Thai Accounting System
Thai Accounting System in Bangkok, Thailand
In Thailand, every business entity whether be small or medium or large must maintain their books of accounts. This implies to every registered entity whether be Thai or foreign which are registered as private limited company, foreign business licensed company, partnership or any other registered business entity. The books of accounts must be maintained as per the guidelines and standard drafted in Thai Financial Reporting standards (TFRS) and Thai Accounting Standards (TAS) and should reflect true financial position of the company in terms of income and expenses, assets and liabilities.
A newly incorporated company must close its books of accounts within 12months from the date of incorporation. A company can follow financial year end same as calendar year i.e. January to December or other dates of 12 months period as mentioned in article of association as period for closing its books of accounts. Balance sheet for the year has to be prepared reflecting proper and accurate composition of assets and liabilities of the company. Annual Profit and Loss account or an income statement has to be prepared showing true picture of company’s income and expense report.
Annual financial statement i.e. balance sheet and profit and loss accounts is to be certified by licensed auditor, approved by shareholders and filed with commercial registration department of the Ministry of commerce and the Revenue Department of the Ministry of Finance.
It is responsibility of the director of the company to arrange annual meeting of shareholders to approve company’s audited financial statement within 4months of the end of the financial year and filing the audited statement and supporting documents including a list of shareholders to registrar no later than 1 month from the date of shareholder meeting.
All companies must comply with this legal provision of annual reporting to government agencies whether the company has started trading or yet to start trading. Non-compliance on submission of annual reporting is subject to penalties and summons from relevant agency.
The accounts and other relevant company documents has to be kept at the company’s registered address for at least five years.
Corporate Income Tax (CIT):
Corporate Income Tax (CIT) is a direct tax levied on a juristic company or partnership carrying on business in Thailand or not carrying on business in Thailand but deriving certain types of income from Thailand.
All business entities whether Thai or foreign conducting business in Thailand must apply for Tax Identification Number and submit the annual tax return (CIT 50) for the fist year of establishment.
STANDARD CORPORATE INCOME TAX RATE
The corporate income tax rate in Thailand is 20 % on net profit (accounting periods 2015). However, the rates vary depending on types of taxpayers.
Corporate Income tax rate for SMEs’ entities (with registered and paid up capital less than 5 million THB and sales and revenue of not more than 30 million THB following tax rate applies
| Net profit | Tax rate |
| 0 – 300,000 THB | Exempted |
| 300,001 – 1,000,000 THB | 15% |
| 1,000,001 THB and above | 20% |
Half Yearly Tax reporting:
In addition to the annual tax payment, any company subject to CIT on net profits is also required to make 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 two months after the end of the first six months of its accounting period. The prepaid tax is creditable against its annual tax liability.
Penalties:
If you file PND 51 later than the deadline, you need to pay Baht 1,000 – 2,000 late submission fine (Baht 1,000 if not later than 7 days).
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.
Monthly filings
Monthly VAT Filing:
VAT is an indirect tax imposed on the value added of each stage of production and distribution. Any business entity is obliged to register itself under VAT system when:
1. entity who regularly supplies goods or provides services in Thailand and has an annual turnover exceeding 1.8 million baht. The entity must register under Vat system within 30 days from the date that company made turnover of 1.8 million Baht and
2. The company will employ a foreigner and will thus have to apply for a work permit.
VAT RATE
| NActivity | Rate |
| Sale of goods and services | 7% |
| Import of goods | 7% |
| Export of Goods | |
| Service rendered in Thailand but used abroad | |
| Sale of goods and services to the authorities, state | |
| enterprise or UN organization under a foreign loan or | 0% |
| assistance project International transport services | |
| Sale of goods and services between bonded warehouses | |
| Sale of goods within customs free zones. | |
| Small entrepreneur whose annual turnover is less than 1.8 million baht | |
| Domestic and International Transport by the way of land | Exempt |
Rent of immovable property | |
Sale of agricultural product o.a. |
Sale of newspapers, magazines and textbooks
Healthcare, cultural and educational services
The VAT returns, known as a PP 30, are submitted to the Revenue Department (‘RD’) on or before 15th day of the following month in which the payment was made, and the tax invoice was raised. E.g. a tax invoice dated 25th July 2018 will be included on the VAT return submitted to the RD by the 15th August 2018.
The Revenue Department has announced that companies registered for e-filing have an extra eight days to file all tax returns. This incentive will run until 31 January 2019.
Submission to the Revenue Department
- PP 30 to be filed on or before 23rd of the month
Late submission
The penalty for late submission is:
- 300 baht within the first 7 days
- 500 baht after 7 days
The penalty for late submission is up to twice the amount of tax due that month. There is also a surcharge of 1.5 percent of the tax payable per month.
WITH HOLDING TAX FILINGS
Certain types of income paid to companies are subject to withholding tax at source. The withholding tax rates depend on the types of income and the tax status of the recipient. The tax withheld will be credited against final tax liability of the taxpayer. The following are the withholding tax rates on some important types of income.
| Employment income | |
| Paid to an employee | 5-37% |
| Dividends | |
| Paid to another company registered in Thailand Paid to a non-resident company Paid to a residing individual Paid to a non-resident individual | >10% or exempted 10% 10% 10% |
| Interests | |
Paid to another company in Thailand (which is not a financial institution) Paid to a non-resident company Paid to a residing individual Paid to a non-resident individual | 1% 15% or the rate provided in the applicable tax treaty 15% 15% or the rate provided in the applicable tax treaty |
| Royalties | |
Paid to another company registered in Thailand Paid to a non-resident | 1% 15% or the rate provided in the applicable tax treaty |
| Technical service fees | |
Paid to another company registered in Thailand Paid to a non-resident Professional services Advertising Rental Rent service Transportation (not including fare for public transportation) Non-Life Insurance Premiums | 1% 15% or the rate provided in the applicable tax treaty 3% 2% 5% 3% 1% 1% |
Following are basic requirement for Withholding tax to be charged
- Invoice value for the service more than 1,000 THB
- Invoice value less than 1,000 THB having long term contract. (e.g. internet, telephone)
Withholding Tax submission deadlines
The payer of income is required to file the return (Form CIT 53) and submit the amount of tax withheld to the District Revenue Offices within seven days of the following month in which the payment is made.
The Revenue Department has announced that companies registered for e-filing with have an extra eight days to file all tax returns. This incentive will run until 31 January 2019.
Penalty for Late submission
The penalty for late submission is:
- 100 baht within the first 7 days
- 200 baht after 7 days
An additional penalty of 1.5% of the outstanding amount calculated monthly.
Monthly Social security Payment and Payroll service
Employer in Thailand with one or more employees hired on permanent basis should contribute social security of the its employees to rates affix by social security office. Employees’ contributions are withheld from their salary by employers and are allowed as a tax deduction against employee’s assessable income.
Both Employee and employer’s contributions are remitted monthly to the appropriate authorities and failure to remit the contributions results in penalties.
The current social security filing rate is 10% of employees’ salary, out of which 5% is contributed by employer and another 5% is withheld from employee’s salary but not more than 1500 THB per month regardless of salary >15,000 THB per month.
Hence, Employer and employee’s maximum contribution is limited to maximum of 750 THB from each party.
At PNP International Legal we can take care of your monthly social security obligation towards your employees and towards the government.
WE ARE HAPPY TO DISCUSS YOUR REQUIREMENT AT YOUR CONVENIENCE
