As Thailand continues to attract foreign direct investment, it is crucial for foreign investors to understand the country’s audit and compliance requirements. This guide outlines the key regulations foreign companies must follow in Thailand, including financial reporting, appointing auditors, holding annual general meetings, and penalties for non-compliance.
Audit and Compliance Regulations in Thailand
Several key laws govern audit and compliance in Thailand.
The Accounting Act of 2000
This act outlines the financial reporting and auditing requirements for companies in Thailand. All registered entities must prepare annual financial statements and have them audited by an independent certified public accountant (CPA).
The Securities and Exchange Act of 1992
Companies listed on the Stock Exchange of Thailand fall under the jurisdiction of this act. They must submit quarterly financial reports reviewed by auditors.
The Bank of Thailand Act
This governs financial reporting and auditing requirements for banks and financial institutions regulated by the Bank of Thailand.
The Insurance Commission Act
Insurance firms operating in Thailand must comply with the auditing and reporting stipulations under this law.
The Financial Institutions Business Act
Financial institutions like finance companies and credit foncier companies are regulated by this act. It mandates audits and filing of financial statements.
The key provisions under these laws
- Preparation and submission of annual audited financial statements
- Appointing an independent CPA auditor
- Filing statements within 150 days of fiscal year end for foreign companies
- Listed firms must submit quarterly reviewed statements
- Financial institutions must comply with accounting standards set by governing bodies
- Retaining accounting records for 5-7 years
- Penalties for non-compliance include fines and surcharges
The acts aim to uphold financial reporting standards, transparency, and compliance for businesses operating in Thailand.
Annual General Meetings (AGMs) and Compliance Obligations
The Thai Civil and Commercial Code mandates that companies and partnerships hold an AGM at least once a year, within four (4) months of the end of the fiscal year.
The board of directors must issue a letter to organise the AGM. Proper notice must be given to shareholders.
The typical AGM process involves:
- Setting an AGM date within the stipulated timeline
- Preparing the notice, agenda, annual report, and financial statements
- Sending out notices to shareholders at least seven (7) days before the meeting
- Conducting shareholder registrations and quorum confirmation
- Presenting agenda items for shareholder approval
- Recording minutes and voting outcomes
Key AGM agenda items
- Clarifying minutes of the previous AGM
- Approving the director’s report on the company’s activities and operations
- Acknowledging the company’s financial results from the previous fiscal year
- Selecting new directors to replace outgoing ones
- Appointing the auditor and determining their audit fees
- Considering dividend payouts to shareholders
These agenda items allow shareholders to stay informed and participate in important company decisions to ensure good governance. Companies must properly document AGM proceedings.
Appointing Auditors and Conducting Audits
Under Thai regulations, companies must have their annual financial statements examined and certified by an independent auditor.
Only certified public accountants (CPAs) qualified under the Thai Accounting Professions Act can be appointed as auditors. They must apply the Thai Standards of Auditing (TSA) during the audit process.
The key roles and responsibilities of auditors include:
- Evaluating the company’s internal controls and bookkeeping practices
- Verifying the accuracy and completeness of financial records
- Assessing compliance with applicable accounting standards and regulations
- Checking that financial statements present a “true and fair” view of the company
- Issuing an audit opinion and report stating whether the financial statements are free of material misstatement
CPA auditors must issue an audit opinion along with the financial statements when they are submitted to authorities and for filing tax returns. The audit opinion validates the accuracy of the accounts.
Fiscal Year and Accounting Period Selection
Thailand follows a self-assessment tax system, with the standard tax year being the 12-month period ending 31 December.
However, companies can choose their own accounting period or fiscal year-end date, provided it does not exceed 12 months. The selected period must be notified to the Revenue Department.
Once an accounting period is chosen, it cannot be changed without written approval from the authorities.
For the selected accounting period, companies must:
- Maintain proper accounts and bookkeeping
- Have financial statements audited
- File statements within 150 days from the fiscal year end
Effective April 2020, the financial statements must be submitted electronically to the Department of Business Development, Ministry of Commerce.
Choosing an appropriate accounting period aligning with business cycles can help optimise tax planning. But companies should weigh compliance requirements for financial reporting when deciding their fiscal year.
Accounting Standards in Thailand
All registered companies, including limited companies, foreign companies, and partnerships, must maintain accounts and undertake annual audits.
For financial reporting, companies in Thailand need to apply the Thai Financial Reporting Standards (TFRS). TFRS has undergone substantial harmonisation with the International Financial Reporting Standards (IFRS) in recent years.
TFRS also contains some additional national requirements beyond IFRS. Foreign companies are allowed to use IFRS for reporting purposes.
Thailand provides two simplified standards for small and medium enterprises (SMEs):
- Thai Accounting Standards (TAS)
- Thai Accounting Standard for Non-Publicly Accountable Entities (NPAEs)
These provide exemptions and reduced disclosures for SMEs compared to full TFRS.
Listed firms on the Stock Exchange of Thailand have additional obligations. They must prepare quarterly financial reports reviewed by auditors as per securities regulations.
Complying with the applicable accounting standards is mandatory for all companies to enhance transparency for stakeholders and governance.
Compliance and Reporting for Foreign Companies
Foreign companies operating in Thailand through subsidiaries, branches, or representative offices have certain additional compliance requirements:
- Branches and regional offices of foreign companies must submit financial statements within 150 days from the fiscal year end.
- Foreign firms can prepare statements in a language other than Thai but must attach a Thai translation (for reporting purposes).
- As mentioned, foreign companies are allowed to use IFRS. But the statements must be audited by a Thailand-licensed CPA.
- Foreign companies must report their global income on a self-assessment basis. Relevant forms and supporting documents need to be submitted (for tax filing).
- Foreign businesses must inform Thai authorities of details like registered capital, office location, business activities, and registers of shareholders and directors.
- Changes in important information need to be reported within the specified timelines to ensure registry details are updated.
- Foreign companies must comply with accounting, tax, commercial registration, and foreign business laws applicable in Thailand.
Annual Reports and Documentation
In addition to filing financial statements, limited companies in Thailand must prepare an annual report at the end of each accounting period.
For private limited firms, this can be a simpler report. But public limited companies must include:
- Corporate information like capital structure, nature of business, and number of employees
- Background on directors and management team
- Chairman’s statement on performance and outlook
- Business review and analysis of operations
- Corporate governance and risk management policies
- Sustainability initiatives and CSR activities
- Decisions taken at the annual general meeting
- Branding and marketing highlights
Documents can be maintained in English, but a Thai version of the annual report should be provided to local shareholders.
The annual report builds trust and transparency with stakeholders. Public firms often make this available on their website and submit it to regulatory agencies.
Retention of Books of Accounts
Per Thailand’s Accounting Act, companies must retain accounting books and records for at least five (5) years from the end of the fiscal year.
Certain businesses like banks, finance companies, and insurance firms have to maintain books for longer (7-10 years) as stipulated by sector regulators like the Bank of Thailand.
The Director-General of Revenue can also instruct companies to keep bookkeeping for up to seven years, especially if tax or compliance issues are suspected.
Proper documentation must be maintained in original form, either physically or digitally, as permitted by laws. This is crucial for financial statement audits.
Penalties for Non-Compliance
Late filing of financial statements can attract fines of up to 100,000 THB. Under the Revenue Code, more severe penalties apply for non-compliance:
- 20% surcharge for under-reporting income by over 25%
- 100% penalty for incorrect tax return filing
- 200% penalty for no filing
You can submit a written request to the tax officer explaining justifiable circumstances. However, ignorance of compliance duties will not be accepted. Engaging accounting services in Thailand is advisable to avoid such issues.
Conclusion
Larger foreign companies can establish in-house teams, but small and mid-sized investors can benefit from outsourced accounting services in Thailand. Professional accounting firms specialise in helping foreign businesses navigate the regulatory landscape, maintain proper books, select auditors, file taxes correctly, and avoid penalties for non-compliance. This expertise makes engaging their services worthwhile.
