Tax & Legal News Flash Issue 76

The Ministry of Finance has announced guidelines for conversion of any items in the financial statements (including currency, asset and liability) of a company or juristic partnership that adopts a foreign currency (i.e. other than Thai baht) as its functional currency.  A company or juristic partnership that notified or has obtained an approval from the Director-General of the Revenue Department shall do as follows:

1. Convert any items in the financial statements (including currency, asset and liability) on the last day of the accounting period before the transition to functional currency in accordance with accounting principles and be certified by the auditor under the rules, methods and conditions prescribed by the Minister;
2. Convert any currency, asset and liability balances that are not in functional currency at the end of accounting period into functional currency by using one of the following methods:

(1) The average rate between the buying and selling rates of commercial banks, as ascertained by the Bank of Thailand (“BOT”).  If this is not viable for certain parts, an approval by the Director-General of the Revenue Department must be obtained in order to apply other rates for such parts;

(2) The average buying rate or the average selling rate of the commercial banks as ascertained by the BOT. If it is not viable for certain parts, an approval by the Director-General of the Revenue Department must be obtained in order to apply other rates for such parts.

If the company or juristic person adopts either (1) or (2), the chosen method shall be applied consistently. Any subsequent changes must be approved by the Director-General of the Revenue Department.  

In order to adopt foreign functional currency, the company or juristic person can notify or request an approval from the Director-General of the Revenue Department. There are 23 currencies allowable for income tax purposes as follows:

The guidelines shall be applicable from the date of related notifications, i.e. 21 March 2020, onwards.