Understanding VAT in Thailand: What You Need to Know
Value Added Tax (VAT) has been a part of Thailand’s tax system since 1992, when it replaced the Business Tax (BT). Essentially, Valuable Added Tax is an indirect tax applied to the value added at each stage of production and distribution.
1. Who Pays VAT?
Anyone regularly selling goods or providing services in Thailand with an annual turnover exceeding 1.8 million baht must pay Valuable Added Tax. A service is considered provided in Thailand if it’s carried out in the country, regardless of where it is used, or performed elsewhere but utilized in Thailand.
Importers are also subject to Valuable Added Tax, regardless of registration status. The Customs Department collects VAT on imports. Certain businesses are exempt from Valuable Added Tax but may be liable for Specific Business Tax (SBT). VAT covers both tangible and intangible goods for sale, personal use, or other purposes, including imported items. Services are activities benefiting individuals or businesses that do not involve supplying goods.
2. VAT Exemptions
- Certain transactions and businesses are exempt from Valuable Added Tax, including:
- Small businesses with an annual turnover below 1.8 million baht
- Sale and import of unprocessed agricultural goods and related products (fertilizers, animal feed, pesticides)
- Sale and import of newspapers, magazines, and textbooks
- Some basic services, including domestic and international land transport, healthcare services from both public and private providers, educational services, and regulated professional services like medical, auditing, and legal services
- Cultural activities, labor services, research, public entertainers, services exempted by law such as religious and charitable services, and government agency services
- Goods imported into Export Processing Zones (EPZs) or re-exported items eligible for import duty refunds
3. VAT Tax Base
VAT is based on the value of goods or services provided, whether it’s money, property, or other benefits that can be valued in monetary terms. The calculation depends on the type of goods:
- General Goods and Services: Valuable Added Tax is calculated on the total value of goods or services, including payments, service fees, or benefits convertible into money. The tax base includes Excise tax but excludes VAT and any clearly stated discounts.
- Imported Goods: VAT base = C.I.F. price + Import duty + Excise Tax (if applicable) + other relevant taxes/fees.
- Exported Goods: VAT base = F.O.B. price + Excise Tax (if applicable) + other relevant taxes/fees.
4. VAT Rates
- Standard Rate: The current Valuable Added Tax rate is 7%.
- Zero-Percent Rate: Some activities are taxed at 0%, such as:
- Export of goods
- Services provided in Thailand but used abroad, according to regulations
- International transport by air or sea
- Supply of goods/services to state enterprises or government agencies under foreign-aid programs
- Sales to UN agencies, embassies, and consulates
- Transactions between bonded warehouses or between businesses in EPZs.
5. Timing of VAT Payments
The Time of Supply determines when a business must account for VAT on goods or services. This timing varies as follows:
Goods
- For general goods, VAT is payable at the earliest of:
- The time of delivery;
- Transfer of ownership;
- When a payment is made;
- When a tax invoice is issued.
- For hire-purchase or installment sales, Valuable Added Tax is due at the earliest of:
- The time each installment payment becomes due;
- When a payment is made;
- When a tax invoice is issued.
- For goods supplied on consignment, Valuable Added Tax is due at the earliest of:
- When the consignee delivers or transfers ownership of the goods to the buyer;
- When a payment is made;
- When a tax invoice is issued.
- For imported goods, Valuable Added Tax is due at the earliest of:
- When import duty is paid;
- When a guarantee is provided;
- When a guarantor is arranged;
- When a bill of lading is issued.
- For exported goods, Valuable Added Tax is due at the earliest of:
- When export duty is paid;
- When a guarantee is provided;
- When a guarantor is arranged;
- When a bill of lading is issued;
- When goods are exported from Thailand or sent to an Export Processing Zone (EPZ);
- When goods are shipped from a bonded warehouse.
Services
- For general services, VAT is payable at the earliest of:
- When a payment is made;
- When a tax invoice is issued;
- When the service is utilized.
- For service contracts based on performance milestones, Valuable Added Tax is due at the earliest of:
- When a payment is made;
- When a tax invoice is issued;
- When the service is utilized.
- For imported services, VAT is due at the time the payment for the service is made.
6. Issuing Tax Invoices
VAT-registered businesses must issue tax invoices for all transactions, detailing the nature, value of goods or services, and the amount of VAT. The invoice must include the words “Tax Invoice” prominently and list key information including:
- Name, address and tax identification number of issuer.
- Name and address of the purchaser or Clients.
- Tax invoice number.
- Descriptions of goods or services.
- Amount of Valuable Added Tax chargeable.
- Date of issuance.
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7. Calculating VAT
Valuable Added Tax liability is calculated as:
Valuable Added Tax Payable = Output Tax – Input Tax
Output tax is the VAT collected from customers for sales.
Input tax is the VAT paid on purchases or imports of goods.
8. VAT Refunds
If input tax exceeds output tax in any month, businesses can claim a refund in the form of cash or as a tax credit for future months. VAT refunds must be claimed within three years, and unused input tax can be credited for up to six months. Non-creditable input taxes (e.g., entertainment expenses) can be deducted from corporate income tax (CIT) instead.
9. VAT Registration
Businesses liable for Valuable Added Tax must register (Form VAT 01) before starting operations or within 30 days of reaching the threshold income. The registration is filed with local revenue offices. For businesses with multiple locations, registration is done through the head office’s revenue office. Easy Day Phuket Accounting will advice you on the timing.
10. Filing Returns and Paying Valuable Added Tax
VAT returns must be filed monthly (Form VAT 30), with payments due by the 15th of the following month. If multiple business locations exist, each must file separately unless otherwise approved. VAT on services from foreign providers must be declared by the Thai recipient using Form VAT 36.
If goods or services are subject to excise tax, VAT returns and payments must be submitted to the Excise Department within 15 days. For imports, VAT is paid to the Customs Department at the point of entry.
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