VAT in Thailand
What is VAT?
VAT (Value Added Tax) is a sales tax applied to a wide range of goods and services in Thailand.
If your home country uses GST then you can think of VAT as essentially the same, just a different name.
Whether VAT is charged is solely dependent on the seller and whether they have chosen to, or been required to, register for VAT.
Whether the buyer is registered for VAT has no impact on VAT being charged, but will affect the buyers ability to deduct the VAT paid as an expense.
Registering a Business for VAT
When a business first exceeds revenue (not profit) of over 1,800,000 THB per financial year, the business must register for VAT. This must be completed within 30 days of exceeding this threshhold.
Optionally a business can choose to register for VAT before reaching this threshhold.
This would normally be done when they want to be able to claim back VAT, need to handle VAT on imports/exports, or another department such as Immigration expect VAT registration during another process.
To register for VAT you must complete form Por.Por.01 which would be submitted at the Revenue Department office which covers the businesses head office location.
If you operate under certain exempt activities then you should also complete form Por.Por.01.1
You will need the following:
- Property rental contract of the business registered premises, with the name and address of the property owner or a consent letter for the properties business use.
- ID card or passort of owners
- Company registration documents, or partnership/fund/juristic, if applicable
- Business licenses if applicable
- Location map of business, with photos of building
- Power of attorney form with stamp duty attached, assuming the business owner is not applying in person.
There is no fee payable for registering for VAT.
Calculating VAT on Invoices
The current VAT rate is 7% which is applicable on all items which are not otherwise excluded from VAT. You will find the list of excluded categories below.
VAT is simply calculated at the percentage rate of each items price.
This calculation would be common for B2B sales, where all parties are typically VAT registered so it is common for VAT to be added to the price.
However for consumer facing businesses it is far more common for prices displayed to already include VAT.
Some countries such as USA have normalised adding sales tax onto consumer prices.
But in Thailand this is rare, outside of certain high end restaurants etc, where prices are sometimes displayed as ++ (+7% VAT and +10% service charge).
If you sell with VAT included you need to work out what amount would equal the final price when 7% VAT is added.
If you have a calculator handy simply divide the price by 1.07 to get the net price.
If you have multiple products at different tax rates in the same order it gets a little more complicated.
The VAT is calculated at each line level, then combined at the end for the final total.
Or if the same invoice had VAT included in the price
You can use the VAT calculator at the top of this page to assist in these calculations, so save this to your bookmarks!
Categories Exempt from VAT
- Sales of goods or services of entrepreneurs with income not exceeding 1.8 million baht per year, unless they have voluntarily registered for VAT.
- Sale of agricultural products within the Kingdom such as rice, corn, flax, cassava, vegetables and fruits, etc. (The Revenue Department's order No. Por. 28/2535).
- Sale of live or non-living animals within the kingdom such as cattle, buffaloes, chicken or meat, shrimp, fish, etc. (The Revenue Department's order No. Por. 29/2535).
- Fertilizer sales
- Sale of fishmeal, animal feed
- Sale of drugs or chemicals used for plants or animals for preventive maintenance destroy or eliminate pests or diseases of plants and animals
- Selling newspapers, magazines or textbooks
- Importing goods according to 2. to 7.
- Providing educational services of government educational institutions Educational establishments under the Law on Private Higher Education Institutions or private schools under the law on private schools
- Providing transportation services in the Kingdom, whether by land by water or by air; and the provision of fuel transportation services through pipelines Entrepreneurs have the right to choose to enter the VAT system.
- Providing international transportation services by land and ships which are not sea ships.
- Providing medical services of public and private hospitals
- Providing services for libraries, museums, zoos
- Providing services for organizing amateur sports competitions
- Providing services for practicing the art of healing, auditing, litigation
- Service of public performers
- Provision of artistic and cultural services in the branch and nature of business prescribed by the Director-General with the Minister's approval
- Research services or providing academic services which must have the characteristics of the business as specified by the Revenue Department, ie research or academic services in the fields of science and social sciences But it must not be a business action. The entrepreneur must be a natural person or a group of persons that is not a juristic person or a foundation.
- Provision of services under an employment contract
- Providing real estate rental services
- Provision of local government services This does not include commercial services of the local government. or to earn money or interests whether it is a utility business or not
- Sale of goods or services of ministries, bureaus, departments which remit all revenues to the state without deduction of expenses.
- Selling products or providing services for the benefit of religion or public charities within the country which does not bring profits to be paid in other ways
- Product donations to hospitals and government educational institutions or giving to organizations or charitable institutions or other medical and educational institutions as announced by the Minister
- The sale of cigarettes produced by the tobacco factory Ministry of Finance which the seller is someone other than the Tobacco Factory Ministry of Finance
- Sales of government lottery tickets government savings lottery and the Thai Red Cross-Thai Red Cross lottery
- Sale of postage stamps, duty stamps or other government stamps government organization or a local government organization Only unused at a price that does not exceed the par value.
- Rice milling services
VAT 0% Rate
In addition, certain activities have a VAT rate of 0%. While this sounds the same as being Exempt, there is a subtle difference.
For a 0% VAT activity there is no VAT charged on the sale. However the business is allowed to claim back VAT on any purchases directly related to the sale of the 0% goods.
For VAT Exempt products there is no VAT charged on the sale and the seller is prohibited from claiming VAT deductions on any purchases related to the sale.
The 0% VAT rate currently applies to:
- 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
VAT on International Payments
In many cases VAT is not applicable on payments to overseas companies.
These sitautions are mostly listed above and fall under the 0% VAT rate.
A company exporting products overseasodes not need to charge VAT on their exports, but will need to pay VAT on related domestic purchases.
For services that are produced within Thailand and consumed outside Thailand there will be 0% VAT.
In some cases there may be foreign VAT applicable, depending on the overseas rules, but this is outside the scope of this article.
Monthly VAT Returns
VAT returns must be filed every month using form Phor Por 30 (PP 30 ภ.พ.30) or form Phor Por 36 (PP 36 ภ.พ.36).
This must be submitted and paid by the 15th of the month, for all transactions from the previous month.
Businesses with multiple branches must each submit their own VAT return, unless they have prior approval of the Director-General of the Revenue Department.
To submit the VAT return you will need to separately list and calculate the totals for the following.
- Standard Taxable Sales
- VAT 0% rate sales
- VAT Exempt sales
- VAT paid on purchases
Even though VAT 0% and exempt incur no VAT, it is still required to provide the totals of these transactions.
The VAT amount due is calculated as:
VAT charged on VAT taxable Sales - VAT paid on taxable purchases.
So if you sold 100,000 THB (Net) of taxable products and bought 40,000 THB (Net) of taxable items your VAT due to be paid would be 4,200 THB (7,000 minus 2,800).
Even though you charged customers 7,000 THB of VAT you only need to pay the Revenue Department 4,200 THB because the other 2,800 THB has already been paid to other VAT registered businesses and will therefore be submitted by those suppliers.
This is where the name comes from, you only end up paying on the "Value Added" which is the difference of what you sold vs purchased.
It is also possible that you are entitled to a VAT refund if the VAT on your purchases is higher than the VAT on your expenses. This is most common for businesses operating in 0% VAT industries, but not in VAT exampt industries who are unable to claim on their purchases.
If you are entitled to a VAT refund you have 2 choices.
1) Roll VAT forward to the next month, where it can be offset against any VAT due, or rolled forward again if still a negative value.
2) Apply for a VAT refund which will be paid out by the Revenue Department.
If you do request a VAT refund to be paid out this may increase your risk of being audited by the Revenue Department. They are always happy to receive money but more careful when paying it out!
So evaluate the risk/reward of this before proceeding, the cost and complexities of an audit could prove expensive if just a small amount owed. For larger companies already subject to yearly audits claiming VAT owed will be no issue.
Requirements of VAT Tax Invoices
One very important point to note is that you must have perfectly correct invoices and receipts from your suppliers in order to claim the VAT back on your purchases.
- The Invoice must contain the words "tax invoice"
- The Invoice must contain the name, address and taxpayer identification number of the supplier
- The Invoice must contain the name and address of the purchaser
- The Invoice must contain the date of issuance
- The Invoice must contain the description, type, category, quality and value of the goods or services
- The Invoice must contain the amount of VAT on the goods or services
- The Invoice must contain the sequential number of the tax invoice
For the invoices that you generate for your customers it is also very important that the invoice numbers run sequentially. Any gaps in the invoice numbers will be perceived by Revenue Department as you trying to hide invoices and a suspect of Tax Evasion.
Penalties for late tax filing or late payment
Value added tax (Phor Por. 30) overdue
1. Criminal fines (must be paid in cash only)
- Late submission not more than 7 days, a fine of 300 baht
- Late submission more than 7 days, a fine of 500 baht
2. Extra fines
- Pay an additional rate of 1.5% of VAT due per month (partial or full), excluding penalties.
- The surcharge must not exceed the tax amount.
- If there is no tax amount to be paid I do not have to pay extra.
- In the case of filing additional tax forms Penalties are calculated as 1 times of the penalty percentage. (If you forget to submit the purchase tax You do not need to request additional submission as well. because it can be submitted in the next month, not more than 6 months from the date of the tax invoice)
- In the case of not filing a tax return Penalties are calculated as 2 times the percentage of the penalties.
- If there is no tax to be paid, no penalty will be charged. But still have to pay a criminal fine in case of not filing the form 500 baht
- Issuing tax invoices And delivered to the purchaser of the product or the service recipient 2 times the penalty
- Issuing tax invoices Without the right to issue double fines
- Using a fake tax invoice, double the penalty
- Do not keep a copy of the sales tax invoice, a penalty of 2% of the tax on the invoice
- Do not keep input tax invoices that use tax credits, fines of 2% of the country Tax taken to credit
- Failure to report as required by law or there is a shortage of goods from the report of goods and raw materials, 2 times the penalty