One of our accounting and payroll clients asked us about their employee claims.

Question:

We understand that the staff claims without original copy or receipts/tax invoices will be deemed non-deductible expenses when we submit yearly tax. Can you explain more on this so we can implement necessary steps?

Answer:

Normally, a company can claim expenses that have original receipts and tax invoices issued in the company name. And if the nature of the expense is one that has no receipt, like taxi fares, then the claim should be accompanied with a little explanation of the expense, like from where to where and for what business.

For expenses without original receipts/tax invoices, like when your employees buy things but did not ask the vendors for them, you have to book the expenses as non-tax deductible. Thus, please remind them to request for an official receipt/tax invoice every time. For example, when they buy things from a supermarket, they need to tell the supermarket to issue a receipt in the company name. For the case of buying things or ordering food through online applications (e.g. from Grab, Lineman or Foodpanda), you may use the e-receipts which are in the company name to be the accounting transaction supporting documents. However, because it is for food, if you pay for food for your employees, you need to add the amount to their monthly income to calculate personal income tax too. But if it is to entertain clients, then you may book it as an entertainment expense.

For air tickets and hotel stay for business purposes, you have to remind them also to request receipt/tax invoice in the company name otherwise, it will be recorded as non-tax deductible expenses.

If you need payroll, accounting or tax services, contact MSNA for assistance. We are the official accountant of the American Chamber of Commerce in Thailand and has been serving the international business community for over 25 years now.

When your company considers changing accounting year-end, for example from 31 August to be 31 December of every year, you need to get approval from both the Revenue Department and the Department of Business Development. Mostly, the documents you need for changing accounting year-end are as follows:

1. Copy of company affidavit;

2. Copy of Minute of Statutory Meeting (This is the document you made when you registered the company. It says whether or not the company has adopted Articles of Association) or copy of the company’s Articles of Association (which most likely says when the accounting year-end is);

3. Minute of shareholders’ meeting with the resolution to change the accounting year-end;

4. Copy of the latest Corporate Income Tax Return and audited financial statements

5. Others

For the Revenue Department you will need to write a letter explain why you want to change your company’s accounting year-end and say what your first accounting period will be once they approve your new accounting year-end. After the RD has checked all your documents, they will approve it and send a letter to the company within a few weeks/months.

After you got the letter of approval from the RD, you will submit online some forms with more or less the above set of documents for changing accounting year-end to the DBD.

Once the DBD approves, you will be able to change your accounting year-end. However, no set of accounts will be for more than 12 months. From the example, if your current accounting year-end is 31 August and you have been approved to change it to 31 December of every year, here are what you will do (now is September 2021):

1. The financial year ended 31 August 2021 – you need to submit the audited financials and corporate income tax return to the Revenue Department within 150 days from 31 August 2021. However, for the Department of Business Development, you need to hold an AGM to approve the audited financials within 31 Dec 2021 and submit it within one month from the AGM date.

2. For the following accounting period, because the DBD’s approval comes out before 31 December 2021, then you will have to close the accounts as of 31 December 2021 within about 5 months about end of May 2022.

Note that if the DBD’s approval comes out after 31 December 2021, then you will close the accounts as of 31 August 2022, then 31 December 2022.

Consult with MSNA Group, your trusted Thai accountants who speak fluent English and have been in the business servicing international business community for over 25 years.

Accounting for BOI companies with various sources of incomes

Most people misunderstand and assume that with the BOI status, they can receive incomes from many different sources. We want to explain here that having a BOI promoted company does not always mean you can always do any businesses and earn incomes from different sources. But in case you can (explain down here), you want to read further about accounting for BOI companies with various sources of incomes.

Thailand Foreign Business Law allows foreigners to do certain business activities. For most business activities, if you do not want to have a Thai majority partner, you need to get a permission to operate the business. One way for foreigners to own their business 100% is to get a BOI promotion whose main purpose is to promote investment in the businesses that truly benefit Thailand. The companies with BOI promotion can operate only the business activities that the BOI approved on the BOI certificates.

Now assuming that your company’s major shareholders are Thai, you may still want to get the BOI promotion for the tax benefits; corporate income tax exemption, machinery import duties reduction, etc. The benefits granted by the BOI are only for the business activities approved by the BOI. However, as a Thai company, you will be able to do other business activities too. This is when you have to be careful in your bookkeeping. In doing accounting for BOI companies with various sources of incomes, you need to separate the incomes and expenses into BOI business and non-BOI business. For the expenses that are paid for the whole company (benefiting both BOI and non-BOI businesses), you will have to allocate them using the most reasonable method. If 40% of the office space is used for the BOI business and 60% is for the non-BOI business, then you will allocate rents accordingly. If specific employees only work for your BOI business, then their salaries will be allocated to the BOI business while the other employees’ salaries will go to non-BOI business.

Contact us today to find out if your business is eligible for BOI promotion or if you need help with accounting.

One of MSNA’s payroll outsourcing clients asked us about the bonus scheme to be given to employees in Thailand.

Question: Our Thai company is currently still operating at a loss. We are studying into a variable bonus scheme to be given to the employees in Thailand and would like to seek your opinion on this matter.  Do you know of any company in our industry or any M&E construction company which pays variable bonuses? If so, what is the average bonus quantum in terms of months? I guess the bonus should be peg to the company profits.

Answer: Regarding bonus scheme, it depends on many factors. For example, companies with western culture usually have a different bonus scheme from the companies with the Thai culture. In many cases, if the monthly salaries are already high, then the number of months for bonus is often lower than if the salaries are low. When you want your company to be an attractive employer, you can pay an attractive salary plus 13th month bonus or you can pay normal salaries plus many months of bonus. Also it depends on the quality of employees. The ones that are very good and can demand higher compensation will stay if the overall remuneration is better than other companies. The ones that are not in high demand will stay even though you do not pay them bonuses. We would suggest having different agreements on the numbers of months for bonus with different employees depending on the levels of performance and the difficulties of finding replacements.

However, if you peg the bonus on company’s profits, it is a non-tax deductible expense. That means all the bonus you pay that is dependent upon the company’s profits will get added back to the bottom line and treated as if it was never an expense of the company for the purpose of calculation of corporate income tax.

Consult MSNA for your questions regarding your doing business in Thailand.

Today, Thai Tax Expert talks about the duties of a taxpayer in Thailand.

A taxpayer is an individual or entity that has the duty to pay taxes and is classified into two:

1. Resident – any individual residing in Thailand for a period or several periods in total of at least 180 days in a tax year (January 1 to December 31) who has a duty to pay tax on income remitted from a source in Thailand as well as on any income from a foreign source in connection with the taxpayers’ employment or business carried on overseas or a property situation overseas and that income is remitted into Thailand within the year that the taxpayer receives that income.
2. Non-resident– the one who is subject to tax only on income from sources in Thailand.

A taxpayer has the following duties:

• File tax returns and pay proper tax
• Register for tax identification number and must also notify the Revenue Department officers of any changes in his particular details
• Pay tax as assessed by the Revenue Department officers on time
• Provide relevant documents and accounts as the law requires. These include receipts, profit and loss statements, Balance sheets, special accounts, etc.
• Cooperate and assist the Revenue Department officers and provide additional documents or information when required as well as comply with the summon

If in any case a taxpayer fails to pay a complete amount of tax, the Revenue Department assessment officer has the right to seize, attach and sell that asset (source of income) by auction even without a court decision and the cash that will be raised from the transaction will be used to pay off tax arrears. Eventually, any taxpayer who does not comply with the law will face civil and criminal action.

Understand better the Thai taxation and know more about your duties as a taxpayer in Thailand. Contact English speaking accountants and Thai tax experts of MSNA for consultation.