Tax News Flash Issue 5
Tax News Flash Issue 5
Additional Tax Deductions For New Capital Expenditure
The Thai government has recently issued a Royal Decree and a Notification of the Director-General to promote and incentivize capital spending on certain eligible assets, provided the expenditure in respect of such assets is incurred during the period 3 November 2015 – 31 December 2016.
The new law provides that, in addition to the normal tax depreciation that can be claimed on assets, a tax deduction for the costs incurred by a juristic taxpayer to acquire, expand, change or improve (not repair) an eligible asset can be claimed as a tax deduction, apportioned over a set number of years.
Generally, the additional deduction will be spread over a certain number of years depending on the nature of the asset starting from the first year in which the asset is ready
The eligible assets and period over which the additional deduction can be claimed is as follows:
- Machinery, parts, equipment, tools, appliance, furniture – 5 years;
- Computer programs – 3 years;
- Vehicles (excluding passenger cars, except where such passenger cars are leased as part of the taxpayer’s business) – 5 years; and
- Permanent buildings (excluding land and permanent building for residential purposes) – 20
The following criteria must also be met:
- The asset must be unused;
- The asset must qualify for tax depreciation and be acquired and ready for use before 31 December 2016;
- The asset must be physically located in Thailand, except in the case of vehicles;
- The asset must not,wholly or partly, fall under any tax privilege provided by any Royal Decree issued under the Revenue Code;
- The asset and the taxpayer must not, wholly or partly, fall under any tax privilege provided by the Board of Investment (BOI), except where the promoted project is under an investment acceleration and the promoted company opts not to claim the benefits under such investment acceleration; and
- The purchasing contract or a similar agreement for the assets must be entered into during the period 3 November 2015 – 31 December 2016 and in the case of permanent buildings, the construction license must be submitted to and approved by the relevant authority during this same period.
Although the Notification issued by the Director General is not clear on this point, based on initial telephone discussions with the Revenue Department, the additional deduction will not be available unless the costs incurred are actually paid during the period 3 November 2015 – 31 December 2016 (i.e., the deduction is not available on an accrual basis). We also understand from the Revenue Department that the additional deduction does not need to be apportioned on a monthly basis from the date the asset is ready for use in a specific tax year. We will keep abreast of developments in the Revenue Department’s interpretation on this aspect and inform readers once a written confirmation is released by the Revenue Department.Since the tax filings for the 2015 year are due by the end of May 2016, taxpayers should urgently consider whether the additional deduction may be relevant to them.
Where a taxpayer has already submitted its 2015 tax return without having taking advantage of the additional deduction, such taxpayer may file an amended return.
Where a taxpayer is contemplating an increase in its investment of Thai eligible assets, such taxpayer should consider structuring the acquisition (and the payment) to take place before 31 December 2016 in order to take advantage of the additional deduction provided under this new tax law.
Should you require any specific advice on the above incentive and its applicability to your 2015 and 2016 tax years, please contact us for assistance
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