Businesses frequently encounter situations where certain inventory can no longer be sold at prevailing market prices due to obsolescence, quality issues, or commercial considerations. A common concern is whether a company must obtain prior approval from the Thai Revenue Department before selling such goods at prices lower than market value.
Background
Company A operates a business selling electric fans. Over time, it accumulated inventory consisting of outdated fan models that could no longer be sold at market prices. As a result, Company A submitted a written inquiry to the Revenue Department asking whether it could sell the obsolete inventory at cost price, and whether prior approval from the Revenue Department was required.
Revenue Department’s Ruling
The Revenue Department ruled that:
- If a company sells goods at a price below market value without reasonable justification, the tax assessing officer has the authority to reassess the selling price at market value on the date of sale.
- This authority is derived from Section 65 bis (4) of the Thai Revenue Code, which allows the assessing officer to adjust income where pricing does not reflect reasonable or market‑based values.
(Revenue Department Letter No. กค.0702/10199 dated 11 November 2015)
Key Conclusion
Companies are permitted to sell goods below market price without seeking prior approval or providing prior notice to the Revenue Department.
However, the company must be able to demonstrate reasonable commercial grounds for selling below market price. Failure to do so may result in the Revenue Department reassessing income based on market value.
Goods Commonly Accepted for Below‑Market Sale
Examples of goods that may reasonably be sold at prices lower than market value include:
- Obsolete or discontinued products
- Products nearing expiry
- Defective or substandard goods
- Goods sold under promotional or clearance campaigns
Recommended Practices and Supporting Documentation
To minimise reassessment risk, businesses should prepare and maintain appropriate documentation, including:
1. Evidence Supporting the Nature of the Goods
- Documentation demonstrating that the goods are obsolete, near expiry, defective, or substandard
- Inspection reports or internal assessments prepared in accordance with company policies
2. Internal Approval Process
- Formal management approval classifying the goods accordingly
- Involvement of relevant departments (e.g. warehouse and accounting) as witnesses
- Signed records or internal minutes confirming oversight of the sale process
3. Promotional Sale Documentation
For discounted sales conducted as part of a promotion, companies should retain:
- Approved sales or marketing plans
- Advertising materials distributed to customers
- Documentation explaining:
- Commercial rationale and objectives
- Expected outcomes and benefits
- Details of discounted products, pricing, and total value
- Post‑promotion performance evaluation
Importantly, promotional discounts must be offered consistently to all customers, not selectively to certain individuals or related parties.
Practical Takeaways
- Selling obsolete or non‑standard inventory below market price is permitted under Thai tax law
- No prior Revenue Department approval is required
- The main risk lies in insufficient documentation or lack of commercial justification
- Proper internal controls and supporting evidence are essential to withstand scrutiny under Section 65 bis (4)
