Netting off of profit and loss and utilization of tax losses of promoted companies

(8/2009)

The ruling of the Board of Taxation No 38/2552 was issued on 13 February 2009 to rule the following matters with regard to BOI promoted companies:

1. Netting off of profit and loss

In the case of a company having more than one project granted investment promotion, the Board ruled that the income and expenses of all promoted projects within the same accounting period must be computed under the provisions of the Revenue Code so as to incur a net profit or a net loss of the promoted projects. In other words, the loss of one promoted project is required to be offset against a profit from another promoted project within the same accounting period so as to obtain a net profit or a net loss of all promoted projects of that accounting period.

If the result is a net loss, it will be regarded as the annual loss of the promoted business and the company is entitled to deduct such annual loss against the profit of its promoted business after the expiry of the tax holiday for a period of 5 years, whereby it may be deducted from the net profit of any one or several years.
Please note that this net off issue is being considered by the State Juridical Council and is still pending for its decision, as the Board of Investment has a different opinion.

2. Utilization of tax losses

In the case where a company has both a promoted business subject to a reduction of 50% of the corporate income tax rate and a non-promoted business subject to the normal rate of corporate income tax, the Board ruled that the company is entitled to first deduct the annual loss of the promoted business against the net profit of the promoted business subject to the reduction of 50% of the corporate income tax rate. Thereafter, if there is an annual loss remaining from the business granted investment promotion, the company is entitled to deduct such loss against the net profit of the non-promoted business that is subject to corporate income tax at the normal rate.