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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


Flip-flop on treatment of exports of services

October 2017 - Tax & Private Client. Legal Developments by LawAlliance Limited.

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17 Oct 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS 

Flip-flop on treatment of exports of services 

Trying to prove an export of services is quite elusive in respect of time and place, and different parties have different views on what should be considered as exportation for tax purposes. For this reason, the number of problems encountered in applying zero-rated value-added tax (VAT) to services has reached epic levels.

Deductibility of guaranteed amounts by fund sponsors

October 2017 - Tax & Private Client. Legal Developments by LawAlliance Limited.

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Deductibility of guaranteed amounts by fund sponsors

Property funds have long been popular with investors in Thailand, where the mutual-fund structure is being phased out and funds are being converted to real estate investment trusts or REITs. Raising funds from investors through such vehicles often involves a guarantee from the originator to increase confidence in the investment. This can be the starting point for problems on the tax front.

Ensure fair and just audits and avoid abusive taxation

September 2017 - Tax & Private Client. Legal Developments by LawAlliance Limited.

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Ensure fair and just audits and avoid abusive taxation

The Revenue Code provides various tools to tax officials to ensure that taxes can be collected with a high level of efficiency. These tools can serve as a double-edge sword, ensuring tax compliance while also imposing punishment on defaulting taxpayers.

Choosing between a tax appeal and a tax refund

September 2017 - Tax & Private Client. Legal Developments by LawAlliance Limited.

More articles by this firm.

19 Sep 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS

Choosing between a tax appeal and a tax refund

You may be surprised to learn that some people do not always claim the preferable tax treatment offered by the government. This is not a surprise to those of us who deal with taxation professionally, as some tax officials interpret the law narrowly and impose extra conditions to prevent abusive transactions based on their understanding or attitudes.

Consequently, some taxpayers would rather play it safe by paying tax first and claiming a refund later. This way, they would avoid the prospect of costly penalties and surcharges should a dispute arise. But a recent court case, in which an individual tried to claim withholding tax on dividends as a final tax, shows that this strategy can backfire.

The Revenue Code explicitly provides that a resident shareholder can opt to leave the 10% withholding tax as a final tax, instead of including dividends as income in tax calculation, on which the progressive tax rates ranging between 5% and 35% would apply. In that case, the taxpayer would not be able to credit the 10% withholding tax against his year-end tax liability.

An individual who includes dividends in gross income is entitled to a dividend tax credit and withholding tax credit. While the withholding tax credit is fixed at 10%, the dividend tax credit is calculated as shown in Part A of the table.

Let's look at the example shown in Part B: A company has a net profit of 100 that is subject to 20% corporate income tax, and distributes all net profits after tax, totalling 80 (100-20) as dividends to its shareholders, from which 10% withholding tax (80x10% = 8) will be deducted and paid to the Revenue Department. The individual shareholder receives a net dividend of 72. If he opts for the dividend tax credit, the shareholder must include as taxable income both the dividend of 80 and the tax credit amount.

As the calculation formula for the dividend tax credit requires the shareholder to know the underlying tax rate, no dividend tax credit will be granted where dividends are distributed out of net profits that are exempted from corporate income tax.

That brings us to the court case illustrated in Part C. Mr A held shares in a holding company (HoldCo), which in turn held shares in a company that had Board of Investment (BoI) privileges (BOICo). BOICo distributed dividends from net profits of 6 million baht, which were tax-exempt during the tax holiday period, both in the hands of BOICo and HoldCo. Thus, when the dividends were distributed to Mr A in 2007, the underlying tax on the dividends was zero.

Due to a misunderstanding, instead of treating the 10% withholding tax as a "final tax", Mr A sought a tax refund by claiming the dividend tax credit and including dividends as income in his year-end tax return.

The Revenue Department detected an irregularity, as no corporate income tax was paid by HoldCo and BOICo. It ordered Mr A to pay additional tax on dividends without any tax credit of approximately 1.3 million baht, together with surcharges, based on the dividend amount appearing in the tax return (for which the effective tax rate was higher than the withholding tax of 10%).

At first Mr A disagreed and appealed. But then, realising his error in interpretation, he cancelled his appeal, a decision supported by the Tax Appeal Committee. Mr A then filed an amended tax return and paid the assessed tax and surcharges. He followed up by filing a second amended return -- on the advice of a tax official -- in which he opted not to include dividends as taxable income, and to leave the 10% withholding tax as final, in order to claim a refund of the assessed tax and surcharges. The Revenue Department rejected his request and the case went to court.

The Supreme Court stated that "due to the cancellation of the tax appeal, the assessment by the Revenue Department had become definitive, thus the tax so assessed must be paid. The later filing of an amended tax return that excluded dividends as income at the year-end could not override the earlier tax assessment".

The court also explained that "where there was an error in tax return filing, the amendment, irrespective of whether it was for additional payment of taxes or for claiming a tax refund, must be made before the tax was assessed. Otherwise, the taxpayer must seek a correction via the tax appeal process to change such assessment."

Significantly, the court pointed out that even though a revenue official had advised Mr A to cancel his appeal and file two amended returns to resolve the problem, "such advice had no legal binding effect". Thus, raising this fact during the trial was not helpful, as the court needed to follow the correct interpretation of the relevant legislation.

Mr A might have won the case if he had amended his tax return immediately and opted to exclude such dividends before the tax assessment was issued. At any rate, the case is another bitter lesson that a taxpayer should thoroughly review his position before making any move in a tax dispute -- and should not easily trust tax officials' advice.

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















Thailand’s accession to the Madrid Protocol: what does it change for brand owners?

The Madrid Protocol is an international treaty establishing a system for the registration of international trademarks.

Thailand finally joined the other ASEAN countries Brunei, Cambodia, Laos, Philippines, Singapore and Vietnam on August 7th, 2017 by becoming the 99th member of the Madrid System. The Protocol will enter into force in Thailand on November 7th, 2017. Ministerial Regulations detailing the registration procedure and costs are expected in the coming months.

Determination of Section 40(8) income

22 Aug 2017 at 04:00 / NEWSPAPER SECTION: BUSINESS

<> Determination of Section 40(8) income

The government recently introduced a tax incentive programme to encourage individuals, including ordinary partnerships and groups of persons, to reorganise their businesses and operate them in the form of a company limited or a juristic partnership. This would make it easier to screen them for tax compliance, given the need to prepare statutory accounts.

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

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