Assisting with writing off bad debt

In this uncertain business climate, many companies may face difficulty collecting debts. If a company wants to write them off, there are some rules that it must follow.

Under Ministerial Regulation No. 186 issued by the Revenue Department, when a debt is not barred by prescription; or not owed by a director or managing partner, a company can write it off from its accounts receivable under the following conditions:

Amount of debt

Legal requirements for writing off bad debt

≤THB 100,000

Notices have been issued and written legal advice has been obtained

THB 100,001 - 500,000

A complaint has been filed with the court

≥THB 500,000

A court has issued a judgement and a decree of execution has already been given, but the debtor has no assets to be sold off to pay back the debt

Benefits of Writing off Bad Debt

A company that writes off bad debt in this way can benefit by booking the amount of the bad debt as a tax-deductible expense which will reduce its profit and the amount of tax to be paid in that fiscal year or within a period of 5 fiscal years.

The two-year prescription period for making a claim related to a normal business debt may not be long enough if a company does not aggressively follow up on bad debts.

Complying with Ministerial Regulation No. 186 will allow a company to book bad debts to its expenses for 5 fiscal years, which will be very useful during both the current and future economic situation.

If you are interested in doing this, our legal team can assist you.