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Press releases and law firm thought leadership

This page is dedicated to keeping readers informed of the latest news and thought leadership articles from law firms across the globe.

If your firm wishes to publish press releases or articles, please contact Shehab Khurshid on +44 (0) 207 396 5689 or


The importance of the effective date in tax laws


The importance of the effective date in tax laws

The government of Prime Minister Prayut Chan-o-cha has passed a number of tax laws and regulations -- far more than its predecessors in the previous decade of political turmoil -- since coming to power in 2014. Keeping track of the enforcement of these new rules is complicated, as some have retroactive effect and some grant grace periods.

Tax issues and business transfers: The devil is in the details

25 Jul 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS

Tax issues and business transfers: The devil is in the details

Ever since tax incentives for business reorganisation were introduced two decades ago, different issues have arisen intermittently, especially as they relate to an entire business transfer (EBT), which has become a popular practice.

Unlike a statutory merger, an EBT is not governed by the general rules of the Civil and Commercial Code or the Public Limited Company Act. Consequently, an EBT's merit relies solely on the provisions of the Revenue Code.

To support economic growth and increase the financial strength of local industries, the income tax burden that should have been borne by the transferor of a business is deferred and indirectly passed on to the transferee. It is not exempted, contrary to a common misunderstanding in the market.

While the law requires the assets to be evaluated at the market price, the transferor is not required to include gains arising from the transfer in its gross income. This applies as long as the transferee carries over the tax cost base of the acquired assets as it appeared on the transferor's books as if it were the transferee's own tax cost base, irrespective of the EBT price the transferee is actually paying.

For example, if the transfer price is 130 and the tax cost base is 100, the business transfer will normally result in taxable profits of 30. However, the transferor will not be required to include the 30 as a gain for tax purposes if the acquisition takes place under the terms of the EBT. In exchange, the transferee can only book 100 as its acquisition cost for tax purposes, e.g. depreciation over the residual useful life or calculation of profits upon resale, if any.

Value-added tax, specific business tax (for immovable properties) and stamp duties are also exempted.

To ensure than an EBT is genuine, the Revenue Code mandates that the transferor be dissolved within the same accounting year that the business is transferred. To accommodate the tax audit process, a "Form Kor Or 1-4", together with the details of the parties and transactions, must be prepared and filed within 30 days.

Although an EBT may sound simpler than applying for Board of Investment promotion, a lack of clear understanding among tax auditors has led to a number of questions related to the substance of such transactions. For example:

Is it possible to register the transfer of certain assets, such as land and buildings, with other authorities, e.g. the Land Department, after the EBT date or after the accounting year when the transfer takes place? Is it essential to complete the transferor's liquidation within the same accounting year as the transfer? Is an EBT at fair market value allowed, or does the law strictly require the transfer to be done at book value?

While most tax authorities have tried their best to eliminate unnecessary debates that would otherwise hinder business integration, some auditors have raised questions that have made EBT transactions difficult in some parts of the country. The same question that was never considered an issue in one tax area office could become a major obstacle or even a deal-breaker in another. Among the questions that have arisen: Is it necessary for the transferee to issue new shares to the transferor as a consideration for the transfer, or is cash payment allowable? Must accounts receivable and payable be transferred in an EBT transaction? A recent precedent case reveals that there is always a devil in the details.

A notification of the Revenue Department director-general requires that Form Kor Or 1-4 be submitted within "30 days from the day the change is registered in the case of a business transfer". It is generally understood that this means 30 days from the day the transferor company's dissolution is registered with the Department of Business Development at the Commerce Ministry. Some taxpayers also believe that submission before the dissolution date would meet the criteria.

Let's look at the example of an EBT transaction by two transferor companies to one transferee three years ago. The Kor Or 1-4 forms for both were submitted "before" the transferor companies' dissolutions were registered. A revenue official accepted them without any objection, despite the absence of certification of dissolution from the Commerce Ministry. After the expiry of the 30-day deadline, a tax auditor decided that the early submissions failed to meet the criteria because they were made before the dissolution registration, and thus both transferors should pay income tax, VAT and stamp duties, together with the relevant penalties and surcharges.

The Revenue Department finally concluded earlier this year that a transferee was not allowed to submit Kor Or 1-4 forms before the dissolution registration date. Nonetheless, as the early submission in this case was caused by a genuine misunderstanding, the forms were deemed as submitted within the deadline, provided the transferee submitted the transferors' certification of dissolution within 15 days from the day it received the ruling.

It is disturbing to other taxpayers, who may not be as lucky as the parties in this case, to learn that such overzealous application of EBT laws could raise such a serious issue. This ruling also shows that a tax auditor can still mount an attack based on a minor formality, even though there is absolutely no hint of tax avoidance or any attempt to cause disadvantage to the government.

If you plan on doing a fancy EBT transaction, take into account the possible risk factors and be ready in advance in case things go wrong.

By Rachanee Prasongprasit and Professor Piphob Veraphong. They can be reached at >

Changing rules for applying foreign tax credits

12 Jul 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS

>Changing rules for applying foreign tax credits

One of the original principles outlined in the OECD Model Tax Convention is that no taxpayer should be taxed repeatedly on the same amount of income earned from a cross-border transaction. This situation is referred to as "juridical double taxation" -- where income is subject to taxes under the jurisdictions of more than one state.

Understanding the tax liabilities of partners in an unincorporated joint venture

27 Jun 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS

Understanding the tax liabilities of partners in an unincorporated joint venture

Looking for Tax Incentives? Make sure you comply

13 Jun 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS

Looking for Tax Incentives? Make sure you comply

Tax incentives can be as sweet as honey, but making a mistake in compliance, inadvertently or otherwise, can leave a taste as bitter as gall. Corporate taxpayers have learned this painful lesson in light of court rulings on the tax treatment of losses carried forward from Board of Investment-promoted businesses.

New Tax Legislation to comply with Fatca

16 May 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS

New Tax Legislation to comply with Fatca

On March 4 last year, Thailand and the United States entered into an agreement to improve international tax compliance and to implement the Foreign Account Tax Compliance Act (Fatca), which Washington introduced in 2010 in an attempt to discourage tax evasion by US citizens holding assets abroad.

When the spirit of the law shines

2 May 2017 at 04:00


When the spirit of the law shines

The current government has been trying very hard to make Thailand a jurisdiction that places more emphasis on substance and less on surface appearances. This is evident in recent legal reforms, but the attitudes of state authorities remain problematic. Many seem to believe that in order to be patriotic, the private sector must submit to any extra conditions that authorities impose above and beyond the legal framework.

Cross-shareholding Rules and Dividend Tax Exemptions Clarified

19 Apr 2017 at 04:00


Cross-shareholding Rules and Dividend Tax Exemptions Clarified

Most people are aware that there are two major types of double taxation for income tax purposes. The first is juridical double taxation, in which one taxpayer is taxed twice on the same amount of income by two different jurisdictions. This is normally dealt with in the context of double-taxation agreements.

Innovation & Thailand 4.0: Value Creation for Business using Trade Secrets

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.

Tax Deductibility of Penalties and Surcharges


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.

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