Apart from what has been discussed so far, there are still some frequently asked questions about the Disclosure Form. These are minor questions, but they are important because if missing them could lead to unnecessary expenses. I have compiled the answers to these questions here.
Q1: Regarding the condition that a company whose revenue from businesses in the accounting period does not exceed Baht 200 million is not required to submit a Disclosure Form, whether such revenue includes other income?
The exemption "no need to submit Disclosure Form" under Section 71 Paragraph 3 states that "the provisions of this section shall not apply to companies with income “from” business or “due to” business." If we go back to the basics, income “from” business refers to the income that the company earns from its business activities as registered with the Ministry of Commerce. For example, if the company is a factory, income from business would be the income from selling products. Income “due to” business refers to the income that results indirectly from business operations. For instance, if the company sells old machinery that is no longer in use, the "income from selling old machinery" is considered income due to business. If the company sells products for cash and deposits the money in the bank, the "interest received" is also considered income due to business. Therefore, the income in this context includes both direct and indirect income of the business. So, it is inclusive of other income.
Q2: Is the total revenue mentioned above based on the “company only” financial statements or consolidated financial statements?
The shortest and most to the point answer is to use the “company only” financial statements because taxes are specific matter of an individual entity. Each tax entity is responsible for its own tax burden. To explain and provide reasoning, I would like to start by summarizing that consolidated financial statements are financial statements that result from combining the figures of affiliated companies, including all subsidiaries. This includes sales revenue, cost of sales, and operating expenses, etc. As for the company's standalone financial statements are the financial statements of the parent company that invested in holding shares in subsidiaries and affiliated companies only.
Since transfer pricing tax is a corporate income tax, I would begin by explaining the tax base according to Section 65, which is "net profit calculated from revenue from business or due to business," also known as direct and indirect revenue of the company. Additionally, Section 65 Ter (13) stipulates prohibited expenses as "expenses that are not specifically for the business" shall not be considered in the calculation of net profit. Therefore, we must exclude the revenue or expenses of subsidiaries from the net profit calculation. This means we should not use consolidated financial statements in this case. Foreigners refer to this concept as the Separate Entity concept. To conclude, Section 71 Ter, first paragraph, requires taxpayers to submit information to help the Revenue Department reassess the tax of each taxpayer. Exceptions under paragraph 3 must be considered based on the specific revenue of that company.
Q3: If a company fails to submit or submit the Disclosure Form late, what are the penalties?
From the previous post, if a company fails to submit the Disclosure Form. When the tax officer discovers this issue during an audit, the company will be subject to a fine of up to 200,000 Baht according to Section 35 Ter. However, if the company has prepared the Disclosure Form but submits it late, the Revenue Department has set the fine rate for late submission at 50,000 Baht if late by no more than 7 days, and 100,000 Baht if late by more than 7 days.
Q4: If a company submits a Disclosure Form with incorrect or incomplete information, what are the penalties? And can the company submit additional information? How?
Those who submit incorrect or incomplete information "without reasonable cause" are subject to a fine of up to 200,000 Baht (Section 35 Ter). The question I received concerns cases where a company submits incomplete information. Should the company submit amendments? Looking deeper, the company likely wants to know if it will receive a reduction for the fine, and if so, how? This case is different from late submission because the Revenue Department has not established guidelines, so it depends on the discretion of the officers, which means uncertainty. Therefore, I would answer as follows:
(a) If the incorrect or incomplete information is due to human error, such as miscalculations, typos, or printing errors, it is certainly not considered reasonable cause and may not be exempt from the fine.
(b) The current uncertain situation does not favor companies submitting amendments because submitting amendments is equivalent to admitting faults and incurring fines immediately. If the fine waiver is not substantial enough, it might be better to leave it as it is and do nothing. Therefore, prevention is better than cure. Before submitting the Disclosure Form, extreme caution must be exercised, and the information must be thoroughly checked to allow the taxpayer to sleep well and have sweet dreams.
[Contact Person: Mr. Phongnarin Ratarangsikul | Partner]