Accounting

The tax year generally is the 12-month period ending on 31 December.A company, on the other hand, is free to choose any accounting term that does not exceed 12 months (a shorter year is allowed only in the year of incorporation, when there is a change of accounting method or in the year of dissolution). After selecting an accounting period, it cannot be changed unless formal authorization from the Revenue Department is obtained.

Thai Financial Reporting Standards (TFRS) are required to be applied in the preparation and presentation of financial statements of domestic publicly accountable entities. For non-publicly accountable entities (NPAEs), “TFRS for NPAEs” are required to be applied, but NPAEs can elect to apply TFRS. Both TFRS and TFRS for NPAEs are based on International Financial Reporting Standards (IFRS), however they do not include several options permitted by the IFRS as issued by the IASB.

Firms must keep books and follow accounting procedures specified in the Civil and Commercial Code, the Revenue Code and the Accounts Act. Documents may be created in any language as long as a Thai translation is included. Each accounting year, each firm must prepare a balance sheet and a profit and loss statement. External accounting control must be delegated to a group of auditors appointed by the firm and the commercial department of the Ministry of Treasury.

Each company has to produce a balance sheet and a profit and loss account for each accounting year. A mid-year profit prediction includes the payment of corporation taxes in advance. Any newly-established business or partnership shall conclude accounts within 12 months after its registration, according to Annual Accounts. Following that, the accounts should be closed every 12 months. The performance record must be certified by the corporate auditor, authorized by shareholders, and filed with the Commercial Registration Department of the Ministry of Commerce within five months of the fiscal year’s end, and with the Revenue Department of the Ministry of Finance within 150 days. If a corporation wants to modify its accounting period, it must get formal permission from the Revenue Department’s Director General.

The external control of accounts must be given to a body of auditors chosen by the company and by the commercial department of the ministry of Treasury.The Thai Accounting Professions Act requires certified public accountants (CPAs) to apply the Thai Standards of Auditing and other Thai standards on review and other assurance engagements issued by the Federation of Accounting Professions when auditing the financial statements of any entity that reports to Thai regulators.

The standard rate of VAT is 10%, but the rate is currently reduced to 7% until 30 September 2023.

Exports of goods and services are zero-rated. If the services are partially used in Thailand, the part of the services used in Thailand (if can be segregated) is subject to VAT at a rate of 7%.

There is no other VAT reduced rate in Thailand.

Some goods and services are subject to excise tax, including alcoholic and certain non-alcoholic beverages, tobacco products, boats, motor vehicles, playing cards, certain entertainment services, crystal glassware, etc.

Company Tax 20%

A domestic corporation is taxed on its worldwide income, but a foreign firm is taxed only on its income earned in Thailand.

A foreign corporation that does not do business in Thailand is liable to a 15% final withholding tax on certain forms of assessable revenue (e.g., interest, dividends, royalties, rents, and service fees) received from or in Thailand.

For corporate income tax purposes, capital gains are classified as regular income and taxed accordingly. As a result, capital losses can be deducted from net taxable gains.

Capital gains paid to foreign beneficiaries are subject to a 15% withholding tax, while profits earned by investors from some countries with whom Thailand has signed a double taxation agreement may be excluded.

Except for corporate income tax and VAT, taxes are generally deductible. The interest on money borrowed for the purpose of making a profit or starting a business is deductible. When incurred, start-up expenditures such as incorporation and registration fees are deductible. Bad debts are deductible (subject to criteria and processes), as are payments to a provident fund.Losses can be carried forward to offset earnings in the five accounting months following. Loss carryback is not permitted.

Donations to specified charities or for public benefit, as well as those to educational or sporting organizations, are tax deductible up to 2% of net earnings.Royalties, management service fees, and interest charges paid to overseas affiliates at arm’s length are also deductible.