A question on withholding taxes: We hire a company to repair old molds and to produce new ones. Do we have to withhold taxes when we pay them? In another case, we have a manufacturing company (who normally produces and sells its own products) produce our plastic products using our own molds. Are we responsible for withholding taxes?

Answer:

When you hire a company carrying on repair service, to repair and produce molds and the required materials are provided by that company itself, such transaction is considered to be a hire of work for the production and repair service. The payment for this kind of service is therefore subject to a 3% withholding tax.

As for the manufacturing company by which you order your goods to be manufactured using your provided mold, and required materials are sourced by that company, in accordance with your orders, the transaction is considered to be a sale of goods and thus, withholding tax does not apply.

Contact MSNA for your accounting and tax questions.

Here is a VAT question from one of our clients:

Hi, our Thai company provides information technology services, including systems monitoring and software management to a company overseas via a website based in United States. Part of our service is to send our employees to the client’s office overseas from time to time for consultation and training purposes. Do we have to include VAT when issuing service invoice to our clients?

Answer:

Services in relation to systems monitoring and software management provided to clients outside of Thailand are considered as an exportation of services which is entitled to a 0% VAT rate.

Learn more information on the VAT system of Thailand on www.MSNAGOUP.com. Contact MSNA for your accounting and tax questions.

As the deadline for submission of Personal Income Tax Returns is nearly approaching, we often receive questions from our individual clients concerning the deductions and computation of their personal income taxes. Here is one of the questions that were answered by the THAI ACCOUNTANT:

Question:

Is it considered a taxable income for the employment benefits in terms of childcare facilities provided by our employer?

Answer:

Employee benefits in the form of contributions made by employers in relation to providing childcare facilities are exempted from Thai tax from 1 January 2011 onwards. The exemption only applies to the employee’s natural children, as opposed to adoptive children, and the childcare facilities must be licensed to operate as part of employee benefit scheme under Child Protection Law.

Contact MSNA for your accounting and tax questions and for more information on Thailand personal income tax.

We have to transfer some of our senior employees from our own company to a sister company along with the reserve funds designated for those employees in case of retirement and resignation. Is there any tax point to be considered?

Answer:

When you transfer your employees from your company to work with your sister company which is considered a separate legal entity, along with the reserve funds designated for those employees in case of retirement and resignation, you are allowed to treat the transferred reserve funds as tax deductible expense for the purpose of computing net profit during the transfer period, without conflict with Section 65 ter. (1) and (9) of the Revenue Code. However, the transferred amount is not considered as income of your sister company because the transfer of reserve is considered a transfer of future payment obligations to the transferred employees. Accordingly, the sister company is not allowed to claim a deduction upon making payment (from the transferred reserve funds) to transferred employees upon their retirement or resignation.

Contact MSNA for your accounting and tax questions and business needs.

Is there any exemption on taxes if we have a disabled employee hired to work with our company?

Answer:

Under Royal Decree (No. 499) BE 2553, a business entity employing a disabled employee with an identification card issued under the Persons with Disabilities Empowerment Act, that has paid employee remunerations, including salaries, overtime wages, bonuses, hardship allowances (if any), medical expenses and social security fund contributions, in accordance with its obligations under the employment contract, is entitled to a corporate income tax exemption.

Contact MSNA for more information on accounting and tax in Thailand.

Thai Government imposes a duty exemption measure to help manufacturers in declared disaster areas whose plants and factories were inundated by the floods.

In summary, eligible flood-affected operators can be exempted from import duty upon meeting the criteria as follows:

1. The business operator has plants in declared disaster area.
2. The business operator imports the goods itself.
3. The imported goods are brand-new and have never been used.
4. The imported goods are the same or similar to those were produced by the business operator at its plants before being inundated by the floods.
5. The imported goods must be pre-approved for import by the Ministry of Industry or other authorized government agency.

The exemption covers imports commencing 1 January 2012 to 30 June 2012.

Further details on the implementation of the above mentioned measures and associated regulations have yet to be announced.

Contact MSNA for your Thailand tax and accounting questions.

Here is the summary of the recent tax incentives offered by Thailand Board of Investment for directly flood-affected companies.

I. Tax incentives for directly flood-affected companies

Conditions:

• Existing BOI-promoted projects directly affected by flood
• Still have remaining unused corporate tax exemption period

REMARK: An official announcement is to be issued soon.

Tax Incentives:

1. Projects subject to a corporate income tax exemption cap

Remaining at original province

-8 year corporate income tax exemption (subject to 150% cap on new investment * + remaining unused cap)

Relocation to another province

-8 year corporate income tax exemption (subject to 100% cap on new investment * + remaining unused cap)

* All fixed assets (except land) including repairs of existing machinery and replacement machinery previously imported under the BOI scheme

2. Projects not subject to a corporate income tax exemption cap

Companies can use option 1 above or the following scheme.

II. Tax incentives for flood-affected industrial estates

Conditions:

• All industrial estates/zones
• Invest in flood-prevention infrastructure and system

Incentives:

• 8-year corporate income tax exemption with cap of 200% of investment excluding costs of land and working capital.

Contact MSNA for Thailand BOI questions and information.

Thailand BOI Flood Relief Measures

Updated as of January 2012

Here is the summary of the updated flood relief measures implemented by the Board of Investment of Thailand.

Measures to Minimize Business Interruption

1. Factories can be allowed to temporarily relocate elsewhere to continue their production for the period of 6 months from the application submission date. This temporary relocation period can be extended if necessary.
2. Manufacturing process can be allowed to be outsourced partially or wholly on a temporary basis.
3. The BOI, the Ministry of Labor and the Immigration Bureau help facilitate companies to bring in foreign experts and technicians to rehabilitate the factories.

Measures to Reduce Tax Burdens

1. The importation of machinery for replacement is entitled to duty-free. (submission deadline is by the end of June 2012)
2. Raw materials imported damaged by the flooding can be counted as part of the waste allowance without any tax burden.
3. Additional years of corporate income tax exemption are offered to BOI-promoted companies directly affected by the recent flooding that are still during their tax holidays.
4. Industrial estates that invest in flood prevention systems are also offered 8-year tax holidays with the corporate income tax exemption ceiling of 200% of their investment excluding land cost and working capital.

Contact MSNA for your Thailand BOI, accounting and tax questions.

The Thai Revenue Department (RD) has recently released a Departmental Regulation which allows a VAT operator to issue and deliver tax invoices electronically.

It can be noted that in the past, the RD does not accept the issuance and use of electronic tax invoice whereas a VAT operator is therefore required to deliver original tax invoice in hard copy to its customer. Thus, the delivery of tax invoice electronically via the internet or email does not comply with the VAT requirements.

Although still subject to the approval of the Director-General of the RD, this recently announced regulation can allow a VAT operator to prepare, deliver and keep its tax invoices or receipts in an electronic form. In this respect, a VAT operator can decide to use the electronic tax invoices for all its activities or only for selected activities as the VAT operator sees fit. The selected activities must be clearly identified in the VAT operator’s application submitted to the RD for approval.

In the case of recipients of electronic tax invoices who have already notified and undergone inspection by the RD for the purpose of maintaining their documents in electronic form in accordance with the Department Instruction No. Paw. 121/2545, they are no longer required to maintain the hard copy of the electronic tax invoices.

Required qualifications:

– Government agency or a limited company or public company which has a paid-up capital of THB 10 million or more on the day that the application is submitted.

– The applicant has a secure and reliable status, such as a good track record of tax payment, no prior tax evasion record or with net assets greater than net liabilities etc.

– Accounting records connecting the issuance of electronic tax invoices must be in electronic form.

– The applicant has good internal control and reliable process to prove that the electronic tax invoices and electronic receipts will contain the same accurate details when they are created, delivered and received. When an amendment has been made, the system must show all amended information to indicate the information prior to and after amendment.

For the RD’s consideration, the applicant’s accounting software system would need to be appropriately configured with the RD’s electronic tax invoice software since the implementation of the electronic tax invoicing system requires the use of secure and reliable system. Prior to submitting an application, a VAT operator who is interested to apply for and implement this electronic tax invoicing process should approach the Bureau of Electronic Processing Administration team to discuss the general technical requirements in further details.

Contact MSNA for your accounting and tax questions.

The Revenue Department of Thailand has recently announced a new regulation whereby tax payers will be required to use a new 13-digit Tax ID, instead of the current 10-digit numbers. Guidelines given are as follows:

1. Personal income tax payers are to use the Identification Number issued by the Ministry of Interior as their Tax ID number.
2. Juristic persons incorporated or licensed by the Ministry of Commerce are to use the registration number issued by the Ministry of Commerce as their Tax ID number.
3. Other tax payers are to use a 13-digit Tax ID number issued by the Revenue Department.

Use of the 13-digit Tax ID numbers is effective from 1 February 2012, and is to be used for tax return filing, tax payment, withholding deduction and remittance, and in all other contact with the Revenue Department and tax documentation. However, withholding tax certificates, tax invoices, receipts and invoices which have already been prepared using a 10-digit Tax ID number can continue to be used until 31 January 2013.

Contact MSNA for your Thailand taxation and accounting questions.