Tax Issues that the New Year Brings

It is common at this time of year to give gifts to your employees or customers, to hold a party or to take your employees on a trip. But what are the tax implications? Are you treating the personal income tax, VAT or corporate income tax correctly?

Keywords: Mazars, Thailand, Tax, New Year, Revenue Code, PIT, CIT, VAT

1. New Year’s party held for employees

  • Personal income tax: Is the New Year’s party a fringe benefit for employees, subject to personal income tax?

Under Ruling No. Gor Kor 0706/9276 dated 9 November 2005, a New Year’s party held for employees is assessable income under Section 39 of the Revenue Code. However, if a company has a policy of holding a New Year’s party for employees, and the party is held in accordance with that policy, and is for all employees, it is exempt from personal income tax under Section 42 (10) of the Revenue Code (Maintenance income derived under a moral obligation, part of a legacy or inheritance, or gifts given in a ceremony or on occasions in accordance with established customs).

  • Corporate income tax: Are costs incurred for holding a New Year’s party deductible?

Under Ruling No. Gor Kor 0706/9276 dated 9 November 2005, if a company has a clear policy of holding a New Year’s party for its employees, and the party was held in accordance with that policy, and was for all employees, without preferential treatment of some employees, costs incurred for holding such a New Year’s party can be deductible for corporate income tax calculation purposes.

Under Ruling No. Gor Kor 0706/5823 dated 13 June 2007, money spent for holding a New Year’s party of another company, such as a related company, or for customers, is not deductible for corporate income tax calculation purposes under Section 65 ter (3) and (13) of the Revenue Code (Private expenses, and expenses incurred that are not related to the business of the company).

  • Value-added tax: Is input VAT on the costs incurred for holding a New Year’s party deductible?

Under Ruling No. Gor Kor 0706/Por./9052 dated 6 September 2007, if a company has a clear policy of holding a New Year’s party for its employees, and the party was held in accordance with that policy, and was for all employees, without preferential treatment of some employees, input VAT on costs incurred for holding such a New Year’s party can be creditable for value-added tax calculation purposes.

2. Gifts given to employees or customers

  • Personal income tax: Are gifts given to employees assessable income of the employee, subject to personal income tax?

Yes, they are assessable income, but are exempt under Section 42 (10) of the Revenue Code if the company provides gifts to all employees, without preferential treatment of some employees.

  • Corporate income tax: Are the costs of gifts given to employees deductible?

Yes, if a company has a clear policy of giving New Year’s gifts to its employees, and the gifts were given in accordance with that policy, and were given to all employees, without preferential treatment of some employees. Otherwise, they are non-deductible under Section 65 ter (3) of the Revenue Code (Private expenses).

  • Value-added tax: Is input VAT on costs of gifts given to employees creditable?

Yes, based on the same conditions that apply for corporate income tax purposes.

  • Value-added tax: Does a company have to charge output VAT on New Year’s gifts given to customers, and is input VAT on costs of gifts given to customers creditable?

Under Clause 2 (6) of Notification of the Director-General of Revenue on Value-added Tax No. 40, a company does not have to charge output VAT on New Year’s gifts, such as calendars, diaries, or similar items with the company’s name, logo, or trademark, given to customers, provided that such gifts are given as part of general business practice, and their price is reasonable.

Under Ruling No. Gor Kor 0706 (Gor Mor. 01)/266 dated 29 August 2003, a company does not have to charge output VAT on calendars given to customers around New Year’s, provided that such calendars are gifts given as part of general business practice, and their price is reasonable. Furthermore, the input VAT incurred on the costs for making those calendars is creditable.

Under Ruling No Gor Kor 0811/Por. 6945 dated 25 December 1996, a company does not have to charge output VAT on gift baskets given to customers around New Year’s, provided that such gift baskets are given as part of general business practice, and their price is reasonable. However, the input VAT on those gift baskets is not creditable, but is deductible for corporate income tax calculation purposes as an entertainment expense.

3. New Year’s trip

  • Personal income tax: Is a New Year’s trip for employees a fringe benefit of the employee, subject to personal income tax?

No, if the trip is for all employees, without preferential treatment of some employees.

  • Corporate income tax: Are the costs incurred for a New Year’s trip deductible?

Under Ruling No. Gor Kor 0802 (Gor Mor. 14)/131 dated 8 November 2002, yes, if the trip is for all employees, without preferential treatment of some employees.

  • Value-added tax: Is input VAT on the costs incurred for a New Year’s trip deductible?

Under Ruling No. Gor Kor 0811 (Gor Mor)/384 dated 2 April 1997, yes, based on the same conditions that apply for corporate income tax purposes.

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