Lawful corporate income tax planning for SMEs

Good tax planning is not about finding ways to dodge tax. It means understanding your rights and duties under the law, then structuring transactions and documents so that the business pays its tax correctly and in the right amount, without taking on unnecessary risk. This article covers the key points of corporate income tax for small and medium-sized businesses.

Tax rates for SMEs

A company or juristic partnership with paid-up capital of no more than THB 5 million on the last day of the accounting period, and revenue from selling goods or providing services of no more than THB 30 million in the accounting period, pays tax at tiered rates as follows:

Businesses that do not meet these conditions pay tax at the standard rate of 20% of net profit. A capital increase, or revenue that grows past the threshold, therefore affects the tax rate too, so assess the effect before deciding.

Key tax dates

• The half-year return (P.N.D.51, ภ.ง.ด.51): filed within 2 months after the end of the first 6 months of the accounting period, based on an estimate of net profit for the full year. If the estimate falls short of the actual net profit by more than 25% without reasonable cause, a surcharge of 20% of the tax underpaid may apply.
• The annual corporate income tax return (P.N.D.50, ภ.ง.ด.50): filed within 150 days of the end of the accounting period, together with the audited financial statements.

Principles of sound tax planning

1. Keep expense documents complete and correct: expenses with no evidence, or with incomplete evidence, are often disallowed in a tax audit.
2. Make sure expenses relate to the business: keep the personal expenses of directors and shareholders clearly separate.
3. Plan the timing of investments: buying fixed assets affects the depreciation that can be deducted each year, so plan purchases together with the budget.
4. Use the incentives available: from time to time the government offers allowances or additional expense deductions, for example for research and development spending or under promotional measures announced each year. Check whether the business qualifies.
5. Keep directors' remuneration reasonable: pay it as approved and with supporting evidence, and withhold the recipient's tax correctly.
6. Make the mid-year estimate realistic: this reduces the risk of a surcharge for underestimating.

What not to do

• Using tax invoices or other documents that do not come from real transactions
• Leaving part of the revenue unrecorded, or receiving money through personal accounts
• Recording expenses that have nothing to do with earning the business's income

Besides back taxes with penalties and surcharges, these practices may also be criminal offences, and they put the business under closer scrutiny at its next audit.

Frequently asked questions

Does a loss-making company still have to file P.N.D.50?

Yes, even if it made a loss or had no revenue. A net loss can be carried forward and deducted as an expense in later accounting periods, for no more than 5 accounting periods, subject to the conditions in the law.

If we increase our capital above THB 5 million, do we still get the SME rates?

The condition looks at paid-up capital on the last day of the accounting period. If it exceeds THB 5 million on that day, the business pays tax at the standard rate for that accounting period.

When should we start tax planning?

From the start of the financial year, with another review before filing P.N.D.51. Planning at year end usually leaves few options and risks rushed decisions.

Let us help you plan your tax

Kerwin & Vance reviews your business's structure and transactions to plan tax systematically and within the law. Find out more about our Tax services, or book a consultation with us.

This article provides general information only. Tax rates, conditions and measures may change with the relevant laws and announcements, so check the latest information or consult a specialist before taking action.