Additional deduction of interest and wage expenses

Keywords: Mazars, Thailand, Tax, Wage expenses, Royal Decrees, Government Gazette, COVID-19

27 August 2020

1. Royal Decree No. 707 providing an additional deduction of interest on low-interest loans (soft loans) 

Under Royal Decree No. 707, a company or legal partnership can claim a tax deduction of 1.5 times (1 time as a normal deduction and 0.5 times as an additional deduction) the interest expense paid on low-interest loans (soft loans) from 1 April 2020 to 31 December 2020. 

In order to qualify for the additional deduction under Royal Decree No. 707, the company or legal partnership must meet the following conditions:

• Having income of not more than 500 million baht in the last 12-month accounting period, where the last day of the accounting period ended on or before 30 September 2019 arising from or in consequence of the business conducted.
• Having not more than 200 employees in the accounting period mentioned above.
• Paying interest on loans under the low-interest credit measures to help entrepreneurs directly and indirectly affected by the COVID-19 outbreak according to the Cabinet's resolution in March 2020.

The rules, procedures, and conditions specified by the Director-General of the Revenue Department must be complied with.

2. Royal Decree No. 708 providing an additional deduction of wage expenses

Under Royal Decree No. 708, a company or legal partnership can claim a tax deduction of 3 times (1 time as a normal deduction and 2 times as an additional deduction) the wage expenses paid from 1 April 2020 to 31 July 2020 to employees insured with the Social Security Fund. Eligible wages for the additional deduction shall be the amount actually paid to employees who earn not more than 15,000 baht per month.

“Wage” is defined as money agreed upon between employer and employees as compensation for their work under the employment contract for normal working time, regardless of whether it is hourly, daily, weekly, monthly, or otherwise. This also includes the money that an employer shall pay to its employees on holidays and days off to which they are entitled under the Labour Protection Act, but does not include overtime, bonuses, assets, or other benefits that an employer pays to its employees due to employment.

In order to qualify for the additional deduction under Royal Decree No. 708, the company or legal partnership must meet the following conditions:

• Having income of not more than 500 million baht in the last 12-month accounting period, where the last day of the accounting period ended on or before 30 September 2019 arising from or in consequence of the business conducted.
• Having not more than 200 employees in the accounting period mentioned above.
• Having a number of employees insured with the Social Security Fund on the last day of April 2020, May 2020, June 2020 and July 2020, whichever is the case, that is not less than the number of employees insured with the Social Security Fund on the last day of March 2020, unless there are reasonable grounds for this, as specified by the Director-General of the Revenue Department.
• Not claiming the additional deduction of wage expenses, whether in whole or in part, under another Royal Decree or the Revenue Code.

The rules, procedures, and conditions specified by the Director-General of the Revenue Department must be complied with.

If a company or legal partnership has claimed an additional deduction under this Royal Decree and subsequently fails to comply with the rules, procedures, and conditions, the right to claim the additional deduction under this Royal Decree shall be terminated. Consequently, the company or legal partnership must include the amount of the additional deduction already claimed as its income in its net profits for corporate income tax purposes in the accounting period in which the additional deduction was claimed.