Where a company or juristic partnership has foreign currency-denominated monetary assets, assets, or liabilities outstanding at the end of its accounting period, such items must be translated into Thai Baht for the purpose of computing net profit under Section 65 bis (5) of the Revenue Code. Consequently, the Revenue Department prescribes that taxpayers shall apply the exchange rate determined by the Bank of Thailand as of the last day of the relevant accounting period when converting the value of such foreign currency-denominated monetary assets, assets, or liabilities into Thai Baht as follows:
1. Companies and Juristic Partnerships
When measuring year-end foreign currency-denominated assets and liabilities, companies and juristic partnerships are permitted to choose between either:
- the average exchange rate between the commercial banks’ buying rate and selling rate as calculated by the Bank of Thailand; or
- foreign currency and foreign currency-denominated assets are translated into Thai Baht using the average commercial bank buying rate published by the Bank of Thailand, while foreign currency-denominated liabilities are translated using the average commercial bank selling rate published by the Bank of Thailand.
Once a method is adopted, it is required to be applied consistently in subsequent accounting periods unless a change is approved by the Director-General of the Revenue Department.
Moreover, if a taxpayer adopts the methods of translating foreign currency or foreign currency-denominated assets using the average commercial bank buying rate published by the Bank of Thailand, the relevant foreign currency balances must be translated using the bill buying rate or telegraphic transfer buying rate in accordance with generally accepted accounting principles (GAAP).
2. Commercial Banks and Certain Designated Financial Institutions
Foreign currency-denominated assets and liabilities are translated into Thai Baht using the average of the commercial banks' buying and selling exchange rates published by the Bank of Thailand.
Lastly, iIf the accounting period ends on a Bank of Thailand holiday, taxpayers must use the exchange rate published by the Bank of Thailand on the last preceding business day for foreign currency translation purposes.
(Source: The Revenue Department’s website)
Author's Notes:
Unlike Section 65 bis (5) of the Revenue Code, which allows taxpayers to select among various foreign currency translation methodologies, the New Notification prescribes specific exchange rate methods of the Bank of Thailand for translating foreign currency-denominated assets and liabilities into Thai Baht.
In order to ensure consistency in computing taxable profits, the selected method must be applied consistently and may only be changed with the approval of the Director-General of the Revenue Department.
[Contact Person: Ms. Thirapa Glinsukon, Partner]