Previously, any transactions in foreign currency had to be converted into Thai baht for Thai corporate income tax purposes. However, in December 2016, the Thai government approved an amendment to the Thai Revenue Code that allows a Thai corporate income taxpayer to recognize transactions in a foreign currency for corporate income tax purposes.
Keywords: Mazars, Thailand, Tax, Corporate Income Tax, Revenue Code, Revenue Department
27 January 2017
We set below the main points of the amendment:
1. A corporate income taxpayer is allowed to use a foreign currency for corporate income tax calculation purposes. The taxpayer must prepare accounts in that currency, in accordance with accounting standards.
2. The currency for converting the value of assets or liabilities for the corporate income tax calculation purpose may be added as limited by the law.
3. The balances of money, assets, and liabilities at the end of an accounting period – prior to the use of a foreign currency as a functional currency to prepare a balance sheet, and profit and loss statement – shall be converted into the foreign currency using methods in accordance with accounting standards, and certified by a qualified auditor. Any profit or loss arising from such a conversion shall not be assessable or deductible for corporate income tax calculation purposes.
4. A tax return and tax payment must be completed and made in Thai baht. The foreign currency must be converted into Thai baht by applying the average rate based on the selling and buying rate calculated by the Bank of Thailand at the time that the income was earned or the expenses were incurred. Any profit or loss arising from such a conversion for the tax payment purpose shall not be assessable or deductible for corporate income tax calculation purposes.
5. Tax losses carried forward and tax credits (if any) can be utilized in the corporate income tax calculation without having to convert them anew. For example, if the company had losses carried forward in the previous accounting period, and those losses were in the foreign currency, and were converted into Thai baht for the purpose of completing the tax return in the previous year, the company does not have to re-convert such losses into the foreign currency.
6. To use a foreign currency for corporate income tax calculation purposes, that currency and the exchange rate to convert other currencies into that foreign currency must be approved by the Thai Revenue Department.
7. If a corporate income taxpayer that already uses Thai baht for corporate income tax calculation purposes wishes to change the exchange rate previously used for converting other currencies into Thai baht, it must obtain the approval of the Thai Revenue Department.
8. This amendment shall apply to accounting periods from 1 January 2016 onward.