Tax coupons for duty and tax paid on exported goods in Thailand

Keywords: Mazars, Thailand, Accounting, Customs Department, TFRS, NPAEs, Tax coupons

Scenario

Company A (‘the Company”) exports goods overseas. In relation to these exports, the Company has paid duty and tax in advance to the Customs Department totalling THB 3.5 million.

The Company has a right to request a refund of the duty and tax from the Customs Department. In the past, the Company has received approval from the Customs Department to redeem a tax coupon for the full amount. The length of time needed to get approval is around one to three years after submitting an application for a refund.

Issues

How should these transactions be reported in the financial statements of the Company?

Response

Paragraph 11 of the Thai Financial Reporting Standards for Non-Publicly Accountable Entities (TFRS for NPAEs) states that an entity should recognize such transactions on an accrual basis – in the period in which they occur – which may or may not be the same accounting period as that in which the entity receives or pays cash.

In addition, Paragraph 26.1 of the TFRS for NPAEs states that an asset is a resource controlled by an entity as a result of past events, and one from which future economic benefits are expected to flow to the entity. The following criteria must be met for an asset to be recognized:

  • It is probable that future economic benefits will flow to the entity.
  • The item has a cost or value that can be measured reliably.

As noted in the scenario, in the past, the Company received approval from the Customs Department to redeem a tax coupon for the full amount of a refund. Thus, it appears that the Company can measure the value of the tax coupon reliably, and it is probable that economic benefits will flow to the Company.

Therefore, the Company should recognize the tax coupon for THB 3.5 million as an asset and income in the financial statements when receiving formal approval for compensation from the Customs Department. There is no need to wait until the Company actually receives the tax coupon from the Customs Department. This approach is also consistent with Revenue Department practices.

The Company’s accounting records for these transactions would therefore be as follows:

 

 

Class of transaction

Debit (THB)

Credit (THB)

When paying the customs duty and tax in advance to the Customs Department

 

 

 

 

Customs duty/tax

Expense

3,500,000

 

             Bank

Asset

 

3,500,000

 

When receiving formal approval for tax coupons from the Customs Department

 

 

 

 

Tax coupon

Asset

3,500,000

 

Income from tax coupon 

Income

 

3,500,000

References: TFRS for NPAEs

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