Use of a foreign currency as the functional currency for corporate income tax purposes

Under Notification on Income Tax No. 373 issued by the Director-General of the Revenue Department, which became effective on 15 May 2020, a company or legal partnership may adopt a currency other than Thai currency as its functional currency for corporate income tax purposes under the following rules, procedures, and conditions

Keywords: Mazars, Thailand, Tax, Corporate income tax, Revenue Department, Functional currency, Foreign currency, Ministry of Finance

18 November 2020

1. The company or legal partnership must adopt the other currency as its functional currency for preparing books of account which are in accordance with accounting principles, and a qualified auditor must certify that such a currency is used as the functional currency.

2. The currency to be used as a functional currency must be one of the currencies listed in Notification on Income Tax No. 392 issued by the Ministry of Finance on 21 March 2020. The 23 currencies listed in the Notification are set out below:

Australian dollar
(AUD)

British pound
(GBP)

Brunei dollar
(BND)

Canadian dollar
(CAD)

Chinese yuan
(CNY)

Danish krone
(DKK)

Euro
(EUR)

Hong Kong dollar
(HKD)

Indian rupee
(INR)

Indonesian rupiah
(IDR)

Japanese yen
(JPY)

Malaysian ringgit
(MYR)

New Zealand dollar
(NZD)

Norwegian krone
(NOK)

Philippine peso
(PHP)

Singaporean dollar
(SGD)

South Korean won
(KRW)

Swedish krona
(SEK)

Swiss franc
(CHF)

Taiwan dollar
(TWD)

United Arab Emirates dirham
(AED)

United States dollar
(USD)

Vietnamese dong
(VND)

 

3. The company or legal partnership must notify the Director-General of the Revenue Department within six months of the first day of the accounting period that it wishes to adopt such a currency as its functional currency. The procedure for doing this is as follows:

3.1      Submit the notification form (Form Sor.Ngor. 1) through the Revenue Department’s website using the registered username and password for the Revenue Department’s e-filing system, or through the Ministry of Finance’s website using the registered username and password for the Tax Single Sign-On system; and

3.2      Scan the auditor’s certificate stating that the company or legal partnership has adopted the other currency as its functional currency for accounting purposes and upload it to the Revenue Department’s website or to the Tax Single Sign-On system at the Ministry of Finance’s website.

4. The company or legal partnership must file tax returns through the Revenue Department’s website or through the Tax Single Sign-On system at the Ministry of Finance’s website.

A company or legal partnership which meets the rules, procedures, and conditions set out in points 1 through 4 above can adopt the other currency as its functional currency from the first day of the accounting period in which notification is given to the Director-General of the Revenue Department, and must continue to use it consistently. If the company or legal partnership wants to change the currency used as its functional currency, it can do so upon the approval of the Director-General of the Revenue Department.

Converting the other currency, as well as the value or price of assets, liabilities, and other items in the financial statements

A company or legal partnership which has notified the Director-General of the Revenue Department that it will use another currency as its functional currency must follow the rules specified in Notification on Income Tax No. 393, issued by the Ministry of Finance, to convert the other currency, as well as the value or price of assets, liabilities, and other items in the financial statements, as set out below:

 1.    Convert any currency, asset, liability, or other item in the financial statements remaining on the last day of the accounting period before the accounting period in which the other currency will be used as the functional currency according to accounting principles which have been examined and approved by a qualified auditor.

 2.    Convert any currency, asset, or liability remaining on the last day of the accounting period which is not in the functional currency into that functional currency using one of the following methods:

2.1      Using the average rate between the buying and selling rates of commercial banks, as set by the Bank of Thailand. If such a rate cannot be applied to any of these things listed, the company or legal partnership must obtain the approval of the Director-General of the Revenue Department to apply a different rate to those things.

2.2      Using the average buying rate or the average selling rate of commercial banks, as set by the Bank of Thailand. If such a rate cannot be applied to any of these things listed, the company or legal partnership must obtain the approval of the Director-General of the Revenue Department to apply a different rate to those things.

Whichever method the company or legal partnership chooses, it must apply that method consistently, and cannot change it without the approval of the Director-General of the Revenue Department.