• A good Thai accountant should be knowledgeable on the Thai tax law and practice. A general knowledge of business law is a big plus.
• A good Thai accountant knows what constitute a valid tax invoice, the tax invoice from which you can claim back the VAT you paid on goods and services.
• A good Thai accountant recognizes when the transaction requires tax withholding.
• A good Thai accountant always meets deadlines for financial reports.
• A good Thai accountant is neat and tidy and makes sure all transactions have proper supporting documentation.
• Smart Thai accountants know that they need to freshen up their knowledge very often by attending training or seminars and reading tax and accounting publications.

It is a good idea to hire another Thai Accountant from a well established Thai accounting firm to check your accountant’s work once in a while.

When your Thai business has surplus cash and chooses to lend it to the directors or other companies in the group, it has to charge an interest. The tax officials will tell you to adjust your corporate income tax return to reflect the interest income from such lending. Usually they are fine with the rate of interest of not less than the interest the company will get if it deposits the money in a fixed account.

When the company receives interest income on the money lent to its directors and other companies, it has to file a Specific Business Tax Return (PT 40) and submit 3.3% on the interest received within 15^th of the following month.

THAI ACCOUNTANT suggests you always accrue the interest income when you lend money to other people, but file the SBT form PT 40 only when you have received the interest money.

An employee terminated without a valid cause as stipulated by law is entitled to receive the following severance pay:

• 30 days’ wages where the employment period is at least 120 days but is less than one year.
• 90 days’ wages where the employment period is at least one year but is less than three years.
• 180 days’ wages where the employment period is at least three years but is less than six years.
• 240 days’ wages where the employment period is at least six years but is less than ten years.
• 300 days’ wages where the employment period is ten years or more.

In the event that the employer relocates its place of business that essentially affects the normal living of an employee or his/her family, the employer must notify the employee of the relocation at least 30 days in advance or pay an amount in lieu of the advance notice equal to 30 days’ wages. In this connection, if the employee refuses to move and work in the new location, the employee has the right to terminate the employment contract and is entitled to receive a special severance pay of not less than the prescribed rates of severance pay.

In the event that the employer terminates the employment of an employee as a consequence of streamlining the work units, production process, distribution service, or the introduction or change of machinery or technology, which thereby results in the reduction of the number of employees, the employer must notify the Labor Inspector and the employee concerned at least 60 days before the date of termination of the employment or pay in lieu of the advance notice to the employee an amount equal to 60 days’ wages. The terminated employee will be entitled to the prescribed rates of severance pay. Moreover, if the terminated employee, has worked consecutively for over 6 years, the employee would be entitled to an additional special severance pay at the rate of 15 days’ wages per one full year of service, calculating from the start of year 7 onwards. However, the total amount of this additional special severance pay is limited to the equivalent of 360 days’ wages.

Read the official version of the Thai Labor Law:

Labour Protection Act B.E. 2541 (A.D. 1998)

Labour Protection Act B.E. (No.2) 2551 (A.D. 2008)

According to the Thai labor law, if an employment contract does not specify any duration, either party can terminate the contract by giving notice at or before any time of payment, to take effect in the next pay period.

In Thailand, an employer does not have to pay severance pay to an employee when employment is terminated upon any of the following conditions:

(1) performing his/her duty dishonestly or intentionally committing a criminal offence against the Employer;

(2) willfully causing damage to the Employer;

(3) committing negligent acts causing serious damage to the Employer;

(4) violating work rule, regulation or order of the Employer which is lawful and just, and after written warning having been given by the Employer, except for a serious case with no requirement for the Employer to give warning.

The written warning shall be valid of not exceeding one year from the date when the employee commits the offence;

(5) absenting himself/herself from duty without justifiable reason for three consecutive working days regardless of whether there is holiday in between;

(6) being sentenced to imprisonment by a final court judgment.

In item (6), if the imprisonment is for offences committed by negligence or a petty offense, it shall be the offense causing damage to the Employer.

Upon termination of employment without severance pay upon the above conditions, the Employer needs to specify the fact which is the cause of termination in a letter of termination of employment or inform the cause of termination to the employee at the time of termination of employment.

Accounting graduates in Thailand usually would surprise anyone when they join the work force after they just got out of school. They have forgotten all accounting debits and credits. They do not remember almost anything from their accounting education. At our Thai accounting firm, we invest a lot of money and time in training each accounting staff. They are our biggest asset. THAI ACCOUNTANT have an observation that the accountants that choose to work with a Thai accounting firm for a few years usually end up being chief accountants at other firms because they have learned every and all tasks in the accounting area. The ones that choose to work in the accounting department of bigger firms in other fields, usually are put in one area of the accounting department, doing only accounts receivable or accounts payable, or as a cashier (prepare checks), etc. They do not get to work on the overall accounting of the company, thus they do not have the experience needed to become a chief accountant or an accounting manager.
Good accountants are not that hard to find, but very difficult to keep. We, at MSNA, are a perfect alternative when you want excellent Thai accountants to take care of your accounts.

Thai Accounting Standards (TAS) are issued by Thailand’s Federation of Accounting Professions (FAP). All Thai Accounting Standards follow the International Accounting Standards (IAS), thus have the same numerical orders and title and content. Thailand, like many other countries in the international accounting community has adopted the IFRS (International Financial Reporting Standards).

FAP plans to fully adopt IFRS as the Thai Accounting Standards for the SET (Stock Exchange of Thailand) listed companies within 2011 through 2015. For the non-listed companies, FAP plans to announce the adoption of Thai Accounting Standards and IFRS to be applied in 2011. However, FAP normally issues its notification to provide exemption for some Thai Accounting Standards that are too difficult to comply by the SME’s.

THAI ACCOUNTANT gets this question very often.

There are vendors in Thailand (or outside Thailand) that will not let your Thai company withhold taxes from them saying that their prices do not include taxes. Well, the Thai tax law makes it your duty to withhold some taxes when you pay for certain things. If you do not withhold the tax, you will have to still submit it to the Thai Revenue Department using your own money.

THAI ACCOUNTANT has 3 choices for you to consider:
1. Withhold taxes from those vendors anyway. If any of them do not let you, then you may want to find other vendors to work with.
2. You may choose to submit the taxes on behalf of the vendors (because you did not withhold from the vendors). The taxes you pay on behalf of the vendors who are juristic persons (companies and registered partnerships) will become an add-back expense, which you cannot use to lower your corporate income tax liability. Only the taxes paid on behalf of individuals can be tax deductible expense.
3. You may choose to let your vendors increase their prices by the amount of tax that you have to withhold. This way, the tax you withhold is officially not paid by you. So the tax amount will not be an add-back expense.

THAI ACCOUNTANT prefers choice 1 because it is the law. They need to let you withhold the tax from the payment and hopefully you are in the field where you do not have to deal with the vendors who do not want to comply with the law.

Good Thai accountants will deal with those tough vendors for you.

The maximum number of working hours of employees in Thailand is fixed at 8 hours a day and 48 hours a week in total. In some types of works, as stipulated by the Thai labor law, the employer and the employee may agree to arrange the period of working hours but the working hours in any case must not exceed 48 hours a week. In establishments in which the work is deemed injurious to health or personal safety, as stipulated by law, working hours must not exceed 7 hours a day and 42 hours a week in total.

All employees are entitled to a daily rest period of at least 1 hour after working for 5 consecutive hours. The employer and the employee may arrange the daily rest period to be shorter than 1 hour at each time but it must not be less than 1 hour a day in total. A weekly holiday of at least 1 day a week at intervals of a 6 day period must be arranged for the employee.

For work performed in excess of the maximum number of hours fixed either by regulation or by specific agreement (if the latter is lower), employees must be paid overtime compensation. The rates of overtime vary ranging from 1.5 times to 3 times the normal average hourly wage rate for the actual overtime worked. Certain employees engaged in employment related work on behalf of the employer and other types of work as prescribed by law are not entitled to overtime compensation. The maximum number of overtime working hours is limited to not more than 36 hours a week.

All employees are entitled to unlimited sick leave, but the number of days paid sick leave shall not exceed 30 regular workdays a year. The employer may require an employee to produce a certificate from a qualified doctor for a sick leave of three days or more.

A female employee is entitled to maternity leave for a period of 90 days including holidays, but the number of days paid leave shall not exceed 45 days.

An employee who has worked consecutively for one year is entitled to at least 6 working days of paid vacation every year, in addition to the 13 holidays in a year traditionally observed in Thailand.

Here is the full version of Labour Protection Act B.E. 2541 (A.D. 1998)

and Labour Protection Act B.E. (No.2) 2551 (A.D. 2008)

Today THAI ACCOUNTANT talks more about Thailand VAT. What kind of VAT we cannot claim back.

Some VAT invoices are abbreviated tax invoice, like the ones we get from 7 Eleven, cash registers of department stores and small shops, etc. These tax invoices have the word “TAX ABB” and we cannot claim back the VAT included in the amount we paid for these invoices. That means we will not include these tax invoices in our Input VAT Report, thus we cannot claim it back. However, with this kind of tax invoice, if we buy a significant amount worth our time, we can ask the seller to issue a full tax invoice for us. They must issue one for us. And with the full tax invoice, we will be able to claim back the VAT.

Some expenses, like gasoline for passenger cars (not trucks) or gifts or meals and accommodation that seems to be entertainment type of expense, cannot be included in the Input VAT Report. Usually we need a full receipt from the seller/service provider so that we can book the expenses in our accounts, but the law does not permit us to claim back the VAT we paid for these expenses.

For the expenses that we pay for, if their tax invoices are not correct (as THAI ACCOUNTANT talked about yesterday), we will not be able to claim back the VAT and also the VAT we paid will be classified as “Add-back expense”, which means we have to add back this VAT portion to the bottom line profit when calculating the corporate income tax at year-end. (But we can still use the expense portion as the expense of the company.) So please always try to get the correct form of tax invoices.

There is much more to Thailand VAT. It helps to have a good Thai accountant handle your Thai accounting and tax.

Today THAI ACCOUNTANT gives a brief explanation of VAT in Thailand for the purpose of giving you a general idea of VAT that you need to know doing business in Thailand.

VAT (Value Added Tax) is the amount we collect from our customers when they buy our goods or services and we have to submit it (using the form PP.30) to the Thai Revenue Department within 15th of the following month. When we have registered our company into the VAT system, we need to file this form every month even the months we do not have any sales or income. If we fail to file the form, there is a fine of Bath 500 per form, plus the fine and interest on the amount of VAT owed.

Before we can submit PP.30, we need to prepare 2 reports; Output VAT Report and Input VAT Report (explained in detail down below). Then we take the month’s totals of these reports to fill into the form PP.30. If the amount of Output VAT is higher than the Input VAT (that means the sales VAT that we collected from our customers is more than the purchase VAT that we paid to our suppliers) then we have to pay the difference to the Revenue Department when we submit the form PP.30. If the Output VAT is less than the Input VAT, then we can choose to get the refund in cash (but it takes a lot of time and effort to try to get the refund because the Thai Revenue Department will have to check a lot of papers) or choose to take the difference to offset with the Output VAT of the following month. THAI ACCOUNTANT highly recommends you choose the latter.

Output VAT Report is the detailed summary of all the tax invoices we issue for the month for the sales of our goods (whether or not we have been paid) and for the services we provided and got paid for.

Note:
1. The law says that for goods, we have to issue a tax invoice when we receive a deposit (issue a tax invoice just for the deposit amount) or when we deliver the goods (issue a tax invoice for the whole amount of the sale minus the deposit received earlier, if any) whether or not we have been paid.
2. For services, we have to issue a tax invoice when we get paid (a deposit or the whole amount of service fees).

Input VAT Report is the detailed summary of all the tax invoices we get for the month from our suppliers when we buy goods and services from them (because they have to collect 7% from us too).

The tax invoices that can be filled into the Input VAT Report (thus the VAT can be claimed) are the ones that have the following particulars specified by law, i.e. the word “TAX INVOICE” (not “Tax Invoice Copy”), date of the tax invoice, tax invoice number, name and address of the tax invoice issuer, their tax ID number, name and address of the customer, description of the goods or services (and in case of goods, quantity and unit price) and the Thai Baht amount of the VAT separated from the total amount of the invoice. Please make sure there is no correction made anywhere in the tax invoice even if someone has initialed it. THAI ACCOUNTANT recommends you ask the issuer to issue a new one for you if there are any mistakes on the tax invoice.