As a business owner, you may wonder why you are called upon so often for an audit from the Revenue Department and may ask, “What exactly is the tax audit policy?”

There are four kinds of tax audits in Thailand:

Business operation visit

This kind of tax audit is the softest one, as it will normally apply to every business. As per the strategic plan of the Revenue Department, their target is to have this kind of audit at least once a year for every company in order to maintain up-to-date profiles of the taxpayers.

The objective of this kind of tax audit is to have clear understanding of the business of the taxpayer and advise the correct way of paying tax. They will normally pay you a visit within six months of you setting up the company and this will be followed by surprise visits once a year, with the help of the company address you have registered with the government.

Normally, they enquire about the nature of your business, and ask for official business registration, affidavits, VAT registration and other details.

Then they will ask for two or three months of accounting documents and your monthly tax return (VAT and withholding tax) in order to ascertain that you have complied with tax laws.

If they find wrongdoing such as paying less tax than should be paid, they will ask you to file and pay the additional tax.

If you agree, and show them the receipt after you pay the additional tax, they will close the case. If, however, you do not agree with the department’s findings, you need evidence of your tax-paying compliance in the absence of which, they will issue a summons.

Tax audit on specific tax issue

This kind of tax audit usually comes about because of questions on the accuracy of your tax payment resulting from the tax analysis section of the Revenue Dept.

The department will normally analyse the consistency of your tax payment or cross check your revenue record with your customers or suppliers, and will inspect any specific tax issue such as withholding tax, VAT, specific business tax (SBT), corporate income tax and transfer pricing issues.

The investigating officers will ask for related documents, check, investigate and inform you if there are any tax shortfalls.

Again, if you agree, you then settle the tax and close the case. If not, as in the previous example, you will be required to prove your compliance or they will issue a summons.

Please note that the department prefers not – generally – to issue summons as once a summons is issued, the Revenue Department will need to conduct a full audit in a very short space of time, which will be a very hard job for them.

The reasons that a company may receive this type of audit include:

Continuing losses for more than two years;
Your company has negative gross profit;
No tax payments over the past two or three years;
Lack of co-operation during an earlier audit;
Significantly lower profit margin than the comparable industry

Tax audit under summons

This case will happen if you do not follow the advice of the tax auditor to pay the tax shortfalls or you are not able to prove your compliance.

The Revenue Department will issue a summons and ask for the whole set of documents for the specific year and, often, for the preceding two years.

This kind of audit will be very comprehensive; investigating officers will go through your company’s accounting and related documents with a fine-toothed comb.

Tax audit under search warrant

This is the hardest form of tax audit and will not happen unless the Revenue Department finds or receives information that you are guilty of tax avoidance.

This will be an immediate, surprise audit, your documents will be blocked, checked, investigated and a tax assessment letter will be issued.

The choices are to agree with the stipulations or to appeal.

Whatever tax audit you face, prepare for the following actions:

Co-operate: follow their requests within the specified time, if you need more time, call them in advance for re-scheduling, and remember to be polite even if you disagree with them.
Appoint one professional representative that understands your business.
Guess what they are targeting, check if your documents are ready for the tax audit, and be prepared to prove your compliance.
Estimate the possible tax risk and solutions.
Do not give information that they do not request.

Sirirat C. is the managing Director of NAT accounting firm. Phuket: 076-212-989 Bangkok: 02-513-7151 Pattaya: 038-378-178 www.thaiaccounting.com