Thailand Law Violation Cost Corporate Tax Deductions
Update | March 2017
On 09 March 2017, Thailand's Board of Taxation issued Ruling No 40/2560, repealing its Ruling No 10/2528, and prescribing that Section 65 ter (6) of the Revenue Code does not only deny corporate tax deductions for penalties, surcharge and fines (law violation costs) that are paid under the Revenue Code law, but it also denies corporate tax deductions for law violation costs that are paid under other laws as well.
Tax Insight | December 2011
Section 65 ter (6) of Thailand's tax code prescribes that tax penalties, surcharge and fines (law violation costs) paid by a company are not allowed as deductions for the purpose of computing net profit for corporate income tax.
Back in 1985, Thailand's Board of Taxation (BoT) issued Ruling No 10/2528, prescribing that the words “tax penalties, surcharges and fines” mean tax penalties, surcharges and fines imposed under the Revenue Code only, and therefore, tax penalties, surcharges and fines imposed under other laws are allowed as deductions.
The reason for this Ruling was that if a company was not permitted to claim tax penalties, surcharge and fines imposed under other laws, then Revenue Code Section 65 ter (6) was "depriving a company of rights and therefore it must be interpreted in a restricted manner”.
For 26 years, the Thailand Revenue Department has been allowing the costs incurred for violating other laws as corporate tax deductions under the BoT's 1985 Ruling.
This month however, the Central Tax Court handed down its decision on Case No 55/2554, saying that:
This is a general information Tax Insight Article only. It should not be used to determine any matter without consulting with an experienced Thailand tax advisor.