The government aims to resume the collection of Specific Business Tax on income derived from the sale of securities on the stock exchange of Thailand within 2023 after more than 30 years of exemption
The capital market, particularly the stock exchange of Thailand (“SET”) is one of the main factors driving the economy of Thailand. Therefore, the strong and stable growth of such has been encouraged and supported by the Thai government. In such regard, over the past 30 years, the government has imposed a personal income tax exemption on income derived from the sale of securities on the SET*1, as well as a specific business tax (“SBT”) exemption at the rate of 0.1*2 percent. This strategy has worked in that the capital market of Thailand has continually grown in a stable manner compared to other countries in the ASEAN region, except for Singapore, which has the strongest capital market in the region by far.
Now that the SET is stable, the Cabinet has approved the collection of SBT from the sale of shares on the SET within 2023, as reported as follows by news agencies: “On 29 November 2022, it was revealed by the Deputy Spokesman of the Office of the Prime Minister that the Council of Ministers (“Cabinet”) has resolved to accept the principle of drafting a royal decree issued under the Revenue Code on the reduction of SBT rates and the determination of tax-exempt businesses (No....) BE........ (SBT collection from the sale of securities on the stock exchange), as proposed by the Ministry of Finance. However, it will not be effective immediately as it has to go through the Council of State’s process, which is expected to take some time. Therefore, said royal decree has been approved in principle but is not effective immediately.” In such regard, the Deputy Spokesman stated that: “After a long exemption period, SBT collection from the sale of securities on the stock exchange, according to the principles proposed by the Ministry of Finance, will return at the rate of 0.11 percent, pursuant to the original law. However, in the first year, the collection rate will be only half or 0.055 percent, which will allow three months of preparation time before the actual collection begins.”*3
In this case, in order for a law to come into force within the first quarter of 2023, the law must be enacted at the level of a royal decree so that the SBT exemption can be repealed and amended from the original exemption for all businesses selling securities on the SET at the rate of 0.1 percent (excluding local taxes of another 1/10 of the SBT) of the income from the sale of shares before deduction of expenses. As of 2023, SBT will be exempted by only half, which is 0.055 percent (excluding local taxes of another 1/10 of the SBT). Moreover, in 2024, all exemptions will be lifted, resulting in the trading of securities in 2024 being subject to SBT at the rate set by the Revenue Code, which is 0.1 percent (excluding local taxes of another 1/10 of the SBT).
Nevertheless, the news reports do not specify the type of tax the government aims to collect; hence, many shareholders on the SET are concerned that they will have to pay personal income tax from the sale of shares combined with other income at the rate of 5-35 percent, regardless of whether or not if there is a profit or capital gain from the sale of shares or other income from the SET. In such regard, we would like to clarify that the income from the sale of shares an individual receives is still entitled to the exemption of such income.
SBT collection on the sale of shares is one of many business processes that was previously subject to SBT but has been exempt for a long time. This can be seen from many other types of businesses that are also subject to SBT, such as: life insurance and pawn shops, which are subject to SBT at the rate of 2.5 percent of their income*4 (excluding local taxes of another 1/10 of the SBT); banking; land and property sales; and bank lending businesses, which are subject to SBT at 3.0 percent of their income*5 (excluding local taxes of another 1/10 of the SBT). Said businesses that are subject to SBT are those that cannot be included in the VAT system. Therefore, the SBT must be paid at a rate lower than the current VAT rate of 6.3 percent (excluding local taxes of another 1/10 of the SBT).
In conclusion, investors who trade shares on the SET must closely follow the new law and regulations that are due to come into force, and carefully consider the pros and cons of whether to sell their shares now or continue to hold and sell them after the first quarter of2023, which is when this law will come into force.
This is intended merely to provide a regulatory overview and not to be comprehensive, nor to provide legal advice. Should you have any questions on this or on other areas of taxation law, please do not hesitate to contact our tax team.
Reference from https://mgronline.com/stockmarket/detail/9650000113718
*1 Section 42 (17) of the Revenue Code and Section 2(23) of the Ministerial Regulation (No. 126) B.E. 2509 (1966)
*2 Section 91/2(7), Section 91/5(7) and Section 91/6(1) of the Revenue Code, as well as Section 3(1) of the Royal Decree (No. 240), B.E. 2534 (1991)
*3 Reference from https://mgronline.com/stockmarket/detail/9650000113718 on 30 November 2022
*4 Section 91/2(3)(4), Section 91/5(3)(4) and Section 91/6(2) of the Revenue Code
*5 Section 91/2(1)(5)(6), Section 91/5(1)(5)(6) and Section 91/6(3) of the Revenue Code