Thai VAT Rules

June 7th, 2010

VAT’ how to do it

I have heard that many small businesses in Phuket – particularly restaurants and bars – are now being invited by the local tax officers to register for VAT. Therefore, I think it is a must that they have a clear understanding of the VAT laws that concern them. So, in this issue I have outlined the VAT laws that focus on small, local businesses.

According to the law, any person or entity that regularly supplies goods or provides services in Thailand and has an annual turnover exceeding 1.8 million baht is subject to VAT. If your annual turnover is less than 1.8 million, you are exempt from paying VAT.

Any person or entity that is liable for VAT in Thailand must be VAT registered (Form VAT 01) before the operation of business or within 30 days after its income reaches the threshold. The registration application must be submitted to the nearest Revenue Office. Should the taxpayer have several branches, registration must be submitted to the Revenue Office where the headquarters is situated.

Tax Base
The Tax base of VAT is the total value received or receivable from the supply of goods or services.

Tax Rate
Currently the rate is 7%.

Tax Point
The tax point of VAT differs depending on whether you are selling goods or providing services. If you are selling goods, a tax invoice needs to be issued at the time of delivery (even if you have not yet been paid). If you are providing a service, a tax invoice can be issued when payment is made.

Tax Invoice
There are two kinds of tax invoice that you need to know about:

1) TAX INVOICE (Full): Only a full tax invoice can be used as evidence to claim input tax credit.

A full tax invoice must contain the following elements:
- The word “Tax Invoice” in a prominent place.
- Name, address and tax identification number of the issuer.
- Name and address of the purchaser or customers.
- Serial numbers of tax invoice and tax invoice books (if applicable).
- Description, value and quantity of goods or services.
- Amount of VAT chargeable.
- Date of issuance.

This type of tax invoice cannot be used to claim back your purchase VAT, as they are only issued from the cash registers (tills) of retail business such as minimarts, supermarkets, bars or restaurants etc. Cash Register (Till) If you are in a retail business like a minimart, supermarket, bar or restaurant, remember that once you have registered VAT your cash register must be registered with the Revenue department too (ask your accountant for more information about this).

Tax Calculation
VAT liability = Output Tax (Sales tax) minus Input Tax (Purchase tax)

Each month, if your input tax exceeds output tax, you can claim a refund, either in the form of cash or tax credits to be used in the following months. As for unused input tax, it may be credited against output tax over the next six months.

However, the refund can only be claimed within three years of the filing date. Certain input taxes, such as tax in relation to entertaining expenses, cannot be credited against VAT. However, such non-credited input taxes can instead be used as deductible expenses against Corporate Income Tax.

Tax Return and Payment
A VAT return must be filed on a monthly basis. The VAT return (Form VAT 30) together with the tax payment, if any, must be submitted to the Area Revenue Branch Office within 15 days of the following month.

If you have more than one place of business, each place of business must file a return and make payment separately, unless you have received approval from the Director-General of the Revenue Department.

I hope that the above information is useful for those of you with small, local businesses. If you ask me why you are forced to register for VAT, my answer is that the tax officers don’t believe that your annual turnover is less than 1.8 million baht.

But, if you are confident that you will not reach 1.8 million a year, by law you do not need to register. Try your best to explain this to the tax officer. He should accept this, as it is your right not to pay VAT unless you turnover more than 1.8 million a year.

Reproduced courtesy of Khun Sirirat of Thai Accounting

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