Tax on Monthly Pension in Thailand received from overseas by foreigners living in Thailand.

Question:

I am residing here in Thailand with a retirement visa. I receive monthly pension from my home country. Am I required to file my taxes here in Thailand given the fact that this pension has already been taxed in my country?

Answer by THAI ACCOUNTANT:

The money earned overseas is considered as personal income subject to income tax in Thailand only:

1. if you lived here for at least 180 days in the year and;

2. the income was earned and brought into Thailand in the same year.

If you brought the part of income earned in 2011 into Thailand in 2012, that money will not be subject to Thai income tax. So if you put your entire monthly pension in a saving account and only bring some when needed, that is a good way to do it. If you happen to be checked by the Thai Revenue Department, you just need to be able to prove that the income was brought in on first-in first-out basis. Basically, during 2012, you should bring in the money that was earned before 2012.

Contact MSNA for your Thailand tax and accounting questions.

As a part of an initiative to promote competitiveness, below is the summary of the recently enacted Royal Decree No. 530 by the Thai government in relation to the Thailand’s Corporate Income Tax Reduction.

• Companies or juristic partnerships (including companies listed on Stock Exchange of Thailand):

– Accounting period commencing on/after 1 January 2012, tax rate = 23%

– Accounting period commencing on/after 1 January 2013, for the next 2 accounting periods, tax rate = 20%

• Companies or juristic partnerships, with fully paid up capital not exceeding Baht 5 million on the last day of the accounting period and revenue of no more than Baht 30 million from sales of goods or services during the accounting period:

– The portion of net profit of THB 1 – 150,000, tax rate = 0%

– The portion of net profit of THB 150,001-1,000,000, tax rate = 15%

– The portion of net profit over THB 1,000,000: tax rate = 23% for the accounting period commencing on or after 1 January 2012 and 20% for the accounting period commencing on or after 1 January 2013 onwards.

It should be noted that the income tax reduction to 20% for SMEs (companies or juristic partnerships, with fully paid up capital not exceeding Baht 5 million on the last day of the accounting period and revenue of no more than Baht 30 million from sales of goods or services during the accounting period) does not have any limited period as opposed to other companies or juristic partnerships.

In addition, the Royal Decree No. 531 has been enacted to reduce the corporate income tax for the companies listed on the Market for Alternative Investment (MAI), except those for which are still entitled to 20% corporate income tax rate. The applicable corporate income tax rate of 25% on the first Baht 50 million of net profit for the accounting period commencing on or after 1 January 2011 shall be applied to the following:-

(i) The company that has been listed prior to 1 January 2010 and entitled to the tax reduction under the Royal Decree No. 467 (20% corporate income tax rate), and then completed the utilization of the 20% rate for 3 consecutive accounting periods before 31 December 2011;

(ii) The company that has been listed prior to 1 January 2010 and never been entitled to the 20% corporate income tax rate under the Royal Decree No. 467;

(iii) The company that has been listed during 1 January 2010 to 31 December 2011.

Contact MSNA for your Thailand accounting and tax questions.

Today, THAI ACCOUNTANT answer a question from one of our avid readers. How to account restoration expenses of real estate development? See our answer below and how you can account the cost of the company for real estate restoration of your company here in Thailand.

Question:

We have real estate development projects located in the flood affected areas. How should we record project restoration expenses due to floods?

Answer:

Thank you for your inquiry. For the accounting treatment of the restoration expenses, my advice depends on the status of your project as classified as below:

Status 1: If your project has already been sold out, the restoration expenses should be charged to the income statement when incurred.

Status 2: If your project has been partly sold, the restoration expenses should be apportioned between the “sold” part and “unsold” part (inventory). Costs relating to the sold part should be recorded as expenses, while those relating to the unsold part should be recorded as a cost of inventory.

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

A tax incentive to encourage use of trusts for transactions in Thailand’s capital
market has recently been approved by Thailand cabinet. The measure exempts
trust settlers, trustees and trust beneficiaries from income tax, VAT, specific
business tax and stamp duty in income, receipts or instruments executed derived
from transactions performed in relation to an agreement establishing a trust in
accordance with the laws on using trusts for transactions in the capital market
(“in some cases”),

Further details on rules/regulations relevant to the measure have yet to be announced
by the Thai government.

For Thailand accounting and taxation, contact MSNA, Thailand accountant.

Under Section 65 bis (10) of the Thai Revenue Code, dividends received from companies
or mutual funds incorporated under Thai law are exempted from income tax if the
recipient of the dividend is:

(a) A listed company; or

(b) A company holding at least 25% of total shares/units with voting rights in the
dividend payer, provided that the dividend payer does not have a directly or indirectly held shareholding interest in the dividend recipient.

In other case, the recipient of dividends is allowed to treat only one half of the
dividend revenue as assessable income for corporate income tax purposes.

However, the dividend recipient must hold the shares/investment units for at least three
months before and after the date the dividend is received (the so-called 3+3 rule).

Recently the Thai cabinet approved a draft Royal Decree that included dividend income
tax exemption / reduction for new companies formed by amalgamation or transferees
under an entire business transfer scheme.

Under a measure approved by the cabinet, when the dividends are received from new
companies formed by amalgamation or from the transferee under an entire
business transfer scheme, the period of time that the dividend recipient held
shares or units in the amalgamating companies or the transferor of business
before the amalgamation or business transfer can be taken into account in
determining the length of the shareholding.

For Thai taxation and accounting, contact MSNA, Thai accounting company in Bangkok.

Does financial support we received for the company has to be treated as taxable income and subject to VAT?

Answer:

In general, financial support received as a donation or reward must be treated as taxable income.

However, financial supports provided by the following parties are exempted from corporate income tax:

A. Financial support from the government

Financial support from the government are exempted from corporate income tax on condition that the recipients comply with conditions and procedures imposed by the Director-General of the Revenue Department (yet to be announced). Companies are encouraged to register as a flood-affected party with any government centers or agencies assigned to assist flood victims in their locality.

B. Financial support from parties other than government

Financial support from parties other than government in an amount “not exceeding the actual damage” will be exempted from corporate income tax.

Meanwhile, financial support or assistance received without obligation is not subject to VAT because they are not regarded as a consideration for the sale of goods or provision of services.

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

Losses or damage to goods and assets are not regarded as sales of goods and assets and therefore, no VAT is payable.

Claims paid by insurers for lost or damaged goods and assets, as well as for business interruption, are not subject to VAT because they are not regarded as consideration for sales of goods or provision of services.

However, if damaged goods or assets are sold to others, including the insurer, VAT must be paid on the proceeds.

Contact MSNA, Thailand Accounting firm, for your tax and accounting questions.

Businesses that suffered losses from the recent flooding in Thailand are asking if they can use the losses to lower their income tax.

If your company is insured and the losses are covered by the insurance policy, they cannot be treated as expenses immediately and you must wait until the issue of the insurance claim is resolved. Once the amount of the insurance claim is agreed, the losses (net of the insurance compensation) can then be treated as tax-deductible expenses.

However, if your company is not insured, losses incurred can be treated as expenses immediately. But if assets or goods are not totally lost and were only damaged, then these must be destroyed or sold before they are expended. Necessary evidence of destruction should be established and retained for future reference. This is because if the Revenue Department requests to see the evidence in the future, the details and evidences will not be forgotten or lost.

On the other hand, when there is compensation received from insurers, if the compensation exceeds the net book value of lost fixed assets, the excess is exempted from corporate income tax (a concession granted by the authorities as a consequence of the previous floods and of benefit to the current floods).

However, compensation received from insurers in excess of the cost of goods (not fixed assets) and any compensation received for business interruption are taxable income since no concession was granted specifically for these two categories.

Contact MSNA, Thailand Accounting firm, for your tax and accounting questions.

The Revenue Department has made an announcement regarding the extension of deadline for tax filing.

For taxpayers with business located in certain areas in the flooded provinces, the tax filings of personal income tax, corporate income tax, value added tax,
specific business tax, withholding tax and payment of stamp duty in cash for
the month of period ended at July, August, September, October and November is extended to December 30, 2011.

We recommend checking with the Revenue Department in your area where your business is located to see if your area got an extension of tax filing deadline.

Contact MSNA for your tax and accounting questions.

What to do in case of loss of tax and accounting documentation due to flooding?

Today, THAI ACCOUNTANT answers a timely question from one of our accounting clients.

Our office has been flooded for months and our files and office stuff including
accounting and tax documents were totally damaged. What should we do?

Answer:

The taxpayers who lost books and accounts need to report to the police stations.

To protect your claim, you should report the loss due to the flood along with a list of all damaged or lost documents to the local police station as a future
reference.

Need advice in filing a report with the local police station in your area? Contact MSNA for further assistance.