Measures providing corporate income tax reliefs to spur investment in the Special Economic Zones, new machinery, and the hotel industry were promulgated in the Government Gazette on June 22, 2020.
Issue No. 693: Income tax reductions for companies or juristic partnerships that have business establishments located in a Special Economic Zone
Corporate income tax reductions on the net profits of a company or juristic partnership have been granted for income generated by business establishments located in a Special Economic Zone (SEZ) from manufacturing goods or services rendered and used in an SEZ. The corporate income tax has been reduced to 10% of the company’s net profits for ten years or ten consecutive accounting periods. Companies in an SEZ area, regardless of where their head office is located, can claim these tax benefits from June 23, 2020 until December 30, 2020.
To qualify for the tax benefit, companies registered as a corporate entity after June 23, 2020 must be established in a permanent building in an SEZ. Companies registered before this date must be established in an expansion or addition to an existing permanent building in an SEZ.
Companies must also meet the following requirements:
1. The company has submitted an application to be a company or juristic partnership in the Special Economic Zone to the Revenue Department before December 30, 2020.
2. The company must not claim tax incentives under the following:
a. Corporate income tax exemptions and reductions granted under the law on investment promotion.
b. Corporate income tax reductions for Regional Operating Headquarters granted under Article 6 of the Royal Decree No. 530 (2011) and amended by the Royal Decree No. 583 (2011).
c. Income tax exemptions for SMEs under Article 7 of the Royal Decree No. 530 (2011) and amended by the Royal Decree No. 564 (2013).
d. Income tax reductions for investors in SEZs under Article 4 of the Royal Decree No. 591 (2015).
3. The company must create separate accounts for business activities in the Special Economic Zone that receive the tax privilege and those that do not.
4. The company must comply with the terms and conditions under additional regulations to be issued.
If the company or juristic partnership fails to comply with the conditions in any accounting period, the tax benefit will be revoked as from that accounting period.
Issue No. 695: Income tax deduction for companies or juristic partnerships for investment in new machinery
Companies or juristic partnerships may receive a 150% corporate income tax deduction for expenditure on new machinery assets purchased between January 1, 2020 and December 31, 2020. The tax deduction does not apply to businesses that purchase machinery for the purpose of renting or leasing them out.
The Royal Decree No. 695 extends and augments the scope of the Royal Decree No. 690, which permitted companies to deduct expenses on new machinery purchased between September 19, 2019 and May 31, 2020 at a rate of 50%.
Machinery is defined according to the Machinery Registration Act B.E. 2514 (1971) as anything which consists of a part that either generates, converts or delivers energy. This definition does not include vehicles registered under the Motor Vehicle Act B.E. 2522 (1979).
The machinery must also meet the following requirements:
1. The machinery has never been used before.
2. The machinery is entitled to deduct costs for the wear and depreciation of property under Section 65 bis (2) of the Revenue Code
3. The machinery shall be in a condition ready for use by December 31, 2020.
4. The machinery shall be located in Thailand.
5. The machinery shall not be entitled to any tax deduction under another Royal Decree.
6. Businesses exempt from corporate income tax under the law governing investment promotion, targeted industry businesses, or Eastern Economic Corridor businesses are not eligible.
In order to claim the deduction, companies must:
1. Provide an investment plan and payment plan to the Revenue Department.
2. Comply with the terms and conditions under additional regulations to be issued.
In any accounting period, if the company or juristic partnership fails to comply with the Revenue Department’s conditions, or the machinery does not satisfy the above criteria, the tax benefit will be revoked and tax returns from the relevant accounting period will need to be re-filed. If the machinery is sold, damaged or no longer exists, the tax benefit will end in the accounting period in which any of these events occur, and there will be no need to re-compute the tax benefit.
Issue No. 698: Income tax exemption for companies or juristic partnerships that are hotel operators for the addition, change, expansion or improvement of assets related to the business
Companies or juristic partnerships that are hotel operators are permitted a corporate income tax deduction for 150% of expenses for the renovation or expansion of hotel assets. The deduction applies to purchases made between January 1, 2020 and December 31, 2020. It does not apply to repair or maintenance costs.
Hotel assets eligible for the deduction are as follows:
1. A permanent building for use as a hotel business under the relevant law.
2. Fixtures that are components of or attached to the permanent building.
The hotel assets must also satisfy the following requirements:
1. The assets have never been used before.
2. The assets are entitled to deduct costs for the wear and depreciation of property under Section 65 bis (2) of the Revenue Code
3. The assets shall be in a condition ready for use by December 31, 2020.
4. The assets are located in Thailand.
5. The assets shall not be entitled to any tax deduction under another Royal Decree.
6. Businesses exempt from corporate income tax under the law governing investment promotion, targeted industry businesses, or Eastern Economic Corridor businesses are not eligible.
In order to claim the deduction, companies must:
1. Provide an investment plan and payment plan to the Revenue Department.
2. Comply with the terms and conditions under additional regulations to be issued.
In any accounting period, if the company or juristic partnership fails to comply with the Revenue Department’s conditions, or the asset does not satisfy the above criteria, the tax benefit will be revoked and tax returns from the relevant accounting period will need to be re-filed. If the asset is sold, damaged or no longer exists, the tax benefit will end in the accounting period in which any of these events occur, and there will be no need to re-compute the tax benefit.