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Thai Tax refunds and tax audit protection

Thai Tax Refunds and Tax Audit Protection in Thailand

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The Challenges of Tax Audits and Thai Tax Refunds

Understanding tax audits and Thai tax refunds is crucial for any individual or business operating in Thailand. The Thai Revenue Department (TRD) enforces tax laws with severe authority and often with pedantic enforcements it’s vital to be prepared in case of an audit. On the other hand, knowing how to properly request and receive tax refunds can alleviate tight cashflow and financial burdens.AO has a strong track record in successfully getting clients their tax refunds and protecting clients from TRD tax audits.

The Anatomy of a Tax Audit in Thailand

A tax audit in Thailand is a multi-step process that includes both informal and formal stages. The informal stage, known as a tax investigation, often involves meetings with TRD officers, company visits, and document requests. If issues remain unresolved, a formal tax audit ensues, during which TRD issues tax summons and can ultimately result in tax assessment letters. The key point is that an audit usually starts informally and escalates to a formal stage when necessary.

Factors Leading to a Tax Audit

An audit can be triggered by various factors such as:

  • Submission of a Thai tax refund request (whether corporate or personal)
  • Fluctuating profits or recurring business losses
  • Routine tax supervision by the Thai Revenue Department
  • Government focus on specific businesses or transactions

Tax Audits and Statute of Limitations

Tax authorities have the right to audit your business if they suspect any inadequacies or falsehoods in your tax returns. These audits can go back five years from the filing date or up to ten years in cases involving intent to evade tax. The statutory limitation for tax assessment in Thailand is ten years.

 

Focus Areas for Thai Tax Authorities

Current areas of focus for tax authorities include:

  • Review of any changes in accounting policy (e.g., inventory, revenue recognition, depreciation rate, etc.).
  • Detailed reconciliation of Output VAT/Input VAT against accounting revenues and expenses, including detailed review of original tax invoices for errors and non-deductible expenses.
  • Review of deductibility for management service fees or expenses allocated to Thailand by foreign affiliates.
  • Review of Related-Party Disclosure Form compliance and details supporting international inter-company transactions and transfer pricing.
  • Compliance with foreign currency conversion rules concerning expenses & revenues / assets & liabilities in foreign currency.
  • Inventory management and stock card reporting, including non-deductible provision for obsolete/slow moving/return/damaged items.
  • Fixed assets disposal (e.g. sold, destroyed, and written-off), impairment, or revaluation of assets.
  • Detailed review of sales promotion expenses, entertainment expenses, transportation and travel, etc.
  • Review of supplier contract details against WHT rates, computation and timing of submissions.
  • Review of supplier and customer contracts for applicable Stamp Duty adherence.
  • Reconciliation of mid-year tax filing estimates against year-end taxable profits to assess penalties for under-estimation greater than 25%.

 

 Tips for a Smooth Tax Audit

  1. Know the Process and Players: Always understand who is involved in the audit and what documents you’ll need to provide. Tax audits can fluctuate significantly between one province and the next, and even between TRD offices within the same province.
  2. Realistic Expectations: Mistakes can be found during the audit; the goal is to negotiate to minimize assessment and penalties.
  3. Full Disclosure: Provide all the information requested by the TRD officer to expedite the process.
  4. Seek Expert Advice: Consult with your tax advisor for any uncertainties to mitigate risks effectively. AO has a successful record in navigating tax audits and achieving tax refunds for our clients.

Common Pitfalls to Avoid

  1. Going Uninformed: Make sure the right person is in charge of oversight and communications during the tax audit process within your organization.
  2. Overconfidence: Don’t expect to “win” on all fronts during the audit; instead, be prepared to make concessions.
  3. Being Evasive: Transparency is key. Attempts to hide or obscure information can lead to severe penalties.
 
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John Casella

Chief Executive Officer

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John has more than 30 years of professional experience in Thai Tax Refunds and Audits, accounting and business consulting for a wide range of companies and projects in South-East Asia and North America. He holds active licenses as both a Certified Public Accountant in the USA and a Chartered Professional Accountant in Canada. 

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John joined AO in 2022, after building up a strong team at PKF and Baker Tilly where he was in charge of the accounting, tax advisory and corporate legal teams, as well as provision of integrated services to accounting and payroll clients. John first started working in Thailand in 1997 and spent 10 years in corporate advisory services. He began his career based in Canada as a financial auditor for Arthur Andersen.

The Most Frequent Questions

A tax audit in Thailand starts with an informal investigation where the TRD may request documents and conduct meetings. If unresolved, it escalates to a formal audit with tax summons and assessment letters.

Thai Tax refunds are generally processed after the annual tax return is filed and assessed. If you've overpaid your taxes, you can apply for a refund which may trigger an audit to verify the claim

Yes, if it's found that you've overpaid your taxes, a refund may be issued after the audit is completed.

If you have more questions?

An audit isn't necessarily mandatory for all, but any business or individual can be subjected to an audit based on several triggering factors like fluctuating profits or a Thai Tax refund request.

Tax audits can be triggered by various factors such as submission of a Thai tax refund request, consistent business losses, or fluctuating profits. Being fully aware of these triggers can help you prepare better.

Audit defense services provide professional representation during a tax audit, which can be beneficial in negotiating reduced penalties and better outcomes. However, the "worth" depends on your specific circumstances and potential liabilities.