A question on withholding taxes: We hire a company to repair old molds and to produce new ones. Do we have to withhold taxes when we pay them? In another case, we have a manufacturing company (who normally produces and sells its own products) produce our plastic products using our own molds. Are we responsible for withholding taxes?

Answer:

When you hire a company carrying on repair service, to repair and produce molds and the required materials are provided by that company itself, such transaction is considered to be a hire of work for the production and repair service. The payment for this kind of service is therefore subject to a 3% withholding tax.

As for the manufacturing company by which you order your goods to be manufactured using your provided mold, and required materials are sourced by that company, in accordance with your orders, the transaction is considered to be a sale of goods and thus, withholding tax does not apply.

Contact MSNA for your accounting and tax questions.

Here is a VAT question from one of our clients:

Hi, our Thai company provides information technology services, including systems monitoring and software management to a company overseas via a website based in United States. Part of our service is to send our employees to the client’s office overseas from time to time for consultation and training purposes. Do we have to include VAT when issuing service invoice to our clients?

Answer:

Services in relation to systems monitoring and software management provided to clients outside of Thailand are considered as an exportation of services which is entitled to a 0% VAT rate.

Learn more information on the VAT system of Thailand on www.MSNAGOUP.com. Contact MSNA for your accounting and tax questions.

As the deadline for submission of Personal Income Tax Returns is nearly approaching, we often receive questions from our individual clients concerning the deductions and computation of their personal income taxes. Here is one of the questions that were answered by the THAI ACCOUNTANT:

Question:

Is it considered a taxable income for the employment benefits in terms of childcare facilities provided by our employer?

Answer:

Employee benefits in the form of contributions made by employers in relation to providing childcare facilities are exempted from Thai tax from 1 January 2011 onwards. The exemption only applies to the employee’s natural children, as opposed to adoptive children, and the childcare facilities must be licensed to operate as part of employee benefit scheme under Child Protection Law.

Contact MSNA for your accounting and tax questions and for more information on Thailand personal income tax.

We have to transfer some of our senior employees from our own company to a sister company along with the reserve funds designated for those employees in case of retirement and resignation. Is there any tax point to be considered?

Answer:

When you transfer your employees from your company to work with your sister company which is considered a separate legal entity, along with the reserve funds designated for those employees in case of retirement and resignation, you are allowed to treat the transferred reserve funds as tax deductible expense for the purpose of computing net profit during the transfer period, without conflict with Section 65 ter. (1) and (9) of the Revenue Code. However, the transferred amount is not considered as income of your sister company because the transfer of reserve is considered a transfer of future payment obligations to the transferred employees. Accordingly, the sister company is not allowed to claim a deduction upon making payment (from the transferred reserve funds) to transferred employees upon their retirement or resignation.

Contact MSNA for your accounting and tax questions and business needs.

Is there any exemption on taxes if we have a disabled employee hired to work with our company?

Answer:

Under Royal Decree (No. 499) BE 2553, a business entity employing a disabled employee with an identification card issued under the Persons with Disabilities Empowerment Act, that has paid employee remunerations, including salaries, overtime wages, bonuses, hardship allowances (if any), medical expenses and social security fund contributions, in accordance with its obligations under the employment contract, is entitled to a corporate income tax exemption.

Contact MSNA for more information on accounting and tax in Thailand.

Thai Government imposes a duty exemption measure to help manufacturers in declared disaster areas whose plants and factories were inundated by the floods.

In summary, eligible flood-affected operators can be exempted from import duty upon meeting the criteria as follows:

1. The business operator has plants in declared disaster area.
2. The business operator imports the goods itself.
3. The imported goods are brand-new and have never been used.
4. The imported goods are the same or similar to those were produced by the business operator at its plants before being inundated by the floods.
5. The imported goods must be pre-approved for import by the Ministry of Industry or other authorized government agency.

The exemption covers imports commencing 1 January 2012 to 30 June 2012.

Further details on the implementation of the above mentioned measures and associated regulations have yet to be announced.

Contact MSNA for your Thailand tax and accounting questions.

The Thai Revenue Department (RD) has recently released a Departmental Regulation which allows a VAT operator to issue and deliver tax invoices electronically.

It can be noted that in the past, the RD does not accept the issuance and use of electronic tax invoice whereas a VAT operator is therefore required to deliver original tax invoice in hard copy to its customer. Thus, the delivery of tax invoice electronically via the internet or email does not comply with the VAT requirements.

Although still subject to the approval of the Director-General of the RD, this recently announced regulation can allow a VAT operator to prepare, deliver and keep its tax invoices or receipts in an electronic form. In this respect, a VAT operator can decide to use the electronic tax invoices for all its activities or only for selected activities as the VAT operator sees fit. The selected activities must be clearly identified in the VAT operator’s application submitted to the RD for approval.

In the case of recipients of electronic tax invoices who have already notified and undergone inspection by the RD for the purpose of maintaining their documents in electronic form in accordance with the Department Instruction No. Paw. 121/2545, they are no longer required to maintain the hard copy of the electronic tax invoices.

Required qualifications:

– Government agency or a limited company or public company which has a paid-up capital of THB 10 million or more on the day that the application is submitted.

– The applicant has a secure and reliable status, such as a good track record of tax payment, no prior tax evasion record or with net assets greater than net liabilities etc.

– Accounting records connecting the issuance of electronic tax invoices must be in electronic form.

– The applicant has good internal control and reliable process to prove that the electronic tax invoices and electronic receipts will contain the same accurate details when they are created, delivered and received. When an amendment has been made, the system must show all amended information to indicate the information prior to and after amendment.

For the RD’s consideration, the applicant’s accounting software system would need to be appropriately configured with the RD’s electronic tax invoice software since the implementation of the electronic tax invoicing system requires the use of secure and reliable system. Prior to submitting an application, a VAT operator who is interested to apply for and implement this electronic tax invoicing process should approach the Bureau of Electronic Processing Administration team to discuss the general technical requirements in further details.

Contact MSNA for your accounting and tax questions.

The Revenue Department of Thailand has recently announced a new regulation whereby tax payers will be required to use a new 13-digit Tax ID, instead of the current 10-digit numbers. Guidelines given are as follows:

1. Personal income tax payers are to use the Identification Number issued by the Ministry of Interior as their Tax ID number.
2. Juristic persons incorporated or licensed by the Ministry of Commerce are to use the registration number issued by the Ministry of Commerce as their Tax ID number.
3. Other tax payers are to use a 13-digit Tax ID number issued by the Revenue Department.

Use of the 13-digit Tax ID numbers is effective from 1 February 2012, and is to be used for tax return filing, tax payment, withholding deduction and remittance, and in all other contact with the Revenue Department and tax documentation. However, withholding tax certificates, tax invoices, receipts and invoices which have already been prepared using a 10-digit Tax ID number can continue to be used until 31 January 2013.

Contact MSNA for your Thailand taxation and accounting questions.

Today, THAI ACCOUNTANT answers a question about VAT Refund for Exporters.

Question:

I would like to make sure that if we export goods and can work with a 0% VAT, it doesn’t necessarily mean that we cannot claim recoverable VAT right? I mean the VAT we pay when purchasing goods?

Answer:

When you export goods, whatever it is, you don’t have to pay VAT (because VAT on export is 0%) and you can claim back your purchase VAT. However, it may take months before the Thai Revenue Department refunds the purchase VAT to you (assuming that all the purchase VAT amounts that you have are refundable).

Contact MSNA for your Thailand tax and accounting questions.

As of January 2012, below is the summary of tax relief measures which the Thai government has implemented for flood-affected persons and companies:

I. Personal income tax allowance for expenditure on repair of damage to houses and cars due to flooding;

II. Additional expense deduction for expenditure on replacement of machines due to flooding and a special depreciation method, for corporate income tax purposes.

I. Here is the summary of personal income tax allowance for expenditure on repair of damage to houses and cars due to flooding-conditions:

1. For immovable properties, including buildings, condominiums, and assets attached to such properties damaged by flooding (‘The properties’)

1.1 Eligible expenses

• Expenditure on repairing buildings, condominiums and assets attached to such properties, including on equipment and materials used for repair
• The properties above must have been damaged by the flooding between 25 July 2011 and 31 December 2011 and located in flood-affected areas as announced by the government.

1.2 Tax allowance

• THB 100,000

1.3 Eligible persons

• Owner, lessee or person using such properties for residential or business purposes or other benefit, who made payment of such expenses between 25 July 2011 and 31 December 2012.

1.4 Conditions

• If payment was made for repair of property in more than one place, the tax allowance can be claimed for expenditure on all properties, but in total is capped at THB 100,000.
• In cases where damage is covered by property insurance, the tax allowance is granted for expenditure in excess of the compensation received from the insurance company, but in total is capped at THB 100,000.
• The right to the tax allowance must be exercised in the tax years 2011 or 2012, or both, but in total is capped at THB 100,000.

2. Cars under Motor Vehicle Act damaged by flooding

2.1 Eligible expenses

• Expenditure on car repair, including on equipment and materials used in the repair.
• The cars must have been damaged by the flooding between 25 July 2011 and 31 December 2011.

2.2 Tax allowance

• THB 30,000

2.3 Eligible persons

• Owner or lessee under the hire purchase agreement for the repaired car, who resides in a flood-affected area as announced by government agencies and makes payment of such expenses between 25 July 2011 and 31 December 2012.

2.4 Conditions

• If payment was made for repair of more than one car, the tax allowance can be claimed for expenditure on all cars but in total is capped at THB 30,000.
• In cases where damage is covered by property insurance, the tax allowance is granted for expenditure in excess of the compensation received from the insurance company, but in total is capped at THB 30,000.
• The right to the tax deduction must be exercised in the tax years 2011 or 2012, or both but in total is capped at THB 30,000.

II. Meanwhile, additional expenses deduction for expenditure on replacement of machines due to flooding and a special depreciation method for corporate income tax purposes-conditions are as follows:

a. Additional tax deduction for machine replacement costs

– Tax exemption at 25% of amount paid to acquire machines used for manufacturing or providing subcontract manufacturing services

– The newly acquired machines must have been available for use between 25 July 2011 and 31 December 2012

– The newly acquired machines are to be depreciated over as period of at least 5 years.

b. Special depreciation method for the replacement machines

– Companies or partnerships affected by flooding between 25 July 2011 and 31 December 2011 and located in flood-affected areas as announced by the government, that buy or receive transfer of ownership in machines for use in their business can deduct 40% of the value of the machines on the date of acquisition

– The residual value is to be deducted in accordance with the conditions of the tax code. Hence, 52% of the value will be deducted as depreciation in the first year and 12% in each of the second to fifth years.

– Such machines must have been available for use between 25 July 2011 and 31 December 2012.

Note that the tax measures under a. and b. above are not available to taxpayers who are already entitled to other tax privileges.

Further details of rules/regulation relevant to these measures should be sought.

Contact MSNA for your accounting and tax questions.