During the festive season, several new tax laws were passed quietly while all worried eyes were on Thailand's growing political uncertainty. The changes to the progressive rates for personal income tax, which offer lower tax brackets, have already been well publicised. However, the following developments are also worth studying:
The first legislation deals with tax-free corporate reorganisation, under Royal Decrees 573 and 574. The purpose is to resolve a longstanding issue related to how a financial institution and an insurance company should realise reserves for bad or doubtful debts when undertaking a corporate restructuring. While most companies are not allowed to deduct reserves as tax expenses, the tax law allows financial entities and life and non-life insurance companies to set aside reserves for bad or doubtful debts subject to certain conditions.
This may be viewed to give such businesses an advantage over general companies. However, when such an institution carried out a restructuring in the form of a statutory merger or an entire business transfer (EBT), where the transferor company was required to be dissolved within the accounting year that the EBT took place, the "recapture rule" under Section 74(2) of the Revenue Code came into play.
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