It’s CIT time again

Any Thai company subject to corporate income tax (CIT) is required to file a half-year tax return by estimating its annual net profit and its tax liability; and must pay half of the estimated tax amount within two months of the end of the first six months of its accounting period.

Therefore, a company that has an accounting year the same as the calendar year (January – December) will have to file its semi-annual income tax return and pay tax (if any) by the end of August. So it’s time to get out your calculators again.

As the half-year tax is filed based on estimated annual profit, there will be a surcharge of 20% of the tax underpaid if the estimated profit is more than 25% lower than the final profit. For example, if your estimated annual profit is 100,000 baht, then you need to file half-year profits of 50,000 baht and pay 30% tax, equalling 15,000 baht. However, if your actual end-of-year profit is 150,000 baht, the following tax calculation – and tax surcharge – must be made:

[(50000/150000)*100] = 33.33%
The correct semi-annual tax is 22,500 baht
But we have paid 15,000 baht
Tax underpaid 7,500 baht
Surcharge 20% of 7,500 is 1,500 baht

Many companies have complained to the tax department about paying the surcharge when their estimation was 25% lower than their actual profit. If this happens, you can refer to Por 50/2537. This law indicates that if the company pays a half-year tax of not less than 50% of the CIT paid in the previous accounting period, there will be no surcharge even if the actual profit at the end of year is higher than the estimation by 25% or more.

Now you have your choice: pay taxes based on your estimation and take a risk, or play it safe by paying half-year taxes of not less than 50% of the previous year’s tax. And it’s worth remembering that prepaid tax can be used as a tax credit against the company’s annual tax liability.

Reproduced courtesy of Khun Sirirat of Thai Accounting         www.thaiaccounting.com