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Overview of Information about Forming a Business

1. Forming a Business
2. Tax & Accounting
3. Annual Accounts

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Forming a Business - Annual Accounts
Annual Accounts
If a company wishes to change its accounting period, it must obtain written approval from the Director General of the Revenue Department.

A newly-established company or partnership should close accounts within 12 months from the date of its registration. Thereafter, the accounts should be closed every 12 months. The performance record is to be certified by the company auditor, approved by the Managing Director, and filed with the Commercial Registration Department at the Ministry of Commerce within 5 months of the end of the fiscal year and with the Revenue Department at the Ministry of Finance within 150 days of the end of the fiscal year.

Accounting Principles
In general, the basic accounting principles practiced in the United States of America are accepted in Thailand, as are accounting methods and conventions sanctioned by law. The Institute of Certified Accountants and Auditors of Thailand is the authority promoting the application of generally accepted accounting principles. Any accounting method adopted by a company must be used consistently and may be changed only with approval of the Revenue Department.

Certain accounting practices of note include:

:: Depreciation
The Revenue Code permits the use of varying depreciation rates according to the nature of the classes of assets which have the effect of depreciating the assets over periods that may be shorter than their estimated useful lives. These maximum depreciation rates are not mandatory; a company may use lower rates that approximate the estimated useful lives of the assets. But if a lower rate is used in the books of the accounts, the same rate must be used in the income tax return.

:: Accounting for Pension Plans
Contributions to a pension or provident fund are not deductible for tax purposes, unless these are actually paid out to the employees or the fund is approved as a qualified fund by the Revenue Department and is managed by a licensed fund manager.

:: Statutory Reserve
A statutory reserve of at least 5 percent of the annual net profits arising from the business must be appropriated by the company at each distribution of dividends, until the reserve reaches at least 10 percent of the company's authorized capital.

:: Stock Dividends
Stock dividends are taxable as ordinary dividends and may be declared only, if there is an approved increase in authorized capital. The law requires the authorized capital to be subscribed in full by the shareholders.

Auditing Requirements and Standards
Audited financial statements of juristic entities (that is, a limited company, a registered partnership, a branch, a representative office or a regional office of a foreign corporation, a joint venture) must be certified by an authorized auditor and submitted to the Revenue Department and (except for joint ventures) to the Commercial Registrar for each accounting year.

Auditing standards conforming to international auditing standards are, to the greater extent, recognized and practiced by authorized auditors in Thailand.

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