Tax Newsletter, Issue no. 1/2016 I. Tax developments – 2015

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Tax Newsletter – 1 April 2016
Tax Newsletter,
Issue no. 1/2016
I. Tax developments – 2015
In this issue:
I. Tax developments
– 2015
I. Corporate income tax
II. Personal income tax
III. Value added tax
IV. Stamp duty
V. Transfer pricing law
VI. Inheritance tax and
gift tax
VII. Tax incentives
VIII. Other tax issues
II. DTA update
I. Thailand-Singapore
II. Thailand-India
III. Thailand-Tajikistan
III. Update of other
issues
I. Special Appeal Court
II. Service businesses
I. Corporate income tax
1 Reduction of tax rates
1.1 Corporate income tax rate
The current corporate income tax
rate of 20% has been treated as a
temporary reduction from the
statutory rate of 30% under the
Revenue Code since 2013. It has
now been officially reduced to
20% under the Revenue Code for
accounting periods beginning on
or after 1 January 2016.
Net profit (Baht)
1.2 SME corporate income tax
rates
For accounting periods beginning
on or after 1 January 2015:
Tax rates (%)
0 – 300,000
Nil
300,001 – 3,000,000
15%
Over 3,000,000
20%
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Tax Newsletter – 1 April 2016
To be eligible for the reduced
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.
Note: A proposed amendment to
these SME corporate income tax
rates has been approved by the
Thai Cabinet on 13 October 2015.
However, at the time of this
publication, the legislation has
not yet been issued.
2 Additional reasonable excuse
where the estimated net
profit for half-year tax is
lower than actual net profit
by more than 25%
See our tax newsletter no. 7/2015
3 Double deduction allowed for
accommodation and
travelling expenses
See our tax newsletter no. 1/2015
II. Personal income tax
1 Reduction of personal
income tax rates
for one more tax year until 31
December 2016.
The following reduced personal
income tax rates will be effective
Net income (Baht)
0 – 150,000
Tax rates (%)
Exempt
150,001 – 300,000
5
300,001 – 500,000
10
500,001 – 750,000
15
750,001 – 1,000,000
20
1,000,001 – 2,000,000
25
2,000,001 – 4,000,000
30
Over 4,000,000
35
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2 Amendment of criteria and
conditions for contributions
to RMF and LTF
See our tax newsletter no. 5/2015
3 Additional tax deduction
allowed for travel and
accommodation expenses
See our tax newsletter no. 1/2015
4 Tax amendment for nonjuristic ordinary
partnerships and nonjuristic bodies of persons
See our tax newsletters
nos. 1/2015 and 8/2015
5. Amendment of due date for
filing advance personal
income tax returns for
compensation obtained in
exchange for a long-term
lease of immovable property
and which is to be
apportioned as taxable
income over the lease period
See our tax newsletter no. 6/2015
6 Amendment of conditions
for qualified pension life
insurance premium
Qualified pension life insurance
premiums had been allowed as a
deduction in the computation of
personal income tax at an
amount not exceeding 15% of
‘assessable income’ with a
maximum of Baht 200,000.
With effect from 1 January 2015,
the base for the calculation of the
life insurance premium which
qualifies for the deduction has
been amended to be an amount
not exceeding 15% of ‘assessable
income which is subject to
income tax in each tax year’ with
a maximum of Baht 200,000.
Tax Newsletter – 1 April 2016
7 Measuring the duration of
employment so as to qualify
for the special tax
computation under Section
48(5) of the Revenue Code.
So as to qualify for the special tax
computation for a registered
provident fund under section
48(5) of the Revenue Code when
an employee leaves work, one of
the conditions is that the duration
of employment must not be less
than five years.
New legislation allows an
employee to count the duration of
employment with the former
employer together with the
duration of work with the new
employer, including the case of
returning to work with the former
employer. This is on the condition
that the period of unemployment
was not more than one year and
that the special tax computation
method under section 48(5) was
not used when the employee
ceased working for the former
employer. In addition, the
provident fund benefit under the
former employer must be
transferred to the new employer’s
provident fund.
In the case where the special tax
computation method under
section 48(5) upon resignation is
used or the period between the
date of resignation from the
former employer and the date of
starting work for the new employer
is longer than one year, the
duration of employment for
entitlement to the special tax
treatment will recommence on the
first day of working for the new
employer.
This is effective for assessable
income received from 1 January
2015 onwards.
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Tax Newsletter – 1 April 2016
III. Value added tax
1 Extension of 7% VAT rate for
one more year
3 Discount on re-insurance
premiums not included in
VAT base
The 7% rate of VAT has been
extended for one more year from
1 October 2015 to 30 September
2016.
With effect from 30 April 2015,
the discount on re-insurance
premiums given by a re-insurance
company to an insurance company
need not be included in the VAT
base.
2 E-book sales exempt from
VAT
With effect from 2 May 2015,
sales of electronic newspapers,
magazines and textbooks
delivered on the internet are
exempt from VAT.
4 The position of director is not
subject to VAT
See our tax newsletter no. 1/2015
IV. Stamp duty
Stamp duty is required to be paid by
cash to the Revenue Department
instead of by affixing stamps for the
following instruments:
-
-
hire of work agreement with
remuneration of Baht 1 million or
more.
See our tax insight no. 5/2015
lease of land, buildings, other
construction or floating rafts
with rental of Baht 1 million or
more, and
V. Transfer pricing law
On 7 May 2015, the Cabinet
approved a draft Act Amending the
Revenue Code that will introduce
specific transfer pricing provisions
into the Revenue Code.
At the time of this publication, the Act
has not yet been issued.
See our tax insight no. 4/2015
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Tax Newsletter – 1 April 2016
VI. Inheritance tax and gift tax are now in
force
The inheritance tax will be levied
upon obtaining a legacy from a
testator who has died, whereby the
inheritance will be exempt from
personal income tax under section
42(10) of the Revenue Code.
The Revenue Code Amendment Act
introduces a tax on gifts which will be
levied when a gift is given by a person
who is still alive. The gift will be
subject to personal income tax under
the Revenue Code.
See our tax newsletters nos. 4/2015,
5/2015 and 6/2015
VII. Tax incentives
1. Tax incentives for
international headquarters
(IHQ) and international
trading centre (ITC)
With effect from 2 May 2015,
regulations regarding IHQ and
ITC regimes have been issued to
grant tax incentives to attract
firms to establish IHQs and ITCs
in Thailand.
An IHQ is defined as a company
incorporated under the law of
Thailand for the purpose of
providing managerial, technical
or supporting services or
financial management to its
associated enterprises or
branches situated in Thailand or
abroad.
An ITC is defined as a company
established under the law of
Thailand and engaged in the
business of buying and selling
goods, raw materials and parts
including providing services
relating to international trade to
foreign juristic entities.
See our tax newsletter no. 3/2015
2 Tax incentives for investment
in special economic
development zones (SEZ)
SEZ are border areas, whether
inside or outside of industrial
estates, to create economic
connectivity with neighbouring
countries and to prepare for entry
into the ASEAN Economic
Community (AEC).
Tax incentives for investment in
these SEZ have been granted by
both the Revenue Department and
the Board of Investment (BOI).
See our tax newsletter no. 7/2015
VIII. Other tax issues
1 The 8-day extension for
filing online tax returns has
been extended for a further
two years
See our tax newsletter no. 1/2015
2 The income or net profit of
the business of a private nonformal tutorial type of school
is no longer exempt from
personal and corporate
income tax.
See our tax newsletter no. 5/2015
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3 Specific development zones
The period of reduction of
various tax rates for individuals
and companies located in specific
development zones (provinces of
Narathiwas, Pattani, Yala and
part of the area of Songkhla) has
Tax Newsletter – 1 April 2016
been extended for another three
years from 1 January 2015 to 31
December 2017.
II. DTA update
I. New double tax treaty between Thailand
and Singapore will be in effect from
1 January 2017
According to the website of the
Revenue Department, the new
double tax treaty between Thailand
and Singapore has entered into force
on 15 February 2016 and therefore
will be effective in place of the
current double tax treaty from the
tax years 1 January 2017 onwards.
For significant changes in the new
treaty, see our tax newsletter no.
7/2015.
II. New double tax treaty between Thailand
and India will be in effect from
1 January 2017
A Double Tax Treaty has been in
effect between Thailand and India
since 1987. On 29 June 2015, a new
version was signed. The new treaty
was ratified on 5 January 2016 and
became enforceable on that date.
Therefore, the provisions of the new
treaty will have effect from the tax
year commencing on 1 January
2017.
Below is a summary of the main
features of the new treaty which are
different from the current treaty.
Permanent establishment (PE)
 Under the new treaty, the
threshold period for the furnishing
of services, including consultancy
services through employees and
other personnel by the enterprise
of one of the states in the other
state would constitute a PE only
where such activities continue (for
the same or a connected project)
within such other state for a period
of more than 183 days within any
twelve-month period. This limits
the time frame for counting the
threshold period, while there is no
such limit in the current treaty.
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This means that under the current
treaty, a threshold period would be
counted from the first day and
continue to be counted whenever
the personnel of the enterprise
perform such activity in the other
state. Once the total period reaches
more than 183 days in any year, a
PE will be created.
However, under the new treaty,
there is a time frame whereby the
threshold period is required to be
reached within any twelve-month
period. If the period does not exceed
183 days in any twelve-month
period, it cannot be counted
together with the time spent in any
other twelve-month period.
 The asset type PE will also
include “a sales outlet”.
 Under the status of dependent
agent, the activity of securing
orders by an agent wholly or
almost wholly for the enterprise,
or for its group companies,
would constitute a PE. This has
been amended in the new treaty
to be the activity of securing
orders by an agent wholly or
almost wholly only for the
enterprise itself which will
constitute a PE.
 In the current treaty, the
independent agent status would
be lost if the agent carried on the
activities in the other state
wholly or almost wholly for the
enterprise itself, including
activities for its group
companies. This has been
changed in the new treaty to
limit the consideration only to
the activities performed for the
enterprise of the other
contracting state.
Tax Newsletter – 1 April 2016
Business profit
 Under the current treaty, income
or profits of an enterprise of a
contracting state were taxable in
the other state where the
enterprise carried on business
through a PE situated therein, but
only so much of them as were
attributable to (a) that PE, (b)
sales in that other state of goods or
merchandise of the same or
similar kind as those sold through
that PE, or (c) other business
activities carried on in that other
state of the same or similar kind as
those effected through that PE.
The new treaty has deleted the
concept of the so-called ‘force of
attraction’ mentioned under (b)
and (c) above. Therefore, the
profits of an enterprise may be
taxed in the other state but only so
much of them as are attributable
to that PE.
 In determining the profit of the
PE, the current treaty allows the
deduction of expenses which were
incurred for the purpose of the
business of the PE, including
executive and general
administrative expenses so
incurred, whether in the state in
which the PE is situated or
elsewhere.
The new treaty has added the
condition to limit such claimable
expense to follow the tax laws of
the state where the PE is situated.
Shipping and air transport
Under the new treaty, the term
“operation of ships or aircraft”, in
which the income will fall under this
article and not the business profit
article, is extended to include the
“use, maintenance or rental of
containers in connection with such
transportation”.
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Dividends
Tax Newsletter – 1 April 2016
Please note that the tax rate for
dividends under the Thai tax law is
10%.
principally of immovable property
situated in a state, may be taxed in the
state in which the immovable
property is situated. Gains from the
alienation of shares in other cases
may be taxed in the country in which
the company, whose shares are being
alienated, is resident.
Interest
Independent personal services
The tax rates for dividends specified
in the new treaty have been reduced
from 15% and 20% to 10%.
Under the current treaty, the 10%
tax rate for interest is applied if it is
received by any financial institution
(including an insurance company)
and the 25% tax rate applies if it is
received by others.
For the new treaty, the tax rates
have been reduced to 10% regardless
who is the recipient of the interest.
The term “interest” in the new treaty
will not include “penalty charges for
late payment”. Hence, these
penalties would be categorized as
other income, which may be taxed
either in the country where the
penalties arise or the country of
residence of the recipient.
Royalties
Conditions which result in a resident
of a state being taxed in the other
state on income derived from
independent personal services have
been changed.
Under the new treaty, the income
derived by a resident of a state may be
taxed in the other state if:
(a) The income earner has a fixed base
regularly available to him in the
other state for performing his
activities (changed from
maintaining a fixed base in the
other state for a period of more
than 183 days in the relevant year
under the current treaty), but only
income as is attributable to that
fixed base may be taxed in that
other state, or
Consideration for the alienation of
any copyright of literary, artistic or
scientific work, etc., is no longer
classified as royalties under the new
treaty. It could fall under the capital
gains article which may be taxed in
the relevant country.
(b) The income earner is present in
the other state for more than 183
days in any twelve-month period
(changed from 183 days in the
relevant “previous year” or “tax
year” concerned as the case may be
in the current treaty), but only
income as is derived from his
activities performed in that other
state may be taxed in that other
state.
Capital gains
Dependent personal services
Under the current treaty, a capital
gain from the transfer or sale of
shares would be taxable in the
country of residence of the
transferor or seller.
In the new treaty, the threshold for
income earned by an individual from
an employment exercised in the other
state has been changed from more
than 183 days in the relevant
“previous year” or “tax year”
concerned to be more than 183 days
within any twelve-month period
commencing or ending in the fiscal
year concerned.
The tax rate for royalties has been
reduced from 15% to 10%.
However, in the new treaty, gains
from the alienation of shares of a
company, the property of which
consists directly or indirectly
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Elimination of double taxation
The ordinary tax credit remains
unchanged for both Thailand and
India.
However, the tax sparing concept
has not been included in the new
treaty. Hence, Thai and Indian tax
residents will no longer be allowed
to obtain a foreign tax credit in their
countries for the income tax that has
been exempted or reduced under the
investment promotion laws of the
other country.
Tax Newsletter – 1 April 2016
It should be noted further that the
new treaty uses the term “beneficial
owner” in several articles, including
interest, dividends and royalties,
instead of “recipient” as stipulated in
the current treaty. Most treaties which
Thailand has entered into with other
countries now adopt this term of
‘beneficial owner’.
It is recommended that companies
review their business dealings with
India and consider whether the new
treaty will have any adverse impact
thereon and prepare for the change
next year.
III. Double tax treaty between Thailand
and Tajikistan
Thailand and Tajikistan signed an
Agreement for the Avoidance of
Double Taxation and the Prevention
of Fiscal Evasion with respect to
Taxes on Income ("DTA") on 17 May
2013. The DTA came into force on
23 December 2013 and is effective
from the tax years or accounting
periods beginning on or after 1
January 2014. Please note that the
DTA has only recently been posted
on the website of the Revenue
Department.
A brief summary of the main articles
of the DTA is as follows:Taxes covered
 Income tax and petroleum
income tax
Permanent establishment
includes:
 A building site, a construction,
installation or assembly project
or supervisory activities in
connection therewith, but only
where such site, project or
activities continue for a period of
more than six months.
 The furnishing of services,
including consultancy or
managerial services, by an
enterprise of a Contracting State or
through employees or other
personnel engaged by the
enterprise for such purpose, but
only where activities of that nature
continue in the territory of the
other Contracting State for a
period or periods aggregating
more than six months within any
twelve-month period.
Dividends
The tax rate on dividends is 10%.
Interest
The tax rate on interest is 10%, while
no Thai tax is imposed on interest
paid in the following cases:
 In connection with the sale on
credit of any merchandise or
equipment
 On any loan or credit of whatever
kind granted by a bank
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Tax Newsletter – 1 April 2016
 To the Government of
Thailand/Tajikistan as defined in
the DTA
 To a resident of the other State in
connection with any loan or
credit guaranteed by the
Government of
Thailand/Tajikistan as defined in
the DTA.
Royalties
The tax rates are as follows:
 Copyright of literary, artistic 5%
Capital gains
 Capital gains from the sale of
shares of the capital stock of a
company the assets of which
consist directly or indirectly
principally of immovable property
situated in one of the countries
may be taxed in that country.
 Capital gains from the sale of any
property other than those
mentioned above and other than
those mentioned in the DTA will
be taxable in the country of which
the seller is a resident.
or scientific work
 Royalties in all other
10%
cases
Elimination of double taxation
An ordinary credit will be granted to
eliminate double taxation. This means
that the credit for the tax paid in one
country against the tax payable in the
other country cannot exceed the
amount of tax as computed in the other
country.
III. Update of other issues
I. Special Appeal Court to be set up
Under the litigation process, any
dispute on certain lawsuit cases has
to be brought to special courts of first
instance, which include the
following:
-
Tax
-
Labour
-
Intellectual property and
international trade
-
Bankruptcy
-
Cases related to the youth and
family.
After the judgment of the court of first
instance has been made, an appeal in
these special cases can be submitted to
the Supreme Court directly without the
need to appeal the case to the Appeal
Court. This has resulted in a large
number of special cases pending in the
Supreme Court.
According to the relevant legislation
which came into effect on 15 December
2015, a Special Appeal Court is to be
set up as another level of ‘appeal court’
so as to consider these special lawsuit
cases with the aim to reduce the
number of special cases in the
Supreme Court.
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According to this legislation, after the
judgment of the special court of first
instance has been made, an appeal in
the special cases will be required to
be submitted to the Special Appeal
Court. The judgment of the Special
Appeal Court will be treated as final.
However, a further appeal may be
made to the Supreme Court if the
issue is considered to be significant
and the approval of the Supreme
Tax Newsletter – 1 April 2016
Court has been obtained. Therefore,
the possibility of appealing these
special cases to the Supreme Court will
be limited.
Currently, the Special Appeal Court
has not yet been established. It is
anticipated that it will be ready to open
fully around October 2016. Hence,
during the transition period, the
appeal process to the relevant courts
will continue to be the same as before.
II. Service businesses in which a foreign
investor no longer requires a foreign
business licence
With effect from 19 February 2016,
the following service businesses are
not regarded as restricted
businesses and therefore foreign
investors are not required to obtain
a foreign business licence under List
3 (21) of the Foreign Business Act
BE 2542 (1999):
Non- life insurance under the law
governing non-life insurance.
Financial institutions and other
businesses under the law
governing financial institutions:
Securities or other businesses
under the law governing securities
exchange
(a) Commercial banking
(b) Representative office of
commercial banks
Life insurance under the law
governing life insurance
Note: With effect from 18 March
2013, the following service businesses
are not required to obtain a foreign
business licence:
Forward contract businesses under
the law governing forward
contracts
Trustees under the law governing
trusts for transactions in the
capital market
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Tax Newsletter – 1 April 2016
Contact us

Tax Mergers and Acquisitions/ Tax
Structuring
 Paul Stitt, Partner ext. 1119
 Prema Rao, Associate Partner ext. 1156
 Vanida Vasuwanichchanchai, Associate Partner ext. 1303
 Tax Reporting & Strategy/ Indirect
Tax Services
 Somboon Weerawutiwong, Lead Partner ext. 1247
 Somsak Anakkasela, Partner ext. 1253
 Prapasiri Kositthanakorn, Partner ext. 1228

 Somsak Anakkasela, Partner ext. 1253
 Prapasiri Kositthanakorn, Partner ext. 1228
Outsourcing Services
 Transfer Pricing
 Peerapat Poshyanonda, Partner ext. 1220
 Janaiporn Khantasomboon, Partner ext. 1437
 Tax Dispute Resolution
 Ornjira Tangwongyodying, Partner ext. 1118
 Niphan Srisukhumbowornchai, Partner ext. 1435
 Financial Services
 Prapasiri Kositthanakorn, Partner ext. 1228
 Ornjira Tangwongyodying, Partner ext. 1118
 Orawan Fongasira, Partner ext. 1302
 Legal Services/ BOI Services
 Somboon Weerawutiwong, Lead Partner ext. 1247
 Vunnipa ruamrangsri, Partner ext. 1284
 Japanese Business Desk (JBD)
 Atsushi Uozumi, Partner ext. 1157
 U.S. Tax Desk
 Greg Lamont, Partner ext. 1280
 International Assignment Services
 Jiraporn Chongkamanont, Director – Practice Leader ext. 1189
 World Trade Management Services
 Paul Sumner, Partner ext. 1305
15th Floor Bangkok City Tower, 179/74-80 South Sathorn Road, Bangkok 10120
Tel: +66 (0)2 344 1000
Fax: +66 (0)2 286 6666
Website: http://www.pwc.com/thailand
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Tax Newsletter – 1 April 2016
Editors:
Ornjira Tangwongyodying, Partner ext. 1118
E-mail: [email protected]
Seetha Gopalakrishnan, Associate Partner ext. 1011
E-mail: [email protected]
1. The transfer must be between affiliates (as defined) which are public or limited companies, organised under
Thai law.
The affiliated company status must be maintained for not less than 6 months from 31 December 2009.
The registered paid-up capital of the transferee company must not be less than net asset value transferred.
2. The transfer must be completed within 31 December 2009.
3. The assets transferred must be related to the transferor’s type of business and not be a normal sale. The
transferee must use such assets in the same manner or for a related business and the transfer must be made
at market value as at the transfer date.
© 2016 PricewaterhouseCoopers Legal & Tax Consultants Ltd. All rights reserved. PwC refers to the Thailand member
firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see
www.pwc.com/structure for further details.