NACC Now Requiring Filing of Income & Expenses Statements from Some Contractors

The National Anti-Corruption Commission (NACC) has begun enforcing a notification that require private parties with a contract with a state agency or state owned enterprise (SOE) to submit an income and expense statement with the NACC if that contract has a value of two million Baht or more.  This requirement applies to Thai companies and some foreign companies, although the scope of its application to foreign companies is not entirely clear.  The notification can be found here.  The notification full name is “The Notification of the National Anti-Corruption Commission Re: Rules and Methods for the Preparation and Submission of the Income/Expense Account of a Project under a Contract between an Individual or Juristic Person and a State Agency B.E. 2554 (2011) (the “Notification”). That part of the Notification that requires the submission of a six page income and expense statements became effective recently in January this year.

The Notification does not require submission of its official reporting form if:

  1. both parties are state agencies, except for state agencies which have the duty to submit a corporate income tax return (not a concern for foreign business operators); or
  2. the party is a juristic person established under the law of a foreign country and has no agent or representative in Thailand, but has delivered or provided services in Thailand and the state agency or SOE has made the payment to the party under the Contract directly to the foreign country.

It is not exactly clear what “agent or representative means”. This obviously creates tax concerns since the NACC is empowered to consult with the Revenue Department and the income and expense statement itself must be filed with the Revenue Department. There is also a danger of the government “black listing” a contractor if the NACC contends it was supposed to file an income and expense statement, but failed to do so. In practice, some agencies and SOEs are sending letters to their vendors with a simple reference to the Notification, but little or no information about what Notification requires.

The NACC also has the authority to establish rules and methods for foreign juristic person who does not fall under the filing requirement, but no such rules have been promulgated yet.