Thailand Taxes: Managing Tax Audits (part 1)

January 6 2012 Categories: Thailand Taxes No comments yet

In this post I will try to give readers a few tips on how to manage Tax Audits. I guess that readers would prefer tips on “how to avoid a tax audit”. Unfortunately, in Thailand, you cannot avoid tax audit. To the contrary, you may expect regular mandatory visits from the Tax Administration.

Nowadays visits from the tax administration are not conducted by a single tax officer but by a team of two or three of them. They will generally drop by unannounced. Note that teams are rolled approximately every three years and that over the life span of your company you will have to deal with several different teams.

Visits of the Tax Administration are triggered by different causes.

Newly Created Company Visit

The first type of visit is also the less worrisome one, a team of tax officers will visit the offices of a newly created company, or of a company that recently moved into a tax district. The purpose of the visit is for the team that will be managing the company to collect information as to the nature of the business of the taxpayer. They are not here to look for trouble just to understand how your business is structured, managed and what your objectives are.

Annual Taxes Compliance Visit

You may expect a tax compliance visit every year; this is why I was saying in my intro that there is no way to avoid tax audits. The purpose of this visit is to check whether the company has fulfilled all the tax requirements. In general the tax officers will during this review examines your income and expenses statements and request to see the following basics documents,

(1) The copy of the company tax return and the receipt of the taxes paid

(2) Withholding taxes returns such as:

P.N.D.3: that is to say withholding tax returns form on payments made for monthly rent, services.

P.N.D. 1: that is to say withholding tax returns form on payments such as employees’ salaries.

P.N.D.2: that is to say withholding tax returns form on payments such as dividends paid to individuals

P.N.D.54: that is to say withholding tax returns form on overseas payments.

(3) VAT Tax Returns

PP.30: Vat tax returns and receipts

(4) Sales and Purchases Tax Invoices

(5) Receipts and Payments vouchers

(6) Bank statements

Up to recently the Revenue Officer Annual Taxes Compliance review was mostly superficial the officer checking the big deductible expenses accounts and checking whether taxes on expenses (withholding taxes) was paid and that there was no discrepancy in the VAT input and output.

In recent years tax officers started to go more in depth into the account of the company, especially this year because the Revenue Department collected 170 Billion less taxes than targeted.

Tax Audit upon Request for a Tax Refund

Then there is the tax audit which is triggered following a request for a Tax refund. Companies who for the first time request a VAT refund or companies that request a withholding tax refund may expect their request to trigger a Tax Audit during which the Tax officers will check whether the company requested the refund complied with tax regulations.

This type of tax audit will be more in depth than the yearly tax audit. The reason being of course that Thai Taxman is no different from the one you may have to deal with in your home country. By definition the Taxman does not like to give back money.

Tax Audit for Investigation Purpose

This is a tax audit which is triggered by summon from the Tax Administration because for example the officer suspects that the company either failed to declare income or under declared its income. It may also follow an investigation following a request for tax return.

The effect of a summon is to extend the prescription period from two to five years. Summon can be issues within 2 years after the filing of the relevant tax return. Note that if you do not comply with a tax summon you will forfeit your right to appeal against any subsequent assessment make by the tax officer.

In tomorrow post we shall discuss the do and don’t of a tax audit.

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

Originally posted 2009-10-08 05:12:15.

Doing Business in Thailand