Tax Newsletter AUGUST 2016

DLO’S Tax Newsletter

Issue 68 August 2016

Tax Laws Update

Tax Exemption on Personal Income Tax and Stamp Duty for Income Derived from Selling Immovable Property to a Foreign Government or International Organization

Royal Decree (No. 614) B.E.2559 exempts personal income tax (PIT) and stamp duty on income derived from selling immovable property to a foreign government or an international organization, where such immovable property has already been handed over and paid for before the date that this Royal Decree has become effective, but has not yet had the transfer registered because the transfer was suspended by the official, thereby resulting in such registration and juristic act occurring after the date that this Royal Decree became  enforceable.

This Royal Decree has been effective since July 2, 2016.

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

 Exemption on Income Tax for Donations to various Funds

Royal Decree (No. 615) B.E.2559 exempts personal income tax, as a double deduction from actual expense with respect to donations of money or property to the Safe and Creative Media Development Fund, the Cultural Promotion Fund, the Contemporary Art Fund, the Archives Promotion Fund or the Archaeology Fund. This tax exemption is subject to the following rules:

– For individuals: the donation must be in the form of money only; and

– For juristic persons: the donation can be in the form of money or property.

This Royal Decree has been effective since July 6, 2016.

For more details, please see: http://goo.gl/KZ3bzF

Tax Benefits for Income Tax for Donations to Schools

Royal Decree (No. 616) B.E. 2559 has extended the validity period of tax benefits for donations made to schools (excluding tutorial schools) from January 1, 2016 to December 31, 2018. This tax benefit entitles taxpayers to deduct twice the amount they actually donated. The previous Royal Decree (No. 558) B.E. 2556 which initially granted this tax benefit expired on December 31, 2015.

For more details, please see: http://goo.gl/BtX7RT and http://goo.gl/e7gWz0

Amending of Rules of holding LTF from 5 years to 7 years

Ministerial Regulation No. 317 (B.E. 2559) provides new rules relating to the holding of Long Term Equity Fund (LTF) for those LTF’s that are purchased within the period January 1, 2016 through until December 31, 2018. An individual must buy and hold a LTF for a period of not less than 7 calendar years in order to receive the following tax benefits:

1. Exemption for income paid for buying LTF as a tax allowance; and

2. Exemption for money or benefits received from selling the LTF.

However, readers should be aware that this tax exemption shall still be under the rules and conditions as stipulated by law.

For more details please see: http://goo.gl/f8TbZK

The deduction of personal income tax for the OTOP products purchasing

The Ministerial Regulation No. 318 (B.E. 2559) prescribed the deduction of personal income tax for purchase of OTOP products during the period August 1-31, 2016. The Deduction must be based on the actual payment made for the purchase of OTOP products but such deduction cannot exceed 15,000 Baht. This deduction is subject to a number of rules and conditions, including:

1. The purchased OTOP product must be certified and registered with the Community Development Department and subject to Value Add Tax;

2. The payment for the OTOP product must be made to a VAT registrant and the buyer must receive a full tax invoice; and

3. To take advantage of this tax deduction, taxpayers must follow the Notification of the Director-General of Revenue Department on Income Tax (No. 272).

For more details, please see  http://goo.gl/pPUFLt and http://goo.gl/uBveJl

Extension of Time for claiming Stamp Duty until July 31, 2016

The Ministry of Finance has extended the time for claiming stamp duty for duty which has been stamped by affixing a stamp on the instrument that must be paid in cash until 31 July 2016. This extension shall apply to the following types of instruments that require a duty stamp to be paid in cash:

1. An instrument for the  lease of land, building, other construction or floating house that has a rental fee of 1 Million Baht or more; and

2. An instrument for the hire of work that has consideration of 1 Million Baht or more.

The conditions stipulate that to take advantage of this extension, such instruments must be made within the period from April, 5 2015 through until January 31, 2016.

For more details please see: http://goo.gl/tWURrM and https://goo.gl/Gbn6yq

Tax News

The Ministry of Finance instructed the Revenue Department to enlarge tax base for nominee’s company and E-Commerce entrepreneur.

The Permanent Secretary of the Ministry of Finance issued an instruction to the Revenue Department to investigate tax payments of nominee in companies across all business sectors.

Furthermore, the Government has appointed the e-Commerce Tax Council to undertake research on the levying of new taxes given that some current taxes in Thailand have many loopholes which have resulted in less tax revenue for the Government.

For more details, please see http://goo.gl/qzuA26

Interesting Dika (Supreme Court) Judgment

Dika (Supreme Court) Judgment No. 13986/2558, in re:

H. Company                                          Plaintiff

The Revenue Department                    Defendant

Issue: Remittance of profits from Thailand (Section 70 Bis of the Revenue Code)

Tax collection on remittance of profits according to Section 70 Bis of the Revenue Code prescribes that a company or juristic partnership remitting its profits from Thailand has to deduct tax from such remitted profits at the rate of 10 percent and deliver such tax within 7 days from the last day of the month in which such profits are remitted in accordance with the Notification of the Ministry of Finance dated July 24, 2002. Therefore, this means that the tax liability of the remittance shall arise upon the remitting of profits from Thailand.

In this case, the Plaintiff’s client directly transferred a service fee to the Plaintiff in the USA on several occasions, it can be regarded that the payment of such service fee remitted from Thailand partially included profits or deemed profits; therefore, it must be seen that the Plaintiff’s branch in Thailand is the company remitting its profits or other type of money set aside from profits or deemed profits from Thailand according to Section 70 Bis of the Revenue Code. Thus the Plaintiff’s branch was subject to the duty to deduct tax from such remitted profit in this regard. According to Section 70 Bis of the Revenue Code every transfer date of the service fee to the USA is the date that the profits were remitted from Thailand by the Plaintiff’s branch.

Despite having no facts about the exact amount of remitted profits which the Plaintiff’s client remitted from Thailand by transferring the service fees to the USA; the Court considered that it was reasonable to find that the amount of remitted profits was 420 Million Baht given that in 2012 all service fees directly transferred from the Plaintiff’s client to the Plaintiff in the USA amounted to 2,000 Million Baht,. After this, such remitted profits had to calculate the averages for the monthly remitted profits which were deemed to be remitted by the Plaintiff’s branch, and then to deduct it at the rate of 10 percent for remitting to the local revenue office by filing  tax returns for remittance (form P.N.D. 54).

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