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.

Today, THAI ACCOUNTANT got an interesting question regarding Corporate Income Tax:

Question:

We, a registered Thai company, are entitled to receive dividends from our subsidiary company in Japan. How will this affect our Corporate Income Tax?

Answer:

Dividends received by Thai Companies from their subsidiaries which are foreign companies located overseas are exempt from corporate income tax provided that the following conditions are met:

– Thai Companies that receive dividends must hold at least 25% of shares with voting rights in the foreign company;

– Upon receipt of the dividends, Thai Companies must have held the shares for at least 6 months from the date of acquiring the shares in the foreign company;

– Dividends received must be paid out of the foreign company’s taxable profits which are subjected to normal rate of at least 15% in accordance with the foreign tax laws.

In the case that there is a tax exemption or reduction on taxable profits from the normal tax rate due to special rules or regulations in the foreign countries, the dividend income received by the Thai companies is still exempted from corporate income tax in Thailand.

If you have any tax or accounting questions, please contact MSNA.

Thailand’s Revenue Department has been encouraging Thailand
companies and other Thai tax payers to adopt Tax Returns E-filing for a few
years.

The Thai Revenue Department has the policy to go green to
cut on its paper use and manpower. It is now more than ever encouraging the tax
payers in Thailand to file their tax returns online (E-filing). Many of MSNA’s
accounting clients in Thailand have received calls from the Thai tax authority
to ask them to start using the e-filing service on the Revenue Department’s
website. Well, sorry the page is only in Thai. You can have your Thai accountant visit that page to start filing your Thailand company’s tax returns on the internet.

To start filing tax online, a tax payer has to file form Por Or 01 “Application Form
to file tax returns via the internet” which has the name, address, tax ID and
contact information of the tax payer, on the Revenue Department’s website. Then within
15 days after filing that form, the tax payer has to physically submit the
following documents to the Electronic Tax Filing Management Office of the
Revenue Department, Revenue Department Building, 27th Floor, 90 Soi Paholyothin
7, Paholyothin Road, Phayathai, Bangkok 10400 :

1. “Agreement for Filing Tax Returns via the internet”
2. The tax payer’s Thai ID card copy (in case the tax payer is a Thai individual), or copy of the tax payer’s Thailand company papers (company affidavit, and the authorized signatories’ passport copy). Note that the papers need to be signed by their owner or in case of a Thai company, the company affidavit copy has to be signed by the authorized signatories and affixed with the company’s stamp.
3. Power of Attorney. If you will not take the above documents to submit to the Revenue Department yourself, you need to make a power of attorney to appoint someone as your agent to submit the documents for you.

After you get their approval, they will send you the user ID and password and inform
you of the first month that you can start E-filing on the Revenue Department
website.

Notes:

1. E-filing your tax returns can be done only within the deadline of each kind of tax returns. For example, the withholding tax returns of the month of August 2011 can be filed online only between 1 – 7 September 2011 and the VAT return of August can be filed between 1 – 15 September. After the deadline, they can only be filed at the Revenue Department branch in your area.
2. When you are using the E-filing service on the Revenue Department website, you will have the options to make E-payment from your bank in Thailand (where you have previously applied for internet banking service) or to take the payment to a bank to deposit into the Revenue Department’s account. The payment has to be made within the tax filing deadline of each type of returns. From the example in Note 1, the deadline for making the tax payment for VAT returns of August is by the 15^th of September.

If you hire a Thai accounting firm to file tax for you, your accountant will have
to prepare all the forms for you to apply for the E-filing service.

For Thailand taxation and accounting questions, please contact us.

MSNA has many accounting clients in Bangkok whose companies operating in Thailand providing services. As their Thai accountant, we get this question often – Is there withholding tax when a Thai company invoices an overseas client?

Withholding tax is there when your company pays a vendor (mostly for services, but please check with your Thai accountant or MSNA for your type of business) and you have to withhold some tax. And when another company in Thailand pays your company for service, they will have to withhold some tax from the payment.

In the case of getting paid from an overseas client, if the tax law of the country of your client’s origin generally requires that they withhold tax when paying an overseas company (you), then we need to consult the double taxation treaty between Thailand and that country to see if your company should pay tax in that country and if so what the rate is.

If you have any tax or accounting questions, please contact MSNA.

When you have a company operating in Thailand, a lot of times you or the company’s employees have to travel for the company’s business. How do you reimburse your travelling expenses, like tickets, meals, accommodation and entertainment in a way that is considered legitimate to the eyes of the Revenue Department officials?

When the Revenue Department officials audit the books of your company, if they see that you have travelling related expenses, they want to assume that you took the trip for your pleasure unless you have proof that it was for the company’s business and that all the expenses paid on the trip were reasonable for the trip and reimbursed at cost. If you cannot prove those two points, the travelling expense may get added back to your bottom line profit to recalculate the corporate income tax and you may end up having to pay more tax.

To prove that the trip was for the company’s business, you can attach some email correspondence with, or invitation from, the company in the country (or province in case it was inside Thailand) where you took the trip to. It can be trade show brochures or any other publication if you went to that particular country for the event. The best practice is to attach such supporting documents to the payment voucher in which you reimbursed for the travelling expenses.

Now to prove that the expenses paid for the trip are legitimate expenses, the general rule is that you need to have original receipts for each expense item.

– For air ticket, the safest way is to have the travel agent (if you buy the ticket from a Thai travel agent) issue a receipt in your company’s name. If you buy the ticket online or it is impossible to get a receipt issued in your company’s name, then the E-receipt sent by the online vendor may suffice. I use “may” because some Revenue Department officials are more difficult than others.

– For meals and accommodation, the Revenue Department officials that we talk to advised that you need to get receipts for those expenses from the vendors. And the safest way is for the receipts to be in the company’s name. In case of overseas trips, if it is not possible to have the company’s name of the receipts, just get the receipts.

– For taxi fares and any other expenses whose nature is that the vendors do not issue receipts for the customers, then in your travelling expense report (or expense reimbursement form), you should specify the reason why you had to pay for the expense. Like taxi fares, write down that you took the cab from where to where for what business.

– Please note that if the company just gives the employee a daily allowance for meals and taxi for example, it will likely be treated as part of the employee’s income and thus needs to be included in his personal income tax calculation. If the employee reimburses for the expenses at cost, it will not be part of his income.

– What happens if the expenses do not have receipts for is that the Revenue Department officials will very likely add them back to recalculate the corporate income tax.

For tax questions, contact www.msna.co.th.