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Tax and AccountingInformation about taxation and accounting services in ThailandTax: » Taxation Accounting: » Reporting Requirements Taxation There are three classes of taxation on income and consumption as follows : the corporate income tax, the personal income tax, and Value Added Tax (VAT) and the specific business tax. Corporate Income Tax All companies and partnerships which are registered under Thai law or which are formed under foreign laws and carry on business in Thailand are subject to the corporate income tax. All income of companies and partnerships registered under Thai law is subject to this tax based on its worldwide income. Profit Computation The corporate income tax is imposed on the net profits of the business received during a taxable year. The taxable year for companies is their accounting period, which shall be a duration of twelve months. However, it may be less than twelve months in the case of the first accounting period after incorporation or after granting approval of the Revenue Department and Commercial Registration Department for a change of the closing date. Capital gains are taxed as ordinary income. Personal Income Tax Every persons, resident or non-resident, who derives assessable income from employment or business carried on or assets located in Thailand is subject to the personal income tax, whether such income is paid in or outsides of Thailand. An individual who is present in Thailand for more than 180 days in any tax year (calendar year) is treated as a resident of Thailand, for tax purposes. Residents are also subject to income tax on income from foreign sources to the extent that such income is brought into Thailand in the same taxable year that he is deemed to be a resident. Personal income taxes are payable (to the extent not already paid by withholding) and tax returns for each year are to be filed prior to the end of March of the year following that in which income was earned.Imposition of Taxes Companies are required to withhold income tax from the salary of all regular employees. A value-added tax of 7 percent is levied on the value added at each stage of the production process and is applicable to most firms. The VAT must be paid on a monthly basis. A specific business tax is levied on firms engaged in several categories of business not subject to VAT, based on gross receipts, at a variable rate from 0.1 - 3.0 percent. Corporate income tax is 30 percent of net profits and is due twice each fiscal year. A mid-year profit forecast entails advance payment of corporate taxes. Value Added Tax "V A T" is chargeable on the increase in the value of goods sold or services rendered within the country in the course of business or professional practices including services rendered outside but used inside Thailand. The increase in the value of the goods or services is the difference between the cost of acquisition of the goods or provision of the service and the sale price of the same. VAT is added to the sale price of the goods or services charged on the customers and is evidenced by the VAT tax invoices issued by the sellers of goods or providers of services. Business operators earning more than 1,200,000 Baht per annum must register for VAT with in 30 days of the date they reach 1,200,000 Baht in sales. Four categories of business transactions are subject to VAT. They are: 1. Sale of goods 2. Rendering of services 3. Export sales 4. Import of goods for any purposes whatsoever In principle VAT is chargeable on such business transactions only if they are made within the country. The only exception where VAT is chargeable on transaction made outside the country is where services are rendered outside but used within the country. ACCOUNTING Reporting Requirements Companies must keep books and follow accounting procedures specified in the Civil and Commercial Code, the Revenue Code and the Accounts Act. Documents may be prepared in any language, provided that a Thai translation is attached. All accounting entries should be written in ink, typewritten, or printed. Specifically, Section 1206 of the Civil and Commercial Code provides rules on the accounts that should be maintained as follows: The directors must cause true accounts to be kept of the sums received and extended by the company and of the matters in respect of which each receipt or expenditure takes place of the assets and liabilities of the company. Annual Accounts If a company wishes to change its accounting period, it must obtain written approval from the Director General of the Revenue Department. A newly-established company or partnership should close accounts within 12 months from the date of its registration. Thereafter, the accounts should be closed every 12 months. The performance record is to be certified by the company auditor, approved by the Managing Director, and filed with the Commercial Registration Department at the Ministry of Commerce within 5 months of the end of the fiscal year and with the Revenue Department at the Ministry of Finance within 150 days of the end of the fiscal year. Accounting Principles In general, the basic accounting principles practiced in the United States of America are accepted in Thailand, as are accounting methods and conventions sanctioned by law. The Institute of Certified Accountants and Auditors of Thailand is the authority promoting the application of generally accepted accounting principles. Any accounting method adopted by a company must be used consistently and may be changed only with approval of the Revenue Department. Certain accounting practices of note include: Depreciation The Revenue Code permits the use of varying depreciation rates according to the nature of the classes of assets which have the effect of depreciating the assets over periods that may be shorter than their estimated useful lives. These maximum depreciation rates are not mandatory; a company may use lower rates that approximate the estimated useful lives of the assets. But if a lower rate is used in the books of the accounts, the same rate must be used in the income tax return. Accounting for Pension Plans Contributions to a pension or provident fund are not deductible for tax purposes, unless these are actually paid out to the employees or the fund is approved as a qualified fund by the Revenue Department and is managed by a licensed fund manager. Statutory Reserve A statutory reserve of at least 5 percent of the annual net profits arising from the business must be appropriated by the company at each distribution of dividends, until the reserve reaches at least 10 percent of the company's authorized capital. Stock Dividends Stock dividends are taxable as ordinary dividends and may be declared only, if there is an approved increase in authorized capital. The law requires the authorized capital to be subscribed in full by the shareholders. Auditing Requirements and Standards Audited financial statements of juristic entities (that is, a limited company, a registered partnership, a branch, a representative office or a regional office of a foreign corporation, a joint venture) must be certified by an authorized auditor and submitted to the Revenue Department and (except for joint ventures) to the Commercial Registrar for each accounting year. Auditing standards conforming to international auditing standards are, to the greater extent, recognized and practiced by authorized auditors in Thailand.
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