Both tax reviews and tax health check-ups are used for a review aimed at identifying any potential tax exposures arising from missing or incomplete tax filings/documentation.  This article also focuses on the benefits of conducting a “tax due diligence” during a business acquisition, the main objective of which is also to minimise tax exposure.

Mr. Satit Rangkasiri, the Director-General of the Thai Revenue Department has stated that business entities must strictly comply with the Revenue laws.  The intensity of tax auditing from the Thai Revenue Office may be increased to ensure that taxpayers are not seeking advantages from the 2011 floods, unstable political situation or avoiding their tax obligations using the world economic downturn as an excuse.

Since Thailand's tax system operates on a self-assessment basis, taxpayers need to integrate tax planning initiatives in their accounting systems as well as complying with the regulatory requirements prescribed by the Thai Revenue Code.  Unfamiliarity with tax laws and regulations may result in an inability to control tax compliance costs and unnecessary penalties and/or surcharges, which may be avoided or reduced by completing a tax compliance review.

What is a Tax Check-Up?

A tax health check-up is a review of the tax affairs of a business entity, which is intended to highlight potential weaknesses or risks arising from errors or omissions in the business records and accounting systems, as well as identifying potential tax liabilities.

How does it work?

A tax check-up report will serve as a business tool to identify major errors or non-compliance with tax regulations which could result in significant tax penalties or unnecessary tax liabilities.

Purposes of a tax check-up

  • To identify any risks in relation to the collation or recording and reporting of data produced for the Revenue Department.
  • To implement tax saving opportunities for the business entity.
  • To avoid predictable/hidden costs and time.
  • To provide the business entity with a reasonable level of comfort in affirming that the tax return will not contain any inappropriate statements and/or estimations before filing of the tax return.
  • To reduce the risk of a Revenue Department tax examination.

A tax check-up can be a key tool to analyse and highlight areas for concern along with providing worthwhile suggestions to enable the business to mitigate any potential tax liabilities.

Who needs a check-up?

Taxpayers need to meet their tax obligations as prescribed by the Revenue Code and related regulations.  Even though you may believe that you are a good taxpayer, the complexity of the Thai Revenue laws and regulations may leave you at risk to unaccounted for tax exposures.  Consequently, the business should regularly review compliance with the appropriate regulations.

What is a Tax Due Diligence?

A tax due diligence has similar objectives to a tax check-up, but provides a different perspective of a company.  Whilst a tax check-up can be used to minimize risks of tax exposure for existing business owners, a tax due diligence is essential for a new investor wishing to acquire a business in Thailand.  A tax due diligence provides a tax profile of the target entity.  It determines potential past, present and future tax – liabilities, including disclosed, undisclosed and realized tax liabilities and assists in the establishment of a purchase price, determination of tax warranties and indemnities to be included in the sale & purchase agreement, and helps to develop an appropriate acquisition and funding structure.

Benefits of a Tax Due Diligence

The tax due diligence report will reveal/provide:

  • potential risks and opportunities, tax contingencies and aggressive positions that may impact pricing and need to be addressed in the documentation and implementation of the deal;
  • issues in respect of the business and the financial structure from a  tax perspective as well as the legal perspective;
  • appropriate tax planning scenarios for the deal; and,
  • appropriate tax warranties and indemnities.

A proper tax due diligence should be undertaken in conjunction with financial and legal due diligence reviews to ensure that the key issues and risks are appropriately identified and assessed.  Tax due diligence advice may help to protect both financial management and legal privileges.

Our Services

RSM has several legal and tax advisors with a wide-range of experience in providing tax check-ups, tax due diligences and legal due diligence reviews for both local and international firms.  Our services assist companies to comply with the Thai Revenue Code and other applicable laws.  In the event that you require any further information, please feel free to contact us.