Customs duties are imposed under the Customs Act and the Customs Tariff Decree and are collected on both imports and a limited number of exports. Classification of imports is based on the Harmonized Commodity Description and Coding System (the so-called ‘Harmonized System’). Thailand has adopted the Association of Southeast Asian Nations (ASEAN) Harmonized Tariff Nomenclature (AHTN) 2022, which is based on the Harmonized System 2022, as its import tariff nomenclature.
Duties are levied on a specific or an ad valorem basis, whichever is higher, and the applied ad valorem duties range between 0 and 80 percent. Exemptions from import duties are available on items of goods as prescribed in the Customs Tariff Decree. Preferential duty rates are available on imported goods from countries that have a preferential free trade agreement (FTA) with Thailand.
Currently, Thailand has FTAs with the following countries:
- ASEAN member states (Singapore, Vietnam, Malaysia, Indonesia, Philippines, Cambodia, Laos, Myanmar, and Brunei)
- Australia
- Chile
- India
- Japan
- New Zealand
- Peru
Also, as a member of ASEAN, Thailand has preferential trade agreements with the following countries:
- Australia and New Zealand
- China
- Hong Kong
- India
- Japan
- Korea
Generally, the value of imports is based on their cost, insurance, and freight (CIF), whereas exported goods are based on their free on board (FOB) amount.
Thailand has implemented the World Trade Organization (WTO) Valuation Agreement. The primary basis for the customs value is the transaction value, which is the price actually paid or payable for the goods when sold for export, subject to adjustments for certain elements that are considered to form a part of the value for customs purposes or that can be deducted from the value of the imported goods (e.g., the cost of transportation after the importation, duties, and taxes associated with the import).
Elements that may need to be added include royalties and license fees that are related to the goods and paid as a condition of sale, proceeds from subsequent resale in the importing country, and the value of goods or services supplied by the buyer, such as design or development fees related to the imported goods. If the declared price is evidently low or is unlikely to be the true value of the goods, Thai Customs will likely dispute the declared price.
Customs controls and procedures
Customs procedures for goods arriving in Thailand are like those existing in most other countries. An importer is required to file an entry form together with other requisite documents, including a bill of lading, invoice, and packing list via the e-Customs system.
Customs duties are due upon the arrival of the vessel carrying the imported goods, and goods may be stored in a Customs bonded warehouse for up to 45 days with no submission of an import entry and 60 days in the case of submission of an import entry. Landing and storage charges must be paid before the goods are released.
Customs incentives schemes
Various customs incentives schemes, each with its own specific conditions and duty privileges, are available, including the following:
- Duty and tax compensation (tax coupons).
- Duty drawback for imported raw materials used in export production.
- Duty drawback for re-export in the same state.
- Free zones (Customs or Industrial Estate Authority of Thailand Free Zones).
- Manufacturing bonded warehouses.
- General bonded warehouses.
- Board of Investment (BOI) promotion.
- Preferential import duties under FTAs.
Offences and penalties
Although, technically, an offence against the customs law is a criminal offence, in practice, legal procedures are usually concerned with the recovery of tax arrears and fines Offences include non-compliance with customs procedures, false declarations, and the most serious offence of smuggling and evasion of customs duties. Statutory penalties are as prescribed by the relevant provisions of the Customs Act. Where Customs and the offender agree to settle the case at the Customs level (i.e., waiver of prosecution), the penalties would be in accordance with the settlement criteria as prescribed by the Director-General of the Customs Department. Currently, we understand that a duty evasion offence would typically be settled with a fine of from 50 to 200 percent based on the duty shortfall per the import entry. The VAT penalty would also be applied proportionally based on the duty fine. Duty and VAT surcharges (capped at the amount of the shortfall) are applied in this respect as well.
For import licensing errors, the settlement criteria would be the surrendering of the goods or a fine in lieu thereof based on the value of the goods plus the duty and tax payable. For offences related to smuggling, the penalties are based on a multiple of the value of the goods.
Excise Tax
In addition to import duties handled by the Customs Department, certain import items are also subject to excise taxes. Excise tax is a form of consumption tax that is imposed on the sale of a selected range of services and goods (whether manufactured locally or imported) that are considered luxuries. The tax liability arises on locally manufactured goods when leaving the factory and at the time of importation for imported goods.
The excise tax calculation is based on both ad valorem rates (a percentage of the suggested retail price [SRP]) and/or specific rates (based on the quantity or weight of the goods). The excise tax formula varies depending on type of excise taxable products, for example:
- (SRP x ET rate) is applicable for motor vehicles, motorcycles, and cosmetic products.
- (Specific rate x quantity) is applicable for petroleum oil products.
- (SRP x ET rate) + (specific rate x quantity) is applicable for non-alcoholic beverages and tobacco products.
- (SRP x ET rate) + (specific rate x quantity x degree of pure alcohol) is applicable for alcoholic beverages.
In addition to the excise tax, an interior tax is also levied by the Excise Department at the rate of 10% of the excise tax payable. Other taxes, such as the health tax, Thai Public Broadcasting Service tax (TPBS tax or TV tax), and the elderly fund tax, may apply to certain specified products in the categories of cigarettes and alcoholic beverages.
The manufacturer of the products must file a return and remit the tax due prior to taking the goods from the factory or bonded warehouse. If a VAT liability arises before the goods are taken out of these locations, the manufacturer must file a return and remit the excise tax to the Excise Department within 15 days from the end of the month.