Sharing taxpayer databases between authorities
The Thai Customs Department (Customs) and Revenue Department (RD) can now access the other’s database in order to obtain taxpayers’ tax and duty payments records, primarily for use in tax audits. Below are some sample cases.
Customs consistently challenges that royalties paid to parent companies or other related companies abroad should be included in the import value of all goods purchased from the parent and/or related companies. It appears that Customs can access the RD’s database to identify taxpayers who have submitted withholding tax on royalty payments using the RD’s Form PND 54. Based on taxpayer’s withholding tax records, Customs can determine the exact amount of royalty paid. If a taxpayer is unable to prove to Customs that the royalty in question is not related to the imported goods or is not a condition of sale of the imported goods, the taxpayer may be assessed the duty shortfall, plus a penalty of two times the amount of duty shortfall and a surcharge of 1.5% of the duty shortfall per month.
In addition, the taxpayers would also be liable to VAT shortfall plus penalty at one time of VAT due and surcharge at 1.5% per month. In view of the above, Customs is now able to determine the royalty value using their internal data records, making it unnecessary to request data from taxpayers. In this regard, if a company has paid royalty without including such royalty as import value of imported goods, it should be prepared to defend its position if challenged by Customs.
Similarly, the RD can now utilize Customs’ database to obtain taxpayers’ past Customs filing data. Generally, the RD accesses taxpayers export entry information filed with Customs. Revenue reconciliation between corporate income tax (CIT) and VAT filings is one of the items the RD generally asks for when it conducts a tax audit. Further, the RD also compares the export value according to the Customs database against the value of export in the VAT returns, and revenue disclosed for CIT purposes. If the export value according to the Customs database is significantly higher than that declared in a CIT return, the RD would assume that the taxpayer under-declared revenue for CIT purposes which may be liable for income tax on additional sales revenue plus penalty up to an amount equal to the additional tax liability, and a surcharge of 1.5% of the tax liability per month.
On the other hand, if the export value according to the Customs database is significantly lower than the export amount declared in a VAT return, the RD would assume that the goods were sold locally and thus should be subject to 7% VAT. If a taxpayer is unable to prove that the goods were for export and therefore eligible for 0% VAT, the 7% VAT would be assessed together with penalty and a surcharge of 1.5% of the VAT amount per month. The taxpayers are recommended to maintain appropriate documentation to support the treatment adopted and any differences between the customs, CIT and VAT records.
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