On 30 December 2015 the Supreme Court (Cases No 15100/2558 and No 15345/2558) ruled in favor of the Thai Revenue Department’s (“TRD”) interpretation regarding the combining of profits and losses under multiple Board of Investment (“BOI”) privileges.

 

In general, the BOI grants privileges (which provide tax and non-tax benefits) to companies on a project by project basis. It is not uncommon that companies apply for multiple BOI privileges as they expand their business operations and take on new projects.

 

In these court cases, the taxpayers were granted multiple BOI privileges and for corporate income tax purposes, they computed their net taxable profits separately for each BOI project. As a result, the taxpayers did not set off their losses from certain BOI projects against their profits from other BOI projects arising in the same accounting year. Rather, during the tax exemption period, the taxpayers carried forward the losses to the next accounting year and/or set off such losses against non-BOI projects.

 

The TRD disagreed with this approach. In the TRD’s view, which has since been confirmed by the Supreme Court judgments, the loss which can be carried forward to the next accounting year and/or set off against profits from non-BOI projects, shall mean the net loss after setting off such losses against profits derived from any BOI projects in the same accounting year. This should be the case even where the profits from a specific BOI project is still subject to the tax exemption period.

 

In the court’s view, since the BOI did not prescribe the rules and criteria in computing the net taxable profits of a company with multiple BOI privileges, the determination of net taxable profit should be determined in accordance with the Revenue Code and thus the tax assessments issued by the TRD in these cases was correct. The treatment per the Revenue Code is arguably set out in the Board of Taxation ruling No.38/2552 dated 13 February 2009.

It is believed that following the outcome of the above court cases, and in order to provide more clarity to affected taxpayers, the Finance Minister issued a Notification on 16 June 2016. In terms of the Notification, companies with multiple BOI privileges who acted in good faith but did not, for corporate income tax purposes, set off their losses from BOI projects against profits from other BOI projects, will be granted the following concessions:

 

1. Exemption from penalties (which can be as high as 100% of the corporate income tax liability) and surcharges (at 1.5% per month), provided the taxpayer’s position is regularised with the TRD by latest 1 August 2016. 
2. Extension until 1 August 2016 to file their corporate income tax returns and make payment of the corporate income tax liabilities due to the TRD. Where a taxpayer has already made payment of the corporate income tax, penalties and surcharges, and the 3 year time period to apply for a refund has expired, the application to request a refund of the penalties and surcharges is also extended to 1 August 2016.

 

The Finance Minister has specified that the following rules, procedures and conditions will apply:

 

1. To be entitled to the aforementioned concessions, at least one of the following qualifications must be present:
   
   • a company that has not yet received a summons for a tax audit;
   • a company that has been issued with a summons for a tax audit but has not yet received its tax assessment notification or order to pay corporate income tax;
   • a company that has received its tax assessment notification or order to pay corporate income tax; or 
   • a company that has received its tax assessment notification or order to pay corporate income tax and is currently in the process of appealing against the said assessment with the Board of Appeals or another court.
2. The aforementioned extension is only provided to companies that do not combine their profits and losses from separate BOI projects in the same accounting period in order to calculate a net profit or loss for corporate income tax purposes.
3. If a company has lodged an appeal of its tax assessment with the Board of Appeals or another court, the company must at a minimum withdraw the portion of the appeal relating to the utilization of losses from BOI projects. This withdrawal must be approved by the Appeal Committee or the court before the company will be eligible to apply for the aforementioned concessions.

 

Since the TRD has the right to conduct an audit investigation as far back as 5 years (where there is reason to believe that tax evasion was evident), companies with multiple BOI privileges are urged to take advantage of the concessions provided by the above Notification to regularise their current and historic corporate income tax affairs with the TRD before the deadline of 1 August 2016. 

 

Should you require any specific advice on the above and its applicability to your current and historic tax years, please contact us for assistance.

 

KPMG in Thailand won two awards from 2016 International Tax Review Awards: National Tax Firm and Tax Disputes & Litigation Firm

KPMG was also recognized as the Asia Tax Firm, Asia International Tax Firm, Asia Indirect Tax Firm and Asia Global Executive Mobility Firm