A tax audit in Thailand is normal. In some cases, it can be triggered by discrepancies in submissions or non-compliance. It could be due to suspicious financial reporting in other cases.
Preparation is essential regardless of the reason. Auditors are keen on:
- Documentation
- Accuracy
- Consistency in the records presented to the Revenue Department.
Doing it in a systematic way minimizes risk and saves on audit time.
The following is a useful list of checkpoints to help you prepare for that audit.
Organize your essential accounting records
Ensure all accounting books are accurate and up to date. This comprises the:
- General ledgers
- Trial balances
- Profit and loss statements
- Balance sheets.
The figures should align with the bank statements and tax returns filed in the past. Any unexplained variance will most likely invite scrutiny.
Review corporate income tax filings
Auditors will investigate mid-year (PND 51) and annual (PND 50) tax returns. Ensure that the reported income is consistent with financial records. The deductions should be:
- Reasonable
- Appropriately classified
- Well-documented.
Personal or unsupported expenditure is not allowed.
Prepare VAT documentation
Where your business is registered under VAT, ensure that all tax invoices meet the legal requirements. The input and output VAT should reconcile with monthly PP30 returns. The most frequent reasons for reassessment and penalties include:
- Missing invoices
- Mismatched totals
- Wrong formats.
Review transfer pricing and foreign transactions
Firms with foreign shareholders or cross-border dealings must be ready to defend pricing and payment systems. Supporting records must demonstrate arm’s length terms. At this point, many businesses use professional tax services in Thailand to ensure their documentation meets the Revenue Department’s standards.
Check withholding tax records
Withholding tax is one of the common areas of audit. Review things like:
- Monthly filings
- Payment receipts
- Withholding tax certificates given to vendors or employees.
The withheld amount must correspond with:
- Contracts
- Invoices
- Payroll records.
Mistakes in this area can lead to accumulated liabilities.
Confirm payroll and social security compliance
Payroll documents should be consistent with personal income tax returns and social security payments. Auditors can examine employee documents, including:
- Contracts
- Benefits
- Bonuses
- Allowances, etc.
They do this to ensure correct tax treatment. Wrong classification of workers or inadequate reporting of pay raises increases audit risk.
Gather supporting contracts and agreements
Gather the following:
- Service contracts
- Lease contracts
- Loan contracts
- Intercompany arrangements.
These documents support expense claims, withholding tax positions, and pricing structures. Any mismatch between the accounting records and contracts usually results in further enquiry.
Appoint a single point of contact
Appoint one person to communicate with the auditors. This guarantees uniformity in answers. Responses must be factual. They must be backed by documentation.
Hire tax experts before and during the audit
Consult tax experts before the audit commences. They will discover and resolve any possible problems in advance. Tax professionals are able to:
- Inspect filings
- Draft explanations
- Communicate with auditors
- Respond strategically.
They will minimize the chances of poor communication, unwarranted disclosures, and penalties.
Concluding thoughts
Companies that plan well and engage skilled tax advisors are much more likely to handle audits effectively. Active expert assistance mitigates compliance risk and ensures audits are completed with limited operational interference.
