Business types of pharmacy and tax responsibility

          Pharmacy can be established as sole proprietorship which is an individual legal entity and partnership or corporation which is a juristic person. Each business type has different accounting duty and tax responsibility as follows

1. Individual legal entity: there is no duty to keep accounts according to the Accounting Act, B.E. 2543 (2000) while such entity has subjected to personal income tax.
2. Juristic person: there is duty to keep accounts according to the Accounting Act, B.E. 2543 (2000) and such entity has subjected to corporate income tax.

Pharmacies’ revenues and expenses
      Revenues typically consist of

• Sale revenues from wholesale and retail. This must be adjusted for discounts       and deductions (for example, wholesaler rebates, returned merchandise, etc.)
• Commission revenues
• Service revenues from basic screening program as being the partner of the         development system for continuous chronic decease patients project from         National Health Security Office (NHSO) and Community Pharmacy Association       (Thailand)
• Other revenues such as interest income and gain or loss from sale

      Expenses usually include

• Cost of goods sold which represents the cost of products sold during the period
• Wages and salary include the benefits
• Utility
• Licensed pharmacy
• Accounting and auditing fee
• Depreciation and other expenses

               For the sole proprietorship pharmacies which are not VAT registered entity, there is no need to prepare financial statement annually. However, they are required just to record revenue and expense on daily basis. For the pharmacies which are established as juristic person, they are required to prepare financial statements: balance sheet, income statement and statement of changes in owners’ equity, at least on annual basis. In addition, such financial statements must be reviewed and audited by certified public accountant according to the Accounting Act, B.E. 2543 (2000).

          Pharmacy and taxation
          1)  The sole proprietorship pharmacies which are established as individual legal entity: a sole proprietorship’s income is taxed at the personal income tax rates with exemptions, deductions and allowances applicable to all individuals. To calculate the personal income tax, the steps to be taken are as follows

• Determined the assessable income: According to the Revenue Code, the income under Section 40 was classified into eight categories. All income resulting from    advantages realized either in cash or in kind must be considered. For pharmacies,      income from selling medicines and related products are considered as income   under Section 40(8): income from business, commerce, agriculture, industry,   transport or any other activities not mention in income under Section 40(1) –           40(7).
• Deduction of expense for income from business or any other activity: the   expense can be deducted either
  • as 60 percent of income or
  • as actual amount with supporting documents
• Allowance and exemption after deduction of expenses such as personal    expense, spouse and children, parental care, health insurance premium,       provident fund contribution, and interest paid on loan for purchase of residence. 
• Calculate the taxable income from assessable income minus expenses,     allowance and exemption, then tax expense would be the taxable income multiplies by personal income tax rate. However, taxpayer has to compare such      tax expense with tax expense calculated from 0.5 percent of assessable income,          the higher amount must be paid.
• Personal income tax rate (as at 2018)

• Tax filing:
  • the taxpay liable for a tax return shall file a tax return form (Form PIT 94) within the month of September of every tax year by reporting only the income under Section 40(5) – 40(8) derived during the period from January to June. 
  • the taxpay liable for a tax return shall file a tax return form (Form PIT 90) within the month of March of next tax year by reporting all the income under Section 40 derived during the period from January to December. 

          2)  The pharmacies which are incorporated as juristic person: Corporate income tax is a direct tax levied on a juristic person carrying business in Thailand or not carrying business in Thailand but deriving certain types of income from Thailand. To calculate the corporate income tax, the steps to be taken are as follows

• There pharmacies shall take into account all revenues arising from or in    consequence of the business carried on in an accounting period.
• The deductible expenses shall be in accordance with the condition prescribed by the Revenue Code in the Section 65 Bis and 65 Ter
• The CIT is calculated from the pharmacies’ net profit on the accrual basis.
• Corporate income tax rate (for accounting period beginning or after 1 January     2017)

      * SMEs refer to any Thai companies with registered capital less than 5 million baht and revenues less than 30 million baht.

• Tax filing:
  • Juristic persons are required to make a tax prepayment (Form CIT51) by estimate their annual net profit as well as tax liability and pay half of the estimated tax amount within two months after the end of the first six months of its accounting period.
  • Juristic persons are required to file annual tax returns (Form CIT50) within 150 days from the closing date of their accounting period.

          Besides income tax which is direct tax paid directly by an individual or organization, the next issue will present the topic of Value added tax (VAT) for the pharmacies which have revenues over 1.8 million baht a year and are VAT registered, and its pros and cons.