Tax Newsletter MARCH 2018

DLO’S Tax Newsletter

Issue 87 March 2018

Inside this Issue

Tax Laws Update

1. Income tax exemptions for donations made to the Justice Fund.
2. Corporate Income Tax (CIT) exemptions for income support received from Targeted Industries Fund.

Tax News

1.      Tax measures for donations made to the Research, Development and Innovation Fund.

1. Tax benefit measures for investors who invest in start-up enterprises.
2. Tax measures for minimizing the effects of the rising of minimum wage rates.
3. Tax measures to promote the establishment of high potential foreign education institutions.

Interesting Dika (Supreme Court Judgment)

Dika                     (Supreme Court Judgment) No. 2640/2560 in re:

Between             Company Or.                                                           Plaintiff

The Revenue Department                                     Defendant

Issue:                   Value added tax in relation to pre-paid cards of online game

Tax Laws Update

1. Income tax exemptions for donations made to the Justice Fund.

Royal Decree (No.651) B.E. 2561 provides an income tax deduction of 2 times the amount of the donation of money or asset made to the Justice Fund. However, taxpayers will also need to comply with the following conditions:

– For individual persons, the donation must be in the form of money in order to receive the income tax deduction

– For juristic persons, the donation can be in the form of money or an asset in order to receive the corporate income tax exemption.

The law has been enforced from January 27, 2018 onwards.

For more details, please see: https://goo.gl/n6FtfM

2. Corporate Income Tax (CIT) exemptions for income support received from Targeted Industries Fund.

Royal Decree (No.652) B.E. 2561 provides a deduction on income tax for juristic persons in relation to income support received from the National Competitive Enhancement for Targeted Industries Fund from February 14, 2017 onwards. To take advantage of these measures applicable companies and juristic partnerships must comply with all relevant rules, procedures and conditions as prescribed by law.

For more details, please see: https://goo.gl/2rjqXg

Tax News

1. Tax measures for donations made to the Research, Development and Innovation Fund.

On January 30, 2018, the Cabinet approved in principle the draft of the Royal Decree issued under the Revenue Code (No….) B.E….for an income tax deduction of 2 times the amount of the donation made by an individual person or a juristic person to the Research, Development and Innovation Fund from the enforced date until December 31, 2019.

To be eligible for this tax deduction, taxpayers also need to comply with all relevant rules, procedures and conditions as prescribed by law.

For more details, please see: https://goo.gl/Hm8JAX

2. Tax benefit measures for investors who invest in start-up enterprises.

On January 30, 2018, the Cabinet approved in principle the draft Ministerial Regulation (No…) B.E which provides an income tax deduction for individual investors according to the actual amount paid but not exceeding 10,000 baht for the payment of their investment in capital shares or shares for increasing the capital to a juristic person (SMEs) that operates a business which is established between October 5, 2015 – December 31, 2019.

Taxpayers will also need to comply with all relevant rules, procedures and conditions as prescribed by law in order to take advantage of these tax measures.

For more details, please see: https://goo.gl/Hm8JAX

3. Tax measures for minimize the effects of the rising of minimum wage rates.

On January 30, 2018, the Cabinet approved in principle of the draft Royal Decree issued under the Revenue Code (No…) B.E… for a corporation income tax exemption to juristic persons on wage paid to daily workers, but not exceeding 15 percent of the paid wage expenses. The juristic persons must have incomes from sales of goods or service in accounting period not exceeding 100 millions baht and have not more than 200 employees in a tax exempted accounting period. The exemption shall be applied for the wage paid between April 1, 2018 – December 31, 2018.

The taxpayer also needs to comply with all relevant rules, procedures and conditions as prescribed by law.

For more details, please see: https://goo.gl/Hm8JAX

4. Tax measures to promote the establishment of high potential foreign education institutions.

On February 6, 2018, the Cabinet approved in principle the draft of Royal Decree issued under the Revenue Code (No…) B.E for an income tax deduction of  2 times the amount of the donation of money or asset made to eligible high potential foreign education institutions according to the Head of the National Council for Peace and Order since January 1, 2018 onwards and this tax measure shall be subject to the rules and procedures as prescribed by law, which shall include the following

– For individual persons, the donation must be in the form of money in order to receive the tax deduction;

– For juristic persons, the donation can be in the form of money or an asset in order to receive the corporate income tax deduction

Moreover, the Cabinet has also approved in principle a tax exemption for income tax, value added tax, specific business tax and stamp duty for natural persons and companies or juristic partnerships with respect to income derived from the transfer of properties, the sale of goods or the execution on an instrument for the purpose of making a donation to the above mentioned institutions.

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

Interesting Dika (Supreme Court Judgment)

Dika                     (Supreme Court Judgment) No. 2640/2560, in re:

Between              Company Or.                                      Plaintiff

The Revenue Department                          Defendant

Subject:                Value added tax in the case of online game pre-paid cards

The Plaintiff entered into a contract enabling Company F. to use online game pre-paid cards of the Plaintiff to play games of Company F. A game player could buy an online game pre-paid card of the Plaintiff and then enter the serial code and password of the purchased card in data boxes to redeem points on the Plaintiff’s website and select an online game to play. Thereafter, the player would receive another set of serial code and password of Company F., which the Plaintiff had stored in its database. The player must enter the website of Company F., which linked to the Plaintiff’s, and enter the serial code and password so received to redeem points on the website of Company F. once again. Then the computer program would convert the value on the front of the online game pre-paid card to points so that the player might use them to buy fictitious items in the online game of Company F. In this connection, the Plaintiff’s system would function to record the use of the online game pre-paid card to play games of Company F. and send a summary report on the use of the card to Company F. monthly. On having received from the Plaintiff the summary report on the use of the card, Company F. would then issue a bill according to the value of the online game pre-paid card that had been used, less a discount given to the Plaintiff at the rate agreed upon.

The Tax Lawsuit Division of the Supreme Court ruled that this case was not a sale and purchase by the Plaintiff and Company F. of the right to redeem points to buy fictitious items in a game play of Company F. nor was it an agreement of Company F. to give a discount or allowance at the time of the sale of goods or the provision of services under Section 79 of the Revenue Code in any way. But it was characterized as a deduction of the service fee for the Plaintiff having installed a software system to link its website to that of Company F. so that the holder of an online game pre-paid card of the Plaintiff would be able to play the game(s) of Company F.; and accordingly it was characterized as the provision of a service under Section 77/1 (10) of the Revenue Code.  The money deducted by Company F. as a discount for the Plaintiff was therefore a tax base value which must be applied by the Plaintiff to the computation of value added tax in each month and the Plaintiff had the duty to collect such service fee from Company F.and not to set it off as a discount against the payment for the purchase of fictitious items from the game, which the Plaintiff had to pay on behalf of the holder of its online game pre-paid card.

Comment

A discount or allowance which shall not be included in a tax base value for computation must be one that has been given by a registrant at the time of sale of goods or provision of services and deducted from the price of the goods or services and such deduction is expressly shown in a tax invoice issued on each occasion, according to Section 79, paragraph three (1), of the Revenue Code.

In this case, there is a correlation between the sale of incorporeal goods by Company F. to the online game player, not to the Plaintiff with a discount given, and the receipt by the Plaintiff of a discount through the link of the Plaintiff’s website to that of Company F., with a discount given by Company F. off the value of the purchase of incorporeal goods by the online game player.

The difference between the sale of incorporeal goods and the provision of services is that the former is a transfer of title to or ownership of property of an intangible nature which may, however, have value and be capable of being appropriated, according to Section 77/1 (8), Section 77/1 (9) and Section 77/5 of the Revenue Code, whereas the latter means any act performed with a view to benefits of value other than sale of goods, according to Section 77/1 (10) of the Revenue Code.

The Plaintiff’s action, which comprised the installation of a software system to link its website to that of Company F. to enable the holder of an online game pre-paid card of the Plaintiff to play games of Company F., was characterized as one that resulted in a benefit of value. The receipt by the Plaintiff from Company F. of  a discount calculated on the payment for the purchase of fictitious items in the online game so that the online game player would buy them from the Plaintiff, was characterized as a purchase of incorporeal goods and such discount must be received at the time of purchase of goods or receipt of services and such receipt must be characterized as a benefit in return solely for the buyer of the goods or the service recipient. However, according to the fact the discount received by the Plaintiff resulted from its provision of services to Company F. in the form of a reciprocal agreement. The discount was characterized as remuneration or a service fee received by the Plaintiff. Therefore, the Plaintiff had the duty to include such service fee in the tax base value for the computation of value added tax in each month. I, the author, agree to the Supreme Court’s judgment.

Author: Wannipa Sanguanrat

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