Income tax exemption for gains from disposal of shares in companies in targeted industries
Keywords: Mazars, Thailand, Tax, Corporate income tax, Personal income tax, Venture capital company, Revenue department, Government Gazette
05 October 2022
Royal Decree 750, which came into effect on 15 June 2022, was issued to provide an exemption from corporate income tax (“CIT”), and personal income tax (“PIT”) for capital gains made in the following cases:
- The disposal of shares in companies engaged in business in the targeted industries (“the Companies”).
- The disposal of shares in a venture capital company (VCC) or of units in a trust that has invested in the Companies.
- The dissolution of a VCC or trust that invests in the Companies.
Details of the tax exemptions and the key conditions to be met for them are summarized below:
Action from which a gain is made | Key conditions |
1. Disposal of shares in the Companies |
|
2. Disposal of shares in a VCC or of units in a trust |
Note: When calculating profits, legal reserves are not included. |
3. Dissolution of a VCC or trust |
|
To be eligible for the income tax exemption, the VCC or trust must meet the following conditions:
VCC
- Must be a Thai registered company
- Must have paid-up capital of at least THB 20 million
- Must be registered as a VCC with the Office of the Securities and Exchange Commission
- Has not claimed a tax exemption under Royal Decree 10, Royal Decree 597, or Royal Decree 636 yet.
Trust
- Must have paid-up capital of at least THB 20 million
- Must be registered as a trust with the Office of the Securities and Exchange Commission
- Has not claimed a tax exemption under Royal Decrees. 597 or 636 yet.
On 6 September 2022, Notification of the Director-General of the Revenue Department on Income Tax No. 428 was issued to further provide clarification on the rules, procedures, and conditions to be followed in order to qualify for the tax exemption under Royal Decree 750.
1. Duty to file a form:
- The Companies are required to file an income proportion report form containing information on shareholders and the proportion of income derived from their business in each accounting period.
- VCCs and trusts are required to file an investment report form containing details of investments in the Companies and the proportion of the investment in each accounting period.
These forms must be filed through the Revenue Department’s website within 150 days of the last day of the accounting period. If the deadline is on or before 31 December 2022, the deadline is extended to 30 June 2023.
2. Investors are required to keep an investment report form available for inspection by the Revenue Department.
3. Where investors derive income from the sale of shares in a VCC or of units in a trust which has no retained earnings, the investors are required to prepare evidence to show the proportion of the investment in the Companies compared to all the investments of the VCC or trust in an accounting period prior to the transferred.
The tax exemption under Royal Decree 750 shall be effective up to 30 June 2032.
References: Government Gazette (in Thai) dated 14 June 2022
The Revenue Department (in Thai) dated 6 September 2022