Tax audit is the process of verification and inspection of the tax return(s) and taxpayers' books to ensure that their tax computation complies with tax law. A tax audit can arise from one or more of the following factors:
- The submission of tax refund request
- A situation where a taxpayer’s business continually incurs losses for several years/ fluctuation of the Company’s profits
- The normal process of tax supervision by the Thai Revenue Department
- Government policy to focus on a particular business or transactions
Tax audits can be divided into two main stages:
- Tax investigation (informal): It could be done by a company visit, meeting between taxpayer & the TRD, a request for documents submission, and cross-checking for documents with trading partners or parties involved in the same transaction under the investigation.
- Formal tax audit: This refers to when the TRD issues tax summons and tax assessment letters.
The TRD never use these two types of tax audits separately. However, the TRD always begins the tax audit with the informal one, followed by the formal tax audit when struggling to resolve the dispute.
As we mentioned above, every company can be audited by the TRD. As such, we have compiled a list of some tips and traps based on our experience to help you complete the audit smoothly.
Know process and players
Before the tax audit begins, the TRD officer always gives you notice (or summons) to request the documents and let you know what they want to see. It would help if you understood the process of tax audits and who will be involved in each step.
Having realistic expectations
During a tax audit, the TRD officer may discover new issue(s) that the company has incorrectly done, such as non-deductible expense, entertainment fees, non-claimable input tax, etc. You should accept those mistakes (if it’s wrong) and try negotiating with the TRD officer to reduce surcharges and penalties as much as you could.
Disclose all relevant information
The TRD officer may ask you for information during the tax audit, and you should give them your cooperation and disclose all information they request. It will help speed up the process, and if you cannot answer, you should let the TRD officer know that you will get the answer as soon as possible. Please note we advise you to tell everything to the TRD officer that they ask for during the audit. You should seek advice from your tax advisor if you are unsure what the impact is from your answer.
Seek advice if you do not understand
Nobody is perfect. You have things that you are good at and things that you are not so good at doing. Therefore, you should consult with your tax advisor in case the issue is beyond your understanding. Every answer has its impact. So, be careful when you provide information to the TRD officer. Based on our experience, having an efficient tax advisor can help you save more money and solve tax issue(s).
Going into process uninformed
You should not go into a tax audit by not being aware of the issue they want to audit. Importantly, do not assign this directly to a person who is not involved with the issue(s). We have experienced many companies giving the tax audit to the wrong person, resulting in a considerable tax assessment.
Expecting to win 100% on all issues
You should not expect to complete a tax audit with a 100% win on the issue(s) raised by the TRD. Again, you must accept that this is your mistake and take note of this for the following year.
Being evasive or defensive
You should not try to evade or hide something from the TRD officer. Trust me, and they have enough experience to know that you are trying to avoid or hide something from them. If they find it, you will have a lot of trouble.
This article was prepared and accomplished by the author in his personal capacity. The opinions expressed in this article are the author’s own and is not intended to provide legal advice or suggest a guaranteed outcome as your situation may differ, and the law may have changed since publication. Also, this article does not reflect the view of Grant Thornton Thailand in this matter. For specific technical or legal advice on the information provided and related topics, please contact the author.