In addition to their annual tax payment, companies, subject to Corporate Income Tax (CIT) on net profits (including those generating no profit at all), are also required to make tax prepayment in the form of a half-year report (form PND 51). A half-year report is useful to enable stakeholders to stay up to date on the key performance matrix of the company. Further, it assists in a company’s comparison of its performance against that of other companies within the same industry.
A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within two months of the end of the first six months of its accounting period. The prepaid tax is creditable against its annual tax liability.
Example: If a company’s accounting period ends at the end of the calendar year (i.e. December 31), the first six fiscal months are: January through June. The company’s half-year report will then be due within two months of June, that is, by the end of August.
Generally, if a company attempts to pay less tax through forecasting a lower annual profit, it will have to pay an additional 20% tax on the difference between the forecast and the actual tax, in the event that the actual year-end profitability turns out to be 25% higher than what was forecasted.
A reasonable exception to this rule is where the company files a half-year report on a forecast amount of net profit which is more than or equal to half of its actual net profit from the previous accounting year. In this circumstance, where the company has underestimated its earnings beyond the acceptable threshold, a company will be taken to have acted reasonably.
Mahanakorn Partners can prepare and submit your company’s half-year report along with your tax payment.