June 29, 2010--Tax incentives to help revive the struggling tourism sector will aim to encourage domestic tourism and offer assistance for small and large businesses alike, says Winai Wittawatkaravet, the director-general of the Revenue Department.

Political tensions over the past few months, culminating in the May 19 riots in Bangkok, have had a devastating impact on tourism. Some of Bangkok's most luxurious hotels, including the Four Seasons, Centara Grand at CentralWorld, the InterContinental and the Dusit Thani, saw occupancy plummet to single digits during the red-shirt anti-government protests from March to May.

Minor International, which operates the Four Seasons, Anantara and Marriott brands, said earlier this month that foreign arrivals were expected to drop to just 13 million this year, compared with an earlier forecast of 16 million and against 14.1 million last year.

Authorities have announced a five-part package of tax incentives to help the industry, starting with a 15,000-baht personal taxable income deduction on domestic tourism-related spending for Thai residents. The Council of State, the government's legal arm, is currently reviewing the plan, which will be applied retroactively to cover spending from March through Dec 31. Residents seeking to claim deductions must keep relevant receipts to be filed with their 2010 tax returns.

A resident will be allowed to claim 100% of the cost of a domestic tour package up to a maximum of 15,000 baht. Hotel and resort expenses may also be claimed in full under the incentive, for properties registered with the Interior Ministry.

The Revenue Department would permit deductions only for lodging expenses for individual trips, said Mr Winai.

Hotel rack rates inclusive of breakfast would probably be allowed, he said. But other services, such as meals or spas, may not be deducted under the programme.

A second incentive allows tourism operators to claim up to two times the actual expenses incurred for domestic or international trade shows in their corporate tax filings in the 2010 and 2011 accounting years. The measure will apply only to events supported by the Tourism Authority of Thailand.

Additional deductions will be given to companies for training-related seminars held this year and next. Under the current law, up to two times cost of training events is deductable, a level that will be increased under the programme to support the hotel and Mice (meetings, incentives, conventions and exhibitions) sectors.

The department also will allow car operators to increase depreciation claims for their vehicle fleets. Existing rules allow depreciation charges of up to one million baht over five years for vehicles seating up to 10 passengers. Under the new rule, depreciation may be claimed up to the full value of the vehicle over five years.

For rental cars, depreciation rules will permit charges up to the full value of the vehicle, compared with the previous rule limiting charges to up to 36,000 baht a month.

Depreciation rules will also be changed for hotels renovating their properties. Previously, the cost of renovations may be booked under depreciation charges of up to 20% of the value over five years.

The new rule will permit faster depreciation, with up to 60% of the value of the improvements taken in the first year and the remainder averaged over four years. The measure will apply only for the 2010 and 2011 accounting years.

Mr Winai said the five tax measures included measures that may be issued as ministerial announcements or as executive decrees.

The legal process is expected to be completed relatively soon, he said, adding that it was difficult to estimate the final cost to the government for the programme, he said.

For the 15,000-baht personal tax deduction alone, the department estimates lost tax revenues could amount to as much as 3 billion baht.

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