Transfer Output VAT, Claim Input VAT
Technically, companies in Thailand do not pay value-added tax, or VAT. They do, however, have a VAT obligation. Companies that are remiss in reporting and remitting the VAT they received for their goods and services are subject to fines, so it may seem like a financial burden. Nevertheless, there is also a VAT refund process available to offset this and ease that apparent burden.
What is VAT in Thailand?
Value-added tax, or VAT, in Thailand is much like VAT regimes around the world. National revenue departments implement VAT as a consumption tax on goods and services. It is meant to be paid by the end consumer, but, in Thailand specifically, the provider is responsible for collecting and submitting VAT. This includes services provided by overseas suppliers in Thailand. In this case, a Thai company may end up paying this VAT out of pocket unless they are VAT registered (discussed below).
Currently, the VAT rate in Thailand is 7%, but there are exemptions. Goods sent for export or are traded between duty free zones or bonded warehouses are subject to 0% VAT as well as services provided in Thailand but fully used overseas. Certain services within Thailand are also VAT exempt, including education, auditing, healthcare, and domestic transportation.
Even if exempt, you may need a VAT ID
Importantly, entities that record total annual sales lower than 1.8 million baht are exempt from VAT and do not have to register for a VAT ID. However, most companies that employ foreigners usually need a VAT ID when applying for a work permit for non-Thai employees.
So, it is recommended that every company, especially those with foreign employees, investigate whether they should obtain a VAT ID. A potential benefit to consider getting a VAT ID is claiming input VAT, especially if you pay VAT on services from overseas suppliers, which we discuss below.
Output VAT: Collect and transfer
Companies must send the VAT they collected for the month by the 15th of the following month along with a Form PP 30. If they deal in exempt or 0% VAT goods or services, they must still file. Otherwise, fines may accrue for delinquent submissions.
A company that uses overseas suppliers is responsible for those suppliers’ VAT. For example, a Thai company engages an architectural firm in France to design a hotel in Phuket. The fees paid to the French firm is subject to Thai VAT. This type of VAT must be reported and paid with a Form PP 36 by the 23rd of the following month. Now, if the Thai company has a VAT registration and if that company paid this VAT on behalf of the French firm, then the Thai company can claim this payment as input VAT.
Input VAT: Pay and claim
As part of your VAT filings, you can also offset the amount you collected and must submit with any VAT your company paid as a consumer. During the regular course of business, your company will most likely have to pay VAT for various goods and services. VAT-registered companies can apply for a refund or tax credit for the difference between the VAT they paid as consumers (input VAT) and the VAT they collected from customers to the Revenue Department (output VAT).
Since obtaining a refund can often be a drawn-out bureaucratic undertaking, most companies will apply for a credit. They can then use this input VAT credit to offset the output VAT amount they need to submit.
Let GPS Legal keep your VAT in order
Do you need to register for VAT? When should you submit your VAT forms? Do you need to submit just a Form PP 30, or do you need a Form PP 36 as well? Did you claim all the input VAT possible for the fullest benefit? There is no reason to drown your staff in receipts and paperwork. GPS Accounting has experts that can assist you with your VAT issues and filings. Contact us today for a free initial consultation to find out how.
