Understanding summons audits
TAXPAYERS in Thailand are usually |familiar with business operation visit |(BOV) audits and specific tax issue (STI) audits. Summons audits, on the other |hand, are less known even though they |existed long before the introduction of BOVs and STIs.
This year, that’s about to change as |the Revenue Department has upped |their frequency as they established |special task forces specifically for summons audits in all area offices at the end of last year.
The increase in summons audits is aimed specifically at reducing the number of unclosed cases or issues brought about by the BOV and STI audit.
The selection of companies to be |summoned is based on predetermined |criteria established by the Revenue Department.
To name a few, these are companies |with low profit compared with others in the same industry, continued operating losses, a high purchase-expenses-to-sales ratio, and companies that have never been audited before.
Aside from these, the pre-existing criteria will still be used. That is, summons audits are issued to taxpayers with indications of false reporting in their tax returns, or of tax or duty evasion.
Also, if the prescription period to summon a taxpayer is nearing expiration, but the BOV or STI audit is still ongoing or has just started, the Revenue Department will turn the audit into a summons audit.
This extends their rights to assess a company on that particular year, giving them up to 10 years from the date that the tax return was due.
How is a summons audit different from a BOV or STI?
Summons audits are considered the most stringent, BOVs the most lenient, and STIs between the two. The differences are explained below:
1. Intensity of the tax audit: A summons audit fully audits all taxes in the Revenue Code.
These are corporate income tax, with-holding tax, value added tax, specific business tax, and stamp duty. A BOV audit, |on the other hand, is a preliminary audit |of these taxes, while an STI audit only focuses on a specific tax issue – such as stock inspection, VAT refund or transfer pricing – in detail.
2. Additional tax penalty: A tax penalty of 100 per cent to 200 per cent will be applied for a corporate income-tax shortfall found under a summons audit.
There is no such penalty under BOVs or STIs.
3. Re-audit possibility: Once completed, a summons audit is never reopened again for that year unless the tax officer can present new evidence that came to light which was not available at the time of their audit.
Unlike a summons audit, BOVs and STIs can technically be reopened as the prescription period to audit for a particular month/year is five years from the date the return is filed.
Get prepared now
A summons audit can be quite unpleasant, as it often takes the taxpayer on a long journey of appeals to the Tax Appeal Committee and a succession of courts. This is quite costly in terms of lawyer fees and investment in personnel time.
As summons audits will be on the rise, |taxpayers should prepare well in advance, particularly by conducting a tax health |check.
This allows you to identify and resolve outstanding issues yourself before the Revenue Department instigates an investigation – and this, in turn, reduces your penalty exposure.
Author: Vorasa Srichaikul, Senior Manager, Tax and Legal, PwC Thailand
