HLB - Thailand’s Cabinet Approves Enhanced Tax Measures to Support Social Enterprises

HLB Thailand Tax Team

The Thai Cabinet has approved in principle a draft Royal Decree to enhance the tax incentives offered to support social enterprises in Thailand. The measures approved aim to strengthen social development and help Thailand achieve the UN Sustainable Development Goals.

The new Royal Decree will amend the tax measures under Royal Decree No. 735 issued under the Revenue Code that were enacted already to support social enterprises through the Revenue Department’s electronic donation system (e‑Donation), and expired on 31 December 2023.

The key changes include:

• Making permanent the 100% tax deduction for companies that contribute money or property to support social enterprises, which had previously expired on 31 December 2023.
• individual taxpayers who donate money to support social enterprises will be allowed to claim a 100% deduction.
• Increasing the corporate and personal income tax deduction for donations to the Social Enterprise Promotion Fund from 1 times to 2 times for donations made from 1 January 2024 to 31 December 2028.
• Extending the exemption from income tax, value added tax, specific business tax and stamp duty for individuals, companies, or juristic partnerships on income received from the transfer of property, sale of goods, or execution of instruments arising from a transfer of property to a social enterprise without consideration, or a donation of property to the Social Enterprise Promotion Fund, effective from 1 January 2024 onwards.
   

The tax benefits will be available only when the support or donation is made through the Revenue Department’s electronic donation system (e-Donation).

A grace period will be granted for social enterprises to register with the Revenue Department to receive tax benefits after the legally prescribed deadline. Social enterprises and their supporters will receive the tax benefits starting from the accounting period or tax year following the period of registration.

The Director-General of the Revenue Department has announced that once the Royal Decree comes into force, Revenue Department Notification (No. 38) will also be amended to relax the criteria for claiming deductions and expense allowances for investments in shares or partnership interests for the establishment or capital increase of social enterprises. Investors will be required to hold shares or partnership interests in the social enterprise for at least 10 years from the date of investment, instead of having to hold such shares or interests indefinitely. This amendment will also apply to investments made before the effective date of the new Royal Decree.

The Revenue Department estimates that the tax measures will result in lost government revenue of approximately THB 110.83 million per year (an increase of approximately THB 21.93 million from the revenue loss in 2023), but will strengthen social enterprises and support sustainable development, particularly through the employment of persons requiring special assistance and promotion.

The Bureau of the Budget agreed that the Cabinet may approve the draft in principle and supported assigning the Office of Social Enterprise Promotion to promote awareness, monitor results, and conduct annual evaluations together with the Ministry of Finance.