Have you ever thought that you could capitalise taxable income over a very long period of time and pay corporate income tax year by year, even if you have already received all the upfront payments from customers? This sounds common enough in cases where you have a long-term contract with one period of time for the provision of services.
For example, it is common for rent of, say, 300 million baht, payable upfront on day one under a 30-year contract, to be capitalised over the full lease term. You will then realise the upfront rental income on a straight-line basis of 10 million baht a year and pay corporate income tax on the net profit in each relevant year until the end of the lease term.
Of course, a different concern may exist if the long-term service contract is not in the nature of a lease or a construction service _ for example a golf club membership, in which case tax regulations limit the capitalisation period of the upfront payment to no more than 10 years _ an effort by the Revenue Department to prevent abusive tax planning by deferring payments. This rule has no impact on the lease of real property, which is our focus today.
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