Stock on hand or Inventory on hand
This is particularly relevant insofar as inventory affected by recent flooding as both Stock on hand that can’t be sold because it’s spoiled or has been destroyed (as well as all scrap and waste stocks, etc) should be physically removed and written out of business owners books before the end of December 2011 in order to obtain a tax deduction for the 2011 financial year. The following procedures may need to be followed:
- Companies in an export processing zone need to follow the rules prescribed by the IEAT and have an auditor witness the destruction;
- Companies receiving promotion on imported raw materials need to comply with the BOI and have an auditor witness the destruction; and,
- For other companies, there must be an inspection and approval of the destruction by the company’s personnel including persons from the warehouse, accounting, sales and internal audit (if applicable) departments, who must sign a record of the stock destruction.
Bad debts
Any debts that cannot be collected should be written out of your accounting records before the end of December 2011 in order to obtain a tax deduction in the 2011 financial year, and for such bad debts, the following procedures need to be followed:
- For bad debts less than Bt100,000, demand for payment must have been made and the matter must have been pursued to a suitable extent;
- For bad debts between Bt100,000 and Bt500,000, court action must have been made and the court must have accepted the complaint; and,
- For bad debts over Bt 500,000, a court injunction or order must have been issued.
Staff bonuses
Staff bonuses are not permitted as tax deductions in Thailand until actually paid, or if not paid at the year-end date, there must exist a legal obligation for the company to pay the bonuses in 2011. That is, with no legal obligation to pay, staff bonuses that are not actually paid as at the year-end are not permitted as an accrual for tax purposes in Thailand. Accordingly therefore, you should ensure that either staff bonuses are paid to staff before year-end, or if they are going to be paid in the 2012 financial year, you must ensure
that a properly constituted directors’ meeting is held before
the end of the year to resolve the payment of staff bonuses in order to create the legal obligation of the company to pay.
Losses on investments
Losses on investments cannot be claimed as a tax deduction until such time as the investments are sold (i.e. disposed). In the case where an investment loss has arisen due to the economic crisis or the recent floods, you may be able to crystallize that loss for tax purposes by selling the investment to another company before year-end.