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Accounting in Thailand for Small Businesses

Oct 13, 2014 | Sharon Cheong

Small business entrepreneurs who wish to start and maintain a company in Thailand need to possess basic bookkeeping skills and comply with the requirements and regulatory laws of the Civil and Commercial Code, Accounting Act, Public Limited Company Act, and other laws of Thailand.

The type of company that will be established in Thailand will influence its tax rates and benefits based on the regulations and rules of the Thai Revenue Code.  Companies registered under Thai laws are traditionally taxed 20% of their net profit. Small companies and juristic partnerships with a capital of under 5 million Baht have a lower tax rate. Those with a net profit of less than 1 million Baht are taxed 15%, whereas other businesses with a net profit of over 1 million Baht are taxed 20%. Meanwhile, companies with a net profit of less than 150,000 Baht are exempted from paying taxes.

Tax Overview

Companies and juristic partnerships operating a business locally or from sources outside of Thailand have to pay Corporate Income Tax (CIT) to the Thai Revenue Department. Juristic companies and partnerships include limited companies, joint ventures, registered partnerships (whether ordinary or limited), foundations, associations, and branches of foreign companies that earn revenues from sources in Thailand.

Besides the CIT, the Ministry of Finance also collects the majority of taxes categorized as Value Added Tax or Specific Business Tax, Stamp Duty, and Personal Income Tax. Other collecting agencies in Thailand are the Customs Department (which is in charge of collecting import and export duties), the Excise Department, and the local government (which collects municipal and property taxes).

The computation of the CIT is based on the net profit as per the conditions stipulated in the Thai Revenue Code. Corporate taxpayers should bear in mind that an audited financial statement is required for earnings, 50% of the estimated income tax must be paid by the end of the 8th month, and failure to pay taxes will be fined 20% of the arrears.

Thai companies are also required to pay the following: social security contributions, workmen compensation fund (paid by employer), and taxes on property, property transfer, advertising, vehicle, check transactions, tax, and fuel.

Accounting Services in Thailand

Even SMEs in Thailand are directed to prepare and submit a number of accounting documentation to the Thai Revenue Department.  These companies must submit monthly financial reports and an annual financial statement; as well as payments of withholding tax, withholding tax return, value added tax, mid-year tax return, and an annual tax return. Other required accounting documents are record accounting transactions and financial statements schedules.

An accountant can be tasked to do the company payroll if they are based in the office. This job specification includes payroll calculations, payment transfers, pay-slip creation, computation and remittance (to government agencies) of withholding tax, and social security as well as provident fund of employees.

Accounting services must follow the standards set by the Thai Federation of Accounting Professionals (FAP) and the Institute of Certified Accountants and Auditors of Thailand (CAAT).  The rules and regulations of the FAP and CAAT are consistent with the financial reporting protocol and international accounting regulations.

Accounting Tips

The Thai Revenue Department has various clauses when it comes to tax exemptions, lower tax rates, and deductible expenses applied in calculating the CIT.

Some of the deductible expenses are the following: 200% deduction each for research and development, job training, and the provision of equipment for persons with disability. Bad debts, net losses, wear and tear, donations of up to 2% of net profit, entertainment expenses, and others are considered deductible expenses.

Accounting knowledge is required to balance books, compute taxes, prepare payroll, and so on. Most SMEs will save more money if they opt to acquire the services of a professional accountant in Thailand. However, this does not necessarily mean that business owners should leave every bit of accounting to their accountants. As business owners, they should study the applicable business accounting and tax laws.

Since there are numerous exemptions and deductions for SMEs, business owners should get the services of a tax expert to help them compute, monitor, and pay their taxes.  They must pay taxes on time and keep up-to-date accounting books that comply with the law and conform to the establishment's tax-plan.

Changes in accounting and tax rules are possible so it is best for business owners to stay informed. Consultation with an accountant will help keep business owners stay updated with rules that could affect their establishment in terms of taxation and financial documentation.

Any tax problem has to be dealt with immediately. The delay will only result in penalties and more interest. In case the tax due and penalty are ignored, a tax lien is forced on the business owner.

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