By Pardorn Suchiva, Legal Director
On 15 September 2022, the Thai Supreme Court of Justices passed a verdict in the Toyota Prius Case between Toyota Motor Thailand (“Toyota”) against the Thai Customs Department (“TCD”) and the Thai Revenue Department (“TRD”) stating that Toyota has not only lost the case but is liable to pay additional tax and penalties of over Ten Thousand Million Baht.
Background
- In 2013, the TCD had notified the result of tax assessment in relation to the import entries of the auto-part of approximately 250 copies, the value of tax assessment is almost twelve million Baht to Toyota.
- A ground for this tax assessment is in relation to wrong declaration by Toyota of imported auto parts which were declared as separated auto parts. TCD stated that the declaration on importation of the said auto parts cannot be separated nor declared and paid the import duty by the type of imported products under Japan-Thailand Economic Partnership Agreement (“JTEPA”). Although, the imported products are auto parts which were separated into different parts as CKD or COMPLETE KNOCK DOWN and contain corresponding quantity. The said imported auto parts can be used for assembling into a finished car (Prius). Therefore, the said auto parts must be declared as a finish car which is classified as category 8703.23.51 of the HS tariff code and with duty rate of 80%.
- Toyota argued that they imported the aforesaid auto parts from Japan in accordance with JTEPA. Toyota further argued that the related auto parts were granted privileges under JTEPA by the Ministry of Industrial Works and that they correctly paid all relevant taxes in accordance with the Customs laws, Excise tax laws, Revenue Code and JTEPA.
- Toyota appealed this tax assessment against the TCD but the appeal was dismissed. Toyota then filed a claim to the Central Tax Court in 2019 and the Court had a verdict and ruled that Toyota won the case and were not subject to the surplus customs duty claimed by the TCD.
- TCD and TRD appealed the Central Tax Court’s judgement to the Court of Appeal. The Court of Appeal had a judgment in reverse of the Central Tax Court’s judgement which ruled Toyota to pay the surplus customs duty to the TCD.
- Toyota filed the appeal to the Supreme Court and the Court accepted the appeal of Toyota in March 2021.
The key points of the Supreme Court’s Judgment are as follows:
- The Supreme Court ruled that Toyota had imported all the parts for reassembly of complete Prius cars. For this reason, it was not eligible for reduction or exemption of customs tax and import tariff under JTEPA.
- Toyota must pay additional tax and a fine penalty over Ten Thousand Million Baht to the TCD and TRD within 30 days of 15 September 2022.
- Based on the Supreme Court’s judgment, even if the importer declares on the entry document as separated auto parts but such auto parts are essential parts which can be used for assembling a whole car, the Court considers that this shall be subjected to the importation of completed cars rather than separated auto parts.
- The company that would like to enjoy benefits under JTEPA in order to import auto parts for a low customs duty rate must consider that all imported auto parts might not be counted as an essential part which can be interpreted as a complete finish goods and/or can be immediately re-assembled as a complete finish goods.
Should you have any queries with respect to this article or if you require any information about RSM Legal services in Thailand, please do not hesitate to contact Khun Pardorn Suchiva on askus@rsmthailand.com