How to Complete the Annual Closing Process for Company Accounts

Introduction

Most companies in Thailand have their financial year end on December 31st. This means they must complete the closing of their accounts and satisfy any accounting requirements in Thailand within 150 days of this date.

Ensuring compliance with Thai accounting regulations is a mandatory requirement for all businesses, regardless of whether they conducted transactions or remained dormant throughout the financial year. 

This guide provides a comprehensive overview of the annual closing process, covering key requirements, financial statement preparation, audit procedures, and the steps involved in holding an Annual General Meeting (AGM) in Thailand.

Requirements for the Annual Closing of the Company Accounts in Thailand

In Thailand, a company’s tax year typically runs from January 1 to December 31. However, a company may choose a different financial year, as long as it does not exceed 12 months.

Thailand operates a self-assessment tax system, where companies are responsible for preparing and filing their tax returns in Thailand by the required deadlines while paying any taxes due.

The annual Corporate Income Tax (CIT) in Thailand return must be filed within 150 days of the end of the accounting period.

What is the Process for the Annual Closing of a Companies Accounts for the Past Financial Year?

In order for a company to close their accounts for the fiscal year, they must prepare a set of written financial statements. Financial statements in Thailand are records that state the business activities and the financial performance of a company for the past year. 

The annual financial statements of a Thai company must include the following:

Statement of financial position

A Statement of Financial Position, in Thailand is the Thai equivalent of a “Balance Sheet”. A statement of financial position provides an overview of a company’s financial health by stating the company’s assets (what it owns), liabilities (what it owes), and equity (the owner’s stake). 

Profit and loss statement

A profit and loss statement is a summary of the company’s revenues, expenses, and overall profit or loss. A profit and loss statement is used to highlight how much money the company received and spent during that period.

Statement of changes in equity

A change in equity statement is a financial statement that provides details for any changes in a company’s shareholder equity over the previous financial year. This statement will include information on the company’s net profit, dividends paid, and any other changes to its equity. 

Cash flow statement

A cash flow statement provides details about the movement of cash coming in and out of a company. This statement reflects any income generated from: 

• operations, 
• investments, and 
• financing activities

Other required information

The following information must also be included in the financial statement:

• Criteria of the preparation of the financial statements
• Description of the accounting policies
• Additional information on the balance sheet, income statement, cash flow statement and statement of changes in equity.

Once the financial statement has been prepared, it must be audited by an independent auditor.

Does Every Company Need an Annual Audit?

As part of the accounting requirements in Thailand for a company, their financial statements for the previous fiscal year must be submitted to the Ministry of Commerce in Thailand. These financial statements must be audited by an independent auditor and submitted to the Ministry of Commerce within 150 days from the end of the financial year. 

An independent audit in Thailand is required to verify the accuracy of the financial statements and to ensure compliance with financial reporting regulations. This audit must be conducted by a certified auditor, and cannot be done by the company’s internal accounting team.

Many companies in Thailand, the fiscal year concludes on December 31st, meaning the submission of the audited financial statements to the Ministry of Commerce must be made before the end of May.

Read more:

Do Thai Companies Need to Complete an Annual Audit?

When Does the Annual General Meeting Need to be Held?

An Annual General Meeting (AGM) in Thailand is a statutory requirement and every company is required to hold an AGM at least once per annum, as per the Thai Companies Act.

The AGM must be held within 4 months of the end of the company’s financial year and will allow the shareholders to discuss and approve matters related to the company’s operations, including the approval of audited financial statements in Thailand.

This meeting provides shareholders with the opportunity to thoroughly examine and discuss the auditor’s report. They can raise queries, request additional information, and seek explanations regarding any aspect of the financial statements.

Additionally, the shareholders must vote on the appointment of the auditor for the upcoming year.

Requirements for Calling an AGM

To call an AGM, the following steps must be completed:

Notice of Meeting

The company must issue a formal notice to all shareholders, directors, and the auditor. This notice must specify the date, time, venue, and agenda of the AGM.

Publication Requirement

Prior to a recent amendment to the Thai Civil and Commercial Code (CCC), companies in Thailand had to publish a notice for their AGM in a local newspaper and mail an invitation to every shareholder listed in the Company register by no later than seven days before the meeting date (or 14 days for special resolutions). However, this is no longer the case, unless a Company has a shareholder holding a bearer certificate.

Many companies include mechanisms for calling an AGM within their Articles of Association (AOA). However, these mechanisms may be based on outdated requirements from the old CCC, which required the publication of a notice summoning the AGM. If a company has not updated its AOA, it must still comply with the publication requirement.

Agenda of the Meeting

The AGM must include the following:

• Approval of the audited financial statements
• Appointment or reappointment of the company’s auditor
• Declaration of dividends (if applicable)
• Election or re-election of directors (if applicable)
• Any other statutory or business-related matters

Quorum Requirements

A quorum must be met for the AGM to proceed. In practice, this means that at least one quarter of the total shareholders or shareholders holding at least one-fourth of the total issued shares must be present, either in person or via proxy.

Voting and Resolutions

Resolutions are passed by a simple majority unless specified otherwise in the company’s Articles of Association. Certain issues, such as amendments to the Articles of Association or capital reductions, may require a higher voting threshold e.g. 75%.

Meeting Minutes and Compliance Filing

After the AGM has been completed, the minutes of the meeting must be recorded and maintained in the company’s official records. 

The approved financial statements and other required documents must be submitted to the Ministry of Commerce in Thailand within one month of the AGM date.

Please note, the penalties for not arranging the Annual General Meeting to approve the audited financial statements within 4 months after the fiscal year end are:

• Company penalties – a fine not exceeding THB 20,000
• Director(s) penalties – a fine not exceeding THB 50,000

When Should the Final Filing be Submitted?

Once the financial statements have been approved at the AGM, the final filing must be submitted to the Ministry of Commerce. This filing must be completed within 1 month of the AGM and the following documents must be submitted:

• Audited financial statement
• Balance sheet
• Company name
• Detail of directors
• List of shareholders
• Minutes of the annual meeting
• Profit and loss accounts
• Type of business

All documents must be prepared in Thai, however, the documents can be prepared in another language along with a Thai translation.

When is the Tax Payment and Settlement Made?

Once the financial statements have been audited and approved at the AGM, the company must pay the corresponding CIT amount along with the tax return if it has profits.

What are the Penalties for Failing to Submit the Annual Filings?

Individuals or entities that do not comply with Thailand’s accounting regulations may face a penalty of up to 200,000 THB.

Furthermore, under Thai tax regulations, if a company’s half-year Corporate Income Tax return (PND 51) understates its taxable profits by more than 25% compared to its final annual CIT liability, a 20% penalty will be charged on the shortfall. Additional penalties include a 100% surcharge for incorrect filing and a 200% surcharge for failing to file the return altogether.

However, if the taxpayer submits a formal request to the tax officer, a penalty reduction of up to 50% is possible.

What are the Compliance Obligations for Dormant Companies?

All legal entities and businesses registered within Thailand are required to maintain proper accounts and submit their yearly filings. This requirement is mandatory for all registered entities, including those that remain dormant and/or do not make any transactions or undertake any business activities during the year.

Does the Closing of Accounts Affect the Work Permits for Foreign Employees in Thailand?

Closing the company’s accounts for the previous year is especially important for companies that hire foreign employees. Failure to complete the annual account closing process on time can affect a company’s ability to renew work permits for foreign employees in Thailand. 

If the accounting is not completed properly and on time, the Labour Department may deny work permit renewals until the closing of the accounts has been completed. 

This is also the case for companies with BOI Thailand (Board of Investment) promotions. However, failure to submit the required reports within the required time frame could lead to the loss of their BOI Thailand status, as well as the ability to support Work Permits for foreign employees in Thailand.

Disclaimer

Please note, this article is for informational purposes only and is not legal or tax advice.