Accumulated Depreciation

[baagim]

Thanks in advance for your replys.If a property is sold ten years after purchase and sold for the same price it was bought for 3,100,000 bath.Was not easy to sell (its in a company name)Lawyers say that the property has accumulated depreciation over the years and that the company has to pay taxes of 123,000bath. On the day of sale 142,000 bath was paid at the land office.Just received a letter saying that a penalty of 50,000 bath has been added within a week to the 123,000 bath company taxes for slow payment.

[falang07]

It makes sense to me.

[Delight]

Who is asking for the money . The Tax authorities or a lawyer ?

(P.S it is Baht not Bath)

When you sell a property in a company you are selling the company . The land office has nothing to do with it.

Given that you no longer have an interest in the company -then why are you being asked for company taxes .

Sounds like you are being conned

Edited May 27, 2013 by Delight

[falang07]

But the penalty seems quite high, resembling a loan shark's rate.

[PattayaPhom]

Seems you sold to a Thai so 5% tax is paid and then you are paying to wind the company down with any backdated taxes. Looks about right

[baagim]

Who is asking for the money . The Tax authorities or a lawyer ?

(P.S it is Baht not Bath)

When you sell a property in a company you are selling the company . The land office has nothing to do with it.

Given that you no longer have an interest in the company -then why are you being asked for company taxes .

Sounds like you are being conned

hello to all and thank you for taking the time to reply.It was my first post and i'm sorry if i did'nt make the post to clear.The property was sold to a thai person in their own name.The compny is not closed down yet. The lawyer's office doing the company books for the last ten years have sent me the letters asking for the money.

Quote.Second letter from the lawyer.

I have to inform you that your company have to pay tax 173,000 baht

The auditor still confirm that the house must have accumulated depreciation for every year.

This is the principle of accounting and is not the same as market value.

If you miss the schedule there will be a penalty for delay.

Can anyone tell me if imposing a penalty is legal

[watcharacters]

.

i liked you better as a complete non contributor lurker as you've been for a long, long time.

Go find a real estate lawyer.. Yeah you have to pay him/her a fee. Sorry about that.

Hurts. Right?

[Ginkas]

If you miss the schedule there will be a penalty for delay.

Can anyone tell me if imposing a penalty is legal

Yes, a penalty for late payment is written into the tax laws (of every country, I should think) -

so, imposing the penalty is absolutely legal if you are late in paying.

It's the law!

[ishouldknow]

I have read a few of these company winding down/asset sale etc posts... they all seem to have the SUDDEN avalanch of charges - seems fishy to me.

Why should there be any late charges if the company accountant was doing their job properly all these years? If you are closing the company today and/or dispossing an asset then it goes on this year's tax and that year has not even finished yet so, you are NOT late!!!

Depreciation is under various international accounting standards (for company yearly reports) just an "expense" to spread the initial lump sum over the lifetime of the asset - under tax law it is treated a lot differently and is often added back. Also, LAND does not depreciate! Only the building - partition the asset into land and building and you could arrive at a lower amount!

You could also use the accountring system of having the asset revalued to real price before sale - thus you could in certain situations wipe out such gains and losses etc to ensure a "break-even" cost and thus no profit to pay taxes on...

I would suggest that you get a translator and go to a 100% Thai accountant/law company (that normally/never has dealt with a foreigner) and speak to them - you probably will get a fair answer as opposed to the accountants/lawyers that deal mainly with farangs (as I would expect they have a list of schemes/cons etc to make you pay lots of money - which they probably pocket)!

You could also go the the local tax office and try and speak to someone there - I have found them to be fairly decent and it does not feel like going to a police station or an interrogation room!

Another option you might have, and this is to see if your accountant is conning you, is to submit all the reports to the tax office and wait for them to issue you with a bill (and pay then) - you might be surprised to see a big difference between what you were quoted and what you ACCTUALLY have to pay!

Good luck.

Edited May 29, 2013 by ishouldknow

[Gsxrnz]

It would appear to me that your accountant has been claiming a tax deduction for each year based on the annual calculated depreciation of the asset. You have sold the property for more than the "written down value". (The written-down value or "Book Value" would be the original purchase price, less the amount of depreciation claimed or attributed to the property over the years.)

Therefore you have received a tax advantage during your period of ownership that must now be reimbursed to the tax office as you have affectively received a gain in the sale value over and above what was the book value of the asset.

Edited May 29, 2013 by Gsxrnz

[ishouldknow]

Who is asking for the money . The Tax authorities or a lawyer ?

(P.S it is Baht not Bath)

When you sell a property in a company you are selling the company . The land office has nothing to do with it.

Given that you no longer have an interest in the company -then why are you being asked for company taxes .

Sounds like you are being conned

hello to all and thank you for taking the time to reply.It was my first post and i'm sorry if i did'nt make the post to clear.The property was sold to a thai person in their own name.The compny is not closed down yet. The lawyer's office doing the company books for the last ten years have sent me the letters asking for the money.

Quote.Second letter from the lawyer.

I have to inform you that your company have to pay tax 173,000 baht

The auditor still confirm that the house must have accumulated depreciation for every year.

This is the principle of accounting and is not the same as market value.

If you miss the schedule there will be a penalty for delay.

Can anyone tell me if imposing a penalty is legal

Just do the maths for the above:

173,000 tax on depreciation in 1 year? That is a f___ing big amount of depreciation to create such a tax liability!

If it is for more than 1 year, then the accountant and "auditor" should have a carrying amount for depreciation listed on last year's accounts (official accounts submitted to the relevant government bodies) - is that there? If it is not there then you have caught them with their pants down!

Penalty for delay - as mentioned in my previous post, the tax year has not even eneded yet, and after that there are a few months (ie all due in 2014)!

I smell another "let's milk the farang scam"!

Edited May 29, 2013 by ishouldknow

[Gsxrnz]

Who is asking for the money . The Tax authorities or a lawyer ?

(P.S it is Baht not Bath)

When you sell a property in a company you are selling the company . The land office has nothing to do with it.

Given that you no longer have an interest in the company -then why are you being asked for company taxes .

Sounds like you are being conned

hello to all and thank you for taking the time to reply.It was my first post and i'm sorry if i did'nt make the post to clear.The property was sold to a thai person in their own name.The compny is not closed down yet. The lawyer's office doing the company books for the last ten years have sent me the letters asking for the money.

Quote.Second letter from the lawyer.

I have to inform you that your company have to pay tax 173,000 baht

The auditor still confirm that the house must have accumulated depreciation for every year.

This is the principle of accounting and is not the same as market value.

If you miss the schedule there will be a penalty for delay.

Can anyone tell me if imposing a penalty is legal

Just do the maths for the above:

173,000 accumulated depreciation in 1 year? That is a f___ing big amount! If it is for more than 1 year, then the accountant and "auditor" should have a carrying amount for depreciation listed on last year's accounts (official accounts submitted to the relevant government bodies) - is that there? If it is not there then you have caught them with their pants down!

Penalty for delay - as mentioned in my previous post, the tax year has not even eneded yet, and after that there are a few months (ie all due in 2014)!

I smell another "let's milk the farang scam"!

It's actually TEN years and I would suspect quite reasonable. Also, it pays to assume that you're NOT being ripped off and try and understand what is actually going on from a logical perspective. If logic cannot be discovered then assume otherwise - but don't bring out the big guns just because you don't understand the accounting.

[ishouldknow]

It's actually TEN years and I would suspect quite reasonable. Also, it

pays to assume that you're NOT being ripped off and try and understand

what is actually going on from a logical perspective. If logic cannot

be discovered then assume otherwise - but don't bring out the big guns

just because you don't understand the accounting.

Yes, you are quite right the OP did mention 10 years (I seem to have missed that). OK, then it would seem to be a reasonable amount (depending on the property price though and the depreciation policy).

Doing a rough calculation, if the tax on the depreciation is 173,000 then we are roughly looking at depreciation of about 1 million over 10 years... if the property is a combination of land and buildings and the original price was 3,100,000 one could question the depreciation method. There is no depreciation on land (unless it is used for mining where it gets depleted etc). So, the question is what exactly is the property?

Also as mentioned, it might be possible for him to revalue the asset by changing the accounting policy and thus he might be able to avoid such dues...

However, as mentioned before, he should still take a look at last year's records that were submitted and he could check to see if there are any differences.

And in this part of the world it is probably more prudent to assume the worst first and then let THEM prove that they are justified (the burden of proof should lie with those who want to take tens of thousands of Baht)!

And when the company likes to use scary sentences like the Auditor has confirmed... I smell a rat - that is not the job of an auditor (their job is to report to the shareholders/external parties the true and faithfull representation of the accounts)! Their job is not to help prepare the accounts and advise on how the depreciation should be done and tax liability - thus they are now not independant and cannot be auditors!

Edited May 29, 2013 by ishouldknow

[Gsxrnz]

The Transfer Fee and Specific Business Tax that you paid at the Land Office (142,000) seem about correct - depends on what the official Government "Appraised Value" was, not the actual Sale Value. However, it seems to be in the ballpark and I assume you have a receipt that shows what was paid for what, so you should have no confusion over that.

The 123,000 depreciation recovered figure also seems reasonable given a 10 year ownership period. 5% is the depreciation rate of buildings in Thailand. Without knowing what the attributed value of the building was, impossible to calculate, but your accountant should have annual accounts that show this data for your company. This would normally go into your annual accounting but maybe they're asking for immediate payment because the only asset of the company has been sold - just guessing.

The 50,000 penalty is difficult to understand so I suggest you ask your lawyer/accountant for the specific document he received from whichever government agency that shows how and why the 50,000 is payable, when it is payable, and to whom it is payable. If he cannot produce a document then be suspect and ask for further clarification. 50k penalty on a 123k tax bill sounds high so maybe there is more to it than just being a "penalty". Maybe he didn't file your return for last year or something and he's trying to wash the penalty into your land sale?

[ishouldknow]

The Transfer Fee and Specific Business Tax that you paid at the Land Office (142,000) seem about correct - depends on what the official Government "Appraised Value" was, not the actual Sale Value. However, it seems to be in the ballpark and I assume you have a receipt that shows what was paid for what, so you should have no confusion over that.

The 123,000 depreciation recovered figure also seems reasonable given a 10 year ownership period. 5% is the depreciation rate of buildings in Thailand. Without knowing what the attributed value of the building was, impossible to calculate, but your accountant should have annual accounts that show this data for your company. This would normally go into your annual accounting but maybe they're asking for immediate payment because the only asset of the company has been sold - just guessing.

The 50,000 penalty is difficult to understand so I suggest you ask your lawyer/accountant for the specific document he received from whichever government agency that shows how and why the 50,000 is payable, when it is payable, and to whom it is payable. If he cannot produce a document then be suspect and ask for further clarification. 50k penalty on a 123k tax bill sounds high so maybe there is more to it than just being a "penalty". Maybe he didn't file your return for last year or something and he's trying to wash the penalty into your land sale?

123,000 is not the depreciation - that is the tax on the depreciation (so the depreciation value is a LOT more)! Hence my scepticism about the method of deprecition and all else! As for a 50,000 penalty - that is a lot and also the timing is the issue - is the company still trading? (if yes, then the tax for this year is not late)!

[Gsxrnz]

The Transfer Fee and Specific Business Tax that you paid at the Land Office (142,000) seem about correct - depends on what the official Government "Appraised Value" was, not the actual Sale Value. However, it seems to be in the ballpark and I assume you have a receipt that shows what was paid for what, so you should have no confusion over that.

The 123,000 depreciation recovered figure also seems reasonable given a 10 year ownership period. 5% is the depreciation rate of buildings in Thailand. Without knowing what the attributed value of the building was, impossible to calculate, but your accountant should have annual accounts that show this data for your company. This would normally go into your annual accounting but maybe they're asking for immediate payment because the only asset of the company has been sold - just guessing.

The 50,000 penalty is difficult to understand so I suggest you ask your lawyer/accountant for the specific document he received from whichever government agency that shows how and why the 50,000 is payable, when it is payable, and to whom it is payable. If he cannot produce a document then be suspect and ask for further clarification. 50k penalty on a 123k tax bill sounds high so maybe there is more to it than just being a "penalty". Maybe he didn't file your return for last year or something and he's trying to wash the penalty into your land sale?

123,000 is not the depreciation - that is the tax on the depreciation (so the depreciation value is a LOT more)! Hence my scepticism about the method of deprecition and all else! As for a 50,000 penalty - that is a lot and also the timing is the issue - is the company still trading? (if yes, then the tax for this year is not late)!

We seem to be generally in agreement so let's not confuse the OP with our accounting semantics. Sorry, said depreciation when I meant tax on the depreciation. I don't know how you do your depreciation calculations but this is how I see it.

The company tax rate has been circa 30% over the 10 years. Assuming the building value for depreciation purposes was 820,000 claimed at 5% p.a Flat Rate, depreciation over 10 years, then the tax benefit was 123,000. That's assuming Flat rate and not Diminishing value. Regardless, the 123,000 seems about correct. Maybe the OP can confirm the building value v. land value?

I would suggest that the accountant has used the word "auditor" but more logically probably means the Tax Assessor or Tax Auditor, being essentially the Tax Office. Or possibly the tax specialist in his office who may be called the "Auditor". Thais have a habit of using official titles in ways that we sometimes find confusing.

I agree the 50,000 penalty looks odd but there may be an explanation - if documentation can be provided then the OP is at least in a position to seek clarification.

[ishouldknow]

The Transfer Fee and Specific Business Tax that you paid at the Land Office (142,000) seem about correct - depends on what the official Government "Appraised Value" was, not the actual Sale Value. However, it seems to be in the ballpark and I assume you have a receipt that shows what was paid for what, so you should have no confusion over that.

The 123,000 depreciation recovered figure also seems reasonable given a 10 year ownership period. 5% is the depreciation rate of buildings in Thailand. Without knowing what the attributed value of the building was, impossible to calculate, but your accountant should have annual accounts that show this data for your company. This would normally go into your annual accounting but maybe they're asking for immediate payment because the only asset of the company has been sold - just guessing.

The 50,000 penalty is difficult to understand so I suggest you ask your lawyer/accountant for the specific document he received from whichever government agency that shows how and why the 50,000 is payable, when it is payable, and to whom it is payable. If he cannot produce a document then be suspect and ask for further clarification. 50k penalty on a 123k tax bill sounds high so maybe there is more to it than just being a "penalty". Maybe he didn't file your return for last year or something and he's trying to wash the penalty into your land sale?

123,000 is not the depreciation - that is the tax on the depreciation (so the depreciation value is a LOT more)! Hence my scepticism about the method of deprecition and all else! As for a 50,000 penalty - that is a lot and also the timing is the issue - is the company still trading? (if yes, then the tax for this year is not late)!

We seem to be generally in agreement so let's not confuse the OP with our accounting semantics. Sorry, said depreciation when I meant tax on the depreciation. I don't know how you do your depreciation calculations but this is how I see it.

The company tax rate has been circa 30% over the 10 years. Assuming the building value for depreciation purposes was 820,000 claimed at 5% p.a Flat Rate, depreciation over 10 years, then the tax benefit was 123,000. That's assuming Flat rate and not Diminishing value. Regardless, the 123,000 seems about correct. Maybe the OP can confirm the building value v. land value?

I would suggest that the accountant has used the word "auditor" but more logically probably means the Tax Assessor or Tax Auditor, being essentially the Tax Office. Or possibly the tax specialist in his office who may be called the "Auditor". Thais have a habit of using official titles in ways that we sometimes find confusing.

I agree the 50,000 penalty looks odd but there may be an explanation - if documentation can be provided then the OP is at least in a position to seek clarification.

I agree, let's not go into long essays that might confuse the OP!

Wish him all the best and hope he updates us in the future.