Thailand Half Year Corporate Income Tax Returns - How to file them without fear of the 20% tax shortfall penalty
Tax Advantage Article | August 2008
Half-year corporate income tax returns are required to be filed within 2 months after the end of an entity's half-year, and for most corporate entities in Thailand, 31 August is the last day for filing the tax return and paying the half-year tax amount.
Section 67 bis of the Revenue Code prescribes the basis on which half-year tax is required to be computed and paid, as follows:
And Section 67 ter of the Revenue Code prescribes that when a corporate entity estimates a net profit amount for an entire year that is lower than the actual net profit amount for the entire year by more than 25%, the corporate entity is subject to a penalty of 20% of the shortfall half-year tax not paid.
But the Section 67 ter penalty prescription states four more very important words … “without a reasonable excuse”.
That is, the 20% penalty under Section 67 ter of the Revenue Code cannot be imposed when an entity has a “reasonable excuse" for underestimating its net profit.
It is another one of the tax-facts-of-life in Thailand that irrespective of a “reasonable excuse” being honest and legitimate, it's just about impossible to get a Thailand Revenue Dept audit officer to believe you.
The easiest and safest way for corporate entities to have a "reasonable excuse" is to follow the Director-General's Instruction No Paw 50/2537 to his Revenue officers dated 31 August 1994, which prescribes as follows:
In the case of an entity that is required to prepare an estimated net profit amount, and the entity files a half-year income tax return with an estimated net profit amount and the half-year tax payment is not less than one-half of the tax paid for the previous year, this case shall be treated as a reasonable excuse.
Accordingly, by simply estimating a net profit amount for the current year and paying a half-year tax amount that is not less than one-half of the amount of tax paid for the previous year, you will have a “reasonable excuse”!
This Tax Advantage Article is general information only. It should not be used to determine any matter without consulting with an experienced Thailand tax advisor.
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