On July 18th, 2022, five Royal Decrees (RD) concerning taxation and COVID-19 pandemic response were published in the Government Gazette. RDs, numbers 751, 752, 753, 754, and 755, were issued under the Revenue Code (“RC”).
Exemptions on Donations to the Office of the Permanent Secretary for COVID-19 Response and Support
RD (No. 751) B.E. 2565 (2022) extends a prior tax incentive program (RD No. 723), which ended on March 5th, 2022, to promote the donation of money and property to the Office of the Permanent Secretary of the Prime Minister’s office, to support COVID-19 response measures. Income tax and VAT shall be exempted on donations made via the electronic donation system from March 6th, 2022, through December 31st, 2023.
For natural persons, assessable income tax shall be exempted in an amount equivalent to the money donated. However, the exemption must not exceed ten percent (10%) of assessable income after the deduction of other specified expenses and allowances and in combination with other donations under Section 47 (7) of the RC.
For companies or juristic partnerships, income shall be exempted in an amount equivalent to the money or price of the property donated. However, the exemption is not to exceed two percent (2%) of the juristic person’s net profit when combined with other expenses for public charitable purposes or public health benefits under Section 65 ter (3) (b) of the RC.
Additionally, value added tax (VAT) shall be exempted on the donation of goods, by VAT registrants, to the Office of the Permanent Secretary in support of COVID-19 response measures.
Exemptions of Expenses Related to COVID-19 Testing
RD (No. 752) B.E. 2565 (2022) extends a prior tax incentive program (RD No. 733), which ended March 31st, 2022, to encourage business operators to test staff and employees for COVID-19. Income shall be exempted at fifty percent (50%) of the expense incurred for buying self-test type COVID-19 antigen tests from April 1st, 2022, through December 31st, 2022.
Tax Exemptions to Promote Liquidity and Business Operations
RD (No. 753) B.E. 2565 (2022) was introduced in response to liquidity challenges which business operators face because of the COVID-19 pandemic. The intent is to facilitate business operations by tax-exempting property sales and buy-back financing schemes. The scheme contemplated is one whereby business operators use existing property to obtain funds by selling their property to a trustee, under the condition that the business will buy-back that asset. Qualifying sales and buy-back arrangements will enjoy the following tax incentives under this RD.
The seller (business confronted with liquidity issues), will not need to recognize income for corporate income tax purposes. Furthermore, it is exempt from VAT, specific business tax, and stamp duty that would otherwise arise from the property’s sale.
The buyer (which must be a trustee), will be exempt from VAT, specific business tax, and stamp duty that would otherwise arise from the subsequent resale (i.e. the buy-back by the original seller).
Conditions to enjoy this tax treatment includes:
1. The company or juristic partnership must sell the property to a trustee of a trust property with buy-back conditions within two (2) years from the Royal Decree’s date of enforcement or July 18th, 2024; and
2. The buy-back must occur within five (5) years after the initial transfer to the trustee.
Exemptions on Donations to Healthcare Institutions during the COVID-19 Pandemic
RD (No. 754) B.E. 2565 (2022) enacted a series of tax measures to incentivize the donation of money or property to healthcare institutions specified in this RD. Qualifying donations are limited to those made between April 26th, 2022, and December 31st, 2022.
For natural persons, assessable income tax shall be exempted at two (2) times the amount of money donated after the deduction of expenses and allowances. However, the exemption may not exceed ten percent (10%) of assessable income after the aforementioned deductions are made under Section 47 (1), (2), (3), (4), (5), and (6) of the RC.
For companies and juristic partnerships, income tax shall be exempted at two (2) times the expenses donated, regardless of whether it was paid in money or property. However, the exemption may not exceed ten percent (10%) of the net profit before the deduction of expenses for public charity purposes or public benefits and expenses for education or sports under Section 65 ter (3) (b) of the RC.
An additional condition is that the transferor, a natural person, company, or juristic partnerships, may not deduct the cost of that property or goods when calculating their income tax. This is prerequisite for income received from the transfer of property, sale of goods, or the execution of instruments arising from donations, to be exempt from income tax, VAT, specific business tax, and the stamp duty.
A natural person, company, or juristic partnership that has exercised the right of income tax exemption under this RD must not deduct the donation under Section 47 (7) (b) of the RC. Furthermore, the money or property must not be deducted as expenses for public charitable purposes or public benefits under Section 65 ter (3) (b) of the RC.
Extending Tax Incentives to provide Articles and Medical Devices for the Treatment and Prevention of COVID-19
RD (No. 755) B.E. 2565 (2022) extends a prior tax incentive, which ended on March 31st, 2022, to promote the donation of medical devices for the treatment, diagnosis, and prevention of COVID-19.
IMPORT VAT: Under this RD, goods imported for the treatment, diagnosis, or prevention of COVID-19 are VAT exempt if donated to the following three categories of organizations:
✓ Government medical establishments. (As specified in this RD)
✓ Other governmental agencies (others than those in Category 1)
✓ Public charitable organizations, institutes, or medical establishments qualifying under Section 47 (7) (b) of the Revenue Code
However, this VAT exemption is applicable to goods imported and donated to the aforementioned qualifying medical institutions between April 1st, 2022, and March 31st, 2023.
INCOME TAX & VAT: Income received by a company or juristic partnership from the transfer of property or sale of goods arising from qualifying donations will be exempt from income tax and VAT. However, the transferor must not deduct the cost of the property or goods as an expense for income tax calculation. This exemption applies to donations made between April 1st, 2022, and December 31st, 2023.