The Revenue Department has eased bad debt disposal regulations.
The Revenue Department has eased bad debt disposal regulations.
When COVID-19 puts many businesses on a dead end, many companies had to close or went bankrupt causing their creditors to bear the burden and loss.
To help businesses survive, the Revenue Department amended the ministerial regulations to improve bad debt disposal indicating that it reduces the process/period of writing off bad debt faster to help reduce tax burden and debt collection cost.
The characteristics of bad debt that can be written off, conditions and accounting cycle policy can be summarized as follows:
Rules for bad debt write-off according to amount of debt.
1. Amount of debt exceeding THB2,000,000, one of the following actions must be taken against debtor;
- Necessary actions for debt recovery taken as deemed appropriate, but repayment of debt is unattainable due to the debtor’s death, or disappearance, or the dissolved business is indebted to other creditors having preferential rights over all assets of the debtors.
- A lawsuit taken against the debtor in a civil case or a participation in debt servicing has been filed and court order has been issued together with the first execution report issued by executing officer stated that the execution has been carried out, but the debtor does not have assets to pay off debts.
- A bankruptcy action taken against the debtor in a bankruptcy case and the court issues an order approving the composition of such debt or the debtor is adjudged to be bankrupt, and the debtor’s assets are divided for the first time, or the court has ordered a case closure
If above action is taken in a foreign country, documentary evidence issued by the legal authority of that country must be presented and legalized as a translation from a foreign language into Thai in accordance with the Ministry of Foreign Affairs’ Document Legalization Act
2. Amount of debt is less than THB2,000,000, one of the following actions must be taken against debtor;
- Debt collection measures taken as deemed appropriate with substantial evidence, but repayment of debt is unachievable due to the debtor’s death or disappearance, or in the event that the dissolved business has other creditors having preferential rights over its assets.
- A lawsuit taken against the debtor in a civil case or a participation in debt servicing has been filed and such action has been endorsed by the court.
- A bankruptcy action against the debtor and such action has been endorsed by the court.
- Upon completion of any of the above actions, the director or managing partner of the creditor must approve the disposal of the debt within 30 days from the end of the accounting period.
3. In the event that the amount of debt is less than THB200,000, bad debts can be written off with no court-involved action but only to present valid evidence supporting that the demand for repayment has been taken as deemed appropriate.
** The above principles are applicable to entities with fiscal year commencing from 1 January 2020 onwards **
3 Exception:
A debtor of a financial institution with 100% loan reserve in accordance with the Bank of Thailand’s regulations, the debt disposal could be done without having to act as per conditions specified in No. 2 as well as meeting below criteria;
3.1 Overdue principal or interest for a total period of not less than 360 days or 12 months.
3.2 Or being a debtor who meets the regulations for writing off assets from an account announced by the Bank of Thailand.
3.3 Or being a debtor who meets the regulations for writing off assets from the account and financial obligations under the debt restructuring announced by the Bank of Thailand.
The new regulations are expected to help reducing litigation costs, tax expenses and simplify the process of writing off bad debt. This measure would be most beneficial to debts with low principal and also to clients, financial institutions, and court because the number of court cases will be greatly reduced in accordance with the reduction of debt threshold.
Source:
- https://www.bot.or.th/covid19/content/sme/Pages/asset-warehousing.aspx
- https://www.bot.or.th/Thai/ResearchAndPublications/articles/Pages/Article_8Apr2021.aspx
- https://www.tnnthailand.com/news/tnnexclusive/80168/
- https://www.infoquest.co.th/2021/86260
- https://www.posttoday.com/finance-stock/news/653154
- http://www.fio.co.th/fioWebdoc64/P640506-13.PDF
- https://www.rd.go.th/2483.html
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