Tax News No. 263 November 2018

Tax News No. 263 November 2018

By Royal Command of His Majesty King Maha Vajiralongkorn Bodindradebayavarangkun, it is hereby proclaimed that;

Whereas it is deemed propor tp amend the Revenue Code;

Be it, therefore, enacted this Act under the advice and consent of the National Legislative Assembly as follows;

Section 1 This Act is called the “Amendment Act on Revenue Code (No.47) B.E.2561”.

Section 2 This Act shall come into force on the following date of its publication in the Government Gazette.

Section 3 There shall be added the following provision as Section 35 Ter of Revenue Code.
“Section 35 Ter Whoever fails to comply with Section 71 Ter or submits the transfer pricing disclosure form, documents or evidence under Section 71 Ter of which its information is incorrect, incomplete, without any justifiable reason. The person shall be fined not exceeding 200,000 Baht.”

Section 4 There shall be added the following provisions as Section 71 Bis and Section 71 Ter of Revenue Code.
“Section 71 Bis In case companies or juristic partnerships having mutual relationship have  commercial or financial conditions different from the conditions which should have been made by an independent companies or independent juristic partnerships as well as such related companies or juristic partnerships make transactions on the way which is believable that there is to transfer profits each other, an assessment officer has authority to adjust revenue and expenses of such companies or juristic partnerships so that the assessment officer shall adjust them to revenue supposed to be earned and expenses supposed to be paid by an independent company or juristic partnership by deeming that such companies or juristic partnerships earned and paid for the adjusted amount in order to compute amount of net profits under Section 65 or assessable income under Section 70 or Section 70 Bis in accordance with rules, procedures, and conditions as prescribed by Ministerial Regulation.

The company or juristic partnership having mutual relationship under Paragraph one means two or more related companies or related juristic partnership having relationships as following characteristic:

(1)    An entity holds shares or is a partner of the other entity, either directly or indirectly, not less than 50 percent of the other entity’s total capital;

(2)    A shareholder or a partner holding shares or being a partner of an entity, either directly or indirectly, not less than 50 percent of the entity’s total capital holds shares or is a partner of the other entity, either directly or indirectly, not less than 50 percent of the other entity’s total capital;

(3)    Related entities have mutual capital, management, or control relationships in a way that an entity cannot separate its independent of business operation from the other entity as prescribed by Ministerial Regulation.

In case the revenue and expense adjustments of the companies or juristic partnerships having mutual relationship made by the assessment officer in pursuance of Paragraph one result in the fact that the companies or juristic partnerships paid tax or was deducted withholding tax in an excessive amount which should have been paid or without liability to pay for, the companies or juristic partnerships having mutual relationship are entitled to file application for request of tax refund within 3 years as of the last date of corporate-tax-return filing as prescribed by law, or within 60 days as of the date when the assessment officer informed a written notice on the adjustments as announced by Notification of Director-General.

Section 71 Ter The company or juristic partnership having mutual relationships with other company or juristic partnership where they are fallen into any characteristic in pursuance of Paragraph two of Section 71 Bis, whether or not there are relationships throughout an accounting period or mutual transactions in the accounting period, shall submit the document with regard to information of the companies or juristic partnerships having mutual relationship and the values of mutual transactions in each accounting period according to the form as specified by the Director-General to an assessment officer, together with the tax return, within the period under Section 69.

Within 5 years as of the submission date of the document on information of the companies or juristic partnerships having mutual relationship in pursuance of Paragraph one, an assessment officer, with approval by the Director-General,  may send a notice to and request the companies or juristic partnerships having mutual relationship in pursuance of Paragraph one to submit documents or evidence on necessary information so that the assessment officer can analyze condition of mutual transaction regarding the companies or juristic partnerships having mutual relationship as announced by Notification of Director-General. The recipient of the notice shall execute within 60 days as of the date when receiving the notice. If the recipient has a necessary cause and is unable to execute within the scheduled period, the Director-General can permit to extend the scheduled period which shall not be exceeding 120 days as of the date when receiving the notice. Especially in case the recipient receives the notice at the first time, the recipient shall execute within 180 days as of the date when receiving the notice.

The provision under this Section shall not apply to the companies or juristic partnerships earning an income, which is derived from business or as a result of business, in an accounting period not over than the amount or having any other characteristic as prescribed by Ministerial Regulation. The amount of income under Ministerial Regulation shall not be less than 200 million Baht.”

Section 5 The provisions of Section 3 and Section 4 shall apply to the income of the related company or related juristic partnership in the accounting period starting in or after 1 January 2019 onwards.

Remarks :– The reason to promulgate of this Act is that, at present, many large company or partnership are involved in capital in terms of capital, management or control. They have the conditions of commercial or financial transactions different from independent party. There are seem that these methods will increase continuously, which may affect the taxation and financial status of the state. To prevent and solve such problems, there should prescribe the rules for collection corporate income tax of such cases to be in accordance with international principles and practices. Therefore, it is necessary to enact this Act.

Amendment Act on Workmen Compensation (No.2) B.E.2561 (2018)

    Recently, the Workmen Compensation Act (No.2) B.E. 2561 (2018) had been published in the Government Gazette on date 10th October 2018 shall be effective after 60 days on date 10th December 2018 governing term enforcement of the law, responsibility of the entrepreneur and wage contractor, prescribing the procedures and payment rate on medical care fee, expense of industrial rehabilitation, funeral expense, indemnity and additional payment in case the employer did not pay the contributions or pay the contributions incompletely including the rule on filing of the registration of employer, notification of danger, illness or disappearance and filing application for the compensation, etc. Be it there for amend the provision for the employee to gain the coverage and the benefit appropriately as follows: –

1)    Add the definition of “Disasters” means fires, storm, flood or earthquake covering any other disaster, even though it happening from nature or the person which leads to be dangerous to life or body of the people or the damage on assets of the people or the state.

2)    In the hire by the wage package method, there shall be repealed the provision under Section 11 of the Workmen’s Compensation B.E.2537 (1994) and replaced by the following provision;

“Section 11 In case the entrepreneur hire by the wage package method assigned consigning to any person to subrogate to control the work and to have responsibility for payment of wages to each person, or assigned to any person to procure and employ on employee to do the work which is not the business enterprise on the type of the procuring affairs,  by the way of that work is the part of the process of production or business which performs in the establishment or work place of the entrepreneur and the essential equipment of using for such work is providing by the entrepreneur, in such case the entrepreneur as in the status of the employer which has to abide by this Act.”

3)    In duties of the employer to provide the medical treatment for employee, there shall be repealed the provision on Paragraph 1, Section 13 of the Workmen Compensation B.E.2537 (1994) and replaced by the following provision;

“Section 13 In the case an employee suffers from injuries or sickness, an employer shall provide immediately medical treatment for employee in proportion to injuries or sickness and shall pay necessary medical expense in the amount as actually paid in accordance with the rules, procedures, condition and rate as prescribed in the Ministerial Regulation.”

4)    In industrial Rehabilitation, there shall be repealed the provision Section 15 and Section 16 of the Workmen Compensation B.E.2537 (1994) and replaced by the following provision;

“Section 15 In the case where an employer has to obtain industrial rehabilitation after suffering from injuries, or sickness, the employer shall pay the rehabilitation expense for employee in the amount as actually paid as necessary in accordance with the rules, procedures, conditions and rate as prescribed in the Ministerial Regulation.

Section 16 In case where the employee suffers from injuries or sickness causing death or disappearance, the employer shall pay funeral expense to the person who proves having arranged the funeral on rate as prescribed in the Ministerial Regulation.”

5)    Rate of the indemnity, there shall be repealed the provision under Section 18 and Section 19 of the Workmen Compensation B.E.2537 (1994) and replaced by the following provision;

“Section 18 When the employ suffers from injuries or sickness or disappearance, the employer shall pay the monthly indemnity to the employee or the entitled person under Section 20 as the case may be as follows: –
(1)     Seventy per cent of the monthly wages where the employee is unable to work, not withstanding such employee has or has not lost an organ under (2), with the payment to be made from the first day that the employee is unable to work until and throughout the time he is unable to work, but not exceeding one year.
(2)     Seventy per cent of the monthly wages where the employee has lost physical ability of the body, the payment shall be made according to the period of payment as prescribed by the Announcement of the Ministry of Labour, but not exceeding ten years.
(3)     Seventy per cent of the monthly wages where the employee suffers from disablement, the payment shall be made according to category of disablement and to the period of payment as prescribed by the Announcement of the Ministry of Labour, but not less than fifteen years.
(4)    Seventy per cent of the monthly wages in case of the death of employee or disappearance within ten years

“Disablement” under this Section means where the employee has lost an organ or lost physical ability of an organ or the body or lost of mental health causing the decrease of ability of work until unable to do the normally work as prescribed by the Announcement of Secretary-General by the suggestion of the Medical Committee.

The rules and procedures of calculation of the monthly wages shall be in accordance with the announcement of the Ministry of Labour on the indemnity under Paragraph one must not be less than the minimum monthly indemnity and not more than the maximum monthly indemnity as prescribed by the announcement of the Ministry of Labour.

Section 19 In the case where the employer pays the indemnity under Section 18 (2) or (3), then the employee is subsequently died whereas he does not obtain indemnity within the period of indemnity according to the entitlement, the employer shall pay indemnity to the entitled person under Section 20 until completion of the period under the right, but the total for indemnity payment shall not be more than ten years.”

Amendment Act on Revenue Code regarding the use of foreign currency for making financial transactions

On 2 October 2018, the Cabinet passed resolution on the draft of Amendment Act on Revenue Code (No …) B.E. … for adjusting rules in the use of other foreign currency, excluding Thai currency, for making financial transactions as well as for providing an exchange rate for calculation of values or price of currency, assets, liabilities and a calculation method and tax payment of a company or juristic partnership applying foreign currency for making financial transactions. The essence of the draft of this Act is that;

1.    There shall be amended Section 65 Bis (5) and repealed Section 65 Bis so as to prescribe rules in calculation of net profits and net loss of a company or juristic partnership in case currency, assets or liabilities of which values or price remain as foreign currency on the last date of an accounting period and are received or paid during the accounting period as follows:

2.    There shall be added Section 76 Ter so as to prescribe that a company or juristic partnership applies other foreign currency, excluding Thai currency, as the currency for making financial transactions can inform the Director-General of the use of the foreign currency for preparing a balance sheet, a working paper, profit and loss accounts, a revenue account before deduction of expenses, including the calculation of net profits or revenue volume before deduction of any expenses and together with computation of payable income tax. In addition, making tax assessment and informing of payable income tax, including additional paid income tax, computation of penalty and surcharges, and any practical operation between an assessment officer and a company or juristic partnership applying other foreign currency, excluding Thai currency, as the currency for making financial transactions shall apply such foreign currency for its financial transactions. The purpose of this amendment is that the use of other foreign currency, excluding Thai currency, as the currency for making financial transactions can be processed completely in every relevant step, except for the process on tax payment required to use Thai currency.

3.    There shall be added Section 76 Quarter so as to prescribe rules in calculation of values or price of currency, assets, liabilities and other lists on financial statements at the end of an accounting period before the accounting period applying other foreign currency, excluding Thai currency, as the currency for making financial transactions. And there shall be rules using for the first accounting period before the accounting period applying other foreign currency, excluding Thai currency, as the currency for making financial transactions.

4.    There shall be added Section 76 Quinque so as to prescribe rules in calculation of the remaining of values or price of currency, assets or liabilities on the last date of an accounting period and which is received or paid during an accounting period of a company or juristic partnership applying other foreign currency as the currency for making financial transactions. Section 65 Bis (5) shall not be applied and the calculation shall be rules as followed:

5.    There shall be added Section 76 Sex so as to prescribe that tax payment and tax refund of a company or juristic partnership applying other foreign currency as the currency for making financial transactions shall be Thai currency. The calculation shall refer to an average rate between a buying rate and a selling rate of commercial banks as calculated by the Bank of Thailand on the last working day prior to the tax payment date or prior to the date when an authority approves for tax refund. The purpose is to comply with an actual exchange rate on the date when paying tax or getting tax refund.

6.    There shall be added Section 76 Septem so as to prescribe that gain or loss from an exchange rate resulted from the currency conversion for making financial transactions or resulted from the calculation of converting values of currency used for financial transactions to Thai currency for tax payment of a company or juristic partnership applying other foreign currency as the currency for making financial transactions shall not be regarded as revenue or expenses for computation of net profits or net loss.

7.    The new amended and added Sections shall apply for an accounting period starting on or after 1 January 2019 onwards. As for the old Sections, the sections can be applicable only in case tax imposition operation remains or shall be payable before the enforcement date of the draft of this Act.

Details of principles and reasons recorded and the draft of this Act are attached to this topic.
 

Amendment Act on Revenue Code is as follows:
(1)    To amend the calculation of currency, assets or liabilities which are worth as foreign currency and remain as Thai currency on the last date of the accounting period or while being received or paid during the accounting period (Amend Section 65 Bis (5) and repeal Section 65 Bis (8)).
(2)    To add rules in calculation and tax payment of a company or juristic partnership applying other foreign currency, excluding Thai currency, as the currency for making financial transactions (Add from Section 76 Ter to Section 76 Septem).

Since accounting standards are adjusted so as to comply with the standard of international financial report, the standard requires businesses making some financial transactions with foreign currency to be able to apply other foreign currency, excluding Thai currency, as the currency for making financial transactions. The purpose is to have the operation of income tax imposition from a company or juristic partnership comply with the accounting standards. As a result, the business operation will carry on more conveniently, cost of a business person will be decreased, and there will be more IHQ and ITC being persuaded to establish in Thailand.

Thus, there shall be proper to adjust rules in Revenue Code on the use of other foreign currency, excluding Thai currency, as the currency for making financial transactions, the exchange rate for calculation of values or price of currency, assets or liabilities, and the method on calculation and tax payment of a company or juristic partnership applying foreign currency as the currency for making financial transactions. This Act shall be necessarily enacted accordingly.
 

Section 1 This Act is called the “Amendment Act on Revenue Code (No…) B.E. …”.

Section 2 This Act shall come into force on the following date of its publication in the Government Gazette.

Section 3 There shall be repealed and replaced provision on (5) of Section 65 Bis of Revenue Code amended by Emergency Decree on Amendment of Revenue Code (No. 16) B.E. 2534 (1991) as follows:

“(5) Currency, assets or liabilities of which values or price are worth as foreign currency remained on the last date of the accounting period shall be converted to Thai currency as each of the following methods:

    
   Currency, assets or liabilities of which values or price are foreign currency and are received or paid during an accounting period shall apply the calculation method of converting values or price to Thai currency by referring to a market price on the date when receiving or paying.”

Section 4 There shall be repealed (8) of Section 65 Bis of Revenue Code amended by Amendment Act on Revenue Code (No. 16) B.E. 2502 (1959).

Section 5 There shall be added the following provisions as Section 76 Ter, Section 76 Quarter, Section 76 Quinque, Section 76 Sex, and Section 76 Septem in Part 3 Corporate income tax of Chapter 3 Income tax of Title 2 Revenue Taxes of Revenue Code.

“Section 76 Ter A company or juristic partnership applies other foreign currency, excluding Thai currency, prescribed by Minister of Finance on the Government Gazette as the currency for making financial transactions shall inform the Director-General for the use of such foreign currency. The use of such foreign currency consists of making preparation for balance sheet, working paper, profit and loss accounts, revenue accounts before deduction of expenses, including calculation of net profit or revenue volume before deduction of any expenses and calculation of an amount of payable income tax.

When the company or juristic partnership informed to the Director-General, the use of foreign currency for making financial transactions under Paragraph one can be applied as of the first date of the informed accounting period and can also continue applying until there is an approval of the Director-General for change of the foreign currency.
Informing under Paragraph one and making approval under Paragraph two shall be subject to rules, procedures as announced by the Director-General on the Government Gazette.

Making tax assessment and informing of payable income tax, additional paid income tax, income tax refund, including calculation of penalty and surcharges as well as other practical operation between an assessment officer and the company or juristic partnership applying foreign currency, excluding Thai currency, as the currency for making financial transactions shall proceed with the use of such foreign currency for the financial transactions made by the company or juristic partnership.

Section 76 Quarter    When the company or juristic partnership applying foreign currency, excluding Thai currency, as the currency for making financial transactions has informed or been approved by the Director-General under Section 76 Ter, the calculation of values or price of currency, assets, liabilities and other items on financial statements at the end of an accounting before the accounting period when foreign currency, excluding Thai currency, is used as the currency for making financial transactions, and any other lists, including net loss under Section 65 Ter (12) used for calculation of income tax which remains on that date shall apply the calculation method of values and price to be the foreign currency used for making financial transactions as follows:

Section 76 Quinque    Section 65 Bis (5) shall not be applied for the calculation of values or price of currency, assets or liabilities of the company or juristic partnership applying foreign currency as the currency for making financial transactions under Section 76 Ter. However, the calculation method of the values or price of the currency, assets or liabilities to be the foreign currency used for making financial transactions as follows:

Section 76 Sex    Tax payment under Section 67 Bis and Section 68 and tax refund in case  company or juristic partnership applies other foreign currency as the currency for making financial transactions under Section 76 Ter shall apply Thai currency. The calculation method of values shall refer to an average rate between a buying rate and a selling rate of commercial banks as calculated by the Bank of Thailand on the last working day prior to the date of tax payment, or prior to the date when an authority approves for tax refund.

Section 76 Septem    Gain or loss of an exchange rate which results from the conversion of currency for making financial transactions, or from the calculation of converting values of the foreign currency used for making financial transactions to Thai currency for tax payment of a company or juristic partnership applying other foreign currency as the currency for making financial statements under Section 76 Ter shall not be regarded as revenue or expenses for calculation of net profits or net loss.”

Section 6  The provisions on Section 3 and Section 5 shall apply for the accounting period starting on or after 1 January B.E. 2562 (2019) onwards.

Section 7  The provisions of Revenue Code repealed or amended by this Act has still been applicable only for the operation of tax imposition which remains or shall be payable prior to the enforcement date of this Act.

Section 8 The Minister of Finance shall have the care and be in charge of this Act.

Countersigned

………………
Prime Minister