Editorial staff

DLO’S Tax Newsletter

Issue 101 June 2019

Inside this Issue

Tax Law Update

1. Personal income tax (PIT) exemption on income for expenditure on touring fees or accommodation fees.
2. PIT exemption for expenditure on equipment and costumes utilized for the purpose of education and sports.
3. PIT exemption on income for expenditure on OTOP products.
4. PIT exemption on income for expenditure on book’s and servicing
5. PIT exemption on income for expenditure on immovable property for living purpose.
6. Criteria for levying PIT on returns from mutual funds’ and levying corporate income tax (CIT) on mutual funds.

Tax News

1. PIT exemption measures on compensation according to measures to promote the payment and delivery of information via electronic systems.
2. Revision regarding income taxation payments to be made by Tobacco Authority of Thailand on behalf of tobacco product sellers.
3. Tax measures to promote investment in Special Economic Development Zones.
4. Tax measures to promote Thailand’s Voluntary Emission Reduction Project.

Interesting Deka
Dika (Supreme Court Judgment) No. 2375/2561, in re:
Between           Mr.Sor                                     Plaintiff
                          Revenue Department           Defendant
                          Issue: Tax base for VAT calculation

Tax Law Update

1. Exemption of personal income tax on income paid for touring fee or accommodation fee.
Ministerial Regulation No. 344 (B.E. 2562) provides fora PIT exemption for service fees paid to tour operators or accommodation providers between April 30, 2019 through until June 30, 2019, equivalent to the actual amount paid in secondary provinces but not more than 20,000 baht, or not more than 15,000 baht for such expenditure paid in other provinces which are not considered as secondary provinces. However, when including relevant service fees and accommodation fees, from both secondary and other provinces, not more than 20,000 baht of PIT exemption will be granted to the taxpayer.

To be eligible for this exemption, a taxpayer must comply with the rules, procedures and conditions prescribed by the Director-General of the Revenue Department.
For more details, please see: https://bit.ly/2M636DV

2. Exemption of personal income tax on income paid for equipment and costumes for education and sports.
Ministerial Regulation No. 345 (B.E. 2562) stipulates a PIT exemption for expenditure on equipment and apparel for education and sports from May 1, 2019 to June 30, 2019, equivalent to the actual amount paid, however the exemption for both shall not exceed 15,000 baht.

To be eligible for this exemption a taxpayer must comply with the rules, procedures and conditions prescribed by the Director-General of the Revenue Department.
For more details, please see: https://bit.ly/2HwMRvc

3. Exemption of personal income tax on income paid for purchasing OTP products.
Ministerial Regulation No. 346 (B.E. 2562) provides a PIT exemption for expenditure on OTOP products, where such purchase occurs between April 30, 2019 through until June 30, 2019, such exemption shall be equivalent to the actual amount paid, but not more than 15,000 baht in total.
However, in order for taxpayers to take advantage of this PIT exemption such OTOP products must be registered with the Department of Community Development, and the taxpayer must comply with the rules, procedures and conditions prescribed by the Director-General of the Revenue Department.
For more details, please see: https://bit.ly/2WfBv7h

4. Exemption of personal income tax on income paid for book’s purchasing and servicing
Ministerial Regulation No.347 (B.E.2562) stipulates a PIT exemption for the purchase of books or service fees paid for books that are in the form of electronic information (i.e. e-books) provided that the seller or service provider is in Thailand. This exemption shall be available for such purchases made between January 1, 2019 through until December 31, 2019, and shall be equivalent to the actual amount paid, but together this exemption shall not exceed 15,000 baht.

To be eligible for this exemption a taxpayer must comply with the rules, procedures and conditions prescribed by the Director-General of the Revenue Department.
For more details, please see: https://bit.ly/2WiSCVH

5. Exemption of personal income tax on income paid for buying immovable property for living purpose.
Ministerial Regulation No.348 (B.E.2562) provides for a PIT exemption for the purchase of land and building or condominium that are valued at not more than 5,000,000 baht provided that such purchase is for the taxpayer’s living purposes and subject to the condition that the transfer (of property) occurs within the period April 30, 2019 to December 31, 2019. This PIT exemption is equivalent to the actual amount paid, but shall not exceed 200,000 baht.

To be eligible for this exemption a taxpayer must comply with the rules, procedures and conditions prescribed by the Director-General of the Revenue Department.
For more details, please see: https://bit.ly/2JAV446

6. Criteria for levying PIT from returns received from mutual funds’ returns and the levying of CIT on mutual funds
The Act Amending the Revenue Code (No. 52), B.E. 2562, stipulates that mutual fund with juristic person status that are established under Thai law or foreign laws (mutual funds), shall be obligated to pay income tax, in accordance with the following criteria:
1. Personal Income Tax
If a mutual fund is considered as a juristic partnership, then the category of income received from the fund units, tax exemption, and income taxation shall be determined as follows: 1.1 Dividends, share of profits or any other gain derived from a company or juristic partnership (including mutual funds) shall be considered as assessable income under Section 40 (4) (b).
1.2 Gains derived from the transfer of fund units, as well as income derived from the redemption of fund units to a company or juristic partnership that is a mutual fund, shall be limited to gains which have the monetary value which exceeds the capital, this shall be considered as assessable income under Section 40 (4) (g).
1.3 The Act cancels the criteria on PIT exemption for income derived from selling fund units in mutual funds and the income of the mutual fund under Sections 42 (23) and (24) of the Revenue Code.
1.4 Individual taxpayers who are a resident of Thailand who derive assessable income under Section 40 (4) (b) from a mutual fund shall be able to choose to pay tax at the rate of 10 percent on the said income by allowing the payer to withhold tax and they shall not be required to include such income with other types of income in their PIT calculation when calculating their PIT tax liability.
2. Corporate Income Tax (CIT)
If a mutual fund is considered as a juristic partnership, tax exemption, and income taxation, throughout revising the income tax rate of the foundation or association as follows:
2.1 The new law revises the CIT exemption on income which is a dividend from a mutual fund for half of or the whole amount under Section 65 bis (10) of the Revenue Code, such that it shall be in harmony with the definition of a company or juristic partnership above.
2.2 The Act also specifies that a mutual fund does not have to include income that is not income under Section 40 (4) (a) in the calculation as income but it must pay CIT at the rate of 15% on such income before deducting any expenses. Nevertheless, such income that was earned before August 19, 2019 shall be exempt from CIT.
2.3 The new Act also prescribes to cancel a company or a juristic partnership’s income tax rate under (2) (e) for income before deducting any expenses of a foundation or association which carries on a business that produces revenue which is not deemed as income under Section 65 bis (13) that must pay tax at the rate of 10%; and the new Act also stipulates that such income shall be taxed at the rate of 10% before deducting any expenses under Section 67 (3) of the Revenue Code.

This Act shall come into force from 19 August 2019 onwards and a taxpayer must comply with the rules, procedures and conditions prescribed by the Director-General of the Revenue Department.
For more details, please see: https://bit.ly/2YIrcpG

Tax News

1. PIT exemption measures on compensation according to measures to promote payments and the delivery of information via electronic systems.
On April 24, 2019 the Cabinet passed a resolution giving in principle approval to the determination that compensation received according to measures to promote payments made by debit card or other electronic methods for purchasing or receiving services from VAT registrants between1 February 2019 to 15 February 2019, which have sent VAT information from the purchase of products or services to the Revenue Department via electronic systems shall be income that is exempted from PIT, however, such compensation must not exceed 1,000 baht.

To be eligible for this exemption a taxpayer must comply with the rules, procedures and conditions which will be prescribe in the future.
For more details, please see: https://bit.ly/2X2XM5c
2. Revision of income taxation on behalf of tobacco product sellers.
On May 7, 2019 the Cabinet passed a resolution giving in principle approval to the Tobacco Authority of Thailand to pay income tax on behalf of a tobacco products sellers, which are both natural persons and juristic persons at every stage that the tobacco products was bought from the Tobacco Authority of Thailand, starting from the date on which the Tobacco Act of Thailand, B.E. 2561, is enforced (14 May 2018) through until 30 June 2019.
Nevertheless, income derived from the sale of tobacco products which the Tobacco Authority of Thailand must pay income tax on, on behalf of every seller of such products at every stage under Section 48 bis of the Revenue Code, shall be considered as income that is exempted from PIT, from the date on which the Tobacco Act of Thailand, BE 2561, is enforced (14 May 2018) through until 30 June 2019.

To be eligible for this exemption a taxpayer must comply with the rules, procedures and conditions which will be prescribed in the future.
For more details, please see: https://bit.ly/2VVAHVD
3. Tax measures to promote investment in Special Economic Development Zones (SEDZ)
On May 14, 2019, the Thai Cabinet passed a resolution giving in principle approval to extending the time to register rights to reduce corporate tax rates to a company or a juristic partnership which has an establishment located in a SEDZ.
The resolution of the Cabinet prescribed the reduction of CIT rates from 20 percent to 10 percent for 10 consecutive accounting periods, on the net profit from income that is derived from the production of goods or services and the use of services was provided in the SEDZ of such company or juristic partnership.
However, this tax benefit will only be eligible for the accounting period beginning on or after the date of registration of the right to become a company or juristic partnership in the Special Economic Development Area from 1 January 2018 to 30 December 2020.

To be eligible for this exemption a taxpayer must comply with the rules, procedures and conditions which will be prescribe in the future.
For more details, please see: https://bit.ly/30Esyn5

4. Tax measures to promote Thailand’s Voluntary Emission Reduction Project.
On May 14, 2019, the Cabinet passed a resolution giving in principle approval for a CIT exemption for companies or juristic partnership on net profit derived from their operations relating to the voluntary emission reduction project, however such exemption is limited only to the part resulting from the sale of carbon credits, whether it is done in Thailand or outside the Kingdom for 3 consecutive accounting periods, subject to the following criteria:
1. The voluntary emission reduction project that is eligible to received incentives including voluntary greenhouse gas emission reduction project which sells carbon credits in the type of Voluntary Emission Reductions (VERs) must have registered the implementation of the project with the Greenhouse Gas Management Organization (TGO) from the date that the law comes into effect through until December 31, 2020.
2. Participants are able to start counting the first accounting period to receive/earn tax incentives for the voluntary emission reduction project which sells carbon credits for Voluntary Emission Reductions (VERs) from when the Greenhouse Gas Management Organization has issued a certificate of carbon credit sales to the project participants.
3. A company or juristic partnership must file a separate income tax return for its business relating to the voluntary emission reduction project by using the same taxpayer identification number to file such income tax return.

To be eligible for these incentives a taxpayer must comply with the rules, procedures and conditions which will be prescribe in the future.
For more details, please see: https://bit.ly/30Esyn5

Interesting Deka
Dika (Supreme Court Judgment) No. 2375/2561, in re:
Between     Mr.Sor                                   Plaintiff
                    Revenue Department         Defendant
                    Issue: Tax base for VAT calculation

Facts: The plaintiff was a VAT registrant operating a food and beverages business which had establishments located in office areas and commercial districts. The plaintiff declared in its Value Added Tax Return (Phor.Por. 30) showing sales amounting to 175,000 baht per month or approximately 7,000 baht per day every month. The assessment official then inspected the establishment and found that the plaintiff had filed form Phor.Por. 30, declaring unsuitable sales value for the business condition. Therefore, when compared to the income according to the Plaintiff’s testimony that the business had an income of 15,000 to 17,000 baht per day, together with other financial evidence, consequently, the officer assessed the Plaintiff’s income by using an average sales amount of 15,000 baht a day, multiplied by 26 days to get a total monthly income value and then calculated applicable VAT along with fines and surcharges.

Issue to consider: Whether the tax assessment was lawful or not.

Judgment of the Supreme Court: When an assessment official inspected the information acquired from the field operatives at a plaintiff's establishment, taken together with the Plaintiff's testimony regarding the amount of income per day and other financial evidence, the Court found that the Defendant’s evidence outweighed the evidence submitted to the Court by the Plaintiff. Therefore, the Court held that the assessment official had the power to determine the value that the Plaintiff’s business and what it should earn in order to assess the applicable VAT, as well as fines and surcharges according to the law. Hence, the Supreme Court found that the assessment by the assessment official was lawful under the circumstances.

Legal Opinion: The author agrees with the judgment of the Supreme Court because according to the Revenue Code, business person who sell goods or provide services in the Kingdom that are not exempt from VAT have a duty to pay VAT, whereby a business person means a person (either an individual or a juristic person) who is selling goods or providing services in the course of their business or profession.

In calculating VAT on the sale of goods, the Revenue Code prescribes that it must be calculated from the total value that the business person has received or is receivable from the sale of the goods, or in the case of selling goods without remuneration or with remuneration which is lower than the market price without reasonable cause. Furthermore, the Code also prescribes to deem the market price on the date that the goods were sold as the value that the business person received, in order to calculate the applicable VAT that the business person has to pay, in accordance with Section 79 in conjunction with Section 79/3 of the Revenue Code.

Therefore, from the above case, based on the facts according to the testimony of the business person (Mr. Sor) it shows the income amount was lower than the total value received or receivable from the sale of the goods, hence this means that it did not comply with the Revenue Code, therefore the assessment official had the power to assess the total amount of income correctly by using the facts derived from such evidence.

Author: Warinthorn Saruno
Translator: Pia-on Jones

Should you require any legal advice on Thai tax law then please contact us at

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Email: hatairats [at] dlo.co.th