Value Added Tax (VAT) is a non-cumulative consumption tax levied on the sale of goods and the provision of services. All producers, retailers, wholesalers, importers, and any other persons supplying goods and services are subject to VAT, unless exempt under the Revenue Code.
Any person or legal entity that has an annual turnover exceeding 1.8 million Baht is required to register for VAT with the Revenue Department before the registration of the business or within 30 days of the date the annual turnover exceeded that threshold. In case the taxpayer has multiple branches, the registration must be filed with the Revenue office from the company’s headquarters.
A VAT registration is a precondition of employing foreign labor.
The VAT registered person or legal entity must issue tax invoices for every transaction. Every invoice must show the goods sold or services provided, their value, and the VAT amount due. The tax invoice is used to claim input tax credit.
Exemption from VAT
Due to their significance to the public welfare, the following activities are exempt from VAT:
• Small entrepreneur whose annual turnover is less than 1.8 million Baht
• Sales and import of unprocessed agricultural products and related goods such as fertilizers, animal feeds, and pesticides
• Sales and import of newspapers, magazines, and textbooks
• Certain basic services such as domestic and international transportation by way of land, healthcare services, educational services, and leasing of immovable property
• Professional services: medical and auditing services, lawyer, and other similar professional services
• Income from business, commerce, agriculture, industry, transport, or any other activity not specified earlier
• 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 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 and services of government agencies and local authorities
The VAT normal rate is 10%, but has been reduced at 7% until 30 September 2019.
Registered and un-registered importers are subject to VAT in Thailand and the VAT will be collected by the Customs Department when the goods are imported.
The following activities attract a zero-rate VAT:
• Exports of goods and services (that are performed in Thailand and are consumed in foreign countries)
• International transport services by aircraft or sea-going vessels
• Sales of goods and services to Thailand government ministries and departments or state enterprises under foreign loan assistance programs
• Sales of goods and services to the United Nations organizations, its agencies, and foreign government embassies and consulates
• Sales of goods and services between bonded warehouses and to businesses located in export processing zones or duty-free zones
Suppliers of goods and services collect output VAT from the purchaser when a sale is made. Purchasers of goods and services pay input VAT to the seller. Input VAT is deducted from output VAT to determine VAT liability.
If the input exceeds the output, the taxpayer can claim a refund in the form of cash or as a tax credit that can be used within the next 6 months. Therefore, in case they are zero-rated, the taxpayer will always be entitled to VAT refund. The taxpayer can claim the refund within 3 years from the last day of the filing date.
Even if a company is exempt from VAT, it must pay VAT on services and products it purchases. This company is not entitled to claim a VAT refund.
The company does not have to collect VAT on its sales or file monthly VAT forms. If it does it and it is registered for VAT purposes, it may be entitled to claim a VAT refund.
VAT Returns and Payment
The VAT taxable period is a calendar month. VAT returns, even nil, must be submitted together with tax payments, if any, within 15 days of the following month in which VAT is collected.
The taxpayer who has more than one place of business, must file a return and make a payment for each place of business, unless the Director-General of the Revenue Department deems it otherwise.
Services or royalties utilized in Thailand supplied by foreign service providers are subject to VAT in Thailand. The recipients must file a VAT return and pay tax, if any, on behalf of the service providers on the 7th day of the month following the month of the payment.
If the provision of goods or services is also subject to Excise tax, the VAT and Excise tax returns and tax payments must be submitted to the Excise Department within 15 days of the following month.
For imported goods, the VAT return and tax payment must be submitted to the Customs Department when the goods are imported.
The penalty for late submission is up to twice the amount of tax due that month. There is also a surcharge of 1.5% of the tax payable per month.