Tax FAQs 

There are two scenarios for this situation.

1) In the case where the company has insurance
If an asset is lost and a company is in the process of claiming compensation from an insurance company, that loss cannot be immediately claimed as a deductible expense in the corporate income tax computation pursuant to Section 65 ter (12) of the Thai Revenue Code. The company will be entitled to a deduction in the year that the company receives the compensation from the insurance company.

2) In the case where the company does not have insurance
The company can treat the total residual value of the asset as a deductible expense in the year that the loss of the asset occurs but the company is required to possess reliable records as proof of the loss (i.e. fixed assets register, notification to the police to obtain their report, purchase invoice, etc.) We are expecting further guidance from the Revenue Department for circumstances where the company’s financial records are also destroyed.

In principle, if the damages exceed the compensation, the difference can be treated as a deductible expense for corporate income tax purposes. Conversely, if the compensation exceeds the damages, the difference shall be treated as follows.

For the income received from the insurance company as compensation for damages from floods, storms, fires, or other natural disasters occurring in Thailand after 1 January 2011, such income, specifically the amount exceeding the residual value of the property after the deduction of wear and tear and depreciation, shall be exempted from the corporate income tax computation in the accounting period that the company receives the compensation from the insurance company.

However, compensation for business interruption (other than the compensation for damages from floods, storms, fires, or other natural disasters) would not fall within the scope of Royal Decree No. 527. Therefore, companies will be required to include such compensation in the corporate income tax computation.

For an individual taxpayer, the individual can obtain an exemption for the total amount derived from the insurance company in accordance with the terms and conditions under Section 42 (13) of the Revenue Code of Thailand.

A loss from damaged assets can be realized if the company complies with Departmental Instruction No. Paw.58/2538. For destroyed assets, the company may refer to Departmental Instruction No. Paw79/2541 for guidelines of acceptable evidence for the Revenue Department and private tax ruling no. Gor.Kor. 0811/09658 September 14, 1999.

Please note that currently the Revenue Department has not issued any specific guidelines on the loss of assets from flooding except for the announcement on November 3, 2011, which mentions in principle that if a business operator does not have insurance to cover the loss then a business operator will be able to deduct the expense immediately.

However, the Revenue Department has not provided any details on how to manage such damaged assets. We expect that the Revenue Department will issue more clear guidelines and regulations regarding this issue. Therefore, to avoid any dispute with the tax officer, we recommend that the company should complies with the said Paw. 58/2538 & Paw. 79/2541 until there are new announcements/regulations from the Revenue Department.

There is no limit on the donation period. As long as the donation is made after January 1, 2011 and other conditions are met, i.e., the donation is made through an entity acting as an agent for aiding the victim of floods, then the company can obtain a tax deduction for the donation in calculating its corporate income tax.

It should be recorded as selling and administrative expenses.

Currently, there is no such announcement.

Yes, the company can obtain a deduction for income tax purposes for the amount given to its employees for the purpose of providing assistance to employees suffering from the flooding.

In order to do so, the company should have rules, regulations or announcements approved by its board of directors and they should be notified to all staff affected by the flooding prior to giving money.

If the employer makes cash advances, the following tax issues shall be taken into consideration:

1) Specific Business Tax

Where a company maintains a fund for the purpose of lending to employees and interest on loans is charged at a reasonable rate, then the interest should be exempt from the specific business tax. This exemption where (i) the staff are members of the fund and (ii) there is interest charged on the loan. However, if the company does not charge interest on the loans, it could be implied that the company does not qualify for the exemption from specific business tax.

In addition, as the company is lending money to its employees free of interest, Section 91/16 of the Revenue Code will apply. Thus, if the company has no reasonable grounds for interest-free lending, the company may be considered to have received deemed interest income and such deemed interest will be subject to specific business tax. Conversely, if the company does have reasonable grounds and has sufficient evidence to defend this issue, then specific business tax should not be imposed.

2) Corporate Income Tax

In addition to the specific business tax issue, if a company lends money to its employees without charging interest and there are no reasonable grounds for such lending, then the company is subject to the risk of being assessed as having deemed interest income. In most cases, the Revenue Department would not allow interest-free loans to staff. However, it may be possible that if the company has written regulations or announcements approved by the Board of Directors that the lending is made only to employees who have suffered from the flooding and an appropriate amount is lent to each employee, then this may constitute reasonable grounds for lending money to employees without any interest charge. Such actions have not been tested with the Revenue Department and we are yet to receive their response to same.