Incentives to lure SMEs into tax system

Two emergency decrees were declared yesterday with immediate effect whereby SMEs that have proper business accounts and decide to enter the tax system between January 15 and March 15 will not be investigated for back taxes.

Around 98 per cent of Thailand’s businesses are SMEs, which are defined as companies that make no more than Bt500 million in revenue per year.

“This is not a tax amnesty … but it is more of a measure to allow the public and private sectors to move forward together,” said Prasong Poontaneat, director-general of the Revenue Department.

Under the decrees, SMEs with less than Bt5 million registered capital and revenue of no more than Bt30 million per year that enter the tax system within the given time frame will also receive an exemption from paying corporate income tax for net profits gained in the 2016 accounting year. They will be exempted from paying corporate income tax on the first Bt300,000 net profits received in 2017 and will only pay 10 per cent on profits that exceed Bt300,000.

Prasong said the department expected around 30 per cent of the 430,000 SMEs in this category to register within the given time. 

It is estimated that a 10-per-cent increase in the number of tax-paying enterprises would result in an extra Bt5 billion in tax revenue per year.

Businesses that are currently being investigated by the Revenue Department can also register and receive the benefits, as the department will refrain from looking into other years.

Nevertheless, businesses that register within the given time frame but fail to pay proper tax in the future will be subject to investigation into back taxes in the future. 

Commercial banks have also been instructed not to lend to businesses that do not have a tax record approved by the Revenue Department. This measure will be in effect from January 2019 onwards. Penthip Pornchaded, president of the Association for the Promotion of Thai Small and Medium Entrepreneurs, believes that the measure will encourage SMEs to register within the tax system, since the reason most of them have refused to enter it is they are afraid of being hit up for back taxes.

“I definitely agree and am happy with this measure, since business models are changing through e-commerce and the opening of the Asean Economic Community. If Thailand’s SMEs do not have proper business accounts and pay proper tax, then it will be difficult for them to expand in the future,” she said.

“The Revenue Department’s distribution of a free accounting program via their website will support this measure. The success of the measure will also support the government’s clusters plan,” she added.