ABC Company Limited is a company incorporated in Thailand. The principal business of the Company is to

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Question:

ABC Company Limited is a company incorporated in Thailand. The principal business of the Company is to provide rental of machine to industrial customers.

During 2019, ABC leased a machine named ABC Super Power v.2 from vendor in Japan for 10 years.

This machine is used for producing milk box.

As per the lease agreement, the annual lease fee was Baht 2 million. But, ABC was required to pay all lease fee (i.e. Baht 20 million) upfront on the contract date.

After that, ABC sub-leased such machine to XYZ Company Limited, a Thai Company Limited. ABC and XYZ agreed that XYZ had to pay for the leased fee as per the actual production of each milk box.

The fee rate was Baht 0.5 per each milk box. The monthly production units would be clearly shown on the machine monitor.

Due to the error in accounting system of XYZ company, ABC often receives the production amount and invoice lately (around 3 weeks delay). But, ABC still decides to recognise income from this sub-lease based on period that XZY provided the production report and invoice.

About the sale promotion scheme, ABC normally provides the special discount to top customers who could reach each production level as follows:

• 5% discount for customer who can produce more than 2,000,000 units per month; and
• 2% discount for customer who can produce in the range of 1,000,000 - 2,000,000 units per month.

Questions:
(1) From tax perspective, should ABC consider this acquisition (through a lease from Japanese Vendor) as capital expenditure in nature? Please answer and explain the tax reason.
(2) From tax perspective, how much did the asset cost on the acquisition date? And, how much of depreciation or amortisation expense per year? Please answer and explain the tax reason.
(3) From tax perspective, how can ABC recognise income from sub-lease of machine to XZY? Was the current practice correct? Please answer and explain the tax reason.
(4) Do you think the special discount which ABC provides only to top customers are regarded as non-deductible expense in nature? Please answer and explain the tax reason.