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Taxation in Thailand: Common Mistakes, Penalties, and How to Avoid Them

Let’s take a look at some of the most common tax mistakes and penalties in Thailand, as well as how you can avoid them.

Taxation in Thailand

Taxes in Thailand are complicated, but they are unavoidable if you are doing business in the country. Thailand’s Revenue Code contains over 7 chapters and 143 pages. As a result, you can violate any rules without even realizing it.

A minor tax mistake may have a greater effect on your company than you think. When you make a mistake, you are most likely to face a penalty and problems with the Revenue Department. Fixing the mistake can cost you valuable time and money.

Below, we have compiled the common tax mistakes and penalties in Thailand to help you avoid them.

Key Points

  • Taxes in Thailand are complicated, but they are unavoidable if you are doing business in the country.
  • Fines, imprisonments, work permit cancellations, and tax refund issues are the most common tax penalties.
  • Some of the most common tax mistakes in Thailand are creating fake invoices, withholding tax deductions, and neglecting VAT registration.

Common Penalties

Tax penalties in Thailand are generally divided into direct (fines and imprisonments) and indirect penalties (work permit cancellations and tax refund issues).

Direct Penalties

Fines
In Thailand, the penalties for failing to follow tax laws usually range from 1,000 baht to 200,000 baht, depending on the nature of your situation. The interest is calculated immediately after the taxing mistake. In addition to the fixed fines, there is a monthly interest rate of 1.5 percent. If you fail to deduct withholding tax, don’t issue invoices, or create fake invoices, you will have to pay two times the tax amount that you originally need to pay.

Imprisonment
In Thailand, another common penalty for not sticking to tax laws is imprisonment. Even a minor offense such as forgetting to deduct withholding tax on a single invoice can result in one month of jail time.

In Thailand, the penalties for failing to follow tax laws usually range from 1,000 baht to 200,000 baht, depending on the nature of your situation.

Indirect Penalties

Asset Seizure
If you cannot pay taxes and fines, the Revenue Department has the right to seize your assets. They can even seize your assets immediately without waiting for the court judgment.

Tax Refunds Issues
This is an indirect penalty that is not stated in Thailand’s Revenue Code. A minor taxation mistake can further slow your tax refund, which is already a lengthy procedure. Because of this, you cannot get any tax refund at all, causing a significant loss of money because the amount of tax refund will easily exceed $100,000 per month, depending on your company’s income.

Work Permit Cancellation
Your work permit can be canceled if you don’t pay taxes the right way. To issue or extend a work permit in Thailand, you will need the latest year of tax certificates and financial statements.

It is advised that you work with a professional accountant for your company to prevent making any tax mistakes that may have a serious impact on your company.

Common Tax Mistakes

VAT Registration
It is not mandatory to register for VAT immediately after forming a company in Thailand. However, without a VAT registration, your company would be unable to collect the withholding tax from sellers or consumers and cannot issue a tax invoice. This shouldn’t be an issue until revenue exceeds 1.8 million baht a year.

According to Thai Revenue Department rules, all Thai companies must register for VAT within 30 days. Failure to do so results in a penalty of double the tax rate for any revenue above 1.8 million baht and 1.5 percent interest every month.

Issuing Invoices
If your company issues an invoice that is not the same as the Revenue Department’s standards, you will likely face a 2,000 baht penalty per invoice. An invoice is defined as any financial record, including tax invoices, tax certificates, debit notes, credit notes, etc.

If your company intentionally doesn’t issue an invoice to stop paying taxes, the punishment includes seven years in jail and a 200,000 baht fine. In addition, you must pay two times the tax rate with 1.5 percent interest per month.

Creating Fake Invoices
Issuing fake invoices is against the Revenue Department Section 65. If you issue fake invoices, you can be imprisoned for seven years per single fake invoice. Also, your company will have to pay 1.5% interest per month.

Withholding Tax Deductions
Withholding tax can be complicated. The majority of company services are subject to withholding tax, so you may need to collect it on behalf of the Revenue Department for the service your company provides. Then, you will have to report and pay the withholding tax to the Revenue Department every month. There’s a different rate of withholding tax for different services. Also, withholding tax certificates need to be issued for every deduction.

If you forget to deduct withholding tax, issue a tax certificate, or give a monthly report to the Revenue Department, you can face imprisonment and fines. Your company may also need to pay two times the withholding tax that you originally need to pay.

Delayed Tax Payments
You have to file and report your taxes to the Revenue Department at the beginning of every month. If you don’t pay your taxes on time, you will face a 1,000 baht to 2,000 baht fine with a 1.5 percent monthly interest rate per case.

How to Avoid Tax Mistakes

A single tax mistake can have a significant effect on your company. While you might try to minimize the expense of running a business, mistakes can occur simply because you have never heard of one of the tax rules. To avoid this, appoint a professional accountant to manage the tax matters. Hiring an accountant has additional advantages. They will advise you on reducing taxable income, getting more money from tax returns, and even helping you with work permits and visa problems. Finding a dedicated firm to support you with your taxes helps you concentrate on running your business in Thailand.