Tax Newsletter, Issue no. 2/2016

Transcription

1 Tax Newsletter, Issue no. 2/2016 In this issue: Tax developments from January to June 2016 I. Reduction of tax rates II. Tax deduction for purchase of first residence for individual III. VAT exemption IV. Additional tax deductions allowed V. Tax exemption/tax support VI. Other matters Tax developments from January to June 2016 I. Reduction of tax rates The reduced rates of personal income tax extended to cover the 2016 tax year Royal Decree No. 600 was published in the Royal Gazette on 24 February 2016 to extend the period of the following reduced personal income tax rates to cover the 2016 tax year. Net income (Baht) Tax rates (%) 0 150,000 Exempt 150, , , , , , ,001 1,000, ,000,001 2,000, ,000,001 4,000, Over 4,000, Page 1 of 10

2 SME corporate tax rates Royal Decree No. 603 was issued to establish the following tax rates for small and medium enterprises (SME) as follows: For accounting periods beginning on or after 1 January 2015 but not later than 31 December 2016: Net Profit (Baht) Tax rates (%) 0 300,000 Nil Over 300,000 10% For accounting periods beginning on or after 1 January 2017: Net Profit (Baht) Tax rates (%) 0 300,000 Nil 300,001 3,000,000 15% Over 3,000,000 20% To be eligible for the above rates of tax, the SME must meet the following conditions: (1) Paid-up capital on the last day of any accounting period must not exceed Baht 5 million, and (2) Income from the sale of goods and provision of services must not exceed Baht 30 million in any accounting period. II. Tax deduction for purchase of first residence for individual Ministerial Regulation No. 313 was published in the Royal Gazette on 9 February An amount paid for the purchase of a house with land or a condominium unit for use as a residence, up to a maximum of 20% of the value of the property, will be allowed as a deduction in the personal income tax computation for five tax years commencing in the year in which the registration of the transfer of ownership of the property takes place. The amount of the deduction each year must be the same. The following criteria must be met: The value of the property must not exceed Baht 3 million. Payment for the property must be made between 13 October 2015 and 31 December 2016 and the registration of transfer of ownership must be completed within the same period. The taxpayer must own the property for a period of not less than five years from the date of registration of the transfer of ownership except in case of either the death of the taxpayer or the property no longer exists in any form. Page 2 of 10

3 The taxpayer must have never previously owned a property for use as a residence. III. VAT exemption Royal Decree No. 613 was issued to grant VAT exemption on the import of prototype cars or motorcycles for the purpose of research, development or testing which are approved to be exempted from excise tax under the excise tax law. Importers must be operators who have received approval from the Director - General of the Excise Department to carry on research, development or testing of vehicles. The effective date is from 1 January IV. Additional tax deductions allowed Donations to sports organizations Royal Decree No. 596 was issued to allow corporate entities and individuals to extend the period of double deduction for donations to sports organizations for three more years from 1 January 2016 to 31 December Furthermore, exemptions from corporate and personal income tax, VAT, specific business tax and stamp duty are granted to corporate entities and individuals on the proceeds from a transfer of property or execution of instruments in respect of donations to the sports organizations made between 1 January 2016 and 31 December However, donors cannot deduct the cost of the property as an expense for income tax purposes. Research and development Royal Decree No. 598, which became effective on 25 February 2016, repeals the former Royal Decree No According to the new regulation, an additional 100% deduction for tax is still allowed to corporate entities in respect of expenditure on R&D for technology and innovation when hiring government agencies or the private sector, as approved by the Director-General of the Revenue Department, provided the R&D is incurred in Thailand. In addition to the above, a further 100% tax deduction is granted for R&D expenses paid from 1 January 2015 to 31 December 2019 with threshold amounts depending on the revenue of the company. Corporate entities that claim a deduction for R&D expenses under this regulation are not entitled to claim deduction under the investment promotion law either partly or fully. Additional deduction for investment in new assets Royal Decree No. 604 was issued to grant corporate entities an additional deduction based on the actual amount paid between 3 November 2015 and 31 December 2016 for investment in the following types of new assets that Page 3 of 10

4 are ready to be used during the same period: 1. Machinery, components, equipment, tools, furniture and fixtures 2. Computer programs 3. Registered vehicles under the law, excluding passenger cars with not more than 10 seats which are not acquired for use in a leasing business 4. Permanent buildings, excluding land and permanent buildings used for residence purpose. The additional deduction will be averaged equally every accounting period according to the number of accounting periods granted for each type of asset: 3 periods for computer programs, 5 periods for machinery, components, equipment, tools, furniture and fixtures and registered vehicles and 20 periods for permanent buildings. The assets are subject to the following conditions: 1. Must never have been used before and ready for use by 31 December 2016 * 2. Exist in Thailand, except registered vehicles 3. Not subject to tax benefits available under other tax regulations issued according to the Revenue Code, either partly or wholly 4. Not used in a business subject to tax exemption under the investment promotion law, either partly or wholly However, in case of the investment schemes under acceleration, the company can take this benefit. This is on the conditions that there has been no investment in these schemes and the tax privileges thereof have been elected not to be used. If corporate entities do not comply with the criteria and conditions of this regulation in any accounting period, the right to the tax benefit will be withdrawn with effect from the first accounting period in which this tax benefit was used. The tax returns for the respective accounting periods will be required to be re-filed. However, in the case where the assets are sold, damaged or no longer exist, the tax benefit will end in the accounting period in which such event occurs. In this case, the tax benefit already used will not be required to be re-computed. Double deduction for hiring students who currently study accounting Royal Decree No. 607 was issued to grant a double deduction to SMEs for expenses relating to the hire of students who currently study accounting, as certified by their educational institutions under the supervision of the Ministry of Education, for handling accounting matters for accounting periods commencing on or after 1 January 2016 until 31 December In this regulation, the term SMEs means companies or juristic partnerships established under Thai law that have fixed assets, excluding land, with a value of not more than Baht 200 million and no more than 200 employees. Double deduction for expenses paid for domestic seminars and training Royal Decree No. 611 was issued to extend a double deduction to corporate entities from 1 January 2016 to 31 December 2016 for expenses for seminar rooms, accommodation, transportation and other expenses related to domestic * In its meeting on 31 May 2016, the Cabinet approved an amendment to the regulation whereby the machines or permanent buildings do not need to be ready for use by 31 December 2016 Page 4 of 10

5 seminars and training for employees, or expenses paid to tourism operators under the law governing travel agency business and guides for such seminars and training. Expenses for domestic travelling and hotel According to the Ministerial Regulation No. 316, the deduction of up to Baht 15,000 is granted to individuals for domestic travel and hotel expenses which is spent from 1 January 2016 to 31 December V. Tax exemption/tax support SBT exemption for treasury management Royal Decree No. 586 granted specific business tax exemption to qualified IHQs that have obtained a treasury centre license from the Bank of Thailand and an approval from the Revenue Department for the tax concessions when carrying on the business of treasury management for its associated enterprises only on interest received from loans to the associated enterprises. To encourage multinational companies to set up IHQs in Thailand more, Royal Decree No. 612 was issued to extend the tax base for SBT exemption for such qualified IHQs to be all the remuneration received from treasury management services provided to the associated enterprises. This Royal Decree has been effective back to 2 May Tax exemption for conversion of Property Fund to Real Estate Investment Trust (REIT) Royal Decree No. 599, which is effective from 25 February 2016, grants the following tax exemptions: Exemption from income tax to unit holders of Property Fund on income from the conversion of an investment unit in Property Fund to a REIT trust certificate, whereby the income has been incurred between 25 February 2016 and 31 December Exemption from VAT, specific business tax and stamp duty to Property Fund for the transfer of property due to the conversion of Property Fund to REIT between 25 February 2016 and 31 December Tax support for target activities using technology as the basis for the production process and services The government has a policy to promote target activities that use technology as the basis for the production process and services as prescribed and approved by the National Science and Technology Development Agency (NSTD). Tax packages have been issued to grant tax incentives to (1) small and medium sized operators that carry on these target activities, (2) venture capital investing in the operators, including (3) investors in the venture capital. Tax benefits for operators Royal Decree No. 602, published in the Royal Gazette on 21 April 2016, grants to small and medium sized operators (SMEs) a corporate income tax exemption on profit derived from target activities for five accounting periods provided that the target Page 5 of 10

6 activities make up at least 80% of the total income in each accounting period. The Director-General of the Revenue Department must approve the exemption and the company must not apply for a corporate income tax exemption, either partial or complete, under the investment promotion law. To be eligible for this exemption, the SME must be a company or juristic partnership established between 1 October 2015 and 31 December 2016 with registered paid-up capital on the last day of the accounting period of no more than Baht 5 million. Its income from the sale of goods and the provision of services must not exceed Baht 30 million in any accounting period. Tax benefits for venture capital Royal Decree No. 597, which is effective from 25 February 2016, grants to venture capital companies a corporate income tax exemption for ten accounting periods (i) on dividends derived from an operator company performing target activities and (ii) on the gain on the transfer of shares in the operator company provided that the operator company earns at least 80% of its income from the target activities. The operator company may be either an SME, as defined in Royal Decree No. 602, or any company established under Thai law that is not listed on the Securities Exchange of Thailand. Tax benefits for shareholders and unit holders in venture capital Shareholders or unit holders, both individuals and corporate entities, of the venture capital company or private equity trust are also granted personal or corporate income tax exemptions for ten accounting periods on the following income: - the portion of dividends derived from the venture capital company and the private equity trust from the target activities of the operator company - gains on the transfer of shares or trust units in the venture capital company or the private equity trust investing in the operator company carrying on the target activities provided that the operator company earns at least 80% of its total income from the target activities - gains on the dissolution of the venture capital company and the private equity trust based on the proportion of retained earnings from the target activities of the operator company or exempted from tax. The characteristics of the operator company are same as aforementioned. A venture capital company established under Thai law and a private equity trust established to carry on a venture capital business according to the relevant law governing trusts must have paid up capital on the last day of each accounting period of at least Baht 20 million in addition to the shares held in the operator company carrying on the target activities and any other companies. The venture capital company or private equity trust must register with the Securities and Exchange Commission by 31 December In addition, the venture capital company must not have been granted a tax exemption under the previous regulation. The target activities using technology as the basis for the production process and services prescribed and approved by the NSTD are: Food and agriculture Energy saving, energy replacement and clean energy Bio-technology base Medical and public health Tourism, services and creative economics Page 6 of 10

7 Advanced materials Textiles, clothes and accessories Vehicles and parts Electronics, computers, software and information technology services Research, development and innovation or new industries. VI. Other matters Amendment of certain criminal punishments under the Revenue Code The Revenue Code Amendment Act (No. 41), which became effective on 25 February 2016, was issued to amend certain criminal punishment sections under the Revenue Code to cover the tax return filing with incomplete attachments by corporate entities and the request for tax refund by falsehood, fraud, artifice or any other similar device whatever to be under criminal punishment. It is also to increase the punishment rate to be appropriate. Here below are the amendment of criminal punishment sections: section 35 The amendment was to include corporate entities that do not file documents necessary to calculate corporate income tax together with audited financial statement within 150 days of the end of the accounting period under section 69 as the criminal offence which shall be punished with a fine of not exceeding Baht 2,000. section 37 and 90/4(6) The amendment was to include the request for tax or VAT refund by falsehood, fraud, deception or any other similar method as the criminal offence which shall be punished with imprisonment from three months to seven years and a fine of Baht 2,000 to Baht 200,000. section 37 bis The punishment is increased to whoever intentionally fails to file a return with a view to evading payment of tax and duty from a fine of not exceeding Baht 5,000 or imprisonment not exceeding six months or both to be a fine of not exceeding Baht 200,000 or imprisonment not exceeding one year or both. Requirements for companies that registered with the Revenue Department for the waiver of a tax audit Withholding tax still required on payments to SMEs that registered with the Revenue Department for the waiver of a tax audit Further to the Royal Ordinance which was published in the Royal Gazette on 1 January 2016 and Royal Decree No. 595, SMEs that registered with the Revenue Department for the waiver of a tax audit will obtain an additional benefit in the form of income tax exemption for the accounting period beginning between 1 January 2016 and 31 December Nevertheless, according to the Revenue Department s clarification dated 11 April 2016, withholding tax is still required for any payment of income which is subject to withholding tax to such SME. Page 7 of 10

8 For this purpose, the SME must have the following characteristics: (1) Paid-up capital on the last day of any accounting period must not exceed Baht 5 million. (2)Income from the sale of goods and provision of services must not exceed Baht 30 million in any accounting period. Due date for filing annual corporate income tax returns with penalty and surcharge for corporate entities that registered with the Revenue Department for the waiver of a tax audit The Revenue Department has issued a clarification No. 5 dated 22 June 2016 stating that corporate entities that registered with the Revenue Department for the waiver of a tax audit and failed to file the corporate income tax returns for accounting period ending 31 December 2015 by 29 May 2016 are required to file them by 31 August 2016 with penalty and surcharge. For the corporate entities that have the accounting period beginning after 1 January 2015 but no later than 31 December 2015 (in other words, corporate entities that have accounting period not ending 31 December 2015), the due date to file them with penalty and surcharge is the same due date of half year corporate income tax of the following accounting period. (due date of half year corporate income tax is within two months after the end of the first six months of an accounting period.) If the corporate entities do not follow the above due date, the Revenue Department empowers to revoke the waiver of a tax audit. As a results, such corporate entities will not be waived for tax audits and assessments, including criminal fines according to the Revenue Code for income or tax bases incurred or instruments executed including criminal offences incurred before 1 January Contribution to the National Savings Fund Ministerial Regulation No. 314 was issued to grant an allowance to individuals for personal income tax in respect of the actual contribution paid, subject to a maximum of Baht 500,000, to the National Savings Fund. This allowance is effective for assessable income from 2015 onwards. However, this allowance together with the contribution to a registered provident fund, the civil servant pension fund, the welfare fund and investment in retirement mutual funds and qualified pension life insurance premiums may not exceed a total of Baht 500,000 in the same tax year. Furthermore, the benefit obtained from the National Savings Fund as a result of a member becoming incapacitated, or having the status of member terminated upon reaching the age of 60, or being deemed to be 60, or death is exempt from income tax. Page 8 of 10

9 The following regulations have already been issued in Tax Insights Tax measures to encourage tax compliance under the Revenue Code (Tax Insight No.1/2016) Extension of period granted for filing monthly tax returns for all types of tax without penalty or surcharge to corporate entities who registered with the Revenue Department for the waiver of a tax audit (Tax Insight No. 8/2016) The statutory corporate income tax rate in the Revenue Code is now 20% Payments under finance lease contracts will no longer be exempt from withholding tax (Tax Insight No. 3/2016 and 6/2016) Extension of period granted for filing additional VAT returns without penalty or surcharge for corporate entities who registered with the Revenue Department for the waiver of a tax audit (Tax Insight No. 9/2016) Extension for corporate income tax filing for BOI companies with multiple promoted projects (BOI net-off issue) (Tax Insight No. 13/2016) (Tax Insight No. 7/2016) Page 9 of 10

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