Nov 29, 2020
The year’s end, a high season when consumers are out celebrating, is approaching. We believe that operators have created their restaurants-cafés into attractions to draw in customers. Similarly, this means we’re also entering the end of the fiscal year and restaurant owners have to turn their attention to tax management and issues like saving money and reducing expenses, meaning reducing taxes. For this occasion, we’ve invited Ajarn Thanai Nopphakhun, an accounting guru and the Course Director of Flow Account who’s here to give us accounting management advice, which can help operators lower their taxes.
Accounting Management Techniques to Help Lower Taxes
If you want to lower your taxes, you need to know about the taxes that restaurants and cafés need to pay. This is the first thing Ajarn Thanai told us and he explained to us simply that our tax base depends on our business model. There are 2 models for restaurants-cafés: ordinary person or juristic person/corporation.
o Ordinary Person
Restaurant-café owners who haven’t registered as a corporation pay their taxes as an ‘ordinary person’. The taxable amount will be calculated according to the income. The higher your income, the more tax you have to pay.
However, you have to first understand about the tax base used to calculate your taxes. For example, people with income of 0 – 150,000 baht are exempt from paying taxes. This means the income from your restaurant for the entire year. You have to take your restaurant’s income, deduct expenses and personal tax deductions (for the restaurant owner) from it. Use whatever’s left to calculate your taxes.
There are 2 ways to calculate a restaurant owner’s personal income tax.
Method 1: Deduct the expenses in percentage. An expense deduction in the amount of 60% of the income is allowed for restaurateurs. You can deduct your expenses and personal tax deductions (if any), such as allowances for the care of your parents, house rental fees, interest from vehicle purchases and SSF and RMF fees, etc., from your income. Use whatever’s left to pay your taxes according to your tax base. (Table above)
Method 1: Deduct the expenses in percentage. An expense deduction in the amount of 60% of the income is allowed for restaurateurs. You can deduct your expenses and personal tax deductions (if any), such as allowances for the care of your parents, house rental fees, interest from vehicle purchases and SSF and RMF fees, etc., from your income. Use whatever’s left to pay your taxes according to your tax base. (Table above)
The following example is to make it easier to understand:
If your restaurant’s income is: 1,000,000 baht
You can deduct 60% for your expenses: 600,000 baht
Therefore, your income after deducting your expenses is: 400,000 baht
If your restaurant’s income is: 1,000,000 baht
You can deduct 60% for your expenses: 600,000 baht
Therefore, your income after deducting your expenses is: 400,000 baht
Deduct the tax write-offs:
Personal: 60,000 baht
Net income before taxes: 340,000 baht
Use the 340,000 baht to pay your taxes according to the table:
The first 150,000 baht is exempt from taxes.
For the next 150,000 baht, you have to pay taxes at the rate of 5% = 7,500 baht.
For the remaining 40,000 baht, you have to pay taxes at the rate of 10% = 4,000 baht.
Personal: 60,000 baht
Net income before taxes: 340,000 baht
Use the 340,000 baht to pay your taxes according to the table:
The first 150,000 baht is exempt from taxes.
For the next 150,000 baht, you have to pay taxes at the rate of 5% = 7,500 baht.
For the remaining 40,000 baht, you have to pay taxes at the rate of 10% = 4,000 baht.
From the example, you can see that you have to pay taxes in the amount of 7,500 + 4,000 = 11,500 baht.
This is without deducting any of the aforementioned additional tax deduction allowances, which can reduce your taxes even more. However, in order to claim the tax deduction allowances, you’d have to have a good document management system, so you can have all the tax deduction documents you need. (Read ‘Ajarn Thanai FlowAccount: 5 Reasons Why Bookkeeping Can Help Reduce Costs and Increase Profit’). Otherwise, you might have to pay a maximum of 30% in taxes.
Method 2: Take all of your income and multiply it by 0.5%. Choose whichever method that makes you pay a higher tax amount.
“When you operate a restaurant, whether or not you’re at a loss, you have to pay taxes because you take your income and multiply it by 0.5%. Therefore, there are no alternatives. If you keep all your data well in the first place, you can tell right away which method is better.”
Moreover, if your restaurant-café has an income of over 1,800,000 baht, you have to pay value-added taxes, even if you haven’t registered as a corporation. Therefore, you have to keep all the purchase and sales tax invoices. So, it’s particularly important that you keep your documents. From an ordinary person’s perspective, you might risk being at a loss because you don’t have the aforementioned system in your structure. That’s why, compared to registered corporations, there’s a bigger chance that ordinary people will come out at a loss.
As for techniques for reducing restaurant personal income taxes in a way that will give you a lot of deductions, Ajarn Thanai summarized the tricks as follows:
1. You need to check what kinds of expenses you have.
2. You need to know what tax deduction allowances there are.
3. Use all the benefits from government measures or programs.
1. You need to check what kinds of expenses you have.
2. You need to know what tax deduction allowances there are.
3. Use all the benefits from government measures or programs.
o Juristic Person/Corporation
As for restaurant-café operators who’ve registered as a company, there’s only one method for calculating your taxes. Deduct your expenses from your income to calculate the real value. Use whatever you have left to pay your taxes. You can use all types of expenses, whether it’s the salary for the restaurant owner, accounting fees or auditing fees. This can’t be done if you’re just an ordinary person. So, as for the methods used find what tax deductions you can get, it’s more convenient for corporations.
In addition, most restaurant-café operators registered as corporations are SMEs. That means their registered capital doesn’t exceed 5,000,000 baht and their income doesn’t exceed 30,000,000 baht. They don’t have to pay taxes for the first 300,000 baht of profit. Therefore, they have more tax deduction options than ordinary people.
So, Ajarn Thanai summarized the techniques for reducing taxes for juristic persons/corporations as follows:
1. Find out what tax deduction allowances are available.
2. Have you exercised all of your rights?
3. How good is your document management system?
1. Find out what tax deduction allowances are available.
2. Have you exercised all of your rights?
3. How good is your document management system?
“Operators should know their rights and these are separated into the following two channels:
First – Who are you (an ordinary person or a corporation)? What rights can you exercise?
Second – Always stay up-to-date on your rights. You need to follow the news from the Revenue Department. Right now, there’s the ‘Let’s Go Halves’ program, the ‘Shop and Payback’ program and the ‘We Travel Together’ program. These are the things you have to know and keep your eyes and ears open for.”
First – Who are you (an ordinary person or a corporation)? What rights can you exercise?
Second – Always stay up-to-date on your rights. You need to follow the news from the Revenue Department. Right now, there’s the ‘Let’s Go Halves’ program, the ‘Shop and Payback’ program and the ‘We Travel Together’ program. These are the things you have to know and keep your eyes and ears open for.”
How should a good accounting document storage system look?
Notice that Ajarn Thanai reiterated about having a good accounting document management system because if an operator doesn’t have all the documents when they have to use them for their tax deductions, they can claim fewer deductions. Ajarn Thanai has a trick for setting a preliminary document management system as follows:
- You need to separate the income-expenses in order to organize your document storage system and to know how many channels of income you have and how many expenses you have, for example, payments for ingredients, containers and equipment or payments for assets like tables chairs, etc. So, you should sort your documents and keep them according to their categories, for example, assets, kitchen equipment, marketing, etc.
- Make a tax entitlement plan. For example, depreciation rates will be calculated for tables and chairs. You can use them for 5 years. Otherwise, if it’s an equipment purchase, you can claim a VAT refund, including influencer fees that involve withholding taxes. “You need to plan who you’re going to buy ingredients and equipment from because restaurants-cafés buy ingredients and equipment daily or weekly. For example, if you buy at Makro, you can rest assured that you’ll get all the bills you need. You can keep those documents if you have good planning because the small things you do frequently accumulate into a large sum. Therefore, laying out a plan first can help you exercise all of your rights.”
Nowadays, technology can help make managing your accounting easier.
Ajarn Thanai likes to say that you have to keep all of your income-expense documents and data. Of course, restaurants-cafés are merchandizing businesses. Each day they have an accounting list that is a mile long. However, nowadays, accounting management systems aren’t so complicated and chaotic anymore since technology can help make it easier.
For example, if you want to keep all the bills for your expenses, what the owner is most afraid of is missing bills. However, these days, you have technology to help you keep you bills, receipts and tax invoices in an online system, for instance, with the AutoKey function invented by FlowAccount, a program that can keep your bills. Just scan them on the website or take a picture of the bills via an application and the OCR system will read the information from the picture and translate it into numbers without you having to get frustrated and waste your time entering the data manually.
FlowAccount helps you keep an accounting database on the cloud. You can use it on the website and the mobile application. FlowAccount also has functions that will help restaurant-café operators with taxes such as the VAT management system that will help manage value-added tax. It can tell you how many tax invoices you have, which ones are ready to be filed with the Revenue Department and which ones can’t. It’ll also tell you which ones you’ve already filed, which can help you manage all your deduction rights without missing anything. Moreover, it’ll specify which information you’re supposed to enter into the P.P. 30 Form and you can also export the purchase-sales tax report into an excel file.
As you can see, good accounting system planning is bound to help an operator reduce some of their tax burdens, let them know about the benefits they’re entitled to and help them join government stimulus programs. It can help you keep a lot of money in your pocket and, of course, the business will have more reasonable operating numbers.
“If you’re an ordinary person or a corporation, what rights can you exercise?
Always stay updated on your rights and follow the news from the Revenue Department.
These are the things you have to know and keep your eyes and ears open for.”
Ajarn Thanai Nopphakhun
Accounting Guru and Course Director of Flow Account
Accounting Guru and Course Director of Flow Account
Good Accounting Management…Can Help Reduce Restaurant Taxes
www.makrohorecaacademy.com
www.makrohorecaacademy.com
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