On 24 August 2011, the Appeals Court overturned the Criminal Court's tax evasion verdicts for the share transfers under the Wedding Gift Case. This Insight has now been updated for the Appeals Court rulings.
The Wedding Gift Case
The Wedding Gift Case (as it became know) concerns a prosecution of tax evasion for transfers of shares in a prominent Thai public company listed on the Thailand Stock Exchange.
In November 1997, 4.5 million shares in the company were transferred from one individual to another individual. The share price on the Stock Exchange at the time of the transaction was 164 Baht making the value of the share transfer transaction around 738 million Baht but no personal income tax was paid by the transferor or the transferee.
The transferor claimed that she transferred the shares to the transferee on the Thailand Stock Exchange, which transfers are exempt from income tax under Section 42(17) of the Revenue Code; and
The transferee claimed the the shares transferred to him were a wedding gift, which transfers are exempt from income tax under Section 42(10) of the Revenue Code.
The prosecution's arguments were that:
In relation to the transferor's claim - no actual payment was made for the transfer of the shares on the Stock Exchange, the Stock Exchange brokers' fee was paid only to make it look like it was a Stock Exchange transfer, and the documents recording the transfer of shares transaction were falsified documents; and
In relation to the transferee's claim - the shares were actually transferred to him one year after his wedding, which makes his wedding gift claim to be a fraudulent claim.
The Criminal Court's Verdict
On 31 July 2008, the Criminal Court found for the prosecution. The Court's ruling was that the transferor and the transferee were guilty and shall be punished under the prescriptions in the Revenue Code's tax evasion Section 37, as follows:
For providing false evidence to the tax authority under Section 37(1) of the Revenue Code - one year imprisonment each; and
For intention to evade tax by fraudulent means under Section 37(2) of the Revenue Code - two years imprisonment each.
The Appeal Court's Verdict
On 24 Aug 2011, the Appeals Court overturned the verdicts of the Criminal Court, ruling as follows:
For the case of the transferor, whilst the prosecution was convinced there was no actual transaction, the Appeals Court found the prosecution's proof to be weak, leading the Court to doubt, and as a Court must give any benefit of doubt to the transferor, the Appeals Court must quash the guilty verdict and the 3 years jail sentence of the Criminal Court.
For the case of the transferee, the Appeals Court upholds the guilty verdict of the Criminal Court, but due to the transferee being a businessman with no prior criminal convictions, and having made substantial donations to support the education of underprivileged children in Thailand, the Appeals Court reduces the Criminal Court's imprisonment sentence from 3 years to 2 years suspended, and a fine of 100,000 Baht; and
The Court's reasoning behind these Rulings is that the prescriptions in the Revenue Code are “intended to boost the collection of tax from people, not to jail people”.
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