Most companies in Thailand choose their accounting year-end to be 31 December of each year. They need to close their books and file the Corporate Income Tax Return with the Revenue Department within 150 days after the accounting year-end.

THAI ACCOUNTANT would like to point out that the profits per accounting books are not the same as the profits per corporate income tax return. This is because there are many expenses that are included in the companies’ accounting but are not allowed by the Thai tax law, thus have to be added back to the profits in the tax return.

Good Thai accountants and Thai accounting firms should be knowledgeable on this matter.

According to Thailand Revenue Code, Section 65 Ter, the following items shall not be allowed as expenses in the calculation of net profits:

(1) Reserves except:

(a) Insurance premium reserves for life insurance set aside before calculation of profit, but only the amount not exceeding 65% of the amount of insurance premiums received in an accounting period after deducting premiums for re-insurance.

In a case where money is paid out on an amount insured on any life insurance policy whether in full or in part, only the paid amount which does not exceed the reserves under Paragraph 1 for such policy shall not be allowed as expense.

In a case where any life insurance policy contract is terminated, the amount of remaining reserve under Paragraph 1 for such policy shall be calculated in the calculation of income in the accounting period in which the contract is terminated.

(b) Insurance premium reserves for any other insurance set aside before the calculation of profit, but only the amount not exceeding 40% of the amount of insurance premiums received in an accounting period after deducting premiums for re-insurance and this amount of reserves set aside shall be income in the calculation of net profit for tax purposes in the following accounting period.

(c) A reserve set aside for bad debts or suspected bad debts from liability arising from the provision of credit which a commercial bank, finance company, securities company or credit foncier company sets aside under the laws governing commercial banks or laws governing the finance business, securities business and credit foncier business, as the case may be; but only the amount set aside which increases from such type of reserve appearing in the balance sheet of the previous accounting period.

For the increased reserve set aside under paragraph 1 and treated as expense for the purpose of calculating net profit or net loss in any accounting period, if afterwards, there is a reduction of such reserve, such reduced reserve which was already used as expense shall be included as income in the accounting period in which the reserve is reduced.

(2) Fund except provident fund under the rules, procedures and conditions prescribed by a Ministerial regulations.⁷

⁷M.R.No.183

(3) Expense for personal, gift, or charitable purpose except expense for public charity, or for public benefit as the Director-General prescribes with the approval of the Minister, shall be deductible in an amount not exceeding 2% of net profit. Expense for education or sports as the Director-General prescribes with the approval of the Minister shall also be deductible in an amount not exceeding 2% of net profit.⁸

⁸N.DG.ITNo.44

(4) Entertainment or service fees that are not in accordance with the rules prescribed by a Ministerial Regulation.⁷

⁹M.R.No.143

(5) Capital expense or expense for the addition, change, expansion or improvement of an asset but not for repair in order to maintain its present condition.

(6) Fine and/or surcharge, criminal fine, income tax of a company or juristic partnership.⁸

¹⁰R.CT.No.10/2528

(6 Bis) Value added tax paid or payable and input tax of a company or juristic partnership which is a VAT registrant except value added tax and input tax of a registrant paid under Section 82/16, input tax not deductible in the calculation of value added tax under Section 82/5(4) or other input tax as prescribed by a Royal Decree. ¹¹

¹¹R.D.No.243

(7) The withdrawal of money without remuneration of a partner in a juristic partnership

(8) The part of salary of a shareholder or partner which is paid in excess of appropriate amount.

(9) Expense which is not actually incurred or expense which should have been paid in another accounting period except in the case where it cannot be entered in any accounting period, then it may be entered in the following accounting period.

(10) Remuneration for assets which a company or juristic partnership owns and uses.

(11) Interest paid to equity, reserves or funds of the company or juristic partnership itself.

(12) Damages claimable from an insurance or other protection contracts or loss from previous accounting periods except net loss carried forward for five years up to the present accounting period. ¹²

¹²N.RD. Re: Computation of Net Profits and Net Loss of Companies or Juristic Partnerships that are Granted Investment Promotion.

R.CT.No.35/2540

(13) Expense which is not for the purpose of making profits or for the business.

(14) Expense which is not for the purpose of business in Thailand.¹³

¹³R.CT.No.13/2529

(15) Cost of purchase of asset and expense related to the purchase or sale of asset, but only the amount in excess of normal cost and expense without reasonable cause.

(16) Value of lost or depleted natural resources due to the carrying on of business.

(17) Value of assets apart from devalued assets subject to Section 65 Bis

(18) Expense which a payer cannot identify the recipient.

(19) Any expense payable from profits received after the end of an accounting period.

(20) Expense similar to those specified in (1) to (19) as will be prescribed by a Royal Decree.¹⁴

¹⁴R.D.No.315