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An opportunity to self-assess and minimise duty exposures

WHEN goods are imported into Thailand, the importer is required to clear them through customs with payment of any customs duty and value-added tax (VAT). The normal clearance process relies on self-assessment by the importer. That is, the customs paid relies on information provided by the importer.

An advantage of this is the time saved. The goods can quickly pass through customs. The price of obtaining quick clearance, however, is an audit by the bureau on a regular basis.

Given pressures on the bureau to meet tax-collection targets, it is likely that enforcement will increase and the audits may become more frequent. Importers should consider their customs exposures carefully, as the level of exposure to an audit can be significant for the following reasons:

lCustoms can challenge customs shortfalls on goods imported in the past 10 years, even though documents are only required to be retained for five years.

lIf the case is settled at the department level, then penalties equal to twice the amount of the duty shortfall are typically applied, even if the mistake arises from a simple error or misunderstanding.

lIf the case cannot be settled at the department level and goes to court and the importer loses, the penalty increases significantly, to four times the import value plus duty.

lCustoms auditors are incentivised to maximise revenue collection through sharing of the customs penalties collected.

lCustoms regulations and requirements are complex from the technical and practical perspectives and issues such as tariff classification can be open to significant differences in interpretation.

In view of this, one of the best practices is for importers to perform internal reviews of their customs compliance regularly and, if errors are identified, consider practising self-disclosure of the non-compliance to the department before the errors are found during an audit.

By voluntarily disclosing the error and paying additional customs duty and VAT, importers can avoid penalties that would otherwise have been imposed during an audit. They would still be liable for the monthly duty surcharge of 1 per cent and VAT monthly surcharge of 1.5 per cent.

Last month, the Customs Department introduced a special voluntary disclosure programme (VDP) for importers that have unintentionally under-declared customs duty and other taxes to settle the issues without penalty.

The process involves importers making direct contact with the Customs Audit Bureau to request inclusion in the programme. The Customs Audit Bureau would then request information from the importers.

Importers will be required to pay additional customs duty, import VAT and the VAT monthly surcharge of 1.5 per cent. Duty and VAT penalties, as well as the duty monthly surcharge of 1 per cent, are waived.

Besides the exemption of the 1-per-cent monthly duty surcharge, an important benefit of this programme is that it also allows the importer to deal with one port only as opposed to all relevant ports as in the case of normal voluntary disclosure.

However, it is worth noting that importers cannot apply to the VDP for certain offences, such as smuggling or importing prohibited or restricted goods.

Importers should take advantage of the VDP by first performing an internal review of the import/export activities perhaps with the assistance of a customs advisory firm such as Deloitte, identify potential issues and, if issues are found, apply to join the VDP before the closing date on September 30.

Stuart Simons is a tax partner of Deloitte Touche Tohmatsu Jaiyos Co. He can be reached at (02) 676 5700 ext 5021 or ssimons@deloitte.com


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