Thailand Share Premium Corporate Tax Planning
Tax Insight | November 2011
Thailand's Civil and Commercial Code permits the issuance of shares at a premium and also prescribes that share premiums are part of the reserve funds of a company, but Thailand's Revenue Code is silent about taxation of share premiums.
And because of that, proponents of share premium tax planning schemes in Thailand think it's all a bit laissez-faire. But that's not entirely true, and for international businesses that may be considering a share premium tax plan in Thailand, Sherrings provides summaries of the following two Thailand Tax Rulings for you to note ...
1. In 2002, the Thailand Revenue Department lawyers ruled against a golf course company, which did not charge green fees to shareholders who purchased shares in the company for Baht 10 per share and a premium of Baht 40 per share. The par value received was Baht 240 million, and the share premium received was Baht 960 million.
The Revenue Department lawyers didn't believe that normal shareholders would pay such a high premium for investment in the company, believing instead that the shareholders paid the high premium as disguised golf course fees and ruled that the share premiums received by the company constituted not only assessable income for corporate income tax purposes, but also assessable income for VAT purposes as well.
2. In 2008, the Thailand Revenue Department lawyers issued a Tax Ruling, summing it all up for you, as follows:
“A share premium, being the amount of money from an issue of shares that is over and above the par value of the shares, will not be considered as constituting the assessable income of the company. But if it is found that:
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.