2021 In Review- A Roller Coaster Ride to a Happy New Year, 2022
We will say “goodbye” to 2021 and will welcome 2022. The year 2021 was a roller coaster ride for most with government’s COVID-19 controls and new tax schemes, and tax law revisions to ease economic hardship. The Author will address the major tax overhauls that will affect most businesses next year.
1. Digital Asset Tax
The Revenue Department introduced a digital asset tax in 2018, though operators and investors only began seriously considering its implications this year in which we see more and more digital asset operators and investors.
The Revenue Department collects income tax from both corporate and individual taxpayers on profit sharing (or other benefits) from holding digital tokens, and capital gains from their transfers of cryptocurrency and digital tokens. Individual taxpayers must deduct 15% withholding tax from the income for inclusion in their annual income in order to calculate annual personal income tax.
As of this writing, questions and issues remain. For example, unlike interest or dividend income, the 15% withholding tax is not final. An additional tax of 5%-35% will also apply. Further, at present, such income is not tax-exempt, as are capital gains from share trades on the Stock Exchange of Thailand.
2. VAT for e-Services (“VES”)
After years of consideration, the government will tax digital or e-services provided by non-residents, particularly those providing e-services directly to consumers.
As of 1 September 2021, non-resident digital service providers streaming services, selling digital content (e.g., music, movies, games, etc.), offering online advertising, and maintaining digital platforms (e.g., AppStore, Play Store, etc.), must pay 7% output VAT on their income.
During the first month of VES, 106 non-resident operators completed VAT registrations showing more than Baht 9.8 billion in revenue and Baht 686 million in VAT income. Quite a raise for the Revenue Department.
Both non-resident e-Service providers and resident e-Service platform operators should study the VES scheme in order to pay all VAT lawfully owed. The Revenue Department, it is believed, will scrutinize the VES scheme in 2022 not only to bolster revenue collection but to also make examples out of those resistant to the new tax.
3. New Rules to Write Off Bad Debt
The Revenue Department, on 29 April 2021, released Ministerial Regulation 374 (2021) for the write-off bad debt (MR374). The new law is effective for accounting periods starting on or after 1 January of this year. Among distinct changes are an increase in debt thresholds, which are subject to different write-off requirements suitable for present-day commerce, and admission of foreign court rulings where debtors reside overseas. Debtors can now write off debts without having to litigate in Thailand.
Write-off conditions vary based on debt amounts. MR186 now provides the following revised thresholds:
Debt Amount of Each Debtor
Tier Old New
1 >500,000 >2,000,000
2 >100,000 -≤500,000 >200,000 - ≤ 2,000,000
3 ≤ 100,000 ≤ 200,000
The new thresholds, now more realistic in the current business environment, allow corporate taxpayers to write off smaller bad debts without lengthy and costly processes, and with clearer timeframes under Tiers 1 and 2, in particular. (See DRKILAWTALKS, Issue No. 192.)
Readers should be reminded that creditor directors must approve the write-offs within 30 days from the end of the accounting period starting on or after 1 January 2021.
4. VAT remains at 7%
The VAT rate will remain at 7%, still down from 10%, until at least September 2023.
5. More Transfer Pricing Rules: Added Documents Required for Related Party Declarations
In October 2021, the Revenue Department issued rules requiring certain taxpayer to prepare added documents or evidence to corroborate transfer prices used among their related companies.
The Revenue Department also requires multinational companies with consolidated group revenue exceeding Baht 28,000 million, in the previous 12-month accounting period, to prepare and submit a Country-by-Country Report (“CbCR”) in compliance with the Organization for Economic Co-Operation and Development (“OECD”) and the Base Erosion and Profit Shifting (BEPS) framework. These submission requirements are in addition to the corporate tax return (“Form P.N.D. 50”). Some exemptions apply. (See DRKILAWTALKS, Issues Nos. 197 and 198.)
6. Land and Building Tax Rates Remains the Same
The Land and Building Tax, introduced in 2019, and effective from 2020, provides provisional tax rates for 2020-21. The government then issued a Royal Decree on 13 December 2021 maintaining the 2020-21 rates, i.e., 0.01-0.1% for agricultural land, 0.03-0.1% accommodation land, and, 0.3-0.7% for commercial and deserted land.
We highlight some of the key tax changes from 2021 that will challenge taxpayers in the next year. Readers should be diligent and compliant to help avoid costly challenges and audits.
Readers can also expect a raft of new tax laws next year. The Author will update you about these legal and tax developments as draft legislation becomes available.
Lastly, the Author hopes that 2021 has been an experience, for better or worse, from which we all can learn and benefit. There is always light at the end of the tunnel, and we are now starting to see a brighter light at the end of 2021.
Wish you all have the brightest and shiniest 2022.
Happy New Year 2022