Companies operating in Thailand should be cautious about matters that could cause surcharges, fines or investigations by the Revenue Department. This article will guide you through the main common tax mistakes that businesses in Thailand often make.
TABLE OF CONTENTS
1. VAT registration
If the company has an annual turnover exceeding 1.8 million baht, the company must register with the VAT system (Form VAT 01) before commencing business or within 30 days after income exceeds the threshold.
Failure to register on time may incur a penalty of two times the tax rate from any revenue over 1.8 million baht, with a 1.5% surcharge added to it every month.
However, if your company is only selling goods or services that are exempt from VAT, your company is not required to register for VAT.
2. VAT tax point
The tax point of VAT differs depending on whether the company is selling goods or providing services.
Type of business
Sale of goods
Delivery of goods or Get paid or Issue tax invoice whichever comes first
Provision of services
Receipt of payment for service fee or Issue tax invoice whichever comes first
The VAT registrant shall prepare a tax invoice and a copy thereof for every sale of goods or provision of services promptly at the time the VAT liability arises: Deliver of goods or Receipt of payment for service fee.
A Tax invoice shall be delivered to the purchaser of goods or the recipient of services.
3. Tax invoice
The tax invoice must contains at least the following:
The wording “Tax invoice” in a prominent place;
The name, address and taxpayer identification number of the VAT registrant issuing tax invoice;
The name, address and taxpayer identification number of the purchaser;
Serial numbers of tax invoice;
Description, type, category, quantity, unit price and total value of goods or services;
The amount of VAT charged on goods or services;
The date of issuance;
The mention “Head office” or “Branch No. …” for both seller and purchaser.
Tax invoice shall be in Thai language or English with Thai language, Thai currency and Thai or Arabic numeral. However, in some businesses, tax invoice is required to be in foreign currency, the VAT registrant shall issue such a tax invoice upon approval from the Director-General of the Revenue Department.
Failure to do so shall be subject to fine not exceeding 2,000 baht per case. For the first mistake, the fine will be not exceeding 100 baht per case. The company shall not change the tax invoice format during the fiscal year. Your accountant can help you prepare the correct tax invoice template.
4. Withholding tax
4.1 Domestic payments
Withholding tax (“WHT”) is the deduction from payment made to service suppliers. Each type of service has a different applicable rate. For example advertising 2%, professional services 3% and rent 5%. The company needs to collect WHT on behalf of the Revenue Department for service provided. The WHT shall be reported and submitted to the Revenue Department within the 7th day of the following month in which the payment was made. In addition, the company is also required to issue a tax certificate as a proof for every deduction.
4.2 Foreign payments
A final withholding tax is imposed on the remittance of income to foreign companies not carrying on business in Thailand in respect of the following:
Brokerage, fees for services
Rental of property
The above taxes may be reduced or exempt under Double tax treaties double tax treaties.
The WHT withheld must be submitted to the Revenue Department within the 7th day of the following month. The fine for late submission will incur a fine of (1) 100 baht per form within the first 7 days late or (2) 200 baht per form after 7 days late, with a 1.5% surcharge of the tax liability added to it every month.
5. Stamp duty
Stamp duty is levied on the execution documents or instruments specified in the stamp duty schedule in the Revenue Code. This includes transfers of land, leases of immovable properties, stock transfers, debentures, mortgages, life assurance policies, annuities, power of attorney, promissory notes, letters of credit, cheques etc.
For more information of stamp duty, please refer to Revenue Department website.
Payment of stamp duty:
Affixing the stamps on the instrument and crossing them out;
Having a stamp impressed on the paper instrument; or
Filing form OrSor 4 and paying the duty by cash or cashiers cheque
However, there are certains instruments required to have the stamp duty paid in cash.
Lease of land, buildings, other construction or floating house with rental of 1 million baht or more for the entire lease period
Hire of work agreement with remuneration of 1 million baht or more
The stamp duty must be paid within 15 days from the date on which an instrument is executed in Thailand.
If you require any support with this topic or any other business operations, please do not hesitate to contact us.
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