The Thailand Board of Investment is very strict and particular about payment of Corporate Income Tax in the scheduled parts of the year. But in spite of the stringent guidelines, the Finance Ministry of Thailand has formulated few relaxations in the process. It is because Royal Thai Government is compassionate towards businesses facing tremendous adverse economic conditions due to the COVID-19 pandemic.
The Finance Ministry intends to introduce tax restructuring for the fiscal year 2020-21. The motive behind such intent is to compensate for lower tax revenue. It also aims to change the economic structure as a result of the pandemic crises’ effects.
Statement of Thailand Finance Minister
According to Finance Minister Arkhom Termpittayapaisith, the ministry was preparing tax reform to boost the country’s taxation system. It aims to enhance the economic outlook in light of changes in the economic landscape for the post-pandemic era. It focuses on the Corporate Income Tax in Thailand greatly.
“The current tax system would not work with the government’s tax income and financial situation in 2021,” Mr Arkhom said. “We are preparing a new structure, and implementation is slated for 2021.”
Following are his declarations –
- The new tax system should not have a negative effect on the general public. It must strike a balance between the public and private sectors, including companies and startups.
- The new structure will support the business sector as Thailand’s economy expands. It must cover international investments in the Eastern Economic Corridor initiative, foreign investment promotion by the Board of Investment, and new S-curve industries.
- The government invested a significant portion of the fiscal budget on assisting Thais and business owners impacted by the pandemic crisis.
- Tax reform could draw and promote domestic private investment from both large Thai companies and international investors.
The Perspective of the Royal Thai Government
In June 2020, the cabinet approved a draught bill that would impose a value-added tax on international digital service providers (VAT). According to Reuters, Thailand is the new Southeast Asian country to explore a way to raise tax revenue from multinational technology firms.
Non-resident companies or platforms that receive more than 1.8 million baht a year from offering digital services in Thailand would have to pay a 7% VAT on revenue. This is according to a Thai bill that has yet to be voted on by parliament. However, no such announcement is made for the Corporate Income Tax in Thailand for a similar range of companies.
Thailand has been debating whether or not to tax digital businesses for years, in the hopes of boosting the country’s internet economy, which is one of the fastest-growing in the region.
With the relaxation of the corporate income tax payment scheme, the government’s tax revenue has decreased substantially. This easing may have an effect on the government’s fiscal situation next year.
Thailand’s economic recovery will take longer than expected to return to pre-pandemic levels of growth. According to the Bank of Thailand, Thailand’s economy will take two years to completely recover assuming widespread administration of a coronavirus vaccine.
Thailand is the only country in the region, according to Bank of Thailand governor Sethaput Suthiwartnarueput, to have experienced low investment rates for both public and private investments following the 1997 Asian financial crisis.
The economic environment, both globally and locally, as well as consumer lifestyles, will change during the post-pandemic era.
Tax Exemptions on Debt Restructuring
Personal and corporate income tax deductions for the debtor on the amount of debt released by debt restructuring;
Personal income tax, corporate income tax, VAT, special business tax, and stamp duty exemptions for debtors and creditors for income arising from the sale, operation, or arranging of a debt restructuring instrument; and
Tax deductions on personal income tax, corporate income tax, special business tax, and stamp duty on income arising from the sale of mortgaged immovable property to an individual other than the borrower.
It should be noted that:
- The creditor must not be a financial institution;
- Debt restructuring must occur between January 1 2020 and December 31 2021;
- The conditions for writing-off bad debt due to debt restructuring will be relaxed; and
- The transfer fee for the transfer of immovable property in connection with debt restructuring will be reduced from 2% to 0.01% in case that the transfer of the immovable property is done within December 31, 2021.
It is difficult to accurately forecast all of the potential effects of the COVID-19 pandemic in Thailand. Therefore, revisions and amendments of tax and non-tax relief measures will deal the economic situation. COVID-19 pandemic has impacted many investors. It can further increase its effect. So it is important for investors to adhere to the latest measures issued by various Thai government agencies.
Your Take!
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