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Value Added Tax (VAT)

Value Added Tax (VAT) is a tax levied on selling goods or services locally produced in Thailand or imported from abroad.

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Value Added Tax (VAT)

Value Added Tax (VAT) payers are producers or sellers of goods or services in the Kingdom (sole trader, limited liability partnership, limited liability company, public company, etc.). If income from the sale of goods or services is more than 1.8 million baht per year, it is necessary to register as an entrepreneur in the system of value-added tax (VAT).

The current value-added tax (VAT) rate is 7% for entrepreneurs who sell goods or provide services in the Kingdom. And the VAT rate will be 0% for exports of goods or services.

Businesses exempt from VAT.

However, certain types of businesses do not need to register for value-added tax (VAT) because of exemptions provided by law, such as:

  1. Selling crops;
  2. Selling animals, alive or not;
  3. Selling fertilizers;
  4. Fishmeal of sale, animal feed;
  5. Selling medicines or chemicals used for plants or animals;
  6. Selling newspapers, magazines, or textbooks;
  7. Providing educational services by educational institutions;
  8. Providing healing practice services, auditing, and counseling;
  9. Providing medical services by a medical institution by the law on hospitals;
  10. Public performer services;
  11. Providing transportation services in the Kingdom;
  12. International transportation which is not carried by plane or sea;
  13. Renting services for real estate.

Incoming and Outgoing VAT

Excoming VAT is the VAT payers collect from customers when they sell goods or provide services. For example, Company A sells products to Company B at a selling price before VAT of 100 baht, so the sales tax charged to the customer is 7 baht (7% of the cost of goods), and the customer will pay 107 baht.

Incoming VAT is value added tax that persons registered as VAT payers will pay to sellers or service providers who are also registered as VAT payers. For example, company A buys goods from company C for 40 baht before value-added tax is charged. Input tax is set at 2.8 baht (7% of the product price), so the total payment is 42.8 baht.

How to calculate Value Added Tax (VAT)

The operator must consider the output VAT and input VAT paid each month to calculate payment to the Department of Revenue as follows:

VAT payable = outgoing VAT - incoming VAT.

If outgoing VAT > incoming VAT, the company must remit the VAT to the Revenue Department. This is because the VAT charged to the customer is greater than the VAT charged to the supplier.

If input VAT > output VAT, the company can apply the excess amount to the next month's tax credit. Or you can request a tax refund in cash.

From the above example, in the case of Company A, the total output VAT is 7 baht, and the entire input VAT is 2.8 baht. In this case, the outgoing VAT > incoming VAT, so company A must pay VAT of 7 - 2.8 = 4.2 baht.

Thus, honest VAT payers are ordinary consumers of goods and services who cannot claim VAT refunds from anyone.

Tax invoice

A tax invoice is a mandatory document that sellers of goods and services must complete to file VAT.

Failure to submit tax invoices by the requirements described below may result in the inability to deduct expenses, resulting in such costs added to taxable income and increasing the company's tax liability.

The tax invoice must contain at least the following information:

  • The wording 'Tax Invoice' is in a prominent place;
  • The name, address, and tax identification number of the seller;
  • The name, address, and taxpayer identification number;
  • Maintaining the 'head office' or 'branch office' number for both the seller and the buyer;
  • The date of the tax invoice;
  • The number of the tax invoice;
  • The description, quantity, price per unit, and total value of goods or services;
  • The amount of VAT charged for goods or services.

Initially, a 'normal' invoice is issued to request payment for goods and services.

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Update: 18-02-2023
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