Thailand Capital Gains Tax Selling and Holding Costs
Tax Insight | September 2011
Section 40(4)(g) of Thailand's personal income tax law does not mention the words, selling and holding costs, and prescribes simply that for a transfer of an investment in partnerships, shares, debentures, bonds, bills or debt instruments, the amount of the assessable income that is subject to income tax in Thailand is:
“Proceeds derived … which exceeds the costs of the investment.”
The Thailand Revenue Department has never issued any notification or clarification to help taxpayers understand what the words "proceeds derived" and "the costs of the investment" mean, and as there is no specific provision in the law entitling taxpayers to claim expenses against assessable income under Section 40(4)(g), many think that the assessable income that is subject to tax is simply the difference between the sales price and the purchase cost, with no allowance of any other costs at all.
The words “proceeds derived” and “costs of the investment” mean more than just the sales price and the purchase cost. They mean (according to the International Tax Committees of the UN and the OECD):
“Proceeds derived” is the amount a seller realizes from a sale, so that if, for example, a sale is effected through an agent or a broker who deducts his fee from the sales price, the “proceeds derived” by the seller is the amount after the agent’s or broker’s fee has been deducted (i.e. it is the net amount the seller actually derives from a sale).
“The costs of the investment” is more than just the purchase cost. Costs of establishing and holding ownership in the investment are also “costs of the investment”, such as, for example, government fees, tax costs and holding costs.
Accordingly, on the basis of the Thailand law simply subjecting the difference between the "proceeds derived” and "the costs of the investment” to tax, you should be entitled to deduct selling and holding costs (in addition to your purchase costs) for the purposes of computing the amount of the capital gains assessable income that is subject to tax.
This Tax Insight Article is general information only. It should not be used to determine any matter without consulting with an experienced Thailand tax advisor.