Today, we talk about the entertainment expenses or those expenditures incurred to entertain a client, customer or staff as part of generating income for the business as well as how to treat it as add-back portion according to Thai tax laws.
The Revenues and Expenses are the two vital items in an Income Statement report; the difference between these two items is called the Net Income. Revenues are the income received by a Company usually from sale of goods and services while expenses are the itemized deductions or costs incurred by the company during its course of business. In the Accounting point of view, all the relevant expenses incurred in carrying and doing the business is considered deductible, but in the Tax Laws’ point of view some or a percentage of these expenses are not considered deductible. One good example for this kind of expense is the Entertainment Expense.
The actual entertainment an expense is to be deducted from gross income. However, in the Thai Tax laws, the total deduction of entertainment expenses in an accounting period shall not exceed 0.3 % of total gross revenue or gross sales, or of the paid-up capital, whichever is greater. In addition, the total entertainment expenses allowed for deduction shall not exceed Baht 10 million.
Hence, if Company A incurred entertainment expense amounting to 10,000, total revenue of 100,000 and a shared capital of 200,000, the total add-back portion added to the accounting net income/loss to arrive for the total taxable net income/loss will be the difference between the entertainment expense allowed by law which is 0.03% of the shared capital or the total revenues whichever is higher. In such case it is 200,000 less 10,000 actual entertainment expense incurred per book or 4,000.
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