Additional tax deduction for SMEs to use a computer program

To encourage small and medium enterprises (“SMEs”) to use legally registered computer software in their business operations, the Government published Royal Decree No. 725 in the Government Gazette on 8 November 2021. Royal Decree No. 725 allows SMEs to deduct a greater amount of expenses incurred for acquiring a computer program for its corporate income tax purposes.

Keywords: Mazars, Thailand, Tax, Tax deduction, SMEs, Government Gazette, Revenue Department,Royal Decree, Corporate income tax

16 December 2021

We set below the key points of this law.

1. Entities that are entitled to the additional deduction under this Royal Decree are SMEs which are companies or legal partnerships whose registered paid-up capital on the last date of the accounting period does not exceed THB 5 million, and income from selling goods or providing services in the accounting period does not exceed THB 30 million. In addition, they must comply with the following rules and conditions:

  • do not receive tax benefits, whether in whole or in part, related to computer programs under other Royal Decrees issued under the Revenue Code; and
  • are not entitled to corporate income tax exemptions, whether in whole or in part, under the law on investment promotion, the law on enhancing the country's competitiveness for target industries, or the law on the Eastern Special Development Zone.

2. Expenses which can be claimed for the additional deduction under this law must be incurred for:

  • purchasing a computer program;
  • hiring another person to develop a computer program; or
  • using the computer program services of another person.

3. The above expenses must be paid to a seller, developer, or service provider of a computer program registered with the Digital Economy Promotion Agency.

4. SMEs can claim a tax deduction of 2 times (1 time as a normal deduction of depreciation of a new computer program or deductible amount of software service fee and 1 time as an additional deduction) the amount actually paid for the above expenses. However, the amount claimed for the additional deduction is capped at THB 100,000.

5. The additional deduction under this Royal Decree shall be available for those accounting periods which start on or after 1 January 2021, and no later than 31 December 2022.

6. Rules, procedures, and conditions prescribed by the Director-General of the Revenue Department must be complied with.