There appears to be some confusion among businesses in Thailand as to the prospects for support measures from the Government of Thailand aimed at debt restructuring to tackle the economic effects of COVID-19.
At the beginning the COVID-19 lockdown, the Ministry of Finance announced approval (subject to Thai government ratification) to implement tax and fee measures to support debt restructuring of creditors that are “non-financial institutions.” One element of confusion for our client is the use of the wording “non-financial institutions” in the above announcement, which has led ordinary business owners to expect that they will be entitle to future debt restructuring support measures.
However, the Ministry of Finance announcement goes on to described the creditors being supported by these debt restructuring measures to consist of: “operators carrying on the business of credit card, hire purchase, leasing, and other creditors that execute debt restructuring with financial institutions.” Therefore, although financial institutions (i.e., BANKS) are excluded from these debt restructuring measures, a lot of other businesses have be excluded from the list of eligible companies (e.g., ORDINARY BUSINESS OWNERS), who are far less finance-oriented than the targeted beneficiary companies, being those with operations involving “credit card, hire purchase, leasing, etc.”
When contacted by PKF, the Ministry of Finance officer confirmed that ordinary businesses are not eligible to benefit from this measure. However, the officers hedged their statement by indicating that their announcement was merely a brief description of the terms for yet-to-be-ratified Thai government measures. The official terms and definitions will be announced later by the Thai Revenue Department and will only become law once circulated in the Government Gazette.
According to the measures announced by the Thai government to tackle the economic effects of COVID-19, these measures applying to debt restructuring will cover the period between 1 January 2020 to 31 December 2021. And the details of the relief measures announce thus far are summarized as follows:
Tax exemption from personal and corporate income tax for debtors on income derived from debts forgiven by creditors
- Tax exemption from personal and corporate income tax, VAT, specific business tax, and stamp duty for debtors and creditors for income derived from sale of goods, provision of services or arranging of instruments in relation to the debt restructuring
- Tax exemption from personal and corporate income tax, specific business tax, and stamp duty for debtors on income derived from the transfer of immovable property if such transfer is made in relation to the debt restructuring
- Relaxation of normal rules imposing conditions and restrictions for writing off bad debt due to debt restructuring
- Reduction of registration fees for rights and juristic acts on transfers and mortgages for real estate under the Land Code Act from 2% to 0.01% (effective from published date until 31 December 2021)
Hopefully, the scope of businesses eligible for debt restructuring measures will be expanded before they become law in Thailand.