Revenue Department Thugs

[ThaiMeDown]

Hi guys,

 

Been reading the stuff here for quite a while. Great site. Sorry my first post is a bit heavy, but maybe someone has some tips / contacts that can help, and if nothing else, it might be a warning to others.

 

I won't go into too much detail for obvious reasons, but has this happended to you?

 

Background.

Thai company owned by Australian company.

Thai company traditionally loses money, but will do better this year.

We have kept it running becuase it is a good PR/marketing 'flag'. makes us look 'International'.

At least we can use the previous loses as a tax deduction in Thailand this year!

 

Well.......no you can't.

 

Revenue departmet says forget the tax refund, or we will come and audit you top to bottom!

And in future, any payments you make to the Australian parent, will be taxed at 15% because we reckon they are 'Royalties', not payments for support services provided from Oz.

 

WTF!

 

The advice i am getting in BKK, is roll over, nothing you can do about it.

 

So unfair. We will probably close our Thai business down due to this treatment (it will just not be viable any more) which sadly will put a few Thais out of work.

 

Any similar experiences?

 

TMD

[ThaiHome]

Transfer Pricing refers to the pricing of contributions (assets, tangible and intangible, services, and funds) transferred within an organization. For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be sold to a foreign subsidiary. Since the prices are set within an organization (i.e. controlled), the typical market mechanisms that establish prices for such transactions between third parties may not apply. The choice of the transfer price will affect the allocation of the total profit among the parts of the company. This is a major concern for fiscal authorities who worry that multi-national entities may set transfer prices on cross-border transactions to reduce taxable profits in their jurisdiction. This has led to the rise of transfer pricing regulations and enforcement, making transfer pricing a major tax compliance issue for multi-national companies.

 

So, you were unable to convince the LTO that the Australian parent was actually providing services or goods for the payment the Thai subsidiary was making to it, right? If you had been able to do that, they would have left you alone. You werenâ??t by chance using those payments to cover the offshore part of the expats salary were you?

Itâ??s a real drag that in the current world, these pesky developing countries are getting wise to accounting tricks the MNCâ??s have been able to do with impunity for years that enabled them to manipulate the profits into lower tax jurisdictions. They should just be glad we are willing to do business here and not expect us to pay the legally required tax. After all, we employ Thais, want do they want?

TH

 

[cavanami]

In the USA, the Japanese auto makers have been paying very little tax by using parts made in Japan, at a high cost, to keep their USA tax rate low.

Say they ship a Honda engine from Japan to the USA, they cost the engine at $10K USD. Then they sell the car at $11K USD, so not they only pay tax on $1K.

The parent company in Japan that sold the engine to the USA makes the big profit.

 

The Japanese companies have been doing this since day one! They pay almost zero tax in the USA!!!

[ThaiHome]

Can you tie your rant to the subject of this to the thread about transfer pricing in Thailand and the revenue department attempts to collect the tax which apparently this foreign company is unwilling to pay and is choosing to close down the Thailand operation instead?

TH

[ThaiMeDown]

You werenâ??t by chance using those payments to cover the offshore part of the expats salary were you?

 

Certainly not. We operate 100% legit

 

They should just be glad we are willing to do business here and not expect us to pay the legally required tax. After all, we employ Thais, want do they want?

TH

 

We have not avoided any taxes at all. Why would we. happy to pay whatever taxes are required....legal taxes.

 

[ThaiMeDown]

Can you tie your rant to the subject of this to the thread about transfer pricing in Thailand and the revenue department attempts to collect the tax which apparently this foreign company is unwilling to pay and is choosing to close down the Thailand operation instead?

TH

 

We are not trying to avoid any taxes. I obviously did phrase this right. We are being asked to forego legitimate losses (tax deduction) and if we don't ............

 

Never mind.

 

Probably best not to discuss this openly.

 

Go back to chatting about Honda engines ............

[ThaiMeDown]

Guys,

 

If anyone has come across this themselves I'd be interested to hear how it panned out. If you have not, I would rather not elaborate further to explain things step by step.

 

just getting too frustrated and angry about the whole deal sorry.

 

 

[Pom Michael]

ThaiMeDown - it is the legitimate losses issue, if the company is not a profitable going concern it just raises the suspision of the revenue department.

 

Your accountant (local) probably knows already why this is happening - it isn't something new from the Revenue department.

 

You can fight it, but is does mean that they will come to audit you 100%, but that doesn't mean you won't get the refund (or deduction).

 

But agree that this type of issue is probably dealt with better on a different type of discussion board, or with your accountant/tax lawyer.

[ThaiHome]

I have spent the last several years convincing the LTO our payments to the parent company were for real services/goods. My point was if you think the payments (which must have contributed to the loss) are not subject to royalty tax, you should be able to prove that and in my experience they will eventually listen.

 

Apparently you must have paid some tax based on your half year forecast expecting to make some profit and did not forecast the loss until the end of the year and now you want a refund on that payment. They hate to give refunds.

 

Declaring an unforecasted loss, requesting refund on payment made earlier, and making payments to an offshore parent, which apparently you cannot substantiate what they were for, is just asking for them to look very closely. They are acting just like tax agencies all over world, trying to maximize the tax while companies try to minimize it.

 

Thailand and Australia have a comprehensive tax treaty that must provide some sort of vehicle to appeal revenue department ruling on your parent company payments being subject to royalty tax. Suggest you go to your accounting or audit firm and ask them to look it up and advise you the steps needed to proceed. This can take a while.

 

 

TH