Just recently, several duty exemption measures were announced by the Thai Cabinet to help manufactures whose companies were affected by flooding and located within declared disaster areas. Briefly, these duty exemption measures cover the following categories and apply to imports made during the period 25 October 2011 to 30 June 2012.

1) Machinery, components and parts, including related tools and equipment, that are imported to replace or repair machines damaged by the floods, subject to the following conditions:

i) The eligible business operator must be located in a declared disaster area.

ii) The eligible business operator may import itself or assign another party to import on its behalf. In such instance, the assigned party must present an approval letter to the Customs Department at the time of import entry.

iii) The machinery, components and parts, including related tools and equipment must be new.

iv) The Ministry of Industry will issue an approval letter authorizing the import and the importer must present this approval letter at the time of entry.

2) Completely built-up (CBU) passenger vehicles under HS 87.03 and CBU pick-ups under HS 87.04 with engine size not exceeding 3,000 cc, subject to the following conditions:

i) The eligible business operator must be an automobile manufacturer whose plant operations cover the complete vehicle production process, including
body-making, painting and vehicle assembly. They must also be located in a
declared disaster area. Manufacturers of vehicles assembled with used parts are
therefore excluded.

ii) Those models of CBU vehicles imported must not currently be manufactured at other local plants. Further details of terms and conditions of this exemption to be issued by the Office of Industry Economics.

iii) The eligible importer must be the automobile manufacturer itself.

iv) The Office of Industry Economics will issue an approval letter authorizing the import and the importer must present this letter at the time of entry.

3) Spare parts for vehicles that are imported for local production:

i) The eligible business operator must be a vehicle parts manufacturer that is located in a declared disaster area.

ii) The eligible business operator may import itself or assign other local vehicle
parts manufacturers to import on its behalf for further assembly. However, the
operator cannot assign to a used parts vehicle manufacturer. If the right to
import is assigned to another party, written notification must be made to the
Customs Department at the time of entry.

iii) The spare parts imported must be new, have never been used and be of the same type that the eligible business operator was producing prior to the flooding; moreover, the imported parts must be used for local assembly of vehicles or vehicle parts.

iv) The Office of the Economics Industry will issue an approval letter authorizing the import and the importer must present this letter at the time of entry.

Remark: Further details on rules/regulations relevant to these measures have yet to be announced.

Today, THAI ACCOUNTANT answers a question from one of our payroll clients regarding the options to buy stocks of a parent company by employees of a Thai affiliate company.

As employees of a Thai affiliate company of an overseas parent company in the USA, it is stated in the terms of our employment that we have an option to purchase stocks of the parent company at a price lower than the market price. When we use this option to buy the stocks, will we be required to pay for tax?

Answer:

An option to purchase stocks of the parent company at a price lower than the
market price is considered assessable income derived from employment within Thailand (income under Section 40 (1) of the Revenue Code), and considered as income derived from the posts in Thailand under Section 41, first paragraph. Therefore, you shall include the benefits received from the purchase of stocks at a price lower than market price as your assessable income for personal income tax purpose. The assessable income of Thai employees derived from the purchase of stocks of a parent company (these are shares which are not publicly traded in the Stocks of Exchange of Thailand) is calculated from the market value of the stock less the exercise price of the stocks on the day ownership is
transferred to the employees.

Furthermore, any contributions the Thai affiliated company made to the purchase of stocks in the parent company as part of the scheme are considered as benefits from the employment under Section 40 (1) of the Thai Revenue Code, and are thus required to be included as assessable income for the purpose of calculating personal income tax.

More to consider:

Gains derived from the sale of shares on a stock exchange in the USA are assessable income under Section 40 (4) (b) and are regarded as overseas sourced income, and therefore subjected to Thai income taxes if you are considered to be a Thai tax resident and the proceeds are brought into Thailand in the same year they were received, in accordance with Section 41, second paragraph.

When you received dividends on the shares acquired from the exercise of the stock options, it is also considered as overseas sourced income, according to Section 41, second paragraph, and therefore subjected to Thai income taxes if you are considered to be a Thai tax resident and the income was brought into Thailand in the same year the dividend was paid.

Learn more about personal income tax and Thailand taxation. Contact MSNA for further information.

THAI ACCOUNTANT answers a question regarding the tax implications on income earned overseas.

I always visit your website and read your informative articles about doing
business in Thailand which is very helpful to foreigners like me. Now I’m considering moving there for a possible business opportunity and residency. My source of income will be profits from a company which is based and only operating outside of Thailand. I am very curious about what I will pay for tax: will it be my total global income or only the portion of it that is brought into Thailand?

Answer:

First, we thank you for reading our information posted on our website. We are happy to know that this has helped you to consider doing business here inThailand.

Referring to your question, when you reside in Thailand for more than 180 days (continuously or not) in a calendar year, the portion of income from overseas that is earned and brought into Thailand within the same calendar year will be subject to Thai tax. This we mean, the income earned in 2012, and brought into Thailand in 2012. For instance, if you bring $ 100,000 of the income that you earned overseas in 2011 into Thailand in 2012, it is not subject to Thai tax.

Contact MSNA to know more about Thai taxation and Thai visa matters.

This post about “RMF and SSF – Personal Income Tax Saving Strategy” was updated in 2021.

RMF stands for Retirement Mutual Fund.

A taxpayer’s personal income invested in one or more RMF’s (which are in compliance with Thailand Securities and Exchange Act) (combined with contribution to provident fund and/or government pension fund) is tax exempt up to 30% of his income in the year, but not more than Baht 500,000 when combined with other retirement funds for example SSF and provident fund. The following conditions apply to RMF:

1. The taxpayer has to buy RMF at least once a year and he must not cease buying RMF for more than one year continuously.
2. The taxpayer has to hold the RMF for at least 5 years from the date of the first purchase and redeem it when he is at least 55 years old unless the redemption is due to disability or death. And when the taxpayer has hold the RMF for more than 5 years and is at least 55 years of age, he can stop buying RMF, or if he wants to buy more RMF, he does not need to comply with no. 1 above any more.
3. The taxpayer must not receive dividends or any other money from the RMF during the holding period and must get the investment and all benefits back only on redemption.
4. The taxpayer must not get a loan or take money from the RMF fund that he has invested in.
5. The taxpayer must attach to his personal income tax return the certificate of RMF purchase issued by the company that manages the RMF.

SFF stands for Super Savings Fund.

Super Savings Fund is any mutual funds to promote long-term savings. A taxpayer’s personal income invested in one or more SSF’s which are in compliance with Thailand Securities and Exchange Act is tax exempt up to 30% of his income in the year, but not more than Baht 200,000. The following conditions apply to SSF:

1. The taxpayer has to hold the SSF for at least 10 years from the purchase date.
2. The taxpayer may use the SSF tax exemption during the years 2020 to 2024.

Contact MSNA, a Thai accounting company in Bangkok, for any tax or accounting questions.

THAI ACCOUNTANT answers a question about corporate tax refund in case of an entire
business transfer by one company to another company.

Our company in Thailand transferred its entire business to another Thailand based
company. The transfer includes all assets, liabilities, rights and obligations.
However, in the appendix of the business transfer agreement, it says that we,
the transferor, shall have the rights to a corporate tax refund that we were
waiting to get from the Thai Revenue Department prior to the business transfer.
Moreover, we informed the Revenue Department of the business transfer and that we
retained the right to the tax refund. Now, our company, the transferor, has
completed the liquidation process and they said that we cannot get the tax
refund. What is your opinion?

Answer:

First you have to understand that upon the completion of the liquidation process, the
transferor’s status as a juristic person and the liquidator’s authority are
terminated. Therefore, claimable rights arising out of the business transfer including
the rights to a tax refund, will belong to the transferee.

Contact MSNA for your accounting and tax questions. We can also help you on company registration or dissolution matters.

In Thailand, there are many rates of withholding taxes to be considered when making a
payment. It is the duty of every company or other business entities to withhold
taxes when paying for salaries, transportation, advertising, rent or most other
kinds of services and remit the tax to the Revenue Department. Even when you
make payment to overseas vendors, you have to submit withholding taxes if the
transactions meet the criteria.

Today, THAI ACCOUNTANT discusses the withholding tax when paying for the service fee of a bank.

For instance, when a company requested a bank to issue a check to its supplier to
settle a service fee on its behalf, the bank would then charge the company for
both service fee for the issuance of the check and stamp duty for which the
bank is liable (whether the bank charged it separately or as part of their
service fee). In this situation, the Revenue Department requires the party
making the payment to deduct withholding tax of 3 % on the sum of the service
fee and the stamp duty, regardless of whether they are paid separately or
together.

Another example is when a bank issued a bank guarantee for a company, and in return
charged the company a service fee and the stamp duty for which the bank is
liable (either charged separately or as part of the service fee) the company is
also required to deduct 3% withholding tax on the sum of the service fee and
the stamp duty, regardless of whether they are paid separately or together.

Contact MSNA for your questions on Withholding Tax and Thai taxation.

One of the measures to boost energy efficiency in Thailand has just been approved by
the Thai Cabinet which is income tax exemptions of up to 25 % on acquisition of
certain assets. Such measures are summarized as follows:-

– Qualified persons are natural persons, limited companies, public limited companies and juristic partnerships.

– The tax exemption applies to expenditures on purchase of assets such as materials,
equipment or machinery which results in energy saving.

– The measures applies on the acquisition of assets made between 1 January 2011 and
31 December 2012 in accordance with rules, procedures and conditions to be
prescribed by the Director-General of the Revenue Department.

– Expenditures for vehicles and materials, equipment or machineries which are to be used with vehicles are not applicable for income tax exemption.

In addition to these measures, the assets must have the following criteria:-

– The assets must be unused.

– The assets must be purchased in a ready for use condition between 1 January 2011
and 31 December 2012.

– The assets must be certified as materials, equipment or machinery which results in
energy saving by the Department of Alternative Energy Development and
Efficiency within 31 December 2012.

– The assets must not be the types disqualified under this prescribed Decree. (Such
details have yet to be made known).

Moreover, deduction of depreciation of the assets must be made over a period of not less
than 5 years from the date that the assets are ready for use.

Thailand tax and accounting questions? Contact MSNA.

If your company in Thailand gives a loan to the director(s) of the company, or to another company or individuals, it is considered as regularly conducting lending activities in a way that is similar to commercial banks. Your company is subject to Specific Business Tax (SBT) on interest income received on the loan. If you use a cash basis in computing SBT, the SBT amount will be computed based on the actual interest income received. In the
event that a borrower failed to pay the loan, the lender is not responsible to
pay SBT on the accrued interest income of the defaulted loan amount. Read more
on Thailand specific business tax.

What if you do not charge interest on the loan? The Revenue Department upon auditing your accounts will assess the interest income for you using the market rate, or at least the rate that you should have got from a fixed deposit account at a commercial bank had you not loaned the money to the people. However, if your company has a loan from someone else or a bank, the interest to be assessed will be at least the rate you have to pay your creditor for the loan you got from them.

Interest income, recognized by you or assessed by the Revenue Department is part of operating income and it makes your net profit (if any) higher and thus your corporate income tax higher.

Contact MSNA for your questions on Specific Business Tax and Thai taxation.

Specific Business Tax (SBT) – a kind of tax you need to know in case your company has an interest income.

Today, THAI ACCOUNTANT discusses a case of Thailand Specific Business Tax (SBT) on interest income received from guarantee deposits.

A company providing commercial, industrial, marketing and management
consultancy services was required to put cash with its client as a guarantee for
possible damages and liabilities that may arise in the course of providing the
services to the client. In return, the client will pay an interest on the
amount and in the event of damages, the client has the right to make deduction
from the guarantee deposit and related interest. Under this circumstance, such
interest income received by the company is considered as revenue subject to
Specific Business Tax. When the company gets paid for the interest, it has to
submit 3% of the interest received as SBT using Specific Tax Return (form SBT
40) within the 15^th of the following month. In doing so, another 10%
on top on the SBT has to be included in the SBT return as a municipal tax. In short,
the company has to submit 3.3% of the interest receipt.

Contact MSNA for your accounting and tax questions.

In addition to the recently approved flood relief loans by the Thai Cabinet, the
Thailand Board of Investment (BOI) has offered tax relief measures to its
promoted companies operating in Industrial Zone 1, Zone 2 and Zone 3 which were
really affected, might be affected or were not affected by the present flooding.

1. For flood-affected BOI-promoted companies

General measures particularly the corporate income tax (CIT) exemptions/reductions are
being granted to BOI-promoted companies that have been affected by floods and for
those who wish to invest in temporary manufacturing facilities or in new
projects to restore their businesses in Thailand. Such tax relief incentives
for each Industrial Zone are as follows:

Customs duty exemption on imported machinery is also being granted to BOI-promoted
companies in all zones. Companies must submit their applications to the BOI
within the year 2012.

2. For new or existing BOI promoted companies not affected by the floods.

In order to maintain and gain more investors, tax incentives are also being
granted to new or existing BOI-promoted companies not affected by the flooding
and who wish to invest in new projects or expand current investment projects in
Thailand. Such corporate income tax (CIT) exemptions/reductions for each Industrial Zone are as follows:

Exemption on customs duty for imported machinery is also being granted for all zones. Companies must submit their applications to the BOI within the year 2012.

3. For specific businesses affected by the flooding

Automotive manufacturers in all zones are exempted from corporate income tax for 5 years with the tax exemption equal to 100% of investment (excluding land and working capital).

Meanwhile, for “eco car” manufacturers, the current corporate income tax exemption scheme already grants the maximum tax incentives and so there is no change.

For other industries, the BOI board will consider relief measures on a case-by-case basis.

4. For BOI promoted industrial estates/industrial zones operators affected by flooding

The BOI-promoted industrial estates/industrial zones operators wishing to invest in flood prevention infrastructure in the future, whether in current areas or zone extensions, will be granted a corporate income tax exemption equal to 200% of the investment (excluding land and working capital), valid for eight years.