Additional deduction for an investment in new machinery

Under Royal Decree No. 695, a company or legal partnership can claim a corporate income tax deduction of 2.5 times (1 time as a normal deduction of depreciation and 1.5 times as an additional deduction) for investments made in new machinery under the rules, procedures, and conditions specified by the Director-General of the Revenue Department.

Keywords: Mazars, Thailand, Tax, Corporate income tax, Revenue Department, Royal Decree No. 695, Investment, Machinery

20 November 2020

Machinery eligible for the additional deduction is defined as objects consisting of several parts assembled for use in generating energy, converting or transforming energy, or transmitting energy by using water, steam, fuel, wind, gas, electricity, or any other power or a combination of several types of power. It also includes equipment, flywheels, pulleys, belts, shafts, gears, or other things arranged for reciprocating performance of work, but does not include vehicles that must be registered as such.

In order for the payments for the investment in machinery to be eligible for the additional deduction, they must be made between 1 January 2020 and 31 December 2020. However, this does not include payments for the repair and maintenance of machinery.

To claim the additional deduction, the following conditions must be met:

  1. The machinery must have never been used.
  2. The machinery qualifies for deduction of depreciation under Section 65 bis (2), of the Revenue Code and must be acquired and ready for use by 31 December 2020.
  3. The machinery must be in Thailand.
  4. The company or legal partnership must not have been granted tax privileges under any Royal Decree issued under the Revenue Code, either in whole or in part, for the machinery.
  5. The machinery must not be used in a business exempt from corporate income tax under the law governing investment incentives, or the law enhancing competitiveness for targeted industries, or the law governing the eastern special development zone, either in whole or in part.

In addition, the company or legal partnership must prepare an investment project and payment plan, and must submit it to the Revenue Department according to the rules, procedures, conditions, and timeline specified by the Director-General of the Revenue Department. 

A company or legal partnership engaging in a leasing business and investing in machinery for leasing purposes is not eligible for the additional deduction.

If a company or legal partnership claims the additional deduction and then fails to comply with any of the related requirements in any accounting period, it shall lose the right to claim the additional deduction, and the company or legal partnership must include the additional deduction which was claimed previously as income when calculating its corporate income tax for the accounting period in which the additional deduction was claimed. In the event that the machinery is sold, destroyed, lost, or becomes unusable, the right to claim the additional deduction will be lost in the accounting period in which the respective event occurred, but the company or legal partnership will not have to include the additional deduction claimed previously as income when calculating its corporate income tax.