Before a Thailand corporate entity implements a strategy of selling below market price, you should formulate and document a position for Section 65 bis (4) of the Revenue Code. This is because Section 65 bis (4) prescribes:
“In the case without justifiable ground property is transferred, service is rendered or money is lent without consideration, service charge or interest, or with consideration, service charge or interest at an amount lower than market price, the Revenue officer has the power to re-assess the consideration, service charge or interest at the market price on the date of the property transfer, rendering of the service or lending of the money.”
Only when there is justifiable ground for selling at lower than market price will it be allowed for the purpose of computing corporate tax. If your corporate entity doesn't have justifiable ground, the tax audit officers can adjust the sales prices and re-assess corporate tax.
You may think that a global economic downturn is a sufficient justifiable ground for selling below market prices. But merely saying that is not enough, and your corporate entity must be able to prove to the tax audit officers in Thailand that justifiable ground exists for a particular circumstance.
There is no guideline for justifiable ground in the law, and the guideline for this matter can really only be ascertained by examining past tax judgments. Some of those are as follows:
Held to be not justifiable:
Selling motorcycle spare parts at a price lower than market price because the sales were made to an affiliated company.
Selling liquor products to retailers at a price lower than the market price because of potential income gains to be made by other means.
Selling audio equipment and appliances to a customer at a price lower than market price because another customer, who had previously ordered the goods, cancelled the order.
Held to be justifiable:
Selling chemical products at a lower than market price because the selling price is according to the world market price.
Selling cars at a lower price because the demand for cars had plummeted, but the seller was obliged to meet sales volumes that it had contractually promised to meet.
The guideline that can be ascertained from these cases is that a lower than market price is justifiable only when there is an external force that dictates the selling at a lower price, such as, when the world price dictates the selling price, or when there is a particular contractual commitment to an independent third party.
And for both cases of the world price and the particular contractual commitment dictating the selling price, external (not internal) evidence was provided, proving that the selling below market price was not just a ploy by the companies.
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