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 prepared in any language, provided that a Thai translation is attached. All accounting entries should be written in ink, typewritten, or printed.
Specifically, Section 1206 of the Civil and Commercial Code provides rules on the accounts that should be maintained as follows:
The directors must cause true accounts to be kept:
- Of the sums received and expended by the company and of the matters in respect of which each receipt or expenditure takes place;
- Of the assets and liabilities of the company.
A. Imposition of Taxes
Companies are required to withhold income tax from the salary of all regular employees.
A value-added tax of seven percent is levied on the value added at each stage of the production process, and is applicable to most firms. The VAT must be paid on a monthly basis.
A specific business tax is levied on firms engaged in several categories of businesses not subject to VAT, based on gross receipts, at a variable rate ranging from 0.1 ñ 3.0 percent.
Corporate income tax is 30 percent of net profits and is due twice each fiscal year. A mid-year profit forecast entails advance payment of corporate taxes.
B. Annual Accounts
A newly-established company or partnership should close accounts within 12 months from the date of its registration. Thereafter, the accounts should be closed every 12 months. The performance record is to be certified by the company auditor, approved by shareholders, and filed with the Commercial Registration Department, Ministry of Commerce, within five months of the end of the fiscal year, and with the Revenue Department, Ministry of Finance, within 150 days of the end of the fiscal year.
If a company wishes to change its accounting period, it must obtain written approval from the Director General of the Revenue Department.
C. Accounting Principles
In general, the basic accounting principles practiced in the United States are accepted in Thailand, as are accounting methods and conventions as sanctioned by law. The Institute of Certified Accountants and Auditors of Thailand is the authoritative group promoting the application of generally accepted accounting principles.
Any accounting method adopted by a company must be used consistently and may be changed only with approval of the Revenue Department.
Certain accounting practices of note include:
Depreciation. The Revenue Code permits the use of varying depreciation rates according to the nature of the classes of assets which have the effect of depreciating the assets over periods that may be shorter than their estimated useful lives. These maximum depreciation rates are not mandatory; a company may use lower rates that approximate the estimated useful lives of the assets. But if a lower rate is used in the books of the accounts, the same rate must be used in the income tax return.
Accounting for Pension Plans. Contributions to a pension or provident fund are not deductible for tax purposes unless these are actually paid out to the employees, or the fund is approved as a qualified fund by the Revenue Department and is managed by a licensed fund manager.
Consolidation. Local companies with either foreign or local subsidiaries are not required to consolidate their financial statements for tax and other government reporting purposes, except for listed companies which must submit consolidated financial statements to the Securities and Exchange Commission of Thailand.
Statutory Reserve. A statutory reserve of at least five percent of the annual net profits arising from the business must be appropriated by the company at each distribution of dividends until the reserve reaches at least 10 percent of the company's authorized capital.
Stock Dividends. Stock dividends are taxable as ordinary dividends and may be declared only if there is an approved increase in authorized capital. The law requires the authorized capital to be subscribed in full by the shareholders.
D. Auditing Requirements and Standards
Audited financial statements of juristic entities (that is, a limited company, a registered partnership, a branch, or representative office, or a regional office of a foreign corporation, or a joint venture) must be certified by an authorized auditor and submitted to the Revenue Department and (except for joint ventures) to the Commercial Registrar for each accounting year.Auditing standards conforming to international auditing standards are, to the greater extent, recognized and practiced by authorized auditors in Thailand.