New Year Need Not Be Taxing

New year is a time for giving but all companies need to consider the potential tax impact of those employee gifts and new year parties. In this article Mazars addresses the Personal Income Tax, Corporate Income Tax and VAT implications of a variety of typical new year expenditure.

Keywords: Mazars, Thailand, Tax, New Year, Personal Income Tax, Corporate Income Tax, VAT, Thai Revenue Code

30 January 2015

1. New year party held for employees

Personal Income Tax: Is the New Year party a fringe benefit of the employee, subject to personal income tax?

Ruling No. Gor Kor 0706/9276 dated 9 November 2005: The New Year party held for employees is assessable income under Section 39 of the Revenue Code. However, provided that the company has a policy for holding a new year party for employees and such party was held in accordance with such policy, and for all employees, it is exempt from personal income tax under Section 42(10) of the Revenue Code (maintenance income derived under moral obligation, corpus of a legacy or inheritance, or gifts made in a ceremony or on occasions in accordance with established customs).

Corporate Income Tax: Are the costs incurred for holding the New Year party deductible?

Ruling No. Gor Kor 0706/9276 dated 9 November 2005: If the company has a clear policy to hold the New Year party for its employees and the party was hold in accordance with such policy, and for all employees, without some preferential treatments to some employees, costs incurred for holding such new-year party can be deductible for corporate income tax calculation.

Ruling No. Gor Kor 0706/5823 dated 13 June 2007: Expenses incurred to support the new year party of another company, e.g. related companies, or customers, is not deductible for corporate income tax calculation under Section 65 ter (3) and (13) of the Revenue Code (private expenses, and expenses incurred not for the business of the company).

Value Added Tax: Is input VAT on the costs incurred for holding a New Year party deductible?

Ruling No. Gor Kor 0706/Por./9052 dated 6 September 2007: If the company has a clear policy to hold the new year party for its employees and the party was hold in accordance with such policy, and for all employees, without some preferential treatments to some employees, input VAT on costs incurred for holding such new-year party can be creditable for value added tax calculation.

2. Gifts given to employees or customers

Personal Income Tax: Are the gifts given to employees assessable income of the employee, subject to personal income tax?

Yes, they are assessable income but exempt under Section 42(10) of the Revenue Code if the company provide those gifts to all employees without preferential treatment to some employees.

Corporate Income Tax: Are the costs of gifts given to employees deductible?

Yes, if the company has a clear policy to give New Year gifts to its employees and the gifts were given accordance with such policy, and to all employees, without preferential treatment to some employees. Otherwise, they are non-deductible under Section 65 ter (3) of the Revenue Code (private expenses).

Value Added Tax: Is input VAT on costs of gifts given to employees creditable?

Yes, on the basis that certain conditions apply the same as corporate income tax.

Value Added Tax: Does the company have to charge output VAT on New Year gifts given to customers and is input VAT on costs of gifts given to customers creditable?

The company does not have to charge the output VAT on new year gifts, e.g. calendars, diaries, or other similar items with the company’s name, logo, or trademark, given to customers, provided that such gifts are given in general business practice and their prices are reasonable (Clause 2 (6) of Notification of the Director-General of Revenue on Value Added Tax No. 40).

Ruling No. Gor Kor 0706 (Gor Mor. 01)/266 dated 29 August 2003: The company does not have to charge output VAT on calendars given to the customers during the new year season, provided that such calendars are gifts given in general business practice and their prices are reasonable. Further, the input VAT incurred on the costs for making those calendars is creditable.

Ruling No Gor Kor 0811/Por. 6945 dated 25 December 1996: The company does not have to charge output VAT on basket gifts given to the customers during the new year season, provided that such gifts are given in general business practice and their prices are reasonable. However, the input VAT on those basket gifts are not creditable, but deductible for corporate income tax calculation as entertainment expense.

3. New Year trip

Personal Income Tax: Is a New Year trip held for employees a fringe benefit of the employee, subject to personal income tax?

No, if the trip were held for all employees, without preferential treatment to some employees.

Corporate Income Tax: Are the costs incurred for holding the New Year trip deductible?

Yes, if the trip were held for all employees, without some preferential treatments to some employees (ruling no. Gor Kor 0802 (GorMor. 14)/131 dated 8 November 2002).

Value Added Tax: Is the input VAT on the costs incurred for holding the new-year trip deductible?

Yes, on the basis that certain conditions apply the same as corporate income tax (ruling no. Gor Kor 0811 (GorMor)/384 dated 2 April 1997).