Thailand extends reduced 7% VAT rate to stimulate economic growth.

The Thai government has announced the extension of the reduced 7% Value Added Tax (VAT) rate for an additional year, aiming to boost economic activity and sustain domestic consumption. Approved by the Cabinet on 9 September 2025, the measure will take effect from 1 October 2025 and remain in place until 30 September 2026.

VAT was first introduced in Thailand in 1992 at a rate of 10%, but it was lowered to 7% during the 1997 financial crisis and has remained at that level ever since.

Although the law requires the VAT rate to be reviewed annually, successive governments have avoided raising it due to its political sensitivity.

Government perspective on VAT and the economy

The reduced VAT rate, originally scheduled to expire at the end of September 2025, has been maintained in response to ongoing efforts to strengthen economic confidence. The Ministry of Finance, through the Revenue Department, proposed the extension as part of a broader strategy to support stable growth.

Finance Minister Pichai Chunhavajira stated that the government must carefully balance the need for state revenue with the potential burden on the population. He noted that while Thailand’s 7% VAT rate is low by regional standards, raising it during a weak economy may not be appropriate.

Pichai emphasised that any future increase should ensure that additional revenue is used for investment, job creation or support for low-income earners, rather than solely reducing public debt.

Economic impact and benefits for businesses and consumers

Mr. Pinsai Suraswadi, Director-General of the Revenue Department, added that maintaining the 7% VAT rate is expected to contribute to Thailand’s economic expansion, helping the country achieve its growth targets while providing relief to businesses and consumers. The continuation of the reduced rate also helps stabilise prices amid rising costs, signalling the government’s ongoing commitment to stimulating domestic spending.