Many SMEs entrepreneurs may have wondered why the company expenses that we pay Even though there is a receipt that is correct and complete But the accounting department or accounting office informed that it cannot be deducted as an expense in calculating net profit for tax purposes. Or to summarize it simply, the expenses we pay cannot help the entrepreneurs save taxes at all. Therefore, AIRA Factoring would like to allow us to explain to SMEs entrepreneurs at the same time that the expenses What type of payment is it? Is it a tax expense or not?
What are the company’s expenses?
Company expenses are a type of cost that is paid out by the business. To pay for goods or services used in business operations
The company’s expenses can be separated into “Accounting expenses” and “Tax expenses” Most entrepreneurs are unable to separate the two types of items. However, they can be easily explained as follows.
Accounting expenses
Accounting expenses are expenses that the company pays for goods or services with correct evidence of payment, such as paying employees’ salaries. Paying for products to be sold This expense will be considered as cost of sales.
Tax expenses
Tax expenses Refers to expenses that the business pays out. with evidence of correct payment And the law allows such expenses to be deducted from income in calculating net profit for tax purposes.
But tax expenses are mostly the same as accounting expenses. But there are exceptions. Some expenses can be accounting expenses. But they cannot be calculated as tax expenses, called “prohibited expenses”.
Prohibited expenses
Prohibited expenses are expenses that the Revenue Department determines: It cannot be used to deduct from income in calculating profits for tax purposes. Which can be divided Prohibited expenses are divided into 8 categories as follows:
Personal expenses of executives or business owners that are outside of company regulations.
Personal expenses of executives or business owners, such as gas for the executive’s car, food allowances, financial aid, merit-making ceremonies, ordination ceremonies that are personal, are not related to the company. or expenses for employees or employees who are outside the regulations It cannot be deducted as an expense at all.
If the company wants to use it for company expenses or wants to use the company’s money to pay By the best way It is clearly specified in the company regulations. This money will be considered as welfare provided by the company to employees. So it can be used as an expense.
2. Expenses to entertain customers that exceed what is required by law.
The law stipulates that the company’s customer entertainment fee must not exceed 2,000 baht per person per visit and must not exceed 0.3% of the company’s income. and the ceiling of expenses in this section The maximum is 10 million baht. Therefore, if the expenses on this item exceed what is required by law. It cannot be deducted from income when paying taxes.
3. Expenses without recipients
Unclaimed expenses are expenses that are paid in cash and no receipt has been issued or there is no clear evidence to whom the payment was made. which if there is no clear source of payment Tax expenses cannot be deducted. They are mostly found in small companies. Therefore, the company must specify the recipient’s name, issue a receipt, or have clear evidence of the transfer. To use as tax expenses
4. VAT expenses
The next expense is one that most people often misunderstand. That is an expense that is VAT. The simple explanation is that in large companies there will be VAT registration. The company must keep a portion of the money to pay VAT. By paying VAT at the Revenue Department.
For example, The company sells products for 100 baht, meaning the company actually receives only 93 baht, while 7 baht is considered the part that must be paid for VAT. Therefore, this amount Therefore, it is not considered a tax expense of the company.
5. Expenses to the parent company or subsidiary company
In normal accounting, expenses paid by the parent company to the subsidiary are considered expenses. But in terms of tax according to Thai law The two companies are considered to be the same company. Therefore, purchasing goods and services between each other It is considered a matter of the flow of money in the company only. Cannot be counted as a tax expense.
6. Reduced real estate expenses
Normally, in accounting, the value of real estate is always assessed. to reflect the changing value of assets In the event that the asset value decreases In accounting, it is treated as an expense in the financial statements. But cannot be used as a tax expense. This is because real estate appraisals cannot tell the true price. It will be known only when the sale actually takes place. The Revenue Department therefore prohibits taking the value of the company’s real estate that has decreased. taken into account as absolute expenses
7. Wasted natural resource expenditures
Wasted natural resource expenses If I were to give an example to show the picture, The company is in the business of cutting and selling wood. Of course, the trees that are cut down will reduce the available resources. In general accounting, it is considered an expense. But in terms of taxes, it cannot be used as an expense. This is because the value of the resources being used cannot be assessed. And there are no clear rules for evaluating to find lost value. If given the opportunity to use this item as an expense Most companies tend to overestimate the value of wasted resources. In order to save taxes for the company
8. Fine expenses
Fines are always incurred by companies whether they are minor or major violations. and when having to pay a fine Of course, this money belongs to the company that paid it out. In general accounting, it must be considered as an expense. But in terms of taxes, we cannot take various fines into the calculation of expenses. Because this expense is not related to the business The Revenue Department considers that If the company strictly complies with the law There will not be any expenses incurred in this part. Therefore, it is considered that the fine is not a tax expense.
In the case where the business operator is a seller of goods or services Have business partners who are government agencies or large private companies? and immediately need cash flow to enhance liquidity within the business I don’t want to wait until the commercial credit term is over. Such documents can be used to use the Factoring service (selling trade receivables) with AIRA up to 90% of the document value, quick approval, quick cash receipt.
