Tax & Legal News Flash | Issue 40
On 6 June 2018, the Thai Revenue Department (“TRD”) released draft amendments to the Thai Revenue Code (“TRC”) to introduce alternative currency conversion methods and a new functional currency approach (“the proposed amendments”). The key features are summarized below.
Section 65 bis (5) of the TRC currently prescribes methods for converting foreign currencies, assets and liabilities to Thai baht for Thai tax purposes.
The proposed amendments will introduce two new, alternative methods for use by juristic companies or partnerships (other than commercial banks or designated financial institutions) to convert foreign currencies, assets or liabilities to Thai baht at the end of each accounting period. The three available conversion options will be as follows:
The first method is currently prescribed by Section 65 bis (5)(a) of the TRC. The second and third methods will be added to that provision under the proposed amendments.
The proposed amendments will also repeal Section 65 bis (8), which relates to the conversion of the cost of goods from foreign to Thai currency. It appears that this will be covered by Section 65 bis (5)(a) after Section 65 bis (8) is repealed, but the precise impact of the amendments is unclear.
The proposed amendments will also introduce a new functional currency method, which may be adopted by certain entities (juristic companies or partnerships) that use functional currency for accounting purposes. The proposed method has the following features:
The proposed amendments will be effective from 1 January 2019. However, as entities must notify the Director-General before adopting the functional currency method, it is likely that entities with calendar year accounting periods will only be able to transition to functional currency from 1 January 2020 (unless they alter their accounting periods).
The proposed amendments may solve a number of problems faced by many entities. A public hearing process is currently underway and will run until 20 June 2018. KPMG intends to make submissions seeking clarification on the areas of uncertainty outlined above. We encourage all public stakeholders to submit their comments on the proposed amendments.
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