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.

Certain types of businesses are subject to Specific Business Tax (SBT) rather than Value Added Tax (VAT). Businesses subject to SBT must pay VAT on their purchases of goods and services but are not entitled to a VAT credit. The SBT ranges from 2.5 – 3.0 per cent on monthly gross receipts. When a monthly return is filed and SBT is paid, an
additional amount of 10% of the SBT payable is levied as a municipal tax.

Businesses that are subject to SBT

• Banking, financial and similar business
• Life Insurance
• Pawn Brokerage
• Real Estate
• Any other business specified by the Royal Decree i.e. business engages in repurchasing agreement (REPO) and factoring

Activities of certain entities are exempted from SBT such as:

• Activities of Bank of Thailand, Government Savings Bank, Government Housing Bank and Bank for Agriculture and Agricultural Cooperatives
• Activities of the Export-Import Bank of Thailand, the Industrial Finance Corporation of Thailand, Asset Management Corporation, Small Industrial Finance Cooperation and Secondary Mortgage Corporation
• Activities of National Housing Authority, Government Pawn Brokerage and Pension Fund
• Activities of selling securities listed in the Stock Exchange of Thailand

Specific Business Tax Base and Rates

Filing Specific Business Tax Return and Payment

SBT taxable period is a calendar month. SBT return (Form SBT 40) must be filed (and payment must be submitted) on a monthly basis by the 15^th of the following month
whether or not the business has income.

Contact MSNA for your accounting and tax questions.

An MSNA’s accounting client has asked us a question about the VAT on purchase of
goods from a company overseas.

We just ordered some products from a US-based company. This US Company contracts a
Thailand-based manufacturer to produce these products and directly deliver to
us on behalf of them. Is there any VAT to be accounted for? How should we
recognize it?

Answers by THAI ACCOUNTANT:

Sales of goods between a Thailand-based company and a company based overseas with the
goods being manufactured and delivered in Thailand by a Thai manufacturer would
be considered as sales of goods in Thailand (under Section 77/2(1) of the Thai
Revenue Code) that is subject to 7% VAT.

For your case, since you ordered from a non-Thai company (US-based), you would be responsible to self assess the VAT on the gross payment, file a VAT remittance return (Form Por Por 36), and remit the VAT to the Revenue Department by the 7^th day of the following month in which the payment was made. Thus, a receipt issued to you by the
Revenue Department after you paid for the VAT can be used as your company’s input
tax invoice which is creditable against your output tax in the tax month when
VAT is remitted.

In the event that you did not account for VAT, both you and US-based Company would
be both liable to pay for the VAT deficit and a surcharge of 1.5% per month on
the tax deficit. Both of you will also be subject to a fine for not submitting
VAT.

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

Here are Corporate Income Tax and VAT questions from MSNA’s accounting client who owns his business in Bangkok, Thailand, about expenses on improvement of leasehold
property. Read on for the answers from THAI ACCOUNTANT.

We prepared ourselves for the flood. In fact, we improved pavements on the
vicinity and neighboring properties of our office and even constructed a wall
to protect our office from floodwaters. However, we are just leasing this
factory building. Can we include the expenses as deduction for our CIT
computation? How about the VAT for the building materials that we bought?

Answers by THAI ACCOUNTANT:

When you build a wall and improve private pavements and connecting pavements on your company’s rented plot of land, you have made an improvement of the company’s leasehold
property from which the benefits cover more than one accounting period; however,
expenses incurred for such improvement are not tax deductible (under Section 65
ter (5) of the Revenue Code). Such expenses would constitute capital
expenditure that is subject to depreciation (see Section 65 bis (2) of the
Revenue Code and Clause 4 (5) of the Royal Decree No. 145). Meanwhile, for
expenses incurred to improve the sections of the pavements that are not owned or
leased by the company, it is not considered as tax deductible expense as it was
not exclusively used for the company’s business according to Section 65 ter
(13) of the Revenue Code.

As for VAT, any input VAT paid by the company for purchasing materials and
services involved in the building of the wall and the improvement of company’s pavements can be offset against the company’s output VAT. However, any VAT paid on purchasing of materials and services involved in the improvement of the sections of the pavements that
are not owned or leased by the company, cannot be offset against the company’s
output VAT since it is not an expense incurred exclusively for the business of
the company.

For Thailand accounting and tax question, contact MSNA.

Today, THAI ACCOUNTANT got a very timely question.

Since last month, we are continuously giving donations to flood victims of Thailand. Can we include it as deductions for computation of our corporate income tax; at what rate we should use?

Answer:

We acknowledge your generosity. Indeed, you can use your expenses as deduction to
compute your Corporate Income Tax.

Donation expenses given to flood victims between 1 September 2011 and 31 December 2011 can be deducted at 1.5 times the actual expense but the valued amount condition at 10% of net assessable income for the purpose of personal income tax computation and 2% of net profit for corporate income tax computation, still applies.

Contact MSNA for your tax and accounting questions in Thailand.

First-time home buyers in Thailand are benefiting from a new tax scheme recently approved by the Thai Cabinet. This scheme will enable low-income earners to have their
own houses, in response to the Thai Government’s urgent policy of increasing the peoples’ standard of living.

The incentives are summarized as follows:

1. To qualify as first-time buyers, the home buyers must not have previously owned
any residential property or have been recorded as the householder in the House
Registration, unless there is evidence to prove that they were not the owners.

2. The value of residential properties must not be more than Baht 5,000,000.

3. As amended by the Cabinet on 27 September 2011, the proposed tax
exemption of 10% of the cost of a new residential unit costing no more than
Baht 5,000,000 (i.e. up to Baht 500,000) will be treated as a tax exemption and thus deductible from tax payable when calculating personal income tax.

4. The ownership transfer of the property must be registered between 21 September 2011
and 31 December 2012 and the owner must hold the ownership for at least 5 years.

5. Eligible first-time buyers cannot have previously benefited from any of the following
tax schemes:

• Tax allowance for interest paid in respect of the purchase, hire-purchase or
  construction of a residential building.
• Tax exemption on the amount paid to buy a new residential building or condominium in accordance with the Ministerial Regulation No. 271 B.E. 2552 (2009); or
• Tax exemption on the income derived from the sale of residential property to buy a new residential property in accordance with the Ministerial Regulation No. 241
  B.E. 2546 (2003)

6. In case of co-borrowing, a co-borrower who owns a residential property stated in
no. 1 or has benefited from the tax schemes as discussed in no. 5 is not
eligible for a tax exemption.

This tax scheme however is subject to conditions that will be announced by the Director-General of the Revenue Department of Thailand.

The purpose of this summary is to provide awareness to those eligible first time
home buyers. Please contact MSNA, Thailand Accountant, for an expert advice regarding your tax planning.

The Thai Cabinet, during its meeting on 13 September 2011, has approved the
guidelines to refund the excise taxes for the qualified first time car buyers
in order to promote the auto manufacturing industry and to increase purchasing
power by lowering the cost burden for people acquiring the necessities for
daily living. At the same time, it would enable the Government to earn more from the collection of corporate income tax, value-added tax, and car excise tax.

How to become eligible for excise tax refund as a first time car buyer?

Answer:

According to the scheme, the following criteria to become eligible for the excise tax
refund are as follows:

– The first time car buyer must be at least 21 years old and the car purchased must
also be manufactured in Thailand, excluding those produced with imported used parts.

– The car purchased is the first car of the buyer and the purchase is made during September 16, 2011 to December 31, 2012.

– The car must be a passenger car with the engine capacity of not over 1,500 CC or
pick up or double cab and must not be assembled from used parts imported from
overseas.

– The buyer must possess the car for at least 5 years and the buyer must claim for
the refund with the Excise Department along with a letter confirming the
non-transfer of car within 5 year period and copies of hire purchase contract
in case the car is hire purchased.

– The Department of Land Transport will record the 5 year non transfer condition in
its data base and also in the car registration book and will also check and disallow any such transfer within the 5 year period.

How much excise tax can be refunded?

Answer:

The excise tax will be refunded based on actual excise tax paid but not exceeding
THB 100,000 per car. The refund will be made after one year of possession
starting from October 1, 2012.

For questions about Thailand accounting and taxation, please contact MSNA, Thailand Accountant.

Today, THAI ACCOUNTANT got a question on VAT regarding exported services.

Do we have to charge VAT if we provided services to a company outside Thailand? If so, at what rate should we charge?

Answer:

Under the old law (Notification of Director-General of Revenue Department on VAT No.
105), services rendered overseas were subject to VAT at the rate of 0% under
the circumstances that the service had to be used entirely outside of Thailand. However
under the new law (Notification of Director-General No. 181), if the services are
used partially within and partially outside Thailand, then it is possible to
allocate the VAT so that it is partially subject to 7% VAT and the services
used partially in a foreign country will be zero-rated.

Eventually, if your services to your overseas clients are done in Thailand but the product of the service is used outside of Thailand, you don’t have to charge 7% VAT.

This is applicable to any activity that is performed to generate a valuable benefit other than sale of goods. However, this does not apply to travel and tour services in a foreign country.

Contact MSNA, Thailand accounting firm for your accounting and taxation needs.

Today, THAI ACCOUNTANT got a question regarding the online filing of VAT.

Question:

We recently filed VAT return via the internet and paid for it by check but the clearing of this check took so long although we already filed VAT and made the payment before the deadline. Would it be considered late submission of VAT if the check was not cleared on time?

Answer:

At times like this, the Revenue Department sees that your company has a justifiable reason for the late payment and they usually consider extending the deadline of the VAT filing without imposing penalties and a criminal fine. However, you will still be liable to pay a surcharge at the rate of 0.75% per month on the amount of tax payable.

For Thailand taxation and accounting questions, please contact MSNA.

When an employer company pays rewards to its employees, there are both Personal Income Tax on the employee and Corporate Income Tax on the employer company to consider.

THAI ACCOUNTANT got a question about the tax implication when paying monetary rewards to employees as follows:

Question:

The Company used monetary rewards as an incentive for employees to improve performance or reduce operating costs. Such rewards are paid at a rate of 3% of the profit before corporate income tax based on profit and loss figures reviewed quarterly. However, if in any quarter the company incurs a loss, the rewards would not be given. What does the Company has to consider tax-wise.

Answer:

The amount of money received is considered as assessable income of the employees pursuant to Section 40 (1) of the Thai Revenue Code and must be included in the personal income tax computation of the employees. And the Company is responsible to deduct withholding tax as per Section 50 (1) of the Thai Revenue Code at the time of payment.

From a corporate income tax perspective, even though the payment is based on a profit that the company makes every quarter as opposed to the profit at the end of accounting period, it is evident that the payment is based on profit and no compensation is paid if the company generates no profits. Therefore, the payment is a non-tax deductible expense in
accordance with Section 65 ter (19) of the Thai Revenue Code.

Please contact MSNA for more information regarding accounting and tax in Thailand.