Tax treatment of BOI losses

In the Minibea court case, the central tax court previously ruled that the losses incurred from projects with investment promotional privileges (BOI projects) could be offset against the profits of the projects not receiving investment promotion privileges, without the need to offset against the profits of other BOI projects first.

Keywords: Mazars, Thailand, Tax, BOI, Ministry of Finance, Supreme Court, Revenue Code, Board of Appeals, Minibea

4 July 2016

However, the Supreme Court has recently overruled the central tax court’s decision. The Supreme Court held that a company with many BOI projects must set off tax losses incurred for BOI projects against taxable profits of other BOI projects that arise in the same accounting period to derive an overall net taxable profit or loss for the BOI projects. If the result is a net tax loss, the company may then utilize that loss against the profit of its projects not receiving investment promotion privileges.

Accordingly, the Thai Ministry of Finance has announced a notification to extend the deadline for filing a tax return for companies who receive investment promotional privileges from the Board of Investment of Thailand, but do not set off tax losses of BOI projects against taxable profits of other BOI projects. This is because such a practice does not comply with Board of Taxation Ruling Number 38/2552.

To encourage those companies to comply voluntarily with this ruling, and to mitigate their tax burden, the Thai Ministry of Finance has issued a notification to extend the deadline for filing a tax return and requesting a tax refund, subject to the following conditions:

1. This extension of the deadline to file a tax return and request a tax refund only applies where a company fails to include income and expenses for all BOI projects incurred in the same accounting period to calculate a net profit or loss for the BOI projects according to Board of Taxation Ruling Number 38/2552.

2. Where the company has appealed against the tax assessment of the revenue authorities to the Board of Appeals or a court in relation to the issue of utilization of tax losses for BOI projects, the company must withdraw the appeal. Where the company has appealed against the tax assessment of the revenue authorities to the Board of Appeals or court for many issues (including the issue of utilization of tax losses for BOI projects), the company must withdraw the appeal in regard to the issue of utilization of tax losses for BOI projects, and the Board of Appeals or court has approved such withdrawal.

3. As a result of this notification, the deadline to pay tax and submit the tax return is extended to 1 August 2016. If the company pays tax and submits the tax return by that date, no penalty or surcharge shall apply.

4. Where the company has paid tax, a penalty, and a surcharge, and the deadline to request the refund under Section 27 ter of the Revenue Code (within 3 years of the last day of the time limit prescribed by law for filing tax returns) has passed, the deadline to apply for a refund of the penalty and surcharge has been extended to 1 August 2016. 

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