(7/2006)
For your attention, when reviewing your tax returns, please be fully aware of the following regulations enacted in 2005, as they may affect 2005 corporate income tax returns to be filed by Tuesday 30 May 2006 for accounting periods ended 31 December 2005.
Educational Support Donations (Royal Decree No. 420 and Director-General Notification dated 5 January 2005)
Double the amount of the expenses are deductible for corporations making cash or non-cash donations for rendering educational support to a state education institute, a government organization education institute, a private school established under the law governing private schools, or a private university established under the law governing private universities, according to the rules, procedures and conditions of the Director General Notification dated 5 January 2005. The expenses must be related to the procurement or construction of a building with or without land for an educational institute or to procure educational equipment and materials including computers and peripherals, as prescribed by the Minister of Education, for educational purposes. Please note that such computers and peripherals must have never previously been used.
However, in total such expenses must not exceed ten percent of the net profit before deduction of expenses for charity or for public benefits and for education or for sports under Section 65 ter (3) of the Revenue Code.
Effective date: 25 August 2004 but applicable since 5 January 2005
Social Support Donations (Royal Decree No. 428)
- Double the amount of the expenses are deductible for corporations making cash or non-cash donations to build or maintain private parks, playgrounds and sports halls open to the general public at no charge, or public playgrounds and sports halls. This is providing that such expenses when combined with expenses paid for educational support in a project approved by the Ministry of Education (under Royal Decree No. 420) do not exceed ten percent of the net profits before expenses paid for public charitable donations or for public interest and expenses for educational or athletic purposes under Section 65 ter (3) of the Revenue Code
- The full amount is deductible for corporations making cash or non-cash donations to 1) a disabled rehabilitation fund, established under the law on rehabilitating the disabled, 2) a social welfare fund, under the law on social welfare, 3) the child protection fund, under the law on child protection, and 4) the national sports improvement fund set up by the cabinet resolution on 16 February 1999. However, such amounts when combined with the expenses incurred for the purpose of public charitable donation under Section 65 ter (3) of the Revenue Code shall not exceed two percent of the net profits before public charity expenses.
Effective date: 25 January 2005
Tax Exemption for Energy Saving Programmes (Royal Decree No. 436 and the Director-General Notification on income tax No. 145).
Companies which incur expenses in the acquisition of energy saving replacement equipment are entitled to income tax exemption equivalent to 25% of total costs, not exceeding Baht 50 million.
Conditions for eligibility of equipment
1. The equipment must be new;
2. The equipment must be acquired by the taxpayer and ready for use no later than 31 December 2006;
3. The eligible expenses must be amortised over five tax years or five accounting periods, as the case may be.
4. The equipment must not be sold during the period of exemption; otherwise the tax exemption privilege will be revoked from the year in which the equipment is sold.
The taxpayer is required to file an application for tax exemption, and an energy-saving certificate for the equipment must be obtained from the Department of Alternative Energy Development and Efficiency.
Effective date: 6 October 2005.
Tax Incentive to Promote the Development of Labour Skills (Royal Decree No.437 and the Director-General Notification on income tax No. 148).
Companies which have incurred costs relating to the provision of training for their employees will receive the following tax incentives;
1. Expenses incurred from the provision of employee training were previously deductible at a rate of 150% of the actual cost under Royal Decree No.288. This Royal Decree has increased this rate to 200% as follows:
- Public training: 200% of the expenses in sending employees to train in an education institute or skilled labour training institute established by the Government Authorities or announced by the Minister of Finance.
- In-house training: 200% of the expenses in training employees in accordance with the rule procedures and conditions in Director-General Notification on income tax No. 148 as summarized below;
i) the curriculum adopted for training the employees of a juristic company or partnership is one formulated for developing the employees' labour skills and approved by the Ministry of Labour and Social Welfare, and the training cost per employee is at the rate approved by the same ministry
ii) the training must be for the benefit of the employers business
iii) the individuals participating in the training must be employees of the employer.
iv) the employer must set up a condition that requires the employee who participates in training to continue working after the end of the training.
v) the employer is required to identify the specification, size and quality of the materials and equipment to be used in the training course so that they are not mixed up with those used in the business normally carried out by the employer.
2. Public Training House: Expenses incurred by companies (public training house) for pre-employment training courses for employees are deductible at the rate as follows:
- 150% of the expenses for pre-employment training course for the benefit of the companies’ business as from 29th January 2003 until the day before the enforcement date of this Royal Decree (18th October 2005).
- 200% of the expenses for pre-employment training course for the benefit of the companies’ business as from the enforcement date of this Royal Decree (19th October 2005).
Effective date: 19 October 2005.
Tax Incentive for Cost of Living Support for Lower Income Employees (Royal Decree No. 438 and the Director –General Notification on income tax No. 147)
Companies which provide special cost of living allowances to their employees are entitled to claim a 50% additional deduction for corporate income tax purposes, subject to the conditions outlined below:
1. If the special cost of living allowance of a maximum of Baht 1,000 per month is paid to employees who receive a salary of between Baht 7,000 and Baht 10,000, the combined salary and special living allowance must not exceed Baht 10,000, or
2. If the special cost of living allowance is paid to employees who receive a salary of Baht 7,000 or less, the combined salary and special living allowance must not exceed Baht 7,000 per month.
3. In order for the special cost of living allowance to be eligible for the increased deduction rate, it must be paid to employees between 1 August 2005 and 31 December 2007, and payment must commence by 31 December 2005.
Effective date: 19 October 2005.
Tax Exemption on Dividends Received by Thai Companies Holding Shares in Foreign Companies (Royal Decree No. 442)
Limited companies or public companies incorporated under Thai law are to be exempt from tax on dividends received, subject to the following conditions:
(1) The company which is the recipient of the dividends must hold not less than 25 percent of the shares with voting rights of the company paying the dividends for a period of not less than six months before the date on which the dividends are received.
(2) The dividends must be derived from net profits taxed in the foreign country at a rate of not lower than 15 percent.
(3) In the event that a “special law” in a particular foreign country provides a reduced tax rate or exemption for the net profits under (2), the limited company which receives the dividends is still eligible for tax exemption. (Information received indicates that this exception applies in cases where the company paying the dividend is granted a reduced tax rate under laws similar to those applicable to BoI promotion.
Effective date: 24 November 2005
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