VAT, GST and Sales Tax in Thailand

Summary

Name of the tax Value-added tax (VAT)
Date introduced 1-Jan-92
Trading bloc membership Association of Southeast Asian Nations (ASEAN)
Administered by Thai Revenue Department (http://www.rd.go.th)
VAT rates
Standard 7% (increase expected after 30 September 2017)
Other Zero-rated and exempt
VAT number format Same as tax identification number
VAT return periods Monthly
Thresholds
Registration Annual revenue of THB1.8 million
Recovery of VAT by non-established businesses (foreign legal entities) No (unless the non-established business is registered for VAT in Thailand as a result of carrying on a business either in its own right or through an agent)

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services consumed in Thailand by a taxable person
  • The importation of goods or services into Thailand
  • The export of goods or services out of Thailand

Who is liable

A taxable person is any entity or person that falls into any of the following categories:

  • A seller of goods in the course of a business or profession in Thailand
  • A provider of services in the course of a business or profession in Thailand
  • An importer of goods and services
  • Any person deemed by the law to be a trader, such as a local agent of an overseas corporation that sells goods or provides services in Thailand

VAT registration. VAT registration must be made within 30 days after revenue exceeds THB1.8 million, or before the commence­ment of business. An overseas trader is eligible to register for VAT only if it will do business in Thailand for at least one year, or at least three months if engaged in a government project funded by a foreign loan or foreign aid.

Voluntary registration. A business may register for VAT volun­tarily if its taxable turnover is below the VAT registration thresh­old (annual revenue of THB1.8 million). A business may also register for VAT voluntarily in advance of making taxable sup­plies.

Reverse charge. If an overseas service provider or supplier of goods temporarily carries on a business in Thailand but is not registered as a Thai VAT operator or if such person provides ser­vices overseas for use in Thailand to a payer of service fees in Thailand, the customer for the goods or services in Thailand must self-assess the VAT due and remit it to the Thai tax authori­ties. Payment must be made by the seventh day of the month following the month of the payment of the income. If the cus­tomer for the goods or services is registered as a VAT operator in Thailand, it may recover the VAT paid by crediting it against the output VAT.

Exemption from registration. No exemption from VAT registra­tion applies to businesses that carry on taxable activities. However, certain activities are exempt from VAT (see Section D).

Registration procedures. The application for VAT registration can be submitted in hard copy to the respective area revenue office or online via the revenue department’s website.

For a hard copy submission, the registration application and required supporting documents must be submitted to the area revenue office where the business is located. In the case where the taxpayer has several branches, the registration application must be submitted to the revenue office where the head office is located. If all required documents are fully submitted, the VAT registration should be approved on the same day.

For an online VAT registration, the applicant, who already has a tax identification number, can submit its application via the web-site of the revenue department (www.rd.go.th) 24-hours a day. The supporting documents are not required to be uploaded via the website at the time of registration, but the tax official will visit the applicant’s registered office to inspect all supporting documents prior to approving the VAT registration. The result of the registration application will be sent by email to the applicant within 15 days of the submission date.

Late-registration penalties. Penalties are imposed for failure to register for VAT. The penalty is 200% of the VAT payable each month during the period of the failure to register for VAT.

Group registration. Not applicable.

Non-established businesses. To register as a VAT operator in Thailand, the non-established business must be engaged in activities that allow it to generate tax invoices in Thailand. As a result, input tax can be matched to the output tax and the non-established business can prove that the input tax is relevant to its business operations in Thailand. A non-established business can­not register for VAT simply to claim input tax if it does not have any activities that generate income in Thailand.

Tax representatives. Not applicable.

Digital economy. Sale of goods and provision of services of digital or e-commerce businesses are currently subject to general Thai VAT regulations. However, Thailand is considering applying VAT to downloads of mobile applications.

Deregistration. A business that ceases operations must cancel its VAT registration by deregistering with the tax authorities within 15 days after the date of ceasing operations.

VAT rates

VAT in Thailand is currently levied at a rate of 7% on the value of goods sold or services consumed in Thailand. The VAT rate of 7% will apply until 30 September 2017. This rate may likely be increased by one to three percentage points, subject to the interim government announcement in due course.

VAT applies to all stages of production, distribution and sale, in cluding the importation of tangible and intangible goods and services.

For the importation of goods from a seller located outside of Thailand or customs-free zone area, the importer must pay the VAT due to the customs authority, which collects the VAT on behalf of the Thai tax authority, at the time of importation.

The export of goods and services is eligible for a zero rate of VAT. To qualify as an export of services, services performed in Thailand must be used in a foreign country. If the services are partially used in Thailand, the part of the services used in Thailand is subject to VAT at a rate of 7%.

The following activities are exempt from VAT:

  • Sale of agriculture products, animals and animal products (except canned foods)
  • Sales of fertilizers, drugs or chemicals for caring for plants or animals, and insecticides or pesticides for plants or animals
  • Sales of ground fishmeal and animal feeds
  • Sales of newspapers, periodicals and textbooks
  • Rendering of services in the fields of medicine, auditing or litigation
  • Hospital services
  • Domestic transportation of all types and international transpor­tation by land
  • Leasing of immovable property
  • Business subject to Specific Business Tax (SBT)

Option to tax for exempt supplies. Operators of the following VAT exempted businesses are entitled to register for VAT:

  • Sale of goods not for export or provision of services as follows:
    • Sale of agricultural products
    • Sale of animals
    • Sale fertilizers
    • Sale of fish meals, animal feeds
    • Sale of drugs and chemical products for plants and animals
    • Sale of newspapers, magazines or textbooks
  • Provision of domestic transport by aircraft
  • Export of goods as the trader in the export processing zone under the laws governing industrial estate of Thailand
  • Provision of the service of transporting fuel oils through pipes in Thailand
  • Business with the value of tax base not exceeding the value of the tax base for a small business fixed by Royal Decree

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.”

The tax point for the supply of goods is the time of delivery unless one of the following events occurs earlier:

  • Ownership transfer
  • Receipt of the payment
  • Issuance of the tax invoice

The tax point for the supply of services is the receipt of the pay­ment unless one of the following events occurs earlier:

  • Issuance of the tax invoice
  • In the case of services provided without charge, the use of the services by the service provider or the other recipient persons

The tax point for the import of goods is the time of importation, which is the time of customs clearance.

The tax point for the export of goods is the time of payment of export duty or, if the goods are exempt from customs, the date on which the goods clear customs.

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made.

Input tax includes VAT charged on goods and services supplied in Thailand, VAT paid on imports of goods into Thailand and VAT self-assessed on reverse-charge services.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business pur­poses (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.

Examples of items for which input tax is nondeductible

  • Entertainment expenses or similar expenses
  • Passenger cars (except for car sales or rental business)
  • Goods or services relating to passenger cars such as gasoline and repairs (except for car sales or rental business)
  • Construction of buildings sold or used for a non-VAT business within three years after completion

In addition, the following input tax is not recoverable:

  • Input tax arising from certain types of business activities that are not subject to VAT
  • Input tax shown on an abbreviated tax invoice or a tax invoice that bears signs of correction or alteration of the particulars required by law
  • Input tax not substantiated by a tax invoice
  • Input tax recorded in an incomplete tax invoice
  • Input tax shown on a tax invoice issued by a person not autho­rized to do so

Examples of items for which input tax is deductible (if related to a taxable business use)

Generally, input tax that is attributable on expenses related to the VAT-able business is deductible for VAT computation:

  • Input tax on purchase of raw materials
  • Input tax on purchase of capital assets
  • Input tax on purchase of goods for resale
  • Input tax on royalty payment
  • Input tax on sale and marketing expenses
  • Import VAT paid to customs department for import of goods into Thailand
  • Self-assessed VAT paid to revenue department on reverse-charge mechanism

Partial exemption. Not applicable.

Refunds. The VAT refund can be made within three years from the last day of filing date.

Preregistration costs. Any input tax attributable on the pre-regis­tration costs prior to the VAT registration date is not recoverable.

Recovery of VAT by non-established businesses

VAT incurred by a non-established business (that is, an overseas legal entity) may be recovered only if the non-established busi­ness is registered as a VAT operator in Thailand.

Invoicing

Tax invoices and credit notes. A Thai VAT operator is required to issue a tax invoice for all taxable supplies made, including exports. A tax invoice is necessary to support a claim for input tax deduc­tion or a refund.

A tax credit note may be used to reduce the VAT charged and reclaimed on a supply. The credit note must reflect the reasons for its issuance as allowed by the VAT law. The credit note must be cross-referenced to the original tax invoice.

Proof of exports. An export of goods may be eligible for the zero rate of VAT if the goods are physically exported and if the export is supported by evidence confirming the departure of the goods from Thailand. The evidence required includes the following documents:

  • Customs documentation
  • Original invoice

Foreign-currency invoices. Tax invoices can be issued in a foreign currency if approval has been obtained from the tax authorities.

VAT returns and payment

VAT returns. VAT returns are submitted monthly. A supplier of goods and services must collect VAT from the purchaser of the goods or the recipient of a service and remit it to the Thai tax authority by the 15th day of the month following the month in which the tax point is triggered (for example, the time of delivery, receipt of payment or issuance of an invoice; see Section E). For reverse-charge services, the Thai service recipient is required to self-assess the VAT and remit it to the Thai tax authority by the seventh day of the month following the month in which the pay­ment is made.

Special schemes. Not applicable.

Electronic filing and archiving. The VAT operator can file its monthly VAT returns provided that it obtains the approval from the revenue department.

Annual returns. Not applicable.

Penalties

A penalty of 100% of the tax shortfall is assessed for the late payment of VAT, plus a monthly surcharge of 1.5% of the tax shortfall (capped at 100% of the tax shortfall). However, if a tax­able person does not receive a notice of call for examination, the penalty may be reduced to the following:

  • 2% if the payment is made within 15 days after the due date
  • 5% if the payment is made after 15 days but not later than 30 days after the due date
  • 10% if the payment is made after 30 days but not later than 60 days after the due date
  • 20% if the payment is made more than 60 days from the due date