VAT in Thailand
Value-added tax is a type of indirect taxation on the value-added of each phase of distribution and production for certain products or services. The value of VAT in Thailand is set at 7%, a reduction applicable until September 2023.
Thai VAT registration for a foreign company
Foreign companies are required to register for VAT purposes when they make taxable supplies in certain cases. Temporary VAT registration is possible for foreign companies.
Non-resident companies carrying out activities in Thailand in a non-temporary fashion (more than a temporary basis) are required to register for VAT purposes.
|VAT registration services|| |
|Who needs VAT registration|| |
Businesses with a turnover exceeding THB 1.8 million, irrespective of the tax period
|Time frame for registration||Approximately 1 week|
|VAT for real estate transactions|| |
VAT exempt, subject to other taxes
|Exemptions available|| |
Small companies with a turnover below THB 1.8 million
|Period for filing||VAT returns are filed on a monthly basis. The tax is payable by the 15th of the month following the one in which the liability is incurred. Self-assessment of VAT applies in some cases.|
|VAT returns support||Available upon request|
|VAT refund||When the input tax exceeds the output tax. Unused input tax can be creditable against output tax for a limited period (conditions apply)|
|Local tax agent required||Recommended|
A foreign entity is permitted, according to Section 85 of the Revenue Code, to make an application for VAT registration before the commencement of business in Thailand.
The evaluation of the application, and the subsequent issuance of the value-added tax registration certificate, is made in accordance with the conditions outlined by the Thai authorities.
Some examples of situations in which foreign companies are required to register for VAT in Thailand include the following cases:
- when a foreign company delivers goods within Thailand;
- the foreign company imports goods into the country;
- the foreign trader assembles goods in Thailand;
- when the foreign company exports goods from Thailand;
- in some cases in which the foreign entity supplies services and the place of supply is in Thailand.
In all cases, it is important to note that the registration for value-added tax in Thailand submitted by a foreign company will take place within 30 days from the notification sent to the Director General of the Revenue Department.
The same VAT registration as for locally registered companies also applies in case of foreign entities.
The registration threshold is when the turnover of the said company exceeds THB 1.8 million for the annual tax period, irrespective of when the period occurs.
While there is no mandatory requirement to open a company in Thailand when doing business here (meaning that foreign companies are not required to incorporate for VAT purposes), there is a requirement to perform the VAT registration of a foreign legal entity offering VAT-taxable goods and services, with the mention that the said registration shall, in most cases, remain valid for twelve months from its initial date and no more than three years.
In most cases, foreign companies that provide temporary services in Thailand will use some form of a permanent establishment and are liable for corporate tax as well as corporate tax return submission.
This is due to the fact that the VAT registration threshold may not be surpassed during the temporary provision of services in the country.
However, as highlighted above, foreign companies that offer services in Thailand on a basis that is more than temporary will need to register – following the same logic, it can be assumed that when offering services on a more than temporary basis the registration threshold can be surpassed for VAT taxable goods and services.
VAT registration in Thailand for foreign companies is performed with the Revenue Department, as for regular Thai companies and in most cases the applicant will use the online system.
It should be duly noted that when the business is incorporated abroad, the registered agent in Thailand, the appointed agent residing in the country or an employee of that company designated as the representative – who acts on the behalf of the foreign company directly or indirectly, will be liable for value-added tax purposes, together with the foreign company.
The duties and liabilities of the person responsible for conducting the business in Thailand are described in Section 82 of the Revenue Code.
As far as the due tax is paid, the payment is made by deducting input tax from output tax on a monthly basis.
When the output tax exceeds the value of the input one, the foreign company is to pay the difference. Should the reversed situation take place, the company is entitled to a tax refund.
Foreign companies that engage in VAT-taxable activities also have the option to appoint a fiscal representative.
The tax representative is a local specialist, such as one of our agents specializing in tax and company formation in Thailand, who will represent the client (the foreign company) in front of the Thai authorities.
This can be a useful step, especially for electronic service (e-service) providers that are not registered for VAT in the country.
Special taxation and VAT requirements apply in the case of companies involved in offering e-services from abroad. The treatment of these services is described below, in the chapter concerning VAT changes in Thailand.
What companies need to register for VAT in Thailand?
Any individual or organization that is subject to VAT in Thailand has to register to be a VAT-recorded individual or organization. VAT registration in Thailand must be performed:
• prior to the business operation;
• in a maximum of 30 days after its turnover has exceeded THB 1.8 million.
The experts at our firm specialized in company registration matters in Thailand can also help investors understand the principles of VAT compliance.Companies that register for VAT purposes will display information on the amount of VAT on the invoices they issue (these are issued for each transaction). The name, address, and identification number will be included on the invoice as well as the details belonging to the entity or individual purchasing the goods or services.
The invoice will have a serial number and will include a description of the type, quantity, and value of the goods or services. The amount of VAT, calculated accordingly, will be included in a separate and clear column. An invoice issued in another currency will include the exchange rate used in the conversion.
Our team can give you more details on the requirements for including the VAT percentage on the invoice.
Our accountants in Thailand offer complete solutions for VAT registration as well as the general filing and payment requirements described in this article. Investors often choose to outsource the accounting process in order to make sure that the company is fully compliant and that the submissions are made by a team of experts who will observe the requirements according to the business form.
VAT registration for a local company in 2022
- prepare the registration documents: specific information about the company needs to be provided to the authorities; this can include the business registration certificate, specimen signatures for the directors, proof of company headquarters and others.
- fill in the form: any natural or legal person intending on registering for this tax is required to fill in Form VAT 01.
- submit the application: the filled-in form, together with the required documents, are submitted to the Area Revenue Offices in the region in which the company is based.
- comply with the requirements: once the notice of registration has been issued, the company or individual subject to VAT is required to comply with the VAT return filing schedule.
VAT exemptions in Thailand
According to the domestic Revenue Department the activities which are exempt from VAT in Thailand are:
• Imports and sales of unprocessed agricultural goods and related products like animal feeds, fertilizers, pesticides and others;
• Imports and sales of textbooks, newspapers, and magazines;
• A range of elementary services, like:
o local and international land transports;
o healthcare services offered by the government, clinics, and private hospitals;
o educational services offered by the government, private schools and certain acknowledged educational organizations;
• Certain professional services, such as medical, auditing, legal in court services, and others;
• Turnover from business, trade, agriculture, industry, transport, or other activity not mentioned above. Our company registration professionals in Thailand can provide more details on what these activities are.
• Cultural services such as library services, zoos, or amateur sports;
• Services in the domain of labor employment, research, as well as technical and public entertaining services;
• Goods exempt from import duties;
• Imported products that are supervised by the Customs Department that are about to be re-exported and have the right to receive refunds for import duties;
• Certain services like charitable and religious ones, as well as government agency and local authority services.
Company owners who will provide these services can reach out to our agents for more information on VAT registration in Thailand.
We also invite you to watch a short video about the value-added tax:
Companies that are registered for VAT purposes in Thailand are required to pay this tax by the 15th day in the month following the one for which the tax is applied. This means that the VAT filing schedule is a monthly one and companies will need to observe it. The special form (Form VAT 30) is submitted to the Area Revenue Branch Office (together with the payment, if applicable for that respective month). Companies that have several headquarters in Thailand, or places of business, are required to file the returns and make the payments individually. An exemption for joint filing and payment may be granted by the Director-General of the Revenue Department, however, this is to be expected only in some cases.
In certain cases, such as for nonresidents that submit a self-assessment of the VAT output, this tax is payable on the 7th day of the month following the concerned payment. Exempt companies will pay the value-added tax on products and services that they purchase, however, they will not be entitled to a VAT refund. Also, these exempt companies do not need to collect VAT on sales or file monthly VAT forms (they can, however, do this on a voluntary basis).
When the goods and services are not only subject to VAT but also to the excise tax, then the VAT return and payment shall also be submitted to the Excise Department together with the return for this type of tax. One of our agents who specialize in VAT registration in Thailand can provide more details on this particular case as well as file the VAT return in case of imported goods (a situation in which this step takes place with the Customs Department of the place of import).
VAT refunds are awarded in Thailand if the input tax exceeds the output tax. the taxpayer can, in this case, claim his refund in the form of cash or tax credit that will be used for VAT payments in the coming months. The general rule for calculating tax liability is the following: the input tax is subtracted from the output tax. However, investors should keep in mind that some input taxes cannot be used as credit for VAT. Separate deductibility for these non-creditable input taxes can be made for the corporate income tax. One of our agents can provide more details.
The present VAT rate of 7% is set at this reduced value until 30 September 2023. After this date, the standard rate is to revert to the original 10%. The 7% rate also includes the local tax of 0.3%. Our team can provide investors with updated information as this will take place as well as any other tax law changes that may occur during the year.
VAT changes in Thailand
An important change to the VAT in Thailand was the introduction of this tax to foreign e-businesses. The new rules became effective in September 2021 and thus, value-added tax applies to electronic services offered by e-business operators in foreign countries to non-VAT operators in Thailand. The regulations that are currently applicable in the case of Thai e-business operators remain the same.
The main changes are the following:
- foreign e-businesses that offer electronic services to non-VAT operators in Thailand are required to register with the Revenue Department and will need to pay Thai VAT and file Thai VAT returns;
- the VAT registration threshold is the same as for local business operators, 1.8 million THB;
- foreign e-businesses are not permitted to claim input tax;
- when the foreign e-business offers its services in Thailand through another electronic platform the operator of the said platform is the one that will pay VAT on behalf of the foreign e-business operator(s) that use the platform (by means of a combined output VAT).
For the purpose of the changes described above, intangible property transferred via electronic networks will not be considered one of the goods subject to these requirements. In most cases, a foreign company will provide electronic services to individual customers or small unregistered businesses as these are non-VAT registered persons.
The VAT returns and payments will be made on a monthly basis. A simplified VAT filing system will be in place to streamline the process.
For the purpose of these VAT changes in Thailand, an operator that provides electronic services is one that offers services related to the internet or another electronic network that cannot be offered without the help of its respective technology. An electronic platform is a channel used by one or more operators to offer their services in Thailand. Some examples of the types of services used in Thailand provided by foreign operators include movies and music streaming services, online games, and the services offered by digital content providers.
This tax measure was first proposed in 2017 and has been enacted and published in the Thai Royal Gazette in February 2010.
Foreign electronic services providers who need more information on these changes can reach out to our Thai company formation agents for complete services related to meeting the new VAT requirements.
Please note that the Thai Revenue Department can issue additional requirements or recommendations for foreign electronic services providers that will be required to observe these new rules. We advise those interested to reach out to our agents for further clarifications as well as for updated information in the months following the one in which this requirement will become mandatory.
The Thai authorities had already announced a reduced VAT rate which is to remain in place longer than initially announced. Moreover, the Ministry of Finance has also published a list of modified deadlines for the payment and filing associated with the value-added tax, in the context of the coronavirus pandemic that has affected a large number of businesses and individuals.
Please keep in mind that the guidelines and deadlines mentioned in this article were in place at the time it was written, and information may become available during the year. Our team can provide you with updated information, as needed.
Taxation in Thailand
The value-added tax is an indirect tax, however, it is not the only one that is important for companies doing business in the country. The list below includes the most important taxes for investors who open a company in Thailand:
- 20%: the corporate income tax rate, with a reduced rate available to small companies.
- 10%: the withholding tax on dividends paid to another company in the country.
- 15%: the withholding tax on interest paid to a non-resident company (may be lower in some cases).
- 12.5%: the real property tax, applicable to the rental value of real property; it is deductible when calculating the corporate income tax.
- 5%: the value of the social security contributions payable by the employer each month (subject to a monthly cap).
As far as the real estate tax, also an indirect tax, municipalities impose a house and land tax and a local development tax. The first applies to owners that rent or use the house or building for a commercial purpose.
Starting with 2020, the tax rate on a property is no longer assessed based on the income method but on the assessment based on the appraised value of the property. The tax applies to residential buildings (including condominiums), commercial and agricultural buildings as well as unused land.
In Thailand, the excise tax system complements the VAT system and the excise tax is calculated as a percentage of the price of the goods or a specific charge.
A specific business tax (SBT) also applies in Thailand. Some businesses that are excluded from VAT payments may be subject to the SBT. Some of the businesses that are exempt from the SBT include the government entities such as the Government Savings Bank or the Industrial Financial Corporation of Thailand and the Bank of Thailand.
The National Housing Authority is also exempt from this tax, although only in some respects. Other businesses can also be subject to an exemption (under special sections under the law and a prescribed royal decree).
For those companies that are not exempt from the SBT, the tax rate is usually 3%, calculated as follows:
- for banking, finance, and similar businesses, the tax base is composed of interest, discounts, service fees, profits from foreign exchange and other fees;
- for life insurance businesses, the tax base is also composed of interests, discounts, other fees, or profits from foreign exchange; a reduced rate of 2.5% applies for this type of business;
- for real estate businesses, the tax base is the gross receipts; this business is subject to a 0.1% rate;
- pawn brokerage companies as well as other types of businesses (such as securities businesses) are also subject to this tax at different rates (the brokerage company is also subject to the 2.5% rate).
A local tax rate of 10% is imposed in addition to the SBT in most cases. Our team of tax experts in Thailand can give you more details.
Just like in the case of the Thai VAT, companies that are required to pay the specific business tax will need to comply with the registration, filing and payment requirements. Registration is mandatory for businesses that are subject to this tax within 30 days with the Area Revenue Office in Bangkok or the District Revenue Office for businesses based on other cities. Foreign companies will appoint a representative that will handle the tax registration. This tax is subject to monthly payments and the submission of a monthly form, whether the respective company has engaged in business activities in the said month. The return and payment are submitted to the District or the Area Revenue Office within the first 15 days for the month following the one for which the payment is made. When the company has more than one place of business in Thailand, each of these will make the necessary submissions and payments with the authorities in their area (these can be filed jointly only when the company receives a special approval).
For further information on VAT registration in Thailand in 2022, you can contact our Thai company formation advisers. We provide complete assistance for the incorporation of legal entities and for investors who are concerned with tax compliance. We invite you to contact our Thai company formation advisers for details about our incorporation packages as well as using a virtual office in Bangkok.