What Should Entrepreneurs Know About Taxes
Many businesses have adjusted themselves to changes during the COVID-19 pandemic. Some businesses created a new opportunity against the crisis while others have controlled their expenses for survival. No matter what kind of change, tax is an important issue that entrepreneurs must know.
Tax Planning: Things need to do before starting a business.
1.Personal or Juristic person Business
1. Entrepreneurs should make their decision when starting a business, whether it will be a Personal or Juristic person as tax rate varies by the type of business. For a business with a net income over 750,001 baht, registration as a Juristic person is recommended because entrepreneurs pay tax at 15% which is less than the individual income rate.
(Ref: Individual income tax rate 2017 https://www.rd.go.th/publish/fileadmin/user_upload/news/news11_2560.pdf and Juristic person income tax rate 2015 https://www.rd.go.th/publish/841.0.html )
|Net income / Net profit||The individual income tax rate||Juristic person income tax rate|
|0 – 150,000||Tax exemption||Tax exemption|
|150,001 – 300,000||5%|
|300,001 – 500,000||10%||15%|
|500,001 – 750,000||15%|
|750,001 – 1,000,000||20%|
|1,000,001 – 2,000,000||25%|
|2,000,001 – 3,000,000||30%|
|3,000,001 – 5,000,000||20%|
2.Advance Tax Plan
A good accounting system requires an advance tax plan starting by recording income/expense and keeping track of all financial transactions aligning with accounting standards and tax law. Proper practice will help entrepreneurs forecast how much tax to pay and then plan ahead for actual expenses to get the tax breaks. (Entrepreneurs who have no background in Accounting, please download RDSMEs free at http://www.rd.go.th/publish/41464.0.html )
If entrepreneurs want to register the company as a Juristic person, they should define objectives by considering a potential business in the future. In case there’s any change or extension in the business model, the company objectives must be amended according to the criteria of the Department of Business Development so that the business can sustain itself legitimately.
If an annual net income is over 1.8 million baht, please consider registering your business for VAT within 30 days from the date achieving 1.8 million baht. Entrepreneurs can check the list of businesses with VAT exemption (https://www.rd.go.th/publish/307.0.html ) and start paying VAT for extra income. If entrepreneurs violate this rule, their taxes will be additionally charged back from The Revenue Departmentv.
Apart from tax planning, entrepreneurs should know about expenses that can be managed for tax savings as follows:
1.Deduction of wear cost and depreciation on the date owning the assets at 40% of cost value for assets like computer and machine, and 20% for assets like factory/manufacturing plant.
2.Two times of expenses for wages of the elderly over 60 years old and no more than 15,000 baht, can be deducted. A request to exercise your Right of hiring the elderly labor can be done via The Revenue Department’s website https://newstartup.rd.go.th/taxdeduct/main.jsp
3.Two times of expenses for doing research plus developing technology and innovation can be deducted. Submit research details at the National Science and Technology Development Agency for verification and approval.
4. Two times of expenses for training and developing labor skills can be deducted, for both outside and in-house training.
5. Two times of expenses for Debit card payment fees through EDC (Electronic Draft Capture) can be deducted, providing that the fee is paid from November 1, 2016, to December 31, 2021.
6. A maximum of 2% of net profit for donating money or assets to support COVID-19 cases can be deducted. Besides, entrepreneurs who registered their businesses for VAT will get VAT exemption from March 5, 2020, to March 5, 2021.
Good tax planning is another factor to help the business run smoothly, especially expenses that have the potential to get tax deductions. It’s important for entrepreneurs to follow up on news from The Revenue Department to ensure that they don’t miss out on all the advantages.