Corporate income tax exemption for benefits received for government projects

As approved by the Cabinet on 24 January 2022, Royal Decree No. 747 on providing corporate income tax exemptions for a company or legal partnership receiving benefits for government projects in order to mitigate the impact of the COVID-19 outbreak was published in the Royal Gazette on 24 May 2022.

Keywords: Mazars, Thailand, Tax, Corporate income tax, Royal Decree, Revenue Department, SMEs, Social Security Act

16 June 2022

Under the Royal Decree, the following benefits shall be exempt from corporate income tax:

Compensation received under the employer and insurer's compensation program set out in Section 33 of the 1990 Social Security Act for businesses affected by government measures in the most restrictive and restrictive areas.
Subsidies received under the project to promote and maintain the level of employment in SMEs, provided that the company or legal partnership does not claim a deduction for expenses paid from such subsidies in its corporate income tax calculation.

The corporate income tax exemption will apply for the accounting period in which the above benefits are received.

It should be noted that, for the benefit listed in point 2 above, while a tax exemption is provided for the benefit, a tax deduction is not allowed for expenses paid from such a benefit.

An example given in a recent webinar held by the Revenue Department regarding this issue is set out below:

	Thai baht
Income derived from business	1,000,000
Compensation under the employer and insurer's compensation program	50,000
Subsidy to promote and maintain employment in SMEs	40,000
Total income	1,090,000
Deduction: Expenses for conducting business	(50,000)
Net profit for accounting purposes	1,040,000
Tax adjustment:
Deduction: Compensation under the employer and insurer's compensation program Subsidy to promote and maintain employment in SMEs	(50,000) (40,000)
Add back: Expense paid from subsidy to promote and maintain employment in SMEs	40,000
Net profit for tax purposes	990,000

Based on the example of the Revenue Department, it appears that the net tax benefit of subsidies received under the project to promote and maintain the level of employment in SMEs (point 2 above) is nil.

However, there are no rules or regulations issued by the Revenue Department to clarify which expenses are to be considered paid from the subsidies set out in point 2 above.