Reducing tax liabilities by employing the “business transfer” provisions of the Revenue Code

On 18 April 2011 the Revenue Department passed Royal Decree No. 516 allowing for the exemption of VAT, Specific Business Tax and Stamp Duty in connection with a “partial transfer of business” between associated companies. On 27 September 2011, the Revenue Department issued a notification clarifying the conditions necessary to take advantage of these exemptions as follows:

  • The transferee and transferor companies must be incorporated under Thai law and be considered “associated companies” (as defined in Section 39 of Revenue Code).
  • The companies must maintain their associated status for at least an additional six months following the fiscal year end in which the business transfer occurs.
  • Prior to the partial transfer of business, the companies must jointly file an application with the Revenue Department providing details of the proposed transaction.
  • For partial business transfers that have occurred prior to 27 September 2011, the companies may still be able to take advantage of these tax exemptions if they make a joint filing with the Revenue Department within 30 days from the date the Notice was published in the Royal Gazette.
  • The property subject to the partial business transfer must be related to the partial business being transferred, and the transferee company must utilize the transferred property in the same category of business as previously utilized by the transferor company.
  • The transferor company must not transfer any of the property subject to the partial business transfer for consideration lower than market value, unless the parties can establish justifiable grounds to the satisfaction of the Revenue Department for doing so.
  • The auditor(s) of transferor and transferee companies must meet the qualifications under Section 3 septem of the Revenue Code and comply with the requirements as stated in the Notification.