Thailand Income Recognition Corporate Tax Rules
On 27 April 2017, Departmental Regulation No Taw Paw 279 was issued prescribing a new corporate tax income recognition rule for businesses that enter into a Public Private Partnership concession investment agreement with the government. This Tax Insight has been updated for this new rule.
The Income Recognition Rules
On 12 September 2006, Thailand's Director-General of Revenue issued Regulation No Taw Paw 155/2549, substantially revising the corporate tax income recognition rules in Taw Paw 1/2528 for financial years commencing on or after 1 January 2007.
For corporate tax return filings in Thailand, the Thai tax law prescribes that companies shall comply with the “accruals basis” income recognition rule, as follows:
“Revenue arising in an accounting period, even if not received in that period, shall be taken up as revenue for that period.”
Taw Paw 1/2528 is the Thailand Revenue Department's Regulation for the above law in the tax code. It prescribes the accruals basis rule for the following types of businesses:
Asset management businesses
For asset management businesses, income recognition shall be according to the accruals basis law, except that income arising from sub-standard assets acquired or transferred from financial institutions can be recognized according to the cash basis (i.e. when it is received).
Banking and finance businesses
For banking and finance business operations, income recognition shall be according to the accruals basis law, except that, for interest income that has been in default for more than 3 months, income can be recognized according to the cash basis.
Consignment sales businesses
For businesses selling goods on consignment, income shall be recognized when the goods are consigned to the consignee. But when the consignor and consignee enter into a written agreement for a payment of commission to the consignee when a sale to a customer takes place, the consignor can then recognize the income when the consignee sells the goods to customers.
For construction businesses, income shall be recognized according to work completed in a financial period according to generally accepted accounting methods (i.e. according to the percentage of completion accounting method).
Golf course businesses
For golf course business operations, income shall be recognized by:
Hire purchase and installment sales businesses
For businesses selling goods under a hire purchase or installment sales contract, the entire sales income shall be recognized as income in the financial year that the hire purchase or installment sale takes place. The interest element under the contract shall be recognized as income over the period of the contract according to generally accepted accounting methods (i.e. according to finance transactions)
Insurance and credit card businesses
For insurance and credit card business operations, income shall be recognized according to the accruals basis law, except that, for interest income that has been in default for more than 6 months, such income can be recognized according to the cash basis (i.e. when the income is received).
Life insurance businesses
For life insurance businesses, income shall be recognized according to the accruals basis law, except that, life insurance premium income can be recognized according to the cash basis.
Property leasing businesses
For business operations of leasing (renting) out property, income shall be recognized over the period of the lease (rental) contract.
Public private partnership concession investment businesses
For businesses that enter into a Public Private Partnership concession agreement with the government to undertake a project or co-operate with the government to undertake a project and receive funding from the government under the agreement, the funding amount received shall be taken up as income by apportioning the funding amount received to each financial year from the date of commencing depreciation deductions for the costs of the concession rights under Section 65 bis (2) of the Revenue Code to the date of expiration. (3)
Real estate property development businesses
For corporate entities carrying on business as real estate property developers, income shall be recognized according to whether it is a Public Accountable Entity (PAE) or a Non Public Accountable Entity (NPAE) under the accounting standards, as follows: (1)
(1) As prescribed in Departmental Regulation No Taw Paw 228/2557 issued on 11 Sept 2014.
(2) As prescribed in Departmental Regulation No Taw Paw 262/2559 issued on 31 Aug 2016.
(3) As prescribed in Departmental Regulation No Taw Paw 279/2560 issued on 27 April 2017.
This Tax Insight is general information only. It should not be used to determine any particular matter without consulting with an experienced Thailand tax advisor.