A guide to relief and recovery measures for flood-hit businesses

More than 1,000 industrial plants in 20 provinces have been submerged by flood water, resulting in serious business and opportunity losses. People have been deeply distressed by reports of the severe inundation and the devastating effect that it has had on the lives of so many individuals and businesses. We truly hope that the flood relief measures already in place will go some way towards helping minimise the damage. Below are summaries of the key relief measures adopted by the Revenue Department and the Board of Investment.

 

Relief measures from the Revenue Department 

For juristic persons affected by flooding:

1 CIT exemption on income equivalent to the amount of compensation received from the government. Registration with the authority must be made.

2 CIT exemption on income equivalent to the amount or the price of property received from donations or aid other than under (1), to an extent not exceeding the value of the damages.

3  CIT exemption on the amount of an insurance claim obtained from an insurance company, which exceeds the net book value of the damaged property.

4 The tax filing period for all taxes in affected areas is extended to 30 December 2011. However, CIT filing deadlines that fall during the period of August-December 2011 will be extended to 29 February 2012. 

 

For ordinary members of the public affected by flooding:

1 PIT exemption on income equivalent to the amount of compensation received from the government. Registration with the authority must be made.

2 PIT exemption on income equivalent to the amount or the price of property received from donations or aid other than under (1), to an extent not exceeding the value of the damages. 

3 PIT exemption on income under Section 40 (5) (6) (7) or (8), specifically the part equivalent to the amount of damages and earned by an ordinary person who has registered with the authorities.

4 The tax filing period for all taxes in affected areas is extended to 30 December 2011

 

Relief measures from the Board of Investment

According to the BOI Notification dated October 7, 2011:

1 Permission for BOI-promoted companies to move machinery or raw materials out of factories in emergency cases.

According to the BOI Press Release dated November 7, 2011 for which no regulations have yet been issued by the BOI:

1 Permission for raw materials imported under section 36 (duty-free importation for export manufacturing) that are completely damaged to be recognised as part of waste allowance and relieved of tax burdens.

2 Permission for companies regarding imported raw materials to temporarily outsource all of their manufacturing processes to other manufacturers to maintain continuity in delivering their products to customers.

3 A six-month extension of import tax exemption on machinery brought in to replace that damaged by flooding.

4 Where raw materials had been imported prior to the flooding for use in production for export and had been damaged by the floods, the materials can be written off as waste allowance and relieved of tax burdens. For those raw materials that are still usable, the companies can use them in other on-going projects and still be entitled to benefits under section 36.

5 Permission for companies to outsource temporarily some parts of the production process to maintain business continuity.

 

The above measures are aimed at short-term recovery. To help flood-hit businesses, the government should consider establishing more medium- and long-term relief measures as soon as possible. For example, on the BOI side, investors would like to know whether any investment they make in the recovery of a flood-affected project would be treated as a new investment and therefore be tax exempt. 

On the corporate income tax side, businesses want to know whether the following flood-related expenses will be tax deductible:

_ Money spent on flood protection/recovery. 

_ Money spent to support employees affected by flooding.

Another concern is whether losses incurred from the flood can be carried forward for more than five years or not.  

Whilst Thailand struggles to recover, the government should not forget the essential needs of affected businesses and their staff; this will improve morale and encourage those businesses to quickly get back on their feet. 

A PwC seminar on December 8 entitled “How to respond to and recover from the floods in the shortest time”, is aimed at helping businesses emerge from the crisis stronger and more resilient. Places are limited and will be restricted to one person per company. To book, call Natiall K Juthamas at (02) 286 9999, ext 4201, and mention that you are a Nation reader. PwC has also provided a guide to recovery for businesses, at www.PWC.com/th. 

 

Janist Aphornratana is an associate director of Tax & Legal Services at PwC Thailand.