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.