Editorial staff

DLO’s Tax Newsletter

Issue 93 September 2018

Tax Laws Update

1. Specific Business Tax (SBT) exemption for the business of The Land Bank Administration Institute (Public Organization).
2. Personal income tax payment criteria for income earned from the sale of gold bullion under futures contract/derivative.
3. Value Added Tax (VAT) exemption from the sale of gold bullion under futures contract/derivative.
4. Regulation regarding income tax, VAT, SBT, and stamp duty exemptions for donations to educational institutions established in Thailand pursuant to treaties or agreements between the Thai Government and the United Nations Special Rapporteur.
5. Tax subsidies regulation for political parties.

Tax News

1. Draft ministerial regulations (No. ...) BE .... (Amendment of tax incentives to support tourism and training seminars in secondary tourism provinces) additional exemption for personal income tax for income paid for accommodation fees.

Interesting Dika

Dika               (Supreme Court Judgment)          No. 2043/2560, in re:
Between       Company Jor.                                  Plaintiff
                      Revenue Department                    Defendant
Issue:            Recruitment charges

Tax Laws Update

1. Specific Business Tax (SBT) exemption for the business of The Land Bank Administration Institute (Public Organization).

          Royal Decree (No. 660), BE 2561, exempts SBT for the business of the Land Bank Administration Institute (Public Organization), however such exemption shall be limited to loans for the supply and development of land or loans to support the distribution of land holdings, in accordance with the prescribed regulations of the Board of Directors of the Land Bank Administration Institute and the sale of immovable property in a commercial or profitable manner from July 15, 2016. This exemption has been implemented in order to support the abovementioned institute given that it operates to help farmers and indigent citizens to own land for occupation and housing. This change has also been made to help solve land shortage issues and to help distribute land more equitably.

For more details, please see: https://bit.ly/2N4Jxru

2. Personal income tax payment criteria for income earned from the sale of gold bullion under futures contract/derivative

          Royal Decree (No. 661), BE 2561 stipulates that individuals who earn income from the sale of gold bullion through derivatives/futures contract that are made in the Thailand Futures Exchange Centre, where the transfer of the gold bullion is done using the method of account transfer from the seller to the buyer shall be subject to the a PIT exemption whereby such assessable income shall be exempt from inclusion in the taxpayers’ personal income tax calculation when filing it in such tax year, provided that the activities meet the following conditions:

1. The Decree allows a payer to withhold tax at the rate according to Section 50 (2) of the Revenue Code, which is 15 percent of the difference between the selling price of the derivatives that has gold bullion as a reference, and the gold bullion price to be delivered on the request date and trade must match the gold bullion, or gold bullion price to be delivered at the maturity date of the mentioned derivatives; moreover such trade must be made through the Thailand Futures Exchange Centre.

2. Not filing a tax return to claim as a tax credit, the mentioned tax withheld in whole or in part.

          Moreover, the Decree stipulates that taxpayers who receive compensation from the postponement of taking delivery or who deliver the gold bullion according to the derivatives/futures contract which is made via the Thailand Futures Exchange Centre and allow a tax payer to withhold tax at the rate according to Section 50 (2) of the Revenue Code at the rate of 15 percent of the compensation income. When it comes time for the filing of the PIT return, such compensation shall be exempt from being included in the calculation to pay income tax provided thatthe taxpayer does not claim or use it as a tax credit, or the mentioned tax withheld in whole or in part.

For more details, please see: https://bit.ly/2ONb3ug

3. VAT exemption from the sale of gold bullion under futures contract/derivative

          Royal Decree (No. 662), BE 2561 exempts VAT for the sale of gold bullion under derivatives/future contracts made in accordance with the law on derivatives which are made in the Thailand Futures Exchange Centre, provided however that such gold bullion is 99.99 percent pure and is not in the form of an ornament or figurine.

For more details, please see: https://bit.ly/2L6GlKj

4. Regulation regarding income tax, VAT, SBT, and stamp duty exemptions for donations to educational institutions established in Thailand pursuant to treaties or agreements between the Thai Government and the United Nations Special Rapporteur.

          The Notification of the Director-General of the Revenue Department (No. 7), BE 2561 has prescribed criteria for exemptions of income tax, VAT, SBT, and stamp duty with respect to donations made in the form of cash/money, assets, or goods to qualifying educational institution under the Royal Decree (No. 654), BE 2561.

          1. In the case of exemptions for personal income tax, the donor must donate to qualifying educational institutions in the form of money or cash only.
         2. In the case of exemptions for corporate income tax, a company or juristic partnership must donate to qualifying educational institutions in the form of cash/money, assets, or goods. If a donation is made in the form of assets or goods, such donation must meet the following criteria:

          If the donation was made in a form of assets or goods, the following value is the value of such asset which shall be subject to the exemption.

          (1) In the case of obtaining assets or goods for donation, proof of acquisition of the asset or goods is required; moreover it is necessary to specify the amount and value of the asset or goods. The value of such assets or goods will be determined according to the evidence provided by the company or juristic partnership making the donation.

          (2) In the case of a company or juristic partnership donating its own assets or goods, the value of the donated assets or goods shall be set according to the value which remains after calculating depreciation and the depletion of the assets/goods.

          (3) In the case of a manufacturer of goods for sale or a seller, the cost of such goods (which can be proven/ evidenced) shall be the value of such goods that shall be eligible for the income tax exemption.

          This decree shall take effect from 28 March 2018 onwards.

          For more details, please see: https://bit.ly/2N0FhcI

5. Tax subsidies regulation for subsidy to political parties.

          The Notification of the Director-General of the Revenue Department on Income Tax (No. 324) stipulates conditions which shall apply to taxpayers who wish to subsidize their taxable income to registered political parties. To be eligible, the taxpayer must be a natural person with Thai nationality and when calculating the tax, it must be done according to the Revenue Code as the annual personal income tax returns form as prescribed and eventuate that its taxable. Eligible taxpayers are allowed to receive a tax deduction on money subsidized to registered political parties, however it should be noted that such subsidy shall not exceed the amount of tax payable and must not exceed 500 baht. These rules apply for the purpose of submitting a tax return for filing a Personal Income Tax form for 2018, which must be filed from 2019 onwards.

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

Tax News

1. Draft ministerial regulations (No. ...) BE .... (Amendment of tax incentives to support tourism and training seminars in secondary tourism provinces) additional exemption for personal income tax for income paid for accommodation fees.

          On August 14, 2018 the Cabinet approved in principle the drafted ministerial regulation No…. (B.E….) issued under the Revenue Code regarding a tax exemption (Improvement of tax measures to support tourism and arrangement of training seminar in secondary tourism provinces) according to the proposal of the Ministry of Finance. The essence of the draft ministerial regulation provides a further exemption for personal income tax for individual taxpayers for income paid to a residence in a place where the number of rooms in the same building or several buildings (combined together) does not exceed 4 rooms and with no more than 20 total guests which has been established for the purpose of providing temporary accommodation for travelers or any other person, provided that the consideration (fee) is paid in accordance with Clause 1 of the Ministerial Regulations, which stipulates the types and criteria for operating the hotel business in 2008.

          This exemption is up to the amount actually paid provided that the total does not exceed 15,000 baht. To be eligible for this tax exemption the total accommodation fee must be paid within January 1, 2018 through until December 30, 2018.

          For more details, please see: https://bit.ly/2nXgcV1

Interesting Dika

Dika             (Supreme Court Judgment)     No. 2043/2560, in re:

Between     Company Jor.                             Plaintiff
                    Revenue Department               Defendant
Issue:          Recruitment charges

The facts show that there was an employment contract for job seekers to work abroad (JOR. NGOR. 33 Form), as well as a service receipt and an expense for using an authorized recruiter who was based abroad (JOR. NGOR. 37 Form).

In this case the Plaintiffs received money from job seekers so that the job seekers could work abroad. For those jobseekers wishing to work in Israel, a service fee was charged to the jobseekers at the rate of 5,000 baht per person; moreover they were also charged expenses at the rate of 20,000 baht per person. For those jobseekers wishing to work in Japan a service fee of 22,400 baht was charged to the jobseekers together with expenses charged at the rate of 44,800 baht per person.

The Plaintiff did not attest that the expenses paid by the job seekers were not the costs of recruitment combining with the Labour Ministerial Regulation regarding the pricing of service fee and expenses which are charged from job seeker B.E. 2547, clause 9 which specifies that recruitment licensees are not permitted to collect or receive personal expenses of job seekers from job seekers. Therefore, the expenses according to JOR. NGOR. 33 Form and JOR. NGOR. 37 Form is not deemed as a personal expense of the job seeker. The recruitment services fee and expenses as mentioned were deemed by the Supreme Court as being money that the Plaintiff received from job seekers to provide employment to job seekers to work abroad, whether the received money was a benefit for the job seekers or not. The Court also held that the total expenses for recruitment were income that the Plaintiff received from the Plaintiff’s recruitment business which must be included in the calculation of its net profit according to Section 65 of the Revenue Code. Also, the money received by the Plaintiff from every job seeker was considered to be the total value that the Plaintiff business received from providing the service in the Kingdom which shall be subject to VAT in accordance with Section 77/2 (1) of the Revenue Code.

Opinion

The author agrees with the judgment of the Supreme Court given that:
a. the Plaintiff charged the service fee from the job seekers under the recruitment contracts,
b. the job seekers were able to work abroad; and
c. the Plaintiff issued a receipt for the mentioned service and expenses.
Thus, in the writer’s opinion it should be deemed that the plaintiff’s income came from the business.

Since the Plaintiff did not provide details as to the personal expenses of the job seekers, coupled with the fact that the Plaintiff is not permitted to collect or receive personal expenses of job seekers according to clause 9 of the Labour Ministerial Regulation regarding the pricing of service fee and expenses which are charged from job seekers BE 2547. Thus, the writer is of the opinion that the money that the Plaintiff collected from the job seekers is a service fee for recruitment service according to clause 8 of the same ministerial regulation, which the Plaintiff received from operating its recruitment business.

Given the above, the Plaintiff must include such income when calculating its corporate income tax liability under Section 65 of the Revenue Code in conjunction with the Revenue Departmental Order No. Tor Por 1/2528.

Furthermore, the writer would like to point out that the income that the Plaintiff received from the job seekers is income derived from any actions in return for consideration of the recruitment that shall be deemed to be a service in accordance with Sections 77/1 (10) and 77/2 (1) of the Revenue Code, which shall be subject to VAT at the time when such events take place. Moreover, given that the Plaintiff contacted and coordinated with overseas employers to ensure that the job seekers can work abroad it shall not be deemed as a service provided in Thailand that transfers the result of the service to abroad wholly which will enable the corporate taxpayer to have the right to pay VAT at zero percent rate according to Section 80/1 (2) of the Revenue Code in conjunction with clause 2 (1) of the Notification of Director-General of Revenue issued on VAT (No. 105). Therefore, the Plaintiff must include such services as the tax base to pay VAT in accordance with the law. The Plaintiff is liable for such actions, and the writer agrees with the judgment of the Supreme Court