Press releases and law firm thought leadership
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Thailand 4.0 stands for the new stage to transform the country currently relying on heavy industries (3.0 stage) into a creativity and innovation-driven economy. Trade secrets are definitively value-based and could help pursing Thailand 4.0.
On 14 March 2017, the Thai Department of Intellectual Property (DIP), the US Patent and Trademark Office (USPTO) and the Legal Committee of the American Chamber of Commerce in Thailand, joined by legal practitioners and business owners, gathered to discuss an all too often neglected intangible asset owned by almost any business: trade secrets.
4 Apr 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS
Tax Deductibility of Penalties and Surcharges
What would you do if one day a government body issued a ruling that set aside a guideline you were required to comply with, and another day it issued another ruling requiring you to do a different thing, potentially exposing you to wrongdoing? Unfortunately, that day appears to have arrived in the case of the Board of Taxation, a panel drawn from various respected government agencies, appointed and empowered under the Revenue Code to provide interpretations on tax matters.
Published: 21 Mar 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS
The Miracle of Taxation
Two hundred and forty years ago, the renowned economist Adam Smith set out four canons of taxation in The Wealth of Nations. A decent tax system, he wrote, should follow the standards of justice, certainty, convenience and economy.
7 Mar 2017 at 04:00 / Newspaper section:Business
Turning Entrepreneurs into Corporate Entities
Published: 21 Feb 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS
Tougher measures against tax dodgers
The world is entering a new era in which national tax authorities are joining hands to set up a system to hound those who dodge paying their fair share of tax by applying unacceptable tax-planning schemes.
The latest legislative developments in the tobacco sector in Thailand are worrying the tobacco industry but also the food and beverage sectors as similar regulations may follow.
The content of the draft Thai Tobacco Product Control Act ("TPCA") regulating the packaging and labeling of tobacco products has first been introduced in 2010 under a different Bill named draft Tobacco Consumption Control Act (or “TCCA”), and shows the ever growing restrictions imposed on the tobacco industry in Thailand.
7 Feb 2017 at 04:00 / Newspaper section:Business
New measures to improve well-being and business opportunities
This year has started with some legislation aimed at improving tax treatment and allowances to enhance the well-being of people in general, and to add to Thailand's charm as a target for business investors.
24 Jan 2017 at 04:00
Newspaper section: Business
Using the tax system to reduce inequality is a work in progress
The seriousness of economic inequality was portrayed dramatically by Oxfam International last week, when it reported that the eight richest people in the world own as much wealth as the 3.6 billion who make up the poorest half of humanity. In Thailand, the wealth held by the 50 richest people has been estimated at 25% of the country's gross domestic product.
Published:10 Jan 2017 at 04:00 /Newspaper section:Business
Missed a tax refund deadline? Dont lose hope
Every provision in every piece of legislation has its own reason for being, and any act that contradicts the spirit of the law, even if carried out by a government body, is generally disallowed if it deprives a person of his or her rights. This principle is also applied in considering the time limit for a taxpayer to claim a tax refund.
In general, Section 27 ter of the Revenue Code entitles the taxpayer to request a refund of taxes paid, or withholding tax that is withheld in excess of the required amount or without any tax liability, on condition that the refund application must be lodged within a period of "three years from the due date of the filing of the tax return".
In reality, a situation requiring a taxpayer to claim a refund could arise after the statutory deadline. This phenomenon raises a critical issue as to whether the normal three-year rule should still apply. Is the taxpayer being forced by law to give up the right to a refund?
A recent court case illustrates how this could play out. It involved an auction of land held by the Legal Execution Department, in which the winning bidder paid withholding tax on the purchase price when the ownership transfer was registered in 2004. The court later revoked the auction results, and a letter was issued in 2008 to the Land Department with an instruction to void the registration of the land transfer. Thus, the status of the parties to the transaction reverted and it was as if no transaction had ever taken place. As a result, the bidder had no liability to pay withholding tax either.
The Legal Execution Department refunded the purchase price of the land to the bidder, but not the withholding tax, and the bidder decided to seek a tax refund from the Revenue Department in 2009. Predictably, the department refused to make the refund, asserting that the three-year deadline from the due date of the withholding tax filing in 2004 must apply.
However, the Supreme Court ruled in favour of the bidder, saying that "the three-year deadline under Section 27 ter did not apply to this case, as it was not a claim for a refund of excessive withholding tax, or a refund of tax being withheld without a liability to do so, as of the time the tax was withheld". Accordingly, it ordered the department to refund the withholding tax paid in 2004.
This decision is in line with the fundamental rule of the Civil and Commercial Code (CCC), which requires the statute of limitations to begin "from the moment when the claim can be enforced". This means the moment when the taxpayer's right to claim a tax refund occurs, in this case the auction revocation order in 2008.
That seems to be a happy ending for the bidder, but a question remains as to what the time frame for the tax refund should be in this case.
In the absence of a time frame stipulated by the court for submitting the tax refund form, as the situation is not covered by any specific provision in the Revenue Code, the only guideline appears to be the general 10-year rule of the CCC.
In a similar case, the Department of Highways withheld tax from the price it paid to the Crown Property Bureau (CPB) for some land in 1993. Since the Bureau was not subject to corporate income tax liability, it requested a refund of withholding tax from the Revenue Department without submitting a proper tax refund form (Kor 10).
It was not until 2010, after the Revenue Department issued a letter confirming that the Bureau had no liability to pay tax, that the latter submitted Form Kor 10. The department refused to make a refund on the grounds that the form had been submitted after the expiry of the three-year rule under Section 27 ter.
The court recently ruled that, "since the CPB was not a taxable unit under the Revenue Code, and it had no liability to file tax return, Section 27 ter did not apply as the three-year deadline from the due date of the filing of tax return could never start". Thus, the court applied the general 10-year rule of the CCC instead.
You may be facing the situation of a tax refund claim for which the three-year deadline in the Revenue Code has already passed. But it could still fall under the 10-year rule of the CCC before you have to give up your right to claim. You should take a close look at where you stand, and not simply surrender your rights because someone in your local Revenue Department office says you have no case.
By Rachanee Prasongprasit and Professor Piphob Veraphong. They can be reached at firstname.lastname@example.org
Realisation of Expenses under the 'Canon of Certainty'
More than two centuries ago, Adam Smith set out the rule that equity, certainty, convenience and economy are the top four canons for a good tax system. But since government authorities tend to care less about these principles and more about collecting taxes, it's no surprise that confusion persists when it comes to realisation of expenses.
Basically, in computing net profits for tax purposes, an expense should be realised and deducted if it is relevant to the income that was earned during the same accounting year. However, this matching principle may not always apply to tax deductibility, as the occurrence of expenses and income must be ascertainable rather than probable.
As the Supreme Court explained in one of its decisions: "[T]he rule of thumb in realising income or expense under the accrual basis methodology is that the right to receive such income, or the liability to pay such expense, including their amounts, must be ascertainable.
The case in question dealt with a company paying its board of directors for work performed in 1992, but the payment required approval from the shareholders' meeting that took place in 1993. The court ruled that "since the certainty regarding the definite right of the board to receive consideration, as well as the amount, was not ascertained until the approval was given at the shareholders' meeting in 1993, the consideration must be realised and deducted for tax computation in that year.
Mind you, this does not necessarily mean that such expenses must always be realised and deducted immediately after shareholders approve them. If the company or the shareholders' meeting impose certain conditions on the payment, those terms also must be fulfilled so that the expense can be ascertained.
In a recent revenue ruling, a company paid bonuses totalling 42 million and 38 million baht to eligible employees for work done in 2007 and 2008, respectively. The bonuses were subject to approval by the board of directors, and the employees had to continue to work with the company until March of the following year in order to receive the money.
The Revenue Department declared: "[I]f the bonuses could only be paid after they were approved by the board, and the eligible employees continued to work at the company until March of the following year, then such bonuses must become tax-deductible as expenses only when all such conditions were fulfilled.
More complex issues arise with regard to damages that result in a company taking criminal action against an offender. Since it is uncertain whether the damages will be recoverable, it is not clear when they should be realised as expenses, especially since legal procedures can take years. Even the Revenue Department has offered differing views.
In one case, a sales manager embezzled money from his company in 2003. In 2004, the company filed a criminal case, the manager confessed and agreed to compensate the company in instalments over three years. The Revenue Department said the company was entitled to deduct the damages as expenses "when the damages took place". That was not 2003, but 2004 when the manager confessed his crime. The company was also required to book the compensation paid by the sales manager as income in the year of receipt.
However, the story was different in a subsequent case involving a sales manager who swindled his company out of 710 million baht. The company reported the case to the police and filed a criminal complaint against the manager. In this case the Revenue Department said that "when the damages took place" was the accounting year in which the swindle took place, not the accounting year in which the legal procedure was completed. This now appears to be the department's default position.
A recent revenue ruling reinforced this view and offered some welcome leeway to the taxpayer. The case involved an employee who sold fuel to customers at unusually low prices between 2003 and 2007. The company and the public prosecutor took criminal action in 2008 for embezzlement. The employee was eventually found guilty and imprisoned under a Supreme Court judgement issued on Dec 25, 2014 but pronounced on June 22, 2015.
The Revenue Department reiterated that "when the damages took place" meant the accounting years in which the employee committed the embezzlement. However, if the company could not book the expenses in those accounting years, it could realise the damages in the accounting year of the court judgement, which was 2014.
This decision reflects good faith on the department's part, and could save the company from some potential losses. After all these years, if it was required to deduct damages incurred from 2003 to 2007, it would need to file an amended tax return and seek a refund, which may be limited due to the expiration of the three-year period for a refund application.
That said, the decision unintentionally raises one critical issue. Keep in mind that the damages were to be realised when the Supreme Court made its judgement in 2014, but not when the judgement was pronounced on June 22, 2015. It was impossible for the company to know the outcome of the Supreme Court judgement in 2014. This would ultimately lead it to amend its tax return for 2014 and to apply for a refund when it learned of the judgement on June 22, 2015.
In short, it seems that determining the certainty of the tax expenses is a story of never-ending complexity.
By Rachanee Prasongprasit and Professor Piphob Veraphong. They can be reached at email@example.com