Recent Supreme Court Cases effect companies with multiple BOI privileges
On 16 June 2016, Thailand’s Finance Minister issued a notification granting penalty and surcharge exemptions to companies with multiple projects promoted by the Board of Investment (“BOI’) who have acted in good faith but for corporate income tax purposes have not set off any losses from one BOI project against profits from other BOI projects in the same year. Under this Notification, a company with multiple BOI projects can receive the exemption from penalties, which can be as high as 100% of the corporate income tax liability, and surcharges, at 1.5% per month, if by 1 August 2016 it amends its corporate income tax return to combine profits and losses incurred within the same year from all its BOI projects and make a payment of any additional tax liability due to the Revenue Department (“RD”).
This Notification was issued in order to lessen the tax liability of affected taxpayers following the outcome of two recent Supreme Court cases (Case No. 15100/2558 and No. 15345/2558) which ruled in favor of the RD interpretation regarding the combining of profits and losses of the same year under multiple BOI projects. In general, the BOI grants privileges, which include tax and non-tax benefits, to companies on a project-by-project basis. It is not uncommon for companies to apply for multiple BOI projects as it allows them to expand their business operations and take on new investments. In these court cases, the taxpayers were granted multiple BOI projects and computed their net taxable profits and losses separately for each BOI project. As a result, the taxpayers did not set off their losses from certain BOI projects against their profits from other BOI projects that arose in the same accounting year. Rather, during the tax exemption period, the taxpayers carried forward the losses to the next accounting year and/or set off such losses against non-BOI projects. The RD disagreed with this approach. In the RD’s view, which was validated by the Supreme Court judgments, a loss which can be carried forward to the next accounting year and/or set off against profits from non-BOI projects, must be a net loss after setting off such losses against profits derived from other BOI projects in the same accounting year. This should be the case even where the profits from a specific BOI project are still subject to a tax-exempt period.
In the court’s view, because the BOI has not prescribed any rules or criteria for the computation of net taxable profits of a company with multiple BOI projects, the determination of net taxable profit should be determined in accordance with the Revenue Code and thus the tax assessments issued by the TRD in these cases was correct. The treatment per the Revenue Code is arguably set out in the Board of Taxation ruling No.38/2552, dated 13 February 2009.
The companies with multiple BOI projects are urged to take advantage of the concessions provided by the above Notification to regularize their current and historic corporate income tax affairs with the RD no later than 1 August 2016. This Notification also allows a taxpayer who has already made tax payment together with penalties and surcharges before this Notification to file a request for refund of said penalties and surcharges by 1 August 2016.
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