Key takeaways
- From the day payment is approved, every project cost item must have a clear answer: does it go into inventory, into P&L, is it PP&E, or is it only a reserve?
- Condominium sale projects use the inventory model under TAS 2. Land, construction, directly related soft costs and IDC during construction go into the cost of inventory, while selling costs, transfer costs and head-office overhead are period expenses.
- Contingency is a budget figure, not an accounting entry. A cost arises only when additional work or an approved variation order actually occurs.
- Before assuming that input VAT can be reclaimed, or that interest during construction is immediately tax-deductible, check the facts of the project, because both points directly affect cost.
Why one taxonomy for the whole project
The project cost taxonomy is the standard list of cost items shared by the project team, the accounting team and management. The aim is for the feasibility budget, the cost control budget and the financial statements to speak the same language. The common problem is not wrong numbers but different groupings. For example, the budget includes marketing in soft costs while accounting must record it as a selling expense, so budget vs actual cannot be checked and inventory is overstated.
This page applies to build-to-sell projects, such as condominiums or branded residences sold by the unit. Property held for rent falls under TAS 40, and property used by the entity itself falls under TAS 16, both of which follow different principles.
The standard taxonomy, categories A to H
A. Land costs
| Code | Item | Accounting entries | Reference | Tax issues |
|---|
| A.1 | Land purchase price | Inventory | TAS 2.10 | Recognised as cost on sale and transfer |
| A.2 | Transfer fee, duty and SBT on the purchase date, only the portion borne by the buyer | Inventory | TAS 2.11 | Separate the buyer's and seller's shares according to the contract |
| A.3 | Legal fees and land due diligence | Inventory | TAS 2.11 | Withholding tax according to the type of payee |
| A.4 | Site survey, soil testing, land surveying | Inventory | TAS 2.10 | WHT on service fees |
| A.5 | Brokerage fee on land purchase | Inventory | TAS 2.11 | Withholding tax according to the type of payee |
| A.6 | Demolition, site preparation, tree clearing | Inventory | TAS 2.10 | WHT on contract work fees |
B. Construction hard costs
| Code | Item | Accounting entries | Reference |
|---|
| B.1 | Main contractor BOQ: substructure and superstructure | Inventory | TAS 2.12 |
| B.2 | Architectural works, interior fit-out, façade, hardscape | Inventory | TAS 2.12 |
| B.3 | MEP works: electrical, plumbing, air-conditioning, fire protection | Inventory | TAS 2.12 |
| B.4 | Lifts and vertical transport systems | Inventory | TAS 2.12 |
| B.5 | Roads, drainage, external works, landscape | Inventory | TAS 2.12 |
| B.6 | Utility connection fees | Inventory; the security deposit for electricity or water is separated out as a deposit | TAS 2.10 |
| B.7 | Abnormal waste and rework beyond normal levels | Period expense | TAS 2.16(a) |
C. Professional fees and soft costs
| Code | Item | Accounting entries | Reference |
|---|
| C.1 | Architectural, interior and landscape design fees | Inventory | TAS 2.10 |
| C.2 | Structural, MEP and civil engineering fees | Inventory | TAS 2.10 |
| C.3 | Project management and construction management | Inventory | TAS 2.10 |
| C.4 | Quantity surveyor and cost consultants | Inventory | TAS 2.10 |
| C.5 | EIA, IEE and environmental studies | Inventory | TAS 2.10 |
| C.6 | Building permit and official fees | Inventory | TAS 2.10 |
| C.7 | Insurance during construction (CAR, EAR, PI, liability) | Inventory only for the construction period; after completion it is a period expense | TAS 2.11 |
| C.8 | FF&E for common areas handed over to the condominium juristic person | Inventory | TAS 2.10 |
| C.9 | FF&E for the sales gallery and show units | PP&E | TAS 2.16(d), TAS 16 |
D. Marketing, sales and branding
| Code | Item | Accounting entries | Reference |
|---|
| D.1–D.2 | Marketing, advertising, online media, PR | Selling expense | TAS 2.16(d) |
| D.3–D.4 | Sales commission: external agents and sales staff | Selling expense, or a contract cost asset if it is an incremental cost expected to be recovered | TFRS 15.91–94 |
| D.5 | Launch events and roadshows | Selling expense | TAS 2.16(d) |
| D.6 | Construction of the sales gallery and show units | PP&E, depreciated over the expected selling period | TAS 16 |
E. Finance costs
| Code | Item | Accounting entries | Reference |
|---|
| E.1 | Interest on project loans during construction (IDC) | Inventory | TAS 23.8, 23.17 |
| E.2 | Interest after substantial completion | Finance costs in P&L | TAS 23.22 |
| E.3 | Loan arrangement fees and commitment fees | Included in borrowing costs through the effective interest rate | TAS 23.6, TFRS 9 |
| E.4 | Interest during an extended suspension of development | Finance costs in P&L | TAS 23.20 |
TAS 23.20 uses the phrase "extended period" and does not set a fixed number of months. Setting an internal threshold of three months is acceptable as a policy, but the cause must also be considered. A temporary delay that is a necessary part of the development process does not require capitalisation to stop.
F. Project overhead
| Code | Item | Accounting entries | Reference |
|---|
| F.1 | Site office, utilities and security during construction | Inventory | TAS 2.12 |
| F.2 | Salaries of project team members who work only on the project | Inventory | TAS 2.12 |
| F.3 | Allocated head-office overhead | Administrative expenses | TAS 2.16(c) |
| F.4 | Project bank guarantees and performance bonds | Inventory | TAS 2.11 |
G. Taxes and costs on sale
| Code | Item | Accounting entries | Notes |
|---|
| G.1 | Transfer fee borne by the developer | Selling expense | Normal rate of 2% of appraised value; relief measures apply in some cases, see below |
| G.2 | Specific Business Tax of 3.3%, including local tax | Selling expense | Calculated on the base prescribed by law |
| G.3 | Stamp duty 0.5% | Selling expense | Arises when the transfer is not subject to SBT. Do not budget both items for the same transfer |
| G.4 | Land and building tax during the selling period | Period expense | Holding costs after the unit is ready for sale do not go into inventory |
Transfer fee relief to check before use: According to news reports citing a government announcement, the registration fee for a transfer and mortgage registered at the same time is reduced to 0.01% until 30 June 2027 for individuals of Thai nationality, where the sale price and appraised value do not exceed THB 7 million and the mortgage amount does not exceed THB 7 million. Foreign buyers and juristic persons fall outside this condition. Check the Royal Gazette or the land office before preparing a per-unit budget.
Corporate developers: Do not assume that holding for more than 5 years changes the charge from SBT to stamp duty. Confirm with a tax adviser based on the nature of the entity's sales.
H. Contingency and provisions
| Code | Item | Accounting entries | Recognition point |
|---|
| H.1 | Construction contingency and project contingency | Not recorded in the accounts; a budget reserve | Record the actual cost when an approved variation order arises |
| H.2 | Defects warranty; a practical example is 1–2% of construction cost | Provision under TAS 37 | When revenue from the sale is recognised |
| H.3 | Common area fund contribution to be paid to the condominium juristic person | A liability; not included in inventory | When the obligation arises or is billed |
Presenting the budget in three buckets
Splitting total project cost into three buckets shows immediately which part of the financial statements each item will fall into, and reduces the chance of mixing contingency with actual costs.
| Bucket | Comprises | Destination |
|---|
| 1. Capitalized Inventory Cost | A + B except B.7 + C except C.9 + E capitalised portion + F direct portion | Statement of financial position: inventory |
| 2. Period Selling Cost | D + G and depreciation of the sales gallery | P&L: selling expenses |
| 3. Budget Reserve | Construction contingency and project contingency | Not recorded in the accounts until it actually occurs |
The defects warranty provision should be shown as a separate memo item, because it is recognised on sale and is not a construction expenditure.
Decision test: capitalise or not
- Is it directly related to bringing the goods to a saleable condition? If not, treat it as a period expense.
- Is it a cost of selling? For example, marketing, transfer costs on sale, or the sales gallery. If so, it does not go into inventory, except for commission that meets the contract cost asset criteria under TFRS 15.
- Is it general overhead? For example, executive salaries and head-office IT systems. If so, it is an administrative expense.
- Is it interest on a project loan? If so, check that development is still in progress and not yet substantially complete.
- Is it abnormal waste or rework? If so, it is a period expense; if not, record it in inventory.
Capitalisation principles auditors will ask about
| Principle | Standard | Practical effect |
|---|
| The cost of inventory comprises purchase costs, conversion costs and other costs incurred in bringing it to its present condition | TAS 2.10 | A + B + C + E + F, subject to conditions |
| Excludes abnormal waste, storage costs, administrative overhead and selling costs | TAS 2.16 | Separated out to P&L |
| Capitalise IDC when expenditure is incurred, borrowing costs are incurred and development activity is in progress. All three conditions must be met | TAS 23.17 | Stop when the project is substantially complete, and suspend during an extended suspension of development |
| Allocate costs to units using a systematic and reasonable method | TAS 2 | Use NSA or relative sales value |
| Test NRV at every reporting date | TAS 2.9, 2.28–33 | If prices fall or sales slow, consider a write-down |
| Recognise revenue when control is transferred | TFRS 15.38 | For Thai condominium units this is generally the ownership transfer day; earlier receipts are contract liabilities |
| Set up a defects warranty provision when revenue is recognised | TAS 37.14 | Use historical data or evidence-based estimates |
Tax issues to separate from the accounting entries
Input VAT: do not assume it can be credited in every case
Sales of real estate in the form subject to SBT are not VAT-liable activities, so a developer selling only condominium units generally cannot credit the related input VAT, and that VAT becomes a project cost. If the entity has both VAT-liable and non-VAT-liable activities, input VAT must be apportioned by the method prescribed by law. Check the status before setting the budget, because a 7% difference in hard costs directly affects margin.
The 7% VAT rate is currently extended to 30 September 2027 under Royal Decree No. 807 (2026). In long-term models, use rate assumptions that match the period in which each transaction actually occurs.
IDC: do not conclude that it is immediately deductible
The commonly used earlier approach was to record IDC in inventory in the accounts and deduct it as a tax expense when paid, with deferred tax recognised. However, the Revenue Department once replied to a ruling request (Ref. Kor Kor 0702/1871, dated 4 April 2023) that interest on a loan incurred before the asset is ready for use is capital expenditure under Section 65 ter (5). That ruling concerned an investment asset, not a developer's inventory directly, so a tax adviser must determine the approach to apply, and a temporary difference should be recorded only when the tax treatment actually differs from the accounting.
Typical differences
- Defect provision: the accounts recognise it at the point of sale, while tax deducts it only when the actual expense is incurred, so a deferred tax asset typically arises
- Sales gallery: useful lives may differ between accounting and tax
- Contract cost asset: if commission is capitalised under TFRS 15, the timing of recognition may differ from tax
Standard journal entries
| Event | Debit | Credit |
|---|
| Contractor progress payments | Inventory (development in progress), plus input VAT only where a credit can be claimed | Payables or bank, accrued WHT, retention payable |
| Interest during construction | Inventory: Capitalized Interest | Accrued interest |
| Advertising and marketing | Selling expenses, and input VAT as entitled | Payables, accrued WHT |
| Ownership transfer | Cash/bank, contract liability | Revenue from real estate sales |
| Recognise cost of sales | Cost of real estate sales | Inventory, allocated by NSA or sales value |
| Transfer fees and SBT | Selling expense | Bank |
| Set up a defect provision | Cost of sales or warranty expense | Provision: Warranty |
Documents and month-end closing
| Item | Minimum documents | Approver |
|---|
| Buying land | Title deed, sale and purchase agreement, transfer fee receipt, due diligence report, valuation report | MD and legal department |
| Construction progress payment drawdown | Invoice, payment certificate, progress report, photographs, bank guarantee status | PM, CM, Finance |
| Professional fees | Invoice, milestone evidence, service contract | PM and Finance |
| Marketing and commission | Invoice, contract, evidence of work performed, sales contract | Marketing and Finance |
| Capitalized Interest | Statement, loan schedule, calculation memo | Finance Manager |
| Ownership transfer | Land office receipt, contract, evidence of receipt of funds, settlement statement | Finance and legal department |
Month-end closing checklist
- Reconcile contractor invoices to signed payment certificates
- Calculate and record IDC per the schedule, and confirm that it is still within the capitalisation period
- Check that no selling costs or head office overheads have entered inventory
- Reconcile retention payable to the retention register
- File WHT and tax reports by the deadlines that apply to the business
- Test NRV at least quarterly
- Update budget vs actual and forecast at completion
- At year-end, review the warranty provision and deferred tax
Common mistakes
| Error | Impact | Correct approach |
|---|
| Taking marketing costs or commission into inventory | Inventory and profit for the period are overstated | Record as selling expenses, unless the TFRS 15 conditions are met |
| Capitalising interest after the work is mostly complete | Breaches TAS 23.22 | Stop on the set date and reclassify as finance costs |
| Including the sales gallery in inventory | Misclassification | Classify separately as PP&E |
| Recognising revenue when the booking agreement is signed | Revenue is recognised too early | Record as a contract liability until control is transferred |
| Recording contingency as an advance cost | Inventory does not reflect actual cost | Hold it in the budget |
| Not setting up a warranty provision | Cost of sales is understated and profit overstated in the year of transfer | Set it up when revenue is recognised |
| Allocating head office salaries to the project | Breaches TAS 2.16(c) | Capitalise only the teams working directly on the project |
| Not withholding WHT when paying for services | The payer is liable for the tax and surcharges | Withhold according to the type of income and file by the deadline |
| Not performing an NRV test because the units are believed to sell as planned | Accounting evidence is missing | Prepare an NRV memo on a periodic basis |