On 17 June 2025, the General Department of Taxation (“GDT“) issued Instruction No. 18574 GDT on Tax Obligation for Share Premium (“Instruction“). This Instruction reaffirms the principle of taxable income and provides clarification on the share premium classification for tax purposes. GDT urges all self-declared enterprise owners to thoroughly examine and effectively implement this Instruction from the date of signing.
In this Update, we set out a summary of the key points outlined under the Instruction.
The Instruction clarifies and reiterates the definitions of the important key terms as follows:
- Taxable income refers to the difference between the value of net assets at the end and the beginning of a period. The difference in value from such a period, which needs to include any withdrawals for personal use or prior deductions made by the enterprise owner and excludes capital contributions in the period, is used as the basis for calculating tax liability. Capital contributions, whether in cash or in kind, do not constitute taxable income.
- Share premium refers to the amount received by an enterprise in excess of the par value of its shares when it increases its capital through a new share subscription.
To ensure the effective, transparent, and uniform enforcement of tax laws and regulations, GDT sets forth the following instructions:
- Share premium refers to the capital contribution by shareholders into the enterprise and is not taxable income.
- Share capital and share premium from new shares shall be paid to the enterprise and accurately recorded in the accounting records, accompanied by appropriate documentary evidence. If the enterprise lacks such evidence, any increase in the owner’s capital account will be deemed as taxable income in accordance with income tax provisions.
If you have any queries on the above, please feel free to contact our team members listed here, or our Tax Manager Chum Socheat who will be happy to assist.
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Please note also that whilst the information in this publication is correct to the best of our knowledge and belief at the time of writing, it is only intended to provide a general guide to the subject matter and should not be treated as legal advice or a substitute for specific professional advice for any particular course of action as such information may not suit your specific business and operational requirements. You should seek legal advice for your specific situation. In addition, the information in this publication does not create any relationship, whether legally binding or otherwise. Rajah & Tann Asia and its member firms do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on the information in this publication.
