Withholding tax certificate for overseas vendors
If you are a company operating in Thailand and pay overseas vendors for services, you will have to withhold some tax from the payments and submit it to the Thai Revenue Department within the 7th of the following month using form P.N.D. 54. The tax rates depend on the double taxation treaty between Thailand and vendors’ countries. If there is no such treaty, tax rate will be as stipulated in Thailand Revenue Code. Within the same period, paying to overseas suppliers, it also has to submit VAT return, form P.P. 36, which is the form that you submit 7% VAT on behalf of the vendor overseas. After you withhold the tax from the payment you make to the foreign vendors, sometimes you are requested by them to issue a withholding tax certificate for overseas vendors so that they can use the amount of tax withheld by you as a proof of their prepaid income tax.
How to get a withholding tax certificate for overseas vendors: You will have to get the withholding tax certificate in English from the Revenue Department and send it to them so they can use their tax credit in their country. The process will take 10-15 business day. You, as the payer, have to submit the following documents to Regional Revenue Office.
- A copy of the filed withholding tax return i.e. P.N.D 54. and VAT return, P.P. 36
- A copy of tax receipt issued by the Revenue Department
- A copy of document indicating overseas remittance of payment and exchange rates.
- A copy of service invoice
- A copy of your company affidavit issued not over 1 month
- Power of Attorney
- Other relevant documents, such as copy of royalty agreement, passport or ID card copy of the authorized signatory and the agent’s.
Contact MSNA your Thailand accountant for tax and accounting needs.
Exemption for tax audit by the Thai Revenue Department
The businesses in Thailand welcomed a new law announced by the Thai government on 1 January 2016 that they may be eligible for being exempt from an audit by the Revenue Department on their income incurred within the accounting periods beginning before 1 January 2016. Here are the conditions:
- Being a company or juristic partnership that did not have gross income exceeding THB 500 Million in the accounting period of 12 months ended within 31 December 2015;
- Being a company or juristic partnership that is not being audited by the Revenue Department before 1 January 2016; and
- Not being a company or juristic person that issues or uses fake VAT invoices or presents false expenses to the Revenue Department.
What do you have to do to enjoy this measure?
The company or juristic partnership must register for this measure on the website of the Thai Revenue Department between 15 January to 15 March 2016.
After the registration on the website, the company or juristic partnership must:
- prepare its accounts and financial statements to reflect the real position of its business operation from the accounting period beginning on or after 1 January 2016;
- file all tax returns applicable to its operation and submit taxes and duties completely from 1 January 2016 onward; and
- not do anything to avoid paying taxes and duties.
If you do not fully comply with the above, the Revenue Depart will have the right to audit you.
Please note that even though your company has complied with all the above, if you seek a tax refund, the Revenue Department is empowered by the law to audit you for the purpose of processing the tax refund.
Consult with MSNA for your accounting and tax needs in Thailand.
Thailand corporate income tax rate reduction for 2016 and 2017
The Government just announced Thailand corporate income tax rate reduction for 2016 and 2017 for SMEs. In order to be eligible for the 2016 and 2017 reduced corporate income tax rates, the SMEs must meet the following conditions:
- Being a company or juristic partnership registered (or in other words, established) before 1 January 2015;
- The paid-up capital on the last day of any accounting period must not exceed THB 5 million; and
- The income from the sale of goods and provision of services must not exceed THB 30 million in any accounting period.
- The SME must register for this corporate income tax reduction on the website of the Thai Revenue Department between 15 January to 15 March 2016.
The following corporate income tax rates apply:
- For the accounting period beginning between 1 January and 31 December 2016 – 0% tax.
- For the accounting period beginning between 1 January and 31 December 2017, – 0% for the net profit of Baht 300,000 and 10% for the amount beyond 300,000
Contact your Thai Accountant at MSNA for any questions on accounting and tax in Thailand.
Tax implications when buying software online from a USA company
When a company buys software online from a USA company, the double taxation treaty between Thailand and the USA requires the company in Thailand to withhold 5% tax and submit it to the Thai Revenue Department within the 7th of the following month using form PND 54. And because the Thai company cannot really withhold the tax when you make the payment online for the software, it has to submit the tax anyway from its own pocket. This tax will be treated as a non-tax deductible expense.
Also the company has to submit 7% VAT on behalf of the USA software company. However, the Thai company can claim it back as its input VAT.
Contact MSNA for your Thai accounting and tax questions.
Branch office of foreign company and VAT registration
When a branch office of a foreign company has obtained a Foreign Business License from the Department of Business Development as required by Thailand Foreign Business Law, can it start operation without VAT registration?
You can start the operation of the branch office now. However, if your sales will reach Baht 1.8 M within the time before VAT registration, please refrain from issuing the invoice (whose amount will make the total sales to-date reach Baht 1.8 M) until you have registered VAT.
When a company’s gross income has not reached Baht 1.8 M in an accounting year for the first time, it is not required to be in the VAT system. However, your customers normally will not understand this and they will ask you for a tax invoice anyway. So that means you should register VAT before you make income from sales or services. If you are not registered in the VAT system, you cannot issue a tax invoice. You can only issue an invoice and a receipt and you cannot collect VAT from your customers. VAT can be collected by the companies that are registered in the VAT system.
Learn about Thailand VAT here.
Cloud Accounting Service in Thailand by MSNA
Cloud accounting service in Bangkok Thailand is now offered by MSNA. In the fast-paced world of technology and business, a lot of processes are quickly changing. Many would find that there is a lot of work that should be done on a day to day basis for the business to survive and progress. Keeping up with this kind of issues could consume an ample amount of time and resources for the company.
One of the most vital component of a company that every business should focus to but many would often take no notice of, is accounting. Good management of the accounting books would be helpful for the company in using the available financial information for their decision making and to be able to see the company’s performance. But having to handle different accounting issues would be a lot of work. We believe that there are ways to work smarter – not harder or longer – to focus more on the business and earn more profit.
As our aim to serve our clients beyond their expectations, we always need to be on the loop of the most up-to-date processes. We now introduce our clients to cloud accounting software for our Accounting and Bookkeeping Services. With this kind of software our Accountants and the clients are able to access their books anytime online; data are saved in the “cloud”, no need for keeping a server on their offices cutting off some great amount of costs – costs of keeping professionals that would have to manage all IT issues, costs on buying those equipments and those unexpected costs when troubleshooting and updates are needed. All will be needed would be a stable internet connection and any device that can connect to the internet.
The cloud accounting software that we are handling is very simple that every client wouldn’t have to worry on using it; we can also provide training in such cases that this would be needed so any person from the company can be a user of the software to access the data anytime they needed it.
Because clients are able to have the access on the cloud accounting software in real time there is transparency on management of accounting books for them. The company’s financial information would be available for its users on time whenever they need it.
Our Accountants have undergone extensive training in using this cloud accounting software and can offer complete range of Accounting and Bookkeeping services from setting up the books, preparing tax and financial reports, maintaining accounts, and recording of all your accounting transactions online.
Contact firstname.lastname@example.org for cloud accounting service.
Export via DHL, Fedex or EMS – VAT question
One of our accounting clients asked a question about VAT on their export.
I would like to know if the export portion of my product sales which is roasted whole coffee beans grown, roasted and packed in Thailand, is classified as 0% VAT? The challenge is that I export only 1 or 2 kg per shipment and it is done by EMS courier and then sent via a Thai Post Office. I do not export from an airport or customs point. Kindly clarify. I have been told conflicting answers and I can’t seem to find a definitive answer. Your assistance is greatly appreciated.
Thai Accountant answered: When you export products from Thailand, you must do it via customs. Sending it by post or EMS, you still can declare it with the Customs Department of Thailand. You need to tell the post office that you want to declare Customs, which normally is done using form EMS Por 256. When exporting your products using DHL or Fedex, you need to tell them that you want to send your products through customs. They will prepare some customs export shipment papers for you.
If you do not have Customs export shipment papers, the Thai Revenue Department will treat your sale as domestic one, which is subject to 7% VAT.
Contact MSNA for your accounting and tax questions.
BOI for Software Business
If your business is software related, BOI is the best way to set up your business in Thailand.
The BOI promoted company has the following advantages:
- The company needs only THB 1 M capital/investment.
- The company can be owned 100% by foreigners.
- The company can get more work permits for its foreign technicians or experts than non-BOI companies. (Normally, a non-BOI company needs to have at least THB 2M capital for each work permit and must hire 4 Thai employees for each work permit it is getting.)
- The promoted company is permitted to own land which is to be used as its location to do software business only.
- The promoted company is exempted for the import duty on the machinery (hardware and software.)
- The promoted company is exempted for corporate income tax on the net profit generated from the promoted activity for a period of 8 years as from the date it starts to generate such income.
- The dividends derived from the promoted activity are also tax exempted.
- The promoted company is allowed to transfer money to overseas in foreign currency.
Read Thailand BOI information and contact MSNA for consultation on getting BOI for your software business.
Tax Implication of buying a condominium in Thailand
One of our tax clients is planning to purchase a condominium unit in Bangkok. He asked us if there is any tax to be paid to the authorities. Today, we answer his question based on two scenarios: if the condominium will be purchased under his name or the company’s name.
- When he buys it in his name, he needs to hold it for 5 years otherwise, he has to pay for Specific Business Tax (SBT) 3.3% of the selling price when he sells it on top of the 2% transfer fee and his personal income tax because it will be considered as purchasing a condo for business purpose. However, if he sells the unit after 5 years, he doesn’t have to pay for SBT of 3.3% although he needs to pay for the transfer fee and income tax.
- When the purchase is done in company’s name, the company has to pay the transfer fee plus Specific Business Tax 3.3% of the selling price whether he sells it before 5 years or after. Although we are not yet sure how much corporate income tax the company has to pay in the future, tax will be based on the net profit of the company, part of which is the profit from selling the condominium. Furthermore, if he use it personally, when the Revenue Department comes to check the condominium and they know that he is staying there, they will make the company charge him for rent and this will be part of company’s income. The company can also use the depreciation of the condo as company’s expenses.
Contact MSNA for your accounting, tax and other business needs in Thailand.
Tax Withheld from a Thai Company by another Company Overseas
Today, we answer a question from one of our accounting clients regarding the tax withheld by overseas-based company. Can they recover this cost?
In theory, the tax withheld by another country should be a tax credit to the Thai company, but only if the company makes profit and will have to pay tax, then this tax credit will lower the amount of tax check it has to pay to the Revenue Department.
Hence, to use the withholding tax as tax credit, the company needs the following documents to prove it:
- The withholding tax certificate issued by the client overseas, and has to attach its Thai translation too.
- The proof of payment for the service on the transaction.
Know more about Thailand withholding tax and how it works. Contact MSNA for your Thailand accounting and tax questions.