Value added tax (VAT) in Thailand.

This guide provides an overview of the rules and requirements of VAT in Thailand.

VAT is one of the few indirect taxes that taxpayers in Thailand are subject to. It is important for newly established companies that reach the threshold to register for VAT and complete any requirements in order to stay compliant with the Revenue Code and avoid penalties.

Let’s start.

What is VAT in Thailand?

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.

Who is subject to VAT in Thailand?

Any person or entity that regularly supplies goods or provides services in Thailand and has an annual turnover exceeding THB 1.8 million is subject to VAT.

Service is deemed to be provided in Thailand if the service is performed in Thailand and regardless where it is utilised or if it is performed elsewhere and utilised 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).

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VAT rates in Thailand

The current rate for VAT in Thailand is 7%.

The VAT rate of 0% applies to the following activities:

• Export of goods
• Services rendered in Thailand and consumed outside Thailand in accordance with the rules, procedures and conditions prescribed by the Director-General
• International transport services by aircraft or sea-going vessels
• Sales of goods and services to Thai government ministries, departments or state enterprises under foreign loan assistance programs
• Sales of goods and services to international organisations that Thailand is obliged under agreements with organisations to treat like embassies
• Sales of goods and services to foreign economic and trade offices that are established in Thailand under agreements with foreign governments
• Sales of goods or services between bonded warehouses and businesses located in export processing zones or duty-free zones

Activities exempted from VAT

The following activities are exempted from VAT:

• Small entrepreneurs whose annual turnover is less than THB 1.8 million
• Sales and imports of unprocessed agricultural products and related goods, such as fertilisers, animal feeds and pesticides
• Sales and imports of newspapers, magazines and textbooks
• Certain basic transactions, such as:
  • Transportation: domestic and international transportation by way of land
  • Healthcare services provided by the government and private hospitals as well as clinics
  • Educational services provided by the government and private schools and other recognised educational institutions
  • Professional services: medical and auditing services, lawyer services in court and other similar professional services that have laws regulating such professions
• Income from business, commerce, agriculture, industry, transport or any other activities not specified above
• Cultural services, such as amateur sports, services of libraries, museums and zoos
• Services in the nature of employment of labour, research and technical services and services of public entrepreneurs
• Goods exempted from import duties under the Industrial Estate law imported into an Export Processing Zone (EPZ) 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

How to register for VAT?

An individual or company that is liable to VAT must register by submitting Form VAT 01 before the operation of the business or within 30 days after its income reached the threshold to the Area Revenue Office if the business is situated in Bangkok, or to an Area Revenue branch office if it is situated elsewhere.

If the applicant has several offices, the application must be submitted to the Revenue Office closest to where the main office is situated.

When to file and pay VAT returns in Thailand?

The VAT return (Form VAT 30) must be filed and paid to the Area Revenue Office within 15 days of the following month. Where the taxpayer has more than one place of business, each place of business must file a return and make a payment separately unless the taxpayer has received the approval of the Director-General of the Revenue Department.

Services utilised in Thailand supplied by service providers in other countries are also subject to VAT in Thailand. Service recipients in Thailand are obliged to file Form VAT 36 and pay tax on behalf of the service providers.

If the supply of goods or services is also subject to excise tax, the VAT return and payment must be submitted to the Excise Department together with the excise tax return and payment within 15 days of the following month. In the case of imported goods, the VAT return and payment must be submitted to the Customs Department at the point of import.

Claiming VAT refunds in Thailand

If the input tax exceeds the output tax each month, the taxpayer can claim for a VAT refund in the form of cash or tax credits to be used in the following months.

If the taxpayer is subject to zero-rated VAT, the taxpayer will always be entitled to a VAT refund.

Unused input tax can be creditable against output tax within the next six months. It can only be claimed within three years from the filing date.

What are the items that a registered business cannot recover VAT on?

VAT input tax cannot be recovered in the case that:

• There is no tax invoice
• The invoice is incorrect or incomplete
• The buyer fails to show a tax invoice without a reasonable cause
• The input tax is not directly related to the carrying on of a business
• The input tax arises from entertainment expenses
• The tax invoice was issued by an unauthorised person

Requirements for invoices for VAT purposes

For VAT purposes, the invoice should include:

• The words tax invoice
• The name, address and taxpayer identification number of the supplier
• The name and address of the purchaser
• The date of issuance
• The description, type, category, quality and value of the goods or services
• The amount of VAT on the goods or services
• The serial number of the tax invoice

How is VAT calculated in Thailand?

The formula to calculate VAT is VAT liability = output tax – input tax.

The VAT system in Thailand works as follows: if company A (subject to VAT) purchases fabrics from company B (also subject to VAT), then company A will receive VAT credits while company B will have VAT debits. If company A – let’s suppose that this company manufactured clothes – then sells the clothes to a distributor, it will have VAT debits. At the end of the month, the VAT debits will be set off against the VAT credits. In case the company has credits left, it can request a VAT refund (which is, however, a time-consuming process). If it has debits left, this amount will have to be paid effectively.

In Thailand, VAT returns (PP 30) should be filed on a monthly basis before every 15th of the following month with the Area Revenue Branch Office. Do note that, if the goods or services are also subject to the excise tax, the VAT return should be filed with the Excise Department together with the excise tax filings. The monthly VAT returns are an obligation even if the return is null for that month. The payment of the VAT becomes due at the same time.

VAT non-compliance penalties

Under section 90 of the Revenue Code, punishment for individuals who fail to meet the VAT requirements include:

• A fine of not more than THB 2,000 when the VAT registrant fails to:
  • File a tax return
  • Notify any changes in particulars of the VAT registration
  • Notify a change of place of business
  • Notify temporary business cessation
  • Issue certified copy of tax invoice, credit note or debit note
• A fine of not more than THB 5,000 when the VAT registrant fails to:
  • Display the certificate of VAT registration
  • Notify the opening of additional place of business or the closing of the place of business
  • Notify the transfer of part of the business or the receive of transfer of business
  • Notify the cessation of business or transfer of business
• A fine or not more than THB 10,000, a sentence for not more than one month or both:
  • Any businessperson liable to register for VAT carrying on business without VAT registration
  • VAT registrant fails to issue a tax invoice or its copy or fails to provide the tax invoice or its copy to the purchaser or service recipient
  • A businessperson registered for temporary VAT registration issuing tax invoice not in accordance with the rule, procedure and conditions as prescribed by the Director-General
  • An agent issuing tax invoice on behalf of VAT registrant not in accordance with the rules, procedures and conditions as prescribed by the Director-General
• A fine or not more than THB 10,000, a sentence for not more than six months or both:
  • An agent of a VAT registrant residing abroad issuing tax invoice without approval
  • VAT registrant using a cash register machine without approval
  • VAT registrant fails to make reports on output tax, input tax and goods and raw materials (in the case that the VAT registrant conducts business on the sale of goods) or as prescribed by the Director-General
• A fine of THB 2,000 to THB 200,000 and a sentence from three months to seven years:
  • VAT registrant intends to evade or tries to evade VAT, issuing tax invoice, debit note, or credit note without authorisation
  • VAT registrant intends to or tries to evade VAT fails to issue a tax invoice, debit note, or credit note or their substitute
  • VAT registrant intends to or tries to evade VAT acts falsely, fraudulently or by similar nature

Changes in VAT policies in Thailand

Thailand’s standard rate of VAT as prescribed in section 80 of the Revenue Code is 10%. However, on 23 September 2020, the Thailand VAT Royal Decree (No.715) BE 2563 was announced, which extended the VAT rate of 7% for 12 months until 30 September 2021.

From 01 October 2021 onwards, the sales and imports of goods and services in Thailand will be 10%.

Conclusion

Reach out to Acclime’s professional tax team to ensure you stay compliant with the VAT liabilities.