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Criteria for Tax Exemption under Government Loan Measures

A Royal Decree (Issue No. 707) (“Decree”) announced in July 2020 grants SMEs who take out loans under the government’s low-interest credit measures an additional 50% corporate income tax deduction on interest expenses. On 30 December 2020, the Revenue Department clarified the conditions under which SMEs are entitled to the additional exemption, issuing the Notification on Income Tax (No. 399) Re: Rules, Procedures, and Conditions for Income Tax Exemption on Interest Expenses under the Low-Interest Loan Measures (“Notification”). The Notification will apply retroactively from 1 April 2020 onwards.

Under the Notification, SMEs must give consent to the lending financial institution to provide the Revenue Department with information on loans the borrower received under the low-interest credit measures. The details to be provided by the lending institution are as follows:

1.   The taxpayer identification number of the borrower.
2.   Details of the loan agreement, such as the contract number, the date of entering into the agreement, the amount of money borrowed, the duration of the agreement, and the interest rate under the agreement.

As prescribed under the Decree, and restated in the Notification, companies and juristic partnerships must also meet the following criteria:

1.   The interest must be incurred and accrued between 1 April 2020 and 31 December 2020.
2.   The business’s income from the last 12-month accounting period, ending on or before September 30, 2019, does not exceed 500 million baht.
3.   The business had no more than 200 employees during the last accounting period.
4.   The exemption only applies to interest costs incurred on loans taken out under the low-interest credit measures passed by the Council of Ministers on March 10, 2020.

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