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:
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.
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.