Corporate Income Tax Preparation Checklist
By the end of May Thai companies have to file a corporate income tax return, use the following tax preparation checklist to gather the information you will need to prepare your tax return.
1) Income - Worldwide income
Thai companies are subject to tax in Thailand on their worldwide income; therefore you have to report all company income, no matter where it was born. Corporate income tax is worked on the accrual basis of accounting, so that income earned during a year is taxed in the year earned, regardless of whether the income has been received. Make sure that you include all the invoices you've sent out within the tax year as your income.
2) Gross profit margin
Be careful about your gross profit margin because the tax man always compares your rate with the industry rate and he will not accept a tax return showing you have a gross profit less than the norm.
As the accrual basis of accounting is used for income, you also can use the same method for your expenses. Any expenses derived within the tax year can be booked as expenses whether they have been paid or not.
There are some special deductions available, if you comply with their rules. These include:
- 200% deduction for Research and Development expenses.
- 150% deduction for job training expense.
Investment expenses - Buying fixed assets, such as computers and printers etc, cannot be deducted as onetime expenses, but you can depreciate them over the period, provided that the deduction does not exceed the cost percentage mentioned by the tax laws.
4) Non-deductible expenses
There are some expenses that are nondeductible and should be added back as income in your tax return:
- Donations that exceed 2% of net profits.
- Entertainment expenses that exceed 0.3% of gross receipts or exceeding 10 million baht.
- Private expenses.
- Expenses that do not have an official receipt.
- Corporate income tax.
5) Net losses carried forward from the last five accounting periods
You can use net losses from the last five years to offset against the current year's profit.
6) Tax credit
If you have had tax withheld by your customers when paying for services, you can use that as a tax credit provided that you keep all of the withholding tax certificates.
7) Semi-annual tax prepayment (Form CIT 51)
Check how you have estimated your annual profit and tax in your semi-annual tax return and compare this with your actual annual profit. If the profit is 25% more than you filed at the half year, you will have to pay a 20% penalty on the difference -unless you think you can explain to the taxman, in writing with your tax return, why this has happened. But please keep in mind that it is a rare that he will give up his penalty.
8) Tax rate
The normal tax rate is 30% but there is a reduced corporate income tax rate for Thai company with paid-up capital of 5 million baht and lower. These companies are subject to a CIT rate of 0% on net profit 0-150,000 THB, 15% on net profit up to 150,001-one million baht and 25% on net profit between one million and three million baht. Profits exceeding three million Baht are subject to CIT ordinary rate of 30%.