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Tips for Managing Revenue Department Tax Refund Claim Investigations
 
Napaporn Vatcharanukul | May 2013
 
Herein, I offer 10 tips for managing Thailand Revenue Department tax refund claim investigations.
 
1. Your company will always be audited
 
It perhaps may help you to know that the Revenue Department’s audit action was one of the results of the conditions of the IMF's bailout of Thailand following the 1997 Economic Crash that forced the Thailand Revenue Department to collect more taxes for the State. Prior to that, only a very small number of tax investigations were actually carried out in Thailand, but that changed after the Economic Crash, and it's an almost certainty that a tax refund claim will be investigated (audited) by the Revenue Department audit officers.
 
Tax refund investigations in Thailand are very involved covering all taxes payable under the Revenue Code (not just the type of tax you are asking for a refund), and so management needs to assess its compliance with all taxes prior to submitting any tax refund claim.
 
2. There are no “taxpayer rights” in Thailand
 
Thailand has no “taxpayer rights” charter (as developed countries have), and in Thailand, Revenue Department rights are treated (accepted) as superior to taxpayer rights.
 
Management should therefore not make “rights” an issue for the Revenue Department audit officers, because doing so will only make them dig in and make the whole refund investigation a lot more worse for you and your company.
 
3. Why should a resource owner refund money to a resource user
 
Revenue Department audit officers think that foreign companies come to Thailand to use the resources of Thailand for their own benefit (not for the country’s benefit), and when confronted by a foreign company claiming a tax refund from them, they question why they should. Not only Revenue Department audit officers think like this, many people in Thailand think like this (it stems I think maybe? from “globalization”).
 
Management needs to be aware of this thinking, and be prepared for all sorts of challenges of issues and matters that could possibly stem from “globalization” policies, such as, for example, cost allocation payments to foreign parent companies, royalty payments to foreign parent companies, and management and technical fee payments to foreign parent companies.
 
4. Ways will be found to delay or freeze your tax refund claim case
 
Whether or not is was right and proper to do so, one of the tactics learned by the Revenue audit officers for collecting more taxes for the State following the 1997 Economic Crash is delaying, and even freezing, tax refund claims.
 
Management of tax refund claim investigation really does require regular and constant follow-up of the Revenue Department audit officers, because if you just leave it with them without any follow-up action, you will be giving them the sign that it’s OK to delay or freeze your case.
 
5. Be aware of your own staff’s co-operation with Revenue audit officers
 
Again, whether or not it’s right and proper to do so, another tactic used by the Revenue Department audit officers is convincing Thai company staff to co-operate with them, for the good of the country.
 
Foreigners need to understand that it is not nice at all for a Khon Thai to be confronted with Revenue audit officers using this tactic, and company staff are left with very little, and often, no choice.
 
Generally speaking, this tactic is used when Revenue Department audit officers are needing or wanting the Thai company staff to help them meet their tax collection target, and if this tactic is ever used on your company staff, you need to recognize that the Revenue Department audit officers are wanting to turn your tax refund claim case into a tax bargaining case.
 
6. You are also dealing with the Revenue Department’s bureaucracy
 
Revenue Department audit officers who do the actual audit work may report back to your Thai company staff that everything looks all right, but then, after that, the Revenue Department audit officers come back to your company with a matter or issue to deal with.
 
If this should happen, this is an indication of the Revenue Department’s bureaucracy wanting to turn your tax refund claim case into a tax refund bargaining case.
 
7. Never automatically expect Revenue Department audit officers to have to follow the laws
 
Continuing on from the point above, in the case your Revenue Department audit officers come back to your company with a matter or issue that you find completely “unbelievable”, it's a good bet the bureaucracy has fallen behind in its tax collection targets, and the bureaucracy has "ordered" the Revenue Department audit officers to deny your company's tax refund claim (either in whole or in part).
 
If this should happen, management needs to recognize it as confirmation that your tax refund claim case has already turned into a tax refund bargaining case, and management really does need to decide at this point, whether to accept the bargaining or to appeal the matter or issue.
 
8. Know when to call in tax refund claim assistance
 
In Thailand, the tax investigation process is very time consuming, there are many processes for company staff to undertake, and a lot of information, documents and answers for company staff to provide to the Revenue Department audit officers.
 
If there are staff struggles, the result will not be nice and management needs to know when its time to call for assistance.
 
9. Know who to call for tax refund claim assistance
 
Foreign managers in Thailand need to understand that tax accountants are not tax refund claim specialists, and when a successful result is crucial, a specialist tax investigations assistance consultant having in-depth knowledge of how the Revenue Department audit officers work, and how the bureaucracy works behind them, should be sought.
 
10. Do all you can to avoid having to claim tax refunds
 
My final tip is that, because of all the above, it really is necessary for foreign CFOs and CEOs to spend a bit more time than what they would do back home, managing Thailand tax refund positions. Here's a couple of ideas:
 
·         For withholding tax refund positions, which are, generally speaking, because the net profit result of the Thailand company is not high enough to absorb the withholding tax that has been deducted from gross income, a management plan of forgoing (writing back) some tax deductions or delaying or deferring some tax deductions to another year can save a lot of trouble in Thailand.
·         Similarly, for value added tax refund positions, if the company is carrying on a particular type of business whereby Input VAT will always exceed Output VAT on a monthly basis, such as an export business, filing appropriate application forms, for example, a “Good Exporter” or a “Registered Exporter”, can also save a lot of trouble in Thailand.
 
This Tax Advantage Article is general information only. It should not be used to determine matters without consulting with an experienced Thailand tax advisor.
 
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