Key Takeaways
- Review Incoterms before assessing valuation
- Clearly separate freight and insurance costs
- Maintain commercial contracts and proof of payment
Tax Base Must Align with Real Documents
Customs valuation must correspond with the invoice, contract, proof of payment, freight document, and insurance policy if available. Discrepancies may prompt customs officers to request clarification, delaying the clearance process.
If there is a relationship between the buyer and the seller, such as belonging to the same corporate group, customs may verify whether the invoice price was influenced by that relationship. Exporters and importers should have documentation showing that the transaction price aligns with normal market rates.
- Invoice value (Product price)
- Freight (International transport costs)
- Insurance (Cargo insurance)
- Agreed Incoterms
- Proof of payment
Incoterms and the Tax Calculation Base
Incoterms define who is responsible for costs and risks at each point, directly affecting what needs to be included in the customs valuation. For instance, CIF (Cost, Insurance, and Freight) is typically the standard base for Customs Valuation in Thailand.
If the terms are FOB, the freight and insurance costs from the origin country to Thailand must be added to calculate the correct customs valuation. Failing to include these may result in an under-declared tax base.
- FOB: Must add freight + insurance
- CIF: Invoice price can be used if complete
- EXW: Must add all costs starting from the origin factory
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Contact Our Experts NowAdvantages of Systematic Valuation Record-Keeping
Systematic document management allows importers to respond quickly to customs inquiries during audits. While it requires discipline in separating files and standardizing file names, the setup cost is far lower than paying back-taxes and penalties later.
We recommend creating a shipment checklist template for every import, covering headings like invoice, freight document, insurance, payment proof, and agreed Incoterms to ensure the operational team automatically compiles all necessary records.
When Invoice Price Differs from Market Value
Sometimes the invoice price is visibly lower or higher than the market average. If there is a legitimate commercial reason, such as volume discounts or special pricing under a long-term contract, importers should hold supporting documents like purchase orders, contracts, or price negotiation records to clarify any customs doubts.
Official Reference Agencies and Regulations
- Thai Customs Department: Electronic paperless declaration entry guidelines and customs clearance procedures.
- Ministry of Commerce & DFT: Regulations on preferential Certificates of Origin (Form CO) and targeted import-export control lists.
Customs Valuation is the determination of the value used as the base for calculating import duties and taxes. It does not always look solely at the product price on the invoice, but involves commercial terms (Incoterms), freight, insurance, and other legally required expenses. Incorrect valuation leads to inaccurate landed costs and tax discrepancies.
Frequently Asked Questions
Q: Is it problematic if the invoice price is below market value?
A: Yes, it may trigger customs inquiries. You should maintain comprehensive evidence supporting the transaction terms and price, such as purchase orders, contracts, and bank payment receipts.
Q: Must freight charges be included in the customs valuation?
A: It depends on the agreed Incoterms. Thailand generally uses CIF as the valuation base. If buying on FOB terms, foreign freight and insurance must be added to the invoice value. Have your customs broker verify all documents before submission.
Q: Do transactions between related group companies cause compliance issues?
A: Intercompany transaction prices are closely monitored to verify if they reflect arm's-length market values. You should prepare transfer pricing documentation and consult specialists in advance.
Q: Do buying or selling commissions need to be added to the customs valuation?
A: Generally, buying commissions are excludable, whereas selling commissions paid to agents of the seller are includable. You should consult a customs broker or specialist based on the specific transaction details.
