VAT (value added tax) - explained.
A Value Added Tax (VAT) has been applied in Thailand since 1992 and is an indirect tax imposed on the value added at each stage of production and distribution.
Any person or entity that regularly supplies goods or provides services in Thailand and has an annual turnover exceeding 1.8M THB is subject to VAT. Service is deemed to be provided in Thailand, if the service is performed in Thailand and regardless where it is utilized or if it is performed elsewhere and utilized in Thailand.
Importers are also subject to VAT in Thailand, and VAT will be collected by the Customs Department at the time goods are imported. Certain businesses are excluded from VAT and will instead be subjected to Specific Business Tax (SBT).
Under VAT, taxable goods mean all types of property, tangible or intangible, whether they are available for sales, for own use, or for any other purposes. It also includes any type of articles imported into Thailand. Services refer to any activities conducted for the benefits of a person or an entity, which are not the supply in terms of goods.
Certain activities are exempted from VAT, these being:
- A small entrepreneur whose annual turnover is less than 1.8M THB
- Sales and import of unprocessed agricultural products and related goods such as fertilizers, animal feeds, pesticides, etc.
- Sales and import of newspapers, magazines, and textbooks
- Certain basic services such as:
- Transportation: domestic and international transportation by way of land
- Healthcare services provided by government and private hospitals as well as clinics
- Educational services provided by government and private schools and other recognized educational institutions
- Professional services: Medical and auditing services, lawyer services in court and other similar professional services that have laws regulating such professions Renting of immovable properties
- Cultural services such as amateur sports, services of libraries, museums, zoos
- Services in the nature of employment of labor, research and technical services and services of public entertainers
- Goods exempted from import duties under the Industrial Estate law imported into an Export Processing Zones (EPZs) and under Chapter 4 of the Customs Tariff Act
- Imported goods that are kept under the supervision of the Customs Department which will be re-exported and be entitled to a refund for import duties
- Other services such as religious and charitable services, services of government agencies and local authorities
Registering for VAT
Any person or entity who is liable to VAT in Thailand must register using Form VAT 01 before the operation of business or within 30 days after its income reaches the threshold. The application must be submitted to the Area Revenue Office if the business is situated in Bangkok, or to an Area Revenue branch office if it is situated elsewhere. Should the applicant have several offices, then the application must be submitted to the Revenue Office closest to where the main office is situated.
Tax return and payment of VAT
The VAT return must be filed on a monthly basis. The VAT return (Form VAT 30) together with tax payment, if any, must be submitted to Area Revenue Branch Office within 15 days of the following month. Where the taxpayer has more than one place of business, then each place of business must file a return and make payment separately, unless with the approval of the Director-General of the Revenue Department. Services utilized in Thailand supplied by service providers in other countries are also subject to VAT in Thailand. In such cases, service recipients in Thailand are obliged to file VAT return (Form VAT 36) and pay tax, if any, on behalf of the service providers.
In those cases where the supply of goods or services is also subject to Excise tax, VAT return and tax payment, if any, must be submitted to the Excise Department together with Excise tax return and tax payment within 15 days of the following month. In the case of imported goods, the VAT return and tax payment must be submitted to the Customs Department at the point of import.
Obtaining a VAT refund
In each month where the input tax exceeds output tax, the taxpayer may claim a refund, either in the form of cash or a tax credit to be used in the following months. A zero-rated taxpayer will always be entitled to VAT refund. Unused input tax may be credited against output tax within the following six months. The refund can only, however, be claimed within three years of the date of filing.
Certain input taxes, such as tax in relation to entertaining expenses, are not creditable under VAT. However, those non-creditable input taxes can instead be used as deductible expenses under Corporate Income Tax.