Should SMEs apply for tax audit exemption program?
The Government recently issued an Emergency Decree aimed at incentivizing taxpayers to regularize their tax affairs on a forward looking basis. Any tax examination, inquiry, assessment, payment demands or criminal prosecution in respect of income generated prior to 1 January 2016 will be waived. The Emergency Decree for the so-called ‘tax audit exemption program’ is in force and available to taxpayers from 1 January 2016. Companies and juristic partnerships whose revenue does not exceed THB 500 million for any accounting period ending on or before 31 December 2015 can apply for the tax audit exemption program. This would invariably include Small Medium Enterprises (SMEs) which is a company with paid up capital not exceeding THB 5 million and annual turnover not exceeding THB 30 million. The audit exemption will apply to income tax, VAT, specific business tax (SBT), withholding tax and/or stamp duty due by an eligible company, juristic partnership or SME if such taxes relate to income generated or expenses incurred in any accounting period ending on or before 31 December 2015.
If the eligible company, juristic partnership or SME wishes to apply for the tax audit exemption program it must notify and register with the Revenue Department before 15 March 2016. In addition, the eligible company, juristic partnership or SME must, from 1 January 2016 onwards, prepare accounting records and financial statements that reflect an accurate financial position of the business and comply with all tax compliances for the accounting periods commencing on or after 1 January 2016 and commit no action resulting in the avoidance to pay any tax from 1 January 2016. Failure to comply with such conditions will result in the tax audit exemption program being revoked retrospectively from 1 January 2016.
This tax audit exemption program is part of the government's measures in strengthening SME with single set of account and encouraging SME to comply with the tax laws. No doubt that this is also to bring more taxpayers into the system and encourage tax compliance, which should, in the long term, improve overall revenue collection.
Taxpayers are often reluctant to voluntarily correct non-compliance as they are concerned that it may trigger a tax audit for previous years. This could be both time consuming and result in additional liabilities. Thus, the intention of this program is to provide certainty to taxpayers that no tax audit will be conducted by the Revenue Department in respect of the past years.
Although the certainty is promised, there is a concern from some taxpayers that the Revenue Department will specifically scrutinize and audit the future tax periods of eligible companies, partnerships or SMEs that have elected into the tax audit exemption program. It is therefore imperative that the taxpayers that decide to take advantage of the program correctly administer their tax affairs going forward.
The program may be particularly advantageous to taxpayers with a history of tax non-compliance, in the context of acquisition of an entity with historic tax exposures, or taxpayers planning to expand their business, especially in light of future opportunities presented by the AEC.
The window of opportunity exists until 15 March 2016.
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