Thailand Taxes Reporting Requirements and Sanctions

February 4 2012 Categories: Thailand Taxes No comments yet

Why Focus on this Subject?

Yes I know this matter is boring and you may wonder why to include it in this blog. When arriving in Thailand you will meet other foreigners who will tell you how easy it is to do business in Thailand. They will tell you that

“you don’t need to paid up the capital of your company” or

“you don’t need to keep accounting records” or

“you don’t need to pay taxes” or

“you can keep double accounting” and so on.

Now I believe investors need to know how many of this “you don’t need to do” they actually have to do and what may be the cost of those rumors.

What are the reporting requirements?

There are a lot of ways for a company director to get into trouble. One of the easiest way is not to follow the legal reporting requirements.

All juristic persons or companies must keep books and follow accounting and audit procedures as specified in the Civil and Commercial Code, Public Limited Company Act, Revenue Code, Accounting Act, etc….

Furthermore, they must also follow the Thai Accounting Standard formulated by the Institute of Certified Accountants and Auditors of Thailand and duly enforced by the Board of supervision.

Who has a duty to keep accounts?

If you invest in one of the following entities then the first thing you need to know is that this entity will have a duty to keep accounts, unless exempted, pursuant to the Accounting Act.

Registered partnerships; limited company or public limited company; juristic persons incorporated under foreign law and operating/carrying on business in Thailand (Section 76 bis Tax Revenue Code); joint ventures established under the Revenue Code; business offices with regular operations; and any other persons stipulated by the Minister have an obligation to keep accounts.

To date only ordinary persons are exempted from the duty to keep accounts.

What are the responsibilities of a juristic company or partnership that must keep account?

According to Section 1206 of the Civil Commercial Code, the directors of a company must cause true accounts to be kept of the sums received and expended by the company, and of the assets and liabilities of the company.

This being said, the first responsibility of a juristic company or partnership with a duty to keep accounts is to hand over to the bookkeeper all the relevant documentation, books and records to enable the bookkeeper to prepare financial statement based on this information.

The second responsibility is for the juristic company or partnership to supervise and monitor the bookkeeper work. Finally it has to submit financial statements within specified times.

Can anyone by a bookkeeper?

The bookkeeper key responsibility is to prepare financial statements in accordance with accounting standards and underlying records.

You cannot do your accounting yourself on QuickBooks and you will need to hire someone to do the job.

In order to become a bookkeeper one must fulfill several basic and educational requirements. It can either be a full time employee or an accounting service provider.

The bookkeeper must have the following qualifications: domicile in Thailand, fair knowledge of Thai language, to the extent that he/she can perform his/her work. He/she must not have been imprisoned for an offence under the accounting or auditing laws or if he had a period of not less than 3 years must have passed since then.

The bookkeeper educational qualifications differ whether the bookkeeper is employed by a small or a bigger company. The bookkeeper of small enterprises (registered partnership and limited company established under Thai laws) which are defined as having, on the date of closing the accounts, registered capital of not more than THB 5 million, and total assets of not more than THB 30 million, and annual income of not more than THB 30 million, must have at least a diploma or higher vocational certificate in accounting or equivalent.

For all enterprises (including companies incorporated under foreign laws) other than the above mentioned, the bookkeeper must have at least a bachelor’s degree in accounting or equivalent. Degrees, diplomas and certificates must have been obtained from an institution recognized by the Ministry of University Affairs or the Civil Service Commission or the Ministry of Education.

How are books and records retained?

The most common question of any clients in relation to accounting is: “may I maintain and record my accounting in English or not?”

Yes, accounting entries may be recorded in a foreign language, but there should be an appended Thai translation.

All accounting entries shall be written in ink, typewritten or printed. Accounts, Books and any other relevant records and/or documents and/or supporting documents must be kept at the company business premises.

Such accounts and documents must be kept for at least 5 years from the date of account closing. The Director General of the Department of Commercial Registration can order a legal entity to maintain certain accounts and/or documents for more than 5 years but not exceeding 7 years.

Note also that all fillings of accounting documents or financial statements with Thai administration must be done in Thai language. Be wary of the translation. I have seen clients to get in trouble because English items in their English accounts version were different from the Thai version. In the English version items were qualified as services (no withholding taxes if double tax treaty), in the Thai version the same items were entered as royalties (15% of withholding tax).

What do you do if you lost accounts or documents?

You must report any missing accounts and or lost documents to the Ministry of Commerce within 15 days from the date when the loss or damage to the documents was known by the company.

May your change of accounting method?

In principle, any accounting method adopted by a company must be used consistently. A company might change its accounting method only with prior approval of the Revenue Department.

What is the accounting period?

As explained above, a newly established company (or partnership) should close its accounts within 12 months from the date of its registration.

Thereafter, the accounts should be close every 12 months. If a company wishes to change its accounting period, it must obtain the written approval of the Director General of the Revenue Department.

Financial Statements (Balance Sheet) of juristic entities must be made at least once in every 12 months, at the end of the financial year of the company and contain a summary of the assets and liabilities of the company and a profit and loss account, Auditing and Filing of Financial Statement.

The financial statement must be examined and certified by one or more authorized auditors and submitted for adoption to a general meeting within 4 months after the date of closing of the accounting period of the company and be submitted to the Revenue Department and to the Commercial Registrar for each accounting year.

What must be the content of financial statements?

A set of financial statements should contain the balance sheet, the income statement, the statement of changes in financial positions; notes and other statements and explanatory materials that are integral part of the financial statements.

Financial Statements shall be prepared on the accrual basis of accounting. Financial Statements must have the following qualities: understandability, relevance, reliability and comparability.

The information provided in financial statements must be readily understandable by users. However, information about complex matters should be included in the financial statements because its relevance to the economic decision-making needs of users should not be excluded.

What does relevance and materiality of a financial statements means?

To be useful, the information must be relevant to the decision-making needs of the users of the financial statements. An information is deemed material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.

What does reliability of a financial statements means?

To be useful, the information must be reliable, that is to say free from material error and bias and can be depended upon by users to represent faithfully that it purports to represent or could reasonably be expected to represent.

Faithful representation of transactions means that events must be presented with their substance and economic reality, not merely their legal form. Assets or income must not be overstated, liabilities and expenses not understated.

What does reliability of a financial statement means?

It is simple; the readers must be able to compare the financial statements of an enterprise through time or of able to compare it with different enterprises in order to evaluate their relative financial position, performance and changes in financial position.

Readers must also be informed of the accounting policies employed in the preparation of the financial statements, any changes in those policies and the effects of such changes. The effects of transactions and other events must be recognized when they occur, be recorded in the accounting records and reported in the financial statements of the periods to which they relate to, be prepared on the assumption that an enterprise is a going concern and will continue in operation for the near future.

Can you get in trouble for failing to comply with the reporting requirements?

Contrarily to an idea received, it is of a tremendous importance in Thailand that all corporate documents and all accounting documents be properly filed as they are several laws which provide for penalties of punishment for failing to file the proper documents in time and or to maintain proper and or documented accounts.

Penalties can go from a fine up to seven years of jail depending of the case. They are several laws that cover the subject and it might happen that two laws overlap each other.

In such case, whenever the same act is an offence violating several provisions of the law, the provision prescribing the severest punishment shall be applied to inflict punishment upon the offender. (Please see Section 90 and 17 of the Thai Penal Code).

Note also that several laws contain provision pursuant to which Directors of a company can also be made liable for punishment for the act of the company. Once again, be careful to manage your company by the book.

What are the penalties for non-adherence to the Accounting Act?

The Accounting Act contains several provisions that provide sanctions applicable to offences in relation to the maintaining of the accounts of a company.

For example, the following offences are punishable under the Accounting Act: the failure to prepare accounts when required to do so by law (fine not exceeding THB 30,000); the failure to close its accounts every 12 months; to deliver the bookkeeper accurate documents required or to have a qualified

Originally posted 2009-07-25 07:39:25.

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