Standards for Recording Payment Amounts on Import Declarations and Accounting Treatment for Toll Manufacturing (Free-of-Charge Supply)
Machine translated
We are a company that provides parts to an overseas toll manufacturer free of charge and then re-imports the finished products into Korea (free-of-charge supply transaction). Both exports and imports have been processed under transaction code 29 (Toll Manufacturing), and we only pay the toll manufacturing fee to the manufacturer.
On the import declaration received through the customs broker, the payment amount in field 54 is recorded as an amount that includes both the toll manufacturing fee and the cost of the goods. When processing import accounting, we are using this field 54 amount as the basis; however, since the cost of the goods is included in this amount, the toll manufacturing fee and the accounts payable are inevitably overstated compared to the actual amounts to be paid.
Upon checking with the customs broker, I was told that the payment amount in field 54 is identical to the total taxable value in field 55 (toll manufacturing fee + cost of goods, etc.), and that it is the amount used for calculating VAT, meaning it is recorded identically to the taxation basis. Is this correct? I would like to know the exact standard for the payment amount in field 54 during overseas toll manufacturing transactions (free-of-charge import of materials). (I personally think that field 54 [actual payment amount] should be reported as the toll manufacturing fee, and field 55 [taxable value] should be reported as the toll manufacturing fee + material costs.)
Answer 1
- 0The accounting principle for imported goods, including overseas toll processing trade, is to record the actual amount paid as an expense based on the processing fee or the goods contract. For practical convenience, the settlement amount on the Import Declaration is often used as the amount to be paid; however, discrepancies may arise due to specific inquiry cases or instances where the import value is under-reported. The settlement amount and applied exchange rate on the Import Declaration are primarily prepared for the purpose of imposing customs duties. In the case of your question, despite the settlement amount shown on the Import Declaration, it is correct to recognize only the processing fee as accounts payable. Whether the entries on the Import Declaration for toll processing trade are correct is a matter for a customs broker to address, so I will omit an answer to that part.Machine translated
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