Mergers and Acquisitions: Corporate Income Tax Implications
Under the Revenue Code of Thailand, what are the corporate income tax and other tax implications arising after a merger and acquisition? The basic principle under Thai law is that after a merger, the amalgamated company inherits the rights and liabilities of the former companies.1 This principle is particularly relevant in terms of tax liability. As for the specific implications in terms of corporate income tax and other taxes, further guidance is provided in Revenue Department Advisory Opinion No. Gor. Dor. 0706/10422 issued on 14 December 2005. Although the aforementioned opinion was issued in regards to public limited companies, it is also generally applicable as well to private limited companies registered under the Civil and Commercial Code. The Revenue Department offered the following guide:
- In calculating income and expenses for a former company up to the date the merger was registered and for the amalgamated company after the date of registration, the accrual basis according to Section 65 paragraph 2 of the Revenue Code shall apply. In other words, income (and related expenses) arising in a certain accounting year shall be calculated as part of that year although it still has not been earned (or paid).
- In the event that a former company received services before the merger was registered and then the amalgamated company paid assessable income to the service provider at a time after the merger was registered, the amalgamated company shall have a duty to withhold tax and to issue a withholding tax certificate to the service provider according to Section 50 bis of the Revenue Code.
- In the event that a former company provided services and received assessable income in exchange before the merger was registered, but a withholding tax certificate with the name of the former company as the taxpayer was issued after the registration of the merger, the former company shall be given a tax credit according to the amount of tax that was withheld according to the certificate under Section 60 of the Revenue Code. The former company is still liable for corporate income tax according to Section 73 of the Revenue Code.
- In regards to employee withholding tax according to Section 50(1) of Revenue Code, a former company shall have a duty to withhold employee income tax up until the day before the date of the registration of the merger. The amalgamated company shall have a duty to withhold employee income starting from the day the merger was registered; furthermore, the amalgamated company must submit withholding tax forms Por. Ngor. Dor. 1 Gor. and Por. Ngor. Dor. 2 Gor. on behalf of the former company in accordance with Section 58 of the Revenue Code.
Income tax implications arising after a merger and acquisition are complex. Companies are advised to consult with competent legal counsel in order to understand their rights and liabilities.
1 Sections 152 and 153 of the Public Limited Companies Act of B.E. 2535 (1992); Section 1243 of the Civil and Commercial Code
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