Thai Cabinet Allows Tax Break on Software Related Expenses for SMEs

Last week the Cabinet announced a new measure allowing SMEs to use their software related expenses as a deductible against Corporate Income Tax due. In some circumstances, this will be allowed at a rate of two times the expense.

The measure will apply to SME accounting periods for 2021 and 2022. The three eligible expenses, provided that they are registered with the Digital Economy Promotion Agency, include:

1.   The purchase of software of computer programs from software firms;

2.   Payment for the hiring of developers to create software; or

3.   Fees paid to software providers.

In practice, this means that firms can use the cost of electronic equipment, for example, a new computer, for a tax deduction not exceeding 100,000 baht. In the case of hiring software developers or using software services, SMEs can book the cost at two times the cost not exceeding 100,000 baht.

In a statement by Revenue Department Director General, Dr Ekniti Nitithanprapas, the Director General stated that the measure was approved with the aim of incentivizing SMEs to utilize digital technology to upgrade their operations.

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