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.
VAT and withholding tax on transportation – question
Our company in Thailand will have a sales meeting in Hua Hin, thus we need to engage van transports for our associates. The vendor said that he is not registered as Private Limited or Company Limited; thus the payment will be to the company’s owner even though all transactions, quotation and billing will be under his company name. The invoice will not include tax; The THB 4,000 quotation is NETT.
Our question is can we pay him even though he is not a company?
Answer: It is OK that he is not a company. When you pay hi, you will have to ask for his ID card copy duly signed indicating that he received the amount of money from you. You said his quoted price was not. We assumed that he will not let you withhold 1% tax (transportation is subject to 1% withholding tax), then your company will have to bear it. You have to submit the withholding tax to the Thai Revenue Department even though you did not withhold it.
Contact MSNA for all your 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.
VAT on purchased plane ticket
Today, we got a question from one of our accounting clients regarding VAT.
I have just purchased a plane ticket for a business trip overseas and the travel agency issued a Tax Invoice/Receipt but shows 0 VAT. Is this correct?
Yes, the receipt is correct. They cannot collect VAT from you when it is air ticket or transportation.
Tour companies; usually have pre-printed form of receipt/tax invoice so they can also use it when they arrange tours, which they need to collect VAT from their clients. When they receive money for just transportation, they cannot collect VAT and this paper should be called only “receipt”. For them to do it correctly, they need to cross out the word “Tax Invoice”, but if they did not do it, it is not your problem because there is no VAT that you will wrongly claim back anyway.
Contact MSNA for your Thailand accounting and tax questions.
Expenses Incurred by a Branch Office in Thailand
Today, we got this inquiry regarding the expenses of a branch office in Thailand.
For the expenses of our Thailand branch office, can it only be paid from our branch office account or the head office can pay on its behalf and then invoice the branch office later for reimbursement?
Expenses incurred by the branch office can be paid by anyone. The head office can pay expenses on behalf of the branch but please make sure the branch get all invoices and receipts from the vendors in its official name and address. Also, the branch must withhold taxes where applicable. Thus, then the branch has to pay back to the head office, you can just send a memo or an invoice.
Contact MSNA for your accounting and tax questions.
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 email@example.com for cloud accounting service.
Due Diligence for Companies that are going public
Recently we were commissioned to assist on a due diligence investigation for one of our clients for the proposal of its headquarters to undertake initial public offering (IPO) and to list on the Securities Exchange overseas.
First, we discuss Initial Public Offering (IPO). IPO is done by a company who wants to have their stock be sold to the public through the Stocks or Securities Exchange. That is why it is usually referred to “going public”. Since this involves “selling” this could also mean raising cash for the company, hence increasing capital.
One of the requirements to be done to get into IPO is due diligence. Here we will talk only about legal due diligence. It is a comprehensive investigation of company’s legal requirements, checking of company’s compliance to relevant authorities, and a thorough understanding of all the company’s obligations. This kind of practice greatly requires examination of legal matters.
For the legal due diligence that we had with one of our clients for the purpose of IPO, we performed the following actions:
- Confirm the good standing of the Company (i.e. that the Company is duly incorporated in Thailand and registered accordingly and that its statutory records and filings with the relevant authorities are up to date and accurate);
- Confirm current ownership structure of the Company (i.e. details of all issued shares of the Company; and details of ownership (legal and beneficial) and control of the Company);
- Confirm details of all directors; secretaries and officers of the Company;
- Review all statutory records and registers of the Company, filings and the minute books available in the data room (access to be provided) and through publicly available searches;
- Verify the details of all existing encumbrances of the Company;
- Perform litigation and winding-up searches on the Company;
- Confirm that the Company has all governmental, statutory or other permits, authorities or licenses required in order for it to satisfy its obligations under material contracts to which it is a party;
- Verify that all fees due in relation to all Licenses have been paid and all conditions are complied with;
- Confirm full details of any current breach of any License (as per publicly available information);
- Confirm that the Proposed Restructure / Proposed Listing will not result in a breach of any License or an entitlement for the issuer to revoke, qualify or vary any License; and;
- Review all material contracts in respect of which the Company is a party and provide summary (including details of change of control triggered by the IPO and Proposed Restructure).
IPO is a way to potential growth for any company. But this move would never be easy for anyone; one should be eligible by all means since it involves the public and not all companies would qualify to have their stocks be listed publicly. The company should consider on whom they can rely for the process in undertaking IPO for it to be successful. At MSNA Group, we have our Thai Accountants and Thai Lawyers that has good background on financial and legal aspects of businesses in Thailand to serve in any way possible in attaining our client’s targets. And as our commitment, we will be with them every step of their way – from start-up to growth.
Moreover, due diligence investigation can be carried out for different purposes, the most common purpose for this service is when a potential buyer would like to evaluate a business or company for merger and/or acquisition and another would be, as we’ve mentioned earlier, when a company would like to have their shares be available and listed publicly.
Contact MSNA for Due Diligence Services.
BOI Measures to Promote Improvement of Production Efficiency
With regard to the recently issued Announcement of the Board of Investment No. 1/2557, the Thailand BOI is encouraging both BOI-promoted and non-BOI promoted manufacturers to invest additionally for the improvement of production efficiency. This improvement is to be achieved through 3 measures as follows:-
The announcement includes 3 measures as follows:
- A measure to promote energy conservation, alternative energy utilization, or reduction of negative environmental impact. The investor must submit an investment plan detailing proposed upgrading of machinery to save energy, a plan to introduce alternative energy into the project or a plan to reduce damaging environmental impact according to the stipulated criteria.
- A measure to promote investment to upgrade manufacturing technology and machinery to increase production efficiency. Investors must submit an investment plan detailing replacement or modification of machinery used in automated production lines.
- A measure to promote investment in research and development to upgrade manufacturing technology and advanced engineering designs for improving efficiency. Investors must submit an investment plan for research and development or implementation of advanced engineer designs that conform to the stipulated criteria. Investors with large projects must invest no less than 1% of their total revenue for the first three years from the date of application submission in research and development or advanced engineering designs. For SMEs, projects must invest no less than 0.5% of their total revenue for the first three years from the date the application is submitted in research and development or advanced engineering designs.
Interested investors for incentives under these measures must operate businesses of a type that is specified on the BOI list of businesses that are eligible for promotion. The minimum capital investment requirement for each project must not be less than 1 million Baht, excluding land cost and working capital. For Small and Medium Enterprise (SME) projects, the BOI requires an investment value of Baht 500,000, excluding the cost of land and working capital.
The incentives given to approved projects in all zones include exemption from import duty on machinery and a three-year corporate income tax exemption based on the revenue of an existing project, and will not exceed 50% of the total investment value under this measure, excluding land cost and working capital. Project applications must be submitted by December 31, 2017 and the projects must be completed within three years from the date the promotion certificate is issued.
The investment promotion measures to improve production efficiency are in accordance with the National Economic and Social Development Plan No. 11 which outlines a strategy for restructuring the economy to ensure quality and sustainable growth, with the focus on improving manufacturing production efficiency and promoting the use of advanced science, technology and innovation while also furthering the use of clean energy and alternative energy.
Know more about Thailand BOI promotion and its benefits for your business. Consult with ThaiLawyers for getting BOI certificate, Thai company registration, visa and work permit application.
New Regulations for Visa Extension in Thailand
The Thai Immigration has recently announced the new regulations for extension of temporary stay in Thailand. Under the Order of Royal Thai Police No. 327/2557 which has been effective since 29 August 2014, the regulations that have been changed are as follows:
- Foreign nationals of certain countries entitled for Visa Exemption for tourism purposes and permitted to stay in the Kingdom for 30 days upon arrival according to the Interior Ministerial Announcements, shall be granted extension of stay for one time and not exceeding 30 days from the expiry date.
- In case that the application for extension of temporary stay is not approved due to incomplete qualifications and the foreigner has been granted extension of stay for 7 days in order to leave the Kingdom, such foreigner is not able to appeal for reconsideration of non-permission.
- For the reason of study in a private educational institution particularly for Non-school system (such as Language School etc.) each permission of stay shall be granted for not longer than 90 days but the total permitted period of stay for this reason consecutively shall not exceed one year from the date of entry into the Kingdom.
- For the reason of performing duties in a public charity organization, a foundation, a non-government organization, an association, a foreign chamber of commerce, the Federation of Thai Industries, in case of no certification letter by the relevant government department, each permission of stay shall be granted for not longer than 90 days but the total permitted period of stay for this reason consecutively shall not exceed one year from the date of entry into the Kingdom.
Contact ThaiLawyers for your visa and work permit questions.
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.