PwC Tax Insight PwC Tax Insight # 08/2012 TAX & LEGAL UPDATE

PwC Tax Insight # 08/2012
TAX & LEGAL UPDATE
TAX & LEGAL Services
Heading :
The following report
may be of interest to :
Summary :
*Issued Date: 1 March 2012
BOI Flood Relief measures – Loss and Scrapping of Raw Materials and
Damaged Machines
All clients
Loss and Scrapping of Raw Materials
The Board of Investment (BOI) will allow BOI promoted companies to write off of
the loss and scrapping of raw materials damaged by last year’s floods, without any
import duty liability, provided that the affected businesses ssubmit the following
documents:
1. Request for writing off the loss and scrapping of raw materials using the
prescribed form; and
2. Financial report of the authorized auditor for the period during which the floods
occurred, containing details of the assets damaged by the floods and which have
been recognized as period expenses or provided for as allowance for doubtful
debt or bad debt according to generally accepted accounting principles, or
3. Confirmation evidence from the insurance company or private sector, which are
approved by the BOI to inspect and issue confirmation relating to the loss and
scrapping of raw materials that correspond to those reported by the promoted
businesses.
The request and related documents must be submitted to the BOI b
by 30 June 2012.
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The above conditions and methods for the treatment of the loss and scrapping of
raw materials damaged by last year’s floods, which were imported with import duty
exemption for use in producing, mixing or assembling products for export, wer
were
prescribed according to the BOI Notification No Paw 1/2555 dated 21 February
2012, which replaced the BOI Notification No Paw 4/2554 dated 15 November 2011.
Damaged Machines
The BOI has issued guidelines for the treatment of machinery imported with impo
import
duty exemption or reduction for use in the promoted project and which were
damaged by last year’s floods and can no longer be used, as follows:
1. Damaged machines used for over 5 years from the date of import
A promoted business wishing to write off the cost of machines must submit
form “F PM CM 01-03”
03” or if it wishes to sell the machines must submit form “F
IN MC 04-03”
03” to the BOI. After receiving approval from the BOI it may write off
or sell, as applicable, without incurring any import duty liability.
2. Damaged machines used for 5 years or less from date of import
2.1. Export
For the export of damaged machines, form “F IN MC 06
06-03” must be submitted
to the BOI. Thereafter, the export entry together with the form “F PM CM 01
0103” must be submitted. After receiving approval, the machines can be written
off and will not incur any import duty liability.
2.2. Destruction
If a promoted business wishes to destroy the damaged machines, the following
conditions and criteria must be met:
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PwC Tax Insight # 08/2012
TAX & LEGAL UPDATE
TAX & LEGAL Services
*Issued Date: 1 March 2012
(
(1)
Request for destruction
ion detailing the method of destruction must be
submitted to the BOI.
(
(2)
BOI will consider the appropriate destruction methods and approval will be
issued.
(
(3)
After destruction according to the method approved by the BOI, the
promoted business is required to submit
bmit the evidence of destruction
together with the form “F PM CM 01-03”.
03”. The BOI will then grant approval
for the write off of the damaged machines without import duty liability.
3. Where the damaged machines are covered by an insurance claim and the
insurance
nce company wishes to take the machines out of the factory of the
promoted business without destruction, it would be treated as a sale of the
machines. The following must be complied with:
(
(1)
The promoted business is required to submit a request to sell the machines
using the form “F IN MC 04-03”
03” mentioning that the sale is being made to
the insurance company.
(
(2)
The BOI will grant approval to sell with import duty liability, which will
arise on the date the request for the sale is submitted.
(
(3)
The promoted business
ess pays the import duty according to the letter of the
BOI informing the Customs Department.
(
(4)
The receipt of import duty paid together with the form “F PM CM 01
01-03”
will be submitted to the BOI for approval for writing off the cost of the
damaged machines.
The above guidelines were issued by the BOI on 14 February 2012,
PwC observation
Income from sale of damaged machines would be treated as BOI income (income
exempt from tax) if the approval of the BOI and the Revenue Department is
obtained.
If the sale does not qualify as BOI income the taxpayer should consider the timing of
deduction of the loss from the damage versus the timing of the insurance
compensation. Attention should also be paid to the issue of provision versus accrual
with respect to the estimated damage, which is a contingent amount, versus the
actual damage.
It is also worth noting that the machinery that is imported with import duty
exemption to replace the items that were damaged by the floods may also qualify
for the additional tax incentives (new investment) discussed in our PwC Tax
Insight No. 6/2012, which have now been officially announced by the BOI (The
Board of Investment Announcement No. 1/2555).
For further information, please contact:
- Ms.Janist Aphornratana at [email protected]
- Mr. Thiti Siriphairoj at [email protected]
[email protected].
- Mr. Suradech Hongsa at [email protected]
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