Small and medium-sized businesses who agree to adopt the single financial statement practice will be exempted from backdating probes and enjoy generous tax breaks for two years, according to a Finance Ministry statement on Monday.
The practice of keeping two financial statements — a real one for internal use and an understated one for tax filing — is common among small businesses. As the ministry aims to expand the tax base, it wants to end the practice by providing incentives to these operators.
Under the decrees effective on Jan 1, all companies which have revenue of not more than 500 million baht in the accounting year ending on or before Dec 31, 2015 and agree to sign up for the single financial statement programme will be exempted from backdating probes, the statement said.
They can register online to join the programme at the Revenue Department's website from Jan 15 to March 15.
The operators whose tax liabilities are being probed or those who allegedly issued fake tax receipts, evaded taxes or were on trial before Jan 1 can also apply. The Revenue Department will take action against them only for the pending cases.
After signing up, starting from Jan 1, 2016, they are obligated to prepare their financial statements that reflect the real situation of their businesses. As well, they must refrain from doing anything to evade taxes and must file and pay their dues properly.
As a bonus, businesses with not more than 5 million baht in paid-up capital and 30 million baht in sales revenue in the 2015 accounting year will enjoy tax breaks for two accounting years if they agree to sign up.
For the 2016 accounting year, they will be exempted from corporate income tax on net profits.
In the following accounting year, the first 300,000 baht of their net profits will be tax-exempted while the portion above it will be taxed at 10%.
The ministry and the Bank of Thailand will take action to ensure banks start from Jan 1, 2019 to use the books and financial statements these companies submit in their tax filings as evidence when they conduct transactions with and seek loans from them.
The ministry hopes the single bookkeeping measure and tax breaks for SMEs will encourage them to prepare the financial statements that truly reflect their financial positions. They can also be used as a reliable tool to analyse and plan their businesses going forward.
"The government can also provide the kind of assistance that they really need to help improve their competitiveness," it said.
The practice will also create a sustainable tax base that reflects the current economic situation of the country.
The ministry stressed the decrees are not a tax amnesty since they aim only to exempt backdating probes, investigation and evaluation.
If, after joining the programme, these firms fail to comply, they will no longer be protected from backdating probes and investigation and, by extension, criminal liabilities under the Tax Code.