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.

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.