Key takeaways
Closing the books in a year with transfers runs from the registration date through revenue and COGS recognition to EBIT, then deducting cumulative losses, calculating CIT and paying according to the calendar. The year's tax must be estimated in PND 51 in the same year and settled in PND 50 in the following year, and 1% WHT may exceed CIT, leading to a refund claim.
Introduction
This article uses a hypothetical Year 7 example of a 120-unit project in which 80 units are transferred, to explain the sequence of work from transfer day through to filing the returns.
STEP 1: Ownership transfer day
The selling price is THB 30 million per unit. The customer has already paid 35%, or THB 10.5 million, and pays the remaining 65%, or THB 19.5 million, on transfer day.
| Items per unit | Dr. | Cr. | THB million |
|---|---|---|---|
| Recognise revenue | Cash 19.50 and Contract Liability 10.50 | Revenue | 30.00 |
| SBT 3.3% | SBT Expense | Cash | 0.99 |
| WHT 1% | Tax Credit Receivable | Cash | 0.30 |
TFRS 15 requires revenue to be recognised when control passes to the customer, which for condominiums is generally the registration date.
STEP 2: Moving WIP to COGS
| Item | Dr. | Cr. | THB million |
|---|---|---|---|
| Unit cost | COGS | WIP | 22.00 |
Total for 80 units: revenue THB 2,400.0 million, COGS THB 1,760.0 million, SBT THB 79.2 million
STEP 3: Closing the income statement
| Revenue from sales | 2,400.0 |
| Less: cost of sales | (1,760.0) |
| Less: SBT at 3.3% | (79.2) |
| Profit after COGS and SBT | 560.8 |
| Less: selling and administrative expenses, including commission | (140.0) |
| Less: overhead | (20.0) |
| EBIT | 400.8 |
STEP 4: Calculating net profit for tax
| Cumulative losses brought forward | THB million |
|---|---|
| Year 2; the last year it can be used is Year 7 | 90.0 |
| Year 3 | 120.0 |
| Year 4 | 80.0 |
| Year 5 | 40.0 |
| Total usable | 330.0 |
| Net taxable profit | 70.8 |
| CIT 20% | 14.16 |
| Accounting profit after tax, before the deferred tax effect | 386.64 |
If the company has recognised a DTA from past cumulative losses, the tax expense in the financial statements will differ from current CIT. This must be assessed under TAS 12.
STEP 5: Recording the tax entries
| Dr. | Cr. | THB million |
|---|---|---|
| Income Tax Expense | Current Tax Payable | 14.16 |
STEP 6: Tax cash calendar
| Deadline | Item | THB million |
|---|---|---|
| Aug, Year 7 | PND 51: half of estimated CIT, before deducting credits | 7.08 |
| End of May, Year 8 | PND 50: calculate actual CIT, deducting the half-year tax and WHT credits | Per actual results |
The Year 7 1% WHT is THB 24.00 million, more than full-year CIT of THB 14.16 million. So after deducting the credits to which the company is entitled in the PND 51 return, there may be no additional tax to pay, and at PND 50 a refund of about THB 9.84 million may be claimed. The actual outcome depends on the WHT incurred in the first half of the year.
SBT and CIT do not overlap
SBT of THB 79.2 million is an expense and can reduce the CIT base, giving a CIT saving of up to THB 15.84 million if it falls within the tax base, so the net burden is about THB 63.36 million. In a year when cumulative losses absorb most of the profit, the actual saving will be smaller.
Closing timeline
- During Year 7: transfers take place in stages, SBT is paid and WHT is deducted on transfer day
- By 31 Aug, Year 7: file the Year 7 PND 51
- 31 Dec, Year 7: close the books and record the tax entries
- Within 150 days after year-end: file the Year 7 PND 50, and pay the balance or claim a refund
Conclusion
Year-end closing in a year with transfers must link the accounts, tax and cash together. If transfers are made in order to use cumulative losses that are close to expiry, they must be genuine transfers that reflect the project's readiness, and PND 51, PND 50 and the WHT refund must all be managed.