Thai Co Making A Loss On Items Sold To Uk Co

[brobro2424]

Just in the process of setting up my Thai company to export goods to my uk company for selling to uk customers.

Is there anything to stop me from making a loss on items that I sell to the UK company? So say I buy items for 1000B then sell them to the UK co at 500B ? The vat and duty at UK customs would be based on the 500B rather than 1000B.

The Thai co would show a loss, so no company tax.

I may be missing something fundamental here but surely its not illegal to run a business at a loss?

Could I perhaps even sell the items at a lost but provide admin services to the UK co so that the thai co. broke even ?

Any constructive opinions/ suggestions appreciated

[brobro2424]

I guess specifically I'm interested what the Thai taxman would have to say about it.

Thanks

[soundman]

The Thai taxmen will let you run a loss for a period of time (maybe a few years while you are establishing your business) and if you are still in business after this time but not showing a profit, they will assume you are doing dodgy books and arbitrarily tax your business in line with industry averages regardless of your declared income/profit.

Moral of the story, don't mess with the Thai tax auditors.

[harrry]

Doesn't the EU have pretty strong anti dumping laws.

[brobro2424]

The guy I spoke to at a faily reputable lawyers office today suggested that I couldd not operate at a loss. And that I could not sell something without showing some profit and paying some tax on profits. Something about transfer pricing.

I am wondering whether a Thai business is really what I need. Perhaps I could just pay some Thai people from the UK co. (by oDesk for example) to carry out the buying and packing and shipping of the goods to the UK company via Fedex for example.

Anyone any thoughts on that?

Thanks

[Triplessixer]

The guy I spoke to at a faily reputable lawyers office today suggested that I couldd not operate at a loss. And that I could not sell something without showing some profit and paying some tax on profits. Something about transfer pricing.

I am wondering whether a Thai business is really what I need. Perhaps I could just pay some Thai people from the UK co. (by oDesk for example) to carry out the buying and packing and shipping of the goods to the UK company via Fedex for example.

Anyone any thoughts on that?

Thanks

I would think you could set up an offshore company and have the Thai company sell the goods to the offshore company at a slightly higher price then what you paid in Thailand then from the offshore company sell it to the England company at the regular price. sell the goods at almost the same price that the offshore company sold them to the england company then keep the difference in the offshore company,, I guess one would have to figure out where you were going to make more money 1 by saving it in the offshore company or 2 in the England company but that shouldn't be to hard. The Thai company then makes barely anything and invoices funds from the offshore company every month to keep it operating.,.. just a though...

Edit I think the original post of something along those lines has been posted on here before but I cant remember the author to give proper credit to them sorry about that.

Edited November 25, 2010 by Triplessixer

[TravelerEastWest]

The guy I spoke to at a faily reputable lawyers office today suggested that I could not operate at a loss. And that I could not sell something without showing some profit and paying some tax on profits. Something about transfer pricing.

I am wondering whether a Thai business is really what I need. Perhaps I could just pay some Thai people from the UK co. (by oDesk for example) to carry out the buying and packing and shipping of the goods to the UK company via Fedex for example. Anyone any thoughts on that? Thanks

Your lawyer is correct about transfer pricing - the concept is simple and in your case you are not supposed to sell to related parties at a loss. Typically transfer pricing issues are done by CPA accounting firms not law firms.

As for not showing a profit he probably is wrong again you need a good accountant - think promotional sales or sales to new clients which could have a valid reason for no profits. There are other possibilities. Again you need a good CPA not a lawyer

[raro]

The Thai taxmen will let you run a loss for a period of time (maybe a few years while you are establishing your business) and if you are still in business after this time but not showing a profit, they will assume you are doing dodgy books and arbitrarily tax your business in line with industry averages regardless of your declared income/profit.

Moral of the story, don't mess with the Thai tax auditors.

You are right when it comes to the overall profitability of the company. But if you buy something at a certain price and sell it at a lower price, the tax office would stop you from doing so at first attempt as it is impossible to become profitable doing a business that way.

The minimum accepted mark-up that I have been advised is 3%.

[TravelerEastWest]

The Thai taxmen will let you run a loss for a period of time (maybe a few years while you are establishing your business) and if you are still in business after this time but not showing a profit, they will assume you are doing dodgy books and arbitrarily tax your business in line with industry averages regardless of your declared income/profit.

Moral of the story, don't mess with the Thai tax auditors.

You are right when it comes to the overall profitability of the company. But if you buy something at a certain price and sell it at a lower price, the tax office would stop you from doing so at first attempt as it is impossible to become profitable doing a business that way.

The minimum accepted mark-up that I have been advised is 3%.

Raro,

I would be very surprised if you are correct - as an example what if you buy something seasonal at a certain price and want to sell it next year? Or if you buy something and its value has become lower since you purchased it, or if you are offering a lower price to a new customer - the possibilities are endless.

The poster needs a good CPA, if he can afford it one with a specialization in taxation.

With a good accountant you can even go far beyond a few years of losses.

[raro]

this is not about losses in the balance sheet, this is about selling a product at a loss. This is possible for some exceptions (stock clearance for instance) but if you do that on all your merchandise as the OP plans to, you will have a lot to explain to the tax office.