What is VAT in Thailand?
Value Added Tax (VAT) is a consumption tax levied on the value added to goods and services at each stage of the supply chain. In Thailand, VAT is governed by the Revenue Department and applies to most business transactions. The standard VAT rate in Thailand is 7%, though this can vary based on specific regulations and amendments.
Who Needs to Register for VAT in Thailand?
Businesses in Thailand must register for VAT if their annual taxable sales exceed 1.8 million baht. This threshold applies to both Thai and foreign businesses operating in the country. Companies exceeding this limit are required to obtain a VAT registration number and comply with VAT filing and payment obligations. Additionally, businesses engaged in specific sectors, like manufacturing or wholesale, might also need to register regardless of their revenue.
Which Businesses are Exempt from Thai VAT?
Certain businesses and activities are exempt from VAT in Thailand. These exemptions generally include:
- Small Businesses: Businesses with annual taxable sales below 1.8 million baht are exempt from VAT registration.
- Specific Sectors: Some sectors, such as healthcare and education, are exempt from VAT.
- Exported Goods and Services: Goods and services exported from Thailand are typically zero-rated, meaning VAT is charged at 0%.
TAX Base for VAT in Thailand
TAX Rate
General Rate VAT Rate = 7%
Zero Percent Rate Zero rate applies to:
– Export of goods
– Services rendered in Thailand and used outside Thailand (under specified rules)
– International transportation (aircraft/sea-vessels)
– Supplies to government/state-owned enterprises under foreign-aid programs
– Supplies to UN, embassies, consulates
– Goods/services between bonded warehouses or EPZ enterprises
VAT Tax Points for Different Types of Services
VAT tax points, or the point at which VAT becomes payable, vary based on the nature of the service:
How to Submit VAT and Penalties
VAT returns must be submitted monthly to the Thai Revenue Department. Businesses are required to file their VAT returns within 15 days of the end of each month. The VAT payment is due simultaneously with the filing. Failure to submit VAT returns or pay VAT on time can result in penalties, which may include fines or interest on overdue amounts.
Calculating Sales Invoices with VAT and Withholding Tax (WHT)
When issuing a sales invoice that includes both VAT and Withholding Tax (WHT), it is important to accurately calculate each component. Here’s a step-by-step method:
- Determine the Total Amount Before Tax: This is the amount before adding VAT and WHT.
- Calculate VAT: Apply the 7% VAT rate to the total amount before tax.
- For example, if the total amount before tax is 10,000 baht, VAT would be 700 baht (10,000 x 7%).
- Calculate WHT: Apply the relevant WHT rate (commonly 1% or 3% depending on the type of service) to the amount excluding VAT.
- If the WHT rate is 3% and the amount before tax is 10,000 baht, WHT would be 300 baht (10,000 x 3%).
- Generate the Final Invoice: Add VAT to the total amount before tax, then subtract WHT to show the final payable amount.
- Invoice Breakdown:
- Amount Before Tax: 10,000 baht
- VAT (7%): 700 baht
- Total Amount Including VAT: 10,700 baht
- Less: WHT (3%): 300 baht
- Final Amount Payable: 10,400 baht
- Invoice Breakdown:
Understanding the VAT rule, submission deadline, and forms to be used in Thailand is crucial for compliance and efficient financial management. Businesses must adhere to registration requirements, be aware of exemptions, and accurately calculate and submit VAT and WHT. This ensures smooth operations and helps avoid potential penalties.
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