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COVID-19 Tax Relief Measures for SMEs and Debt Restructuring

Several COVID-19 tax relief measures announced in February and March 2020 were promulgated in the Government Gazette on July 12, 2020, and took effect on the following day. The three Royal Decrees provide assistance to businesses affected by the COVID-19 outbreak by granting interest expense deductions and wage expense deductions to SMEs, and tax exemptions to support debtors and creditors involved in debt restructuring. 

In order to successfully claim tax privileges, companies should ensure they are in compliance with the Revenue Department’s procedures and regulations, as well as additional requirements to be issued.

 

150% Tax Deduction for Interest Expenses
Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 707) 

SMEs who take out loans under the government’s low-interest credit measures are entitled to a 50% additional tax deduction on interest expenses incurred on said loans. To receive the deduction, the interest must be incurred and accrued between April 1st, 2020 and December 31, 2020. Combined with the normal 100% deduction on interest expenses, eligible SMEs may claim a total 150% deduction.

 Eligible businesses must meet the following criteria:

1.   The business’s income from the last 12-month accounting period, ending on or before September 30, 2019, does not exceed 500 million baht.

2.   The business had no more than 200 employees during the last accounting period.

3.   The exemption applies only to interest costs incurred on loans taken out under the low-interest credit measures passed by the Council of Ministers on March 10, 2020.

 

300% Tax Deduction for the Wages of Employees Insured under the Social Security Act
Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 708) 

SMEs will receive an additional 200% income tax deduction on the expense of wages paid to employees insured under the Social Security Act BE 2533 (1990) between April 1st, 2020 and July 31, 2020. Together with the normal 100% deduction on wage expenses, eligible SMEs may claim a total 300% deduction.  

To be eligible for the tax benefit, businesses must meet the following conditions:

1.   The business’s income from the last 12-month accounting period, ending on or before September 30, 2019, does not exceed 500 million baht.

2.   The business had no more than 200 employees during the last accounting period.

3.   The wages eligible for the deduction are no more than THB 15,000/person/month.

4.   The total number of insured employees during the period from April 1, 2020 to July 31, 2020 must not be less than the total number of insured employees as of March 31, 2020.

5.   The business must not claim tax exemptions granted by another Royal Decree issued under the Revenue Code for employment expenses under Section 3.

 

Tax Exemptions for Debt Restructuring
Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 709) 

Tax exemptions to support debtors and guarantors, financial institutions, and other creditors participating in debt restructuring went into force on July 13th, 2020. The incentives are similar to those implemented after the 2011 floods.

Only activities carried out between January 1st, 2020 and December 31st, 2021 are eligible for the exemptions, and all must be executed in accordance with the Bank of Thailand’s regulations for debt restructuring. 

Both financial institutions and the debtors of financial institutions are exempt from personal income tax, corporate income tax, VAT, special business tax, and stamp duty. The exemptions are granted for the amount of income received from the transfer of assets, the sale of goods, the provision of services, and stamps attached to instruments executed as a result of debt restructuring. 

Other creditors (such as credit card issuers and personal loan businesses) and the debtors of other creditors receive the same benefits. Additionally, debtors of other creditors will receive exemptions from income tax for the amount of debt forgiven by the creditor.

Debtors of financial institutions and debtors of other creditors receive exemptions from income tax, VAT, special business tax, and stamp duty imposed on transfers of immovable property under the following circumstances:

1.   The income must derive from the transfer of property, mortgaged by the debtor to guarantee the loan, to a party that is not the creditor. 

2.   The debtor must use the income received from the transfer of property to repay their debts to the creditor. 

3.   The exemption will apply to income up to the amount of the outstanding debt owed to the creditor or obligations under the debt guarantee agreement, in accordance with conditions announced by the Director-General.  

 

Government Gazette, Page 1, Book 137, Section 54 Kor, Announced on July 12, 2020

Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 707) (2020)

By virtue of Section 175 of the Constitution of the Kingdom of Thailand and Section 3 (1) of the Revenue Code, which was amended by the Revenue Code Amendment Act (Issue No. 10) (1953), HM King Maha Vajiralongkorn is therefore graciously pleased to direct the enactment of a Royal Decree, as follows;

Article 1 This Royal Decree shall be called “Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 707) (2020).”

Article 2 This Royal Decree shall come into force from the day following the date of its publication in the Government Gazette.

Article 3  Under Part 3 Chapter 3 in Title 2 of the Revenue Code, companies or juristic partnerships that have an income of no more than 500 million baht from the business or with the last day of the accounting period ending before or on September 30, 2019 in accordance with the rules provided under Section 65 of the Revenue Code, and employees of no more than 200 people during the said accounting period shall receive a 50% income tax exemption for interest costs incurred on loans under the low-interest credit measures. This tax exemption was introduced to help businesses that are directly or indirectly affected by COVID-19 outbreak according to the resolution of the Council of Ministers on March 10, 2020. The tax exemption only applies for interests accrued from April 1, 2020 to December 31, 2020, in accordance with the rules and regulations announced by the Director-General. 

Article 4 The Minister of Finance shall be in charge of this Royal Decree.

 

Government Gazette, Page 4, Book 137, Section 54 Kor, Announced on July 12, 2020

Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 708) (2020)

By virtue of Section 175 of the Constitution of the Kingdom of Thailand and Section 3 (1) of the Revenue Code, which was amended by the Revenue Code Amendment Act (Issue No. 10) (1953), HM King Maha Vajiralongkorn is therefore graciously pleased to direct the enactment of a Royal Decree, as follows;

Article 1 This Royal Decree shall be called “Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 708) (2020).”

Article 2 This Royal Decree shall come into force from the day following the date of its publication in the Government Gazette.

Article 3 Under Part 3 Chapter 3 in Title 2 of the Revenue Code, businesses shall receive a 200% income tax exemption for the expenses paid to employees who are insured under Section 33 of the Social Security Act (1990), as amended by the Social Security Act (Issue No. 2) (1994). The expenses must be for the actual amount of salary paid to employees who receive no more than 15,000 baht per month from April 2020 until July 2020, according to the rules and regulations by the Director-General. 

The expenses under paragraph one must be paid from April 1, 2020 to July 31, 2020.

“Salary” means the money that employers and employees have agreed upon to pay as compensation for the employee’s work under the labor contract for the normal duration of work whether it be hourly, daily, weekly, monthly, or other time periods. This also includes the money that an employer pays to an employee on holidays and days off when the employee does not work, which the employee is entitled to receive under the law on labor protection. This does not include overtime pay, bonuses, assets or other benefits that an employer pays to an employee due to the employment. 

Article 4 Companies or juristic partnerships that are exempt from income tax under Section 3 must satisfy the following requirements:

1.   Have an income of no more than 500 million baht from the business or with the last day of the accounting period ending before or on September 30, 2019 in accordance with the rules provided under Section 65 of the Revenue Code, and employees of no more than 200 people during the said accounting period. 

2.   The number of employees who are insured on the last day of April 2020, May 2020, June 2020 and July 2020, as the case may be, must not be less than the number of employees who are insured on the last day of March 2020, except for reasons prescribed by the Director-General.

3.   The company or juristic partnership must not claim tax exemptions under other Royal Decrees issued under the Revenue Code for employment expenses under Section 3, whether in whole or in part. 

Article 5 In the case that the company or juristic partnership has claimed the tax exemption under this Royal Decree and subsequently does not comply with the rules and regulations according to the provisions of Section 3 and Section 4, the right to claim the tax exemption under this Royal Decree shall end. The company or juristic partnership must include the amount of income tax that has received the exemption into the calculation of net income for tax purposes in the accounting period during which the exemption was claimed.

Article 6 The Minister of Finance shall be in charge of this Royal Decree.

 

Government Gazette, Page 8, Book 137, Section 54 Kor, Announced on July 12, 2020

Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 709) (2020)

By virtue of Section 175 of the Constitution of the Kingdom of Thailand and Section 3 (1) of the Revenue Code, which was amended by the Revenue Code Amendment Act (Issue No. 10) (1953), HM King Maha Vajiralongkorn is therefore graciously pleased to direct the enactment of a Royal Decree, as follows;

Article 1 This Royal Decree shall be called “Royal Decree issued under the Revenue Code on Tax Exemption (Issue No. 709) (2020).”

Article 2 This Royal Decree shall come into force from the day following the date of its publication in the Government Gazette.

Article 3 This Royal Decree shall apply to debt restructured in accordance with the rules for debt restructuring of financial institutions announced by the Bank of Thailand, in accordance with the rules and regulations specified by the Director-General.

Article 4 In this Royal Decree,

“Financial institutions” means 

1.   Government financial institutions established by specific laws

2.   Financial institutions under the law on financial institution businesses

3.   Asset management companies in accordance with the law on asset management companies

4.   Other juristic persons announced by the Director-General and approved by the Minister

“Other creditors” means

1.   Creditors that are not financial institutions

2.   Other creditors other than (1) that have negotiated with financial institutions to restructure the debt for the debtors and have entered into a written agreement with a financial institution.

“Non-financial institution” means a company that is not a financial institution under the law on financial institution businesses, and operates the following businesses;

1.   A company that operates a credit card business, which is a business that requires legal approval;

2.   A company that operates a personal loan business under supervision, which is a business that requires legal approval;

3.   A company that operates a microfinance business under supervision; which is a business that requires legal approval;

4.   A company that operates retail loans at the provincial level under supervision, which is a business that requires legal approval;

5.   A company that operates a hire purchase business with securities listed on the Stock Exchange of Thailand;

6.   A company that operates a leasing business with securities listed on the Stock Exchange of Thailand.

“Debtor” shall also include the guarantor of the debtor.

Article 5 Income tax under Part 2 and Part 3 Chapter 3, Value Added Tax under Category 4, Specific Business Tax under Category 5, and Stamp Duty under Category 6 in Title 2 of the Revenue Code, shall be exempted to the debtors of financial institutions and financial institutions. The exemption applies to income received from transferring assets, selling goods or providing services, and for stamp duties related to the debt restructuring of financial institutions carried out in accordance with the rules for debt restructuring of financial institutions announced by the Bank of Thailand. This shall only apply to the transfer of assets, sale of goods, services provided, and attached stamp duties carried out between January 1, 2020 and December 31, 2021.

Article 6 Under Part 2 and Part 3 Chapter 3 in Title 2 of the Revenue Code, income tax shall be exempted to the debtors of other creditors for the income received from the release of the debt of other creditors that was carried out by using the rules for debt restructuring of financial institutions announced by the Bank of Thailand mutatis mutandis. This shall only apply to debt released between January 1, 2020 and December 31, 2021.

Article 7 Income tax under Part 2 and Part 3 Category 3, Value Added Tax under Category 4, Specific Business Tax under Category 5, and Stamp Duty under Category 6 in Title 2 of the Revenue Code, shall be exempted to the debtors of other creditors and other creditors. The exemption applies to income received from transferring assets, selling goods or providing services, and for stamp duties attached to the debt restructuring of other creditors that have carried out by using the rules for debt restructuring of financial institutions announced by the Bank of Thailand mutatis mutandis. This shall only apply to the transfer of assets, sale of goods, services provided, and attached stamp duties carried out between January 1, 2020 and December 31, 2021.

Article 8 Income tax under Part 2 and Part 3 Category 3, Specific Business Tax under Category 5, and Stamp Duty under Category 6 in Title 2 of the Revenue Code, income tax shall be exempted to the debtors of financial institutions for the income received from transferring immovable property, which the debtor of a financial institution pledged as a guarantee for the loan of the financial institution, to another debtor, who is not the financial institution creditor, and for the stamp duty incurred by the transfer of said immovable property. Debtors of financial institutions must use the income received to pay the financial institution creditor for debt restructuring that has been carried out in accordance with the rules for debt restructuring of financial institutions announced by the Bank of Thailand. However, this shall only apply to the amount of income that does not exceed the outstanding debt owed to the financial institution or obligations under the debt guarantee agreement with the financial institution in accordance with the rules and regulations announced by the Director-General. This shall only apply to the transfer of immovable immovable property and attached stamp duty carried out between January 1, 2020 and December 31, 2021.

Article 9 Income tax under Part 2 and Part 3 Category 3 Specific Business Tax under Category 5, and Stamp Duty under Category 6 in Title 2 of the Revenue Code, shall be exempted to the debtors of non-financial institutions for the income received from the transfer of immovable property, which the debtor of a non-financial institution pledged as a guarantee for the loan of the non-financial institution, to another debtor, who is not the non-financial institution creditor, and for the stamp duty that is attached for the transfer of said immovable property. Debtors of non-financial institutions must use the income received to pay the non-financial institution creditor for debt restructuring that has been carried out by using the rules for debt restructuring of financial institutions announced by the Bank of Thailand mutatis mutandis. However, this shall only apply to the amount of income that does not exceed the outstanding debt owed to the non-financial institution or obligations under the debt guarantee agreement with the non-financial institution in accordance with the rules and regulations announced by the Director-General. This shall only apply to the transfer of immovable property and attached stamp duty carried out between January 1, 2020 and December 31, 2021.

Article 10 The Minister of Finance shall be in charge of this Royal Decree.

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