The Revenue Code imposes certain limits on tax deductibility on the expenses incurred on a sedan car and a passenger vehicle with a number of seats not exceeding 10 seats (the “Sedan Car”) to curb corporate excessive spending on Sedan Cars. One of the limits is Baht 36,000 cap on the monthly rent for the Sedan Car that is tax deductible. If a company spends any amount beyond the cap, any amount in excess of the cap is non-deductible for the tax purpose. If a limited company rents any Sedan Car from either leasing company or car rental company for its use, the tax deductible rent is capped to Baht 36,000 per one month inclusive of VAT. The current rule does not provide any exemption to the Baht 36,000 rent cap on Sedan Cars.
In October 2010, the government introduces an exception to this cap exclusively for car rental companies to relieve a tax burden and stimulate an investment in a business. Under the new exemption, this Baht 36,000 rent cap will no longer apply to the rent paid by a limited company operating a car rental business who rents the Sedan Car from any person for the purpose of renting the Sedan Car out to a customer. This means it is now possible for any car rental company to take a lease of the Sedan Car with the monthly rent of more than Baht 36,000 and then sublease the Sedan Car to a customer without having to face any non-deductible expense. With this new exception, a car rental company will have more flexibility in acquisition of rental Sedan Cars.
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For more details, please contact our lawyers for consultation.
NARIT & ASSOCIATES NEWSLETTER No.47Edition October 2010
