Thailand Tax Refund Claim Investigations
Tax Insight | Napaporn Vatcharanukul | May 2013
Herein, I offer foreign business managers of international companies in Thailand some insights into Thailand Revenue Department tax refund claim audit investigations.
1. Your company will 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 audited by the Revenue Department's tax audit officers, which audit will cover all taxes payable under the Revenue Code (not just the type of tax you are asking for a refund).
2. Do not make “taxpayer rights” an issue in Thailand
Thailand has no “taxpayer rights” charter, and in Thailand, Revenue Department rights are culturally accepted as superior to taxpayer rights. Whilst you need to fight for your rights in Thailand, you should not make “taxpayer rights” an issue for the audit officers, because doing so will only make the tax refund claim audit a whole lot worse for your company.
3. Prepare for the 'why should we refund money to you' thinking
Revenue Department audit officers think that foreign companies come to Thailand to use the resources of Thailand for their own benefit (not for the benefit of Thailand), and when they are confronted with a foreign company claiming a tax refund from them, they question why they should. Foreign business managers should be aware of this and be prepared for all sorts of challenges, particularly any “globalization” policies, such as, for example, cost allocations and services fees from foreign companies.
4. Regularly and constantly follow-up the Revenue audit officers
Whether or not it is 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. Tax refund claims really do require a lot of regular and constant follow-up of the Revenue audit officers, because if you just leave it with them, you will be giving them the sign that it’s OK to delay or freeze your claim.
5. Staff co-operation with Revenue audit officers
Again, whether or not it’s right and proper to do so, another tactic used by the Revenue tax audit officers is convincing Thai company staff to co-operate with them, for the good of the country. Foreigner business managers need to understand that it is not nice at all for Khon Thai to be confronted with tax audit officers using this tactic and Thai company staff are often left with very little or no choice other than to follow.
6. The Revenue Department’s bureaucracy
The Revenue audit officers who do the actual audit work may report to your company's staff that everything looks alright, but then, after that, they come back with a tax issue for you to deal with (and often a surprise issue). If this should happen it's an indication that the audit team head and/or director are not accepting your tax refund claim and you now have two or three tax audit officers to satisfy.
7. Don't automatically expect audit officers to follow the laws
Continuing on from the point above, in the case your Revenue audit officers come back to you with an issue that you find strange or even unbelievable, it's a good bet the audit team head and/or director have created a reason without any reference or regard to the laws simply for the purpose of cutting your company's tax refund claim (either in whole or in part).
8. When to call in tax refund claim assistance
In Thailand, the tax investigation process is very time consuming with lots of information and documents to submit, and a lot of answers to questions to provide to the Revenue audit officers. If your staff is going to struggle with satisfying the Revenue audit officers, or you are confronted with a reason without any reference or regard to the laws the result will not be nice and management needs to consider calling in assistance.
9. Who to call for tax refund claim assistance
Foreign business managers 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 with in-depth knowledge of the Revenue Department's tax refund investigation process should be sought.
10. Do all you can to avoid having to claim tax refunds
My final insight is that it is necessary in Thailand for foreign managers to spend a bit more time in Thailand than they would do back home managing tax refund positions, and doing all you can to avoid having to claim a tax refund in Thailand is wise management in Thailand.
This Tax Insight is general information only. It should not be used to determine any particular matter without consulting with an experienced Thailand tax advisor.