Albert Einstein once stated that the hardest thing to understand in this world is Income Tax. If the genius can have a problem in understanding taxation, you and I can be very prone to misinterpretation. This article will guide you to understand the tax audit and compliance for a foreign business in Thailand.
Overview
- The self-assessment tax system for businesses in Thailand is generally a 12-month period ending on December 31 every year.
- Foreign businesses and companies operating in Thailand in form of Representative Offices, Branch Offices or Regional Offices must submit their financial statements within 150 days from December 31.
- Financial and Accounts statements must be examined, verified and certified by independent certified and recognized auditor before submission.
- The Financial statements must be prepared by all foreign companies, joint ventures, partnerships or their branches for their assigned accounting period as assigned by the Thai Ministry of Commerce.
- No change or modification in the accounting period is possible without a written consent for the Revenue Department or the Thai Ministry of Commerce.
- The prevalent audit and compliance regulations are framed under the following legal outlines –
- The Accounting Act of 2000
- The Securities and Exchange Act of 1992
- The Bank of Thailand Act B.E. 2485
- Insurance Commission Act B.E. 2550, and,
- Financial Institutions Business Act B.E. 2551
Annual General Meetings for Business in Thailand
The Civil and Commercial Code of Thailand mandates companies and businesses operating in Thailand to hold Annual General Meeting (AGM) every year. To proceed in the purpose, the Board of the Directors of the concerned business must issue a letter within four months from the end of the fiscal year announcing the AGM to the relevant bodies and officials. Moreover, the AGM is held to address agendas like:
- Clarification of the minutes of the current AGM against the last AGM,
- Approval of the report of the Director or Board of Directors on the business activities of the company,
- Analysis and acknowledgement of the operational results of the company in the last fiscal year,
- Selection of new Directors to replace the terminated ones (if any) or appointment of new Directors,
- Appointment of Auditors and finalization of audit rates and fees, and,
- Discuss and consider dividends.
Appointing Auditors for Foreign Business in Thailand
Check, verification and certification of financial statements by qualified and certified independent auditors are necessary for foreign business in Thailand. This regulation is in accordance with the Accounting Professions Act of Thailand. By this act, all Certified Public Accountants (CPA) must apply the Thai Standards of Auditing while certifying financial statements with them.
The Thai Standards of Auditing states that tax auditing is irrespective of the fact as to whether it is a trading company or not. This regulation is not applicable only if the total capital, assets and income of any registered partnership under Thai law are not exceeding the prescribed regulations of the Ministry.
Fiscal Year for Foreign Business in Thailand
The self-assessment tax system for foreign business in Thailand follows a 12-month cycle ending on December 31. Additionally, companies also have the provision to choose their own accounting period. It is possible if it is not exceeding 12 months. However, to choose an accounting period, it needs prior permission from the Director-General of the Revenue Department.
There was an announcement in April 2020. According to it, all foreign business in Thailand must file their financial statements electronically with the Department of Business Development (DBD) of the Thai Ministry of Commerce.
Accounting Standards for Foreign Business in Thailand
According to Thai law, any foreign company or businesses in Thailand, irrespective of their type of incorporation or liability are having obligations to keep their accounts and undertake annual audits.
The financial statements of these companies must comply with the Thai Financial Reporting Standards. It must be in harmony with International Financial Reporting Standards. The Thai Revenue Department adopts International Accounting standards. Additionally, it can also have some local elements beyond the mandate set by international standards.
Foreign companies and businesses are permitted to use the International standards. However, most of the SMEs in Thailand adhere to the regulations and mandates set by Thai Accounting Standards (TAS). They also follow the Thai Accounting Standard for Non-Publicly Accountable Entities (NPAEs). Companies on Thailand Stock Exchange have obligations to prepare financial statements for the review of Thai auditors on a quarterly basis.
Annual Reports of Businesses in Thailand
Both public and private companies in Thailand with limited liability have obligations to provide the following documents. They must do it after the end of every accounting period –
- The document clearly certifying the Name of the Company and Type of Business.
- Business and Personal Details of Directors.
- Financial Statement of the Company according to the Thai Standards of Auditing.
- Balance Sheet of the Company reflecting all transactions during the respective Accounting Period.
- Profit and loss Accounts of the Company.
- List of Shareholders, as on the date of the last Annual General Meeting.
- Minutes of the Annual General Meeting.
The documents must be prepared in the Thai language for reporting purposes. However, in the case of the use of a foreign language, the filing must have a translation of the same in attachments. Private and public limited companies must undertake an audit of their financial statements at the end of the fiscal year. Moreover, they must appoint an auditor for the task.
Accounting Act of 2000 instructs businesses to retain their books of accounts for at least five years. The Director-General of the Revenue Department can extend it up to 7 years more. However, this action depends upon the business activity.
Penalties for Non-compliance
If any company or business in Thailand fails to comply with these regulations, it can attract a penalty of up to 200000 baht. It is equivalent to US$6400 for the defaulter company.
A 20 per cent surcharge is for the business in Thailand if it underestimates its annual profit by more than 25%. The surcharge is 100% if the filing is incorrect and 200% if any company fails to file a return. There is a provision of penalty reduction by 50%. It is upon the discretion of a tax officer if a defaulter company approaches the authorities in writing.
I hope this article helped you to know the tax audit and compliance for your business in Thailand. For further guidance and assistance, get our free consultation by writing your inquiry to us at [email protected].
