What does the Thai Revenue Department usually examine in a tax audit, and how should we respond to a notice?
1. What tends to trigger an audit
| Situation | Why it draws attention |
|---|
| A VAT refund claim | The Revenue Department usually verifies input VAT before refunding |
| Several years of losses while still operating | Inconsistent with the scale of business; may indicate under-reported income or excess expenses |
| Revenue in VAT returns does not match the annual income tax return | Easily spotted by cross-checking data |
| Large related-party transactions, especially service fees, royalties and interest paid to an overseas head office | Involves withholding tax and transfer pricing |
| A tip-off, or the industry is targeted for review | The Revenue Department opens a case itself |
2. The four most common issues
Input VAT: invoices with the wrong name, tax ID or description, or not matching actual business, cannot be credited.
Withholding tax: not withheld, or withheld at the wrong rate, on service fees, rent or foreign payments.
Expense deductions: expenses without proper documents, non-business expenses and entertainment above the cap (generally 0.3% of the higher of revenue or paid-up capital, up to THB 10 million) may be added back to taxable income.
Related-party transactions: unreasonable pricing, or no contracts and evidence of services (see How should related-party transactions with head office be priced?).
3. What to do when you receive a notice
Read it carefully: which years, which documents, what deadline, and whether attendance is required.
Appoint one contact: ideally the accountant or adviser who knows the books, so the message is consistent.
Provide documents within the requested scope: they must match the books and the returns; check before answering anything unclear.
Keep written records: lists of documents submitted and notes of meetings.
Follow the procedure if you disagree: you can appeal to the Board of Appeal within 30 days of receiving the assessment notice.
4. How serious can it be?
Besides the tax itself there is a surcharge of 1.5% per month (capped at the tax amount) and a penalty, usually 1 times the tax underpaid and up to 2 times for failure to file. Voluntary correction and cooperation may reduce penalties.
5. The best response is a check-up first
Rather than waiting for a notice, have a tax health check every year and fix problems before an audit (see What does a tax health check cover, and how often should we do one?).
6. Basis and scope of service
Basis: Thai Revenue Code provisions on tax audits, assessments, surcharges and penalties, and appeals (Sections 19, 30 and others); the ministerial regulation on the entertainment expense cap. Actual requirements follow the notice and current rules. Z&X can help organise documents, accompany meetings and prepare appeals.
Related services: Tax Health Check | Accounting & Tax Outsourcing
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