Employers are legally required to provide employees with 30 days of sick leave a year. It is also quite common for Thai employers to reimburse employees for medical expenses they incur.

Such reimbursements, however, do not constitute assessable income for tax purposes.

Some employers in seeking to contain their medical-expense exposure in any one year often purchase employer group health-insurance coverage for employees and their immediate families.

But in a rather quaint reversal of logic, the Thai Revenue Department (TRD) has issued a ruling stating that employers providing such group health-insurance cover must attribute the cost of coverage to each employee and deduct personal income tax on the basis that this is a taxable benefit provided to an employee which relates to their employment.

The TRD recently issued notices to employers requiring them to remit any underpaid employee income-tax withholdings to the TRD together with late-payment surcharges at 18 per cent per annum.

In a recent move, however, common sense prevailed, with the caretaker Cabinet announcing two new measures aimed at increasing health-insurance coverage for Thai families as well as foreigners working in Thailand and their families.

With retroactive effect from January 1, 2006, the following will, once the amended laws have passed Parliament, apply to:

l Employers who provide group employee health insurance (including coverage in a foreign country for staff occasionally overseas on business for the employer) provided by an insurer authorised to transact such business in Thailand which covers employees, their spouses, parents and children and is for a period not exceeding one year will no longer be exposed to underpayment of employee withholdings

That's because this "benefit" will no longer be regarded as assessable. Employers who bear such costs continue to be entitled to an income-tax deduction for them;

l An individual taxpayer in Thailand will now also be entitled to claim an income-tax deduction of up to Bt15,000 on a purchase of insurance to cover the parents of the taxpayer or the taxpayer's spouse providing the income of any parent does not exceed Bt30,000 in any year.

This amendment will increase the annual tax deduction available for health-insurance premiums incurred to a total of Bt75,000 (up from Bt60,000).

That includes a deduction of up to Bt50,000 for coverage for the taxpayer, Bt10,000 to cover a spouse who has no income and, now, Bt15,000 to cover the parents of the taxpayer or the taxpayer's spouse providing the income of any parent does not exceed Bt30,000 in any year.

Employers not currently providing such group health insurance to their employees may now consider it appropriate to do s.

Andfamilies may now consider extending coverage to their dependant parents.

Suda Pathomthanasarn

For further information, please contact Suda Pathomthanasarn, executive director of tax at KPMG Phoomchai Tax & Legal Ltd at (02) 677 2445 or by e-mail at suda@kpmg.co.th