Accounting in Thailand and What You Need to Know

All Thai and foreign companies registered in Thailand have multiple obligations when it comes to accounting and tax. We hereby give a short overview of what should be kept in mind.

Accounting and annual audit

All companies in Thailand have to prepare and keep accounts. This is not only the case for a limited company, but also for registered partnerships, foreign juristic persons doing business in Thailand, public limited companies and joint ventures. Only a private person is exempted from this obligation. The accounts have to be drafted according to the Thai Accounting Standards formulated by the Institute of Certified Accountants and Auditors of Thailand, and should reflect a true and correct image of the company’s expenses and assets.

 

A newly incorporated company should close its first accounting year within 12 months after its registration, and for the following years the accounting period should be closed every 12 months (per December 31st or another date). The balance sheet, an overview of the assets and liabilities, and the profit and loss accounts have to be prepared and filed at the end of each period. The accounting year may be changed, but written approval from the Director General of the Revenue Department is required.

 

The financial statements also have to be examined and certified by a licensed accountant (regardless of whether the company has traded or not). Within 4 months after the closing of the accounting year, the duly signed off accounts should be approved by the Annual Shareholders’ Meeting. Upon approval, the financial statements have to be submitted to the Revenue Department and the Commercial Registrar within one month. Failure to comply with these regulations may result in a penalty up to 100,000 THB.

 

The accounts and other relevant company documents have to be kept at the company’s registered address for at least 5 years.

 

Corporate income tax (CIT)

All companies are required to apply for a Taxpayer Identification Number (TIN) within 60 days after incorporation or – for foreign companies – before starting business in Thailand. This number will not only serve for Corporate Income Tax but also for Withholding Tax and VAT purposes.

Standard corporate income tax rate
Accounting year ending on December 31st 2012 23%
As from January 1st, 2013 20%
Corporate income tax rates for SME companies (Paid up capital of not more than 5mio THB and sales and services income less than 30mio THB)
Net profit below 150,000 THB Exempted
Net profit between 150,000 THB and 1mio THB 15%
Net profit exceeding 1mio THBAccounting year ending on or after December 31st, 2012 23%
Net profit exceeding 1mio THBAccounting year beginning on or after January 1st, 2013 20%

 

In addition to the annual tax payment, any company subject to CIT is required to make a half year tax prepayment (Form CIT 51). A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within eight months after the beginning of the accounting period. The prepaid tax is creditable against its annual tax liability.

In case not enough tax was prepaid – the actual year end profitability amounts to 25% more than (the double of) the forecast – an additional 20% tax will be due on the difference between the forecast and the actual tax due.

VAT – Value Added Tax Accounting

A company is obliged to register for VAT in three cases:

(1)   The activities that the company will conduct are VAT subjected (e.g. export of goods);

(2)   The turnover of the company is more than 1,800,000 Baht per year. The company has to apply for a VAT number within 30 days after the company reached this amount of sales;

(3)   The company will employ a foreigner and will thus have to apply for a work permit.

 

Activity Rate Additional information
Sale and import of goods and services 7% The official VAT-rate is actually 10% but as an economic measure during the crises in 1997 the rate was lowered and has been confirmed every year since. In principle the rate of 10% will be applicable again as from October 2012.
Export of goods ;Services rendered in Thailand, but used abroad;International transport services;Sale of goods and services to the authorities, state enterprise or UN organization under a foreign loan or assistance project;Sale of goods and services between bonded warehouses;

Sale of goods within customs free zones.

0% No VAT debits are counted when the services are rendered or the good is sold, but that the company can deduct the VAT credits that it receives when purchasing these goods or services from another VAT subjected company. 
Domestic transport;Rent of immovable property;Sale of agricultural product o.a.;Sale of newspapers, magazines and textbooks;Healthcare, cultural and educational services,… Exempted  

 

The VAT system in Thailand works as follows: if company A (subject to VAT) purchases fabrics from company B (also subject to VAT), then company A will receive VAT credits while company B will have VAT debits.  If company A – let’s suppose that this company manufactured clothes – then sells the clothes to a distributor, it will have VAT debits. At the end of the month, the VAT debits will be set of against the VAT credits. In case the company has credits left, it can request a VAT refund (which is however a time-consuming process). If it has debits left, this amount will have to be paid effectively.

 

In Thailand, VAT returns (POR POR 30) should be filed on a monthly basis before every 15th of the following month with the Area Revenue Branch Office. Do note that, if the goods or services are also subject to the Excise Tax, the VAT return should be filed with the Excise Department together with the Excise Tax Filings. The monthly VAT returns are an obligation even if the return is nihil for that month. The payment of the VAT becomes due at the same time.

 

Interactive offers a full range of VAT accounting services, including the registration with the tax authorities, VAT filings and reimbursement of VAT credits.

 

WHT – Witholding Tax Accounting

Tax has to be withheld by the payer of – amongst others – employment income, dividends, interests, royalties and technical service fees. The applicable rates are:

 

Employment income
Paid to an employee 5-37% Advance tax (to be deducted from the CIT)
Dividends
Paid to another company registered in Thailand 10% or exempted
Paid to a non-resident company 10%
Paid to a residing individual 10% Possibility to obtain a dividend tax credit
Paid to a non-resident individual 10%
Interests
Paid to another company in Thailand (which is not a financial institution) 1% Advance tax (to be deducted from the CIT)
Paid to a non-resident company 15% or the rate provided in the applicable tax treaty Final tax
Paid to a residing individual 15% Final tax
Paid to a non-resident individual 15% or the rate provided in the applicable tax treaty Final tax
Royalties
Paid to another company registered in Thailand 3% Advance tax (to be deducted from the CIT)
Paid to a non-resident 15% or the rate provided in the applicable tax treaty Final tax
Technical service fees
Paid to another company registered in Thailand 3% Advance tax (to be deducted from the CIT)
Paid to a non-resident 15% or the rate provided in the applicable tax treaty Final tax

 

Payroll Services and Social Security Fund

Even with a small number of employees, calculating and processing salaries can be a tedious and time consuming accounting process. Computations can be a labyrinth of paperwork, transfers of funds to different bank accounts, employee savings accounts, and different government agencies.

We provide flexible payroll services and accountancy that improve payroll management for small and medium sized businesses. Apart from the abovementioned monthly payments of withholding tax on salaries (PND 1), our services generally include a mix of the following tasks:

• Payroll calculations;
• Pay-slip creation;
• Submitting pay instructions to your bank;
• Withholding Tax Certificate (BIS 50);
• Provident Fund;
• Workmen’s Compensation;
• Payments to government agencies;
• Electronic reporting.

Both the employee and employer are required to contribute 5% of the monthly salary, with a cap of 5% of 15,000 THB (i.c. 750 THB). Interactive can fulfill all your Social Security Fund obligations (SPS 1-10). We are happy to discuss your particular needs at a time of your convenience.