

               There shall also be an exemption on income tax, VAT, specific business tax and stamp duty for natural persons or companies or juristic partnerships in relation to income received from the transfer assets or the sale of goods or the execution of instruments for the purpose of making donations to the above mentioned educational institutions.

               For more details, please see: https://goo.gl/gbnv6M

 

3. Tax measures for promoting the purchase of gold bars in the Gold Future Centre.

               On November 14, 2017, the Cabinet approved in principle an exemption on income tax for capital gains earned from the sale of gold bar or compensation from postponement of delivery dates of gold bars (which are 99.99 percent pure), in relation to futures contracts. The Cabinet has also agreed to allow buyers to deduct withholding tax at the rate of 15 percent on such income. Such income shall also be exempt for the purpose of calculating income tax

               The Cabinet has also approved an exemption with respect to VAT for the sale of gold bars, which are 99.99 percent pure, and are not in the form of gold ornaments or other forms according to the future contract.

               To take advantage of these measures taxpayers will need to comply with all relevant rules, procedures and conditions as prescribed by law.

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

 

Interesting Deka (Supreme Court Judgment) 

Dika                       (Supreme Court Judgment) No. 7052/2559, in re:

Between                Company G.                                                                   Plaintiff

                              Revenue Department                                                    Defendant

Issue:                     Whether the differential regarding a premium payment is allowed as an expense in the calculation of net profits under section 65 ter (13) of the Revenue Code.

 

               The Plaintiff (“ Lessor”) and the mutual fund (“ Lessee”) entered into a lease agreement for the lease of an asset at the amount of 1,700 million THB and the Lessee made a fundraising to public investors. The Plaintiff, is a juristic person which is a separate legal entity from the mutual fund, it agreed to pay a rental security in case the Lessee made a sublease and received income lower than the guarantee of the Lessor (“ Premium Payment”). In practice, the rental fee which the Lessee was to receive from sub-lessee’s should have been based on the Lessee’s ability to pay; therefore, this condition is one way to help the mutual fund and is not related to the Lessor’s business or for it to generate profit. Thus, such Premium Payment was an expense that did not produce an income for the Lessor. Moreover, according to the facts, the Lessor had already received the full rental fee from the Lessee in the amount of 1,700 million THB on the date of signing the lease agreement; therefore, the Lessor did not need to pay the Premium Payment to the Lessee for the sublease agreement between the Lessee and the third party. In light of the fact that  the Premium Payment from the Lessor to the Lessee did not relate to the business of the Lessor, the Lessor could not take the differential regarding the guarantee as an expense for the calculation of net profits under section 65 ter (13) of the Revenue Code.

 

Legal Opinion

               Normally, the expenses of a company or juristic partnership used for the calculation of its net profits must be an expense, which it pays or will pay, for the purpose of carrying on its business. Section 65 ter (13) of the Revenue Code prohibits the use of expenses which are not for the purpose of making profits or for its business when calculating the net profits.

               However, the Revenue Code has not specifically defined the meaning of “for profit” or “for business”, thus we shall need to consider the type of expenses, the regulations or the payment method and also the necessary reasons together with the evidence of such payment based on each individual fact. In the writer’s opinion, in order to consider whether the expense is for the purpose of making a profit or for its business or not, one should not only consider whether such payment is based on the duty of payment of the company or juristic partnership but whether the expense shall enable it to make any income or benefit to the business because if it is an expense which is not related to its business, there is no reason for such company or juristic partnership to pay such expense.

               In this case the Supreme Court held that the differential that the Lessor paid regarding the Premium Payment did not result in the Plaintiff making any income or gaining any other benefit given that the Lessor had already received the full rental fee from the Lessee on the date of signing the Agreement. Therefore, the writer agrees with the Supreme Court’s judgment that this Premium Payment is not an expense for the purpose of making profits or for its business under section 65 ter (13) of the Revenue Code.

Wannipa Sa-nguanrat

 

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

 

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