Depreciation, amortisation, and depletion
Deductions for depreciation are allowed as a percentage of cost. If the rate of deduction adopted by a company under its own accounting method is lower than the maximum percentage of cost permitted, a deduction will be allowed only at the rate adopted by the company. The straight-line basis is the method most commonly used by companies, but any generally accepted basis, such as sum-of-the-years-digits or double-declining method, is permitted. The maximum permitted rates are shown below:
|Asset||Maximum permitted rate (%)|
|Cost of acquisition of depletable natural resources||5|
|Cost of acquisition of lease rights:|
|If there is no written lease agreement or if there is a written lease agreement containing a renewal clause whereby continual renewals are permitted||10|
|If there is a written lease agreement containing no renewal clause or containing a renewal clause but restricting renewable periods to a definitely limited duration||Percentage rate equals 100 divided by the sum of years of the original and renewable lease periods|
|Cost of acquisition of the right in a process, formula, goodwill, trademark, business licence, patent, copyright, or any other right:|
|If the period of use is unlimited||10|
|If the period of use is limited||Percentage rate equals 100 divided by the number of years of use|
|Other assets not mentioned above, excluding land and inventory||20|
Special depreciation methods for certain assets
- Machinery and equipment for research and development (R&D) may initially be depreciated at 40% of cost, with the remaining balance being depreciated at the above maximum rate of 20% per annum.
- Computer hardware and software may be depreciated within three accounting periods.
Special depreciation method for small companies
Companies and juristic partnerships with fixed assets, excluding land, with a value of no more than THB 200 million and with no more than 200 employees are entitled to use the following special depreciation methods:
- Machinery and equipment may initially be depreciated at 40% of cost, and the remaining balance will then be depreciated at the maximum rate of 20%.
- Computer hardware and software may initially be depreciated at 40% of cost, and the remaining balance can then be depreciated within three accounting periods.
- Factory buildings may initially be depreciated at 25% of cost, and the remaining balance will then be depreciated at the maximum rate of 5%.
Start-up expenses, such as incorporation expenses and registration fees, are deductible when incurred.
Interest on money borrowed for the purpose of acquiring profit or for the purpose of the business is deductible. Interest incurred in respect of the construction or installation of fixed assets that require a period of time before they are ready for their intended use is considered to be capital expenditure and deductible in the form of depreciation.
Bad debts written off are deductible, provided that they are consistent with the rules, procedures, and conditions prescribed by the Ministerial Regulations.
Donations to specified charities or for public benefit are deductible in the amount actually paid but not exceeding 2% of net profit. Donations for education or sport are also deductible in the amount actually paid but not exceeding 2% of net profit.
Donations to support certain educational or recreational programmes are allowed a double deduction for tax. Donations made by electronic means to educational institutions from 1 January 2019 to 31 December 2019 are also allowed a double deduction for tax.
Fines and penalties
Fines, penalties, and surcharges imposed under all tax laws are not deductible.
In general, all taxes are deductible except CIT and VAT (in certain cases).
Other significant items
Non-deductible expenses include, but are not limited to, the following:
- Expenses in the nature of provisions.
- Contributions to any fund (except for registered provident funds).
Net operating losses
Losses may be carried forward to offset against the profits of the following five accounting periods. The carryback of losses is not permitted. A change in control of a loss-making company does not impact its loss carryforward status.
Payments to foreign affiliates
A Thailand-incorporated company may claim a deduction for royalties, management service fees, and interest charges, provided they are expended exclusively for the purpose of generating profit or for the purpose of the business in Thailand and are determined on an arm’s-length basis.