Income tax exemption measures for the purchase, hire of work or cost of service related to computer programs or software for small and medium-sized business enterprises

On 11 May 2021, the Cabinet of Thailand approved a draft royal decree under the Revenue Code on tax exemption to support tax measures encouraging small and medium-sized enterprises (SMEs) to transform their businesses during a digital economy. Such draft royal decree grants an exemption on income tax for companies or juristic partnerships with regard to expenditures paid in the form of purchases, hire of work or service fees related to computer programs or software.

The key details of said royal decree are as follows:

1. Defines "sales", "products", "services" and "computer programs or software”.

2. Grants tax exemption right to SMEs only, which are companies or juristic partnerships with a paid-up capital on the last day of the accounting period not exceeding Baht 5,000,000 and income from sales of goods and services in the accounting period not exceeding Baht 30,000,000. Such SMEs shall be entitled to deduct additional expenses at the amount of 1 time but not more than Baht 100,000, from expenses paid for purchases, hire of work or service fees for computer software services or software that has been registered by the Digital Economy Promotion Agency, Ministry of Digital Economy and Society. In such regard, this exemption only applies for accounting periods beginning on or after 1 January 2021 to 31 December 2022.

3. Companies or juristic partnerships that have exercised the right to exemption under this draft royal decree must not use the same right under the law on investment promotion, the law on enhancing the country's competitiveness for target industries, the law on the Eastern Special Development Zone, or tax benefits related to computer program or software under other royal decrees issued under the Revenue Code, regardless of whether in whole or in part.

This measure is a revival of the principles of Royal Decree (No. 647) B.E. 2560 (2017) (tax measures to promote small and medium business enterprises (SMEs) using computer programs); the enforcement of which ended on 31 December 2019. However, this draft decree will provide a definition of "computer program or software”, which will be in accordance with the features of the computer program   in present. It is different from the Royal Decree (No. 647), which contains only the definitions of “sales”, “goods” and “services”. Please note that this is a draft law; therefore the taxpayer should continue to follow the relevant laws and regulations after the law has come into force.