VAT In Thailand: navigating the complexities of taxation laws is crucial for any business operating in Thailand.
One such aspect is the Value Added Tax (VAT), which has been in effect in the country since 1992, replacing the previous Business Tax (BT) system. Understanding VAT in Thailand is essential for foreign investors looking to establish a presence in the country’s market.
VAT is an indirect tax levied on the value added at each stage of production and distribution. This tax is applicable to any person or entity regularly supplying goods or services in Thailand with an annual turnover exceeding 1.8 million baht. Even importers, regardless of their registration status, are subject to VAT in Thailand, collected by the Customs Department upon importation of goods.
However, certain businesses are exempt from VAT and instead subject to Specific Business Tax (SBT). These exemptions include small entrepreneurs with an annual turnover below the threshold, sales and imports of unprocessed agricultural products, newspapers, magazines, textbooks, and certain basic services like transportation, healthcare, and education.
The tax base for VAT encompasses the total value received or receivable from the supply of goods or services, excluding the VAT itself. The tax rates stand at 7 percent for general goods and services, with certain activities enjoying a zero percent rate, such as exports, international transportation, and supplies to certain entities like government agencies and foreign embassies.
Understanding the time of supply is crucial for VAT compliance. For goods, it’s determined by factors like delivery, ownership transfer, or invoice issuance, while for services, it’s based on payment, invoice issuance, or service utilization.
VAT-registered entities must issue tax invoices for every transaction, detailing the nature, value of goods or services, and VAT amount. These invoices serve as evidence for claiming input tax credit.
In case input tax exceeds output tax in a given month, taxpayers can claim a refund, either in cash or as a tax credit for future use. VAT registration is mandatory for entities liable for VAT, and returns must be filed monthly, accompanied by tax payments within 15 days of the following month.
When VAT in Thailand must be paid?
When considering VAT in Thailand, understanding the time of supply for goods or services is pivotal as it dictates when a registered person must account for VAT. Here’s a breakdown:
VAT on Goods
For general goods, the time of supply is determined by the earliest of:
– The time of delivery
– When ownership of goods is transferred
– When payment is made
– When a tax invoice is issued
For hire-purchase or installment sales, the time of supply is determined by the earliest of:
– The time each payment is due
– When a payment is made
– When a tax invoice is issued
For the supply of goods on consignment, the time of supply is determined by the earliest of:
– The time the consignee makes delivery or transfers
– When ownership of the goods transfers to the buyer
– When a payment is made
– When a tax invoice is issued
For imports, the time of supply is determined by the earliest of:
– When import duty is paid
– When a guarantee is put up
– When a guarantor is arranged for
– When a bill of lading is issued
For exports, the time of supply is determined by the earliest of:
– When export duty is paid
– When a guarantee is put up
– When a guarantor is arranged for
– When a bill of lading is issued
– When goods are sent from Thailand to an EPZ
– When goods are exported from a bonded warehouse
VAT on Services
In general, for services, the time of supply is determined by the earliest of:
– When a payment is made
– When a tax invoice is issued
– When the service is utilized
For service contracts where payment is made according to the service performed, the time of supply is determined by the earliest of:
– When a payment is made
– When a tax invoice is issued
– When the service is utilized
For imports of services, the time of supply is when the payment is made.
Navigating VAT regulations in Thailand requires a comprehensive understanding of its intricacies. Seeking guidance from experts like Siam Trade Development, a consulting and regulatory firm for foreign investors, can ensure compliance and smooth operations in the Thai market.
Source: Thai Revenue Department
