Benefits of increasing registered capital in a limited partnership

[TacoHell]

Hi,

I started a business here 8 years ago. Its a VAT registered limited partnership with 2mil registered. Since then, we have acquired physical assets worth over 20mil THB. I've searched the net and consulted my accountant but cant seem to get a clear answer.

1. What are the tax implications if any for having a 20mil registered company?

2. what is the cost to increase? Ive read its 500THB per 100,000thb increased.

3. Will this make it a lot easier to get a line of credit or loan from a Thai bank?

4. Of course I have all receipts and VAT paid for the assets acquired, and have reported all income to support those purchases.

5. Any other benefits or disadvantages?

My accountant made it seem like it was bad idea, stating I would have to pay a lot of tax, but it wasn't clear if that was only a one-off payment (500 per 100,000 increase)

If anyone here with experience could shed some light on this it would be much appreciated.

[maisodni]

Well, for starters, for capitalization below 5,000,000 baht, your business pays 0% tax rate on its first 300,000 baht per year in profit, and 15% tax on its next 700,000 baht in profit - and then 20% on all annual profit in excesc of 1,000,000 baht. For capitalization above 5,000,000 baht, yoir businees pays a flat 20% tax rate.

So - the firest question is: how much retained profit will you leave in the company? With a high capitalization, you will pay 95,000 baht more annual corporate tax on your company's first 1,000,000 baht in annual profit.

But - if you extract all "would be profit" as personal salary, then it really will not matter.

You are correct about the government capital registration fee - it is 0.0005 times the amount of new capital registered.

Most auditors base their annual audit fee partially on the capitalization level of the business. This is partly because the likelihood of a Revenue Department audit goes up, as capitalization increases.

Increasing capitallzation will most likely have no impact on loan - worthiness - that is based instead on a history of profitability (and posibly on the value of security collateral).

You should probaly stay with what you've got, unless you need extra capital, in order to sponsor additional work permit(s).

Cheers,

MS

[TacoHell]

Thanks MS for the clear and concise response. Great info