A tax incentive to encourage use of trusts for transactions in Thailand’s capital
market has recently been approved by Thailand cabinet. The measure exempts
trust settlers, trustees and trust beneficiaries from income tax, VAT, specific
business tax and stamp duty in income, receipts or instruments executed derived
from transactions performed in relation to an agreement establishing a trust in
accordance with the laws on using trusts for transactions in the capital market
(“in some cases”),

Further details on rules/regulations relevant to the measure have yet to be announced
by the Thai government.

For Thailand accounting and taxation, contact MSNA, Thailand accountant.

Under Section 65 bis (10) of the Thai Revenue Code, dividends received from companies
or mutual funds incorporated under Thai law are exempted from income tax if the
recipient of the dividend is:

(a) A listed company; or

(b) A company holding at least 25% of total shares/units with voting rights in the
dividend payer, provided that the dividend payer does not have a directly or indirectly held shareholding interest in the dividend recipient.

In other case, the recipient of dividends is allowed to treat only one half of the
dividend revenue as assessable income for corporate income tax purposes.

However, the dividend recipient must hold the shares/investment units for at least three
months before and after the date the dividend is received (the so-called 3+3 rule).

Recently the Thai cabinet approved a draft Royal Decree that included dividend income
tax exemption / reduction for new companies formed by amalgamation or transferees
under an entire business transfer scheme.

Under a measure approved by the cabinet, when the dividends are received from new
companies formed by amalgamation or from the transferee under an entire
business transfer scheme, the period of time that the dividend recipient held
shares or units in the amalgamating companies or the transferor of business
before the amalgamation or business transfer can be taken into account in
determining the length of the shareholding.

For Thai taxation and accounting, contact MSNA, Thai accounting company in Bangkok.

Question:
We usually give gratuities to our employees every year but for this year, we also provided some assistance due to recent flooding. Can we treat the financial support we provided to those who were affected by the floods as
expenses for corporate income tax purposes?

Answer:

A support in the form of financial assistance or accommodation offers that your company provided to your employees who were affected by the flooding can be treated as expenses for corporate income tax purposes.

You mentioned that you usually give gratuities to your employees but you also provide some assistance for this year due to recent flooding. In this case, your company should set guidelines and criteria for providing support to all employees affected by the flooding, and the employee support fund should be reasonable and appropriate. It is advisable to have a resolution by the company’s board of directors, indicating that the assistance is available to all and not to a specific group of persons.

Meanwhile, for the employees who were affected by the recent flooding, who may be wondering if they have to treat the assistance provided by the employer as taxable income, here is the answer.

The assistance, in a form of financial support or accommodation offers that your employer provided to you and other employees affected by the flooding should be treated as “financial support provided under a moral obligation”, and thus is exempted from personal income tax. Therefore, the company should not withhold personal income tax in respect of the financial assistance provided to affected employees.

Moreover, financial assistance provided by employers to employees as compensation for damage is exempted from income tax to the extent that it does not exceed the actual damage; but the actual damage has to be proven.

However, please note that it is possible that some tax officials may interpret the above issues differently and this has yet to be resolved among various organizations and the Revenue Department.

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

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.

In order to support the flood-hit companies’ rehabilitation project and help the
affected employers, the Thai Cabinet has postponed the effective date for the
country-wide increase in the minimum wage to Baht 300 per day from 1 January 2012 to 1 April.

Based on the approved resolution of the Wage Committee, the details of minimum wages are summarized by provinces below:

*The Thai Cabinet has acknowledged the resolution to increase the daily minimum wage rate which varies across the country from Baht 63 to Baht 85. Thus, this will be increased in two steps as follows:

Step 1. An increase of 39.5% of the 2011 daily minimum wage rate

Step 2. An increase to Baht 300 starting on 1 January 2013.

Remark:
In the years 2014 and 2015, the daily minimum wage rate will be fixed at Baht 300 for all provinces. However, if there happens to be a strong economic disturbance that affects the living standard of the workers, the daily minimum wage rates applicable for 2014 and 2015 may be adjusted as the Wage Committee deems appropriate.

Contact MSNA for your questions regarding the minimum wage hike or should you need further assistance with any other Thailand Labour Law matters.

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.