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Archives for July 2014

Tax Implication of buying a condominium in Thailand

One of our tax clients is planning to purchase a condominium unit in Bangkok. He asked us if there is any tax to be paid to the authorities. Today, we answer his question based on two scenarios: if the condominium will be purchased under his name or the company’s name.

  1. When he buys it in his name, he needs to hold it for 5 years otherwise, he has to pay for Specific Business Tax (SBT) 3.3% of the selling price when he sells it on top of the 2% transfer fee and his personal income tax because it will be considered as purchasing a condo for business purpose. However, if he sells the unit after 5 years, he doesn’t have to pay for SBT of 3.3% although he needs to pay for the transfer fee and income tax.
  1. When the purchase is done in company’s name, the company has to pay the transfer fee plus Specific Business Tax 3.3% of the selling price whether he sells it before 5 years or after. Although we are not yet sure how much corporate income tax the company has to pay in the future, tax will be based on the net profit of the company, part of which is the profit from selling the condominium. Furthermore, if he use it personally, when the Revenue Department comes to check the condominium and they know that he is staying there, they will make the company charge him for rent and this will be part of company’s income. The company can also use the depreciation of the condo as company’s expenses.

Contact MSNA for your accounting, tax and other business needs in Thailand.

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Tax Withheld from a Thai Company by another Company Overseas

Today, we answer a question from one of our accounting clients regarding the tax withheld by overseas-based company. Can they recover this cost?

In theory, the tax withheld by another country should be a tax credit to the Thai company, but only if the company makes profit and will have to pay tax, then this tax credit will lower the amount of tax check it has to pay to the Revenue Department.

Hence, to use the withholding tax as tax credit, the company needs the following documents to prove it:

  1. The withholding tax certificate issued by the client overseas, and has to attach its Thai translation too.
  2. The proof of payment for the service on the transaction.

Know more about Thailand withholding tax and how it works. Contact MSNA for your Thailand accounting and tax questions.

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Treatment of Entertainment Expense as add-back portion per Thai Tax Laws

Today, we talk about the entertainment expenses or those expenditures incurred to entertain a client, customer or staff as part of generating income for the business as well as how to treat it as add-back portion according to Thai tax laws.

The Revenues and Expenses are the two vital items in an Income Statement report; the difference between these two items is called the Net Income. Revenues are the income received by a Company usually from sale of goods and services while expenses are the itemized deductions or costs incurred by the company during its course of business. In the Accounting point of view, all the relevant expenses incurred in carrying and doing the business is considered deductible, but in the Tax Laws’ point of view some or a percentage of these expenses are not considered deductible. One good example for this kind of expense is the Entertainment Expense.

The actual entertainment an expense is to be deducted from gross income. However, in the Thai Tax laws, the total deduction of entertainment expenses in an accounting period shall not exceed 0.3 % of total gross revenue or gross sales, or of the paid-up capital, whichever is greater. In addition, the total entertainment expenses allowed for deduction shall not exceed Baht 10 million.

Hence, if Company A incurred entertainment expense amounting to 10,000, total revenue of 100,000 and a shared capital of 200,000, the total add-back portion added to the accounting net income/loss to arrive for the total taxable net income/loss will be the difference between the entertainment expense allowed by law which is 0.03% of the shared capital or the total revenues whichever is higher. In such case it is 200,000 less 10,000 actual entertainment expense incurred per book or 4,000.

Contact MSNA for your Thai accounting and tax questions.

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