The Government just announced Thailand corporate income tax rate reduction for 2016 and 2017 for SMEs. In order to be eligible for the 2016 and 2017 reduced corporate income tax rates, the SMEs must meet the following conditions:

1. Being a company or juristic partnership registered (or in other words, established) before 1 January 2015;
2. The paid-up capital on the last day of any accounting period must not exceed THB 5 million; and
3. The income from the sale of goods and provision of services must not exceed THB 30 million in any accounting period.
4. The SME must register for this corporate income tax reduction on the website of the Thai Revenue Department between 15 January to 15 March 2016.

The following corporate income tax rates apply:

• For the accounting period beginning between 1 January and 31 December 2016 – 0% tax.
• For the accounting period beginning between 1 January and 31 December 2017, – 0% for the net profit of Baht 300,000 and 10% for the amount beyond 300,000

Contact your Thai Accountant at MSNA for any questions on accounting and tax in Thailand.

Thai limited companies, representative offices and branch offices of foreign companies in Thailand need to submit a mid-year (or interim) corporate income tax return (Form PND 51) to the Revenue Department within 2 months after the end of the first 6 months of their accounting year. Most of such juristic persons use 31 December as the fiscal year-end, so the deadline to file their interim corporate tax return is 31 August of each year. If your accounting year-end is 30 June, then you need to file PND 51 within the end of February.

Penalties:

If you file PND 51 later than the deadline, you need to pay Baht 1,000 – 2,000 late submission fine (Baht 1,000 if not later than 7 days). Plus you will have to pay 20% on top of the amount of tax owed.

How to calculate mid-year tax for most companies:

In theory, the Thai Revenue Department wants you to prepay your tax at mid year using the best estimates of total revenues and expenses to derive your estimated profit for the year and divide it by two to get half year’s profit. From there, you calculate your corporate tax using the current tax rate. Most companies use the actual operating results from their 6 months’ income statement and forecast the second half of the year’s operating result in order to get the year’s estimated incomes and expenses. However, during the second half of the year sometimes your actual profit turns out to be much higher or lower than what you estimated and reported in the PND 51.

What happens if you under-estimate your mid-year tax?

You may have to pay for some penalties if you underpaid your interim tax. If at the end of the year, your actual profit is more than 125% of your estimated profit that you filed on your mid-year corporate tax return, then you will have to pay 20% fine on the underpaid tax. There are very few exceptions. The one and only that will apply to most cases is that if at mid-year the tax you paid is more than 50% of your last year’s tax, then you will not have to pay for the fine.

Suppose you estimated a mid year tax of THB 70 (or 140 for the year from an estimated profit of THB 700), but at the end of the year, you happen to make a profit of THB 1,000, thus you have a tax of THB 200 for the year. That means at mid year, you should have submitted the tax for the half year of THB 100. So you will have to pay a fine of 20% on THB 30 underpaid tax (100 – 70). However, if last year, your income tax was THB 130, fifty per cent of which is 65, then even though this year’s actual tax is much more than the mid-year tax you paid, you will not have to pay for the fine because your mid-year tax was THB 70 and higher than 50% of last year’s tax.

Now what happens if you over-estimated your mid-year tax? Suppose you thought you would make a profit of THB 1,000 for the year (or THB 500 for half year), so you paid tax of THB 100 (tax rate is 20%) on half year’s profit. At the end of the year it turns out you have a loss. You may seek to get a refund on the tax you paid at mid year. However, asking for a tax refund is essentially inviting the Revenue Department to audit your company. So most companies are willing to let go of their overpaid tax. Therefore, planning your mid-year tax is very important.

The best technique to fill out the mid-year corporate income tax return:

Normally the estimates should be done in a way that the tax to be paid at midyear will be a little over 50% of last year’s tax. This is so that if at year-end you end up having so much profit, there will be no fines for under-estimating your mid-year tax. If your last year’s tax was zero due to the year’s operating loss, you can just estimate your profit of this year using any figures. Let’s use ones that will result in a very little tax to pay at mid-year. This way, whatever real profit you have at year end will not result in a penalty and if you have a loss, you can forego the prepaid tax easily.

Consult MSNA for all your accounting and tax needs in Thailand.

This article is about tax on earnings which an employee received from the employer concerning the agreement of compromise. When the employee whose working period is not less than 120 days is terminated, the employer has to pay the employee the compensation according to the Thai Labor Law. The amount of the compensation depends on how long the employee has been working with the employer. This compensation is not subject to tax.

In the case that there is a dispute on unlawful termination in the labour court, if there is a monetary offer from the employer to settle the case and the employee accepts it, both parties can agree in front of the judge. The amount received according to the agreement of compromise before the judge is subject to tax because it is not considered a compensation stipulated in Labour Protection Act. It is considered an income under Section 40(1) of the Revenue Code, which shall be treated the same way as a monthly salary. Therefore, the employer has to deduct withholding tax at the progressive rate from the amount of settlement.

For questions regarding Thailand labour law, please contact our legal team at ThaiLawyers.com

Business people frequently have problems concerning the Thai taxation and cannot find the answers in the Revenue Code. Therefore, it is necessary for them to consult with the revenue department of Thailand. In some cases, you can ask an official verbally to get answers. However the best way is to write a letter detailing the tax question to the Revenue Department. The answer obtained with this process is called ‘’ruling’’.

Ruling is a letter written by people who have tax problems for consulting with Revenue Department to get their official answers. The following is how to get a Revenue Department’s ruling.

1. The letter should be addressed to the Director-general of the Revenue Department.
2. You should describe the problem clearly with the details and attach it with supporting documents.
3. If possible, you should ask the question in reference to the Revenue Code by specifying sections or terms in the code because the answer will refer to the terms and sections of the law.
4. You should keep a copy of the answer from the Revenue Department (ruling) and a copy of your letter for future reference.

However, ruling is only a legal opinion given by the legal team of the Revenue Department. It is not the law. Taxpayers are not obliged to follow it.

Contact MSNA for any tax and accounting needs in your doing business in Thailand.

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.

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.

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.

Today, we got a question from one of our accounting clients regarding VAT.

Question:

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?

Answer:

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.

Today, we got this inquiry regarding the expenses of a branch office in Thailand.

Question:

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?

Answer:

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 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 info@msna.biz for cloud accounting service.