Notification for multiple-BoI project firms

Under this notification, a company with multiple BoI projects can receive the exemption from penalties, which can be as high as 100 per cent of corporate income tax liability, and surcharges, at 1.5 per cent per month, if by August 1 it amends its corporate income tax return to combine profits and losses incurred within the same year from all its BoI projects and makes a payment of any additional tax liability due to the Revenue Department.

This notification was issued to lessen the tax liability of affected taxpayers following the outcome of two recent Supreme Court cases that ruled in favour of the Revenue Department’s interpretation regarding the combining of profits and losses of the same year under multiple BoI projects. 

In general, the BoI grants privileges, which include tax and non-tax benefits, to companies on a project-by-project basis. 

It is not uncommon for companies to apply for multiple BoI projects, as it allows them to expand their operations and take on new investments. 

In these court cases, the taxpayers were granted multiple BoI projects and computed their net taxable profits and losses separately for each BoI project. 

As a result, the taxpayers did not set off their losses from certain BoI projects against their profits from other BoI projects that arose in the same accounting year. 

Rather, during the tax exemption period, the taxpayers carried forward the losses to the next accounting year and/or set off such losses against non-BoI projects.

The department disagreed with this approach. 

In its view, which was validated by the Supreme Court judgments, a loss that can be carried forward to the next accounting year and/or set off against profits from non-BoI projects must be a net loss after setting off such losses against profits derived from other BoI projects in the same accounting year. 

This should be the case even where the profits from a specific BoI project are still subject to a tax-exempt period.

In the court’s view, because the BoI has not prescribed any rules or criteria for the computation of net taxable profits of a company with multiple BoI projects, net taxable profit should be determined in accordance with the Revenue Code and so the tax assessments issued by the department in these cases was correct. 

The treatment per the Revenue Code is arguably set out in the Board of Taxation ruling No 38/2552, dated February 13, 2009.

Companies with multiple BoI projects are urged to take advantage of the concessions provided by the notification to regularise their current and historic corporate income tax affairs with the department no later than August 1. This notification also allows a taxpayer who has already made tax payment together with penalties and surcharges before this notification to file a request for refund of those penalties and surcharges by August 1.

 

Benjamas Kullakattimas is head of tax at KPMG Thailand