Guru Speak

Registered community enterprises have been receiving more substantial tax exemptions since a law that was passed in April last year.

The recent changes state that the first Bt1.8 million of assessable income will be taxfree both in the hands of the registered community enterprise and for members or partners of such enterprises.

However, these registered community enterprises are subject to various requirements different from those we have referred to as "SMEs" in the past.

The government is of the opinion that tax incentives will boost consumption, by lessening the impact of rising costs by reducing personal income tax, generate capital expenditures by allowing accelerated depreciation, and encourage SME companies to list on the Stock Exchange in Thailand by offering reduced corporate tax rates.

These measures should also stimulate the realestate market. For the purpose of this article we will categorise the tax incentives into three sections: personal income tax, corporate income tax and realestate tax.

Individuals will benefit from an increase in tax exemption in an effort to increase consumption and reduce inflation. The increase for individuals will be Bt50,000.

These tax savings over the period of a year can help people in need, especially with the rising cost of essential items.

The changes in personal income tax include:

(a) The increase of annual exemption to Bt150,000;

(b) The increase of annual allowances for life insurance to Bt100,000;

(c) The increase of personal investment contributions to Bt500,000 per year;

(d) The increase of allowances for the support of individuals who are disabled to Bt30,000; and

(e) Individuals will now be able to deduct the cost of energy-saving equipment up to 125 per cent of the item plus installation.

The key changes in corporate income tax include:

(a) Exemptions up to Bt150,000 of net taxable profit for SMEs with less than Bt5 million in registered capital;

(b) Reduction of the corporate tax rate to 20 per cent for three years for companies that list in the Alternative Investment Market before December 31, 2009;

(c) Reduction of the corporate tax rate to 25 per cent for three years for companies listing on the Stock Exchange of Thailand before December 31, 2009;

(d) Full and additional depreciation on machines and equipment which conserve energy up to 125 per cent of the cost, including installation;

(e) Accelerated depreciation on machines and equipment used for manufacturing and rendering services up to 60 per cent for the first year;

(f) Reduction of the useful life of computer software to three years, making this more consistent with accounting principles;

(g) Accelerated depreciation on computer software to 40 per cent for the first year, for companies with total fixed assets, excluding land, not exceeding Bt200 million and with fewer than 201 employees; and

(h) Full depreciation for fixed assets not valued over Bt500,000 for companies with total fixed asset value, excluding land, not exceeding Bt200 million and with fewer than 201 employees.

The Interior Ministry has announced key changes in realestate taxes in an effort to stimulate property transactions, which are designed to help a saturated condominium market. These changes include reduction of the rate of specific business tax from 3.3 per cent to 0.1 per cent for immovable property. Furthermore, a reduction of the transfer fee for immovable property from 2 per cent to 0.01 per cent has been announced.

The goals of these new tax incentives are to increase disposable income for taxpayers and those individuals involved in private investment. Even though the government expects to initially lose over Bt40 billion in tax revenues from individual and corporate taxpayers, it expects to collect additional revenues through taxes applicable to consumption, such as valueadded tax.

Of course Thailand's economy is significantly driven by exports, and therefore these measures cannot be expected to immediately solve all our economic problems. But as they say "every little bit helps" !