Thailand Share Transfer Benefits Tax
Tax Insight | January 2011
The Ample Rich Tax Case (as it became known in Thailand) is a share transfer benefits tax case regarding Thailand tax on benefits received from a transfer of shares in a large tele-communications company listed on the Thailand Stock Exchange.
The shares in the Thailand telecommunications conglomerate were transferred from a BVI company to individuals in Thailand, and then, on the next business day from the individuals in Thailand to a company in Singapore, as follows:
Friday 20 January 2006
Monday 23 January 2006
From these two share transfer transactions the individuals in Thailand earned capital gains income in the order of 15.8 billion Baht but they did not file any tax returns or pay any tax on the capital gains income.
On 8 December 2006, the Revenue Department's new administration (instilled following the Military Coup of 19 September 2006) announced that the individuals had indeed received assessable benefits income under Section 39 of the Revenue Code and Board of Taxation Ruling No 28/2538, and that it had issued tax assessments to the individuals amounting to 5.88 billion Baht.
The individuals appealed the tax assessments, and the issue before the Central Tax Court was whether or not the individuals were liable to tax on benefits they received under Section 39 of the Revenue Code and the Board of Taxation Ruling No 28/2538, which prescribe as follows:
Section 39 of the Revenue Code – Assessable income is income that is prescribed as being assessable income in the Revenue Code, and includes property and other “benefits received that are ascertainable in terms of money".
Board of Taxation Ruling No 28/2538 – For individuals receiving shares under a special arrangement, free of charge or at a price lower than market price, such individuals receive benefits ascertainable in terms of money, which is assessable income under Section 39 of the Revenue Code.
Before the Central Tax Court decided the matter, however, the Supreme Court for Holders of Political Positions handed down its verdict concerning a political case involving the father of the individuals, which verdict included the Supreme Court’s finding that the ownership of the shares in the Thailand telecommunications conglomerate had really never transferred to the individuals in Thailand, but instead, had always remained with the father.
And so, following that, the Central Tax Court's ruling was that despite the fact that evidence had been presented to the Court attesting to the individual’s ownership of the shares in the Thailand telecommunications conglomerate, because of the higher Supreme Court's finding that the true ownership of the shares never really did move from the father to the individuals, the Revenue Department had no legal right to collect tax from the individuals, and therefore the individuals could not be held liable for the tax under the tax assessments.
This Central Tax Court case was decided on the basis of political agenda, rather than on the basis of the tax law, and foreigners should note that the Thai tax law prescribes that "benefits received ascertainable in terms of money" is assessable income in Thailand, and that the Board of Taxation in Thailand has determined that individuals who receive shares under a special arrangement, free of charge or at a price that is lower than market price, are individuals who "receive benefits ascertainable in terms of money".
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.