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Learn more about Thailand Accounting

Whether you are an individual or a company, Thai or foreign, you are subject to Thai law for activities, property and income located in Thailand. Thus, the various laws applicable in tax and accounting matters are applicable to you. For individuals, Thai law imposes various tax and social obligations but no accounting obligation limited to only legal persons. In fact, individuals are subject to the payment of income tax based on their status of resident or income located in Thai territory. As long as they have the status of employee, they are also subject to the payment of monthly social contributions. For companies, from their incorporation, they must keep proper accounts and comply with the tax, accounting and other regulatory laws of Thailand. As soon as it is created, the company must register with the “Revenue Department” within 60 days in order to obtain a tax identification number necessary for compliance with the legal obligations.

Table of contents

What are the accounting obligations?

In terms of accounting obligation, each company must keep its accounts regularly and after the end of the financial year, it must prepare the financial statements including balance sheet and income statement. It must then proceed with the approval of the financial statements by the general meeting within four months of the end of the financial year and send them to the “Department of Business Development (DBD)“.

In terms of accounting and tax liability, each company is required to pay various taxes, on an annual basis for corporation income tax and, on a monthly basis for VAT, “withholding tax” or social contributions. Each company must thus make various accounting declarations and submit them to the “Revenue Department” within the time limit set by the Thai Tax Code depending on the category of income imposed. Failure to comply with the filing of the accounting declaration and the payment of the tax is punished by a fine by the tax authorities.

In terms of social obligation, companies are subject to the provisions of the law on social security requiring them and all their employees to register with the Social Security Office so that employees benefit from coverage for the various incidents of life including accident, death, unemployment, maternity, invalidity, old age and children. Social contributions are paid monthly by the government, the employer and the employee. Employee contributions are deducted by the employer directly from the employee’s salary. The accounting declaration and payment are sent monthly to the social security office. Any delay or omission in the payment of social contributions is sanctioned by a penalty.

A company subject to Thai law must comply with the accounting obligations established by the accounting law. An accounting period must be 12 months. Unless otherwise stipulated in the articles of association, a newly created company must close its accounts within 12 months of its registration. Thereafter, the accounts must be closed every 12 months. If a company wishes to change its fiscal accounting year, it must obtain the written approval of the Managing Director of the Revenue Department.

At the end of each accounting year, the financial statements including the income statement and the accounting balance sheet of the company must be certified by an external accounting expert. Once the accounts have been verified, they must necessarily be approved by the shareholders at an extraordinary general meeting within 4 months of the end of the financial accounting year. For the general meeting to be valid, all shareholders must be convened by registered letter with acknowledgement of receipt and a notice of meeting must be published in a local newspaper.

The approved and certified accounting statements must be submitted to the “Department of Business Development” within one month of the approval of the accounts by the general meeting.

What is the income tax?

Income tax, also called in accounting, “personal income tax“, is the taxation of the income of individuals and unincorporated companies. There are two categories of people: residents and non-residents. Residents are defined as any person staying in Thai territory for a period totaling more than 180 days in the accounting year. In this case, the resident is taxed on all income he receives both within Thailand and abroad. Unlike the resident, the non-resident is taxed in Thailand on the only income he receives from Thailand, whether as rental income received by a property located in Thailand, a salary in return for work performed in Thailand or income from movable property in return for holding shares in a Thai company.

Anyone earning income in Thailand in this way is subject to income tax under the Thai Tax Code. To this end, it must make the annual accounting declaration to the “Revenue Department” no later than March 31 of the following year. The accounting declaration is made by online filing or by mail. The “PND 90” form must be duly completed and signed by the taxpayer. Any delay in filing the accounting declaration is penalized by a late penalty of 1.5%.

The “PND 90” form distinguishes eight categories of income comprising salaries and wages, income from independent personal services, income from business and intellectual property rights, income from interest, dividends and more. Examples of other types of income include income from rental of real estate, income from self-employed professionals, entrepreneurial income and income from other unspecified activities, including business, commerce, industry, agriculture and transportation.

Depending on the category of income you receive, there is an allowance and exemption scheme that allows you to calculate your taxable income. So, for example, if you receive rental income, you benefit from a 30% exemption on the amount of income you receive. This means that only 70% of the income you receive from rentals will be taxable. It is necessary, depending on the category of income received, to apply the exemption regime specific to that category.

For any category of income, each taxpayer receives an allowance of THB 60,000 before tax and various other allowances based on the family quotient and dependents. Once the taxable income is determined, it is possible to know the amount of tax payable by applying the scale of the progressive regime. The income tax rate is progressive according to the amount of taxable income starting at 5% up to 35% for the part of the income that is over 5 million baht.

What is the corporation tax?

Corporate income tax is the taxation of profits made by a Thai company or a foreign company doing business in Thailand. All types of companies are subject to the payment of corporation tax with the exception of unincorporated companies subject to income tax.

Taxable income is determined by the profits made during the accounting year deducted from the deductible expenses of the company. For the expenses to be deductible, they must be provided for in the Thai Tax Code and the company must justify the expense by a receipt that must include the mandatory information. The profit made is that established by the financial statements at the end of the accounting year.

Once the taxable income is determined, it is possible to apply the tax rate to calculate the amount of tax payable. The tax rate is in principle 20% but it is progressive for Small and Medium Enterprises (SMEs) ranging from 15% for a result less than 3 million baht and to 20% if the result is greater than 3 million baht.

The corporation tax declaration is made within 5 months of the end of the accounting year to the “Revenue Department” using the “PND 50” form. The company must also report its half-year result up to August 31 of the current year using the “PND 51” form. The taxation of the half-year result will be the subject of a credit on the annual accounting declaration at N + 1. Any absence or delay of accounting declaration is penalized by a late penalty.

What are the tax incentives for businesses?

Under the provisions of the income tax law relating to research and development (R&D), companies or legal partnerships may benefit from a double deduction of corporation tax for payments made as eligible R&D costs to government or private bodies that are approved R&D service providers. In addition, for machinery and equipment acquired for use in R&D activities, an initial deduction of 40% of the cost is granted on the date of their acquisition, and the residual value may be depreciated over their effective useful life.

What is the withholding tax?

Withholding tax is a tax levied by some companies on payments they make to their service providers, employees or shareholders. Beneficiaries of the payment receive an amount lower than that provided for in the contract. The payer thus pays the tax on behalf of the recipient. The beneficiary of the payment then has a tax credit during his annual accounting declaration.

The amount deducted at source depends on the income category paid. For example, the rate is 10% for dividends, 5% for rental income, 3% for rental costs, professional costs or fees and parking costs. The withholding tax is made on the amount of the service before the VAT is calculated.

There are four types of accounting declaration depending on the income category as well as the beneficiary of the payment:

Form PND 1 for taxes withheld by the company on salaries paid to employees
Form PND 2 for taxes withheld by the company on interest and dividends paid to beneficiaries
Form PND 53 for taxes withheld by the company from vendors who are legal entities
Form PND 3 for taxes withheld by the company on sellers who are natural persons

The beneficiary of the payment having seen part of his income withdrawn may alternatively obtain a tax credit or a refund of the tax upon declaration if the amount withdrawn is greater than the amount due.

There is also a “withholding tax” at a different rate for income paid to foreign companies. Indeed, the company which pays income to a foreign company keeps a part which it redistributes to the “Revenue Department”. The rate charged is 10% for the payment of dividends and profits and 15% for other income such as interest, royalties, capital gains, rents and professional fees paid to foreign companies. These withholding tax rates may be reduced or exempted depending on the income category, in accordance with bilateral conventions in order to avoid double taxation.

What is the VAT?

The Value Added Tax (VAT) is an indirect tax levied on the various stages of production and distribution. Any person or company with an annual turnover of more than 1.8 million Thai Bahts must register for VAT within 30 days of exceeding the threshold. It is possible to register voluntarily in the event that the company pays VAT and wishes to obtain a refund. VAT registration is done with the “Revenue Department” using the accounting form “PP 01”

The applicable rate of VAT is 7% in Thailand. The VAT payable for a company is equal to the difference between the VAT collected and the VAT paid. The company must report the collected and disbursed VAT in the form “PP 30”, which must be filed no later than the 15th of the month following the payment of the VAT.

The taxpayer must also pay VAT on behalf of its foreign service suppliers who are not registered with the Thai system. Indeed, as soon as the Thai company uses a service from foreign providers, it must submit a 7% VAT on their behalf via the form “PP 36” within 7 days of the following month.

Certain activities are exempt from paying VAT, such as newspapers, health services, education services or certain cultural services. There is also a 0% VAT rate for goods exported abroad. In this case, the VAT registration will make it possible to obtain a refund of the amount of VAT paid by the company.

What is a tax invoice?

When the company is registered for VAT, pay attention to the tax invoice issued by the seller. When you buy goods from someone who is also registered in the VAT system, that person must issue a tax invoice upon delivery of the goods. The tax invoice may or may not be on the same paper as the delivery note or receipt. If they are not registered in the VAT system, they cannot issue a tax invoice and do not have to claim VAT from you.

A tax invoice must at least contain the following information:

➤ The words “tax invoice” in a prominent place
➤ The name, address and taxpayer identification number of the company issuing the tax invoice
➤ The name and address of the purchaser of the goods or services
➤ The serial number of the tax invoice
➤ Description, type, class, quantity and value of the goods or services
➤ The amount of value added tax calculated on the value of the goods or services which is clearly separated from the value of the goods or services; and the date of issue

What is the specific business tax?

Certain types of businesses (e.g. banking, finance, securities, insurance, pawn shops, sale of real estate for business or for profit) are subject to the specific business tax (Specific Business Tax – SBT) rather than VAT. Businesses subject to SBT must pay VAT on their purchases of goods and services but are not entitled to a VAT credit. The SBT varies between 2.5 and 3.0% on monthly gross receipts.

What are the social security obligations?

As soon as the company employs an employee, it has an obligation to subscribe to the social security fund. She must therefore register first in order to obtain a social security identifier number and register her employees as and when they start their employment.

Social contributions are paid by both the employer and the employee. For the employee, the tax is levied directly by the employer on his income. The tax is paid monthly by the employer no later than the 15th of each month by filing the form “SSO 1-10”. The employee has the possibility of deducting the payment of the contribution from his taxable income when filing the income tax.

Employees and employers are required to pay 5% of the employee’s salary per month up to a limit of 750 THB.

To be insured for social security, you must be employed and be between 15 and 60 years old. Therefore, the guarantees cease in the event of death or termination of professional activity. To stop the payment of contributions, it is necessary to unsubscribe the person concerned.

Subscription to the social security fund provides protection against the following events: accidents or non-occupational illnesses, invalidity, maternity, death, children, old age and unemployment.

In the event of termination, employees are entitled to several benefits including notice pay equal to two months’ salary, and severance pay, the amount of which varies depending on the employee’s seniority. The employee has the right to severance pay equal to one month’s salary if he has stayed more than 4 months with the company and up to 400 days of salary if he has stayed for more than twenty years with the company.

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