When your business in Thailand cannot collect a debt from a debtor, if you want to write it off from your books, there are some rules prescribed by the Thai tax laws to follow. If you write it off not following the rules, the amount of the debt written off will be classified as a non-tax deductible expense, which means that it is your company’s expense but needs to be added back to the bottom line profit before calculating income tax on your corporate income tax return.

The Ministerial Regulation No. 186 (1991) defines Bad Debts that are eligible to be written off and the procedure to write them off as follows:

The Bad Debts that can be written off from the company’s accounts must have these characteristics:

(1) The debts arose from carrying on a business operation or in connection with the business operation or have been included as revenue in the computation of net profits, but not including debts owed by a person who is or used to be a director or managing partner whether or not the debts arose before or during the time such person is a director or managing partner; and

(2) The claim for debts is not barred from court action by statute of limitations and is
sufficiently evidenced for the purpose of suing the debtor.

The procedures to write-off Bad Debts:

A. Debt by a debtor exceeding Thai Baht 500,000, the following procedures are required:

(1) Demands for payment have been made and the matter has been pursued
to the extent suitable to the case of such acts and such demands have been
clearly evidenced and yet the debts remain unsettled because

(a) the debtor died, is missing or proved to be missing and
has no property to repay the debts, or

(b) the debtor dissolved his business, and the debts due
from him to the other creditors with preceding preferential rights over his
entire properties exceed the value f his properties.

(2) A civil action has been brought against the debtor and after a court order or
injunction the debtor does not have sufficient property to settle the debts; or

(3) A bankruptcy action has been brought against the debtor and a compromise has been reached with the debtor with court approval or the debtor has been adjudged
bankrupt and the first lot of the debtor’s properties have been shared out.

B. Debt by a debtor of more than Baht 100,000 up to Baht 500,000, the following procedures are required:

(1) Demands for payment have been made and the matter has been pursued
to the extent suitable to the case of such acts and such demands have been
clearly evidenced and yet the debts remain unsettled because

(a) the debtor died, is missing or proved to be missing and
has no property to repay the debts, or

(b) the debtor dissolved his business, and the debts due
from him to the other creditors with preceding preferential rights over his
entire properties exceed the value f his properties.

(2) A civil action has been brought against the debtor and the court has accepted the
plaint; or

(3) A bankruptcy action has been brought against the debtor and it has been accepted by the court.

In case of (2) or (3) above, it is required that the director or managing partner of the
company issue an order approving the write-off of the Bad Debt within 30 days
from the relevant accounting year-end.

C. Debt by a debtor not exceeding Thai Baht 100,000, the following procedures are required:

(1) Demands for payment have been made and the matter has been pursued
to the extent suitable to the case of such acts and such demands have been
clearly evidenced and yet the debts remain unsettled; and

(2) A lawyer has expressed his opinion that the costs associated
with the court proceedings will be higher than the amount expected to be
recovered.

Note that once the creditor has complied with all above mentioned rules and regulations, the creditor must write-off the receivable as a Bad Debt expense in the relevant accounting period. In case of category (B), the Bad Debt must be written off in the accounting period in which the relevant court accepts the civil complaint
or the bankruptcy petition.

Please contact MSNA for your Thai tax and accounting questions.

Today, THAI ACCOUNTANT got a very timely question.

Since last month, we are continuously giving donations to flood victims of Thailand. Can we include it as deductions for computation of our corporate income tax; at what rate we should use?

Answer:

We acknowledge your generosity. Indeed, you can use your expenses as deduction to
compute your Corporate Income Tax.

Donation expenses given to flood victims between 1 September 2011 and 31 December 2011 can be deducted at 1.5 times the actual expense but the valued amount condition at 10% of net assessable income for the purpose of personal income tax computation and 2% of net profit for corporate income tax computation, still applies.

Contact MSNA for your tax and accounting questions in Thailand.

Today, THAI ACCOUNTANT got an interesting question regarding the tax incentives related to employee training expenses.

Our Thailand-based company provides training courses to companies’ employees. We
heard from our clients that they can deduct 200% of the training cost when they
pay to us. How is it possible?

Answer:

Yes, your clients are able to deduct 200% of the training cost not as a discount
from their payment to your training course but they can use this as
expenditures for the purpose of computation and submission of their Corporate
Income Tax.

As imposed by Department of Skill Development, Ministry of Labour of Thailand, the
Skill Development Promotion Act B.E. 2545 has been issued to encourage enterprises to provide training, upgrading skills, knowledge and competencies for employees and for those who are not employees. And also encourage private sector to set
up and register with the DSD its own training centers for workplace learning
and training. The incentives have been provided to enterprises by deducting the
cost of training 200% from the annual tax payment. The compulsory measure has
been applied for the establishments with at least 100 employees which have to
provide training for the employees at the rate of 50% of the total number of
employees, if not the employer have to pay contribution to the Skill
Development Fund approximately 480 Baht per head per year for the number of untrained employees. Furthermore, the establishments gain other benefit under this Act such as exemption tax of the training machines, bringing experts or trainers to train their workers, free of charge of water and electric fees.

But before your clients can use this training cost as their expenditures, you must
check with the Labor Ministry if your training courses have to be approved by
them. You can contact them for details on how you can register your courses
with them.

After your courses have been approved by the Labor Ministry, your clients can use 200%
of the amount they pay for training in those courses. 100% of the expense is
normal deduction from your income and the other 100% will be deducted from the
net profit before tax. They will have to fill out the form prescribed by the
Revenue Department, which is the form to keep track of the expenses of sending
employees for training for each accounting period, and they should keep it for
future checking by the tax authorities.

For more expert advice on accounting and tax, please feel free to contact MSNA,
Thailand Accountant.

First-time home buyers in Thailand are benefiting from a new tax scheme recently approved by the Thai Cabinet. This scheme will enable low-income earners to have their
own houses, in response to the Thai Government’s urgent policy of increasing the peoples’ standard of living.

The incentives are summarized as follows:

1. To qualify as first-time buyers, the home buyers must not have previously owned
any residential property or have been recorded as the householder in the House
Registration, unless there is evidence to prove that they were not the owners.

2. The value of residential properties must not be more than Baht 5,000,000.

3. As amended by the Cabinet on 27 September 2011, the proposed tax
exemption of 10% of the cost of a new residential unit costing no more than
Baht 5,000,000 (i.e. up to Baht 500,000) will be treated as a tax exemption and thus deductible from tax payable when calculating personal income tax.

4. The ownership transfer of the property must be registered between 21 September 2011
and 31 December 2012 and the owner must hold the ownership for at least 5 years.

5. Eligible first-time buyers cannot have previously benefited from any of the following
tax schemes:

• Tax allowance for interest paid in respect of the purchase, hire-purchase or
  construction of a residential building.
• Tax exemption on the amount paid to buy a new residential building or condominium in accordance with the Ministerial Regulation No. 271 B.E. 2552 (2009); or
• Tax exemption on the income derived from the sale of residential property to buy a new residential property in accordance with the Ministerial Regulation No. 241
  B.E. 2546 (2003)

6. In case of co-borrowing, a co-borrower who owns a residential property stated in
no. 1 or has benefited from the tax schemes as discussed in no. 5 is not
eligible for a tax exemption.

This tax scheme however is subject to conditions that will be announced by the Director-General of the Revenue Department of Thailand.

The purpose of this summary is to provide awareness to those eligible first time
home buyers. Please contact MSNA, Thailand Accountant, for an expert advice regarding your tax planning.

THAI ACCOUNTANT summarized the simplified rules that have been issued under the Notification of Director-General of Revenue Department No. 182 where a VAT registered person (or company) wishes to issue a tax invoice as part of a set of commercial documents, e.g. the tax invoice is within the same set together with the delivery note, receipt, etc.

If the tax invoice is not the first document in the set, the requirements are as
follows:

• The tax invoice and the copy of the tax invoice must contain the phrase “Documents in a Set”.
• The copy of the tax invoice must also contain the phrase “Copy of Tax Invoice”.
• The above phrases must be printed by the computer as part of the preparation of the tax invoice by the computer system. It is not acceptable to use a rubber stamp or typewriter to make such phrases or to handwrite them on the documents.

This has been effective from 18 June 2011.

If you have any tax or accounting questions, please contact MSNA.

Today, THAI ACCOUNTANT got a question on VAT regarding exported services.

Do we have to charge VAT if we provided services to a company outside Thailand? If so, at what rate should we charge?

Answer:

Under the old law (Notification of Director-General of Revenue Department on VAT No.
105), services rendered overseas were subject to VAT at the rate of 0% under
the circumstances that the service had to be used entirely outside of Thailand. However
under the new law (Notification of Director-General No. 181), if the services are
used partially within and partially outside Thailand, then it is possible to
allocate the VAT so that it is partially subject to 7% VAT and the services
used partially in a foreign country will be zero-rated.

Eventually, if your services to your overseas clients are done in Thailand but the product of the service is used outside of Thailand, you don’t have to charge 7% VAT.

This is applicable to any activity that is performed to generate a valuable benefit other than sale of goods. However, this does not apply to travel and tour services in a foreign country.

Contact MSNA, Thailand accounting firm for your accounting and taxation needs.

Today, THAI ACCOUNTANT got a question regarding the online filing of VAT.

Question:

We recently filed VAT return via the internet and paid for it by check but the clearing of this check took so long although we already filed VAT and made the payment before the deadline. Would it be considered late submission of VAT if the check was not cleared on time?

Answer:

At times like this, the Revenue Department sees that your company has a justifiable reason for the late payment and they usually consider extending the deadline of the VAT filing without imposing penalties and a criminal fine. However, you will still be liable to pay a surcharge at the rate of 0.75% per month on the amount of tax payable.

For Thailand taxation and accounting questions, please contact MSNA.

Thailand’s Revenue Department has been encouraging Thailand
companies and other Thai tax payers to adopt Tax Returns E-filing for a few
years.

The Thai Revenue Department has the policy to go green to
cut on its paper use and manpower. It is now more than ever encouraging the tax
payers in Thailand to file their tax returns online (E-filing). Many of MSNA’s
accounting clients in Thailand have received calls from the Thai tax authority
to ask them to start using the e-filing service on the Revenue Department’s
website. Well, sorry the page is only in Thai. You can have your Thai accountant visit that page to start filing your Thailand company’s tax returns on the internet.

To start filing tax online, a tax payer has to file form Por Or 01 “Application Form
to file tax returns via the internet” which has the name, address, tax ID and
contact information of the tax payer, on the Revenue Department’s website. Then within
15 days after filing that form, the tax payer has to physically submit the
following documents to the Electronic Tax Filing Management Office of the
Revenue Department, Revenue Department Building, 27th Floor, 90 Soi Paholyothin
7, Paholyothin Road, Phayathai, Bangkok 10400 :

1. “Agreement for Filing Tax Returns via the internet”
2. The tax payer’s Thai ID card copy (in case the tax payer is a Thai individual), or copy of the tax payer’s Thailand company papers (company affidavit, and the authorized signatories’ passport copy). Note that the papers need to be signed by their owner or in case of a Thai company, the company affidavit copy has to be signed by the authorized signatories and affixed with the company’s stamp.
3. Power of Attorney. If you will not take the above documents to submit to the Revenue Department yourself, you need to make a power of attorney to appoint someone as your agent to submit the documents for you.

After you get their approval, they will send you the user ID and password and inform
you of the first month that you can start E-filing on the Revenue Department
website.

Notes:

1. E-filing your tax returns can be done only within the deadline of each kind of tax returns. For example, the withholding tax returns of the month of August 2011 can be filed online only between 1 – 7 September 2011 and the VAT return of August can be filed between 1 – 15 September. After the deadline, they can only be filed at the Revenue Department branch in your area.
2. When you are using the E-filing service on the Revenue Department website, you will have the options to make E-payment from your bank in Thailand (where you have previously applied for internet banking service) or to take the payment to a bank to deposit into the Revenue Department’s account. The payment has to be made within the tax filing deadline of each type of returns. From the example in Note 1, the deadline for making the tax payment for VAT returns of August is by the 15^th of September.

If you hire a Thai accounting firm to file tax for you, your accountant will have
to prepare all the forms for you to apply for the E-filing service.

For Thailand taxation and accounting questions, please contact us.

MSNA has many accounting clients in Bangkok whose companies operating in Thailand providing services. As their Thai accountant, we get this question often – Is there withholding tax when a Thai company invoices an overseas client?

Withholding tax is there when your company pays a vendor (mostly for services, but please check with your Thai accountant or MSNA for your type of business) and you have to withhold some tax. And when another company in Thailand pays your company for service, they will have to withhold some tax from the payment.

In the case of getting paid from an overseas client, if the tax law of the country of your client’s origin generally requires that they withhold tax when paying an overseas company (you), then we need to consult the double taxation treaty between Thailand and that country to see if your company should pay tax in that country and if so what the rate is.

If you have any tax or accounting questions, please contact MSNA.

When you have a company operating in Thailand, a lot of times you or the company’s employees have to travel for the company’s business. How do you reimburse your travelling expenses, like tickets, meals, accommodation and entertainment in a way that is considered legitimate to the eyes of the Revenue Department officials?

When the Revenue Department officials audit the books of your company, if they see that you have travelling related expenses, they want to assume that you took the trip for your pleasure unless you have proof that it was for the company’s business and that all the expenses paid on the trip were reasonable for the trip and reimbursed at cost. If you cannot prove those two points, the travelling expense may get added back to your bottom line profit to recalculate the corporate income tax and you may end up having to pay more tax.

To prove that the trip was for the company’s business, you can attach some email correspondence with, or invitation from, the company in the country (or province in case it was inside Thailand) where you took the trip to. It can be trade show brochures or any other publication if you went to that particular country for the event. The best practice is to attach such supporting documents to the payment voucher in which you reimbursed for the travelling expenses.

Now to prove that the expenses paid for the trip are legitimate expenses, the general rule is that you need to have original receipts for each expense item.

– For air ticket, the safest way is to have the travel agent (if you buy the ticket from a Thai travel agent) issue a receipt in your company’s name. If you buy the ticket online or it is impossible to get a receipt issued in your company’s name, then the E-receipt sent by the online vendor may suffice. I use “may” because some Revenue Department officials are more difficult than others.

– For meals and accommodation, the Revenue Department officials that we talk to advised that you need to get receipts for those expenses from the vendors. And the safest way is for the receipts to be in the company’s name. In case of overseas trips, if it is not possible to have the company’s name of the receipts, just get the receipts.

– For taxi fares and any other expenses whose nature is that the vendors do not issue receipts for the customers, then in your travelling expense report (or expense reimbursement form), you should specify the reason why you had to pay for the expense. Like taxi fares, write down that you took the cab from where to where for what business.

– Please note that if the company just gives the employee a daily allowance for meals and taxi for example, it will likely be treated as part of the employee’s income and thus needs to be included in his personal income tax calculation. If the employee reimburses for the expenses at cost, it will not be part of his income.

– What happens if the expenses do not have receipts for is that the Revenue Department officials will very likely add them back to recalculate the corporate income tax.

For tax questions, contact https://msnagroup.com/contact-us/.