In Thailand, as in many other countries, a tax audit can be an intimidating experience for any business or individual. It’s not always about wrongdoing; sometimes, simple oversights or inconsistencies are enough to attract attention from the Revenue Department. Knowing what raises eyebrows is the first step in avoiding unnecessary scrutiny.
1. Unusual Fluctuations in Income or Expenses
One of the most common triggers for a tax audit is when a company reports a sudden drop or spike in income or claims expenses that are unusually high compared to previous years or industry averages. While businesses can naturally experience highs and lows, unexplained changes can raise questions.
For example, if your reported income drops by 40% in a year with no clear economic reason or context, the Revenue Department may want a closer look. Similarly, a dramatic increase in deductible expenses like travel, consulting fees, or entertainment can also raise suspicions.
2. Consistently Reporting Net Losses
It not uncommon for new businesses to report losses in early years. But if your company is consistently showing net losses year after year, yet remains in operation, it may raise a red flag. Authorities may question how the business is still running and investigate to see if income is being underreported or if personal expenses are being claimed as business costs.
3. Large or Unusual VAT Refund Claims
VAT refunds are often scrutinised, especially when the refund amounts are significantly higher than normal. This applies in particular to exporters or businesses that frequently claim VAT input credits. If your VAT claims appear excessive or inconsistent with your revenue, it may prompt the authorities to request supporting documents or conduct a full audit.
4. Mismatch Between Reported Income and Lifestyle
For individuals, a mismatch between declared income and visible lifestyle can attract attention. For instance, if someone with a modest salary is seen purchasing high-end vehicles, multiple properties, or luxury goods, the authorities may suspect undeclared income. Social media activity, bank transactions, and asset ownership records can all be used to build a case for further investigation.
5. Lack of Supporting Documentation
Failing to keep proper documentation for expenses, input tax credits, or income records is another common reason a tax audit in Thailand may be triggered. During routine reviews, being unable to present invoices, contracts, or receipts can lead the Revenue Department to question the accuracy of your filings.
6. Related-Party Transactions and Transfer Pricing
Businesses that deal heavily in related-party transactions, especially across borders, are more likely to come under scrutiny. Authorities may investigate to see if transfer pricing rules have been followed, or if the transactions are being used to shift profits and reduce tax liabilities.
How Professional Support Can Help
Managing taxes in Thailand is not just about filing on time; it’s about doing so accurately and in a way that reflects the reality of your business. If you’re unsure about your filings or simply want peace of mind, working with experts can make all the difference.
Forvis Mazars offers specialised support for businesses facing the risk of a tax audit in Thailand. Their tax experts familiar with local laws, international tax practices, or audit procedures. From helping you maintain proper records to representing you during an audit, Forvis Mazars can step in at any stage to help reduce risks and guide you through the process with confidence.
Explore their tax audit services to learn how they support businesses across Thailand with practical, reliable advice tailored to your operations.
