New draft legislation regarding foreign functional currency in computation of corporate income tax
According to the Thai Accounting Standard (TAS) 21: The Effects of Changes in Foreign Exchange Rates, an entity is required to determine a functional currency for its operation based on the primary economic environment in which it operates and to record transactions using that functional currency.
Therefore, for accounting purposes, a Thai company may end up with a functional currency other than Thai Baht. Under the current tax law, the use of foreign functional currency (FFC) is not permitted. The Revenue Department (TRD) is currently considering amending the Revenue Code to allow companies to adopt the FFC application in computing the corporate income tax.
The objective of this legislative amendment is to reduce compliance cost and the need to maintain separate books for accounting and tax purposes, enhance competitiveness and create fairness for companies that do not use Thai Baht as their functional currency.
The draft legislation was released in July. The key highlights of the draft legislation are summarized below:
We will keep you abreast of further developments on this topic.
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