Yesterday, one farang client asked me why the financial statement I provided for him showed a lot of ‘non-deductible expenses.’

I therefore went through one month of his outgoing expenses and explained one by one which
one was deductible and which was ‘non-deductable.’

1. Business expense is for example a payment for some office stationery purchased from Tesco Lotus. He got a receipt (tax invoice) from the cash machine which obviously
did not show his company name. However, we could theoretically ask for a completed tax
invoice from Tesco that can then be used as evidence to claim back the purchase tax as well as a deductible expense (as the expense was for a business purpose).

According to the Revenue code, one kind of non-deductible expense is “Any disbursement
if the identity of recipient cannot be proved.” This is a very common incident where business expenses are rejected by your accountant due to them being ‘incomplete.’ This will result in your recordable tax expenses being lower than your actual expenses.

This means you will ultimately pay more tax. Therefore, in order to get around this problem your expenses must be able to be tracked back to the recipient. To do this you need one of the following items as evidence that can be proved for the recipient:

a) Completed receipt consisting of name & address of supplier, Tax ID number, description of goods and signature of receiver

b) Your own payment voucher that consists of the same information as a)

c) A copy of the ID card that is signed by your supplier as the receiver

d) A copy of A/C payee only cheque that you’ve paid to your supplier

e) A copy of pay-in slip if you have made a wire transfer to your supplier.

2. Personal expense refers to that which is not for a business purpose such as a meal at a pizzeria or a payment for a home washing machine.

3. Donations can be accepted only if donated to an organization that has approval from the Revenue Department, but it cannot be more than 2% of the net profit. This means that if your business is making a loss then all of your donation expenses are non-deductible.

If you donate T-shirts to a foundation but you put your company logo on it, rather than booking it as a donation, you can log it as a marketing expense which will not be limited
by this legislation.

4. Entertainment expenses where up to 0.3% of gross revenue but not exceeding 10 million baht is deductible. Entertainment expenses that are more than 0.3% of the gross revenue
are non-deductible. If however you go to a restaurant to have an meeting with your staff,
this kind of expense can be booked as a conference expense rather than entertainment and there are no limits for conference expenses.

5. Old expenses refer to activities that occurred in a different accounting period and are considered as non-deductible expenses. Hopefully, you may know why the figure of tax profit is sometimes different from the profit and loss statement you may have completed.

Therefore, knowing how to take full advantage of your deductible business expenses and avoid non-deductible expenses can help lower your taxable profits.

Sirirat C. is the Managing Director of NAT, the first accounting firm certified by DBD, the Ministry of Commerce, as well as ISO 9001:2008 certified
Phuket branch: 076 375 699
Email:info@thaiaccounting.com
www.thaiaccounting.com