Inventory theft refers to the loss of goods or materials due to illegal appropriation. While a significant financial loss, the value of stolen inventory can be claimed as a deductible expense for Corporate Income Tax (CIT) in Thailand.

However, strict adherence to specific procedures and robust documentation are critical to substantiate the loss and prevent it from being treated as a non-deductible expense or even a deemed sale for VAT purposes.

General Criteria CIT Deductibility

• The theft must be genuinely established and reported to the authorities.
• The loss must be unavoidable and beyond the company’s reasonable control.
• The stolen inventory should not be covered by insurance or, if it is, only the non-reimbursed portion is deductible.
• Proper accounting records must reflect the write-off of the stolen inventory.

Documentation Needed For CIT Deduction

• Copy of filed police report detailing the theft. This is often the most critical document.
• Internal investigation report, documenting the circumstances, extent of loss, and corrective actions.
• Inventory records including stock cards, inventory lists, and reconciliation reports showing the loss.
• Witness statements if any employees or third parties witnessed the theft.
• Insurance claim documents. If an insurance claim was filed, details of reimbursement (only non-reimbursed loss is deductible).

Bonus Hint (VAT Implication)

• When inventory is lost due to theft, its market value at the time of loss is generally considered a sale for VAT purposes under Section 77/1(8)(e) of the Revenue Code. The company is obliged to remit Output VAT on this value, even without issuing a tax invoice. This is a common point of assessment during tax audits.