Introduction
In Thailand, it’s mandatory for all legal entities, including limited companies, branches of foreign companies, and representative offices, to prepare financial statements for each accounting period. These financial statements need to be audited by a Certified Thai Auditor and approved by the company’s shareholders.
The purpose of this audit is to ensure transparency and accountability in financial reporting. Failure to comply with the annual audit requirement can result in severe penalties, including fines of up to THB 200,000.
Key Points
- All legal entities and companies in Thailand must prepare financial statements for each accounting period.
- Financial statements must be audited by a Certified Thai Auditor even if there are 0 transactions and no income.
- Thai companies 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) must be called to allow the shareholders to review and approve the auditor’s report.
- Penalties for non-compliance include fines, surcharges, and even imprisonment.
What is an Annual Audit in Thailand?
All legal entities and businesses operating within Thailand are required to maintain proper accounts. This requirement is mandatory for all registered entities, including those that remain dormant and may not make any transactions or undertake any business activities during the year.
As part of the accounting requirements for a company, their financial statements for the previous fiscal year must be submitted to the Ministry of Commerce. These financial statements must be submitted no later than 150 days following the conclusion of the company’s fiscal year.
Typically, for many companies in Thailand, the fiscal year concludes on December 31st, meaning the submission of the financial statements to the Ministry of Commerce before the end of May.
In order to verify the accuracy of these financial statements and to ensure compliance with financial reporting regulations, companies must undertake an independent audit. This audit must be conducted by a certified auditor, and cannot be done by the company’s internal accounting team.
What are the Reporting and Documentation Requirements for an Annual Audit?
Thailand has specific reporting and documentation requirements for the annual audit process. The financial statements required by the Ministry of Commerce must include the following information:
- the company name,
- type of business the company is engaged in,
- information relating to the company directors,
- audited financial statements,
- balance sheets,
- profit and loss accounts,
- a list of shareholders
- The minutes from the annual general meeting.
The required documents must be submitted to the Ministry of Commerce in Thailand. Should any company’s financial statements be prepared in English or any other language, they must provide a translation of the documents in Thai.
Additionally, annual general meetings (AGMs) must be held for companies in Thailand. AGMs provide a platform for shareholders to discuss and approve matters related to the company’s operations, including the approval of audited financial statements.
Under the Thai Companies Act, it is a statutory requirement for every company to hold an AGM at least once annually, and this must occur within four months following the close of the company’s financial year. A key aspect of the AGM is the presentation of the company’s financial statements and the accompanying auditor’s report, delivered by the company’s directors to its shareholders for approval.
This meeting provides shareholders with the opportunity to thoroughly examine and deliberate on the auditor’s report. They can raise queries, request additional information, and seek explanations regarding any aspects of the financial statements. Additionally, the shareholders must vote on the appointment of the auditor for the upcoming year.
Please note, companies should also note that under the Accounting Act of 2000, businesses must retain their 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 is the Process for Submitting an Annual Audit in Thailand?
The annual audit process in Thailand involves a series of steps that must be satisfied to ensure compliance and transparency. Selecting a service provider who offers clear pricing and understands the full scope of the process is important. The main stages of the audit process are as follows:
Step 1: Document Collection
The initial phase involves the collection of the essential documents by the company. These include records of income and expenses for the year, bank statements from all corporate accounts, and any acquired property title deeds.
Step 2: Execution of the Audit
An independent, certified auditor examines and verifies the company’s financial records. This examination covers the general journal, general ledger, trial balance, and other relevant financial statements.
Step 3: Audit Report Review and Authorization
Following the audit, the company receives a copy of the audit report for evaluation. A company director is required to review and sign this report, signifying acknowledgment and acceptance of the auditor’s conclusions.
Step 4: Tax Compliance
Should there be any tax liabilities identified in the audit report, the company must address these by making the appropriate payments to the Revenue Department.
Step 5: Shareholder Engagement
After the audit report has been ratified, the company must meet specific shareholder-related obligations. This includes organizing the Annual General Meeting (AGM) and inviting shareholders to review and approve the audit. The company must ensure they maintain the minutes for the meeting. The AGM must be held within 30 days following the auditor’s signature on the report.
What Happens if a Company doesn’t Complete an Annual Audit?
Individuals or entities that do not comply with Thailand’s accounting regulations may face a penalty of up to 200,000 THB.
Furthermore, should a company understate its profits by more than 25% for a full year, it will be charged 20% on the understated amount. A further 100% surcharge for incorrect filing and a 200% surcharge for failing to file the return may also be enforced.
However, if the taxpayer submits a formal request to the tax officer, a penalty reduction of up to 50% is possible.
Our Thoughts
Annual audits are an essential requirement for all legal entities operating in Thailand. Compliance with the annual audit process ensures transparency and accountability in financial reporting. By understanding the key points, requirements, and process of annual audits in Thailand, companies can avoid penalties and maintain compliance with Thai accounting regulations.
