Accounting for a BOI company – 5 things you should know
Companies who have successfully obtained a BOI License are granted special privileges which can be hugely beneficial to companies looking to enter the Thai market.
Examples of these privileges include, 100% foreign ownership, tax exemptions and the facility to obtain visas and work permits for foreign workers.
While these advantages are significant, BOI promoted companies are also subject to specific regulations and additional scrutiny from the regulator.
One of the things that is often checked is your company accounts, it’s important to remember that accounting does not lie, so make sure you are aware of this.
1. Foreign bank transfer for the minimum capital requirements
As part of the process for receiving a BOI Promotion, companies are required to provide a minimum capital investment. The transfer of the funds for the minimum capital requirement must be done through a traditional bank. The BOI will request a FET transfer form (Foreign Exchange Transaction Form) and will check that the transfer has been specified as “capital investment” or something similar.
If the FET form states that the purpose of the transfer is for a loan or something similar, the said transfer will not be accepted by the BOI as proof of capital investment.
It is also important to note, that as of today any transfers made through services such as Wise are not accepted by the BOI.
2. Business operations must be within the scope of the BOI License
Most BOI companies are majority foreign owned which means that they are restricted from undertaking most business activities, unless their chosen activity is non-restricted (e.g. export) or authorized by both the BOI certificate and the Foreign business License.
For example, if a company has been granted a BOI software license together with a Foreign Business Certificate, they shall not provide invoices for services such as digital marketing or payroll services. If this company was interested in providing digital marketing or payroll services, it must be granted a foreign business license for the additional relevant business activities.
Therefore, you must be careful about the scope of services contained in your invoices.
3. Clearly determined scope for tax incentives
Some BOI Licenses come with certain tax incentives, such as corporate income tax exemptions.
Corporate income tax exemptions are usually valid from the moment the company issues the first invoice (this shall be considered as the starting date of the business operations). Please note that the first invoice MUST be issued as soon as the first computer or piece of machinery has been purchased (after the BOI application has been submitted). Failure to do so could result in issues arising at a later date.
Such corporate income tax exemptions usually last for a duration of up to 6 or more years.
The corporate exemption is generally valid on a specific activity and/or within the scope of the BOI License. If you invoice other services (see point 2 above), the corporate tax exemption may not apply.
A common issue here is where an accountant misses certain revenue where the CIT may have been exempted and/or include revenues where the CIT shall not have been exempted.
When your company undertakes several lines of business, it is highly recommended to set up an accounting and billing system according to each individual line of business.
4. Minimum fixed assets expenses
Most BOI Licenses come with a requirement to invest at least 1 million Baht in fixed assets within the first 3 years of operations. Fixed assets are defined as a long-term tangible piece of property or equipment that is used to generate income.
We have seen numerous examples of accountants not being aware of BOI obligations such as this being imposed on a company. Normally in such cases, the qualifying expenses have been made but not correctly recorded in the books. This is problematic because the financial statements are audited and registered with the Ministry of Commerce every year, making it difficult to amend them. Such revisions may also result in tax issues which will need to be addressed.
Companies who have received a BOI promotion but not yet started their operations are required to update the BOI on the status of their assets as part of the required progress report. Progress reports are required to be submitted every February and July until the company has started its full operations.
The BOI will also check to ensure that this obligation has been satisfied during the annual report (required to be submitted every July until the cancellation of the BOI certificate) and the 3 years audit. If any obligations have not been fulfilled, the BOI may suspend the licence or even revoke it.
In most situations, the BOI will grant offending companies some time to remedy the breach. However, during this extra time granted by the BOI, they will refuse to issue any of the documents required to renew work permit/visas or issue new work permit/visas until it has been rectified.
5. Minimum turn over or expenses
Some BOI Licenses may also come with either of the following requirements:
- A minimum turn over per year (for example, BOI TISO promotions have a requirement of achieving at least a turn over of 10 million Baht per year) or;
- Salary expenses for certain types of employees (for example, BOI Software promotions require companies to have a minimum of 1.5 M THB spent on the salaries for Thai IT developers per year).
The BOI will check during the audit of the company’s books to ensure full compliance with the requirements. As explained in Point 4 above, the accountant must always take this into account and be aware of the BOIs own set of rules for determining what is part and what is not part of the said required expenses.
Checking to ensure accounting compliance
We have expert accountants who specialize in working with BOI companies and are familiar with all the requirements and obligations.
Click here to request a free short audit from our experts to ensure full compliance. Our expert accountants and a BOI lawyer will review your accounting documents for up to one hour and check if there are any potential issues for you to consider. Furthermore, everything will be summed up in a follow up call.
Please note that this article is for information purposes only and does not constitute legal advice.
Our BOI accounting-services audit last for a period of up to 1 hour and will be conducted by expert accountant and Lawyers who are fluent in English and Thai.
Our expert accountant and a BOI lawyer will review your accounting documents and check if there are any potential issues for you to consider.
Up to 1 hour
Audits can be conducted in English or Thai
Audits are handled by experienced lawyers and accountants from the relevant fields of practice
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