Accounting in Thailand: An Overview of the Legal Framework

Understanding the legal framework of the Accounting in Thailand

Strict accounting compliance is mandatory for all businesses operating within Thailand. Companies must adhere to both national accounting standards and prevailing regulations to ensure transparency, accuracy, and legal compliance. The key regulatory bodies that supervise accounting in Thailand include the Thai Revenue Department, the Department of Business Development under the Ministry of Commerce, and the
Federation of Accounting Professions. These regulatory agencies guarantee that businesses maintain proper accounting files and follow statutory criteria, decreasing the risks related to monetary misrepresentation and tax evasion. Failure to abide by statutory accounting prerequisites could lead to administrative penalties, fines, and even lawful implications under Thai law.
The Accounting Act B.E. 2543 and the Civil and Commercial Code of Thailand establish the legal framework for accounting standards, reporting duties, and fiscal record-keeping. The Revenue Code of Thailand governs tax-related accounting practices, like requirements for corporate income tax, value-added tax, and withholding tax adherence. Furthermore, the Public Limited Companies Act B.E. 2535 imposes precise financial disclosure duties on publicly listed companies, while private limited companies must follow the rules established in the Civil and Commercial Code and the Department of Business Development’s guidelines.
The Federation of Accounting Professions is responsible for developing and maintaining accounting standards in Thailand. Thai enterprises must follow the Thailand Financial Reporting Standards, which are largely aligned with the International Financial Reporting Standards. Companies that fail to comply with these demands may face substantial penalties, revocation of business licenses, and possible legal action under Thai law.

Accounting Standards in Thailand

Standards of the accounting in Thailand primarily follow the Thailand Financial Reporting Standards which align with the International Financial Reporting Standards (IFRS). These norms ensure consistency and transparency in monetary statements and are split into two key types:

TFRS for Publicly Accountable Entities (PAEs): These standards are mandatory for companies listed on the Stock Exchange of Thailand (SET), financial institutions, and regulated entities under the Securities and Exchange Commission of Thailand (SEC).
TFRS for Non-Publicly Accountable Entities (NPAEs): These are applicable to small- and medium-sized enterprises (SMEs) and non-listed businesses. However, NPAEs may voluntarily adopt the full TFRS to enhance credibility and compliance with international standards.

What defines a non-publicly accountable entity?

It refers to a company that does not have equity instruments or bonds traded in a public market, whether on a domestic or foreign stock exchange or in an over-the-counter market. Additionally, it is not in the process of submitting financial statements for public trading. It also doesn’t primarily hold assets for broad outsider groups like financial, insurance, or investment companies. Furthermore, it isn’t defined as a Public Limited Companies. It also doesn’t fall under new categories from future regulation updates. Foreign companies may apply IFRS in their financial reporting, subject to the approval of the Thai Securities and Exchange Commission (SEC) or the Revenue Department, where applicable.

Fiscal year ends and accounting periods in Thailand

The default fiscal calendar year close for accounting in Thailand is December 31st, as laid out in Part 65 of The Revenue Code of Thailand. However, businesses can apply for an alternative financial year-end upon obtaining prior written approval from the Director General of the Revenue Department. Moreover, any planned changes for the accounting periods in Thailand necessitate regulatory permission under the Accounting Act B.E. 2543. This confirms financial reporting remains consistent and meets regulatory benchmarks.

Bookkeeping and Record-Keeping Requirements

Accounting laws in Thailand necessitate that corporations maintain precise and up to date accounting records reflecting an honest and fair financial position. The Accounting Act B.E. 2543 and the Civil and Commercial Code (CCC) of Thailand necessitate enterprises to retain records for a minimum of five years, extendable to seven years for specific industries as per Section 87 of the Revenue Code. To assure compliance to the rules of accounting in Thailand, corporations must systematically record and store financial documents in an organized way. The following records are compulsory for all registered businesses in Thailand:

General journal and ledger: A chronological record of all financial dealings, like details of credits and debits, confirming an accurate overall financial view.
Profit and loss statements: A financial statement summarizing earnings, costs, and net profit or loss for a given accounting period.
Balance sheets: A statement reflecting a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
Bank statements and check ledgers: Documentation of all financial transactions conducted through banking institutions, like issued and received checks.
Records of payments and receipts: A detailed log of incoming and outgoing financial dealings, validating the company’s cash flow.
Audit reports (internal and external): Comprehensive assessments of the company’s financial statements, confirming regulatory compliance and financial accuracy.
Electronic fund transfer and credit card transaction records: Verification of all electronic transactions, ensuring accuracy in financial reporting All financial documents must be prepared in Thai, or if in a foreign language, must be accompanied by a certified Thai translation to ensure legal compliance with standards of accounting in Thailand.

Companies are required to implement robust internal control mechanisms to safeguard financial data, prevent discrepancies, and facilitate smooth audits. Non-compliance with bookkeeping regulations may lead to fines, legal penalties, and challenges in tax assessments during regulatory audits. To maintain an organized accounting system in Thailand, enterprises invest in expert accounting software satisfying Thai standards. Additionally, engaging authorized Thai accountants or accredited auditors can help companies confirm suitable financial reporting, minimize flaws, and conform to local regulations.

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Accounting in Thailand: Annual Financial Statements and Auditing Requirement

Under Sections 1175 and 1195 of the Civil and Commercial Code, Thai companies must organize annual financial statements, including:

A statement of financial position summarizing a company’s holdings, liabilities, and shareholders’ value at the fiscal year’s conclusion.
A profit and loss statement particularizing earnings, disbursements, and net profit or deficiency for the reporting period.
A statement of variations in equity outlining capital additions, dividends paid, and retained profits.
A cash flow statement indicating cash inflows and outflows, grouped into operational, investment, and financing activities.
Notes to the financial statement offering comprehensive explanations of accounting policies and key financial disclosures.

These financial statements must be examined and certified by an external certified auditor, approved by the Federation of Accounting Professions (FAP). The Revenue Code and Accounting Act mandate the submission of audited financial statements to the Revenue Department and the Department of Business Development (DBD) within five months from the fiscal year end.

Failure to comply with these accounting requirements in Thailand may result in administrative penalties of up to 200,000 THB, as per the Accounting Act B.E. 2543 (2000). Repeated non-compliance can lead to further legal consequences, including potential revocation of business licenses or additional financial sanctions.

Additionally, publicly listed companies and certain regulated entities face more stringent obligations set by the Securities and Exchange Commission of Thailand (SEC). Shorter reporting timeframes and additional disclosures provide transparency to investors.

Annual General Meeting and Public Disclosures imposed by accounting rules in Thailand

For private and public limited companies, the board of directors must convene an Annual General Meeting (AGM) within four months from the fiscal year-end to approve audited financial statements.
Private and public limited companies must file audited financial statements with the DBD within one month post-AGM. However, Public limited companies must publish their balance sheet in a national newspaper within one month of shareholder approval, as required by the Public Limited Companies Act B.E. 2535 (1992).
Finally, Foreign companies (branch offices, representative offices) must submit financial statements to the Ministry of Commerce (MOC) within 150 days post-fiscal year-end.
Failure to meet statutory reporting deadlines can result in fines ranging from 50,000 to 200,000 THB, and potential business license revocation for repeat offenses.

Tax Accounting and Compliance in Thailand

Taxation compliance in Thailand is crucial due to integral accounting obligations under the Revenue Code. Companies must file half-yearly tax returns (PND 51) and annual tax returns (PND 50). Corporate income tax is calculated based on net profit and must be paid within the stipulated deadlines to avoid penalties.

Those registering for value-added tax must submit monthly filings according to the VAT Act B.E. 2535 (1992), with rates varying depending on goods or services. Businesses must also properly deduct and remit withholding taxes according to Sections 50 and 70 of the Revenue Code for payments including salaries, services, and dividends. Specific business sectors like financial institutions are subject to additional specific business tax regulations under Section 91 of the Revenue Code.
Disregard for tax duties may incur significant financial penalties, interest, and legal consequences from authorities. To prevent disputes, companies should utilize tax experts to ensure filings are completely accurate and rules are followed to maintain operations without interruptions.

Adhering to Thai accounting regulations is essential for maintaining corporate transparency and avoiding legal penalties. Businesses must ensure compliance with TFRS standards, maintain accurate records, file audited financial statements, and meet all tax obligations. Consulting with licensed Thai accountants or legal experts specializing in accounting law can help navigate complex regulations and minimized risks.

Conclusion

Understanding the framework of the accounting in Thailand and continuous regulatory changes allows companies to effectively manage finances and tax obligations, optimizing profitability. However, keeping informed requires proactive efforts as laws evolve. Long, complex sentences mixed with shorter, simpler ones help clarify intricacies and foster understanding for various stakeholders and authorities.
Moreover, non-compliance can result in heavy fines and loss of credibility. Ensuring adherence through accurate record keeping and on-time filings plays a crucial role in long-term success. While regulations aim to increase transparency, optimizing compliance efforts also streamlines business operations. Seeking expert guidance regularly is highly recommended to future-proof strategies and avoid pitfalls in Thailand’s dynamic environment.