Value Added Tax (VAT)

Value Added Tax (VAT) has been implemented in Thailand since 1992 replacing Business Tax (BT). VAT is an indirect tax imposed on the value added of each stage of production and distribution. From a company's point of view the value added is the difference between sales and purchases.

VAT Registration

Any company supplying goods and/or services in Thailand is subject to VAT registration in Thailand.
Exempt from VAT registration are companies with a turnover of less than 1.8 million Baht per year. However, when turnover exceeds this limit during the year then VAT registration is mandatory from the moment when the limit of 1.8 million Baht is reached.
There may be circumstances where VAT registration is not required but nevertheless profitable.

VAT Exemptions

The following goods and services are exempted from VAT:

• Sales and import of unprocessed agricultural products and related goods such as fertilizers, animal feeds, pesticides, etc.
  
• Sales and import of newspapers, magazines, and textbooks
  
• Certain basic services such as:
  
  • Public transportation
    
  • Healthcare provided by hospitals and clinics
    
  • Educational services by recognized educational institutions;
    
  • Professional services - Medical and auditing services, lawyer services in court and other similar professional services that have laws regulating such professions
    
  • Renting of immovable properties
    
• 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 (EPZ's) and under Chapter 4 of the Customs Tariff Act
  
• Imported goods that are kept under the supervision of the Customs Department that 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

VAT Tax Base

• Goods and services delivered in Thailand:
  Tax base is the value received or the receivable value from the supply of goods or services. Value means money, property, consideration, service fees, or any other benefits that is ascertainable in terms of money. Tax base will also include any Excise tax arises in connection with such supply. Tax base excludes the VAT itself. Tax base includes only those discounts and allowances that shown on the tax invoice.
  
• Imported goods:
  Tax base = C.I.F. price + Import duty + Excise Tax (if any) + other taxes and fees (if any)
  
• Exported Goods:
  Tax base = F.O.B. price + Excise Tax (if any) + other taxes and fees (if any)

VAT Tax Rates

Currently, the general VAT-rate is 7 percent.
A zero percent rate applies to goods and services that are delivered under the following conditions:

• Exporting goods
  
• Services rendered in Thailand and utilized outside Thailand
  Aircraft or sea-vessels engaging in international transportation
  
• Supply of goods and services to government agencies or state-owned enterprises under foreign-aid program
  
• Supply of goods and services to the United Nations and its specialized agencies as well as embassies, consulate-general and consulates
  
• Supply of goods and services between bonded warehouses or between enterprises located in Export Processing Zones (EPZ's).

VAT accounting methods

You can choose between two VAT accounting methods: Cash based or accrued based. Once chosen for one of the two accounting methods you may not change i.e. you cannot apply the cash based method in one month and do accrued based in another month.

• Cash based; the VAT on sales is liable at the moment payment is received and VAT is deductible at the moment the purchases are paid for. Cash based VAT accounting is generally used by service companies who's primary source of bookkeeping is the daily cash book i.e. restaurants, bars etc.
  
• Accrued based; the VAT on sales is liable at the moment the sales (tax-) invoice is produced and VAT is deductible at the moment the purchase (tax-) invoice is received.

The Revenue Department describes the time of supply of goods and services to determine when the VAT should be accounted for as the earliest moment when one of the following events occurs:

• Time when goods and/or services are delivered
  
• Time when ownership of the goods is transferred
  
• Time when a payment is made
  
• Time when a tax invoice is issued

Consignment and VAT

In case of consignment, the time when the consignee makes a delivery is normally the first event that triggers the VAT liability. The argument that the ownership of the consigned goods is not transferred yet will not hold since there is a preceding delivery of goods. Where it comes down to is that consignment does not differ from a normal sale, be it that agreements can be made on payment terms and take back guarantees as these are of no concern to the VAT regulations.

Tax Invoice

A VAT registered entity is required to issue a tax invoice for every sale that is made. The tax invoice should include at least show the following elements:

• The wording 'Tax Invoice' or 'Credit Note' in a prominent place
  
• In case of a credit note; a reference to the sales invoice number
  
• Name, address and tax identification number of the issuer
  
• Name and address of the purchaser or customers
  
• Sequence number of tax invoice
  
• Description, value and quantity of goods or services
  
• In case of credit note; the reason of crediting
  
• Amount of VAT chargeable
  
• Date of issue
  Sales invoices and credit notes may not be mixed i.e. a sales invoice may not contain credits other than discounts on the invoiced sales prices or sales transaction.

VAT Submission and Payment

VAT taxable period is a calendar month. VAT submission therefore must be filed on a monthly basis.
VAT submission (Form VAT 30) together with tax payment, if any, must be filed to the Area Revenue Branch Office within 15 days of the following month.
If taxpayer has more than one place of business, each place of business must file a separate submission and payment unless there is an approval from the Director-General of the Revenue Department.
Services utilized in Thailand, supplied by service providers in other countries, are also subject to VAT in Thailand. In such a case, service recipient in Thailand is obliged to file VAT submission (Form VAT 36) and pay tax, if any, on behalf of the service providers.

VAT Refund

In case the deductible VAT (VAT on purchases) in a certain month is higher than the liable VAT (VAT on sales), taxpayer can claim for the refund, either in form of cash or tax credit to be used in the following months.
Deductible VAT on purchases is creditable against liable VAT on sales within the next 6 months. However, a VAT can only be claimed within 3 years from the last filing date.
On certain purchases, such as tax in relation to entertaining expenses, the VAT is not deductible. However, those non-deductible taxes can instead be used as deductible expenses under Corporate Income Tax (CIT).