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Demystifying the Annual Audit Process in Thailand for Foreign Businesses: A Comprehensive Guide
25/04/2023
In Thailand, all legal entities, joint ventures, foreign company branches, and representative offices must prepare financial statements for each accounting period. A company’s financial statements must undergo auditing by a Certified Thai Auditor and receive shareholder approval before filing with the Commercial Registration Department of the Ministry of Commerce and the Revenue Department of the Ministry of Finance.
This blog post will provide comprehensive guidance and information on the Annual Audit for companies in Thailand.
Key points
- All legal entities, joint ventures, foreign company branches, and representative offices in Thailand must prepare financial statements for each accounting period and have them audited by a Certified Thai Auditor even if there are 0 transactions and no income. There is no ”Dormant Status” for a company in Thailand.
- Thai companies, representative offices, joint ventures, and foreign company branches must submit financial statements to the Ministry of Commerce for their designated accounting period within 150 days of the fiscal year’s end.
- An Annual General Meeting (AGM) plays an essential role in the annual audits, allowing shareholders to review and approve the auditor’s report and ask questions related to the financial statements.
- Documentation required in an annual audit includes company name, type of business, information on directors, audited financial statements, balance sheets, profit, and loss accounts, a list of shareholders, and minutes from the annual meeting.
- Penalties for non-compliance include fines, surcharges, and even imprisonment, and businesses must retain their books of accounts for at least five years.
What is the annual audit for Thai companies?
Thailand operates a self-assessment tax system, and the tax year generally ends on December 31. All Thai companies, representative offices, joint ventures, and foreign company branches must submit financial statements to the Ministry of Commerce for their designated accounting period. Companies must submit financial statements even if there are 0 transactions and no income. There is no ”Dormant Status” for a company in Thailand.
For foreign enterprises, including Representative Offices, Branch Offices, and Regional Offices, financial statements must be submitted within 150 days of the fiscal year’s end. Any changes to the accounting period require approval from the Revenue Department.
It is important to note that Thailand has numerous regulations that govern auditing and compliance, including the Accounting Act of 2000, Securities and Exchange Act of 1992, Bank of Thailand Act B.E. 2485, Insurance Commission Act B.E. 2550, and the Financial Institutions Business Act B.E. 2551. Additionally, an independent certified auditor must analyze and certify all financial accounts.
What role does an AGM play in the annual audits of Thai companies?
An Annual General Meeting (AGM) is an important event for Thai companies. It allows shareholders to discuss and approve various matters related to the company’s operations, including the annual audit.
In Thailand, the Companies Act requires every company to hold an AGM at least once a year, within four months after the end of the company’s financial year. During the AGM, the company’s directors present the company’s financial statements, including the auditor’s report, to the shareholders.
The auditor’s report is an important component of the financial statements and provides an independent assessment of the company’s financial position and performance. The auditor’s report also confirms that the financial statements have been prepared per the applicable accounting standards and provide a true and fair view of the company’s financial position.
Therefore, the AGM allows shareholders to review and discuss the auditor’s report, ask questions, and seek clarification on any issues related to the financial statements. The shareholders may also vote to approve the appointment of the auditor for the following year.
In summary, the AGM plays a crucial role in the annual audits for Thai companies as it provides a platform for shareholders to review and approve the auditor’s report, ensuring transparency and accountability in the company’s financial reporting.
What should be included in an annual audit?
After each accounting period, both public and private limited companies are required to provide specific documentation, including:
- The company name,
- type of business,
- information on directors,
- audited financial statements,
- balance sheets,
- profit and loss accounts,
- a list of shareholders as of the meeting date
- and minutes from the annual meeting.
These documents must be prepared in Thai for reporting purposes, and international companies must provide a translation.
Private and public limited companies must have an independent auditor review their financial accounts at the end of the fiscal year.
Under the Accounting Act of 2000, businesses must retain their books of accounts for at least five years. Additionally, depending on the nature of the business activity, the Director-General of the Revenue Department may require an extension of up to seven years.
What must companies prepare and file in an Annual Audit in Thailand?
Depending on the type of corporate entity chosen, the preparation and filing of reporting requirements may vary. Here are some examples:
Private Limited Company: The company director is responsible for calling an annual shareholders meeting within four months of the end of the fiscal year. The purpose of the meeting is to approve the company’s audited financial statements. The audited statement and supporting documents, including a list of shareholders on the meeting date, must be filed with the Registrar no later than one month after the meeting date.
Public Limited Company: The company director must call an annual shareholders meeting within four months of the end of the fiscal year to approve the firm’s audited financial accounts. A copy of the audited financial statement and annual report, along with a copy of the minutes of the shareholder meeting approving the financial statement certified by the director, must be submitted to the Registrar with a list of shareholders on the date of the meeting no later than one month after the meeting’s approval. Additionally, the corporation must publish the balance sheet for public knowledge in a newspaper for at least one day within one month of its authorization at the shareholder’s meeting.
Branch Office, Representative Office, or Regional Office: The Branch Office manager must provide a copy of the financial statement to the Registrar within 150 days of the end of the fiscal year. In this case, shareholder meeting permission is not required.
What happens if a company doesn’t submit its annual audit?
Individuals or entities that violate compliance regulations will be penalized a maximum of 100,000 baht (equivalent to US$3,200).
In case a company understates its profits by more than 25% for a full year, it will be charged 20% on the understated amount. Furthermore, there will be a 100% surcharge for incorrect filing and a 200% surcharge for failing to file the return.
However, if the taxpayer submits a formal request to the tax officer, a penalty reduction of up to 50% is possible.
How can Belaws help?
For more information about annual audits in Thailand, why not talk to one of our experts now?
This article is for information purposes only and does not constitute legal advice.
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Frequently asked questions
Is audit mandatory in Thailand?
Yes, according to the Thai Civil and Commercial Code, all limited companies in Thailand are required to have an annual audit conducted by an auditor. This requirement also applies to other types of entities such as partnerships, joint ventures, and branches of foreign companies.
Can audit be done annually?
Yes, the annual audit is required to be conducted once every fiscal year, which is defined as a period of 12 months. The accounting year in Thailand can be any period of 12 months as determined by the company, as long as it is consistent from year to year.
What is the accounting year in Thailand?
The audit fee in Thailand can vary depending on the size and complexity of the company and the scope of the audit. The fee may also be influenced by the level of experience and reputation of the auditor. Therefore, it is difficult to provide a general estimate of the audit fee in Thailand.
How much is the audit fee in Thailand?
Yes, annual audit is compulsory for all limited companies in Thailand. It is a legal requirement that must be fulfilled in order for the company to comply with Thai laws and regulations. Failing to comply with this requirement can result in penalties and fines.
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