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Learn more about Bookkeeping

Investing in the competitive market in Thailand can be a real challenge as tax and accounting regulations are different from international standards. Thai financial regulations can be complex and inconvenient to grasp, without advice on your side to help and guide you in your business. All businesses in Thailand must do bookkeeping. This obligation does not apply only to private limited companies, but also to registered partnerships, foreign legal persons doing business in Thailand and “joint ventures“. Only a private person is exempt from this obligation. Accounts should be drawn up in accordance with Thai accounting standards and should reflect a true and fair view of the business’s flows and assets.

Table of contents

What means bookkeeping?

Bookkeeping is a system for organizing a company’s financial data. It is a discipline for providing a continuous and real-time statement of the current financial situation of the company.

Bookkeeping purpose is to inventory all the financial flows generated by a company. These flows may result from income or from economic, commercial or even material expenditure.

Bookkeeping therefore offers a concrete vision of the evolution of the value of a company by producing two important documents at the end of each year: the financial statement and the income statement.

What is an accountant responsible for?

An accountant is responsible for the financial administration of a company. His role is to assist the company with its accounting and tax. Indeed, it ensures that the company meets its financial, social and tax obligations. He performs audits and provides advice in tax and financial matters.

The main scope of work of an accountant are as follows:

➤ The production or control of the annual financial statements
➤ The provision of financial, fiscal and social advice
➤ Administrative support for all financial, fiscal and social matters
➤ Sending invoices relating to company services
➤ Payment of supplier invoices
➤ The fulfillment of VAT obligations
➤ Drafting of internal and external reports

What are the Thai bookkeeping standards?

Companies must keep their accounts in accordance with the bookkeeping procedures provided for by the civil and commercial code, the tax code and the law.

In general, basic accounting principles practiced in the United States are accepted in Thailand, as are accounting policies and conventions sanctioned by law. The Institute of Chartered Accountants and Auditors of Thailand is the authority for promoting the application of generally accepted accounting principles. Any accounting method adopted by a company must be used consistently and can only be changed with the approval of the Revenue Department.

Regarding bookkeeping practices, the following can be mentioned:

1. Depreciation

The tax code allows the use of variable depreciation rates depending on the nature of the asset classes, which has the effect of depreciating assets over periods that may be shorter than their estimated useful life. These maximum depreciation rates are not mandatory; a company may use lower rates that approximate the estimated useful life of the assets. But if a lower rate is used in the accounting books, the same rate should be used in the income tax return.

2. Pension plan accounting

Contributions to a pension or provident fund are not tax deductible, unless they are actually paid to employees or if the fund is approved as a qualified fund by the “Revenue Department” and managed by an approved fund manager.

3. Consolidation

Local companies with foreign or local subsidiaries are not required to consolidate their financial statements for tax or other purposes, except for publicly traded companies which are required to submit consolidated financial statements to the Securities Commission of Thailand.

4. Statutory reserve

A statutory reserve of at least 5% of the annual net profits from the activity must be allocated by the company to each distribution of dividends until the reserve reaches at least 10% of the authorized capital of the company.

5. Stock dividends

Stock dividends are taxable like ordinary dividends and can only be declared if there is an approved increase in authorized capital. The law requires that the authorized capital be fully subscribed by the shareholders.

What are the Thai bookkeeping documents?

Regarding Thai bookkeeping documents, each company must be able to present its account book.

At the end of each financial year, the company must prepare its financial statements including the income statement and the balance sheet. The income statement summarizes the company’s income and expenses while the balance sheet is like a photo of the company’s assets.

When a company operates in Thailand, all expenses relating to the payment of goods and / or services are deductible from the payment of taxes provided that the company can justify its expenses. This is because it must have obtained a legitimate receipt from the seller, otherwise this payment may not be tax deductible.

Under Thai law, a receipt is considered legitimate if it contains the following information:

What is a fiscal year?

The fiscal year is in principle a 12-month period that begins on January 1 and ends on December 31. However, a company is free to choose the period of its financial year. The fiscal year lasts 12 months except in special cases permitted by law such as the year of incorporation, change in accounting method or year of dissolution.

What are the bookkeeping obligations in Thailand?

Corporations, including private limited companies, registered partnerships, foreign legal persons doing business in Thailand, and joint ventures, must have a qualified accountant who maintains accounts showing results of operations, financial position or changes in business. Data should be entered in Thai language or accompanied by Thai language translation.

Each company must annually present financial statements certified by an accountant to the general assembly for approval and submit them to the DBD and the Revenue Department. The financial statements are the basis for calculating corporation tax. The company must then settle the payment of corporation tax, VAT, “withholding tax” and social contributions.

How to make the company annual declaration?

You must approve the annual accounts of your company each year after they have been certified by an accountant. Indeed, within four months of the end of the financial year, i.e. until April 30, you must hold an extraordinary general meeting whose agenda is the approval of the annual accounts for the previous year.

Within one month of the general meeting and no later than May 27, approved financial statements must be filed with the Department of Business Development (DBD).

Within 150 days of the end of the financial year and no later than May 27, the audited and approved financial statements as well as the corporate income tax return must be submitted using the “PND 50” form to of the Revenue Department. This is the filing of the annual corporate income tax return for the profits made in the previous year.

After having made your annual declaration, you must, within two months following the first semester of the accounting year, ie no later than August 31, file the semi-annual corporation tax return using the form “PND 51 From the Revenue Department.

How to make the company monthly declarations?

Several declarations must be filed monthly including the declarations of the “withholding tax”, the declarations of the Value Added Tax (VAT) as well as the declarations concerning the payment of social contributions.

Regarding the declarations on the “withholding tax”, the company having carried out the withholding tax must make the monthly deposit at the latest within the first 7 days following the month during which the payment was made of the following declarations:

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

Regarding VAT, the company must make two declarations at two different times with the Revenue Department:

➤ Within the first 7 days of the following month, it must file the “PP 36” form on behalf of its foreign suppliers. As foreign suppliers are not registered in the Thai VAT system, when the business makes a payment to them, it must submit a 7% VAT on their behalf.
➤ In the first 15 days of the following month, she must file the monthly VAT return using the form "PP 30" summarizing the VAT collected and the deductible VAT. This allows, in the event that the VAT paid is greater than the VAT collected, to obtain a VAT refund.

Regarding social security contributions, the company must file the “SSO 1-10” form with the “Security Social Office (SSO)” within the first 15 days of the following month.

This form shows all social security contributions deducted from employee salaries and the contribution paid by the company during the previous month.

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