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Tax Relief Measures for Business Operator Affected by the Flood

Severe flooding that occurred since mid of 2011 through to the beginning of 2012 in Thailand has been considered as one of the worst natural disasters in terms of costs and the amount of businesses affected. There are a number of measures to alleviate burdens of different nature which have been put in place to assist businesses in including tax relief measures. And although there are several tax measures in the forms of tax exemptions and tax incentives already in place since before the latest flooding occurrence, but as the flooding situation was aggravated to such a severe extent towards the end of 2011, the government introduced additional tax exemption and incentive measures, details of which are summarized in the tables below:

Tax relief measures for the business being affected by the flood

Tax Relief Measures Details of Relief and Conditions
Exemption of income tax for donation, compensation for the damage received from Government or in other cases

Royal Decree No. 527 grants exemption of income tax for the following items:

1. Compensation for damage received from the Government

2. Monies or assets received as donations or compensation for losses not exceeding the damage amount.

Exemption of income tax for compensation for the damage received from insurance company Royal Decree No. 527 grants exemption of income tax for the compensation for damage received from insurance companies of the amount that exceeds the cost of assets after depreciation and amortization.
Extension of tax returns filing and payment for the tax payers that are in the affected flood area

Revenue Department announces an extension of tax returns filing and payment for the types of tax payment as follows:

1. Extension for every type of taxes under Revenue Code that is due during July to November 2011 to 5 December 2011.

2. Extension for corporate income tax returns that is due during August to December 2011 to 29 February 2012.

Other tax measures under Revenue Department 1. Loan given to employees who are affected by the flood at low interest rates or without any interest charge, which follows the Company’s policy on employee welfare, is considered as a justifiable reason for not recognizing income or recognizing income lower than the market rate.2. Financial assistance given to employees who are affected by the flood for such employees’ damaged properties, which follows the Company’s policy on employee welfare, can be deducted as an expense for the purpose of corporate income tax and will not be considered as assessable income for the purpose of the employee’s personal income tax.

3. Temporary rent of properties for the employees who are affected by the flood given in order to allow such employees to perform their duties can be deducted as an expense for the purpose of corporate income tax and will not be considered as assessable income for the purpose of the employee’s personal income tax.

Exemption of import duty for replacement of machinery, tools and equipments.

Announcement of the Ministry of Finance on the Customs Duty Exemption for the Area Affected by the Flood, announced on 5 January 2012 provides import duty tax exemption to the businesses which are situated in the flood disaster zones for the following import items;

1. Machineries, parts and any part of machineries, including tools and equipments used with machineries which has been imported to replace damaged machineries

2. Assembled motor vehicle for the selected types (87.03 and 87.04) and engine capacity (not exceeding 3,000 cc) imported as part of a temporally measure to compensate for the domestic production

3. Any items listed in the customs tariff imported to replace any parts or equipments for the production of vehicle within the country

Extension of excise tax returns filing and payment.

– Announcement of the Ministry of Finance on the Extension for Excise Duty Payment (No. 12), announced on 2 November 2011 allows extension of excise tax returns filing and excise tax payment with the following conditions:

Business operators in the provinces of Nonthaburi, Patumthani, Ayuthaya, Singburi, Pijit, Uthaitani and Bangkok Metropolis in Bangbon, Bongplad, Donmuang, Bangkhen, Bungklum, Meenburi, Saimai, Lankrabang and Nongjok Districts, are entitled to an extension for excise duty payment. This is given that the liability to pay such excise duty arise between 1 September 2011 to 5 November 2011, and the application for tax payment and tax payment extension be submitted before 15 December 2011.

– Announcement of the Ministry of Finance on the Extension for Excise Duty Payment (No. 13), announced on 28 December 2011 allows extension of excise tax returns filing and excise tax payment with the following conditions:

Business operators in the provinces of Nakhonpratom, Samutsakhon and Bangkok Metropolis in Taweewatana, Talingshan, Nongkham, Bangkea, Phasijareon, bangkhuntian, Jomtong, Bangkok Noi, Bangkok Yai, Bangna, Suanluang, Pravet, Lanprao, Wangtongland, Bangkrapi, Jatujak, Klongsamwa, Laksi, Sapansoong and Kanyao Districts, are entitled to an extension for excise duty payment. This is given that the liability to pay such excise duty arise between 1 October 2011 to 5 November 2011, and the application for tax payment and tax payment extension be submitted before 15 January 2012.

Measures for BOI Promoted Businesses

The Board of Investment (BOI) has approved of the following tax relief measures which are applicable to BOI promoted businesses:

Tax Relief Measures Details of Relief and Conditions
Disposal of raw and essential material imported using BOI tax privileges without tax burden. Announcement of the Office of the Board of Investment No. Por. 4/2554 on Conditions and Measures for Dealing with Required Raw and Essential Materials and Parts in accordance with Section 36(1) Damaged by Flood, dated 15 November 2011 allows the damaged or lost raw and essential materials and parts imported in pursuant to Section 36(1) of the Promotion of Investment Act B.E. 2520 to be counted as part of the waste allowance without any tax burden. The relief measure requires that an auditor makes a report certifying the reason of loss, type and quantity of raw and essential material and the application for tax relief must be submitted to BOI by 5 June 2012.
Exemption of imported duty on import of machinery for replacement to the machinery damaged by flood. Announcement of the Board of Investment No. 7/2554 on the Extension to the Import Duty Exemption Period for the Import of Machinery as Replacement to Machinery Damaged by Flood, dated 25 November 2011 allows extension for submission of import duty exemption applications for machinery imported to replace damaged machinery in accordance to the Announcement of the Board of Investment No. 4/2554 on the Relief Measures for BOI Licensed Businesses, dated 17 January 2011. The new submission deadline is 5 June 2012.
Extension of tax holiday on exemption and reduction of corporate income tax for the operators that are affected by the flooding. Additional years of corporate income tax exemption are offered to BOI-promoted companies directly affected by the flood that are still have their tax holidays period remaining.1. Project with corporate income tax exemption cap

– 8 year corporate income tax exemption with 150% cap on new investment plus remaining unused cap in case of remaining at the original province; or

– 8 year corporate income tax exemption with 100% cap on new investment plus remaining unused cap in case of relocating to other province.

 

2. Projects without corporate income tax exemption cap

Remaining tax incentive period Additional period granted
Less than 5 years plus 3 more years
5 – 6 years plus 2 more years and 2 year for 50% tax reduction
6 – 7 years plus 1 more years and 4 year for 50% tax reduction
7 – 8 years plus 5 year for 50% tax reduction

 

Extension of tax exemption period and Increasing capped amount for corporate income tax exemption on investment for flood prevention system. Industrial estates that invest in flood prevention systems are offered an 8-years tax exemption period with the corporate income tax exemption ceiling increased from 100% to 200% of their investment excluding land cost and working capital.

 

By Rawat Chomsri, Partner © December 2011
Khun Rawat can be reached at rawat@siampremier.co.th